Category: Pensions

Matt Rodda – 2023 Speech on Raising the State Pension Age to 68

The speech made by Matt Rodda, the Labour MP for Reading East, in the House of Commons on 1 February 2023.

Pensions are an incredibly important issue. People who have worked hard and contributed all their lives deserve a decent pension in retirement. The state pension has been a crucial part of all our lives in this country for a very long time. I thank the Backbench Business Committee for securing today’s debate, and the hon. Member for Amber Valley (Nigel Mills) and Members across the House for their contributions.

I am sorry to say that there has been a certain amount of unhelpful briefing in the media about a possible change to Government policy on state pension age. I urge the Government to stop that, and to raise issues in this House rather than in the media. If Ministers are serious, they should discuss the future of pensions policy with the public and the pensions industry in a proper public consultation. The current speculation fuelled by off-the-record briefings is hugely unsettling for people who are saving for a pension and trying to plan for their future. Ministers should remember that families and pensioners are living through an unprecedented cost of living crisis and facing huge pressures on household budgets. The last thing that people need is further stress and uncertainty.

We are living in challenging times, with inflation rates that the country has not seen for more 40 years. To make matters worse, as the IMF reported earlier this week, the UK faces the worst economic outlook of any major economy. After 12 years of economic mismanagement by the current Government, we are stuck in a period of persistently low growth and, unfortunately, persistently high inflation. As a direct result of that mismanagement, the Government are now trying to cut public spending. They have reduced spending on the state pension before by failing to increase pensions in line with inflation until April this year. That means that pensions have failed to keep up with the huge rise in the cost of food and fuel that has hit pensioners in the last six months.

Independent research by the Pensions and Lifetime Savings Association using data from Loughborough University showed the scale of the Government’s failure. It showed that the basic state pension has now fallen below the cost of living. The PLSA put the basic cost of living for a single pensioner at £12,800, more than £2,000 above the basic state pension, which will be £10,600 in the financial year 2023-24.

The Government’s mismanagement of the economy and their desperate attempts to cut public spending form the backdrop to today’s debate. This is made even worse by Ministers’ disregard for pensioners, the House and the public. The Government’s pattern of behaviour is in stark contrast to the way in which Governments have conducted themselves in the past. As I mentioned earlier, there has been a long-standing convention that pensions policy is based on evidence and agreed by consensus. For example, when the evidence showed that life expectancy was increasing, there was a discussion about the impact on the state pension age, and it was agreed that it should be gradually increased. The UK already has one of the higher state pension ages among OECD countries.

Following extensive consultation about the impact of increased life expectancy in the 2000s, the Government established the Pensions Commission to look into the issue. As a result, and after a great deal of discussion, it was agreed that the state pension age should be raised. The Pensions Act 2007 provided for it to be increased from 65 to 68 in stages over the period between 2024 and 2046. I should stress that those increases were agreed at a time of steady rises in life expectancy. The current situation is somewhat different, to say the least. As we heard earlier, there is clear evidence of a stalling of the increase in life expectancy. Data from the Office for National Statistics on healthy life expectancy between 2018 and 2020 shows a downward trend in most regions of the UK, and the situation for some pensioners seems to be even worse, with a fall in life expectancy among some groups since 2010. We have heard several examples of that today, and there are others.

There is also clear and, in my view, deeply troubling evidence of local disparities, with gaps of about 10 years between the average life expectancy of some people—often those living in better-off areas—and that of their neighbours living in less well-off areas comparatively nearby. The full impact of the pandemic on long-term health is unclear, and there seem to be a growing number of older people of working age who are suffering from serious health conditions. That evidence needs to be considered carefully.

I appreciate that time is limited. Let me end by saying that the Government are letting down both pensioners and people saving for pensions. They have broken with the long-standing convention that pensions policy is developed on the basis of evidence, through consultation and discussion. I hope the Minister will address these issues in her speech. I know that she does prefer to consult, even if some of her colleagues do not always follow that approach.

February 6, 2023
Patricia Gibson – 2023 Speech on Raising the State Pension Age to 68

The speech made by Patricia Gibson, the SNP MP for North Ayrshire and Arran, in the House of Commons on 1 February 2023.

I echo the appreciation of the hon. Member for Amber Valley (Nigel Mills) for bringing the debate on the state pension age to the Floor of the House today. There is great concern that, according to reports, the UK Government plan to accelerate their current timeline for increasing the state pension age again, raising it to 68 by 2034. That means that those born in the 1970s or later could soon be told that a review of the increase in state pension age will further delay their retirement. If the Minister can tell us that that simply will not happen, we can all just go home and not worry about it, as the hon. Gentleman and the hon. Member for North East Fife (Wendy Chamberlain) said. We would all be delighted.

It is bad enough that the state pension age is due to rise again from 66 to 67 by 2028. It is even worse that the women born in the 1950s had their state pension age increased with little or no notice, a move that has robbed them of tens of thousands of pounds of their hard-earned and expected state pension, throwing many of them into deep poverty and unnecessary hardship. That is all bad enough, but now we face the prospect of the Government planning to bring forward the increase in retirement age from 67 to 68 from 2046 to affect anyone now aged 54 or younger.

The Minister may say that no final decision has been taken, but how can anyone, having witnessed how women born in the 1950s have been treated, have any real faith that the Government understand how the increase in retirement age would have a disproportionate impact on those who have worked all their lives for poor pay? The UK already has one of the lowest pensions in Europe, and these plans will have an impact on millions of people, many of whom are already struggling financially. Age UK has said that

“any Government decision to accelerate the rise in Pension Age will condemn millions to a miserable and impoverished run up to retirement—and often beyond too”.

So many people are already in poor health by the time they reach their state pension and they are already suffering financial hardship.

As the hon. Member for North East Fife said, probably every one of us has spoken to women born in the 1950s, and when we do they tell us that the biggest UK Government swindle in recent memory was robbing their generation of their rightful state pensions at the age of 60. Many discovered, often by sheer accident, that their anticipated pension would not arrive until years later, as there was equalisation with men. The anger, sense of betrayal and disappointment was only inflamed when UK Government Ministers bizarrely and insensitively insisted that this provided an opportunity for the women affected to train for new careers. Some of them then formed the Women Against State Pension Inequality Campaign, which continues to campaign for the injustice against them to be recognised and remedied. They must be given the compensation that is their right and I applaud the work they have done, because those women faced delays of up to six years to access their state pension, one in four of them now struggle to make payments on crucial bills and one third are in debt, with single women the worst affected. So that we can avoid this happening again, will the Minister tell us what impact assessment the UK Government have carried out, or will carry out, on any further proposals to accelerate the rise in the state pension age to 68 by 2034 or, indeed, to accelerate it at all?

It seems to the people outside this Chamber who are worried about this or who have experienced this, as the WASPI women have, that this Government have developed a taste for robbing people of their hard-earned state pension. The website Interactive Investor calculates that bringing forward to 2034 the increase in someone’s pension age to 68 could mean a lost year of full state pension of almost £17,000 for workers aged 46. Royal London insurance found that more than half of those aged 55 and over are likely to have the state pension as their main income, with 1.5 million of those in pre-state-pension years, and 31 % with no savings at all to fall back on. Many of them are also struggling with caring responsibilities as well as financial ones.

Pensioners relying on state pension as their main source of income are more likely to have already undergone a working life of low pay, and they are more likely to have health challenges in retirement and a shorter life expectancy. They are also the pensioners who simply cannot afford to retire early, even when health problems occur. Raising the retirement age even further will therefore have a disproportionate effect on poorer older people who will enjoy fewer retirement years.

A review of the state pension age in 2017 established that people should expect to spend one third of their adult life in retirement. As we know and as has been said, life expectancy in the UK is, at best, stagnating, which seriously undermines the case for raising the state pension age. I am afraid that those considerations will not have an impact on Government thinking and that the very logic they have used in the past for increasing state pension age—rising life expectancy—will not apply. If that is the case, I would remind the Minister that not only have life expectancy rates stalled across the UK, but they have actually fallen for the second year in a row in Scotland. Perhaps the Minister would like to factor that in when determining the state pension age. According to the UK Government’s own argument and the logic they have used so far, the state pension age should perhaps even be falling.

