Oral Answers to Questions
Debate between Stephen Timms and Laura Trott(1 year, 1 month ago)
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Sir Stephen Timms (East Ham) (Lab)
The pensions dashboard will provide important support. It was due to be rolled out from August, but last week the Minister, very disappointingly, announced a delay and we do not now know when it will be implemented. Is it a delay of weeks or months, or even longer? Will the Minister give us a full, urgent update before the Easter recess?
Laura Trott
Work is ongoing and I will come back to the House at the earliest available opportunity.
Saving for Later Life
Debate between Stephen Timms and Laura Trott(1 year, 2 months ago)
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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The Parliamentary Under-Secretary of State for Work and Pensions (Laura Trott)
It is a pleasure to serve under your chairmanship, Mr Hosie. I thank the Work and Pensions Committee for its report and the important role that it plays in scrutinising the work of the Department. I also extend my thanks to the Chair of the Select Committee, the right hon. Member for East Ham (Sir Stephen Timms), for securing this debate. We have had thoughtful contributions from everyone here.
The Committee’s report rightly raises key areas for reflection in our ongoing story of pension saving. The pensions landscape has undergone substantial change in recent years with the new state pension, increased pension saving through automatic enrolment, and increased choice through pensions freedoms, backed up with free, impartial guidance. We have laid a solid foundation to enable people to take responsibility and plan more effectively for the retirement that they want.
We have had numerous pension successes, with the most notable mentioned by everyone here today: the successful delivery of automatic enrolment, which has got 10.8 million more people into saving for retirement. However, the way that people save has undergone a significant shift in recent decades by shifting the retirement outcomes responsibility on to individuals rather than employers. That has thrown up policy challenges, which we have discussed today and were rightly considered in the Committee’s report.
I turn now to the future of automatic enrolment. Last year was the 10th anniversary of AE, which was introduced under a Conservative Government. AE facilitated a dramatic shift in workplace pension savings, with 86% of eligible employees in the private sector now participating in a workplace pension. The Government are committed to building on the success of AE by implementing the outcomes of the 2017 review, as endorsed by the Committee. I am pleased that there is a widespread consensus on that.
We will reduce the age at which people are auto-enrolled from 21 to 18, as well as removing the lower earnings limit. I heard what the hon. Member for Glasgow East (David Linden) said about lowering the age to 16—he tells a powerful story—and we will keep that under review. The 2017 recommendations will change the landscape for the better. They will enable people to save for longer and begin their savings journey from the first pound of their earnings. That will give younger people and people in part-time jobs, particularly women, the opportunity to be brought into the world of pension savings for the first time. I know the Committee is keen for me to set out a timeline. I, too, am keen to set out a timeline, and as soon as I have collective agreement I will come back to the Committee and the House to announce that.
In its recommendations the Committee also asked the Government to look at measures to close the gender pensions gap, which is something we can all agree on. My Department regularly monitors the contribution and participation rates by gender and regularly publishes the data in our workplace pension participation and savings trends publications. As discussed, I want to take that one step further and begin monitoring and reporting on the issue regularly. Although many factors create inequality in pension outcomes, most notably the gender pay gap, I have started working with key stakeholders and colleagues across Government to create a framework to understand the challenge and also to produce a definition of the gender pensions gap.
Agreeing a definition, as discussed by many Members today, is a crucial first step. That will allow us to agree a suitable metric to monitor progress and begin reporting on the issue. Again, I need collective agreement before I can say more, but I will come back to the Committee when I have a timeline for that.
Sir Stephen Timms
I welcome what the Minister has just said. Does she envisage annual reporting? Is that the sort of frequency she has in mind for monitoring the size of the gender pensions gap?
Laura Trott
I think annual reporting would make sense, but this is something that we need to look into further. I will come back to the right hon. Gentleman and his Committee.
The hon. Member for Glasgow East spoke about the gender pensions gap. We have seen progress in women’s participation, particularly in automatic enrolment, where they are now slightly ahead of men, but I agree that we need to see further work on the issue. I intend to drive that forward.
