State Pension Reform

Simon Hughes Excerpts

Monday 4th April 2011 Commons Chamber

[Steve Webb]

I am grateful to the Select Committee Chair for her questions. To be clear on the role of pension credit, we envisage that there will have to be a safety net under any system, and the Green Paper provides for consultation about what exactly that might look like. There will still be a guaranteed credit type system—a floor below which people cannot fall. In a single-tier pension world, the savings credit would no longer be necessary for new pensioners. In other words, the savings credit was invented by the previous Government to deal with the fact that 100% marginal tax rates were paid on any saving. Because we are not doing that any more, we will not need the savings credit for new pensioners, which helps to pay for the reform. It is less means-testing, more universal pension.

The hon. Lady rightly mentions the position of women and my point is that women under the current system, who often did their child rearing before the state second pension was introduced, have no protection at all, whereas they have basic pension protection. Under a single-tier world, they get protection at the full rate, so they will benefit from the reforms we are introducing.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

My hon. Friend the Pensions Minister has not only this very month introduced the link between pensions and earnings, for which pensioners have been calling for years, but now makes a clear bid to be the most popular Pensions Minister for decades, in announcing the option of the citizens pension for which he and I have campaigned for ever. It is clearly fairer, simpler and particularly helpful to women and the self-employed. I urge my hon. Friend to be as bold and reforming as he suggests option 2 would allow. I urge him to go fully through the consultation process, but when midsummer’s day arrives—the last day of the consultation—I urge him to go for the single tier state pension so that this Government’s legacy for pensioners will be as radical in this century as the legacy of Lloyd George and Beveridge was for pensioners in the last.

[Steve Webb]

My right hon. Friend puts me on the spot, but I am glad to respond positively. I have noted his comments down as being the first response to my consultation, making it 1-0 for the single-tier option—I will keep score as we go. He is right that the restoration of the earnings link after 30 years of breaking it is an historic event, although it has been rather overshadowed by other events in the world. We think someone retiring this year will, over the years, get an extra £15,000 in basic state pension through the restoration of the link. That is a real firm foundation for today’s pensioners as well as reform for tomorrow’s. I am grateful to my right hon. Friend in respect of the liberal heritage and to my right hon. Friends the Secretary of State and the Chancellor for their encouragement for the proposal to move forward.