The UK Government must abandon any further acceleration of the state pension age across the UK. I hope that all parties will oppose that and commit to continuing that opposition beyond the next election. As the hon. Member for Amber Valley said, if you keep tinkering with, accelerating and rising the state pension age, you create uncertainty and undermine the whole concept of a state pension, perhaps fatally undermining it for future generations.

Even talk of accelerating the state pension age feels like a grubby smash and grab of people’s hard-earned pensions to try to fill the black hole in the UK’s finances, which is a consequence of 13 years of austerity. That austerity started under Labour’s Gordon Brown and has continued ever since, compounded by the damage of Brexit to which Labour is fully signed up, cynically and disingenuously pretending that there is such a thing as a good Brexit after all. Labour knows that, but it is so desperate to win seats in England, it will say anything. But the public are watching.

To raise the state pension age further is bad enough. To raise it even faster than originally planned as a cost-cutting measure is unforgivable. People in Scotland were told in 2014 that the only way to protect the state pension was to vote no to independence. Here we are nine years later, and the state pension does not support the minimum standard of living. Pensioners have already been short-changed by £6,500 on average, due to the state pension underpayments to around 237,000 older people, and a further 100,000 potential underpayments that have been identified, which will take a year to correct. Let us not forget how easily the Government discarded their manifesto commitment to retain the triple lock, the abandonment of which means that current state pension payments are £520 less than they otherwise would have been.

We must all learn from the huge injustice perpetrated on WASPI women—I applaud their campaign for justice—but we cannot permit even more people to be robbed of tens of thousands of pounds of their rightful state pension as life expectancy stalls or even falls in Scotland. Meanwhile, our Government desperately seek to fill their financial black hole because of their own incompetence, and therefore have decided to pick a fight over pensions. That is an outrage. In the dying days of this Government, as they thrash around seeking to pick the pockets of others to pay for their own economic mismanagement, we must say that enough is enough.

February 6, 2023
Wendy Chamberlain – 2023 Speech on Raising the State Pension Age to 68

The speech made by Wendy Chamberlain, the Liberal Democrat MP for North East Fife, in the House of Commons on 1 February 2023.

I congratulate the hon. Member for Amber Valley (Nigel Mills) on securing this debate. How to calculate the state pension age is an intensely technical topic, but it fundamentally impacts on people’s lives, and what we have heard so far this afternoon illustrates that, because there is a great deal of consensus across the Benches. I congratulate the hon. Member for Dover (Mrs Elphicke) on her speech and the areas she covered.

Obviously, it is our job on the Opposition Benches to scrutinise the Government, and I do not expect the Minister to pre-empt an independent review process, but I absolutely agree with the Chair of the Work and Pensions Committee, the right hon. Member for East Ham (Sir Stephen Timms) that we should be publishing any reports and looking at this issue before the Government make a final decision in the public space. This debate is an opportunity for the Government to make a political statement to commit to some of the existing methodologies we have used to date for the state pension age, and primarily that means keeping it based on life expectancy.

We have heard significant concerns today that planned pension ages might be accelerated, and that does not fit with what we are seeing with life expectancy. As the hon. Member for North Ayrshire and Arran (Patricia Gibson) said in her intervention, life expectancy is not increasing. In fact, the evidence suggests it is falling, so far from seeing the retirement age going up faster, we should be seeing no change or at the very least a slowdown in planned increases.

It is highly technical, looking at actuarial tables to work out statistics, but it is important that we do not forget the faces behind the figures. In fairness, the WASPI women have made sure that we never forget the faces again. I am sure that every Member here, including the Minister and me, will have spoken with WASPI women in their constituencies about what they have suffered as a result of process failures with previous age increases. I have met many of the representatives who come to Parliament on fiscal event days. They often stand in the cold and damp waiting all day to be heard. I urge the Minister and Members across the House to meet them, if they have not done so previously.

Although this debate is about the future, I cannot mention the WASPI women without talking about their ongoing right for compensation. They have been waiting years now, and thousands have died without ever seeing a penny. The ombudsman is expected to report within a matter of months, but the only thing that has taken longer than their investigation is the Government’s inability to decide to do the right thing and to promise to follow the results of that report. I hope the Minister will make reference to that in her closing remarks.

The Government must learn lessons from what has happened to the WASPI women. If we are going to see changes, they must be communicated early and fully. People must be able to plan ahead. Age UK suggests 10 years as the length of time in which people need certainty to plan for retirement, as the hon. Member for Amber Valley mentioned. I hope that the Government can continue to commit to that.

I said it was important to remember the faces behind the figures, and it is vital that the Government remember that life expectancy is based on averages, and that all people are not alike. There are already people struggling to work to 66 through no fault of their own. Manual workers, whether farmers or factory workers, are just more likely to struggle to keep up as the impact of a life of labouring catches up with them. The fictional police sergeant Catherine Cawood of “Happy Valley” may hopefully be reaching her retirement from the police on Sunday night in the concluding episode of the series, but she will be 56 when she does so. That is because we accept that police officers are not necessarily physically capable of being able to chase offenders or fight or do any of the physical things we expect. We may hope, however, that Catherine Cawood, as well as going to the Himalayas, can also continue to contribute in a part-time work capacity elsewhere.

Health problems for many mean that people cannot work full time. Part-time working is increasing, and many people have caring responsibilities. This is the generation of sandwich carers who take care of their parents, their children or grandchildren and, when needed, their partners. There is of course a benefit to the economy, and to older workers themselves, of continuing to work if they can. If that is the Government’s aim, I implore them to see that increasing the state pension age, when we are not seeing a corresponding rise in health and life expectancy, is not the solution. People might be living longer, but they are not necessarily doing so in good health.

There are steps that the Government could take. I continue to champion the needs of unpaid carers, many of whom are in the pre-retirement age bracket. I welcome the Government’s support for my Carer’s Leave Bill, which will have its Third Reading on Friday, and look forward to their support as it passes through the Lords, but there is still much to do. Reforming carer’s allowance, securing flexible working as a day one right, offering more training and respite for carers, and investing in local services such as day centres would all help, as would more re-training, as the hon. Member for Dover mentioned, and a greater understanding of what is keeping older workers out of the workforce. We need to ensure that there is a social security net for people who have paid in and who, for whatever reason, cannot manage those final few years. That would be more effective at encouraging people to work longer, even past retirement age, than just forcing people somehow to soldier on.

Of course, there is a balance to be struck. The pension age must be both effective and sustainable. I agree that it must realistically reflect how long people can expect to live after retirement. We all see adverts pop up on our social media about how to retire at 40, but we know the Government could not be expected to fund such a period. Knowing that there is a balance means also making the expectation of the state pension realistic. I want my children, and my children’s children, to have it to look forward to one day. Our younger generations have suffered the outcomes of Brexit, of covid and of the cost of living crisis. Owning a house is a dream, not a reality for far too many. Future generations deserve the same promises, the same security as those that came before. We must not pull up the ladder.

I urge the Government to use this opportunity to reassure the House that they will follow the rules on determining retirement age by looking at life expectancy, protect those who struggle to work later in life and help those in work who can do so. Too often in recent years the Government have trailed potentially detrimental pension changes only to withdraw them later. Today’s debate gives them an opportunity to make sure that that is not the case in future.

February 6, 2023
Natalie Elphicke – 2023 Speech on Raising the State Pension Age to 68

The speech made by Natalie Elphicke, the Conservative MP for Dover, in the House of Commons on 1 February 2023.

It is a pleasure to follow the right hon. Member for East Ham (Sir Stephen Timms). He is very knowledgeable about these matters, as his comments demonstrated; I thank him for them. I am grateful to my hon. Friend the Member for Amber Valley (Nigel Mills) for securing the debate and to the Backbench Business Committee for agreeing to it, because statutory pension age and pension amounts are of such importance to my constituents in Dover and Deal.

