Clause 3 - Savings credit

State Pension Credit Bill [Lords] – in a Public Bill Committee at 10:15 am on 18th April 2002.

Alert me about debates like this

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 10:15 am, 18th April 2002

I beg to move amendment No. 1, in page 2, line 42, leave out 'age of 65' and insert 'qualifying age'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to consider amendment No. 2, in page 3, line 26, at end insert—

'(6A) In the case of men aged under 65, such regulations shall provide that the calculation of qualifying income shall include an amount equal to the amount of retirement pension that the claimant has accrued at the time of the claim.'.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The Committee benefits from the fact that the Bill has been considered in another place. A fundamental issue was raised there: the treatment of 60 to 64-year-old women who are excluded from the savings credit under clause 3. These amendments

address that matter. They are intended to equalise entitlement to the savings element of the pension credit not at 65 years of age, as the Bill proposes, but at the state pension age—although it is clear that that will rise for women.

The initial effect of the amendments will be to bring everyone over 60 into the scope of the savings credit, rather than to exclude everyone under 65. That will bring in women pensioners of between 60 and 64 years of age, as well as male non-pensioners in that age bracket.

The Government say that they have to equalise, and we understand that. The winter fuel payments situation is a good recent example where the Government fell foul of the courts because they did not equalise. They were forced to equalise ex post, which was not desirable. Therefore, we accept that there must be equalisation. However, a question must be answered: should that happen at 65 or at pension age? For the sake of simplicity, I will say ''60'' instead of ''pension age'' throughout the rest of my contribution.

It appears that the argument in favour of 65 goes as follows: the Bill is about pensioners, so why should men aged 60 to 64 who are not pensioners get the savings credit? The first response to that is that men aged 60 to 64 who are not state pensioners get guarantee credit. The idea that the state pension credit does not apply to non-pensioners is wrong. A group of non-state pensioners—men aged 60 to 64—get the guarantee credit if they are entitled to it. There is not a principle at stake. People who are not pensioners already benefit from the pension credit.

Why should men aged 60 to 64 be excluded from the savings credit element of the pension credit? There is an assumption that to keep non-pensioners out, we must equalise at 65. However, one can think of measures in addition to the guarantee credit, such as the winter fuel payment and concessionary travel, that are aimed at pensioners and equalised at 60, although the equalisation of concessionary travel was forced by a court case. The argument that one cannot include non-pensioners when one equalises is not borne out by other aspects of the system, or even the Bill. Therefore, there is no reason why men aged 60 to 64 should not fall within the scope of the savings credit.

The second concern might be what happens to rich men aged 60 to 64 because the measure is designed for pensioners who, on average, are poorer members of society whom the means-tested benefit is designed to help. We do not want to help rich men aged 60 to 64. However, the benefit is means-tested and, therefore, such a person would have pots of money and would not be entitled to the benefit. We are not discussing rich men aged 60 to 64 but relatively poor men between those ages.

The question arises: what is the problem? Baroness Hollis implied in another place that part of the integral structure of the state pension credit is that it is built around the state pension. One of the thresholds in the Bill—I forget its name—is the same as the pension. Therefore, if we are addressing a group who do not

draw a pension, how can they be given a savings credit that is premised on the assumption that people draw a pension? That is where amendment No. 2 comes in because it would assume that men aged 60 to 64 were drawing the pension that they had accrued so far.

The point is slightly subtle and I have had difficulty getting my head around it. However, given the way in which the system is structured, a person who has a pension entitlement that is less than the full entitlement must use their savings to bring them up to that entitlement before they earn pension credit. A man aged 60 to 64 who did not have a pension would not receive savings credit unless he used earnings or pensions to bring himself up to the £77 level of the pension. He would receive savings credit only on the bit above £77. I happily accept that a system that rewards men aged 60 to 64 with more than £77 of savings is peculiar, and that would have been the strange effect if we had tabled only amendment No. 3.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions 10:30 am, 18th April 2002

We are talking about amendments Nos. 1 and 2, not amendments Nos. 3 and 4.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I apologise. The Minister is quite right.

That would have been the strange effect of tabling only amendment No. 1. Amendment No. 2 is designed to address that and would assume that such men were drawing the pension that they had accrued so far.

The Minister might say, ''It is a funny business to assume that people are getting a pension when they are not.'' However, on Tuesday she said that the system would do that for 65-year-old men who defer. If a 65-year-old man defers his pension until he is 66 and claims pension credit at 65, the Government will, properly, say, ''We'll assume that you're getting a pension and treat you as though you were getting a pension, even though you're not, because we do not want to give you a barmy advantage for deferring and treat you as though you have no income.'' The principle of assuming that a person gets a pension that he does not receive is implicit in the system.

