I welcome you to our Committee. I appreciate that you are perhaps not as used to appearing in this sort of forum as some of our other witnesses. Hopefully, you have already seen that it is not the Spanish inquisition. The reason why we want to hear from you is so that we can learn from the evidence you can provide, so I hope that you will feel able to react. You have also requested the chance to make a brief statement at the beginning, which I have agreed to. Will you do that now before we move on to the questions?
Marion Rees: Of the 700,000 women in our group, 70,000 will be disadvantaged by our not being included in the Bill. During the 1970s, it was normal for women applying for work to be asked, as part of the interview process, about their plans for having children, the expectation being that they would give up work when they started a family, thereby prejudicing employers against giving them higher paid roles. Those women who did take time out of the workplace to raise their families, and other women in low-paid employment who have paid their contributions, now find they are being discriminated against at this final hour.
The offer of being able to buy the necessary additional contributions to make up the shortfall is for many women not feasible. Nor is the suggestion that 85% of those women can defer their pension until the age of 65 in order to receive the single-tier pension. It is unlikely that the women will have a convenient pot of money at their disposal to subsidise the wait. It has been said that we should have planned for our retirement. How many did just that, only to find that poor financial management by those professionals to whom we entrusted our savings has now rendered those investments worth considerably less than expected?
We have worked. We have paid our contributions, and all we ask is that we are treated fairly and equitably to enable us to receive the pension that is right for us. This pension is not a benefit. It is something to which we have contributed all our working lives. To say that we will, over the course of our pensionable lifetime, be many thousands of pounds better off is spurious. Who knows how long each of us is going to live?
For the majority of people, a pension is not about how much they will receive over a period of 20 years or so, but how much money they have to live on that week. Our energy provider is not interested in what level of pension we receive. The supermarket cashier is not interested in what level of pension we receive. Our energy will cost the same as it will cost those on the STP. The price of food is the same, whether we are on the STP or the old rate.
Women receiving the current rate of £110 per week will be, say, £34 a week worse off than a woman receiving the STP. Imagine what £34 can buy for someone living on a limited, fixed budget? We as a group of women were part of the generation that campaigned for equality for women. We started our working lives being discriminated against and, if this Bill is not amended to include us, we will end our lives being discriminated against.
Thank you for your opening statement. In general, what are your concerns about the impact of the single-tier state pension? You have obviously covered some of them in your statement, but can you just set out why you feel so strongly about this?
You touched briefly on the changes that have already been made to pensions; we obviously have the triple-lock increases of pensions and of course the change to the age range came in under the previous Government as well. So some of those things are existing pensions policy, separate from this Bill. However, could you just set out more broadly why you feel you are not in a good place as far as this Bill is concerned?
Catherine Kirby: I am not so sure I do, but I will give it a go. I was looking at Steve Webb’s evidence last night at the Select Committee. I was not sure myself, but Mr Webb said that we were not notified in about 1995 that we would have to be equalised in 2010, and we are currently in the equalisation process. Apparently, no letters were sent out; I personally do not know if there were any. So, at very short notice, this single tier has come in. Some of us have lost three years at the end of our group pension and, as Marion rightly says, you live from week to week; it is not a lump sum that we can put in the bank and say, “I’ve got £10,000 or £15,000.” Men of the same date of birth are getting the single-tier pension, and men’s pensions anyway are greater.
What I believe are the fundamental flaws in this aspect of the Bill are, one, that we are not included in it and, two, that the Bill has been introduced while the equalisation process has been going on—it is slap-bang in the middle. We cannot change our position. If we were a few years earlier, if we needed to—although many of our women have got 39 years, because in our day we were told that we needed 39 years’ national insurance, so we could not actually buy any more if we wanted to. Additionally, because of our cohort age group, we would not be in a position to, as we are so at the 12th hour of our pension stage. So we are losing out on everything that we have done. We are not asking for a hand-up or a handout, but we are being treated discriminatively and unjustly at this point in time by the way that the Bill has been brought in. I understand that it is not in the legislation and we are just outside it, but that is the way it has been done. There are no transitional arrangements at all for us.
If I can just take you back to the triple lock for one moment, obviously that is already in force. Last year, I think we had the largest ever weekly cash increase for pensioners. There was quite a high rate of pension increase. So there has been some benefit, and we always avoid, for instance, the 75p rise that we had in the past. The rise last year was more than £5 a week.
I am grateful to you for coming in. In a sense, I can understand the point you make: that you perceive that you are missing out on something that other people are getting, and clearly you are—you are missing out on the single tier, which on average would be about £6 a week more for the group of women in the group you were born in. So, although you contrast £110 with £144, the average experience of your group would be about £6 a week more.