For a person of my age, the statutory pension is like one of those Scottish mountains. It is an optical illusion: as we get ever closer, it seems that there is just that bit further to go. When I started my working life, my pension age was 60. When it was changed in 2010, I was already roughly two thirds of the way through my expected working life. Should the pension age be raised to 68, a woman of my age, at current rates, will have lost out on the equivalent of between £59,000 and £77,000. That matters because of the basis on which I began paying national insurance contributions when I started work.

The first point that I would like to raise on behalf of all pensioners-to-be is that pensions are an unusual area because the rules on grandfathering rights that are usually applied are simply not followed. Surely it would be fairer to use the basis that applied at the point at which people started to work and started to pay national insurance contributions. If someone’s pension age is to be changed, it should be changed in the first third of their expected working life, not right towards the end. No one affected by a date change can go back in time to take out an ISA, top up their pension or use their income differently, as they might have done if they had known that such changes were due. People affected by the changes might have made different decisions if they had known that they would have to work for considerably longer, and it might have made a difference to their quality of life at an older age.

Secondly, people might have made different career choices or made career changes if they had known that they would have to work for longer. Thirdly, the expected extra years of work—eight whole years, in the case of women of my age—may mean that people will need extra skills training and support during their working life. If the pension age is to be extended even further, budgetary consideration will need to be given to support for lifelong learning, with leave being given for skilling up and study being prioritised for people affected by the change.

For many people, the ages of 60 to 68 represent a period in which, in the eyes of bosses or fellow workers, they may be considered past the peak of employability. I am pleased to say that that is not the case for contributions in this place, but age discrimination in our society is very real. I suggest that no further changes should be made to pension age unless such age discrimination is firmly and clearly tackled.

If we want people to work later in life, we have to give them the tools, support and legal protection that they need to do so. That is all the more important because age discrimination in particular terms and conditions of employment is currently perfectly legal. If the pension age is to be extended, the law needs to be changed. Age discrimination, like any other form of discrimination, is humiliating, demeaning and damaging. We do not want to subject people to it by making them remain in work while such prejudice continues.

I have a constituent, Stephen, who at the age of 66 —the current statutory pensionable age—is facing just such lawful age discrimination. He has worked for a very large Kent company for more than 30 years. He is an effective, respected and well-liked employee with a fantastic track record of work. When Stephen reached his 66th birthday, he did not get a birthday card from his bosses; he got a letter to the effect that it was not possible to sack him on grounds of age, so instead they were terminating his life insurance, his health insurance and all his other insurance benefits.

Stephen was doing the same job at 66, at 66 minus one day and at 66 plus one day, but now he does not get the same money’s worth in relation to his contract of employment. If he falls ill, he cannot get the same access to speedy private healthcare that other people working for the company can. If—heaven forbid—he died, his wife would no longer have compensatory insurance. However, he is doing exactly the same job as someone else. It is the same job he did before, and the same job he will do the day after. The attitude demonstrated by the company communicates to him and to the wider employment community in Kent that it thinks a person who is older is worth less. We must tackle that issue if people are to stay in the workplace longer.

I have looked into the policy considerations that are sometimes put forward. The first, essentially, is that an older person does not need to work. As a woman who has been in the workplace for quite a long time now, I remember a time when employers would say that a woman did not need to work, did not need to get the same bonuses as a man, and did not need to be offered overtime, because it was men who had families to feed. We have outlawed that, because equal pay at work is not about who is doing the work, but about what the work is. Allowing age discrimination, as we do now, sends a message that an older person is not worth the same as a younger one. The continual changes in the pension age also send a clear message that older people’s safety, stability and security in managing their own lives are not a priority.

The second reason put forward is that it becomes more expensive for everyone—the premium for the company itself goes up—if older people are included in corporate benefits, or global benefits, beyond the statutory age. To apply that logic, would it be okay to disallow health cover in an employment context to someone who had a chronic condition that could give rise, or had given rise, to needing that policy? Of course not; we would say that that was discriminatory and wrong. At the heart of equalities law is the fundamental view that employers cannot discriminate between those they employ based on characteristics that are not relevant to whether they can carry out the job. By continuing a discussion of the type that has been happening about the pension age moving and whether people will be supported in older-age working, we are failing to address this absolutely dreadful discriminatory environment.

The third and final reason given is that a disincentive to recruit older workers would be created, because the costs I have mentioned would be higher for the company. I agree that we do not want to create disincentives to employing older people, particularly if we are to require people to work for years and years more than they had expected, but the argument sounds awfully similar to the well-known discussion about whether the cost of maternity leave would dissuade employers from employing women who become pregnant. We outlawed that, and we know that a woman can still add value, be productive and be effective when pregnant, so why are we making people work longer? Why are we raising the statutory pension age and communicating from this Parliament that it is okay to discriminate against older workers? It is not, and it is wrong—all the more so if the pension age is raised from 66 to 68, because we would be raising it above an age at which employers are already discriminating against workers, as I have illustrated. Unless we tackle age discrimination, we will continue to have an environment in which it will be very difficult for people who are working in older age.

As these pension changes are brought forward, I do not feel that enough has been done to support, encourage and incentivise employers to look favourably on an older workforce. For example, national insurance contributions could be reduced for older workers. Also, if people are excluded from benefits by reason of the current law, older workers should receive money or money’s worth in cash or vouchers to make up for the work benefits that have been removed from them.

By way of conclusion, I am not persuaded by the arguments for increasing the pension age further or discriminating on the grounds of age. It is simply not acceptable. There is no justification for the treatment of my hard-working and loyal constituent Stephen with the discrimination he has faced in his workplace. If the pension age is to be raised again and we are going to keep making these changes, forcing people to stay in work for longer, age discrimination must be tackled first. We should be taking steps now to change behaviours in the workplace to make sure that older people who now have to work longer will be able to do so and will be treated fairly and equitably. We should be outlawing this outdated and discriminatory law against older workers.

February 6, 2023
Stephen Timms – 2023 Speech on Raising the State Pension Age to 68

The speech made by Stephen Timms, the Labour MP for East Ham, in the House of Commons on 1 February 2023.

I congratulate the hon. Member for Amber Valley (Nigel Mills) on securing this Backbench Business debate, which gives us the chance to ask for the Government’s views on this topic of great importance and enormous public interest. I am delighted that the Pensions Minister, the hon. Member for Sevenoaks (Laura Trott), and the former Pensions Minister, the hon. Member for Hexham (Guy Opperman), are in their places on the Front Bench.

I agree with much of what the hon. Member for Amber Valley said. The idea of spending a third of adult life in retirement is a sensible yardstick to run with. He made the point, in passing, about the importance of implementing the recommendations of the auto-enrolment review, and I agree with him that that is important. We are repeatedly told that it will be done in the mid-2020s, but time to implement it before 2025 is either running out or has possibly already run out.

In my remarks, I will focus on the process we are in. I recall the wise words of David Cameron, who said:

“Sunlight is the best disinfectant.”

He argued—rightly, in my view—for a culture of openness in government. One of the results of his view was the 2010 protocol on publication of all Government social research, which was most recently updated last year. It states:

“Principle 1: The products from government social research and analysis will be made publicly available”,

and that research should be published “promptly”, within 12 weeks of completion.

For a number of years, that was, to their credit, the Government’s approach. In 2017, when the first review of state pension age was undertaken for the Government by John Cridland—as the hon. Member for Amber Valley has pointed out—his report, and the report of the Government Actuary, were both published on 23 March 2017, nearly four months before the DWP’s own review was set out on 19 July 2017, shortly after the hon. Member for Hexham took up his former post as Pensions Minister in June 2017.