I accept that it is a bit muddy to assume that a person is receiving the pension that they have accrued so far. The phrase ''decrepit computer systems'' may pop up in the next half hour. The phrase is beloved of the Secretary of State because he is fond of saying that computers cannot count—no, not ''count'', although one wonders about that sometimes. I meant to say cannot cope.

Many men aged 60 to 64 would have accrued something approaching a full basic state pension. Amendment No. 2 would not assume that they have a full basic state pension because that would entitle them to savings credit to which they might not be entitled if, when they reached 65, they did not have a full basic state pension. Our drafting of the amendment erred on the side of caution, as we are wont to do. For example, we are arguing not that someone who has just swanned into the country should be imputed to be earning a full basic pension and should receive a savings credit for each penny that he had saved, but that people who have worked all their life and have practically accrued a full basic pension should receive a reward for their savings at the age of 60, not 65. I accept that, over

time, the 60 years threshold will rise and eventually equalise at 65.

We want equalisation at 60 not 65 because of women aged 60 to 64. That is the critical reason behind the amendments. Women pensioners will have listened carefully to the Secretary of State for Work and Pensions announcing the virtues of the pension credit and the savings credit and saying that they are a reward for pensioners who save and that, at last, they will not be worse off than their neighbour. Women aged 60 to 64 will have said, ''Good. That's me.'' The Government made the case that the pension credit would be good news for people who save and that it would get rid of the next-door neighbour problem.

It will not. Many woman aged 60 to 64 may think of themselves as pensioners. That is not a strange notion. Let us bear in mind a woman of 62 years who heard the Secretary of State talking about pensioners being rewarded for saving. Perhaps long speeches qualify certain proposals, but headlines do not, and nor does the coverage given to such speeches. The Government have raised an expectation among women aged 60 to 64, and to turn round and tell them, when the system is in place, that they may have to wait five years to be rewarded for saving and until then will be no better off than their next-door neighbour may create resentment. If the amendment were to bring 60 to 64-year-old men into the scope of the proposal, it is worth considering.

Can the Minister give us an estimate of the savings credit entitlement of women aged 60 to 64 if the threshold was lowered? That could be used as part of the total cost but, if the proposal really is a reward for saving, pensioners should be given that reward.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

In the case of women aged 60 to 64, would it help if we assumed that earnings would be treated in the same way as savings and counted as income towards the system?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I might need to think about that. We will come back to earnings. The Minister may argue about the cost of the amendment. However, to the extent that it relates to women aged 60 to 64 it is an issue of justice. The Government have raised the expectations of a group of people. They may say that they have made it perfectly clear that savings credit starts at 65, but let us be honest about such matters. If it were said in a ministerial announcement that pensioners were to be rewarded for saving, that is probably as much as people would take in. The idea that there are two components and that one develops at one age while another develops at another, is pushing it a bit. Expectations have been raised and they should be honoured.

What would be the cost if the proposal related to men aged 60 to 64? We are referring to poorer people. We are imputing a pension. Men who had not contributed to a pension would not receive much savings credit, so we would be rewarding men of that age with small savings. That is not unreasonable and, if they are in the system, it may improve take-up when they are 65. I am talking about equality and dealing

with women pensioners who thought that they would be rewarded for saving, but who will not receive that reward until they are 65. There are plenty of precedents, including the Bill, for equalisation at 60 for men who are not state pensioners and imputing in the way set out under amendment No. 2. The fact that people would receive the pension that they had accrued so far would deal with the problem that only those with big savings would receive a reward. The proposal is modest and reasonable and one that the other place has not had the chance to consider in the form set out by the amendment. I commend it to the Committee.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

The hon. Member for Northavon has put his argument clearly and imparted some ingenuity into his thoughts. I almost became animated when I first thought that I would need to declare an interest to the Committee given that I attained my 60th birthday this year. However, as the hon. Gentleman rightly reminded us, given that I am in receipt of a parliamentary salary, it is relatively unlikely that I would be unable to avail myself of the pension credit, although I suppose that I could invent certain circumstances. I therefore feel no inhibition when speaking about it.

The hon. Gentleman set out his requirements, which would have been mine, too, for the Under-Secretary to respond about the cost involved. That is not a trivial matter. I referred to it in our earlier debate on double provision. Ministers must have regard to the cheque element.

Secondly, as Lord Higgins said in another place, an issue of equity is involved. Equalising the pension age is a delicate issue, but all Committee members accept that whatever is introduced should be equal for people of the same age. That principle is incontestable. The issues are whether we opt at one end or the other, the cost involved and whether the proposal is deliverable. That is a reasonable question to which the Under-Secretary should respond.

