By Matthew Barrett
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Yesterday saw the Second Reading in the Commons of the Pensions Bill – the legislation currently in the news which accelerates the existing timetable for increasing the State Pension age to 66. This will mean the pension age will be increased from 60 to 65 for women by 2018, before being raised to 66 for both men and women in 2020.
The Secretary of State for Work and Pensions, Iain Duncan Smith, said the core aim of the Bill is to "to secure this country’s retirement system, putting it on a stable and sustainable footing for the future."
The news headlines surrounding the Bill relate to the fact that women born in March 1953 will begin to receive their pension at 62, but women born in April 1953 will have to wait until 65. Mr Duncan Smith was asked about this early on in his remarks:
"Steve McCabe (Birmingham, Selly Oak) (Lab): Given that the vast majority of the 600,000 people who will be excluded from getting a pension under the raised threshold are women, is the Secretary of State at all worried that the Bill is beginning to look as if it discriminates against women?
Mr Duncan Smith: I recognise the hon. Gentleman’s concern. We are not blind to the issue, but we have decided to strike a balance between making the scheme work from the beginning and avoiding driving people on very low incomes into sacrificing too much and therefore not seeing the rewards. It is important to make the point that in the Green Paper, as the hon. Gentleman will have noticed, we talk about the single tier pension, from which there will be very significant benefits to women. We hope that in due course that will achieve a balance.
I do not dismiss the hon. Gentleman’s considerations. We keep the issue constantly under review and will watch carefully to see what happens. It is important that we get auto-enrolment off the ground in a stable manner. I hope hon. Members on both sides of the House recognise that these are balanced decisions—sometimes nuanced decisions—that we have to take, but we will make sure that we review them."
Mr Duncan Smith was also asked about this specific group of women several times, by Members on all sides, including Conservatives Eleanor Laing (Epping Forest) and James Gray (North Wiltshire), as well as Labour's socially conservative welfare reformer, Frank Field. Mr Duncan Smith stood his ground and defended the Government's policy:
"Mr Duncan Smith: As I have made clear and will make clear later, the parameters of the Bill are clear and it is my intention to stand by those parameters. The ages will therefore equalise in 2018 and rise together to 66 by 2020. Of course, I am always happy to discuss these issues with colleagues from either side of the House, including those in the coalition. However, I make it absolutely clear that our plan is to press ahead with the Bill as it stands. The ages will therefore rise together to 66 by 2020."
Mr Duncan Smith set out why the changes are necessary:
"Pensions policy has not been updated accurately to reflect all the increases that I spoke about. I remind the House, however, that we are by no means alone in having to deal with this issue; others are making decisions about it. Ireland has already legislated for the pension age to be raised to 66 by 2014, and the Netherlands and Australia are increasing state pension age to 66 by 2020. The United States is already in that position, and Iceland and Norway are now at 67. Under existing legislation, the timetable for the increase to 66 in the UK was not due to be completed for another 15 years, yet the timetable was based on assumptions that are now out of date. The Pensions Act 2007 was based on ONS projections of average life expectancy from 2004. Those projections have subsequently increased by at least a year and a half for men and for women, so the situation is moving apace. That is why we are taking the necessary decision to look again at the timetable for increasing the state pension age. The Bill amends the current state pension age timetable to equalise men’s and women’s state pension ages at 65 in 2018 and then progressively to increase the state pension age to 66 by 2020. This new timetable will reduce pressures on public finances by about £30 billion between 2016-17 and 2025-26."
Shadow Secretary of State for Work and Pensions, Liam Byrne, praised Labour's record in office:
"Frankly, when we came to power in 1997, too few of our older citizens enjoyed either that honour or that respect. Nearly 30% of our pensioners were forced to live in poverty. The state pension had declined from 20% to just 14% of average male earnings. That is why we set about changing that picture with such speed, passion and determination. That is why we lifted 1 million pensioners out of poverty; why we lifted gross income for our pensioners by more than 40%; why we ensured that no pensioner must live on less than £130 a week; why we introduced the winter fuel allowance, free off-peak travel on buses and free TV licences; and why we increased tax thresholds to ensure that 60% of pensioners now pay no tax. We are proud of our record. It is now set out in the Government’s own figures that pensioner poverty in this country is at its lowest level for 30 years."
A succession of Conservative members responded to Mr Byrne, and noted Labour had a far worse record in office than Mr Byrne's remarks implied.
