Child Support, Pensions and Social Security Bill
Baroness Hollis of Heigham (Parliamentary Under-Secretary, Department of Social Security; Labour)
My Lords, Amendment No. 69 is similar to one we discussed in Committee. It seeks to boost the amount of additional pension which someone with low earnings would receive from their years of SERPS entitlement while S2P is building up to maturity.
The amendment would allow someone who had low earnings while in SERPS to have their SERPS calculated when they reach pensionable age as if those earnings, when revalued, were at the level of the lower earnings threshold. I am glad to see a comforting shake of the head to acknowledge that the amendment has been understood. That is not always the case!
The number of SERPS years which could be enhanced in this way would be restricted to the number of years between the introduction of S2P and the reaching of pensionable age. This would give a retrospective boost for certain people for years before the introduction of S2P, based on the number of years' entitlement after its introduction.
Perhaps I may remind noble Lords of what we are trying to achieve with S2P. We are reforming SERPS to refocus state help on those who have the least opportunity to build up good second pensions. SERPS has served many pensioners well, but because it is earnings related those who earn the least gain the least from it.
Under SERPS, someone who earns just above the lower earnings limit for the whole of their working life will still retire on a state pension below the minimum income guarantee. And that is before the 1986 and 1995 changes to SERPS have their full effect. But under our proposals, anyone retiring with a full working life of employment behind them, or periods of caring or disability, from 2038, when the state second pension has built up, will receive a total of basic and additional pension above the MIG.
We recognise that the benefits in S2Ps take time to build up. Pensions, by their very nature, are a long-term issue. I am sure that the noble Lord will have read the financial pages which state, "If you don't start building your pension at 23, 25 or 27 you will not have a decent one at 65 and you cannot come into a pension scheme at 50 and have anything much worth having".