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43 Pensions Bill [Lords] 20 JUNE 2011 Pensions Bill [Lords] 44 [Mr Duncan Smith] sacrifice. It will also simplify administration for employers by aligning the earnings trigger with the existing personal tax threshold. Jonathan Evans (Cardiff North) (Con): My right hon. Friend refers specifically to the linkage of the personal allowance but, as he knows, our Government are committed to increasing the allowance significantly. What impact is that likely to have on auto-enrolment? Mr Duncan Smith: We are committed to reviewing that year by year, so I can assure my hon. Friend that we will constantly take it forward and not leave it static. Introducing a waiting period of up to three months, which has been widely discussed and debated, will ease the regulatory burden on employers. We had many representations from employers. In view of the present circumstances and the difficulties that many of them face, it is important to recognise the key considerations that we had to take into account in framing the Bill. Workers will retain the right to opt into the system if they consider it to be in their best interests to do so. That is important. Although we are allowing a let-out, if workers want to enter they will retain the right to do so. The Bill also amends legislation to enable employers with defined contribution schemes to self-certify their scheme. That is simple and straightforward. It makes it easier for employers with an existing scheme to try to align that. If it is aligned closely enough, the scheme can go ahead, saving employers the complication of having to change and engage in a new scheme. That is fairer and more reasonable. Steve McCabe (Birmingham, Selly Oak) (Lab): Given that the vast majority of the 600,000 people who will be excluded from getting a pension under the raised threshold are women, is the Secretary of State at all worried that the Bill is beginning to look as if it discriminates against women? Mr Duncan Smith: I recognise the hon. Gentleman’s concern. We are not blind to the issue, but we have decided to strike a balance between making the scheme work from the beginning and avoiding driving people on very low incomes into sacrificing too much and therefore not seeing the rewards. It is important to make the point that in the Green Paper, as the hon. Gentleman will have noticed, we talk about the single tier pension, from which there will be very significant benefits to women. We hope that in due course that will achieve a balance. I do not dismiss the hon. Gentleman’s considerations. We keep the issue constantly under review and will watch carefully to see what happens. It is important that we get auto-enrolment off the ground in a stable manner. I hope hon. Members on both sides of the House recognise that these are balanced decisions—sometimes nuanced decisions—that we have to take, but we will make sure that we review them. Mr Tom Watson (West Bromwich East) (Lab): Will the Secretary of State give way? Mr Duncan Smith: Indeed. How can I resist? Mr Watson: The right hon. Gentleman knows that I have always admired his ambition, but is he familiar with the Burkean maxim that change always brings certain loss and only possible gain? What appears to sit within the proposals he is outlining today is certain loss for many thousands of women facing retirement. Will he sketch out a little more how he intends to give them security, given that many trade unions—the Public and Commercial Services Union, Unite, GMB and Unison— have just voted for strike action? I strongly contend that fear about insecurity in retirement is fuelling that. Mr Duncan Smith: It is always nice to be accused of having ambition. I thought I was supposed to have given that up a few years ago, but I will be tempted by the hon. Gentleman. Workers can still opt in. They must be told that they can opt in, and if they feel it is the right thing to do, auto-enrolment will still be open to them. I will not be tempted just yet on the other subject to which the hon. Gentleman refers, which is the pensions age. I will take an intervention from him, if he wishes, when we get to that. For the moment I want to stay on auto-enrolment. As I said earlier, I recognise that these are not absolutes. In other words, to get the scheme going we have taken some of these decisions, but we will see where that goes. If there is a very big drive for more to go into it, we will take that into consideration. Amendments made in the other place will ensure that the strength of the certification test is maintained by requiring that I and subsequent Secretaries of State ensure that at least 90% of jobholders receive at least the same level of contributions under the certification test as they would have received based on the relevant quality requirement for automatic enrolment. Employers told us in discussions that the certification test will significantly ease the process of automatic enrolment. I believe that these changes, taken together, will allow us to present individuals and businesses with a credible set of reforms that will bring much of the next generation into saving for the first time, which was Labour’s intention when in government, and one that we will pursue, thus beginning to improve the poor level of saving. There has been some talk, not necessarily by hon. Members here, about the possibilities of mis-selling. We have retained the powers to prevent excessive charging in automatic enrolment schemes and will use them as necessary and keep them constantly under review. Part 3 of the Bill covers occupational pension measures, including a few relatively minor changes to the legislation governing the uprating of occupational pensions. The Bill amends existing legislation to set the indexation and revaluation of occupational pensions at the general level of prices. These changes are consequential amendments that follow the Government’s decision to use the consumer prices index as the most appropriate measure of inflation for benefits and pensions. I remind the House that the key legislation for setting the statutory minimums for the revaluation and indexation of occupational pensions is not in the Bill, as we have already considered the issue in previous debates on the Social Security Benefits Up-rating Order 2010. This is not the time to revisit those debates, but no doubt someone will want to. Hon. Members might wish to note that all the Government will do is set out the minimum increases; if schemes want to pay more than the statutory minimums, that is a matter for them.
