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

Well, temporarily they do. Unless we give everybody everything free, we must recognise that we sometimes do things for poor people because it is right to. Inevitably there will be an element of people who work and think, “It is not fair; I do not get that free.” However, as part of a civilised society I do not want people who have no income to be unable to afford medicines. That is just the way it is. If we give everyone free prescriptions and free everything, we will just tax everyone to the hilt. I understand what the hon. Gentleman says, and the new state pension system will start to address that point by setting levels of pension above the basic means test.

Automatic enrolment will be a huge step towards pensions for the millions of people who may never understand them, because the firm chooses it for people, puts them in for it, and puts money in. We put tax relief in, and people are free to opt out. Nine out of 10 are staying in, which is fantastic. Just as the hon. Gentleman got the pension scheme extended to shipyard workers, as I think he said, we are extending pensions to 10 million people, many of whom are low paid or part-time—many will be women or people on the edge of the labour market, and they are just the sort of people who would not otherwise have had a pension. That is a huge step forward in the spirit of what the hon. Gentleman achieved for his constituents all those years ago, and it will bring millions more in.

The hon. Gentleman asked about the scope of auto-enrolment. It is about employment and an employment relationship. There must be an employer to pay the employer contribution. The self-employed are not in auto-enrolment, but they do well out of the new state pension scheme, because at the moment the self-employed class 2 national insurance builds up only the basic pension, not the SERPS bit. In our new world, there is no distinction—there is just the pension; so every year in which a self-employed person puts in, in future, will be more valuable than now. That person will be building up 35ths of the whole pension, not 30ths of the basic state pension. So the self-employed will get better provision.

Carers, unless they are in a contract of employment, will not be auto-enrolled, because there will be no employer to put them in a scheme. However, they will be credited into the 35 years of full single-tier pension, so a carer will build up, every year, a 35th of the £144 pension—or whatever it will end up as. There is provision for carers in the new system.

Most people on zero-hours contracts work 20-odd hours a week, and as long as, at some point, they trigger auto-enrolment—as long as they earn above the threshold, ever—they will be put in. If I am on a zero-hours contract and work zero, zero, zero, zero, and then 20 hours over a pay period and go above the trigger, my employer has a legal duty to put me in. There are complexities about waiting periods and the rest, but the basic principle is that I must be put in once I am over the trigger. Once I am in, if there is a week when I have no earnings, of course no money goes in; but if there is a week when I do have earnings, money goes in. I do not fall out of the pension. Once I am in, I am in. Auto-enrolment happens once. It is triggered by earning above the threshold once in a pay period.

Annotations

George Morley
Posted on 4 May 2014 3:23 pm (Report this annotation)

The Minister talks about fairness and poor people and says that the new state pension system will start to address that point by setting levels of pension above the basic means test.
What he does'nt say is that it will be frozen if you retire to a country not preferred by the government - which is mainly directed at the Commonwealth where the pension purchasing value will gradually drop due to inflation and they will be tomorrows poor people living in poverty even though they qualify and have paid for the indexing during their working life.
This is government fairness !
Removal of clause 20 from the Pensions Bill would fix this !