I have often expressed great regret that the Department, for some reason or other—perhaps reflecting a different approach across Government—has abandoned the practice set out by David Cameron and instead now resists publication of research and analysis, or delays it for as long as it possibly can. Preventing public discussion no doubt has the benefit of allowing Ministers to avoid having to answer difficult questions, but it has the disastrous drawback of worsening policy outcomes. The policy cannot be informed by public debate before the decisions are made, because the evidence that would allow a debate is not available. The Government publication protocol was watered down a little last year, but its essential gist remains unchanged. It says, for example:

“The primary purpose of social research commissioned and conducted by government is to inform…policy and delivery, but it also plays a role in wider policy debate.”

That is quite right, but, as we have discussed in the Chamber on various occasions, in the DWP the requirements of the protocol are simply ignored. They are not being fulfilled.

I have been hoping very much that the new ministerial team will turn over a new leaf and take a more enlightened approach. Indeed, the new Secretary of State has hinted that he is considering the advantages of greater openness. But here we have a flagrant example of his predecessor’s bad habits of hiding analysis and evidence until it is convenient to the Government to release them. Instead of publishing the evidence four months before the Government’s decision, as was done in 2017—around the time the former pensions Minister, the hon. Member for Hexham, was appointed—the Department is keeping the evidence hidden until it makes its announcement “early in 2023”. Presumably, as the hon. Member for Amber Valley has suggested, that will be at the time of the Budget next month.

In my brief contribution to this important debate, I mainly want to press the Minister to publish now both the report by the independent reviewer, Baroness Neville-Rolfe, which the Secretary of State received on 16 September last year—more than four months ago—and the related Government Actuary’s report, which was submitted to Ministers on 5 October. Publish them now. Why have they not been published already? What possible benefit can there be in keeping this important work and evidence hidden for all this time?

The Select Committee has published today an exchange of letters with the Minister on the subject. When asked why these reports are not being published before the Government’s announcement as they were for the 2017 review, the Minister, who is in her place, replied that

“this is a different publication schedule to the last review, the issues are still under consideration and so we think this approach is more appropriate.”

In other words, they appear to be saying, “We don’t want anyone to see the evidence until we have made up our mind. This is still under consideration, so we think it is not appropriate to publish the evidence.” Surely, there ought to be a public debate about all this before the Government make their decision, not afterwards. This instinct of hiding things, not disclosing them, and not complying with the requirements of the cross-Government protocol is very damaging to the Government’s ability to make good policy.

Surely, Ministers should take advantage of public debate to inform their decisions, rather than refusing to show anyone the evidence until after the Government have made up their mind. What has become of David Cameron’s belief in sunlight? We are talking here not about confidential advice to Ministers—there is no requirement to publish that—but rather about expert analysis that will eventually be published, and which sets out the evidence that will underpin the Government’s decision. Publish it now so that everybody can see it. The protocol says that

“analysis should be published promptly…as early as possible following agreement of the final output.”

So it should be. The recent independent review was announced in December 2021. The terms of reference said that it should explore what metrics the Government should take into account when considering how to set state pension age. They stated that it should include a consideration of recent trends in life expectancy in every part of the United Kingdom; whether it remained right for there to be a fixed proportion of adult life that people should, on average, expect to spend over state pension age, and what metrics would enable state pension costs, and the importance of sharing those fairly between generations, to be taken into account.

The Select Committee agreed months ago that once Baroness Neville-Rolfe’s review had been published, we would take evidence on it, including from her, as the hon. Member for Amber Valley said, before the Government announced their decision. Now that the Government are unwilling to publish the analysis before they announce their decision, we clearly cannot do that.

The Sun has reported that the Government plan to raise the state pension age from 67 to 68 as early as 2035, which will affect everyone who is 54 and under, instead of 10 years later, as set out in current legislation. Is that the right thing to do? Well, we need to see the evidence. The key evidence is about future projections of life expectancy. As we heard from the SNP spokesperson, the hon. Member for North Ayrshire and Arran (Patricia Gibson), emerging evidence shows that the trend of rising life expectancy is not what it was before the pandemic.

One of the expert witnesses at this morning’s meeting of the Select Committee said, “Mortality seems to have peaked, because one reason why there was increasing mortality was that the second world war lifestyle was ironically quite healthy for people, and the numbers are now going down quite a lot.” We were discussing something else this morning, and I do not know what evidence the witness was drawing on there, but I do not know what evidence the Government will draw on either, because it has not been published and it should have been. There should be no delay in publishing it.

Cohort life expectancy statistics are produced every two years. A new set is expected this year. The latest, 2020-based projections show life expectancy at 65 still rising, but at a slower rate than in previous releases. Of course, the 2020 figures did not take any account of changes arising from the pandemic. The change in projection has prompted some commentators to call for the planned rises in the state pension age to be abandoned, or at least to be slowed.

Lane Clark & Peacock took the latest Office for National Statistics life expectancy projections and reran the 2017 calculations of the Government Actuary’s Department. They concluded that any move from 67 to 68 would not be needed until the mid-2060s rather than the mid-2040s, and certainly not by the late 2030s, as suggested by The Sun. They also suggested that the move from 66 to 67, which is currently scheduled to be phased in over two years from 2026, could be put back until the end of the 2040s. They went on to argue that if further ONS statistics show relatively lower life expectancy growth, that could imply further delays to planned increases, and perhaps even abandoning the planned rise to 67.

The former pensions Minister but two—I think— Steve Webb, who is now a partner at Lane Clark & Peacock said:

“The Government’s plans for rapid increases in state pension age have been blown out of the water by this new analysis. Even before the Pandemic hit, the improvements in life expectancy which we had seen over the last century had almost ground to a halt.”

Those are important public policy questions. They should be debated in Parliament and among the public before the Government announce their decision, so that that public and parliamentary debate can inform the Government’s decision. We should not just see the evidence after the Government have announced what they plan to do, because changing the Government’s mind at that point will not happen.

A wide public debate should take place now, but it cannot happen unless the independent review and the Government Actuary’s report are published before the announcement is made. I ask the Minister to resist the temptation to keep the documents hidden for even longer and instead to remember the wise words of David Cameron, and to be open and publish those two key documents.

February 6, 2023
Nigel Mills – 2023 Speech on Raising the State Pension Age to 68

The speech made by Nigel Mills, the Conservative MP for Amber Valley, in the House of Commons on 1 February 2023.

I beg to move,

That this House has considered the matter of raising the State Pension age to 68.

I thank the Backbench Business Committee for providing the time for this debate, and Members for staying here on what I know is a tricky day for travelling. Some people may have somewhere more exciting to get to later in the evening, and I suspect we will not be able to drag this out until 7 o’clock, but you never know. There is plenty to talk about on pensions, and we can but try.

I wanted to hold this debate because the Government have recently received the periodic review of the state pension age from Baroness Neville-Rolfe. They have not yet published that review, but we have been seeing stories in the media suggesting that there may be an announcement in the Budget of a change in date for the increase in the state pension age to 68 from 2044 to sometime in the 2030s. I should probably declare an interest in that, depending exactly when that choice is made, it may change my own state pension date. That is on the record, but I have no idea what year the Government are thinking about.

I hesitate to say it, but this is actually a really important decision that will have a very significant impact on a lot of people. It needs to be made very carefully, and with very careful consideration of the impacts on people of different genders, backgrounds and occupations and on those in different parts of the country. Its impact for a manual worker will be very different from that for a professional, or someone living in an area with much lower life expectancy than, say, in the south-east of this country, and it is the same for those who have had a high-earning career rather than a lower-earning one. So it is quite a hard thing to get right, as various studies have shown. The other reason to be very careful is that the whole success of the pension regime depends on certainty and predictability, and if people start to think that nothing is certain or predictable, then they cannot have confidence, the whole basis on which we save for our retirement starts to become unclear and people start showing behaviours that we would much rather they did not show.

