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Social Security

Part of Rail Update – in the House of Commons at 6:24 pm on 5th February 2018.

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Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Social Justice) 6:24 pm, 5th February 2018

We have indeed, and I am sure I have been copied into the same emails that the hon. Gentleman has received. It is wrong that people still face this glaring injustice, and the new DWP team must look at it again to ensure that there is action upon it.

The DWP must also finally act to rectify another pension injustice: that suffered by women born in the 1950s. The WASPI campaign has been the clearest, most persistent and compelling of the dozens we have seen before us in the last two and a half years. It is a scandal that the UK Government continue to refuse to address this issue, which is not going away.

I turn to the draft Guaranteed Minimum Pensions Increase Order 2018. Under the old state pension system, which was made up of the basic state pension and the state earnings-related pension scheme, people built up their basic element through national insurance contributions, but built up SERPS depending on their circumstances. Some people—doing so themselves, or because their employer did it—were contracted out of SERPS. Contracting out occurred because it allowed both parties—the individual and the employer—to pay reduced national insurance contributions. However, to ensure some standard was maintained, the employer had to guarantee that their company pension would match at least the SERPS the employee would have received if they had not been contracted out. That is the guaranteed minimum pension, or GMP.

The system ran for a number of years between the 1970s and 1990s, but was discontinued by the Labour Government, and now the new state pension works in a completely different way. Complicated rules apply to uprating, depending on when the pension was built up. We know that people will be impacted in different ways, but people who were extensively contracted out may just receive the basic state pension, and for some this might come as a shock.

Clearly this is an extremely complex matter and we know that people are struggling to understand their circumstances. Our main concern regarding the order is that the UK Government ensure that people are adequately informed of the impact of the new state pension on their own pension pots.

Not all those who were contracted out were made fully aware of the impact on their eventual pension pot. While it is good that a minimum guarantee is linked to CPI, there are adverse impacts for some people. We understand that the Government’s changes to the state pension mean that any GMPs that people have accrued between 1978 and 1988 will not be uprated, and that a maximum of 3% each year will be uprated for GMPs built up between 1988 and 1997. This applies to those who have retired after 6 April 2016. Whether or not people benefit depends on their circumstances, and some people will get less money than they expected. People who were contracted out were not necessarily aware of what that meant at the time, or did not necessarily understand its implications, and they certainly could not have anticipated that their retirement income would be impacted by such future changes as the Government have made to the state pension. For those without further savings to fall back on, like many of the WASPI women, this can mean a loss in income. The UK Government should have better communicated the impact of these changes for those who were contracted out.

All in all, what this points to is the urgent need to establish an independent pensions commission. The Government continue to ignore the needs of pensioners, as well as the looming pensions and savings crisis we may well encounter in the future. The Government need to ensure that people’s retirement savings are on a sustainable footing so that future generations can plan for their future. The SNP has long called for the establishment of an independent pensions commission to ensure that employees’ savings are protected and that a more progressive approach to fairer savings is looked at as we move to a period in which defined benefit schemes are becoming a thing of the past and the new state pension begins to take effect. The need for that independent commission is greater than ever.