I beg to move,
That the draft Guaranteed Minimum Pensions Increase Order 2021, which was laid before this House on
I welcome the new shadow Ministers to their posts. You wait ages for a new shadow Minister, Mr Deputy Speaker, and then two come along in a matter of weeks. I welcome Matt Rodda to his new post. I worked in detail with his predecessor, Jack Dromey, who was a wonderful colleague to work with, so my new opposite number has big shoes to fill. I wish him well. Likewise, I welcome David Linden to his new role as the Scottish National party shadow spokesman. I thank Neil Gray for his work both with and against the Government over many years.
Guaranteed Minimum Pensions Increase Orders are an entirely technical matter that we attend to in this place each year: an order is required by section 109 of the Pension Schemes Act 1993. This statutory instrument provides some inflation protection for the guaranteed minimum pension part of an occupational pension that was built up between 1988 and 1997. This year, that part will be increased by 0.5%, in line with the consumer prices index assessment that took place between
I thank the Minister for his generous introductory comments and for setting out the Government’s proposed approach. I thank DWP staff and, indeed, all those supporting pensioners for their work at this difficult time.
Britain should be the best country in the world in which to grow old. One of the first responsibilities of Government is to ensure that there is a proper state pension, as a central part of the welfare state, and that people are able to look forward to a decent income in retirement. That is why we support the triple lock.
This statutory instrument addresses the needs of a particular group of state pensioners—those who paid into the state earnings-related pension scheme—and offers them an increase in line with inflation. Labour supports the measure and will not oppose the Government’s proposals; nevertheless, I wish to put those proposals into a wider context.
First, we should bear in mind the fact that huge numbers of pensioners in the UK rely on the state pension for their income. Figures from the Office for National Statistics show that in recent years we have seen the highest proportion of pensioners who are reliant solely on the state pension since the 1990s. In that light, it is clear that decisions made in this House about the state pension, including SERPS, have wide-ranging repercussions for people’s quality of life in retirement and should not be taken lightly.
As Labour has pointed out before, today’s retirement landscape is a challenging one, and we will have to work hard to find new ways to meet those challenges, including by ensuring that there is real regulation of profit-making consolidation vehicles for defined benefit pension schemes, which are often referred to as pension superfunds. They are currently subject only to an interim regulatory regime announced by the Pensions Regulator this summer.
We also need to create the conditions to support defined benefit schemes more widely. Part of that work involves listening carefully to experts and organisations on the funding requirements of both open and closed defined benefit schemes. We received assurances from the Government during the final stages of the Pension Schemes Bill in the other place, and an important dialogue will take place over the coming months to ensure that the emerging regulatory framework works for all schemes.
Furthermore, although we welcome the approval of the new pensions dashboard as a great opportunity for people to see all the information about their pension in one convenient location, it is vital that we protect consumers from the risk of exploitation. As the shadow Secretary of State for Work and Pensions, my hon. Friend Jonathan Reynolds, told this House when the dashboard was being discussed in relation to the Pension Schemes Bill:
“The last thing we want is for people to make bad choices, prompted, for example, by market disruptions or unscrupulous operators, until they are more accustomed to that level of access.”—[Official Report,
I reiterate his call to safeguard the public dashboard by giving it a head start and keeping commercial transactions off the dashboard until protections can be guaranteed.
Labour also believes that there must be accessible and transparent fee information on the dashboard. We have seen how complexity can make it difficult for those saving for their pensions to understand transaction costs. We should now take the opportunity to fix this problem. In the same light, the Government must do more to end pension scams. Although progress has been made, we must none the less stamp out this behaviour, as the consequences of people falling victim to scammers can be utterly devastating and can turn their lives upside down.
I welcome the growing interest in the assessment and disclosure of climate risk in pension investments. This is a very important issue and we must not rest on our laurels. Pension funds represent trillions of pounds in value and, as such, have huge potential for good if properly directed.
