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Pensions Bill [HL]

My Lords, like everyone else who has spoken, I support the amendment of my noble friend. We all agree—and I am sure that we will come back to this issue, following the point made by the noble Lord, Lord German—that what we also need is a decent state pension: the £140 pension espoused by his honourable friend Steve Webb in the other place, which would be transforming for both men and women in retirement. However, that does not address the issue here, which is about not just equalisation—no one disputes that—but the speeding up of that equalisation, including the very speedy additional year. First, I suggest that that makes some easy assumptions that are false. Secondly, it has some unintended consequences that have perhaps not been considered. The first easy assumption is that because we are all living longer, we must work longer to support our old age. One understands the stats about the number of workers relative to the number of pensioners and the additional costs in the future of long-term care. However, increased longevity is not actually accompanied by increased years of full and healthy living, whereby one enjoys leisure, holidays and time with grandchildren. All the research shows that those extra years of longevity come with extra infirmity, particularly for those who are worse off. It is very much a class, as well as a gender, issue. Since the Black report, the health inequalities of those in the bottom E and D classes have widened, not narrowed, relatively—not absolutely, as obviously they have improved for us all. Those extra years come with extra infirmity—fortunately not bed-bound infirmity necessarily requiring residential care but second-order infirmity, including the need for help with, for example, cleaning, transport, aids, appliances and care to allow you to stay in your own home. The implication is that the healthy years of retirement will be squeezed and reduced as retirement age increases, because you will not enjoy extra years of healthy living at the other end as a result of increased longevity. The first thing to address is the fact that we are squeezing the number of years people, particularly poorer people, can hope to expect to enjoy in retirement. The second assumption or myth is that women, as a result, will stay in the labour market longer and until they retire. That retirement age will increase first to 65 and then to 66. I do not know why we think that this will happen because it has not just been connected to the state retirement pension or even to the fact that employers have traditionally got rid of people at the age of 65. It has never been true for men. The majority of men leave the labour market at around 62 or 63 years old. It is even lower in Europe. In other words, half of all men have been on benefit for at least a year, sometimes two years or more, before they draw their state pension. Men compared to women have more secure and better paid employment. Therefore, they have more incentive to stay on until the age of 65. But they cannot and they do not. Why do we therefore believe that women are likely to do so when men currently do not? It is possible that if a woman’s health permits—obviously, I hope that it will—she will continue in a part-time or a mini-job, which would give her a more flexible approach to the labour market. But all the statistics show that she is no more likely than her partner—I guess that she would be less likely than her partner—to maintain full-time work past her early 60s whatever the basic state retirement age is. Therefore, she has to live on something or someone else. Either she will be married to a man or in a partnership with a man who is two or three years older and who is drawing his state pension. But she will not be able ultimately to draw hers for another two or three years if she is two or three years younger than him. Therefore, as a couple, they will be poorer and either she will draw JSA or ESA, or he will draw pension credit, which is a point to which I want to return. The cost of either her being on JSA or his drawing pension credit will be little different, I suspect—I would be interested if the Government have the figures—from the cost of the married woman’s 60 per cent dependency pension now. I suspect that a lot of the savings are fallacious in that respect. Alternatively, she may be single and on JSA or ESA, having first to run down any capital she may have beyond £16,000 and she simply lingers longer in poverty while awaiting her right to draw state pension and pension credit, thus ensuring that she enters retirement with increased need for that pension credit. The good news is that because we introduced the 30-years-only rule for national insurance, together with other changes for carers, grandparents and so on—introduced by the previous Government and my noble friend Lord McKenzie but supported on all sides by all parties—she would increasingly come to draw a full state pension in her own right. However, because the Government propose to move so quickly, they are effectively creating a cliff edge, which has been addressed in several of the previous speeches. If the Government are determined to hold to their timetable, I wonder whether they could at least smooth the financial cost for individuals. I calculate that some 236,000 men will be the real losers from these changes as well as women. Have the Government considered this? I have not seen any mention of this at any stage. Why? At the moment a man over 60 on JSA or the future equivalent of ESA getting, say, £67 a week can under equality rules be topped up to the pension guarantee—not the pension savings guarantee—of £132 a week on equity grounds because women can. I suspect that much of the Government’s savings—I have calculated them to be something like £740 million in total for all men removed from this—will come from the unintended consequences perhaps of men losing their entitlement to pension credit, which comes on equality grounds because as women’s pension age rises so men of that same age will lose their right to pension credit pari passu. Therefore, men as well as women face a cliff edge because of their potential loss of pension credit which some 236,000 men currently enjoy between the ages of 60 and 64, even though they cannot draw a state pension. As women’s state pension age rises, so in tandem does the age at which men can draw pension credit, although not, of course, the state pension itself. So 236,000 men and all the women described by previous speakers will be much poorer as a result because they will steadily lose access to pension credit as women’s pension age rises. Men’s income will fall from £132 to £67. If that is not a cliff edge, I do not know what is. What are the Government going to do about this? Will they guarantee that men currently below 65 on pension credit will keep their pension credit benefit come what may? In that case, we will find that a woman a year older than a man will have half the income he has. Is that acceptable? I think not. The alternative is to withdraw the benefit from him overnight so that he faces his income being halved. What are the Government going to do? It is a complete mess, and I have seen no information to tell us how this will be handled. We could find a single man of 63 having double the benefit income of a single woman of 63 by virtue of the fact that he is drawing pension credit and of course—given the universal credit, which I very much support—no man of 61 currently on pension credit will dream of coming off it to go into work because, if he loses that job and comes back on to benefit, he will have lost his eligibility for pension credit because of the new rules that will have to take effect. It is a mess. Either the Government keep the benefit already attributed in which men, age for age, can have double the income of women, age for age, or they will take it away and give a cliff edge to men that is completely unfair and without any possible planning. What do the Government propose to do about what seems to be a serious anomaly for 236,000 men, according to my statistics from the Library, who are currently enjoying pension credit between the ages of 60 and 64? Behind that comes the question of whether we can smooth this cliff edge. Could we think of an age-related addition for men and women alike who are caught by this, not the full pension credit rate of £132—that is going from £65 to £132—which, given the cost, would be unacceptable, but an age-related addition of perhaps £30 a week, which would take the JSA or ESA for any man or woman between 60 and 65 as the age of retirement is gradually raised for women and then eventually for men and women alike? We should then take their JSA—because they have to be on some benefit or other if they are not in work—to perhaps the state pension level of £97, although not to the pension credit level of £132. In other words, it would be a halfway step. Instead of dropping from there to there, you could provide a halfway step. Any man or woman over the age of 60 would be eligible for an age-related addition of, say, £30 for an individual and £45 or so for a couple on top of their other benefits. This would smooth the loss of pension credit for those not yet of state retirement age but currently receiving it, and would effectively bring them up to the level of the state pension, but not to the level of the pension guarantee credit that they would otherwise have had and in the past have claimed. It would stop some men having potentially a better financial deal from the state than some women because they are already on pension credit although they are under 65. I would much prefer the Government to slow down the implementation of the raising of women’s retirement age, as my noble friend argued. It is much the preferable solution, but if the Government insist on keeping their current timetable, I ask them to respond to the unintended consequences for those men on pension credit and whether they are comfortable with the fact that a man of 63 could well end up having double the income of a women of 63, which I am sure would not be widely acceptable. If the Government are uncomfortable with the implications of pension credit for existing men, then they have a moral responsibility to address this cliff-edge problem for women in the future and, frankly, for thousands of men now.