Can I ask you to compare yourself with two other groups? You have compared yourself with a man born on the same day, who, as you say, gets single tier but has to wait a lot longer for it than you would have to. Can I ask you to compare yourself with two other groups—a fictional older sister and a fictional younger sister? Your fictional older sister, who was born in 1949, had to work—as you have just said—39 years for a full basic pension. You only have to work 30 years. Your fictional younger sister will not get a pension until she is 65 or 66; your group will get a pension at 61, 62 or 63. So, if we had received oral evidence from your fictional older sister and your fictional younger sister, would they have agreed with you that you are uniquely prejudiced against?
Catherine Kirby: I would not be able to speak for somebody else; I can only speak for the group I am in and from my understanding from the women who have contacted me. Did you say about 30 years? I always thought that when I started out and left school in 1969 that, whenever it came in, it was 39 years. I think it changed in 2007. Many of us who would have been going for the 39 years would be close to having had it anyway. Is it correct that it changed only in 2007?
The point is that lots of women did not get 39 years. Lots of women perhaps had 30 or fewer. So the reduction from 39 to 30 was a big boost to women’s state pensions, which you have benefited from but your fictional older sister did not. Is it not that each group comes one side of a line? Some things you have benefited from—such as 30 years—and some things you will not benefit from.
Catherine Kirby: Except for the 80,000 who were brought in by, I believe, the Treasury override after your evidence. On the Sunday—you gave evidence on the Monday, then the other cohort was brought in. At the end of our cohort there is a one second age difference. They will get their single-tier state pension—one year and 10 months, one third of those, men as well? When they get that amount it will work out greater. It is about £13,000, because they would be on £145. If you use our lower rate, it would be about £11,000, even though we would get it for two years. But then, of course, 70,000 of us would be getting the worst pension for the rest of our lives.
Thank you for giving up your time to come in. I want to ask some hypothetical questions about eligibility for the STP, not your particular circumstances. As you will know, the 35-year requirement for a full single-tier pension and a 10-year minimum qualifying rule are quite significant changes to what has recently gone before. You may have heard evidence from the Pensions Policy Institute—or you can read it shortly—saying that it will have pretty minimal effect on most people who qualify for the STP. Do you think there are any particular groups that will be fully eligible for the STP that will be disadvantaged by its introduction?
Catherine Kirby: I do not know. Today we have been kindly allowed and invited to speak about our particular group, which is 51 to 53. I cannot give a wider answer, other than that some of the people may be married or bereaved, for example, within that group. I can speak only for our group. If you are talking about disadvantage, people say the median is £6 difference in relation to our cohort. It is not always the case. People have kindly given me personal information and I have not yet come across anybody where it is £6. It is a median, and that is not always quite the case. I worked out that you could take three pensions at £145, £135 and £115 and calculate a median of £125 or £130. That is greatly different from the person at the bottom. It has been said to me that six quid is important each week for a person on a low income. Every pound does count, and I believe our group will be disadvantaged by not having the option of either the single-tier or state pension.
Everyone seems to be having that problem today. I shall enunciate much more clearly, and hold my chin up as well.
There is an acceptance that the present arrangements are quite complex. Do you think that the STP will be a much more simple-to-understand set of arrangements?
Catherine Kirby: In theory, yes, because it is a single tier. That is my understanding because of course it cannot apply to us or to enrolment. I actually think that the concept is probably a good idea, but I guess the devil is always in the detail, or not, and only time will tell. The idea that people have a foundation amount is good, yes.
For those who have inherited or derived rights to a pension, do you think that the arrangements, particularly the transitional arrangements, are appropriate?
I am sure that you have a view.
Do you have a view on the starting level for the STP. You may have heard or read Age UK’s evidence from Tuesday. It said that it would like to see a 5% uplift on the pension credit standard minimum guarantee, which is £145.40, so we are talking somewhere north of £150. Do you think that the Government’s starting figure is reasonable, or do you think that it should be higher?
Catherine Kirby: The answer to the second one is definitely that everyone thinks something should be higher, but we are in the age of austerity—we are where we are—and it is supposed to be above the pension minimum guarantee level. I guess that the difference would be in how much it is, but I would think that that would incline more people. They would know where they are—one of the aims is less means-testing—and people would have a foundation for another pension, if they are able to. But with auto-enrolment, that would help people—even some low-ish paid people—into another pension.
If the starting figure were to be significantly higher—north of £144, and north of £144 plus 5%—do you think that the end to means-testing would pay for that increase, or would the funding have to be found from elsewhere?
Catherine Kirby: That is in the impact assessment, which I believe was working on a figure of £144 or £145, so then it would be greater. Currently, over time it will be less. Is it 0.5% in GDP—8.05% to 8.5%? There would then be less administrative costs, so there is some slack in the budget at the moment.
The last time we discussed this issue, the pensions Minister put a figure of around £4 billion on the cost of bringing the 700,000 women into the new state pension. Do you recognise that figure, or do you have your own costing?