I would add only one further point, which relates to the legal advice that Ministers have received on the matter. I return jocularly to my forthcoming, but no doubt somewhat delayed, until September next year, winter fuel payment. The matter has arisen simply because the court embarrassed the Government into having to make changes in such a way that they now claim credit for their generosity. It would be out of order to discuss that. However, legal interpretation does not always coincide with that of Governments. Will the Under-Secretary assure us that no legal whoopsy is likely to make a retrospective adjustment necessary, perhaps in relation to women under the age of 65? Might that adjustment be extended to men in that category? I do not have a sufficiently refined legal mind to have the slightest idea whether that is a risk. I understand that the Bill introduces a new benefit that is income contingent, but I should like the Under-Secretary's assurance on that point and her response to the general points made, which should be considered before we move on.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

''Whoopsy'' is a legal term that I have not come across before. Perhaps it has been introduced into the law since I allowed my practising certificate to

lapse. I shall do my best to deal with the points made by the hon. Members for Northavon and for Daventry.

Amendment No. 1 would make the savings credit available to both men and women from the same age as the guarantee credit—currently 60. The hon. Member for Northavon makes it clear that he accepts the need to equalise, which is essential. I do not believe that it is purely a legal matter—although we are, rightly, open to challenge from all quarters if there is a hint of gender inequality in respect of the provision. Our approach has been driven by trying to ensure that the provision is as equal as possible, not only to prevent us from being challenged in that way but because we believe that there should be equality.

The difficulty that we face in trying to work out an approach to the matter is the inequality that remains in basic state pension provision, of which Parliament has taken cognisance. The previous Conservative Government introduced legislation to provide for equalisation in due course. However, as always with pensions, things have to be done over a period, rather than immediately. The intention is that state pension age will rise gradually from 2010 through to 2020. The period from 1995 has been given in order to ensure that women can make proper provision and that there is no adverse effect on people's long-term planning. Until then, however, we have an inequality in basic state pension provision.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions) 10:45 am, 18th April 2002

Is not the real difficulty—and the dilemma with which everyone must wrestle—that, in removing the gender inequality for those below the age of 65, and not extending the provision, irrespective of the cost of doing so, the Under-Secretary introduces a new discrimination between female pensioners under the age of 65 and those above that age? Both may have the same external income and the same entitlement to the basic state retirement pension, but under the proposals the one below that age will not receive the savings credit while the other will. In dealing with the gender issue, she has created an invidious—although, I accept, difficult to solve—discrimination between classes of female pensioners.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

I hear the hon. Gentleman's point. Equality will not be achieved in general provision until 2020, so it is difficult to devise a way of bringing equality into this provision sooner than that. We discussed different ways of dealing with the inequality inherent in the system. We have all wrestled with the problem and it is clear from the amendments moved by the hon. Member for Northavon that he has also examined it. We went through a similar process of trying to find a way of making the provision as fair as possible, while realising that there is basic inequality in the system on which it is built.

We looked at the problem with great care, but the lowest age at which the savings credit can be paid equally and fairly is 65, which is what we propose. In any case, men can expect to continue building their pension provision until that age. Therefore, other inequalities are introduced because they would receive a reward on the basis of what is not their full

entitlement—because it is continuing to be accrued. The effect of the hon. Gentleman's amendments would be to build in further unfairness, which we cannot do.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Lady says that bringing 60 to 64-year-old men into the system on the basis of the pension that they have accrued so far would be unfair. I cannot believe that any of those who receive the money would say, ''No, I do not want it. It is not fair because I might accrue some extra pension.'' They would tolerate the unfairness and thank the Government for bringing them into the system.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

Until the basic state pension has completed the process of being made gender neutral, there will be inequalities in the system somewhere however we decide to tackle the problem. The difficulty that we face arises because the current state provision is not paid equally to men and women until the age of 65. That is why we have decided to make that the age at which savings credits are paid. Until equality is achieved, there will be an anomaly.

Photo of Sandra Osborne Sandra Osborne Labour, Ayr

This subject is of concern to many people. I especially hate to see women losing out in any way. However, I recognise the great difficulties involved in trying to reach an equitable solution. Will the Under-Secretary tell us how many women between the ages of 60 and 64 are likely to be affected?

I admit to some difficulty in following the proposal of the hon. Member for Northavon, which was extremely complicated. I am not sure that it would be workable. The Under-Secretary says that she has examined the issue in detail, so will she tell us the numbers involved and whether the provision would be open to legal challenge if such an amendment was accepted?

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

I shall deal with that point in due course.

