Pensions Bill

Debate between Baroness Greengross and Baroness Sherlock

Monday 16th December 2013 Grand Committee

[Baroness Greengross]

My amendment is about a public education programme, which is necessary as so many people are in the same position, as has been outlined in noble Lords’ statements. Amendment 30 seeks to ensure that individuals are made aware of both their responsibilities and expected outcomes here; for example, in terms of state pension contribution years and amounts, and what outcomes they can expect and when. Given longer life expectancy and extended working patterns, it is not unreasonable to increase the number of national insurance contributory years from 30 to 35. People who have contributed for less than 35 years but for at least the minimum qualifying period of seven to 10 years are going to receive a proportion of the pension. However, it is absolutely critical that this change is clearly communicated to all individuals so that they can ensure that any years outside of work—for example, because of ill health or caring responsibilities—are counted as years of contribution and so that they can make appropriate private pension arrangements, should they wish to do so.

[Baroness Sherlock]

My Lords, these amendments relate to the crucial question of information. The Government have stressed at different stages of the Bill the move to reduce the complexity of the state pension to make sure that people understand their likely entitlement and are therefore incentivised to save enough to complement the support that they can expect from the state. This came up a lot when the Work and Pensions Select Committee looked into the matter. Citizens Advice, in its written evidence to the Select Committee, noted that a considerable complexity would remain in the system, mainly as a result of transitional provision. It accepted that as being unavoidable but said that:

“A commitment to a sustained communications programme could improve outcomes, manage expectations, minimise misinformation, promote action on NI contributions, and support personal saving for retirement”.

I think that was nicely put. The ABI said this to the Select Committee:

“Adequate communication of the change will be essential, or the clarity and simplicity of the new system could be undermined … No-one should feel unclear about the amount they will receive—and therefore need to save personally themselves”—

—a common view between the ABI and Citizens Advice.

The Select Committee noted that various witnesses focused on that issue. Sally West of Age UK said that,

“we are finding a lot of people are understandably confused”.

I think that that is an understatement. The Select Committee reported considerable confusion about the reforms. Many people wrongly believed that the introduction of the STP would mean that everyone would get £144 a week in state pension, because they did not understand the eligibility criteria. Others thought that there would be no means-testing at all; others thought that if they were due more under the current system, they would lose all that and get only what was due under the new system. The implications of having been contracted out or of not knowing whether you were contracted out or in was another area of confusion. It was noted that it was therefore important to,

“ensure that people have full information about their own future entitlement as well as a reasonable understanding of the reforms”.