Pension Schemes

Vicky Foxcroft Excerpts

Thursday 2nd May 2024 Commons Chamber

[Vicky Foxcroft (Lewisham, Deptford) (Lab)]

I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing and opening this debate. He has spoken passionately about this subject in the House before, especially in relation to the BP, Shell and other oil and gas schemes, and about the way that decisions are being made because of concerns other than the best interests of scheme members. I admire his knowledge and determination to support those who have been affected by adverse changes to their pension schemes.

My good friend, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), passionately raised the case of his constituents who are Allied Steel and Wire pensioners, and he spoke of the need for the Government to carefully consider the Select Committee’s report. I hope that the Minister will meet hon. Members and their constituents, and that he will update hon. Members who have so doughtily put forward their constituents’ cases. I worked as a trade union official in a previous life, and I represented many members in pension disputes, so I have experience of this area.

I thank the Backbench Business Committee for granting this debate, and I thank colleagues for their valuable and insightful contributions. Young people are frequently, quite rightly, advised to start planning for their retirement as early as possible. When people make plans for their future, they do so in good faith. A contract is effectively created between employer, or state, and employee to provide for an income to be paid in later life. Although it would be naive to think that nothing could change during the intervening decades, people make decisions about how they will afford their retirement when they enrol in a pension scheme.

The right hon. Member for Orkney and Shetland has previously spoken in this place about the emotional representations he has received from people affected by the changes to the BP defined benefit scheme. I am sure nobody here could fail to be moved by the words of the dying BP pensioner who was told that his widow will no longer be protected from inflation, despite previous assurances. Pensions are, after all, not only an income while we are alive. They are also a way of providing for loved ones after we are gone.

My Lewisham, Deptford, constituency is not so well known for its oil and gas, but I have a constituent who is affected. When they contacted me last year, my constituent outlined how, in practical terms, BP’s decision to override the recommendations of its pension fund trustees meant that the pensions of some 60,000 individuals in the UK had declined, in real terms, by 11% in just two years. For an individual in their 60s on an average pension, that 11% cut equates to a loss of income of about £60,000 across their retirement. Some 16,000 of the individuals affected are in their 80s and 90s, and it is not a great leap to assume that many may be in poor health and may have faced spiralling energy costs over the last few years. That is just one example of the huge impact that policy changes can have on individuals.

Let me turn to the wider pensions landscape. There are three types of pension in this country: defined benefit, defined contribution and the state pension. All have been touched on at various points during this debate. We have reached something of a critical moment in pensions policy. The last far-reaching review of the UK’s pension system, carried out by the Pensions Commission, reported in 2005. Since then, the UK has weathered a global financial crisis, a pandemic and the highest levels of inflation for almost 40 years. Over the same period, home ownership rates have fallen and there has been a big rise in self-employment, thanks to the gig economy. In short, the way people are—or are not—saving for their retirement has changed, and we need to determine whether the current pensions landscape is still working.

That is why in November my right hon. Friend the Member for Leeds West (Rachel Reeves) announced a wide-ranging pensions review. Our review will look across the whole sector. It will set out proposals to ensure that individuals get the best possible returns, and will identify the barriers to pension funds investing more in UK productive assets. Perhaps a quick review of the track records of Labour and the Conservatives will provide further evidence of why Labour is best placed to hold that review. Under the last Labour Government, pensioner poverty halved—a million were lifted out of poverty. So how are things going under the Conservatives? On their watch, one in five pensioners now lives in poverty; gas and electricity bills have rocketed; mortgages and rents have gone through the roof, and more older people are renting into retirement; and increasing numbers of pensioners are relying on their hard-earned savings to get by.

Analysis carried out recently by Labour has shown that the state pension is the main source of income for more than 6 million people. Women, over-75s and single pensioners would pay the heaviest price if the Tories cut the state pension to fill the £46 billion tax black hole created by their unfunded proposal to cut national insurance. That would see the pension cut by £96 a week, or pensioners paying more in tax. That is proof that you can’t trust the Tories with the state pension.

In the midst of a cost of living crisis that is hitting pensioners hard, the Government are failing to ensure that families are getting the support that they are entitled to; up to 880,000 eligible pensioners are not claiming pension credit. When we look at various workplace pensions, our analysis shows that average pension pots are £6,300 smaller than they would have been had wages grown at the rate they did under the last Labour Government. A worker on average earnings can expect to have amassed a £70,600 pension pot since 2010. However, if wages during that period had grown at the rate they did under Labour, the same worker would have built up a £76,900 pot.

Working people will feel the cost of Tory chaos for years to come, with the Government’s failure to make work pay wiping thousands of pounds off the value of the average pension pot. All that is before we get to the Government’s broken promises on the triple lock, and the billions that the right hon. Member for South West Norfolk (Elizabeth Truss) wiped off pension funds with her disastrous mini-Budget. We may not represent the same party, but I hope that the right hon. Member for Orkney and Shetland will agree that older people are paying a heavy economic price for the mess created by the Tories.

The number of people aged over 65 will increase from 11 million to 14.5 million over the next 20 years. We are living longer—one in four babies born today will be around to celebrate their 100th birthday—yet the Centre for Ageing Better says that a financially secure and healthy later life is becoming increasingly unlikely for millions of people.

Labour’s record on pensions is clear. We lifted a million pensioners out of poverty. We introduced pension credit, boosting the incomes of the poorest pensioners, a disproportionate number of whom were women. As my right hon. Friend the Member for East Ham (Sir Stephen Timms) rightly pointed out, we created automatic enrolment, which brought 10 million more people into workplace pensions and gave them a level of retirement income they otherwise never would have had. When the Tories broke the triple lock, which has been vital in protecting pensioners’ incomes and providing security, we campaigned against that. Under Labour, the triple lock is safe.

Furthermore, we will never put the nation’s financial stability at risk by playing fast and loose with the economy. We will tackle the cost of living crisis head-on and ensure that individuals have the security they deserve in retirement. We will give future pensioners the ability to prepare for retirement with confidence by creating more better-paid jobs in every part of the country, helping people get into, stay in and get on in work, and championing decent second pensions for all.

Pensioners, along with everyone else in the country, need change. Labour has a plan to grow the economy, put money back in people’s pockets, make work pay and be the party of pensioners again. Although it is not within the Minister’s power to call a general election, perhaps he could have a word with someone who can.