It is important to see today’s announcement in terms of what it means here and now as many pensioners face a hard and difficult winter due both to the coronavirus and the current very cold weather. Over 1 million pensioners who are entitled to pension credit are not claiming it, with very serious consequences, including tens of millions of pounds-worth of linked support for home heating being denied to those who have not claimed. The story is similar for pensioners who are entitled to a free TV licence. I challenge the Government to do much more to make people aware of pension credit entitlements and to encourage far greater take-up.
It is also important to raise the issue of those with concerns about their occupational pensions. For example, in the immediate term, what assessment have the Government made about the viability of Arcadia’s pension scheme and the impact that the sale of the high street businesses will have on staff and pensioners?
While this motion might appear on the surface to be a technical measure that affects only a proportion of pensioners, it is important that we understand the context in which we pass it. I hope that the points I have made emphasise how important it is that in the longer term we consider the pension system as a whole when making any decision that has the potential to affect so many people. As Members of this House, we make decisions that shape not just the lives of millions of current pensioners but the lives of millions of hard-working people who are yet to retire. If we are to make Britain the best place to grow old in, then we must work hard to address the issues that we have discussed today.
I rise as chairman of the all-party parliamentary group on frozen pensions. That is a body that ought not to exist at all, but unfortunately its presence is necessary and has been for some time.
It is to the eternal shame of successive Governments that there is a group of United Kingdom citizens living in Canada, Australia, South Africa, the West Indies and other far-flung places who are entitled to United Kingdom pensions and have seen those pensions frozen since they left the UK for foreign parts. That is wholly unacceptable. These people are men and women who have, in very many cases, served their country long and honourably. They are former members of the armed forces and former diplomats. They are people who have given public service and have paid their way in the United Kingdom, and then, in later life, moved to live with families overseas.
As we heard briefly in the previous debate, a United Kingdom pensioner living in Canada will have their pension frozen, sometimes for many years; the case of Anne Puckridge has been cited. A few hundred yards across Niagara Falls, in the United States, that same pensioner would have their pension uprated in line with inflation, in the same way, as we have heard today from the Minister, that other pensions in the United Kingdom are quite properly uprated. This situation persists because successive Governments have sheltered behind the opinion that, because there is no reciprocal arrangement with another country, it is not necessary for the United Kingdom to pay the full pension. That has led to the disgraceful circumstance where, in Canada, for example, the Canadian state finds itself having to top up the funds payable to a United Kingdom pensioner in order to enable them to live. That is, as I have said, a shame upon our society.
During the past year, the all-party group researched the circumstances of the many pensioners living overseas. It sought the advice of the Canadian, the Australian and other Governments and sought the opinion of parliamentarians and the Speakers of their Houses. Shortly before Christmas, we published our findings. That report is a damning indictment of what the Government of the United Kingdom have allowed to prevail for far too long.
The Canadian Government specifically have indicated very clearly that they wish to enter into a reciprocal agreement with the United Kingdom. In a background note to a parliamentary question, a Government document says that
“officials have received a letter from the Canadian federal Department responsible for leading the negotiation of Canada’s international social security agreements. The letter seeks to conclude a social security agreement between Canada and the UK. Officials have acknowledged the letter.”
It is a matter of record that the Canadian Government have sought to break the ice. They have made the move and have offered to negotiate a reciprocal agreement with the Government of the United Kingdom. In a written answer on
Let me start by expressing my thanks to the Minister for his kind words at the beginning of his speech; it is much appreciated and I look forward to working with him in this new role.
Last week, people across the British Isles rightly came together to mourn the passing of a remarkable gentlemen, Captain Sir Tom Moore, a war veteran who served his country and lived to see his 100th birthday. Honouring pensioners and valuing them for their contribution to our society is something that the UK does very well with words, but perhaps less so with actions, and that is particularly the case when it comes to pensions. It is an inescapable fact that the United Kingdom has one of the worst state pensions in Europe, which shows just how much the British Government value older people who have worked their entire lives, paid their taxes, and now find themselves struggling to get by on the relatively low state pension, compared with their peers on the European continent.
