State Pension Age (Women)

Debate between Steve Webb and Angela Smith

Wednesday 11th May 2011 Westminster Hall

[Steve Webb]

On how the proposed single-tier pension will work, it is a Green Paper with options, so the sort of detailed figures for which the hon. Lady asks will be produced when we have identified which of the two options we will go for and refined the proposition. That information will be made available when the proposition is refined further.

To clarify, at the moment, many women in the age cohort that we have been discussing will have spent time at home with their children before the state second pension was introduced. Whereas the state second pension offers protection for time at home with children, the state earnings-related pension scheme did not. That set of women is approaching pension age. People have accused me of moving the goalposts. I am indeed moving the goalposts for those women, but in their direction. They will draw a state pension—yes, later, but for an average of more than 20 years. Compared with when we first started debating the changes in state pension age last summer, that is a significant difference.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

If the Minister is so confident that the changes that he is introducing will be so beneficial, have not the Government failed to communicate that fact? Throughout the election campaign, I met women on the doorstep who were angry about what he describes as the changing of the goalposts, because they felt that it was against their interests, not in favour of them.

[Steve Webb]

I accept entirely that although what we propose is a lot simpler in a sense than what came before, that is not massively well understood because pensions are so complex. As we refine the proposition, we will have a lot of communicating to do. However, it stands to reason, for example, that paying a flat-rate state pension rather than an earnings-related one will, on average, benefit women. It must, because women earn less on average. Crediting years at home with kids towards the full pension, not just the basic pension, will and must benefit women on average. There can be no doubt that the options presented in the Green Paper would substantially benefit women, on average, out of the overall pensions budget. I look forward to the hon. Lady’s help in communicating that to her constituents.

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[Steve Webb]

I am grateful to the hon. Gentleman for raising that point, and for his self-restraint in making a brief and thoughtful contribution in order to allow others to speak. He is right that we need to make people aware of the changes. Our dilemma is that none of this is law yet. We must tell people that it may happen, but we cannot say on Government websites, “These are the new rules,” because Parliament has not approved them yet. The current website describes the current legislative position, as we are required to do, and then it says, “However, important changes are being discussed in Parliament. Click here if you want to find out what is being proposed.” As soon as the changes go through—this summer, or whenever—we will, of course, publicise them. We routinely write to people before they reach state pension age, and in a time of change we do it more.

I agree entirely that we need to communicate. One frustration of mine is that I get letters saying, “You’ve put my pension age up by six years.” Anyone who is going from 64 to 66 had their state pension age raised from 60 to 64 some 15 years ago, but they did not notice, because when they were 42 or so, they were not interested in pensions. That is our challenge. People close to pension age are interested in pensions and follow such matters; younger people turn off as soon as they hear “pensions”. Communicating to people further ahead is a challenge.

[Angela Smith]

I thank the Minister for giving way again; he is being generous. Surely the fact is that if the pension generally will improve, as he says, it will improve for everybody. I was born in 1961—I am not afraid to admit it—and my retirement age is still 66 under the proposals, as it was before the election. I will benefit from the more generous pension that he plans to offer, but women born between 1953 and 1960 are still being singled out, in that they will have to wait longer than they planned before getting that more generous pension. They will still lose out, and they are still being discriminated against.

[Steve Webb]

I suspect that the hon. Lady will not benefit from our proposals, as I imagine that she would have received a full basic state pension anyway, whereas the proposals will help some women who would not have received it. By being employed here, she is also contracted out of SERPS, resulting in a deduction from the £140. I do not actually think that she would benefit.

I do not dispute for a second that that set of women will be affected by the changes, but the pension that they will get under our proposals will be significantly better on average than that received, for example, by women who retired a few years earlier. We can do all sorts of comparisons between this group and that group. Some things will be better for some and some will be worse. What I am saying is that several hon. Members have said, “You used to campaign for women’s pensions, but you don’t care any more,” but I have spent all my time as a Minister working on proposals that will benefit women pensioners specifically.

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[Steve Webb]

That does not apply to the figures I quoted, which relate to the difference between 1993 and 2010. All of the women in 1993 had a state pension age of 60, but all of the women whom I was talking about are under 60—they are currently in their late 50s. A diminishing proportion of the women about whom we have been talking have caring responsibilities, although that may change.

The issue of moving the goalposts has been mentioned and I think that one Member said that we are happy to change the pension age at the last minute. We have set out in our Green Paper a consultation on how we should do this beyond 66 in the longer term. In other words, what is the right balance between notice, keeping up with longevity, and fairness for those who have to pay national insurance for the increased longevity? There is a dilemma. Ideally, we would give people huge amounts of notice.

[Angela Smith]

That is what we did.

[Steve Webb]

That is not what the previous Government did. We would love to be able to say to people who are 40 or 45 years old, “This will be your pension age.” However, if we said that to 45-year-olds, who have another 20 years or more before they retire, and another 20 to 25 years of life in retirement, we would be locking in what we know about longevity now for pensions that we will still be paying in 50 years’ time. That is just not viable.

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[Steve Webb]

We have made it clear that the age-66 changes are in the present Pensions Bill, which will be legislated for long before the end of this Parliament. We are also consulting in the Green Paper on a systematic mechanism for going beyond 66 that takes account of all the factors that we have talked about. That will try to strike a balance between notice, which is important, and fairness for those who bear the cost of increased longevity. The intention—this is something that no previous Government have done—is for the further changes to do it in a more systematic way. The 60 to 65 equalisation was a response to a legal case. The previous Government’s plans for 66, 67 and 68 were not ad hoc exactly, but there was no mechanism in place to respond to subsequent improvement in longevity. What we are trying to do as part of our reforms, which we are consulting on at the moment, is give people the certainty that future Governments will not just pass a law and change things, but that there will be a structure in place and that they will know how it is going to be.

[Angela Smith]

I was on the Committee for the Bill that became the Pensions Act 2008, which, as the Minister has said, set out the changes recommended by the Turner report. He says that the approach that he wants to introduce is systematic, but does it not mean a constant shifting of the goalposts that will leave most people, however much notice they are given, with a constantly changing picture of when they should expect to retire?

[Steve Webb]

I hope that the hon. Lady will respond to our consultation on the right process. She raises the important issue of how we strike a balance. The fact is that one in six of us alive today will live to be not 88, but 100, and that figure is increasing all the time. How do we strike a balance between that and giving people notice? We could have a principle of always giving people x years’ notice, which would mean that it would not matter if longevity improved dramatically after that point. That is part of what we are consulting on and there are trade-offs. I hope that the hon. Lady will respond to that.

We are moving into a world in which pension ages will not be the rock-solid certainty that they have been in the past, because they cannot be. The hon. Member for Bolton South East (Yasmin Qureshi), who has left the Chamber, said that this is like someone starting a job but having their contract changed halfway through. On that basis, people start paying national insurance at 16, have a guaranteed pension age for the next 50-odd years, and have another 20-odd years after they start drawing a pension. Therefore, the second that they are in the system at 16, nothing can change until 70. That is economic madness. There has to be some adjustment, but I accept that it has to be done in a measured way, which is why we are consulting on an appropriate mechanism.