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Eligibility for State Pension

Oral Answers to Questions — Work and Pensions – in the House of Commons at 2:30 pm on 1st July 2013.

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Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons) 2:30 pm, 1st July 2013

What assessment he has made of eligibility for the state pension following the rise in contributions to 35 years from 2016.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

In the long term around 85% of people will get the full single-tier pension under the Government’s proposals.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

Does the Minister accept that as a result of the changes fewer people overall will qualify for the state pension by 2020? Does he agree that that is particularly unfair to people who, being so close to retirement, will not have time to make up the years?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

We have put in place special provision for the very people to whom the hon. Gentleman refers. When we value their pension rights at 2016, we will do so under the current rules, where 30 years are needed to qualify, and the new rules, where 35 years are needed, and we will use whichever of the two provides the highest number. The 2016 calculation will take whichever set of rules treats people most favourably and they will build upon that.

Photo of Julian Brazier Julian Brazier Conservative, Canterbury

Does my hon. Friend accept that the proposed arrangements will greatly reduce means-testing in the long run and so restore incentives for people to save?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

My hon. Friend is right. The danger with the current system is that people who save find that the Government come along and say, “You’ve saved some money—we’ll take some money off you.” Our intention is to encourage, not penalise, saving. Paying a single, simple, decent pension just above the level of the basic means test will greatly enhance those incentives.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

The Government’s case for the new state pension is that it will increase the incentive to save in private pensions, but does the Minister agree with his hon. Friend the Member for Warrington South

(David Mowat), a Treasury Parliamentary Private Secretary? He told the House during Second Reading of the Pensions Bill:

“One reason that people are not saving is that there is massive distrust of the industry. I have many colleagues in the private sector who would almost cut their arms off than invest in the pensions market.—[Hansard, 17 June 2013; Vol. 564, c. 712.]

What will the Minister to do to encourage people to make those savings in private pensions?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I agree with the hon. Gentleman to the extent that there is mistrust of private pensions, which is why we have taken strong action,: for example, we have banned consultancy charges, which were a source of concern. On savings incentives, if he looks at our analysis, he will find that low earners in particular will have much smaller withdrawal rates when they save. Therefore, the return on savings, particularly for low earners, about whom I am sure he is most concerned, will be enhanced by the proposals.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Does the Minister anticipate making pensions the subject of a cap at any stage?

R

It would be good to see a cap on the earnings and...

Submitted by Rob Kay Continue reading

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I think my hon. Friend might be referring to the idea of a total welfare cap, and while the Chancellor of the Exchequer has explicitly ruled out the idea of capping state pensions, I understand there are others in this House who are prepared to cap state pensions.

J

To even think about capping state pensions would be political suicide for any party. We have paid for our pensions all our lives and already the UK state pension is...

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