I actually support—I did support and I still support—the position the coalition Government got to in the 2010 to 2015 Parliament, in which we raised the state pension age to 66 in 2011 and brought forward the increase to 67 really quite considerably. That was based on the principle that we should get roughly a third of our adult life in retirement, and I think we should be very clear about sticking to that principle. However, it is right that, if life expectancy increases, that has to be paid for. If we are going to get longer in retirement, we have to find a way of paying for that. The inevitable impact is that we have to work a bit longer to pay for that. If there is a clear principle that we will spend about a third of our adult life in retirement, people can at least understand what the situation is and what may be coming down the line. I urge the Minister to not move away from that principle, to at least give people that understanding.

I fully support all the other pension reforms introduced by the coalition Government, including the successful roll-out of auto-enrolment and the introduction of the single-tier state pension, which was designed to say to people, “You will get a state pension and it will be above the poverty threshold, so there will not be any means test. If you save more and have your own private pension, you won’t be losing benefits.” It is therefore absolutely worth saving for that pension. The success of auto-enrolment ties directly into that. Everybody is clear that it is well worth their doing that.

Patricia Gibson (North Ayrshire and Arran) (SNP)

May I take the hon. Gentleman back to a point that he made a moment ago about raising the pension age because of increasing life expectancy? That has always been the justification that has been given. However, at best, life expectancy is now stalling, and in Scotland it has been falling for the past two years. Does he agree that, in that context, it seems bizarre to use that information to raise the age further and faster?

Nigel Mills

I will come to that point in my argument. If we accept that we should stick to the principle that we get roughly a third of our adult life in retirement, the reason why we would increase the state pension age is that we have seen a three-year increase in life expectancy, and that should give us two more years on the state pension age. So for every 12 months life expectancy goes up, people should effectively get four months of that in retirement and expect to work for eight months of it. The hon. Lady is right: the data does not now show, sadly, life expectancy increasing, certainly not at the rate that was forecast by all the actuarial calculations at the time of previous reviews. The data for the 2018 to 2020 reference period showed that male life expectancy had fallen by seven weeks compared with the 2015 to 2017 reference period, and female life expectancy had gone up by half a week, or something really quite insignificant.

On that logic, we would be thinking, “Yes, we are due a periodic review and it would say that nothing has changed—in fact it has got a bit worse. There is nothing to see here, so let’s not make any more changes.” The Minister can intervene if she wants to say that that is what the review says, and we can all go home quite early, but I suspect that nothing is ever quite that simple.

I suppose what we are asking the Minister to confirm later in the debate is whether the Government will stick to the principle of people getting a roughly fixed proportion of their adult life in retirement, and whether they will therefore be guided by that 33% figure. The hon. Lady’s point would appear to suggest that the position is, if anything, worse than that at the time of the Cridland review six years ago and we should presumably come to the same conclusion as that. That is not what the media stories are suggesting. They seem to be saying that the increase to 68, scheduled for the mid-2040s, will come forward to perhaps as early as the mid-2030s—possibly around 10 years from now.

That leads me on to two keys asks of the Government, and I think they were principles that were previously set. First, increases in the state pension age should always come with 10 years’ notice, so we should never give people less than 10 years to have to change their retirement plans. Perhaps the Minister will confirm that there will be at least 10 years’ notice.

Furthermore, we should make one of these changes only every 10 years; we should not be making multiple changes. Had the Cridland review been handled differently, we could have had the increase to 66 from 2011, the increase to 67 in 2014, and then the move to 68 a few years after that. That would have been far too much change too quickly for people to handle.

Those key principles that we established were not that different from what the Labour Government did in previous pension Acts when they brought in pension age rises. It is overwhelmingly in the interests of a stable pension system that we keep those fundamental principles in place. We do not want to end up in another situation like we had with the Women Against State Pension Inequality Campaign, where women—and I met many of them in my constituency—genuinely did not know that their state pension age was going up significantly until they tried to claim it or thought they were about to get it, only to in some cases find out that it was another five or six years away. That is why we need to ensure we have that certainty in place. I know that that was changed in the Pensions Act 1995, so everybody had at least 15 years’ notice for most of it, but people just were not told, or at least not in a way that they understood or noticed. We need a clear, stable pension architecture, as was established under the coalition Government, with a single-tier state pension above the poverty threshold, so that people could save for themselves and had predictability.

This is not random conspiracy theory nonsense. Articles are occasionally written by people who just do not believe that when they get to retirement age, their state pension will be there, or that they will ever get to it. In fact, there was an article in the Daily Mail raising exactly that point. Reading other stuff around, we see that there is a general pervasive fear that people will never get to state pension age—that it will always be pushed just out of reach and they will never actually get there. That is why we need to be absolutely clear that that is not what we are trying to do here. We have a predictable and reliable state pension system that people can factor into their retirement savings and then use to plan for the later years of their life. I am sure the Minister will be able to reaffirm that that is absolutely the Government’s position.

There is a question about whether the Government are minded to make a change. I think the Cridland review suggested that we could have brought the change forward to the late 2030s, at least, so it should not be a complete surprise if we think that 2044 is probably too late and would result in that figure of roughly 33% becoming a bit generous and people getting a bit longer than that. We need to set out the rationale for that pretty clearly and try to work through how we can help people who will be put in the most difficult position by that change. Intriguingly, the Cridland review said that if the Government are after Budget savings, increasing the state pension age is not a very clever way to do that. Instead, the review recommended abolishing the pension triple lock, which, I suspect, is not a view that has great support around Parliament. Hopefully this latest review does not re-recommend that, and the Government will not accept it if it does.

There were, though, some sensible analyses and recommendations as to what we can do to help people who are out of work in their mid-60s because they are either not really fit for work or not realistically going to get a job then. How do we give them financial support when we cannot give them their state pension? Do we subject them to full universal credit conditionality, or can we find a way of giving them a better experience? The review recommended potentially allowing people to access the state pension a year early, having a benefit equivalent to the state pension at least a year early or having a tapering-off approach to UC or UC conditionality, in case people fall out of work at just the wrong point.

I am not actually aware that the Government have ever really put in place any of those measures, so that would be another ask of the Minister. If the Government are thinking of making a change, while we do need the notice, can we also put in place a plan early for handling those who will be the worst affected by the change? I think we will need that for the rise to 67, anyway, which is coming up much sooner. It is just not realistic for people who fall out of work very late in their working life to get another job, and leaving them in financial trouble for those last few months before they get their pension seems to be a rather inefficient and cruel situation. Hopefully we will have made some progress on that before we get to the next pension age.

I would also like to say that I do not think handling this sort of issue as part of the Budget process is necessarily sensible. This change will not affect the public finances this year or next year, or, actually, the next Parliament; it may not be until the Parliament after that, or possibly even the Parliament after that, when this triggers any financial savings. There is not, as far as I can tell, any real Budget sensitivity to how the Government make this announcement, so I do not think we need to have a shroud of secrecy over what the Government are thinking of doing.

What the Government should do is publish the Neville-Rolfe review. It would be helpful if Baroness Neville-Rolfe could appear before the Work and Pensions Committee and explain the findings of her review. I think she has been brought back as a Minister in a different Department, so I am not entirely clear whether that would be permitted. Could we have a Minister from a different Department answering questions about a review they led before they were a Minister? I cannot think of any reason why not. Perhaps the Minister could confirm that the Government would be happy for her to come and explain the findings of her review. We could then have an open consultation about the content of that review and come up with a coherent policy, rather than it being dropped out by the Treasury and perhaps consulted on afterwards. The fear is always that once something has been announced, there is much less chance of it being changed.

I hope that the Government will get the feeling from this debate that people are concerned about there being further rises in the state pension age before we have had a chance to assess fully the impacts of the rise to 66—let alone the rise to 67 that is coming. I think we all recognise that it is a difficult situation and that it is worse for different parts of the country, worse for people in different occupations and possibly worse for women than for men. It would be useful to understand those implications and how we can mitigate them before we make any further decisions.

Fundamentally, if life expectancy data is not going as has been forecast, we should respond to the facts as they change and accept that our policy on expected changes to the state pension age can change as well, that we do not need the increases to come as fast and as often as we had thought, and that we should just leave things as they are. Let us hope that life expectancy starts to increase again. We can make these decisions then, rather than rushing into things that really hurt people, that bring uncertainty to the pension system—we do not need that—and that will probably not bring any financial savings for several Chancellors.