Catherine Kirby: No, I do not. We did it on the way up—we did not have a calculator, so it was a bit on the tricky side—and I believe it to be £21,840,000 per annum, so I do not know where the billions came from. I had to write it out because I am not used to those sorts of figures. For the cohort group, which was written later, it seems to be talking about £6, so I guess they are working on that. But then the Treasury made quite a substantial amount of money by bringing in the tier six days after the evidence was given, saying that it would beginning in 2016 rather than 2017. There has been a windfall to the Treasury.
There are 700,000 women and the calculation is that 70,000 in that group will be disadvantaged by an average of £6 a week. You started to explain that the average hides some of the bigger losses for some people. Can you say a little more about that?
Catherine Kirby: Yes. I am not a researcher, but I gather that that is correct. There was a 1% sample and my understanding of sampling is that half a per cent can always be a mistake. Of the people who have come to me, nobody has only £6 less; it is a greater amount. Doing a calculation for the 70,000 within the 700,000 might make it £6—I don’t know—but £6 is important, anyway. Additionally, within that, there are 105,000 who do not have an option. They do not have a choice to defer. They have stopped working for caring, health or other reasons.
The view of the group is that for a significant section of the 700,000, buying back in is very difficult or impossible. They cannot do that and they cannot defer.
Catherine Kirby: That is right. You cannot buy back in. We are at the twelfth hour of our pension age, so there is nothing to buy back into. You have not got the years. Some of the people—it is in the DWP information—have already retired, and, as the months go by, the clock has ticked. You cannot do it because we are at the Government-dictated state pension age. There is not an option to do so.
Finally, in your view, this problem of the cliff edge arises because the new state pension is going ahead in the midst of the equalisation of state pension age. Can you clarify that?
Thank you, Catherine and Marion, for coming to give evidence today. Can we talk about the timetable for the pension age increases? Do you think the Bill gives people sufficient time to make arrangements? If not, how long do you think the time should be?
Catherine Kirby: Again, I do not know whether I understand correctly, but the Bill—if this is what you are referring to—was originally for 2017. I remember the Minister saying he would be astonished if it changed, and it was discussed at the Select Committee. Then, six days later, after the evidence, it changed to 2016. That must mean that they are able to do it quickly, because there was concern about dealing with it.
But you are talking about the pension age increase. I guess it depends on what socioeconomic class and occupation you are in. We do not have a system designed to deal with that. Some people could work well into their sixties. Equally, from a female point of view—the women’s perspective—they are more likely to be carers or to have family. By that time, you might have aged parents, so it is difficult to be able to keep working all the time. I think I heard either Age UK or Ros Altmann say about our age—the age it is currently—that about a third of people are not in full-time employment. That is for a whole host of reasons. However, if you have increasing life expectancy, there is the dilemma of how pensions are going to be paid for. I think it depends on whether people have a lot of notification—and as I say, we did not appear to have a lot of notification about our situation.
Looking at your situation, how much notice do you feel you should have been given? What would have been a fair amount of notice to give you, and women in your situation, to adapt?
Catherine Kirby: I do not know about it being a “should have”; there is a great unawareness of it. To answer slightly differently, I use the analogy that if you are on a low income and in that position, it is like you are tied to the train track and the train is coming: even if you get six months’ notice of it, when you are chained there you cannot get away. Some people are not able to do anything. That is where auto-enrolment is a good idea: it gives people on a fairly low income the chance to get some extra pension. Of course, that does not apply to our group.
If we are talking about the moment that the sword falls, as it were, you are saying that the cliff edge appears too early for your particular case, so you have not been able to adapt and change. If we move it from you, where should we move it to—how much further away should we move the cliff edge?
Catherine Kirby: In relation to our group, it is to give us whatever is the better of the options. The numbers of people affected are 70,000 and 105,000; we are so much at the 12th hour that it is possible that by the time the Bill goes through the vast majority of us will be at the dictated state pension age, so the solution would be whatever the better option is. As somebody said to me, it is not complicated: by then, both the DWP and ourselves will know that, and I would not have thought that anybody would voluntarily take the worse of the two options. We have already alluded to the cost.
The Bill—indeed, the whole initiative—is supposed to be cost neutral. If we make changes to your particular case, what would be your solution to maintaining that cost-neutral scenario, so that it does not cost any more?
Catherine Kirby: The money that the Treasury gained by changing the inception from 2017 to 2016 was, I think, £5.5 billion—somebody can correct me, but it was certainly in the billions. The money could be taken out of that. Once the Bill is in situ, administratively the system should in practice cost less, because, administratively, it is all going to be the same. There is the separation of auto-enrolment, so you are not having to deal with S2P and SERPS. Over an admittedly much longer period, it is, I think, going to be 0.045% less in GDP terms.
I do not know whether you have focused on this part of the Bill, but there are changes to bereavement support. Do you have any comments on those changes? You may well be aware, but we are going to increase the lump sum from £2,000 to £5,000 for families with children and pay a monthly figure of £400 for a year. Is that an area of the Bill that you have focused on at all?
Order. I am afraid that effectively that brings us to the end of the time allotted to the Committee to question this panel. On behalf of the Committee, I thank you very much.