As Sir Roger Gale outlined, the situation is even worse for pensioners who have moved abroad. Older people who have chosen to join family members overseas have found that their pension has been frozen at the same rate as it was when they first became entitled to it, or indeed the date on which they left the UK and were already in receipt. The reason I spoke about Captain Sir Tom Moore is that frozen pensions particularly adversely impact veterans who live overseas.
Bernard Jackson exemplifies the injustice of Britain’s frozen pensions. Bernard fought in world war two and participated in the D-day landings as a wireless operator in the Royal Air Force. He moved to Canada with his wife, to their dream home. Sadly, after his wife died, Bernard was forced to return to the UK because he could not live on his frozen UK state pension of just £48 per week. He served his country in its darkest hours yet he was forgotten by the UK Government, with that neglect forcing him to leave his dream home. After his return to the UK he continued to campaign against the injustice of frozen pensions, to ensure that nobody else would suffer as he did. Sadly, he passed away in March 2020.
For those of us who have been following the injustice of frozen pensions there has been an encouraging proposal from the Government of Canada to implement a reciprocal agreement and end the injustice of frozen pensions for the 150,000 UK pensioners who live there. I would argue that it is now incumbent upon the British Government to open negotiations with Canada and rectify that moral injustice, because failure to do so, leaving UK nationals abroad in poverty, would send an awful signal for what is now meant to be global Britain.
It is not just overseas pensioners who face injustice when it comes to UK pensions policy. Women here at home continue to be impacted by the changes to the state pension age. Like other parties, we in the SNP support the principle of equalisation of the state pension age, but we have long had concerns about the way in which it has been done. The WASPI women have been left high and dry by a British Government who continue to adopt an ostrich policy when called upon to provide fair transitional arrangements. So we in the SNP will always call for the WASPI women to be supported, and remind Ministers that it is not too late to act on that.
One other area of pensions policy that I want to raise is that of pension credit take-up, particularly during the pandemic. It was incredibly disappointing that the Minister, when appearing before the Work and Pensions Committee last week, confirmed that the DWP had discontinued its take-up campaign, despite countless reassurances from the Government that it would continue. The Government talk a good game about trying to increase the take-up of pension credit, but talk alone is not enough, so I would ask the Minister in summing up to outline exactly what the Government’s strategy is to increase take-up. Do they even have one, and if so, will the Minister publish it?
In summary, the uprating of the state pension in line with the triple lock is welcome, but the WASPI women, and pensioners living overseas, will not feel the benefit of that. As I said at the beginning of my remarks, the British Government are good at warm words for pensioners, but words alone will not keep our pensioners warm in their houses this winter.
I wish to raise concerns specifically about the guaranteed minimum pension, which is the subject of the order. Concerns have been raised by the public with the Select Committee. The ombudsman investigated complaints from two people, and concluded that there had been maladministration in introducing the new state pension system in 2016 over its impact on people with a guaranteed minimum pension. The concern being raised in correspondence since is that the problem identified by the ombudsman still has not been properly addressed.
The ombudsman concluded:
“DWP was aware the pension changes could negatively affect people with long periods of contracting out who were due to reach State Pension Age shortly after the new State Pension was introduced…DWP failed to provide clear, accurate and complete information through its pension forecasts, impact assessments and other literature…despite being warned by both the National Audit Office and the Work and Pensions Select Committee that better communication was needed for those with long periods of contracting out…some individuals were not aware that they might need to consider seeking independent financial advice and might need to make alternative provision for their retirement.”
The concern is still being raised that those problems are not yet being properly addressed.
Last August, the permanent secretary at the DWP replied to a letter from the Committee on that subject. He confirmed that compensation of £500 and £750 had been paid to the two people who had raised the complaint with the ombudsman, as the ombudsman had recommended. I asked for an update on responding to being found guilty of maladministration. In response, the permanent secretary wrote that the ombudsman
“also recommended…that we invite others who believe they have suffered a similar injustice as the two individuals to come forward to have their cases considered.”