I look forward to hearing what the Minister has to say. Let me restate my point: our pension architecture and the foundations on which we have been trying to build the system are all still there and are robust, and we can all rely on them.

February 6, 2023
Laura Trott – 2023 Speech to the Pensions and Lifetime Savings Association

The speech made by Laura Trott, the Pensions Minister, to the Pensions and Lifetime Savings Association on 30 January 2023.

Good afternoon, it’s great to be here at the PLSA, as we launch further measures to ensure people saving into a workplace pension are treated fairly, are properly protected and can enjoy the secure retirement they expect and deserve.

Today’s measures are just one part of our wider reforms to the private pensions sector. Reforms, which, together, recognise and respond to a sector that has undergone significant change over the past few decades.

The move we’ve seen from Defined Benefit to Defined Contribution schemes means it is individuals who now shoulder greater responsibility for growing their pension pot.

It is a structural shift that has led to stark generational differences between those who can expect a predictable level of retirement income – guaranteed by their employer – and those for whom there are no such guarantees.

There is increased risk and uncertainty compared to decades previously and often less adequacy.

The introduction of Automatic Enrolment in 2012 under the Conservatives was a game-changer.

For over ten years, it has been embedding a culture of retirement saving for a new generation within a new pensions landscape.

Millions more people are now saving into a workplace pension – with 10.8 million workers enrolled so far and £33 billion more saved in real terms in 2021 than in 2012.

But as well as coverage, we also need to focus on quality and outcomes.

Having created a new generation of savers, it’s only right that we help them maximise the value of their hard-earned retirement in later life.

Pension Freedoms have provided more flexibility for people to choose how and when to access their pension savings.

Alongside a record number of workplace pension savers and assets, there’s more choice and more freedoms.

But with more choice, comes increased variability in terms of the retirement outcomes that schemes are delivering for savers.

More freedoms put more decisions into the hands of individuals to make.

As scheme members, many feel they are navigating through a hugely complex financial world.

There is more that we can do to help. My plans for reform focus on three pillars. Increasing are Fairness, Adequacy and Predictability.

On Fairness, if your scheme is underperforming and you don’t know about it, you could be losing out on thousands of pounds.

When I started this role, I was shocked to see analysis showing a difference in returns between schemes over a 5-year period of up to 48% in some cases.

This means that a saver with a pot of £10,000 will have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.

This simply isn’t fair. Bringing fairness to our new system is the first pillar of my vision for pensions.

All savers deserve to be confident that their pension scheme is working hard on their behalf and on track to deliver fair and predictable outcomes – reassurance that the generations that proceeded them would have had from their Defined Benefit pensions.

To date, we have introduced “value for members” assessments which came into force in 2021.

Today I am announcing that we will be going further, with a new Value for Money framework.

The consultation I am launching today will seek your views on proposals to require all occupational pension schemes to publish a full assessment of the value their scheme is delivering relative to others.

But what does value for money mean?

When I talk about Value for Money, I don’t just mean low costs. Value for money means that savings are invested well, they are not being eroded by high charges and that schemes are helping members make the right decisions throughout their accumulation period.

The consultation has been jointly developed with The Pensions Regulator and the Financial Conduct Authority. It proposes a framework that will increase transparency, comparability, and drive competition across the pension market.

It will help to deliver long term value for hard-working savers, and it proposes giving the regulator the powers they need to tackle underperforming schemes.

January 30, 2023
Ruth Kelly – 2003 Speech at the National Association of Pension Funds Investment Conference

The speech made by Ruth Kelly, the then Financial Secretary to the Treasury, in Edinburgh on 12 March 2003.

I am very pleased to be here today.

The National Association of Pension Funds is an important organisation, the principal UK body representing the interests of the occupational pensions movement.

Taken together, your members – large and small companies, public sector and local government – provide pensions for over 7 million employees and 4 million people in retirement.

11 million customers, more than £700bn of assets under management, and a membership of consultants, actuaries, lawyers, trustees, administrators, information technology technicians, and investment professionals. The NAPF will be a powerful partner, not just as we take forward our pensions policy, but also as we seek to improve the way markets work, for savers and investors, and ultimately for longer term health of our economy.

We all recognise that these are tough times for the pension industry.

Part of the context for the Pensions Green Paper is increasing concern about the level of pension saving and the ability of the current system to enable individuals to provide adequately for their old age. Some of these concerns are legitimate but some have been overstated. Most people are being paid the pension they were promised. Most are saving for their retirement, either in pensions or in other forms.

Nevertheless there are areas of concern: longer life spans, a decline in pension provision by some employers, complexity of products, and too many people leaving employment too early.

The Green Paper addresses these concerns. It sets out our proposals to renew the pensions partnership between the Government, individuals, employers and the financial services industry – long the mainstay of the UK pensions system.

Within that partnership, occupational pensions – both defined benefit and defined contribution – have been and remain crucial to delivering secure retirements for our citizens.

I want to take a moment to address recent incorrect press reports about the number of people likely to be affected by the Government’s proposals to radically simplify the taxation of pensions published at the end of last year.

These proposals are a massive boost for people saving for a pension.

The Government stands by its estimate that around 5,000 people could have a pension pot larger than the proposed £1.4m lifetime limit. This includes both people in occupational and personal pensions.

It is simply wrong to assume, as these reports have, that everyone contributing to a pension is currently free to put as much as they like into their pensions.

In fact, two-thirds of people with occupational pensions have until now been subject to absolute limits on their annual pension savings. The lifetime limit is equivalent to the maximum pension that these people could have built up under these existing limits.

Of the other third, only a small minority will have managed to accumulate a pension pot worth more than £1.4 million. And while these people will be unable to make further tax-free contributions, their existing rights will be guaranteed.

So far from losing out, the vast majority of people will be better off because they will have

– more choice about when and how much they save,
– more choice about when they retire
– more choice about how they draw benefits from their pension
– and in many cases a larger tax-free lump-sum.

There is also of course concern about the broader financial market environment. The recent falls in global stock markets – with US markets (S&P500) now down 47 per cent since their peak, UK markets (FTSE-100) down 50 per cent, France (CAC-40) down 64 per cent and Germany (DAX) down 71 per cent – reflect ongoing international uncertainties and risks which have also triggered turbulence in oil prices and exchange rates. This has demonstrated once again that no country can insulate itself from the ups and downs of the world economy.

We can’t predict the future of the stock market and how this might affect pension funds, but in the longer term, stock market performance is likely to reflect the underlying performance of the economy. And the fundamental drivers of a successful economy – high employment, low inflation and low interest rates – are in place, and are delivering a secure environment conducive to investment and long-term planning.

The macro-economic fundamentals are sound. But savers and investors, as well as workers and pensioners, also require the micro-economic fundamentals to be sound; for companies to be well run; and capital markets to operate efficiently and transparently. Since today’s conference is about investment, these are the issues I want to focus on today.

The Government has undertaken a number of important strategic reviews on a whole range of issues relevant to your conference today. The Pensions Green Paper itself. Cruickshank and Sandler on how to promote competition in banking and retail savings products respectively. Pickering on pensions legislation and Myners on the chain of relationships around pension fund investment. The discussions which followed Myners on transaction costs and shareholder activism. Higgs on non-executive directors, the Smith Review on Audit Committees, And the CGAA on accounting and auditing.

In all this, our objectives for savings policy and efficiency in capital markets have gone very much hand-in-hand. Our capital markets have a vital role to play in efficiently allocating capital in the economy, thereby meeting the needs of millions of savers. They do so through a long chain – in the case of pensions for instance, from trustees, through investment consultants, to fund managers and in turn to companies and their boards – a relationship which itself is crucially dependent on reliable audit and effective non-executive directors. The more effectively this chain works, the better-served will be our economic objectives and the interests of savers. Yet as we have found, each link in the chain raises its own complex policy issues about competition, incentives and accountability. Our contention is that these issues matter.

