Pensions Bill [Lords]

Debate between Stephen Lloyd and Jenny Willott

Monday 20th June 2011 Commons Chamber

[Jenny Willott (Cardiff Central) (LD)]

The Bill has been somewhat hijacked by the women’s pension age issue, but as the hon. Member for Aberdeen South (Dame Anne Begg) has said, there is much in it that is very good and extremely uncontroversial. There are other proposals that are good, but which some people find controversial, such as those on judges’ pensions. Funnily enough, a number of speakers in the other place became extremely worked up about that. As the Secretary of State said, judges currently make no contributions to their pensions. The only thing they contribute to is survivors’ benefit, for which they pay the princely sum of 2.4% or 1.8% of their salary, depending on the scheme, but they get an extremely generous pension at the end of it. I understand that one in six judges draws a pension of more than £67,000 a year, which puts them in the top 0.01% of pensioners, as the employer contribution is around one third of the salaries. The hon. Lady has just said that fairness is all in pensions, but clearly that does not seem fair to an awful lot of people. At a time of great debate on public sector pensions, there is no reason for judges to be exempt from reform. There seems to be a clear consensus in this place, if not in the other place, that that needs to be tackled as soon as possible.

I also welcome much of the rest of the Bill. The introduction and simplification of many of the opt-out arrangements is really important. The hon. Member for Aberdeen South and I were members of the Work and Pensions Committee in the previous Parliament and did a lot of work on the arrangements for the National Employment Savings Trust and how to ensure that people on low incomes are encouraged and supported to save for retirement. Like her, I welcome many of the Bill’s proposals and think that it is really important that the measures are being introduced. Hopefully, the tweaks will overcome some of the problems identified during the passage of the Pensions Act 2007, which most people supported. Many of the concerns that were raised related primarily to small businesses and those on the lowest incomes and are covered by the Bill.

I am also glad that the Bill will set up a system that will make it easier for people on low incomes to save, because that has been a problem for far too long in this country and needs to be tackled. Although the level of means-testing is still an issue and therefore for some of those on the very lowest incomes, as employers will also contribute to pensions, it will be more worth while under the system in the Bill and the previous Act for more people to save.

However, like the hon. Member for Aberdeen South, I am afraid that I will do what I am sure everyone in the debate will do and raise the concerns about the proposals on the women’s state pension age. I am sure that you, Madam Deputy Speaker, will be sick to the back teeth of people complaining about the women’s state pension age by the end of the debate, as I am sure will the Minister. [Interruption.] You are far too charitable, Madam Deputy Speaker.

I agree with the Government that the state pension age needs to rise. In 1970, someone retiring at age 60 could expect to live a further 18 years. Last year, the figure was 28 years. There has clearly been a significant change in demographics in this country, which has to be reflected in our pensions system. We cannot expect people to work until they drop, but the more time they spend in retirement, the more strain that puts on the public purse.

That issue goes hand in hand with pensioner poverty. The right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who is no longer in his place, talked about the progress he felt the previous Government had made on pensioner poverty. Progress was made, but last year there were still 2 million people of pension age living in poverty, which is unbelievably high for a rich country such as the UK and a disgrace. Unless we seriously overhaul the pensions system, pensioner poverty will continue to be a problem. The longer people live, the less an occupational pension is likely to pay out, for those who are lucky to have them, and the longer they will have to live in poverty after they retire.

We must invest in the state pension in order to tackle pensioner poverty, which is one reason that I welcome the steps that the Government have already taken to bring in the triple lock, which has been a Liberal Democrat policy for a number of years. By linking the basic state pension to earnings and instituting the triple lock, pensioners will hopefully take home £15,000 more over the course of their retirement than they would have done under the previous Government’s policies. That will start to make a difference to levels of pensioner poverty.

What I think will really make a difference is the Pensions Minister’s plan for a flat-rate pension, if and when he is able to introduce that and work it through the House. As has been announced, the plan is for all pensioners with contributions of more than 30 years to receive a flat-rate pension of around £140 a week, uprated by inflation, from 2016. For many people, particularly women in the cohort which has been referred to today, that would be a significantly higher basic state pension than they currently receive. There is particular concern about those women, many of whom do not have private savings and do not necessarily have a full contributions record, as we have discussed in relation to the state second pension. The people who are likely to be penalised by the rising state pension age will benefit significantly from the introduction of a flat-rate pension.

We should not be trying to tackle pensioner poverty simply by increasing the burden on those in society who are working. Wages are flat at the moment and prices are rising, and the Secretary of State has laid out the change in the ratio of pensioners to working people in the population. We need to do something more fundamental. We need to create a sustainable way of managing our ageing population, rather than continually increasing the demands on taxpayers. The Turner commission and the 2007 legislation accepted the premise that, as longevity increases, so the state pension age must rise, but we have now learned from the most recent figures that the situation has changed even more than was understood when the commission carried out its work. We need to take that into account if we are to have a sustainable pension scheme that people can trust for the long term. The Government are right to look at raising the state pension age, and if the flat-rate pension is introduced in 2016, although hundreds of thousands of women will have to work longer, they will get a better pension in the end, which is a trade-off that many will feel is worth it.

As many Members have mentioned today, it is the cohort of women born in 1953 and 1954 who will feel the greatest impact of the change, particularly the 33,000 born in March 1954, who will have to work two years longer. Like other Members, I do not believe that the plans currently laid out are fair for those women. People need time to plan for their retirement, as the hon. Lady for Aberdeen South said. A number of Members have said that those women will have five years’ notice, but my understanding is that it will be seven years before facing the situation, so I would be grateful if the Minister clarified that. Seven years is not a very long time in which to plan whether to work for another two years. In order to keep the public support that we need for such long-term plans, pensions must have full support across this House and among the public as a whole.

[Stephen Lloyd (Eastbourne) (LD)]

I concur with every single word that my hon. Friend says. Owing to the difficult decisions that the coalition Government are making on the economy, I am confident that, by 2018, 2019, 2020, the challenges will have been met and the Government will be able to listen to Back Benchers from all parts of the House and move the change back to 2020. The difficult decisions that will have been made by then will mean that the economy is ready and able to sustain such a move.

[Jenny Willott]

I thank my hon. Friend for his intervention, and it will be interesting to hear what the Minister says to that when he sums up the debate. I am sure that during the debate several suggestions will be made on how to tackle the issue, and that is one.

The changes have to feel fair, but the current proposals do not. The hon. Member for Aberdeen South said that fairness is extremely important, and as the Pensions Minister has said it is extremely important that the basic state pension, whatever its structure, has to feel fair, because it has to last a long time and be free from arbitrary political intervention. The current proposals, however, do not pass the fairness test.