I turn to measures for the self-employed. When I started this role, I found it striking how low pension savings were among the self-employed. As the right hon. Member for East Ham is aware, the success of AE is down to the employer enrolling the member, which is clearly something that the self-employed do not have. Nest Insight has recently published the results of its trials on behavioural messaging and savings mechanisms on financial digital platforms and money management apps, to test the role of tech-based nudges and the value of flexible savings.
My intention is to make retirement savings easier for the self-employed. To do that, I want to better understand the touchpoints through which the self-employed engage with the Government, which will be the most effective at encouraging them to save into a pension pot. So far, the most obvious point is the tax system. We have begun work with the UK trade body for business software developers to help us better understand the software market and explore the opportunities, both current and new, to support self-employed people to save for their retirement. This includes scoping the feasibility of building and testing retirement savings solutions with incompatible software used by the self-employed to manage their money.
We are also keen to explore and test hybrid saving vehicles that combine accessible and illiquid savings, which could preserve some control for individuals in managing their short-term finances alongside saving for retirement. The next stage of trialling will also build on the evidence from the work with HMRC to test the capacity of nudges to pension guidance systems installed within the existing assessment system, with a view to encouraging the self-employed to start saving. The Government have no intention to make automatic deductions for the self-employed via the making tax digital system, and we agree with my hon. Friend the Member for Torbay (Kevin Foster) that although we welcome all ideas for boosting self-employed pension savings, we do not think that mixing them with the national insurance system is workable.
Many Members mentioned the gig economy, and we are continuing to work with the Pensions Regulator and BEIS on this complex issue. As the right hon. Member for East Ham outlined, the Department’s view is that many gig economy workers are already eligible for automatic enrolment, including those on fixed-term or zero-hours contracts and agency workers. I heard what he said about the guidance produced by BEIS, and I will feed that back to that Department.
Sir Stephen Timms
I am grateful to the Minister for giving way again. I hope she is right and the legal position is as she said, but delivering enforcement clearly is not happening at the moment. Does she recognise that the Pensions Regulator needs more powers in order to do the job that she is saying it should be doing already?
Laura Trott
I understand and respect the right hon. Gentleman’s concerns, and I will be having further meetings with the Pensions Regulator about this issue. I look forward to discussing the outcomes of those when I appear in front of his Committee.
Raising the State Pension Age to 68
Debate between Stephen Timms and Laura Trott(1 year, 2 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Laura Trott)
I thank my hon. Friend the Member for Amber Valley (Nigel Mills) for raising this important issue, and all the other Members who have contributed to the debate.
The Government remain committed to ensuring that older people can live with the dignity and respect they deserve, and I absolutely reaffirm that the state pension is and will remain the foundation of state support for older people. As has already been pointed out today, changes in the state pension age have been made in a series of Acts by successive Governments from 1995—when the state pension ages of men and women were equalised—onwards, following public consultations and extensive debates in both Houses.
The state pension age is currently 66, and will increase to 67 in 2026-28. As was mentioned by the hon. Member for Reading East (Matt Rodda), Labour legislated for it to increase to 68 in 2044-46, but, following the Cridland review of 2017, the current Government policy is to bring the increase to 68 forward to 2037-39. That is the baseline; we are required under law to review it every six years, and that is what is now being undertaken.
As we heard from my hon. Friend the Member for Amber Valley, the coalition Government of 2010 to 2015 were committed to the “core principle” that people should spend, on average,
“up to one third of their adult life drawing a State Pension.”
They were also committed to giving individuals at least 10 years’ notice of any changes affecting them. The first review of the state pension age following the Pensions Act 2014 was undertaken in 2017, informed by both the Government Actuary’s report and the independent report undertaken by John Cridland. As I have set out, Cridland recommended bringing forward the increase in the state pension age to 68 from 2044 to 2026, as set out in legislation, to 2037 to 2039.
Sir Stephen Timms
The two documents from 2017 to which the Minister referred were published four months before the Government’s announcement. Why have the Government not published the documents before their announcement this time around, and will she do so now?
Laura Trott
I had a suspicion that the right hon. Gentleman might bring that up. As he rightly pointed out, I have written to him today to explain the rationale behind this, but I will confirm that both documents will be published in full. I look forward to discussing them with his Committee in due course.
Sir Stephen Timms
I just want to know why they have not been published. What is the public interest in keeping these things hidden?