- Anne Main (St Albans) highlighted the treatment of Equitable Life victims, and how their case was "kicked into the long grass for many years".
- Harriett Baldwin (West Worcestershire) highlighted an Age UK survey "which found that 20% of the women affected by the previous Government’s changes to equalise the pension ages of men and women had not realised what was going to happen to them".
- Richard Graham (Gloucester) raised the fact that "In 2002, the Labour Green Paper fudged the issue and, two years later, the then Secretary of State for Work and Pensions clearly told the TUC that raising the pension age would not happen." He then criticised the current Labour front bench for "blithely recommending as an alternative to some aspects of the Bill a speeded-up increase in the pension age beyond 2020". Mr Graham added "Their paymasters, the trade unions, simply would not let it happen. As is so often the case, it falls to the Government to tackle the difficult questions and decide how to balance the interests of future pensioners with those who are earning, paying taxes and paying for those pensions."
- Richard Drax (South Dorset) criticised the Labour Party for walking away from pension reform, and further criticised Labour for increasing the size of the public sector – and the increase in (generous) public sector pensions that come with extra employees.
- Jacob Rees-Mogg (North East Somerset) said he thought "Labour Members are opposing this because they are deeply embarrassed that they failed to increase the retirement age when they were in government"
- Nick Boles (Grantham and Stamford), when referred to pensions legislation passed in 2007 and 2008, replied "I thank the hon. Lady—and remind her that her Government had been in power for 10 and a half years by the time they introduced those Acts, even though it was clear long before they took office that such problems existed."
- Jonathan Evans (Cardiff North)* – who has considerable knowledge of pension issues – launched a comprehensive attack on Labour's record. He said: "I was staggered by the right hon. Gentleman’s opening remarks, in which he said how proud he was of his Government’s record on pensions. Is he utterly unaware of the destruction of the private pensions system in our country wrought by his former leader, and of the revelation that when the Labour Government were elected in 1997, the National Association of Pension Funds said that the end of dividend tax credit would mean the end of at least half the defined benefit schemes in our country? In fact, we have seen much more than that brought about as a direct result of the Labour Government’s policy. I believe that it was forecast to cost our private pensions system at least £50 billion. Is the right hon. Gentleman proud of the fact that under a Labour Government a record number of pension funds closed to new business? Is he proud of the record of a Labour Government who gave pensioners an increase of merely pence? I can tell him that people in my constituency remember that event."
Ben Gummer (Ipswich) made a very thoughtful contribution, striking a balance between supporting the Bill, and being concerned about the unfairness of raising the pension age:
"I am worried by the idea that by the mid part of this century, asking people to retire at 70—incidentally, the age intended by Lloyd George in his great Act of 1908—will be seen as the way to fix this problem, because we may not correct everything that we hope to correct just by increasing the state pension age and doing everything contained in this excellent Bill. Although I support the intention of the Bill and the immediate steps that it takes, the Government need rapidly to revisit the conventions and means by which successive Governments address the central problem of increasing life expectancy and the effect of that on the Exchequer and those working to fund it. Otherwise, we will again end up in a situation that is unsatisfactory and inadequate. It is unsatisfactory because with every increase in the state pension age, we inflict another set of injustices and unfairnesses on those who are approaching that moment in their lives. The predicament of the relatively small group of women we have been debating is a sure indication of far greater problems to come for Governments in future years."
"Another unfairness in the Bill, which was not intended by the Government, results from the change from RPI to CPI for uprating. Many of my constituents who are on occupational schemes, mostly from British Telecom, have found that their pensions have been changed only two years after they were renegotiated between the trustee and the pensioners. The trustee claims that it has been forced to do that by the rules of the scheme. My constituents and I would be interested to know the degree of consideration the Minister gave to the effect that his changes to the uprating regulations would have on the occupational schemes of previously nationalised industries, because they have had a very adverse effect on people who thought that they had funded schemes."
The full debate can be read here.
*Jonathan Evans started his remarks with:
"As you know, Mr Deputy Speaker [Nigel Evans], you and I entered the House on the same day back in 1992, but this is the first opportunity that I have had to observe the hon. Member for Birmingham, Hodge Hill [Liam Byrne] in full flow. I have often wondered how he managed to reach such an elevated position in Government in such a short time, and having listened to him today, I am still wondering."