Fairness in Pension Provision

Part of the debate – in Westminster Hall at 4:15 pm on 8th April 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 4:15 pm, 8th April 2014

I congratulate Mr Donohoe on securing the debate. We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated. I entirely accept his point—not only do not all of our colleagues understand the pension system, but why should a member of the public understand contracting out, guaranteed minimum pensions and all the rest of it? A central drive of the state pension reform—I am grateful to him for his positive comments on that—is to sweep a great deal of that away and to have a single, simple, decent state pension set at a rate that people know. They will get that pension for 35 years in the system, contributions or credits, with no contracting out and no differences if they have been in a company scheme. That is the world that we are moving to.

Clearly, the hon. Gentleman’s constituents have spent their working life in a very different world. I want to say a word about one of the reasons why some of them—without full details it is difficult to comment on individual cases—might be getting less state pension than their neighbour. They might think that that is unfair, but it may not be unfair, because there is something else going on that they are not really aware of, namely the whole business of contracting out, which is about to be abolished. A number of his constituents, whom he mentioned by name, worked for firms that had a workplace pension scheme.

Under the principle of contracting out, the operators of the scheme, not the individual, decided that the scheme would be contracted out of the state earnings-related pension scheme. As a result, the scheme would pay less national insurance and, crucially, the hon. Gentleman’s constituents would pay less national insurance than their neighbours who worked at a factory that was not contracted out. Imagine there are two factories side by side, one of which has a company pension scheme and the other of which does not. At the factory with the company pension scheme that chooses to contract out of SERPS, all the employees in the scheme pay less national insurance than the employees at the factory that does not have a workplace pension scheme.

Annotations

George Morley
Posted on 10 Apr 2014 7:20 pm (Report this annotation)

The Minister says : "I congratulate Mr Donohoe on securing the debate. We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated".
BUT no quality pension provision or fairness should a pensioner emigrate to join his family already living abroad in some countries but not others. This is the real position that the minister never likes to talk about and never mentions because of the embarrassment to himself and his failing after pushing for equality and fairness for ex-pat pensioners who are frozen.
The removal of regulation 3 should be a priority for a truly honest minister plus the removal of the clause 20 in the new bill.

George Morley
Posted on 10 Apr 2014 7:20 pm (Report this annotation)

The Minister says : "I congratulate Mr Donohoe on securing the debate. We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated".
BUT no quality pension provision or fairness should a pensioner emigrate to join his family already living abroad in some countries but not others. This is the real position that the minister never likes to talk about and never mentions because of the embarrassment to himself and his failing after pushing for equality and fairness for ex-pat pensioners who are frozen.
The removal of regulation 3 should be a priority for a truly honest minister plus the removal of the clause 20 in the new bill.

Jane Davies
Posted on 11 Apr 2014 4:46 pm (Report this annotation)

Mr Webb....you talk about fairness all the while ignoring the fact that 4% of state pensioners are being treated unfairly. You know this and yet you ignore this. In doing so you are supporting the continuing blatant discrimination of these pensioners. So please stop talking about fairness because you clearly do not know the meaning of the word.

Unfreeze the 4% now.