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Social Security

Part of Rail Update – in the House of Commons at 6:07 pm on 5th February 2018.

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Photo of Debbie Abrahams Debbie Abrahams Shadow Secretary of State for Work and Pensions 6:07 pm, 5th February 2018

My hon. Friend speaks strongly on behalf of his constituents and women born in the 1950s, given what they are going through, and long may he continue to do so.

There can be no doubt that women have borne the brunt of the Government’s cuts over the past seven years, but that applies particularly to women born in the 1950s, who have been dealt a real injustice through the accelerated increase in their state pension age. The Government have no excuse not to bring forward retirement for women born in the 1950s and early drawdown of their pension, as it is entirely cost-neutral. Alongside our proposals for the extension of pension credit, these additional measures would mean that people affected by the Government’s chaotic mismanagement of state pension equalisation would have the option to retire earlier, and would allow for much-needed financial support. The Government are in a position to implement proposals for early drawdown immediately, but they refuse to do so. I should be grateful if the Minister could explain exactly why that is.

Let me make it clear that the proposals are a “starter”. They do not in any way preclude further action, or even compensation, for this group of women. Will the Minister commit himself to reviewing the Government’s approach to pensions provision for women born in the 1950s, and will he release the original legal opinion contained in the “pink files”?

In the context that I have set out, a 3% uprating of some social security entitlements is unlikely to do much for those who are “just about managing”. As a matter of principle, the uprating should apply to all entitlements, not just the ones that the Government have cherry-picked. In the meantime, although we regret the limit on the groups who will benefit from the uprating, we must support the order, because otherwise those identified will lose out.

Let me now turn to the draft Guaranteed Minimum Pensions Increase Order 2018. We support the uprating of the guaranteed minimum pension in line with inflation, but we believe that some of the issues that were raised last year about the new state pension arrangements that came into effect in April 2016 remain unresolved.

The old state pension had two main components: a basic state pension; and a state earnings-related pension. People who made national insurance contributions at the full rate built up a basic state pension, but an option created in 1978 enabled people to contract out into another pension scheme, either voluntarily or via their employer on their behalf, on the basis that the other scheme met certain criteria. Between 1978 and 1997, schemes that took on such new members were required to provide a “guaranteed minimum pension”. The guaranteed minimum pension system was discontinued by the then Government in 1997.

In 2016, the Government’s introduction of the new state pension ended contracting out by replacing the additional state pension with a single tier. Working-age people now have their existing state pension entitlement adjusted for previous periods of contracting out and transferred to the new state pension scheme. For people who have guaranteed minimum pensions rights under an old pension scheme but who reached retirement age after April 2016, the Government no longer take account of inflation increases in guaranteed minimum pensions when uprating people’s new state pensions. The changes mean that any guaranteed minimum pensions accrued between 1978 and 1988 will not be uprated, and the scheme provider will uprate guaranteed minimum pensions built up between 1988 and 1997 only to a maximum of 3% each year.

When the National Audit Office investigated the impact of the changes, it concluded that there would be some winners and some losers under the new arrangements, depending on the time for which people were contracted into a scheme. Those whose state pensions have been pushed back because of the rise in state pension age will lose out on guaranteed minimum pensions inflation-linked increases that would have been received under the old rules. However, those who lose under the new rules may be able to build up additional entitlement to the state pension. The issue here is a lack of clear information, as is too often the case with the Government.

The NAO report stated:

“Some people are likely to lose out and they have not been able to find the information they need.”

Why did the Government fail to provide information that would enable people to make informed decisions? The NAO also said that it was

“concerned that the Department has limited information about who is affected by the impact of pension reforms on Guaranteed Minimum Pensions.”

Will the Minister provide a much-needed update on the number of people who have been affected since the relevant legislation came into effect? What support is available to help people to understand the changes?

I hope that the Minister will address all the issues that I have raised in respect of both orders.