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Pensions

My Lords, first, I profoundly apologise to the House for not being present at the beginning of the debate. I was unavoidably committed to speaking at the National Association of Pension Funds conference. I regret it the more because I have obviously missed some extraordinarily fascinating speeches. For those who have said kind things about me in my absence, it is clear that I should be absent more often. Thank you. I want to start by talking about a woman whom I met called Brenda, because I want to talk about women’s pensions. I was having jabs for travel in a private clinic last week and Brenda asked me what I was working on. I said, ““Pensions””. ““Oh””, she said, ““my pension is not worth ninepence””. I said, ““How come?”” She said—she was fairly knowledgeable—““Well, I have had three children, so I get that HRP thing, but I have been in this job for 15 years but it will not get me any national insurance contributions””. I said, ““Why not?”” She said: ““I work for 15 hours a week and my employer will not increase the hours, but, in any case, I job share and have to be available the rest of the week in case the other person cannot turn up””. Then she said: ““In any case, my mum is getting a bit frail so I need to be around for her and I like the job””. It meant that, at 57, she was going into retirement without a penny of basic state pension—her HRP is worthless because she had worked below the LEL—and not a penny of occupational pension. As far as I could tell between jabs, at every stage in her life she had made a decision that we would all applaud, but neither her waged work nor her unwaged work were recognised. By making those decent decisions at each stage, she had taken a pension hit. Let me invent a mythical twin brother called Brian, who, equally, had married, had three children, was possibly divorced and re-partnered and had a frail mum. Not one of those events in his life would have stopped him working or affected his pension, although they may have made him miserable. He would have worked full time and built up a full-time pension. In the minutes given me today, I want to make three propositions. The first is that unwaged work is as valuable as waged work. I know that my noble friend Lady Pitkeathley will have expressed that far more eloquently than I could; but Brenda, therefore, should have had a pension in her own right. Instead, we have a contributory system which is based on rights and responsibilities—something for something. But that is a myth because only 60 per cent of contributory years are paid for; the rest are credits. The result is that we get a system which, if you understand it, is complex and if you do not, is riddled with anomalies. Yes, people get something for something, but, equally, many people get something for nothing: for example, a well-to-do man retiring at 60 years old gets five years of free contributions, which he may not need; a married woman will get a 60 per cent contribution from her husband’s pension, whether she has children or whether she has worked. So they get something for nothing. Equally, there are those who get nothing for something—like Brenda. They may have run together two caring jobs of 20 hours each, but they get nothing. They may have done three cleaning jobs at 15 hours each, but they get nothing. The difference of course between the something-for-nothing and the nothing-for-something groups is that the something-for-nothing group is relatively well-to-do—and often men—and the nothing-for-something group is usually poorer, hardworking women who have been knocked always round the system. We could all list additional anomalies—just do not tempt me. My second proposition is that one would expect that if women have a shortfall in their basic state pension—as Brenda certainly would—they should be able to overcome it by rectifying it through an occupational pension. Yet, if Brenda had had a basic state pension of £50 a week and had put aside perhaps £8,000 savings into a pension pot to give her a private pension of £30 a week, she would have been not one penny better off than if she had not saved at all. The basic state pension, far from underpinning her second pension, would have undermined it. That is the system that we have constructed. My third proposition is—even if Brenda had got an occupational pension—to think about the characteristics that an occupational pension demands from women. They must save early from, say, 25 to 30 years old, just the time when they are likely to have children. They should save enough—15 per cent—yet that is the time when they have probably got a mortgage. They should save steadily, but they are likely to be interrupted by their caring responsibilities. And it is advised that women should get an employer’s contribution—but women are far more likely to be in part-time jobs or in jobs where there is no pension attached. They should be able to do that for 35 years—come divorce, disaster or whatever happens in their personal lives. At the end of all that, they are told, they would have a return that is worth having—even though, as I have tried to argue, an incomplete basic state pension subverts the very pensions that they are trying to build. That is before I get to means-testing. On top of that, I would ask that they also hope for a return that will, given the stock markets, be on their side. Given all those risks and conditions that women cannot meet—certainty, saving enough, saving continuously for 35 years and not touching savings whatever happens—how many men, if they were lower paid women in their 20s or 30s, would risk saving for an occupational pension, when they would not know whether it was worth having until the day after they retired? What sort of incentive is it to tell women to support themselves and to go into retirement with an adequate income when the basic state pension does not recognise their waged or unwaged work, when the interface between their basic state pension and their occupational pension undermines each, and when the very characteristics of the occupational pension scheme are devised for full-time work, not waged work, and not for the sort of life that Brenda will lead. It is as though we have set up—this is the sort of thing economists talk about—a game of snakes and ladders, in which Brian, as he goes around the board, will hit all the ladders—promotion, a new employer, a bonus—and Brenda, when she has a child, if anyone becomes ill or she takes on a caring responsibility, hits all the snakes. No sane public policy would develop a system in which what the state wants women to do—to work full time—is at odds with what women themselves and society want—for women to be able to work part time. We should recognise that part-time work is a resource for our society and that women should not be berated for doing it. I conclude by asking my noble friend not to tell us that things will be fine in 20 years’ time because, arguing on the Henry Higgins principle of, ““Why can’t a woman be more like a man?””, in 20 years’ time they will be. That will not do because as women live longer, those caring responsibilities will increase rather than decrease. Moreover, I want men as well as women to be able to make the same sort of choices, balancing their work, their lives and their pension provision. So I hope that in the debate and arguments around Turner, we put the needs of two-thirds of our pensioners—women—at the forefront of the debate. I hope that all noble Lords will agree.