Pensions Bill [Lords]

Jenny Willott Excerpts

Monday 20th June 2011 Commons Chamber

[Jenny Willott (Cardiff Central) (LD)]

The Bill has been somewhat hijacked by the women’s pension age issue, but as the hon. Member for Aberdeen South (Dame Anne Begg) has said, there is much in it that is very good and extremely uncontroversial. There are other proposals that are good, but which some people find controversial, such as those on judges’ pensions. Funnily enough, a number of speakers in the other place became extremely worked up about that. As the Secretary of State said, judges currently make no contributions to their pensions. The only thing they contribute to is survivors’ benefit, for which they pay the princely sum of 2.4% or 1.8% of their salary, depending on the scheme, but they get an extremely generous pension at the end of it. I understand that one in six judges draws a pension of more than £67,000 a year, which puts them in the top 0.01% of pensioners, as the employer contribution is around one third of the salaries. The hon. Lady has just said that fairness is all in pensions, but clearly that does not seem fair to an awful lot of people. At a time of great debate on public sector pensions, there is no reason for judges to be exempt from reform. There seems to be a clear consensus in this place, if not in the other place, that that needs to be tackled as soon as possible.

I also welcome much of the rest of the Bill. The introduction and simplification of many of the opt-out arrangements is really important. The hon. Member for Aberdeen South and I were members of the Work and Pensions Committee in the previous Parliament and did a lot of work on the arrangements for the National Employment Savings Trust and how to ensure that people on low incomes are encouraged and supported to save for retirement. Like her, I welcome many of the Bill’s proposals and think that it is really important that the measures are being introduced. Hopefully, the tweaks will overcome some of the problems identified during the passage of the Pensions Act 2007, which most people supported. Many of the concerns that were raised related primarily to small businesses and those on the lowest incomes and are covered by the Bill.

I am also glad that the Bill will set up a system that will make it easier for people on low incomes to save, because that has been a problem for far too long in this country and needs to be tackled. Although the level of means-testing is still an issue and therefore for some of those on the very lowest incomes, as employers will also contribute to pensions, it will be more worth while under the system in the Bill and the previous Act for more people to save.

However, like the hon. Member for Aberdeen South, I am afraid that I will do what I am sure everyone in the debate will do and raise the concerns about the proposals on the women’s state pension age. I am sure that you, Madam Deputy Speaker, will be sick to the back teeth of people complaining about the women’s state pension age by the end of the debate, as I am sure will the Minister. [Interruption.] You are far too charitable, Madam Deputy Speaker.

I agree with the Government that the state pension age needs to rise. In 1970, someone retiring at age 60 could expect to live a further 18 years. Last year, the figure was 28 years. There has clearly been a significant change in demographics in this country, which has to be reflected in our pensions system. We cannot expect people to work until they drop, but the more time they spend in retirement, the more strain that puts on the public purse.

That issue goes hand in hand with pensioner poverty. The right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who is no longer in his place, talked about the progress he felt the previous Government had made on pensioner poverty. Progress was made, but last year there were still 2 million people of pension age living in poverty, which is unbelievably high for a rich country such as the UK and a disgrace. Unless we seriously overhaul the pensions system, pensioner poverty will continue to be a problem. The longer people live, the less an occupational pension is likely to pay out, for those who are lucky to have them, and the longer they will have to live in poverty after they retire.

We must invest in the state pension in order to tackle pensioner poverty, which is one reason that I welcome the steps that the Government have already taken to bring in the triple lock, which has been a Liberal Democrat policy for a number of years. By linking the basic state pension to earnings and instituting the triple lock, pensioners will hopefully take home £15,000 more over the course of their retirement than they would have done under the previous Government’s policies. That will start to make a difference to levels of pensioner poverty.

What I think will really make a difference is the Pensions Minister’s plan for a flat-rate pension, if and when he is able to introduce that and work it through the House. As has been announced, the plan is for all pensioners with contributions of more than 30 years to receive a flat-rate pension of around £140 a week, uprated by inflation, from 2016. For many people, particularly women in the cohort which has been referred to today, that would be a significantly higher basic state pension than they currently receive. There is particular concern about those women, many of whom do not have private savings and do not necessarily have a full contributions record, as we have discussed in relation to the state second pension. The people who are likely to be penalised by the rising state pension age will benefit significantly from the introduction of a flat-rate pension.

We should not be trying to tackle pensioner poverty simply by increasing the burden on those in society who are working. Wages are flat at the moment and prices are rising, and the Secretary of State has laid out the change in the ratio of pensioners to working people in the population. We need to do something more fundamental. We need to create a sustainable way of managing our ageing population, rather than continually increasing the demands on taxpayers. The Turner commission and the 2007 legislation accepted the premise that, as longevity increases, so the state pension age must rise, but we have now learned from the most recent figures that the situation has changed even more than was understood when the commission carried out its work. We need to take that into account if we are to have a sustainable pension scheme that people can trust for the long term. The Government are right to look at raising the state pension age, and if the flat-rate pension is introduced in 2016, although hundreds of thousands of women will have to work longer, they will get a better pension in the end, which is a trade-off that many will feel is worth it.