The age of 65 is the first point at which we judge that the savings credit can be fairly and equally paid to ensure that we are not open to legal challenge in respect of gender equality. However, the amount of savings credit depends on the amount of existing state provision. If it were paid to those aged 60 to 64, men and women would have different outcomes solely because of the unequal nature of the state provision. That is the difficulty in making the change suggested by the hon. Member for Northavon. We cannot fairly pay savings credit until an age at which the provision is equal for men and women, which is 65.

The hon. Gentleman recognises the problem of paying the credit under that age, because that is what his second amendment seeks to ameliorate. He is with us that far—he has spotted the problem. However, worthy though his amendment is, it would only make things worse. He tries to sort out the problem by saying that we can estimate the amount of basic state pension that a man has accrued on his contribution record

''at the time of the claim.''

The amendment would make the problem worse because there would be a huge administrative cost involved in estimating the accrued pension entitlement of 400,000 men. It would also produce unfair results

and the kind of effects that we want to avoid. Different amounts of pension credit would be payable to people in otherwise identical circumstances, purely because of the difference between state provision for men and for women. That would open us to the sort of legal challenge to which the hon. Gentleman referred.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

While not necessarily disagreeing with the dilemmas with which the Under-Secretary is wrestling, I cannot let pass unchallenged the assertion that the potential roll-up of retirement pension for the male approaching retirement age would be difficult to estimate. Surely that is what her Department proposes to do in issuing retirement forecasts.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

The hon. Gentleman makes some interesting points. The area is difficult and there is no ideal solution. We must ensure that we treat everyone fairly, and if the amendments resulted in people in the same circumstances receiving different amounts because they were male or female, because of the unequal way in which provision works at present, we would not have succeeded in solving the problem. We cannot implement such a system without being open to legal challenge. The first point at which we can ensure that the outcomes are the same is at age 65, in respect of savings credit.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The Minister is engaging constructively with what we want to achieve with the amendments, but who would launch the legal challenge to which she refers? It would not be the women, because they would be receiving more money—they cannot say that they should have even more because they would be using their actual pension roll-up. It would not be the men, either, because we would have brought them into the system when they would not normally have been included. Who will challenge the provision?

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

The hon. Gentleman is not a lawyer, but if he were he would know that someone will always challenge provisions if the outcome is unequal. Never mind the fact that the system is unequal in that men and women in the same circumstances do not receive the same amount of money—if there were a difference, there would be a man who, although he was benefiting, would claim that he should receive the higher amount. In all conscience as a Government, we cannot proceed on the basis that a legal challenge is possible and that we know that what we are doing is wrong but hope that no one will bring a case. That would not be a responsible way to conduct ourselves in government.

The other difficulty with the amendment is that it would cause strange outcomes for some recipients. Some men, for example, would be rewarded for their savings while aged between 60 and 64 and have the calculation based on state pension accrued before the end of their working lives. When they reached 65, however, they would find all their savings rewarded less or not at all. There are instances in which a man could receive a savings credit element between 60 and 64 and lose it when he hit 65, which would be difficult to explain.

I shall give the hon. Gentleman an example. Let us consider the case of a 64-year-old man who has a £60 personal pension but no basic state pension, because he is not yet 65, and no other income. Based on his contributions to date, he would receive a full basic state pension—that is, he would receive £77 when he was old enough. Under the amendment, he would receive £13.80 savings credit. When he turned 65, he would keep his £60 personal pension and receive his £77 a week basic state pension, so under the amendment his savings credit would be reduced from £13.80 to zero.

With the best will in the world, the hon. Gentleman is trying to find a way to include men aged 60 to 64 and to equalise and introduce savings credit at 60 rather than 65. However, the impact on the man in my example would be that he would receive savings credit to begin with, but lose it when he hit state pension retirement age or when he retired.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

As I said, the Under-Secretary is responding helpfully. However, in the case that she has just cited, my argument would be that when the man is aged between 60 and 64, he will have no money other than the £60 pension. The guarantee credit will bring that up to £100. The Minister is saying that he should not be rewarded for having saved because he will lose that reward at 65 when he gets his pension. If the Government's principle is that people should be rewarded for having saved—especially when they have nothing else to live on—why should he not be rewarded for having done so when he is 64? The alternative is that he does not get rewarded for having saved at all—a situation which the Government must surely want to stop.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

It would be slightly more difficult to persuade that man that he should lose his reward for saving when he gets to 65.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

Anomalous situations would arise from the hon. Gentleman's amendment, in addition to the general problem, which we have already mentioned, of the legislation's being open to challenge because there are different outcomes dependent only on gender.

Photo of Ms Annabelle Ewing Ms Annabelle Ewing Scottish National Party, Perth

I appreciate that one can never exclude the possibility of a legal challenge—I declare an interest in that I am a lawyer, although I am not currently practising—but will the Minister clarify on what grounds such a challenge could be brought? What legislation would form the basis of such a challenge?

