Benefits Uprating

Sheila Gilmore Excerpts

Wednesday 8th December 2010 Commons Chamber

[Steve Webb]

Obviously, contracted-out deductions apply not to the basic state pension, but to the additional state pension. The idea of contracting out is that a scheme that offers to provide earnings-related pensions must promise to match the benefits that the state would otherwise have provided. That may not be well understood, but such schemes and the employees who use them pay less national insurance, in return for which, the scheme promises to match what the state would have provided. I do not recognise the hon. Gentleman’s description, but if he writes to me with specific examples, I am happy to look at them.

[Sheila Gilmore (Edinburgh East) (Lab)]

I have been contacted by a large number of constituents who are public sector pensioners, because they are extremely concerned that the pensions to which they have been contributing and which they thought were guaranteed to increase in a certain way should be changed by the Government without any justification. Why is it felt necessary to do that? If it is so good to triple-lock the basic state pension, why is it not equally good for public sector pensioners?

[Steve Webb]

To take the hon. Lady’s second point first, if we were to earnings-link all public sector pensions in payment, it would cause a massive increase in unfunded pension liabilities. She has just spent billions upon billions of pounds, apparently casually, but I am afraid we are not in a position to do that. We have done what Governments have always done, which is to assess the general increase in prices, make a figure for inflation and apply it consistently—in this case, to all social security benefits, tax credits and earnings-related pensions. By statute, public sector pensions are linked to what we do to additional pensions. What we are doing for contracted-out public sector pensions is therefore exactly what we are doing for contracted-in additional pensions.