Pensions Bill

Debate between Iain Duncan Smith and Brian H. Donohoe

Monday 17th June 2013 Commons Chamber

[Mr Duncan Smith]

No, that is not our plan, but our commitment is public and stated, and goes throughout the whole of this Parliament. This Bill brings that in, so any further changes would have be made later. I simply say that our commitment to the introduction of this Bill remains exactly as it stands.

The two tiers—the basic state pension and the additional state pension—together with other outdated add-ons, make for this complication, as does the mess and mass of means-testing known as the pension credit. With 11 million people now not saving enough for their retirement, we can and must do more to simplify the state pension system. The right hon. Member for Birkenhead (Mr Field), who is in his place, has gone on about this matter for long enough and there has been consensus across the Floor of the House. Getting more people to save, and to save more when they save, is critical.

The first step, which the previous Government had initiated, was auto-enrolment. We picked that up and are now successfully rolling it out to help up to 9 million people into a workplace pension scheme and to make savings the norm. That big change has, again, been smoothed through and taken through at rate, but we have taken care and consideration, because at this difficult time some companies would encounter difficulties. We have been careful to ensure that the roll-out allows time for people to plan. Significantly, more than 400 of the country’s largest employers have now met their auto-enrolment duties, and more than half a million eligible jobholders were newly enrolled by the end of April 2013. Once this is in a steady state we expect up to £11 billion more in pensions saving every year. That is a very big and significant reform. People from many other countries around the world have been to talk to my hon. Friend the Minister of State and have seen me about doing it themselves. We are not breaking absolutely new ground, but for us and for many others it is a real departure: getting people to save and save from the moment they move into work.

Measures in the Bill will ensure that automatic enrolment works as intended. We need to address some technical issues, clarify the existing powers and provide for the automatic transfer of small pension pots. The last of those is vital, because a quarter of people already lose track of at least one pension, and it is estimated that some 50 million dormant pots will exist by 2050 if we do nothing about this issue. It is confusing, and I say with the greatest respect to my hon. Friend the Minister of State that although plenty of people understand pensions, dine out on them, sleep on them and can work them very cleverly—the word “anorak” does not come into my lexicon at all—most people find this a complex and difficult area. People can be left with small pots as they move, and that is now the way of work; people move in and out of different companies, leaving behind these pots. It is vital to deal with that, and my hon. Friend has made a huge move to do just that.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Perhaps I am an anorak, as the chairman of the pension fund for Members, but one of the issues is the question of contracting out. As I understand it, the Bill does not allow contracting out. Am I right to say that people like us and many others in the public sector will face an increase in national insurance contributions?

[Mr Duncan Smith]

I fully respect the hon. Gentleman’s knowledge of pensions, and that is the case. We have not shied away from that: there will be an increase in national insurance contributions for a number of people. Some 70% of employees will not pay any national insurance charges, although some 30% do, and overall most of our 10% will get a better pension that will be higher in total than that which they would have had according to their contributions. All, bar a smaller number, will be better off. It is never an easy pill to swallow, but the overall reform benefits the vast majority of people. I accept that there will be that charge, but the vast majority will benefit and even those with higher national insurance charges will benefit, too.

[Mr Donohoe]

In that case, it will mean a pay cut to a considerable number of people in the public sector.

[Mr Duncan Smith]

My point was that although, of course, the charge will add to the amount they pay, overall they will get a better state pension over the lifetime of that pension. It is a trade-off, in a sense: they get more, but they have to pay a bit more. Whichever way we cut it, it would be complex and difficult to avoid that. During the passage of the Bill, we will be happy to hear more from the hon. Gentleman and to hear any ideas he has, but our principal position at the moment is to reduce it to the smallest level that we can.

Pensions Bill [Lords]

Debate between Iain Duncan Smith and Brian H. Donohoe

Monday 20th June 2011 Commons Chamber

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

I beg to move, That the Bill be now read a Second time.

May I first say something that might help the House? Hon. Members might not realise that there are a number of different things in the Bill, and I plan to go through those elements. I will obviously take interventions, and it would be helpful if interventions were made on those sections in due course; otherwise, it will take a long time, and I know colleagues want to speak.

The Bill is designed to secure this country’s retirement system, putting it on a stable and sustainable footing for the future. I remind the House that our first priority on coming into government was to secure the position of today’s pensioners. We acted immediately to introduce the triple guarantee, meaning that someone retiring today on a full basic state pension will receive £15,000 more over their retirement by way of the basic state pension than they would have under the old prices link. For 10 years, the previous Government talked about this, but we acted in our first year.

The backdrop to the Bill is that we have taken action, and we have committed to a permanent increase in the cold weather payments to £25—an increase the previous Government had planned to be temporary. The old rate, I remind colleagues, was £8.50. Last winter alone we paid out some £430 million to support vulnerable families. At the same time, winter fuel payments will remain exactly as budgeted for by the previous Government: at £200, and £300 for those over 80.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Will that be inflation-linked?

[Mr Duncan Smith]

With respect, it never was under the previous Government, and we are not going to change that policy. We have had plenty of discussions on this, and I remind the hon. Gentleman that, although the previous Government uprated it, the Red Book for that time shows that absolutely no money was allowed thereafter, so it was going to settle back. Let us be absolutely clear about that.