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

It is just a matter of equality. The grounds would be the same as those on which other actions have been brought with respect to other benefits—the difference between the pension ages for men and women. There have been cases and we have no reason to think that there will not be further ones. It would not be responsible for us to proceed to implement a system that is blatantly discriminatory on the grounds of gender and hope that no one would challenge it. Although I understand the point made by the hon. Member for Northavon that we will be giving men between the ages of 60 and 65 more money, that is

not to say that they will be getting quite as much as the women.

As long there is inequality, there are grounds for a challenge. We cannot cross our fingers and hope that no one challenges the legislation in the courts. Someone almost certainly would and we would not have many legs to stand on when they did. We have examined the issue and there is no way that we can get around the fact that if what we do creates a gender inequality, albeit of a slightly different kind from the existing one, we would be open to challenge. It would not be possible for us to legislate on that basis. The problem is the existing inequality, and problems of this kind will end only when that inequality ends. Parliament has already made provision for that, but this Bill cannot do it any more quickly and does not seek to do so. Therefore, we have to make do until that inequality ends.

I was asked what would be the cost of paying savings credit to 60 to 64-year-olds. Based on a 100 per cent. take-up, and including the housing benefit and council tax benefit costs, we think that the measure would cost about £200 million. We estimate that about 300,000 benefit units—Committee members will know what we mean by that—would gain from the savings credit's being paid to 60–64 year-olds. However, that does take away the problems that I have been trying—not as lucidly as I might—to explain in respect of the amendments.

I understand why the hon. Member for Northavon wants to equalise provision. We all agree with that. Parliament agrees with that and has made provision for it, but we cannot equalise outcomes until that provision has come into force. The Bill cannot be used to speed up the process of equalising the basic state pension age. The Bill has provisions to ensure that we fit in with that equalisation, which will start soon and will be ongoing.

I hope therefore that the hon. Gentleman will understand that we have gone through a similar process to him in trying to ensure that the maximum number of people benefit from the Bill, but we have concluded that, because of the current inequalities in the system, it is impossible to do so except by paying savings credit at 65. In view of that, I hope that the hon. Gentleman will ask leave to withdraw the amendment.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 11:00 am, 18th April 2002

I thank the Under-Secretary for the spirit in which she responded to the amendment. She gave an example of an anomaly that would have been created under the amendments, but which I believe would not be a problem. Her example was of a person with a £60 private pension who, before the age of 65, had to live on the £60 pension and a top-up that guaranteed him £100. In my world, however, that chap will also receive the maximum pension credit of £13.80. That will give him £113.80. I acknowledge that he will lose the savings credit when he hits 65, but he will start receiving his pension, so he will then have the £77 state pension and a £60 private pension, which will take him up to £137 a week. He will go from £113 a week pre-retirement to £137 post-retirement.

The Under-Secretary may say that he has lost his savings credit, but I cannot imagine him saying, ''This is not fair; you are taking something away from me.'' He will know that he is £24 a week better off. Indeed, that increase will come from the state: his private pension will not have changed. I understand what the Under-Secretary is driving at—that his savings credit would go—and it does sound strange, but his total income will rise significantly. I am not convinced, however, that he would say, ''It's a scandal, Guv.'' I understand what the Under-Secretary is saying, but people will not object if they are better off once they retire but have still received that welcome pre–65 money. It is not a telling objection.

The fundamental objection is that it creates an inequality—a different inequality—that is open to challenge under law. The hon. Lady may say that I am not a lawyer, but the amendment proposes that men and women are treated the same, and that the savings credit should be assessed on the basis of their accrued state pension rights. It so happens that women cannot go on accruing more state pension rights after 60, but men can. The assessment is made indiscriminately, on the basis of the accrued state pension rights on the day when the claim is made. However, the Government have a leg to stand on at least on that issue. I accept that stranger things than that have been challenged, but it is not inherently discriminatory to treat men and women identically and then to assess them on the basis of their accrued rights.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

The difficulty is that, at a certain stage, women cannot accrue more rights. If a man can receive money under an arrangement that allows him to accrue more rights, that inequality would be open to challenge under the equal treatment directive or the Human Rights Act 1998. It would not be responsible for any Government—I am sure the hon. Gentleman would say the same if he was a Minister—to implement legislation that was open to such a challenge.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I appreciate that; I suspect that it boils down to a matter of legal opinion, and I am not qualified to adjudicate on that. However, in principle, we have not built in a structural inequality; we are treating men and women in the same way based on their accrued pension rights to date. The Under-Secretary is saying that women cannot accrue any more, but that is about the future. The critical point for me about the amendment is that, when filling out the forms, one would not need to know a person's gender to work out their savings benefit entitlement. Whether male or female, the sums would be done in the same way; the form would ask what was the applicant's accrued state pension right to date. However, I shall not pursue that point; I accept that the hon. Lady will have received legal advice that even that is somehow discriminatory.

