Future of Pensions Policy

Kirsten Oswald Excerpts

Tuesday 8th December 2020 Westminster Hall

[Kirsten Oswald (East Renfrewshire) (SNP)]

It is a pleasure to serve under your chairship, Mr Hosie. I thank the hon. Member for Delyn (Rob Roberts) for securing today’s debate.

My hon. Friend the Member for East Dunbartonshire (Amy Callaghan) would have been here today but for her recent health issues. Other Members will be pleased to hear that she is showing good signs of recovery, and I know that everyone will join me in sending our best wishes to her.

Members should be in no doubt that the Scottish National party believes that pensions policy should be in Scotland’s hands; this would let our Scottish Parliament set a policy that reflects Scotland’s circumstances. That opportunity to do things that work better for people in Scotland will come with independence, which more and more people recognise as the best future for Scotland.

For now, while the SNP broadly supported the Bill, we believe that improvements can be made, including in managing the roll-out and risks of pensions dashboards, protecting existing defined benefit schemes, tackling the injustice of section 75 debt, and improving automatic enrolment. However, pensions policy must address more fundamental issues; as the hon. Member for Delyn said, pensions policy should be a simple matter, allowing people to save up during their working lives to finance their retirements. Instead, it is notoriously complex; it is of such complexity that many people switch off, leaving their biggest asset—their future security—in the hands of others. Adding new options, such as collective money purchase schemes, increases that complexity.

One of the questions facing the UK is: why has the pensions bar been set so low compared with other countries? A 2017 report by the OECD found that UK pensioners get the worst deal of any OECD country, retiring on just 29% of nation average earnings, compared with an OECD average of 63% and an average for EU member states of 71%.

As the UK’s population ages, this leaves much of the population with little choice and limited purchasing power. Even the triple lock, which the hon. Member for North East Fife (Wendy Chamberlain) spoke about comprehensively, has had a limited impact, with the value of the basic state pension increasing by less than 1.5% of national average earnings since 2011.

Recognising that pensions are too low to support a lengthy retirement should be the beginning of a serious programme for change. The SNP has long supported the establishment of an independent savings and pensions commission to ensure that pensions and savings policies are fit for purpose. Such a commission could prevent changes being announced with no assessment of impacts, and without communication of the changes being made properly, as happened when the 1950s-born WASPI women had their state pension age changed with little or no notice or information, as the hon. Member for Luton North (Sarah Owen) noted. The increase in state pension age beyond 66 also does not take into account the demographic challenges we face in Scotland, but it seems that we in Scotland, just like the WASPI women, are getting a message—that is, that this Government and this Parliament are not listening.

Ahead of the spending review, the Chancellor was warned that the proposal to reform measures of inflation would result in more than 10 million pensioners losing out if he moves to a lower inflation measure. Where was the public debate around a so-called technical adjustment that could take an estimated £60 billion out of UK pension funds?

For many people on low pensions, pension credit could be the difference between living in poverty and simply keeping their head above water. However, pension credit take-up has stagnated at around 60% for the last 10 years; more than 1 million pensioners are missing this lifeline, which also opens access to other vital benefits.

Despite only recently taking responsibility for some benefits, the Scottish Government have already published a benefit take-up strategy and are working to increase awareness of and access to Scottish benefits; I know that my hon. Friend the Member for Glasgow North East (Anne McLaughlin) has done a great deal of work on this. The UK Government need a similar take-up campaign and a strategy for reserved benefits, including pension credit. I wonder whether the Minister will commit to putting such a campaign in place, to ensure that people are aware of benefits and can access those to which they are entitled.

In the midst of great uncertainty, protecting people’s savings and eliminating pensioner poverty is more important than it has ever been. Young people whose lives and prospects could be irreparably damaged by covid and Brexit face losing out on vital lifetime savings. We have heard that there are significant gender, ethnic and regional disparities in pension incomes that a pensions and savings commission could address.

A 2018 study by the Chartered Insurance Institute noted that, by the time a woman is aged 65 to 69, her average pension wealth is £35,700, which is roughly a fifth of that for a man of her age. That is a shocking figure and surely reflects the number of women who have not saved for a pension because of low earnings. The SNP supports automatic enrolment, but far too many have been left behind. The UK Government need to extend the coverage. That could be done by reducing the earnings threshold to the national insurance primary threshold, bringing almost 500,000 people—mostly women —into pension saving, and by lowering the age threshold from 22 to 18. Saving from the first pound earned would also reinforce the importance of starting a savings habit early, but that can be afforded only if we extend the real living wage.

One of the reasons for pensions complexity is the need for reassurance that funds held over long periods of time will not disappear or promised returns fail to materialise. That is why pensions need strong consumer protections. For too often, Governments have failed to deliver that. George Osborne failed to do so when he introduced so-called pension freedoms in 2015. The SNP voiced its opposition at the time, highlighting the risk to people of transferring funds out of their pension to their detriment. Unfortunately, the evidence is that this has turned into yet another Government-initiated scammers’ paradise that will further inflict damage on the reputation of the UK financial services sector.

I want to address the biggest long-term challenge we face in future pensions policy. What will happen to pensions if we allow the assets on which they depend to be significantly devalued or rendered unusable by climate change? The SNP supports industry calls for firms to include climate change-related disclosures in their annual reports. It sounded as though the hon. Member for Southport (Damien Moore) might agree with that. We are committed to putting that on to a statutory basis.

The SNP also supports moves to introduce an easy-to-understand system of climate-friendly external audits so small investors can better understand the climate-related risks of investments, including the risks facing company pension schemes. It was hugely disappointing that the UK Government prevented occupational pension schemes from being required to develop a strategy for aligning investments with Paris agreement goals and net zero emissions targets. With COP26 coming to Glasgow next year, perhaps the Minister could share with members what advice the Department for Work and Pensions has received from the Committee on Climate Change on the role of pensions in tackling the climate challenge. If no advice has been received, will the Department ask for it?

I would also like to ask the Minister to address the issue of frozen pensions that we have heard about already. Half a million UK pensioners living overseas do not receive an increase to their UK state pension with the value frozen when they leave the UK or when the pension is first drawn. This means that their pension decreases in real value year on year. Because it only applies in some countries, we now have significant inequality built up and, for instance, a disproportionate impact on groups such as the Windrush generation.

I will finish by highlighting the issue of inequality. That is the topic that the hon. Member for York Central (Rachael Maskell) was particularly concerned about. It was brought to my attention by a constituent who was allocated a share of her husband’s police pension as part of a divorce settlement. Having become unable to work owing to ill health, she was told that although her ex-husband had retired early and drawn his share of the pension, she is unable to do so until she turns 60. She was shocked to find that such discriminatory regulations are expressly permitted under section 61 of the Equality Act 2010. Does the Minister agree that this seems wholly inappropriate in 2020? Will he tell me what he thinks can be done to address that issue?