As many Members have mentioned today, it is the cohort of women born in 1953 and 1954 who will feel the greatest impact of the change, particularly the 33,000 born in March 1954, who will have to work two years longer. Like other Members, I do not believe that the plans currently laid out are fair for those women. People need time to plan for their retirement, as the hon. Lady for Aberdeen South said. A number of Members have said that those women will have five years’ notice, but my understanding is that it will be seven years before facing the situation, so I would be grateful if the Minister clarified that. Seven years is not a very long time in which to plan whether to work for another two years. In order to keep the public support that we need for such long-term plans, pensions must have full support across this House and among the public as a whole.

[Stephen Lloyd (Eastbourne) (LD)]

I concur with every single word that my hon. Friend says. Owing to the difficult decisions that the coalition Government are making on the economy, I am confident that, by 2018, 2019, 2020, the challenges will have been met and the Government will be able to listen to Back Benchers from all parts of the House and move the change back to 2020. The difficult decisions that will have been made by then will mean that the economy is ready and able to sustain such a move.

[Jenny Willott]

I thank my hon. Friend for his intervention, and it will be interesting to hear what the Minister says to that when he sums up the debate. I am sure that during the debate several suggestions will be made on how to tackle the issue, and that is one.

The changes have to feel fair, but the current proposals do not. The hon. Member for Aberdeen South said that fairness is extremely important, and as the Pensions Minister has said it is extremely important that the basic state pension, whatever its structure, has to feel fair, because it has to last a long time and be free from arbitrary political intervention. The current proposals, however, do not pass the fairness test.

[Mrs Main]

The hon. Lady, who is making a powerful speech, seems, like me, to agree with an awful lot of the very good that is in the Bill, and it would be a shame to ditch the baby with the bathwater, as Opposition Members plan to do tonight. My hon. Friend the Member for Cardiff North (Jonathan Evans) has come up with an interesting proposal, and her hon. Friend the Member for Eastbourne (Stephen Lloyd) has just come up with one as well. Does she agree that Second Reading is the time to do so and to take such ideas into Committee? Like me, the hon. Lady will, I hope, have been encouraged by the sympathetic noises from Government Front Benchers, who are listening to the sensitive arguments from Government Members.

[Jenny Willott]

I absolutely agree. As the hon. Lady says, the point of Second Reading is that we have the opportunity to air a whole load of different options and concerns about the Bill, and as she says also, there have already been a couple of proposals for tackling the issue. I am sure that we will hear more as the debate goes on.

I completely agree that the Bill contains a huge amount that is valuable and important, so I am concerned about the Opposition saying that they will vote against it as a whole. Our constituents, living in our local communities, will be disappointed that the Opposition have taken that approach to the legislation and are not prepared to give a Second Reading to its positive elements.

[Dame Anne Begg]

I am sure that the hon. Lady received a large number of e-mails and letters from her constituents who are affected by this particular anomaly. Did any one of them say that she should vote for the Bill, or did they all encourage her to vote against it?

[Jenny Willott]

To be honest, I cannot remember whether anybody asked me to vote against the Bill. Most writers of the letters and e-mails that I have received raised concerns about the particular proposal in the Bill, and I agree with them. As I have already said, I share their concerns and have issues with what is proposed, but the whole point of Second Reading is that we have the opportunity to raise our concerns and to send the Bill into Committee, where people will be able to go through it clause by clause, to debate what the alternative may be and to have a chance really to scrutinise it. Today’s debate is not the time just to chuck it away.

[Dame Anne Begg]

If there are no changes in Committee and the Bill returns to the Floor of the House in the same position as it is in today, will the hon. Lady vote against it?

[Jenny Willott]

I cannot possibly say what I will do at that stage, because we do not know what shape the Bill will be in. I put the Bill in the safe hands—I am sure—of the Pensions Minister and of colleagues from all parts of the House, who will be able to look at it, try to refine it and send it back to us in the best possible shape. At that point, like all hon. Members, I will be able to decide whether to support it in its entirety.

[Sheila Gilmore]

If the hon. Lady or other Members table an amendment in Committee on the issues that she says she is concerned about, will she vote for them, as she did not when the Welfare Reform Bill was in Committee?

[Jenny Willott]

We have no idea who will be on the Committee for the Bill before us, so I cannot possibly comment on what amendments might or might not be tabled or on who might or might not support them.

The Government should, however, think again about these plans and find a way to make them fairer for the worst affected women. We have already heard a number of proposals, and I was pleased that the Secretary of State made it clear that he is open-minded and willing to listen to what options there are. It was important for us to hear that this afternoon.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

I concur with my hon. Friend. The importance of today is that the strength of feeling about this one aspect of the Bill is aired, that Ministers convey the feeling that there will be a response and, most importantly, that there is a response that makes this part of the Bill fair.

[Jenny Willott]

I agree. My hon. Friend has spoken in the House in recent weeks on the issue and on her concerns about its fairness, and I am sure that Ministers are listening and taking that message on board.

I appreciate that this is a difficult and costly area in which to make any changes. The figures are mind-boggling, and a few months here and there will make a significant difference to the cost, but it cannot be beyond the wit of man to find a way to smooth the process in order to ensure that that small group of women does not end up being so badly affected. I have every faith in the Government and, in particular, in the Pensions Minister, who is generally regarded as one of the UK’s foremost experts on pensions. He has done a huge amount of work in the past on women’s pensions, helping thousands of women to get the money to which they are entitled, so I put him on notice today that I trust him to resolve the issue. I am sure that, if he cannot do it, nobody can.