That was the ombudsman’s recommendation. The permanent secretary wrote:
“We propose to respond…by publishing a factsheet on GOV.UK and I attach a draft. We are currently awaiting the” ombudsman’s “comments on this.”
The ombudsman will have to decide whether publishing a factsheet meets its recommendations—I must say that I have my doubts—but it certainly falls well short of what the Work and Pensions Committee previously called for. It said:
“Government should not rely on general awareness campaigns or happenchance in promoting that understanding. It should focus on identifying the individuals affected, assessing their potential losses, and communicating with them.”
The permanent secretary also wrote that, in addition, the ombudsman
“recommended that their reports into the matter were shared with the Select Committee and we have sent your office copies of these documents today.”
The report was finalised on
I also asked how much the Department knew of the negative impact of the policy on individuals and how it was communicated to Parliament. The permanent secretary wrote:
“As was clear from publication of the Government’s White Paper in January 2013, it was an intrinsic feature of the new State Pension that the old regime of additional State Pension and contracting out, along with its various forms over the years, would be replaced by a new, simpler single-tier system. It was a fundamental feature of the changes that the withdrawal of additional State Pension meant also the withdrawal of GMP indexation.”
The ombudsman’s report highlighted that the White Paper did not say that those who had reached state pension age and could no longer add qualifying years would lose out from the changes. The White Paper gave the impression that people would be able to offset the increase in national insurance contributions that they will pay over the rest of their working lives. It implied that people will offset losses through additional national insurance contributions.
The permanent secretary also wrote:
“A detailed account of the change was provided in a response to a” parliamentary question
The permanent secretary wrote:
“More generally, the policy, and how it was communicated, was examined by the Work and Pensions Select Committee in its investigation into Understanding the new State Pension in 2016. In addition, the NAO reported on the policy in the same year.”
However, both those events took place after the legislation had been passed, not before. Both concluded that the DWP provided insufficient information to people about potential negative impacts.
The ombudsman, I believe, is right that
“DWP should have acted on the feedback they received through the Work and Pensions Committee and NAO reports. By failing to do so, DWP were not open and accountable and failed to seek continuous improvement…this amounts to maladministration.”
The ombudsman found that the DWP had failed to make its external communications clear and that
“there were some individuals who might financially lose out over the long term from the transition of the second state pension to the new State Pension—specifically in relation to the ending of indexation in relation to the second state pension/Guaranteed Minimum Pension.”
It also concluded that there is an injustice to members of the public who were not aware of the possible negative impacts of the removal of the second state pension and its relationship with the GMP. Up to 2 million people have reached state pension age since 2016. DWP literature has not told them that the 2014 reform could harm them over time. The Department has not fully acknowledged the negative consequences to the pension reforms over the long term. Its literature reassures people that notional losses will be offset and that they will not lose out, but that will not be true for some. The ombudsman says:
“The DWP’s actions, therefore, may have provided false reassurance and reduced the incentive for these people to find out about their future pension situation. This is an injustice for those who wished to plan for the future and might have been negatively affected.”
In addition to compensating the individuals and communicating with the Committee, the ombudsman recommended:
“Within three months of this report, review and report back to us on the learning from this investigation, including action being taken to ensure that affected individuals receive appropriate communication from the DWP about their state pensions. In particular, the DWP should ensure that their literature clearly and appropriately references that some individuals, who have large GMPs and reach State Pension Age in the early years of the new State Pension, may be negatively affected by the changes. The DWP should advise individuals to check their circumstances, and should provide instructions for how to do this;
Within three months of this report, review and report back about how other individuals who believe they have suffered an injustice as a result of the maladministration we have found can raise any concerns with the DWP and have them considered”.
Neither of those things has happened so far. It will soon be two years, let alone three months, since the ombudsman published that report. I have given the Minister notice of this question. Can he explain to us how the Department now plans to fulfil its obligations?
There is no doubt that the Department’s claims about the state pension reforms were misleading. They mislead members of the public, potentially seriously, and denied them the opportunity to act to safeguard their position. Can the Minister assure us that the Department has learnt its lessons and that similar mistakes, covering up damaging impacts of its policies on some claimants, will not be repeated in the future?
