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Pensions Bill [HL]

My Lords, I am grateful to the noble Baroness for the opportunity to spend a little time today on our proposals for reforming the state pension. She has been instrumental, as other noble Lords have pointed out, in the move for better pension provision for those left out of the benefits of the heyday of the occupational pension and the earnings-related state counterpart. The Pensions Act 2007, with its enormous boost for women through the reduction in qualifying years for basic state pension and the increasing coverage of the state second pension, could have been the final push for equal treatment in state provision. Even that was not good enough, though. In March last year, a week before the 2007 Act started to deliver for women, the noble Baroness launched the pamphlet The New State Pension: A Call to All Parties, which pushed for further radical change. Very skilfully, she got my honourable friend, the Minister responsible, to contribute a chapter to that. It proposed a new type of state pension with a near-universal amount, set above the level of the means test and made affordable by paying the pension to new pensioners only. Her main motivation, as ever, was to deliver an adequate state pension for women who, because of low pay and career breaks, have historically lost out in pension provision. Just over a year later, the Government published their proposals for improving state provision, A State Pension for the 21st Century. That Green Paper confronts the big issue of how to respond to a decline in private saving at a time of increasing life expectancy. It describes how means-testing, with all the damage that it can do to private saving, pervades the state system. It describes the great complexity of the state system. Bluntly, for most people the system is simply impenetrable. Crucially, it fails to answer the most obvious of all questions from potential private savers: is it worth it? How much will I get from the state when I retire anyway? As importantly, it describes the extent of inequality in the state system—how women, on average, get £40 a week less state pension than men and how they are more likely to live in poverty as pensioners. The Green Paper describes two options for reform to respond to the challenges that the pension system faces. The first option would simplify the state second pension. It would strip out the earnings-related part of the second pension, leaving just a flat-rate amount—the same pension for all workers and people who are credited into the system for caring and other good reasons. The second, more radical, option would effectively fold the basic and second pensions into one to create a simple single-tier pension, set above the level of the guarantee credit. This option, which is clearly similar to the one that the noble Baroness proposed a little more than a year ago, would mean that by 2020 no less than 90 per cent of pensioners—men and women—would retire on a pension above the guarantee credit. The Green Paper, as I said, was published earlier this month and the consultation is currently under way. As the noble Baroness appreciates, changes of the magnitude proposed in the Green Paper can be progressed only by listening to the views of all those with an interest. It is far too early in the process for the Government to come to a view on the way ahead, so I cannot give a conclusion to the consultation. I assure the noble Baroness that, should the Government decide to bring forward proposals to reform the state pension system, we would as a matter of course publish a full assessment of impacts, including those on women, alongside any reform proposals. I remind the House that we published an impact assessment, including a gender, race and disability impact assessment, of our proposals to increase the state pension age first as part of the White Paper setting out our response to the call for evidence and again alongside the publication of the Bill when it first entered Parliament. Those assessments will be further amended and revised as necessary for republication when the Bill enters the Commons and yet again once the Bill has completed its passage through Parliament. I can therefore assure the House that, were the Government to publish a White Paper on reform, we would be no less diligent in providing detailed information on the impacts of any policy changes by gender, ethnicity and a range of other factors. In short, there will be plenty of opportunity for noble Lords, as well as Members of another place, to scrutinise any proposals for reform and their likely impacts, should the Government decide to proceed with reform. I emphasise that the proposals that we have set out in the Green Paper do not depend on increasing the state pension age. As I said in our debates on Clause 1, the rise in the state pension age must be brought forward because the sharp upward revision in life expectancy projections has overtaken the legislated timetable. The revised timetable would be necessary with or without the reforms on which we are consulting. We have already discussed at some length the impact of our proposed changes to the pension age timetable, in particular on those cohorts of women who face an increase in their pension age of up to two years. A number of noble Lords have emphasised that point and I do not propose to rerun that debate. However, I draw attention to the fact that a key objective of the reforms, alongside simplifying the system and rewarding those who save, is to look at how the state pension could be made fairer for groups, including women. The noble Baroness’s amendment seeks to ensure that we consider the impact of the state pension age changes in conjunction with our proposals for reforming the state pension scheme. As I said, we are only at the consultation stage on our reform proposals but I can assure the House that although, as I hope I have made clear, these are not interdependent changes, we would undertake such an assessment if these reforms are taken forward. I trust that I have been able to assure noble Lords that the statutory duty that the noble Baroness’s amendment would impose is not necessary and, furthermore, is somewhat premature. We will have many opportunities to debate what to do with any reform proposals as they go through the whole process. I therefore urge the noble Baroness to withdraw her amendment.