I am grateful for the estimate of £200 million provided by the Under-Secretary. Is that money only for women aged between 60 and 64 with savings, or is it also for men, as proposed in amendment No. 2?

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

It is for both.

Mr. Webb: It would be helpful to know, not necessarily immediately, the breakdown of that £200 million. I am thinking of the 300,000 people who are women aged between 60 and 64, who will have heard the Secretary of State, who think that they will be rewarded but who will be disappointed. Perhaps she can clarify how many of those 300,000 are women who fall into that category. That would help us to assess how important the amendment is. If most of those people are women who think that they are getting something when they are not, that would add weight to the argument; if only a few of them are, the argument would be much weaker.

The Department is fond of emphasising that many people stop work well before 65. Many men between the ages of 60 and 64, who are not earning or well off, may have saved, but they will get no reward. Many people retire early, stop work due to ill health or whatever, and we must support them and encourage them to save.

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

About one third of people between 50 and retirement age are not economically active. They are, however, on benefit, and the Government support them. They do not get pension credit because they are not old enough.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The point is that 60 to 64-year-old men get pension credit, but not the savings credit element. The system says that we should support them, but that we should not reward them for saving. The thrust of the Government's argument is that we should now reward people for saving, but that seems out of kilter with the message that we should not reward those who do so, including women pensioners.

I shall not pursue the point further. The Under-Secretary has given careful responses to the points that we have raised. I may seek legal opinion on whether the provision could be open to challenge, because this is a fundamental question. At this stage, however, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

I beg to move amendment No. 21, in page 3, line 7, at end insert—

'(2A) The Secretary of State shall as soon as practicable after the end of the fiscal year 2004–05 and as soon as practicable after the end of each year thereafter lay before Parliament a report setting out—

(a) the number of persons with a withdrawal rate of 100 per cent. in respect of income beneath the savings credit threshold, and

(b) the total value of the income concerned.'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this we may discuss amendment No. 5, in page 3, line 26, at end insert—

'(6A) Such regulations shall provide that, in the calculation of qualifying income, a claimant may substitute for his actual rate of retirement pension an amount equal to the rate of retirement pension that the claimant would have been entitled to if the provisions of paragraph 5(7) of Schedule 3 to the Contributions and Benefits Act (home responsibilities protection) had been in force since the claimant attained the age of 16.'.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

It is a great pleasure to serve under your chairmanship again, Mr. Griffiths. I begin by craving your indulgence for a moment. I should be able to deal with my amendment in short order, but it is grouped with an interesting amendment in the name

of the hon. Member for Northavon. Given the speed of our proceedings this morning, I am not sure whether we shall complete our consideration of the amendments by the time we adjourn. I do not want to hurry the Committee in any way, but I must leave the Committee at 11.30 am to speak in a debate in another part of the House. My hon. Friend the Member for Daventry has agreed to deal with the amendments after that, if we are still debating them.

Amendment No. 21 is straightforward and deals with the issue, on which we have touched, of those with a 100 per cent. withdrawal rate in respect of income beneath the savings credit threshold. We know that a number of people fall into that category, and it would be useful to know just how many do. The Government might be as interested in that as we are, because part of the justification for introducing the savings credit is to remedy the disincentive created by the operation of the minimum income guarantee on its own on anyone with savings that take them up from the basic state pension of £77 to the minimum income guarantee of £100. That is anyone with savings of £23. Under the minimum income guarantee, such a person would receive no benefit at all from their savings if there was no savings credit. I think that the Government were adverting to that in their consultation paper, when they said:

''The third—and crucial—stage of the Government's reforms is the introduction of the Pension Credit. There is inevitably a tension between the need to ensure there is a level below which pensioner incomes do not fall, and the need to ensure that today's workers have a clear incentive to save.''

A 100 per cent. rate of withdrawal for that £23 of savings does not, however, offer any or even an adequate incentive to save: it offers no incentive, because the money is taken off at the rate of 100 per cent.