As the Minister set out, this is a technical piece of legislation that has to be approved every year, and ensures that those who accrued pensions from contracted-out defined benefit schemes between 1988 and 1997 will receive increases in line with inflation. This will provide a positive impact to those people for whom that applies. I thank Stephen Timms, Chair of the Select Committee, for raising his concerns. I entirely agree that it is incumbent on the Government proactively to reach out to those who may have missed out on moneys due to error or omission on the part of the Government or the Department.
There may now be fewer defined benefit schemes than there were 30 years ago, but many will not reach maturity for decades to come. That will also be the case for many of the people on DB schemes between 1988 and 1997, who will have many years left to work. We have recently spent time deliberating the importance of defined benefit schemes during the passage of the Pension Schemes Bill. I was pleased to see the Minister in the Lords provide reassurances on the Government’s plans for defined benefit schemes. The next steps lie with the regulator—after the Queen grants Royal Assent to the Bill, of course. Therefore, like the shadow Minister, I would be grateful if the Minister updated the House on what discussions have taken place with the regulator regarding defined benefit schemes and what timescales he estimates for the measures in the Bill, such as collective defined contribution schemes, to come into force.
I welcomed in March 2016 the Government’s announcement that those reaching state pension age between
Sir Roger Gale and David Linden referred to frozen pensions. As the Minister will be aware, the 2020 report by the all-party parliamentary group on frozen British pensions revealed that the Australian and Canadian Governments have been calling on the UK to end this policy for many years. Since then, the Canadian Government have formally requested a reciprocal social security agreement covering the uprating of pensions with the UK. Some would refer to this as an immoral frozen pension policy. For the 150,000 UK pensioners affected who live in Canada, the impacts of this policy can be devastating. Since Canada pays Canadian pensioners residing in the UK their full pension, the agreement would simply provide UK pensioners in Canada with the same rights as their counterparts in the UK.
Other Members have referred to this, and I feel that it is important to put it on the record. One such pensioner is 96-year-old world war two veteran Anne Puckridge, who served in all three armed forces but receives a meagre £72.50 a week of the £134.25 a week state pension she is owed, all because she moved to Canada at 76 to be closer to her family. Peggy Buchanan, who served the UK at Bletchley Park, where she helped to break the German Enigma codes, is also denied her full UK pension because she now lives in Canada. As the right hon. Member for North Thanet said, had Peggy’s family settled 2 miles further south in the USA, her pension would not be frozen.
The unjust frozen pension policy that denies half a million UK pensioners who paid into the system their full UK state pension is a national shame that has been allowed to continue by successive Governments for decades. It is not right that UK pensioners are punished with a frozen pension for moving to Canada, often to be close to family or due to health reasons. I am always mindful of the close ties between these countries. As someone who, at the young age of 18, emigrated to Canada and then returned again, I know of the close cultural, historical and social ties that the United Kingdom of Great Britain and Northern Ireland has with Canada.
The recent inquiry by the all-party parliamentary group on frozen British pensions found that one in two frozen pensioners receive a UK pension of £65 per week or less. Many veterans and former public servants who have given so much to this country are now struggling on a frozen pension. The Government of Canada have now presented an opportunity to rectify a moral injustice that sees thousands of UK pensioners in Canada denied the full UK state pension that they paid into. I believe that every UK state pensioner should receive a full uprated UK state pension, regardless of where they live.
I wish to clarify that this legislation will enable us to continue to do right by those who have worked hard all their lives in the expectation that they will be treated fairly and will not be a stopgap to simply put off doing the right thing for another four years. It has to be remembered that every year we put off doing the right thing is a year in which many die without receiving what they have been entitled to. Surely we must bring forward legislation to address this in a more comprehensive way, and I look forward to that happening soon, now that the consultation has ended. I look forward to the Minister’s response, as I believe that many issues still need to be sorted.
