Clause 80 - None

Part of Pensions Bill – in a Public Bill Committee at 2:15 pm on 7 February 2008.

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Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions 2:15, 7 February 2008

All I can say is that we will do our best. I cannot I give an undertaking.

Turning to the point the hon. Member for Eastbourne focused on at some length, the changes announced in the PBR and the points he made in respect of the upper-earnings limit on national insurance contributions and his suggestion that there is a stealth tax hidden in here. I will try to persuade him that that is not the case.

The May 2006 White Paper announced our intention to convert the earnings-related state second pension into a flat-rate top-up to the basic state pension. The process would commence around 2012 and is expected to be finished by 2030. Changes to the tax and national insurance thresholds announced in Budget 2007 have the knock-on effects of extending this transition and of high earners gaining entitlement to more state second pension compared to the position outlined in the White Paper. Measures announced in the pre-Budget report subsequently are consistent with the original intention stated in the White Paper. To keep within our original timetable we are bringing forward to 2009 a key feature of the White Paper proposals, a cap on accruals. To add clarification from the Pensions Policy Institute, which I think the hon. Member for Eastbourne prayed in aid to support his own argument. Responding to this point, it said:

“While this may sound like a significant policy change, widely reported to save the Exchequer £2 billion, it in fact refers to a technical change introduced to restore the flat-rating of S2P back towards the path originally envisaged in the Pensions Act 2007.”

They went to explain that,

“from 2012, S2P will be payable on the same earnings as originally envisaged in the Pensions Act 2007, becoming flat rate around 2030.”

It is a matter of keeping faith with the intentions as originally set out. With that, I hope there will be support for this to be included in the Bill.