I certainly won’t attempt to go over all the ground today, though I do have one or two specific things to say in a moment about where we are on Higgs and the follow-up to Myners.

What I’d like to do first is step back a little and take a quick look at some important points which we can easily get lost in the debates on the detail.

First, I want to pick up some consistent approaches running through all these pieces of work. I would describe these as:

– a strong presumption in favour of promoting and enabling greater competition;
– a consistent emphasis on the importance of wealth creation and long-term value; and
– a belief in strengthening the hand of the customer and the shareholder.

All themes of course which tie very strongly with the Government’s broader economic objectives of promoting economic growth and productivity.

But second, I would argue that we have been deliberately careful throughout about the scale and nature of Government intervention that is merited or makes sense, even in response to the most powerful of analysis. Throughout the work, there has been a consistent caution about the hazards of kneejerk legislation and regulation in this area. Contrast the approach of Higgs and the CGAA, for instance, with that of Sarbanes-Oxley.

In fact, where possible, these reviews have actually opened the door to some significant deregulation – for instance, through Myners’ powerful critique of the weaknesses of the MFR and Sandler’s scruitiny of conduct of business regulation.

Third, I want to suggest that as a result of all this work, there is now a vastly better understanding within Government of the commercial realities of your industries than there ever has been before. Whatever anyone thinks of the conclusions of any of these pieces of work, they have been exhaustive, strongly rooted in evidence and analysis, and open.

Taken together, therefore, I suggest they give us, for the first time, a coherent approach towards policymaking as it affects the investment industry across the piece, rooted in a clear understanding of the chain of relationships in the investment industry and how all the decision-makers and incentives fit together.

In my book, that’s progress.

I know there are concerns in the industry about the potential for review fatigue. I can’t promise, as some have suggested I should, that we might never undertake any further review on any issues relating to investment. But I will say that I believe the challenge for us all now is much more about implementing and driving through work we have already done than about commissioning further pieces of new thinking.

I also firmly believe all this work has been very good for the long-term future of the investment and savings industry in Britain and certainly for a better and more intelligent foundation for Government policy and the ways it affects you – and through you, the interests of millions of savers.

As I see it, we now have a clear approach to this broad corporate governance and capital market agenda, which operates at three distinct levels.

First, at the level of the individual company, we need to promote the interests of shareholders, in relation to the interests of management. As is well-recognised, there should be mechanisms in place designed to identify the conflicts of interests which managers inevitably face, and ensure that they are managed effectively. And companies themselves need to make timely and accurate financial reports.

Second, we need a set of external stakeholders whose actions will promote and reinforce good governance. In particular we need shareholders to be accountable and active in making use of the ownership rights they exercise. And we also need independent auditors, comprehensive and robust accounting standards, and fair and timely market commentary from analysts and ratings agencies.

Third, as an over-arching pressure, we need capital markets which can act as a discipline to poorly performing management. A vigorous market for corporate control through takeovers is a cornerstone, but promoting competition in capital markets, and market access across national boundaries will also be important. And of course we need to pursue vigorously the Myners agenda to improve the framework for investment decisions made by the institutions, and pension schemes in particular.

Within all this three pieces of work deserve particular attention: the work on accounting and auditing, the action flowing from the Higgs review of corporate governance; and of course the ongoing work on Myners.

On the first, we all recognise that there are issues about “who guards the guards” – the role of the auditor, the relationship between the accountancy profession and the regulatory bodies, and the enforcement of standards.

Corporate failure, of course, will always occur; indeed, it must be able to occur if markets are to work effectively. Nevertheless, public confidence in the accountancy and audit profession has been shaken by a series of scandals. And we are putting in place a coherent and proportionate package of measures intended to reinforce the existing strengths of the corporate governance regime in the UK.

But as the nature of the corporate world changes so too the structures we create to govern our companies must change with it; they must be reinvigorated and made relevant to the concerns of modern investors.

Derek Higgs was appointed by Patricia Hewitt and Gordon Brown to review the role and effectiveness of non-executive directors in April 2002 and his report was published in January of this year. Inevitably, Derek’s report was seen in the context of Enron and its backwash – though I would argue that his work is just as much, perhaps more, about the positive challenge of promoting shareholder value as it is about trying to prevent wrongdoing.

The report suggests a significant strengthening of the role of the non-executive director. Higgs also emphasises the importance of formalising the appointment processes and encouraging more candidates with a wider diversity of experience to take appointments in the boardroom. And it proposes stronger arrangements to ensure that shareholder views are heard in the boardroom – something many here stressed to us in the context of the debate on shareholder activism.

We welcomed Higgs’ proposals in full when the report was published earlier this year, based on his thorough analysis and considered recommendations – not least because it provides a robust way forward which avoids a need for clumsy legislative intervention. That remains the Government’s view.

Derek’s report is a careful and well-balanced package. But it has also prompted much debate. And there is some danger that this debate is starting to generate more heat than light. So I would like to take the opportunity of today’s conference to make some observations from the Government’s perspective and suggest some principles which it may be helpful to keep in mind.

First, the Government has a clear objective, if at all possible, to avoid the UK corporate governance framework becoming a matter for regulation as it has elsewhere, for instance to some extent now in the United States through Sarbanes-Oxley.

That is not because we believe corporate governance is unimportant or that there are not public policy interests at stake. It is because we believe a governance framework should ideally leave room for judgement – and these judgements are, in the end, best exercised by shareholders.

This is the philosophy that runs throughout Derek’s report and, provided there is real willingness to make this approach work, it has the Government’s strong support.

Our concern at present is that the present debate – at any rate in the media – is starting to lose a sense of proportion.

– on the one hand, Derek’s report is plainly not the intrusive rulebook some critics have sought to claim.

– but on the other, the debate has shown some signs of a disturbing complacency in places about the UK corporate governance framework.

I do not believe any complacency is justified. We may not have seen an Enron in the UK. But we have not been immune from numerous home-grown cases of large-scale corporate value destruction, either.

Some might say these cases were all unavoidable. Others might argue that stronger corporate governance could never have helped. I doubt both views, and I do not think either represents a fair consensus.

Now Myners pointed to the potential for strengthening the role of shareholders in relation to this sort of case, and we have had a sensible and productive dialogue with you about how to promote that. But one message came through loud and clear from you, the investment community, in the course of the discussions we had.

You repeatedly told us that you could not be effective as shareholders without stronger and more effective non-executive directors in companies, and without better communication flows so shareholder views were heard more clearly – and earlier – in the boardroom.

Derek’s report proposes practical and workable arrangements for furthering these objectives within the framework of the unitary board.
Many shareholders have already welcomed that, and it is vitally important that shareholder voices continue to be heard in the debate on Derek’s report.

At the same time, Derek’s report deserves a more careful reading than some critics have allowed him. Odd myths seem to have sprung up. Derek has not, for instance, somehow invented the role of a senior independent non-executive director. On the contrary, this role is already incorporated in the existing Combined Code. It already works well in many large companies. And nowhere does Derek suggest the senior non-executive should or could be some sort of rival to the chairman – whose role remains rightly central, including in leading on relations with shareholders.

Nor, to be clear, does Derek anywhere propose or envisage that the Combined Code should become a rulebook. The Code is and should remain a statement of best practice. How far companies comply with its provisions, and at what speed, is rightly a matter between them and their shareholders.

The final myth is that Derek’s report is not being properly consulted on. It is. Derek consulted widely and sought comments on his proposals from the main representative bodies, including the CBI. The independent Financial Reporting Council, on which both business and investors are well represented, are now taking the proposals forward into a new Combined Code. The FRC have indicated clearly that they do not want to duplicate Derek’s review. They therefore start from the presumption that Derek’s proposals should, in the absence of a clear case to the contrary, be implemented. We strongly support them in that. But the FRC is hearing and listening carefully to all comments, not just on points of detail. It will then be for them to consider all the inputs and make the judgements they see fit before a new Code issues.

