Pensions

My Lords, the House will be grateful to the Minister for repeating this Statement on the hugely important subject of pensions and how the Government intend to proceed following the publication of the three reports from the Pensions Commission of the noble Lord, Lord Turner. I too give credit to the commission. From what we have been reading in the press, the publication of this White Paper has followed intense haggling between the Prime Minister and the Chancellor of the Exchequer—more, as I understand it, on the affordability of the commission’s proposals than on their substance. While a responsible Opposition understand affordability, I regret that nothing will happen on state pensions until 2012. For the Prime Minister, this is a ““Get out of Gaol Free”” card. What the Government feel is currently affordable, though, is a very welcome extension of the financial assistance scheme, which my party has always regarded as being distinctly mean. Naturally, it is the substance of the rest of the Statement that concerns us and millions of our fellow citizens today. I shall come to that in a moment. But before I do, I have a complaint. At the time of the original Statement announcing the second report of the commission late last year, the Government made it clear that they were seeking a consensus between all political parties on the matter. I have to tell your Lordships that, search as I may, I have seen no efforts that they have made to achieve that objective, unless you count a brief meeting that my honourable friend Mr Hammond had on Thursday last with the Secretary of State. I have to say that I do not. What we have here is a twin-track approach intended to alleviate the desperate state of retirement income that the Government have presided over during the past nine or so years. The first is the reform of state pensions. What is proposed is nothing more than a tax on employment. The current 44 years of working and paying NICS is to be reduced to 30—except that it is not really. Yes, you will be eligible for a full and higher state pension, rising with average income—which I welcome—after 30 years in work, but it will not be payable until you are 66, 67 or 68, depending on the year you reach that birthday. If you remain in work beyond the 30 years, you and your employer will still be liable for NICS. Not only is this yet another stealth tax, it is bound to do exactly the opposite to what the Government’s employment strategy wants and encourage people to retire early—as long, that is, as the individual has enough money to live on until the pension becomes payable. What changes to the income support strategy do the Government envisage to obviate this? Yes, I agree that this new 30-year rule will help people—mostly women—with caring responsibilities, but I assume that men and women will be treated equally, as they will be under EU law as far as pension age is concerned. The changes to home responsibility allowance are also welcome. Currently a carer may have to wait many weeks to get it. The new weekly credit is much fairer. The choice that has been made on the future of the state second pension does not, however, seem very fair. It is to become, as I understand it, payable at a flat rate. However, will it not still be contributed to on the same basis as now? At present, it is graduated, and nearly half of national insurance contributions go toward it. As my noble friend Mr Hammond said:"““Under the government’s proposals that contribution will become a straight tax on income””." That is a sorry and unfair state of events. I turn to private employer pensions. I am on record as saying that the Pensions Commission’s proposal for a default scheme to ensure that virtually everyone in work will have a private as well as a state pension is the right approach. How will the Government see that the default level of 30 per cent will not become the norm, making the pension payable to so many millions of workers that much worse? As to the right level of contributions, we have plenty of time—some five years—to consider the details. I am glad, though, that the White Paper includes something that I called for in the excellent debate led by the noble Lord, Lord Turnbull; namely the phasing in of employers’ contributions. However, why cannot the NPSS be introduced earlier than 2012? The longer the delay, the less that people now in work without a non-state pension will have to spend in retirement. Finally, how will the Government’s intentions be judged? They must provide dignity in retirement. They must be fair, not least when comparing public sector pensions with those in the private sector. They must be affordable, unlike the citizen’s pension. They must provide for and increase personal responsibility, to which I would add the need to re-establish the savings culture. Lastly, they must be simple and understandable by everybody in work. I am afraid that, against those five tests, I find that this White Paper is nothing less than a curate’s egg.