Even after the savings credit has been introduced, some people will still face the 100 per cent. rate of withdrawal. We have covered this issue already, and I do not want to go over old ground, but I should remind the Committee of the facts. The people who fall into this category will include women between the ages of 60 and 65 who have savings and are entitled to the guarantee element of the pension credit, but who receive no benefit for their savings, and people of either sex who have a less than full entitlement to the basic state pension. We have been over that ground, and I need not repeat the point as I am sure that the Committee has it in mind. The point of the amendment is that we need to know how many such people there are.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

Our amendment No. 5 has been grouped with amendment No. 21, which was moved by the hon. Member for Hertsmere (Mr. Clappison). Amendment No. 5 would tackle a group of people who would be covered by amendment No. 21—women with incomplete contribution records.

I should welcome the information that is asked for in amendment No. 21, which would be helpful. Amendment No. 5 would do something slightly different. I mentioned on Tuesday that I am concerned about women pensioners. All Committee members would agree that, both in the past and

present, women pensioners have had a raw deal. When considering poverty and pensioners, one first considers elderly women and widows. I am always looking out for the effect that measures will have on women. All too often, Parliament has failed to think through the effect of pension measures for women.

One group that society has historically not valued is women with caring responsibilities. The Government are fond of saying that measures such as the state second pension show their future recognition of the value of caring, and that that recognition will be reflected in the pension scheme in decades to come. Such changes take decades to work through, and women who are coming up to pension age now have the historical baggage of the past 40 years of our society bound up in their pension entitlement.

A core example is that of a woman who will hit 60 just as the state pension credit is introduced in October 2003. We must consider when she had her child-bearing years, for want of a better phrase. Home responsibilities protection came in 25 years ago when she was 35, so it is a reasonable assumption that many women now hitting 60 would have had most, if not all, of their children before home responsibilities protection came in. In other words, the state pension entitlement of any woman hitting 60 who has had children is likely to be depressed by years of caring.

The system compensates such women to some extent, because if they are single, the means test, or guarantee credit, will top up the pension. Obviously, if they are married, they can get income protection from their husbands' contributions. Even so, many women are reaching pension age with an incomplete contribution record. How should that be treated for the purpose of the savings credit? That is what our amendment is about. We cannot re-write history; these women took time out of the labour market to bring up children at a time when social security did not value that. They brought up children probably in the 60s and early 70s, and they were wrecking their pension rights when they were doing so.

Some women opted for the married woman's reduced stamp and saved themselves money when they were contributing. Some of them will have understood that by doing so they were foregoing a future state pension entitlement, but I have clear evidence that many of them did not understand that. I could give many examples, chapter and verse—although I shall not detain the Committee by doing so—from hundreds of women from around the country who have written to me and said, ''I came back after my honeymoon, and the payroll said, 'You're married, love, so you go on the married woman's stamp.'''

I am told by the Department that those women had to sign a form, but let us face it, we all sign forms, particularly when we are not very experienced in the workings of the tax benefits system. In many cases, the women signed because the payroll told them that they had to, and many of them did not appreciate what they were doing to their future pension entitlement. Those women are now approaching pension age and write to say that they are astonished when they send off for the pension forecast that we have been talking

about, and find that it comes back with pension entitlements worth pennies, literally. I have copies of such pension forecasts. Those women had no idea that that was coming down the track.

How will such women be treated under the savings credit? They must supplement their basic pension entitlement with any savings that they have in order to bring them up to the pension level before they are rewarded for their savings. I gave an extreme example of a woman who is entitled to only pennies when she reaches the age of 60, and I have documentary evidence that such women exist.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley 11:15 am, 18th April 2002

I do not deny that there might be women who, without full information, made decisions that were not to their benefit, but does the hon. Gentleman accept that many women, several of whom I know personally, made conscious decisions that it would be to their immediate benefit to pay less national insurance because that gave their family extra income at the time? Does that build an inequity between women who made a sensible and conscious choice of what they thought was best for their family and women who simply made a mistake?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I absolutely agree with the hon. Lady. Any remedy to that must distinguish between the two groups. For example, if we allowed people to fill the gaps in their record by buying back missing years, that would deal with her point. People who made a conscious decision not to pay national insurance could get on with it, and those who misunderstood could pay the equivalent amount to what they saved. I do not suggest that we rewrite history and reward those who saved money at the time.

Mention of the married woman's stamp might have been a red herring. We must think about the group of women who end up under the contribution threshold. However, the second group, who are more important in many ways, are those who stopped work altogether or who did not start work. They were bringing up children but rather than paying a reduced stamp, they paid nothing at all because they did not work. Such women trashed their pension rights in a society that did not value care in the way that it did after 1977 under home responsibilities protection. Women who had not worked or paid national insurance and who were completely outside the system have been punished once by society for not building up their pension rights. However, the Bill would mean not only that such women would be punished by getting a grotty state pension, but that they would not be rewarded for their savings either because the pension is so low that all their savings, which may not be much because many of these women do not have high savings, would bring them up to only the pension level and not entitle them to pension credit. We would hit them twice.

