Social Security and Pensions

Eilidh Whiteford Excerpts

Tuesday 21st February 2017 Commons Chamber

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I am glad we are able to debate these orders simultaneously. The Scottish National party will obviously not oppose the social security uprating order, and we certainly welcome the pensions uprating order, but this is an opportunity to put on record, again, our deep concern about the ongoing impact on low-income households of the freeze on working-age benefits. We are particularly concerned about tax credits, which are mostly paid to working families with children, and employment and support allowance, which is paid to those who are not currently fit for work but are in the work-related activity group.

Any of us who regularly pushes a trolley around a supermarket can be in no doubt that the price of basic foods and household essentials is rising, and rising sharply. The depreciation in the value of the pound last year has taken some time to filter through to retail prices, but increases in the price of imported food and other goods is now very visible. The Bank of England has made it clear that it expects inflation to remain well above the 2% target for several years.

Ahead of the Budget and looking further forward, I hope the Government will look again at the benefit freeze and recognise that those on low and middle incomes spend a much larger proportion of their income on essentials than wealthier households and are disproportionately affected by rising food and fuel prices. In that context, a 1% rise in those benefits that are included in the order is unlikely to keep pace with the increase in prices that we expect to see over the coming months. The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) has already alluded to the Joseph Rowntree Foundation assessment of the rising costs of essentials, which should give us all pause for thought. One simple example is that many of the severely sick and disabled people who will receive a 1% uprating—those who receive ESA as part of the support group—have limited mobility and are likely to spend a lot of time at home. Inevitably, they incur high heating costs during the winter months, yet the cost of energy is rising. Some of the big energy companies have already made announcements of price increases, and others have said that they are set to follow. Benefits that will be uprated by 1% include most disability and carer benefits—ESA, carers and pensioners’ premiums, statutory maternity and paternity pay and statutory sick pay. All are paid to people who are likely to be disproportionately affected by rising energy costs, and all are paid to people who are unable to work or who are limited in their ability to work.

Financial hardship is an increasing reality for households affected by sickness and disability and, as prices rise, that will only get worse. Even with increases to the minimum wage and personal allowances, large numbers of working parents and disabled people are significantly worse off in real terms and are finding it harder than ever to make ends meet.

When even the Financial Times is highlighting, as it did earlier this month, the strains on household finances that are already apparent and is warning that

“a combination of falling living standards and rising inequality would be extremely dangerous in today’s febrile politics”,

we should really heed the warnings.

I want to turn now to pensions and highlight the proposed increase in the single-tier pension. This has been the first full year that the new single-tier pension has been in effect, but I get the very strong impression that it is poorly understood among the general public.

Although I welcome the 2.5% increase in the single-tier pension, I am not at all clear how many pensioners will actually receive the full benefit of that increase. We know that there are both winners and losers in the transition process and that most new pensioners will not receive the full single-tier pension. Before its introduction, it was estimated that only around 22% of women and half of men reaching state pension age would be entitled to the full single-tier pension. Perhaps the Minister can clarify what has happened in practice and whether those sentiments were right. What proportion of male and female pensioners have received the full whack, and what ongoing impact assessment has the Department undertaken?

Perhaps the Minister can give the House an update on the pensions dashboard. I get the sense that there are real gaps in most people’s knowledge of the new system and that many people coming up for retirement are in for a nasty shock when they realise that they will not be eligible for as much as they think.

In this context, it would be very wrong not to mention the WASPI women, many of whom got insufficient and wholly inadequate notice of the shift in their pension age, and who, as a consequence, will lose enormous sums of money over the course of their retirement.

This week, I had a letter from a constituent who is one of the WASPI women. She did not get proper information about the changes and she has had no time to plan for them. She is facing an uncertain future in more ways than one in that she is currently undergoing treatment for cancer. She says that she does not know whether she will ever receive her pension. She is hopeful that she will make a good recovery—certainly I send her my good wishes. She makes the sobering point that none of us knows what is around the corner. There is a basic injustice here and that is why, even though she is ill, she is determined to fight for a fairer settlement. We can and we must do better by these thousands of women who are losing out.

While we are on the subject of women and gender inequality in pensions, I have to say that I am sorry that, in the past year, the Government have removed savings credits for new pensioners. Around 80% of those who previously benefited from savings credit were women, most of whom will have spent their working lives in low-paid jobs and are unlikely to have had access to an occupational pension scheme. Nevertheless, these are people who have managed to save, against the odds, despite the limited opportunities available to them. There is little enough incentive for people in low-paid jobs to save, and reducing savings credit and abolishing it for new pensioners erodes that incentive even further.

Pensions uprating is a wistful dream for some pensioners. Those who have frozen pensions are left out of the uprating. That is still a very live issue, and one that is likely to be more acute in the months ahead. There are those who are entitled to a UK state pension by virtue of having worked for it and of having paid their contributions but who have, for whatever reason, spent their retirement domiciled abroad. They face very different circumstances depending on whether their country of residence has a reciprocal agreement with the UK for the uprating of state pensions. Those in countries that do not have a reciprocal arrangement with the UK see their pensions frozen at their initial retirement level so, in real terms, the value of their pension falls every single year.

There are thought to be more than half a million people with frozen pensions, mostly in Commonwealth countries such as Australia, Canada, New Zealand and South Africa, but also in countries with strong family and historical links to the UK such as India, Pakistan, parts of the Caribbean and Africa. The issue will only become more acute in the months ahead as the UK leaves the European Union and European economic area. UK pensioners who retire to sunnier parts of the continent—there are thought to be 400,000—currently get their pensions uprated throughout the EEA as normal, but reciprocal arrangements will need to be put in place when we leave the EU if those pensioners are not to find themselves in the same difficult situation as those living in Canada and Australia. I hope that the Minister will be able to share the Government’s thinking on that issue, and tell us what steps they are taking to protect UK pensioners who live in other parts of Europe.

We need to deal with the fact that many of those approaching pension age, who have lived through an era of globalisation, will have worked in several EU countries and may have accrued pension rights in several parts of Europe, with wee bits of pension in several systems. That is true for many people who have worked in global industries or for multinational corporations. It is a bit of a minefield, and it would be immensely helpful if the Minister offered reassurance to UK pensioners living in EU countries that those issues are on the Government’s radar and will be addressed. I hope that the Minister will take the opportunity to address all the issues I raised as she closes the debate.