Laura Trott
As I have said, they will be published in full. On the timing of publication, there is work going on in Government to undertake the review. Once it is finished the documents will be published.
The 2017 review was based on a recommendation to aim for “up to 32%” as the average proportion of adult life spent in receipt of state pension. The review used 2014-based life expectancy data. The Government accepted those recommendations, subject to a further review, before tabling the requisite legislative amendments. The savings from bringing forward this rise to 68 have already been included in published fiscal forecasts.
On 14 December 2021, the Government launched the second periodic review of the state pension age, and work is now under way to complete it, as required by legislation. The review must be published by May 2023, in accordance with section 27 of the Pensions Act 2014. At the autumn statement, the Chancellor committed to concluding the review in early 2023.
As part of the second review, the Secretary of State is considering evidence from two independent reports. The first, a report from the Government Actuary, assesses the latest life expectancy projections from all regions of the UK. There has been a lot of talk about life expectancy today, so I want to put on record the fact that the most recent projections from the Office for National Statistics show a slower rate of improvement in life expectancy than those that informed the Pensions Act 2014 and the Pension Schemes Act 2017. Nevertheless, despite the slower improvement rate, ONS projections continue to show increasing life expectancy over time, and the number of people over state pension age is expected to continue to rise. I can also confirm for the hon. Member for North East Fife (Wendy Chamberlain) that the review will consider the latest recommendations, as well as a wide range of other evidence, before reaching any conclusions about the state pension age.
The second report that will be taken into account is an independent report by Baroness Neville-Rolfe, which will consider recent trends in life expectancy and the range of metrics that we could use when setting the state pension age, including the metrics mentioned by my hon. Friend the Member for Amber Valley. We will publish both documents in full. With respect to the question of whether Baroness Neville-Rolfe will appear before the Select Committee on Work and Pensions, that is a matter for the Committee and for her.
Alongside examining the implications of the latest life expectancy data, the Government review is assessing the costs of an ageing society and future state pension expenditure, as well as considering labour market changes and people’s ability and opportunities to work up to state pension age, bearing in mind recent trends in life expectancy.
My hon. Friend the Member for Amber Valley highlighted the position of those who cannot continue to work. The review will evaluate the impact of previous changes to the state pension age for all individuals, including those with long-term health conditions or disability. The Government continue to provide substantial support for people who are unable to work.
My hon. Friend the Member for Dover (Mrs Elphicke) made some important points about age discrimination. The Government’s business champion for older workers, Andy Briggs, spearheads the Government’s work to promote the benefits of older workers and multigenerational workforces across England, influencing them strategically and by offering practical advice. I will ensure that my hon. Friend’s points about discrimination are passed on to the Department for Business, Energy and Industrial Strategy.
The review will aim to keep the right balance between affordability, sustainability and fairness between generations. The review has not yet concluded—it is very important to emphasise that, given some of the comments today—and I will not pre-empt its outcome. The Government are committed to ensuring that older people have dignity and security in later life, regardless of where in the UK they are living. The Government introduced further targeted support, including cost of living payments of up to £900 for the most vulnerable households and an additional £1 billion, including Barnett impact, to enable the extension of the household support fund in England in the next financial year. Since 2010, the full yearly amount of the basic state pension has risen by over £2,300 in cash terms. That is £790 higher than if it had been uprated by prices, and £945 more than if it had been uprated by earnings. For the first time, from April 2023, the full rate of the new state pension is worth over £10,000 per year.
Automatic enrolment is having a transformational effect on private savings. Over 10.8 million people have been automatically enrolled in a workplace pension, helping to deliver about an additional £33 billion into pension savings in real terms in 2021 compared with 2012. The hon. Member for North East Fife mentioned the PHSO inquiry. She will know that that is ongoing, so it would be inappropriate for me to comment on it until it concludes.
The Government are committed to ensuring that the state pension continues to provide the foundation for people’s retirement income and are proud of the support they have given pensioners since 2010. I welcome today’s debate and thank my hon. Friend the Member for Amber Valley. As I have outlined, the Government take the setting of the state pension age very seriously. I look forward to being able to discuss this matter further—I am sure we will—when the Government finally publish their second review.