---

Pensions

My Lords, I add my congratulations to the noble Lord, Lord Fowler, on securing the debate. He was always ready to speak with me and listen to my views and ideas when he was responsible for these issues, and I appreciated that very much. I declare an interest as president of the Pensions Policy Institute and vice-president of Age Concern. Pension reform is essential if for no other reason than that the current system is not fair: it benefits higher earners and creates a huge amount of uncertainty. People do not know what they are going to get from the state; they may rely too much on the private pensions sector; state expenditure on pensions is rather low and the numbers of people over pensioner age, as we have heard, is increasing very rapidly. The Government have recognised that the state is the primary organisation to prevent poverty in later life, and the pension credit is therefore something that is very welcome; but the facts are that a fifth of all pensioners in this country are living in poverty, that women are much more at risk—14 per cent of single men and 21 per cent of single women are in dire poverty—and nearly one-third of those from ethnic minority groups are living in poverty as well. We know that among pensioner couples, women receive 34 pence for every pound received by men, and nearly 70 per cent of older people receive half their income from the state, while 9 million people are estimated to be saving too little for retirement. I acknowledge that the Government have done a lot, with winter fuel payments, pension credit, help with council tax, local bus travel and so on. Cross-party agreements exist on the fact that pensioner poverty must be eliminated; the problem is to reach a consensus—and we need a consensus—on how best to achieve that. In the interim report of the noble Lord, Lord Turner, last October, he stressed that 12 million people are not saving enough and that their pension income would be slashed by 30 per cent in 30 years’ time. That is an appalling amount. The Pensions Policy Institute says that government estimates for future state spending on pensions are not accurate and therefore should not be used as the basis for calculating the extra cost of reform. In a recent report that the Prudential company produced, it was said that the state pension would no longer provide the majority of pensioners’ incomes, and that is going to start from next year. The company’s data monitor service said that those who were now under 40 may have to work, if this is to be properly remedied, not until 67 but until 75. That is really unthinkable at the moment. The PPI has estimated that more than 3.5 million households are now eligible for pension credit. That number is expected to increase by one-third over the next 10 years. The Government assume in those figures that 25 per cent of those eligible will not claim; that is a terrible estimate. They also seem to assume that GDP will be sufficient to pay for state benefits and pensions, but the number of pensioners will increase by 50 per cent over the next 50 years. The Government do not include tax relief on pension contributions of £16 billion a year when they estimate the costs. So I believe that those figures need to be looked at again. We also know that some groups of older people within our society are particularly vulnerable to poverty and misery in old age. Those include people who are disabled; with the ageing of the population, we must take into account that many more people will suffer from acquired disability. I am very worried, too, about self-employed people—not those running a major business but the little people, the one or two-man or woman businesses, such as window cleaners. We must also think hard about part-time and temporary workers and, of course, low-paid women, as has been eloquently said by the noble Baroness, Lady Pitkeathley, who has always befriended and campaigned for carers. There is a scandalous amount of poverty among older women, and the undervaluing of carers, as the noble Baroness said, continues despite the many improvements in their status that the Government have brought in. After much consideration, I have come to the conclusion that compulsory contributions to state and private pensions are necessary in the longer term, if not now. I turn for a moment to the Scandinavian system. Although we all say that people there pay hugely higher taxes, they have high concessions for parental leave, flexible work and higher taxation at 50.6 per cent compared to our 36.4 per cent; but all those concessions and taxation are tied very strongly to economic growth and to increased productivity, because it all depends on people being in the workforce. That system has led to huge numbers of women—much higher than here—being in the labour market, and a huge increase in national wealth and higher standards of living. So it is worth considering more closely. On women’s pensions, the state system in this country is more suited to 1945 than now. We need either total reform of the contributory system or a model based on residency. The reform of council tax is also essential, but not linked in any way to the ability to pay. Only 16 per cent of newly retired women qualify for a full basic state pension, compared with 78 per cent of men. The Government published a Green Paper on pensions in 2003, repeatedly promising action to improve the situation for women, but so far nothing much has happened. Alan Johnson also confirmed his enthusiasm for tackling the issue in October 2004, when he spoke to the Work and Pensions Committee. At the last Labour Party conference the Prime Minister also made similar statements. The solution, as we know, must be a higher universal state system, reducing the need for means testing. An alternative, recommended by Age Concern might be to reduce the years needed to qualify from 40 to about 25, which would bring most women into the system with entitlement to a full basic state pension. The EOC in recent polls showed that fewer than one in 10 women knew the facts of the situation that they face about being eligible for a state pension. It is vital that the Government follow through on a number of vital commitments that they have made to deliver fundamental reform of the pension system. Muddling through, as up to now, is no longer possible; too many people have suffered, and they will continue to do so if this promise is not kept, and kept soon.