Terminal Illness: Early Access to Pensions

Virendra Sharma Excerpts

Tuesday 2nd May 2023 Westminster Hall

[Laura Trott]

The Department’s position is that help is available through benefits other than the state pension. The state pension is not an entitlement pool that exists; it is done on a pay-as-you-go basis. Of course, it is different from private pensions, which I will come to in a second, and there is more that we could do on that front to make the situation easier and more straightforward.

I of course accept the sentiment on which this proposal is based—that those who are terminally ill should be financially supported—but grounding this support on the state pension system, because it is there, does not make for a practical proposition, and that is in addition to my earlier points on the nature of the state pension.

Hon. Members will be aware that the second Government review of state pension age was published on 30 March 2023. The Government noted the independent report’s recommendations on the rise from 67 to 68, but highlighted that Baroness Neville-Rolfe was unable to take into account the long-term impact of recent significant external factors, bringing uncertainty to the data on life expectancy, the economic position and labour market.

I raise that point because, as part of that process, independent reviewers looked at early-access policies that would allow variation in state pension age for certain groups. John Cridland covered that in his 2017 independent review of state pension age. More recently, Baroness Neville-Rolfe, in her independent review, recommended that the Government should look at such a scheme for people who had spent long periods of their lives doing physical work.

However, both reviewers recognised the real, practical difficulties of designing and delivering such a scheme. We are aware that when and why people leave the labour market will vary and will be affected by a host of factors, including their national insurance record, savings, health, caring responsibilities and other factors. It would be impossible to take account of all those factors in setting the state pension age or to create rules for one particular group that would be fair to others. In addition, the Government are mindful of the fact that a universal state pension age has many benefits, including giving a clear signal to those planning for retirement.

Private pensions are very different. Through automatic enrolment, we have extended pension saving, so more individuals will have access to choices at retirement, with more than 10.8 million people automatically enrolled into a workplace pension as of March 2023. If someone has a defined benefit private or workplace pension, they may be able to begin taking an income and/or lump sums from their pension at any age due to ill health. That provision is dependent on the rules of the scheme.

In addition, the generous tax benefits of saving into a defined contribution pension provide individuals with the ability to accrue savings for their retirement and provide them with freedom and choice about how they access them. Individuals can normally access those savings, without penalty, from age 55. However, to address the point made by the shadow Minister, the hon. Member for Reading East (Matt Rodda), they may be able to access their pension as a lump sum from any age if the scheme administrator has received evidence from a registered medical practitioner that the member is expected to live for less than one year.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) raised a specific example of where there were difficulties. I would be grateful if she would write to me about that, and we can see whether there is anything we can do to help.

The hon. Member for Reading East raised some points on energy. The energy price guarantee has been extended for an additional three months at its current level, from April to the end of June. That will bring a typical household energy bill for dual-fuel gas and electricity down to around £2,500 per year in Great Britain and around £2,109 per year in Northern Ireland.

In conclusion, I have set out the range of support that the Government provide for people with terminal illnesses. Although I of course have the greatest sympathy for anyone in that position, the Government do not believe that adjusting the state pension system to support that group is the right approach, although early access to private pensions is obviously a different matter.

[Mr Virendra Sharma (in the Chair)]

I call Dave Doogan to wind up.