45 Pensions Bill [Lords] 20 JUNE 2011 Pensions Bill [Lords] 46 I think that the move to CPI is supported, by and large, by Members on both sides of the House. That is certainly the indication I was given by the right hon. Member for East Ham (Stephen Timms) and his previous leader, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). We must also consider judicial pensions, although I am not sure how long Members will want to spend on them. Part 4 introduces provisions to allow contributions to be taken from members of the salaried judiciary towards the cost of providing their personal pensions benefits. I know that the House will be very worried that this might be too tough on members of the judiciary, but I will resist any pressure to reduce this provision. Judges currently pay nothing towards the cost of their own pensions, while the taxpayer makes a contribution equivalent to about 32% of judges’ gross salaries, which we think is both unaffordable and unfair to the taxpayer. [Interruption.] I sense that the House is united at least on that. Nick Boles (Grantham and Stamford) (Con): Does my right hon. Friend agree that it is extraordinary that a party that professes a belief in equality failed to tackle this extraordinary unfairness in 13 years in office? Mr Duncan Smith: I would like to be generous to Labour Members and say that they were thinking of the worst-off in society and hoped that they might be able to protect some members of the judiciary. We recognise that we cannot afford to do that, so we must make the system more responsible, fairer and more balanced for all, and these provisions will help us to do just that. It seems that the House is united at least on that. That brings me to the area that I suspect most Members want to talk about—the state pension age. I believe that we will be able to secure a fairer and more balanced system only if we get to grips with the unprecedented demographic shifts of recent years. I will put the issue in context before moving on to some of the detail. Back in 1926, when the state pension age was first set, there were nine people of working age for every pensioner. The ratio is now 3:1 and is set to fall closer to 2:1 by the latter half of the 21st century. Some of these changes can be put down to the retirement of the baby boomers, but it is also driven by consistent increases in life expectancy. The facts are stark: life expectancy at 65 has increased by more than 10 years since the 1920s, when the state pension age was first set. The first five of those years were added between 1920 and 1990. What is really interesting is that the next five were added in just 20 years, from 1990 to 2010. Joan Walley (Stoke-on-Trent North) (Lab): On mortality rates, life expectancy has risen, but is the Secretary of State not aware of the huge inequalities between different parts of the country? We have not yet been allowed to discuss the detail of the equalisation of pensions, the unfairness and injustice of which 55-year-old women in my constituency want to discuss. Surely we ought to be looking at the detail of that, which the Bill simply does not do. Mr Duncan Smith: I recognise the hon. Lady’s concern, but life expectancy has risen among all groups. I recognise also that some groups in certain parts of the country have a lower life expectancy—in pockets of the country, definitely—given the type of work they have done. The point is that, in setting and looking at pensions as we have done historically, that is one thing; the other thing is to look at the people in those conditions and ask, “Why is that the case?” Surely we need to deal with the issue through public health policy, through the way in which we educate people and through the work experience and training that they receive, rather than by trying to do so through differential pensions. Importantly, if we tried to deal with it through pensions, we would be in the invidious and almost terrible position of telling one group of people that they were retiring at a set age and another group, “You’re better than them, you retire at a later age.” That would be an inequality and would be unfair generally, so the hon. Lady is right that there is an issue, but it is not right to deal with it through the pensions age; it is right to deal with it through public health policy. Mr Frank Field (Birkenhead) (Lab): Given that the Secretary of State has told the House, and there is no reason to doubt him, that his proposals are based on fairness, it is reasonable to assume that before the Bill completes its passage we will see some changes to the way in which it treats women. May I question the Secretary of State on a wider point, however? The Bill sets in motion measures not simply to equalise the state retirement pension age for men and women, but to increase it. Does he not accept, as my right hon. Friend the Member for Croydon North (Malcolm Wicks) has previously said, that people who enter the labour market early are usually those who live the shortest in retirement? Would it not be fairer for the Government to base eligibility for the state retirement pension not on a person’s age but on their contributory years? Mr Duncan Smith: I know that the right hon. Gentleman and the right hon. Member for Croydon North (Malcolm Wicks) have raised the issue in the past. I recognise their background, great experience and genuine sense of a need to try to figure out a solution. I am always willing to listen to argument and debate that, but my concerns are twofold: first, I am not certain that we have the data going back far enough to be able to make the calculation, although I might be wrong; and, secondly, I return to the point that in the past we have not done things in that way, because it is very difficult to set out differential pension retirement ages for different groups. We are going to equalise provision for women and men, but now the debate is about breaking them apart, and that would lead us into all sorts of debates about unequal retirement ages. Malcolm Wicks (Croydon North) (Lab) rose— Mr Frank Field rose— Mr Duncan Smith: With respect, I recognise the right hon. Gentleman’s point, and I will take an intervention from his right hon. Friend the Member for Croydon North, but this is a complicated and fraught area that we should not necessarily deal with in the Bill. Beyond it, I am willing to hear more. Mr Watts: Will the right hon. Gentleman give way?
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