Clause 4
Pensions Bill
6:00 pm
James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)
Scrutinising such a proposal as this is exactly what the Committee is for. As the Opposition Front Benchers said, the issue has not been hugely looked at. We had one response in the consultation, from Carers UK, which agreed that ADIs were outdated. Other than that, they have not been the top subject of conversation down in “The Dog and Duck” or, indeed, in pensions circles.
The clause abolishes increases in state pension entitlement in respect of a spouse or an adult who has the care of the pensioner’s children. The clause would have effect for new claims from April 2010, but would not apply to certain existing claims until April 2020. Our big-picture argument is that the whole concept is outdated. The idea of one person being dependent upon another purely because of their age is outdated. When the hon. Member for Eastbourne quoted the remark about adult dependency being an outdated concept, we do not mean that adults can never be dependent, just that the particular principle—there should be a payment to someone who is over state pension age because their spouse is under state pension age—is, I think, pretty much agreed by everybody not to be something that anyone would come up with today. The core reason why abolishing this is important is not so much because the cost is huge now. However, because of state pension age equalisation, every couple—unless both were born on the same day—would in effect have one person who was thought dependent on the other under the provisions. The costs would increase significantly over time.
That is why the clause intends to remove the provisions in the Social Security Contributions and Benefits Act 1992 that enable a person claiming a category A or a category C state pension to receive an increase in their pension in respect of a spouse or alternatively an adult who cares for a child on their behalf. I should explain that none of the increases in respect of category C pensions are in payment, nor will any arise in the future. That is one of the parts of the legislation that shows for how long today’s debate will have an effect, because category C pensions are payable only to people who were over state pension age in July 1948 and their widows but they are still in the system and those pensions are still being paid. Only widows remain and they will not be affected by the changes.
Our intention is that from April 2010 increases of pension in respect of adult dependants will no longer be available. Any such increases in payment immediately before the proposed change will cease, if they have not already done so, in 2020. The clause is part of our policy to simplify the rules for state pensions. The current dependency increase provisions are a hangover from the immediate post-war period when single-breadwinner households were the norm. There is little justification for that in the 21st century. As I have said, only a small number of people benefit: only around 65,000 men and a handful of women receive an increase of pension for an adult dependant. Over the past decade the proportion of men receiving an increase for an adult dependant has fallen from about 2.5 per cent. to about 1.5 per cent.
However, between 2010 and 2020 those numbers are forecast to increase roughly tenfold for two reasons. The first is the increase in women’s state pension age, because the dependency increase provisions benefit only those couples in which the wife has not reached pension age when the husband claims his pension—in effect they are applicable only to the minority of couples where the wife is more than five years younger than the husband. As women’s pension age increases, the provisions are set to have far wider application. The second reason is that from 2010 the dependency increase provisions were set to extend to women—that is to enable a woman to claim an increase of pension for her husband—and to people in civil partnerships. As a result the net costs of paying increases foradult dependants were estimated to rise to around£1.4 billion by 2020.
The hon. Member for Eastbourne will be glad to know that we are reinvesting the money that will not be spent on our reforms to the state pension scheme. By taking money out of paying people as dependants, we will be paying people in their own right. That is why the analogy about a cliff edge does not quite run. For any couple who retire after 2010, although they would not get an adult dependency increase, the spouse would get the benefit of a far more generous pension provision. There is no strict analogy, as the hon. Member for Yeovil will see, with the issue that we debated earlier because of the compensating benefits for anyone who retires after 2010. He is furrowing his brow, so I do not know whether he wants to intervene.