Pensions Reform

I start by adding our congratulations to Lord Turner and his fellow commissioners on what is clearly an influential report on pensions. I also congratulate the Secretary of State, as well as his team and his officials, on introducing the White Paper according to the timetable that was initially indicated, which some of us might have felt would be difficult, particularly in the light of the divisions in the Government on the issue. I also congratulate the Secretary of State on appearing to have brought the Chancellor of the Exchequer on board for the pensions solution. Indeed, the Chancellor was even seen smiling on the Front Bench earlier. Whether that is because he feels that he is now in a position to take credit for the proposals, or whether he feels that he has succeeded in burying some of them, we shall find out over time. The Secretary of State knows from our earlier discussions that there is a great deal in his White Paper that we welcome and agree with, and that we believe fundamentally that the direction he is taking on pensions reform is the right one. However, he also knows that we have a major concern that the pensions architecture that he is building rests on the sandy and insecure foundation of a basic pension system—a state pension system—that will still rely hugely on means-testing, have a very low basic state pension and therefore raise issues of complexity and disincentive to save. We have indicated to the Secretary of State that we are in favour of the proposal to restore the earnings link, that we have broad support for the NPSS and that we also accept the increase in the state pension age in order to fund a lot of those improvements. However, I want to discuss some of our fundamental concerns about today’s statement, starting with what appears to be a Gordon Brown get-out clause in relation to when the link to earnings will come in. The Secretary of State has given the impression today that he is signing up to Lord Turner’s proposals. In fact, he is bringing forward by five years the proposals to increase the state pension age, therefore saving money, and the Chancellor of the Exchequer seems to be moving back by between two and five years the date when pensioners will see some benefit from the earnings link. Why is there the issue of an affordability test, when the cost of the proposals is clear? Why is it stated on page 110 of the White Paper that the earnings link and higher state pension age should be ““inextricably linked””, when it is now clear that although the Secretary of State proposes to increase the state pension age, he is vague about when the earnings link will be introduced? He says that there will be a decision on that at the beginning of the next Parliament, if his party is still in power. Can he indicate what ““beginning”” means? Does it mean within the first Budget or within the first year? Does he accept that in bringing forward the state pension age and delaying the earnings link, he is short-changing the pensioners who will be interested in this statement? On the earnings link, will the Secretary of State also comment on the position of the 1 million pensioners who live abroad, some of whom do not even receive a price link at present in relation to the state pension? Will he confirm whether the earnings link will be extended to pensioners abroad, including those who do not benefit at present? Does the Secretary of State accept that he was wrong to describe the basic pension that he will deliver as in any way generous? If the earnings link is delayed until 2015, as it could be, does he accept that the average pensioner today would be just £2 better off than with a price link? In other words, does he accept that the settlement does little for today’s generation of pensioners? Does he also accept that although he has succeeded in capping the degree of means-testing in the system, he is still reliant on a system in which, even if his figures are accurate, one third of pensioners will be subject to means-testing? How will that affect the incentives for people whom he hopes will enter the national pension savings scheme? Will he also indicate why he has not accepted—[Interruption.]