Clause 1 - Equalisation of and increase in pensionable age for men and women

Part of Pensions Bill [Lords] – in a Public Bill Committee at 2:45 pm on 7 July 2011.

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Photo of Rachel Reeves Rachel Reeves Shadow Minister (Work and Pensions) 2:45, 7 July 2011

I want to come on that point because, although the impact assessment acknowledges that people from black and minority ethnic communities save and earn less and are more likely to be in receipt of pension credit, nothing in the Bill will alleviate the impact on the groups that will be particularly affected, as we have seen in other areas.

We know that poorer pensioners need extra support. The Government’s impact assessment shows that men and women born between 1953 and 1955 who are on lower earnings, have had interrupted careers and will be dependent on pension credit throughout retirement, will suffer the greatest percentage loss in lifetime pension income as a result of the accelerated timetable. It also shows that people who rely mainly on pension credit in retirement will lose proportionately more than higher earners, who can carry on contributing to their private pension saving if they work longer and who also tend to live longer on average.

Beneath the headline numbers, there is a worrying distribution between different ethnic groups, as my hon. Friend said. People of black and black British origin  have the lowest level of private pension and investment income—£46 a week compared with £155 for white people. Some 40% of pensioners of Pakistani or Bangladeshi origin and 29% of black and black British pensioners are in the bottom quintile compared with 14% of white pensioners, and that concentration will be greater as a consequence of the increase in the age for eligibility for pension credit consequent on the acceleration of the equalisation timetable.

People in minority ethnic groups are less likely to be saving for their retirement, while, according to the latest DWP family resources survey, white households are 10% more likely than any other ethnic group to have an ISA or premium bonds, and are over 30% more likely to do so than the group with the lowest saving rates—those of Pakistani and Bangladeshi origin. Consequently, they are less able to mitigate the loss in pension credit income. A person from a non-white ethnic group is twice as likely to be entitled to pension credit at the minimum age at which that benefit is paid, and labour market activity rates show that, for over-50s, non-white groups are less likely to be in employment.

The Government’s impact assessment is clear on that point. It states that

“delaying the point at which the State Pension and Pension Credit become payable is likely to have a greater adverse impact on certain ethnic groups compared to others…This impact is likely to be stronger for those affected by a delay in Pension Credit income of more than a year”.

It also states that as

“disabled people are also more likely to be reliant on Pension Credit at minimum qualifying age than non-disabled people, there will be a proportionately greater impact for those born in 1954 whose entitlement will be delayed by more than a year”.

It asserts:

“However, we consider this is justifiable in the wider context of the need to ensure that the state pensions system (including Pension Credit) is to be both affordable in the long-term, and provide a decent income in retirement.”

I do not think that that is a justification. When we consider that to mitigate the adverse and disproportionate impact on this group would be likely to reduce the overall savings by less than 5%, it is very hard to see how the Government reached that conclusion.

I support an acceleration of the state pension age, although I stand by the Opposition’s amendment that sees no change before 2020. In the face of increasing longevity, our pension system does need to respond, but this amendment does not undermine those goals. It does, however, address the disproportionate impact that such an accelerated timetable has on the poorest, who had the misfortune, for the purposes of this Bill, to be born in certain months of the 1950s, and it improves the transition to a higher state pension age for men and for women. This is a transitional arrangement that does not affect the timetable proposed by the Government.

On Second Reading, the Minister and the Secretary of State said that they would look into transitional arrangements. Members on both sides of the House went away with the view that these would be forthcoming for the Committee stage this week. Yet this is the third proposal that we have debated in Committee, and it is no doubt the third that will be rejected, although I wait to have assurance from the Minister. First, we had the amendment yesterday, which saw no change before 2020, and then a rise in 2022 in the state pension age to  66, which would have saved £20 billion. Next, we had the amendment from my hon. Friend the Member for Erith and Thamesmead, which would have alleviated the burden on the 33,000 women facing a delay of two years, and the 500,000 facing a delay of more than a year, saving £25 billion. Now we have this amendment, which sees a transitional arrangement that would at least protect those on the lowest incomes and save more than £28 billion of the planned savings that the Government are looking for. If not this amendment, then what amendment will support the transition process for those most affected by the provisions in this Bill?

I ask the hon. Member for Norwich North, what has been the result of her regular meetings with the Minister, urging him to look again at how women could be affected? In the Norwich Evening News on 6 June, the hon. Lady said:

“There is a real and justified concern that the changes to the state pension age are deeply unfair, particularly to the 33,000 women who are being asked to work two years longer at very short notice, and without time to plan properly for their retirement.”

She goes on to say:

“I agree with the Age UK protesters. These changes should be reconsidered. The Government needs to look at how to change the current plan to make it fairer to women. It is certainly important to increase the retirement age, as the current system is unsustainable”—