I would like to thank all colleagues for their contributions. This is a debate on the Guaranteed Minimum Pensions Increase Order 2021, and there was limited discussion of that, but there was widespread discussion of many other aspects of pensions legislation, some of which related to the previous debate.
The shadow spokesman, Matt Rodda, raised many particular policies that he wishes to campaign on, and I welcome those efforts. He will discover that many of the policies that he raised were issues that were debated, discussed and in fact legislated on by the Labour Government of 1997 to 2010. Indeed, the Chair of the Work and Pensions Committee, Stephen Timms, was the Pensions Minister in, I believe, 2008 and held my job in a previous Labour Government.
The shadow Minister raised a number of issues in respect of DB support, climate change and pension scams. Clauses 123, 124 and 125 of the Pension Schemes Bill take forward those three issues. We have set out, both in the White Paper and in the legislation, the extensive work that we are doing to support DB on an ongoing basis, and I have worked extensively over the last three to four months with many of the proponents of open DB schemes and many of the organisations that wish to continue the support. We have also worked very hard with the Pensions Regulator, and that work continues on an ongoing basis.
The shadow Minister is right to raise climate change as a vital issue. We believe that we have made pensions safer, better and greener. The clause 124 regulations will be forthcoming. Indeed, we have already brought forward the response to the consultation in respect of the taskforce on climate-related financial disclosures, which makes us the world’s first country to legislate for TCFD in respect of climate change and pensions.
Finally, on pension scams, clearly the shadow Minister is aware of the extensive discussion and debate that we had before the Work and Pensions Committee last week, and the extensive work that we have done to address the pension transfer problem, which is the key area that the DWP can address. I believe that we will be able to legislate and regulate, and have the power this autumn to ensure that those transfers are stopped, as I set out in much greater detail at the Work and Pensions Committee.
My right hon. Friend Sir Roger Gale raised an issue both in the previous debate and in this debate in respect of overseas pensions. He will know that, sadly, the policy on uprating of UK state pensions paid overseas has been the policy of successive Governments of different political persuasions for over 70 years, since world war two. I do not have good news to tell him, I am afraid. There is no intention that I am aware of for this Government to change that policy.
David Linden made his first contribution as shadow Minister and I, again, welcome him to his place. I look forward to visiting Scotland, when the pandemic allows, to campaign at length leading up to May. In respect of the key issue that he raised, I gave extensive evidence to the Work and Pensions Committee a week or so ago on pension credit. There is much that we are trying to do to progress that, whether in the form of Government communications or our work with the BBC. The fact of the matter is that pension credit is a benefit introduced by the Labour Government that has never achieved more than 70% of take-up. All Governments, including this Government and myself, want greater take-up of pension credit, and we are definitely doing everything possible to try to increase it.
The Chair of the Work and Pensions Committee addressed in detail a particular point on the Guaranteed Minimum Pensions Increase Order and the history of that legislation. He addressed the ombudsman’s findings relating to two individuals. Concerns have been raised regarding the way that the permanent secretary has dealt with correspondence to the Work and Pensions Committee and/or the ombudsman. I was not aware of that issue until yesterday. Clearly it is for the permanent secretary to respond. On the quality of the original policy formulated from January 2013 by Steve Webb, the Liberal Democrat Pensions Minister, I cannot comment at this stage, but I reject any criticism of a policy that was clearly scrutinised and legislated for by both Houses before it was implemented.
Wendy Chamberlain raised open DB. I assure her that we continue to work extensively with the Pensions Regulator on those issues. Although I welcome the comments of Jim Shannon, I do not think that I can amplify any of the other matters thus far. With those comments, I commend the draft order to the House.
Question put and agreed to.
That the draft Guaranteed Minimum Pensions Increase Order 2021, which was laid before this House on
I thank the hon. Gentleman for giving notice of his point of order and for putting the matter on the record at the earliest opportunity. I think we will leave that there.
I will now suspend the sitting in order for Members to safely leave and others to come into the Chamber.
Exceptionally—I think this may be the first time, therefore very exceptionally—we are going to have a technical suspension for 10 minutes. Everybody please be here no later than 4.33 pm.