Clause 10
Pensions Bill
12:30 pm
Sally Keeble (Northampton North, Labour)
I shall be brief so that the Minister has time to respond before we adjourn. The amendments would make the state second pension more flat rate. They would bring forward the flat-rating of the accrual state second pension to increase redistribution rather than giving increased benefits to the higher earners. That would mean that the state second pension would be more targeted towards the lower earners. The amendments would abolish the second accrual rate band, which gives greater benefits from S2P for those earning more than the lower earnings threshold, currently £12,500 a year, with additional benefit accrued on earnings up to the upper earnings limit.
The band would slowly erode anyway under the present system, so that S2P would be flat rate by 2030. Abolishing it now would enable a greater level of flat-rate benefit to be paid to all through an increase in band 1 to accrual rates of 45 per cent., which would give greater support from the state for all, rather than the state pension system delivering more for higher earners. The higher earners can, of course, save for themselves and can accrue a greater retirement income through private savings either in existing schemes or through the proposed system of personal accounts.
Generally, there has been a lot of criticism of the Bill for not providing for pensioners’ needs now. I do not agree; the present generation of pensioners is supported by other means. Pension credits have been mentioned, and there are also things such as fuel allowance, the increase in the personal allowance and the introduction of the 10p starting rate for tax. However, the group that I have been concerned about consistently—they are, largely, the people we are talking about in relation to the state second pension—is women pensioners. They will start to see some benefits under this scheme, but will miss out on the more general improvements that will come, either through the restoration of the earnings link and the reduction to 30 years’ contributions or because they are not of the generation that is earning now and getting the same access to pensions as men thanks to higher earnings and different working patterns. That gives us a generation of women between now and about 2020 or 2030 who may need more financial support in retirement. Bringing forward the flat rate in S2P and making it more redistributive will make it more supportive for that particular group at a critical stage before the other improvements come through.