The last group of amendments addressed the fact that we are penalising people aged 60 to 64 by excluding them from the savings credit. However, we would also hit women who brought up children by giving them a grotty pension and a grotty savings credit. The amendment would examine what would

have happened if the home responsibilities protection rule had applied when the women were bringing up their children. Our society now thinks that what women did then was worth doing and that it was wrong not to recognise that. Although we would not recalculate their pension entitlement—one could argue that we should, but I am going only one step down that track—they should not be penalised for what they did. We should certainly not penalise them twice when legislating for their incomes over the next 30 years. If the amendment were not accepted, a woman who cared for and brought up children would receive no savings credit at the age of 60. The period might not be 30 years because there is the question of what women get from their husbands when they reach 65. However, the period could be five years.

When such women's husbands reach state pension age, women receive a 60 per cent. pension based on their husband's contributions. The threshold for a couple is 160 per cent. of the threshold for a single person and, therefore, the issue diminishes substantially. Until the husband reaches 65, however, it is a big issue. Women with what are loosely termed toy-boy husbands—women with husbands who are merely younger than them—will be penalised for at least five years. If a 60-year-old woman has a 60-year-old husband, although that may be an extreme use of the phrase ''toy boy''—[Interruption.] The hon. Member for Daventry is not my idea of a toy boy.

If a 60-year-old woman has a 60-year-old husband, she will not receive savings credit during the five years until he is 65. Does the Committee really want to say that a woman's reward for saving is all about the age of her husband? That is not right, given our regard for the independence of women and the value that we place on caring activities.

The Minister may say that history cannot be rewritten, that we now have a system in place and that people will just have to lump it. Perhaps I am being slightly uncharitable, but that is the Government's argument. They say that women did not have such protection in the past and that their income is topped up through the minimum income guarantee, so what do women want? Well, let us consider those women who, given that start in life, have still managed to save. It would not have been easy. The fact that they did not have a paid job until they were in their mid–30s or until their children started school would not have been atypical in those days. They would not have saved a great deal anyway. Some women may have a little amount of savings or a pension from when they were 40-years-old. Can we not reward those meagre savings? It would not even cost that much—people seem to be wary when I say that.

I hope that the Minister has an estimate in mind? We are not talking about huge sums. I am referring to a group of people who have been penalised once, and I do not want them to be penalised again. The amendment reflects the value of their caring in the way that Parliament accepted was right post–1977. We must not replicate society's attitudes of the 1960s. If

the amendment were not accepted, we would be reinforcing those attitudes on the pensioners of 2002.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

I refer to a particular aspect of amendment No. 5. I have sympathy with his motives although, in rectifying an anomaly, we may create new anomalies. As my hon. Friend the Member for Colne Valley (Kali Mountford) said, such a proposal may not improve matters. I hate to disappoint the hon. Gentleman; although I agree with what he forecasted Labour Members would say. The best way in which to cope with the anomaly would be to give people a top up through the guarantee credit element.

I seek assurance from the Minister about the treatment of foster carers. They provide a vital service and deal with some of the most difficult cases that life can throw at people. A constituent of mine has given up her job to take on two teenage boys who have been subjected to fairly significant abuse in two different homes. That is an incredible step to take on behalf of society and, bearing in mind the expenses that carers receive, it is poorly rewarded. The service is not salaried.

My constituent was warned that, under the current system, she would lose contributions to her basic state pension. Home responsibilities protection is calculated through passporting from other benefits. If she gave up work to look after her own children, she would receive home responsibilities protection through the receipt of child benefit but, because she does not receive child benefit for fostering children, she does not receive home responsibilities protection.

The sensible reaction of people who realised that they were not receiving credits towards their basic state pension—very few people do realise that—might be to save towards a private pension. The problem with the savings credit as it is constructed is that such people may be subjected to a 100 per cent. withdrawal rate on the small income from their private pension. If they were earning less than £77 overall in retirement, the income will be taken away at the rate of 100 per cent. Will the Government consider rectifying the overall situation with regard to foster carers or allow those who have saved towards a private pension to keep a proportion of that pension in retirement?

We must continue to attract people into foster caring. I have sat on adoption panels that have had to make terrifying choices about where to place children—such as in foster homes that we were not confident would give them the best possible care or to leave them in care homes. We all know that children in care often have a bleak prospect of educational development and fall back into criminality and drugs. The more that we can attract foster carers into offering their services, the better. If the Government can reassure us that they will consider proposals in respect of the pensions of foster carers, the more progress would be made towards attracting people into the foster care service.

It being twenty-five minutes past Eleven o'clock, THE CHAIRMAN adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.