Clause 1
Pensions Bill
11:00 am
David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)
I am extremely grateful to the Minister for his co-operative approach. It merely demonstrates the extraordinarily prudent approach taken by those on these Benches compared with amendments tabled from other quarters, and perhaps even by me later in our proceedings.
It is worth highlighting the reason why the issue is of such concern. Because of the way that the new cut-off date will work, a woman retiring only a day before it could find herself with a state pension totally different from that of a woman retiring a day later. In extreme circumstances, people who in other senses have similar characteristics could have pensions that are as much as £1,000 a year different. Over a 20-year period—moderate life expectancy beyond retirement age—that could mean a difference of £20,000.
There will also be differences between individuals, including women. A woman who has one year less than the existing qualifying years, say 38 years, who retires and takes a state pension before the cut-off date is not entitled to a full basic state pension, but someone with a much lower number of qualifying years who retires a day or two later could find themselves with a higher pension. That is not something that only affects women, as a number of the members of the DWP Committee pointed out. It also means that men retiring in 2009 could have very different pensions fromthose retiring in 2010—pensions based not on total qualifying years, but on the dramatic shift in the number of qualifying years required for a full basic state pension. The hon. Member for Weston-super-Mare had a colleague on the DWP Committee who asked the Secretary of State for Work and Pensions whether a man retiring with 43 years of qualifying contributions in 2009 would have a lower pension than a man retiring a few days after the 2010 cut-off date with a 30-year period of qualifying contributions.
There will be a great sense of unfairness regarding the measure, which is why many people have argued that there should be a retrospective attempt to count in individuals who are excluded at the moment. Obviously, the Liberal Democrats have a natural sympathy for that view as believers in a residence-based pension. The Government are not going down that line and we will debate the proposals on retrospection, but we see no enthusiasm from the Government to make any changes to the scale.
In their response to the DWP Committee report, the Government say why they do not believe it to be appropriate to make changes to the existing legislation and to be more generous. The first argument that the Government deploy is weak. Paragraph 52 of the Government’s response to the report states:
“It is important to recognise, however, that women born before that date”—
women born before the April 2010 cut-off date—
“will keep the State Pension entitlement they have been expecting during their working lives.”
The majority of people who do not benefit from the change will not regard the fact that the Government are not going to erode their existing state pension entitlements in some way as an enormous bonus. The argument is a poor basis for opposing any attempt to moderate the effect of the measures.
In paragraph 53 of the Government’s response to the report, the DWP uses another semi-excuse, which the hon. Member for Weston-super-Mare will recall from the DWP Committee proceedings. The Secretary of State for Work and Pensions said that the only thing he could say to the Committee was that it was important to bear in mind that women retiring up to 6 April 2010 have the opportunity to do so at age 60, but women retiring after that date do not. Paragraph 53 states:
“It would be unfair for people to gain from both these existing rules and the proposed changes.”
That is a dubious point. Given that the increase in the state pension age relates to women rather than men, the Government’s argument does not hold for both categories of people. Also, the way in which the Government plan to phase the increase in the state pension age actually means that some women who end up working after 2010 will do so by an almost inconsequential amount of time.
Some of the people who lose out because of the 2010 cut-off date may actually be retiring only a day or month later than those who retire before the cut-off. Therefore, the idea that those people who will work beyond 2010 and then go on to claim their basic state pension will have a terrible penalty imposed on them by the Government by having to work longer—and therefore that it is intuitively fair that they will receive the offset of a lower number of qualifying years—sounds like an argument that some clever person in the Department for Work and Pensions’ spin operation has concocted after the proposals were brought forward rather than being a persuasive argument in itself, one devised from first principles.
From the Minister’s response on the clause that suggested that this particular issue be given reconsideration, we get the impression that there is no prospect of his signing up to something that will create a massive Bill. We also get the impression from both the Minister and the Secretary of State that they understand that there are some very legitimate concerns due to the way in which the Government have sought to introduce this in 2010—which, to be fair to the Government, they have done in order for the provision to have rapid effect.
Therefore, notwithstanding the fact that almost any changes are likely to have some cost, we hope that the Government will be flexible on this issue and remain open to reasonable ideas that seek to moderate this cliff edge or reduce the number of people facing the cliff edge. The Minister is entitled to say, as I have already said, that we are replacing one cliff edge with another. However, that may be perceived as unfair for those people who are still below the state pension age and who feel that this Bill could have enormous benefits for them, but who later find that they narrowly miss the cut-off date because of having to wait two years. I hope that the Minister will not be closed to proposals of this type, and that he will tell us not just about the cost of this proposal but about the number of women who would benefit and the number who would be affected. I hope that he will go that extra mile to make these important and welcome proposals more acceptable to those who currently find them extremely unfair and harsh.