Turning to Myners

Myners identified the key role that pension fund trustees have in ensuring the effective management of savings, in being clear about what decisions are being made by whom and why, and in exerting intelligent pressure on intermediaries to ensure they are acting in the interest of the fund. This was the role of the Myners principles, which I’ll come back to in a moment. At the same time, we remain clear that it is right to legislate to require appropriate expertise from trustees taking investment decisions and we reaffirmed that commitment in the Pensions Green Paper. It seems to me hard to argue against this proposition. Those looking after large sums of other people’s retirement savings clearly need to have an adequate understanding of the issues. Even with the benefit of the excellent advice trustees receive from many in this room, they still need to be questioning and intelligent customers for that advice.

Both Andrew Smith – who is leading on this work – and I are committed to working with you to ensure we get the most practical and workable solution and to establish what expertise trustees do need, and how those requirements should be set out, reviewed and enforced. I know DWP Ministers will be interested in your input – indeed, I understand that the NAPF, and others, recently had a substantial, and helpful, discussion on all this with officials as part of the Pensions Green Paper consultation process.

As Myners emphasized, enhanced engagement from pension fund trustees is part of a wider process as we work to ensure that appropriate pressures are exerted – both on fund managers and on the companies in whom they invest. There is an emerging consensus around shareholder activism as an important part of this process. Shareholders are right to take a close interest in the companies in which they invest, and we are right to recognize that shareholder activism is a vital force in keeping management up to the mark. And they are right too to emphasise that strong and effective non-executive directors have a vital role to play in this context.

So we welcome the work of the Institutional Shareholders’ Committee on its statement of principles on the responsibilities of institutional shareholders and agents. Active engagement will build stronger companies and better returns for the members and beneficiaries of pension funds. The revised principles are a very welcome initiative. However, as we said at the time of the statement, the key test will be the impact on industry behaviour.

The challenges raised by Myners on transaction costs remain. The objectives must be to promote proper transparency of the trading costs for pension funds and to deal effectively with any unnecessary costs – maximizing the amount that goes into the pensions pot – and to promote the overall efficiency of the capital markets. It is important these objectives are met. In the first instance, the FSA will – in the very near future – be coming forward with proposals for consultation, following the completion of it’s review in the area of soft commission and bundling. We shall then consider, in the light of the FSA’s conclusions, how best to address this challenge for trustees and the wider investment industry in the review I am launching today of progress on the Myners principles.

Myners’ recommendations have been implemented, in the first instance, through voluntary guidance. I know that the fund management industry has welcomed that flexible approach and, in government, we want to give you the chance to demonstrate that you can deliver. But that does not mean we are any less serious about improving the quality of investment decision making.

So the review will set out a clear picture of progress toward the implementation of the Myners recommendations and enable us to develop a clear understanding of where the voluntary approach is working and where it is not. Our aim is to be objective, thorough and focussed on how the investment process has changed. On that basis, we will be able to decide how best to continue to drive Paul Myners’ agenda forward.

So we welcome the work that has already started on implementing the Myners recommendations. And we welcome the NAPF survey – an important contribution to the debate. Now is the time to cast our net more widely, to develop a substantive and thoroughgoing understanding of the progress the industry has made.

I can today announce that the Government has asked Consensus Research to conduct the review. I’m sure many of you will have come across them through the market research work they have done for in many areas of the financial services industry.

Their work will fall into two parts – a qualitative survey concluding with a report this summer – and informing a major quantitative survey to conclude toward the end of the year. We want this to work, we want it to be balanced and we want it to be thorough. That means we want you to be involved, to be open about where progress has been made, and where more work still needs to be done.

I am not going to pre-empt the conclusions of the report, or anticipate what action – if any – the government should take. We believe in the Myners principles – and establishing the conditions necessary for a dynamic and flexible industry to operate in the public interest. So we are serious about change.

Accounting, auditing, corporate governance, Myners and the work flowing from that – we have covered a lot of ground in the last year. At times, it can seem that there is a bewildering array of reports, voluntary guidelines, principles, and committees. But I believe, and I am sure that as the experts in the industry you will recognise, that all of this work flows from the same essential understanding and drives toward the same shared ideal.

We all want to see the partnership which sits at the heart of the pension industry reinvigorated. We all want to see people saving more for their retirement, more of that saving going into the pension pot and all of it channelled efficiently through the capital markets to drive growth across the wider economy. We all know that that means action from government to strip away outmoded and outmoded restrictions on the pension industry – the Green Paper points the way forward. We all know also that it means action from the industry: intermediaries operating within a competitive market and making investment decisions free from conflicts of interest; institutional shareholders engaging with the companies they invest and upholding high standards of corporate governance; accountants and auditors operating within a robust and transparent system – providing a flow of information the markets can trust.

I started today by talking about partnership. Recognising responsibilities on both sides and acting on those responsibilities is what partnership is about. That is how, going forward, we can reinvigorate the pensions system that has served this country so well, and that is my message for you today.

Thank you.

January 2, 2023
Laura Trott – 2022 Speech on the State Pension

The speech made by Laura Trott, the Parliamentary Under-Secretary of State for Work and Pensions, in Westminster Hall, the House of Commons, on 12 December 2022.

It is a pleasure to serve under your chairmanship, Sir Robert. I thank all hon. Members for their valuable contributions, and the hon. Member for Battersea (Marsha De Cordova) for opening the debate.

The Government disagree with the petition’s proposed approach. It makes two suggestions: to increase the state pension and to lower the retirement age. I will first address the proposal to increase the state pension to £380 a week. That would equate pensioner income with the national living wage in 2022-23. However, the national living wage and the state pension are two very different provisions, with distinct purposes. A direct comparison cannot be drawn between the levels of the two. The national living wage aims to protect low-income workers and to provide an incentive to work, by ensuring that workers benefit from being employed. However, most pensioners have already left the labour market. Comparisons made in the e-petition between headline state pension amounts and the national living wage do not consider the full package of state measures available to support people in retirement or the fact that pensioners do not pay national insurance or into a pension scheme through automatic enrolment.

We need to be clear with the public that a state pension of £380 per week for every UK pensioner would be unaffordable. It would mean an annual cost of up to £251 billion if it was applied for 2022-23. That compares to the £110 billion we are currently forecast to spend on the state pension. In the UK we have a system of state and private pensions, which jointly provide an income for people in retirement. Most people will have a private or occupational pension on top of the state pension. In the 2021 financial year, the average net income of all pensioners was £361 per week, after housing costs. Crucially, the Government also provide around £67 billion each year in tax relief to boost private retirement savings. It is important to consider all aspects of Government support for retirement, rather than solely the state pension amount.

The Government are committed to ensuring that the state pension continues to provide the foundations for people’s retirement income, and we are proud of the assistance we have given pensioners since 2010. Since 2010, the full yearly amount of the basic state pension has risen by over £2,300 in cash terms. That is £720 more than if it had been uprated by prices, and £570 more than if it had been uprated by earnings.

As all hon. Members here today recognise, the Government have announced plans to apply the triple lock this year. It was announced, according to the normal parliamentary timetable, that from April the state pension will be over £3,000 per year higher in cash terms, which is double what it was in 2010, £790 more than if it had been uprated by prices, and £945 more than if it had been uprated by earnings.

Pension credit has come up a lot today, as it should. Pension credit provides vital additional financial support by topping up the state pension and other retirement incomes. The hon. Member for Battersea referred to the minimum income guarantee, which is what we put in place to ensure that pensioners do not fall below a certain base. It also acts as a gateway to other help, including assistance with rent, council tax, NHS prescriptions and heating bills. Of immediate importance, it is a gateway to the additional cost of living payments we are paying to those on qualifying means-tested benefits. There is more that we need to do to link that up with other information that the Government have. I will be pleased to work with Opposition Members, as well as the hon. Member for Glasgow East (David Linden), in order to try to make that happen.

We have taken direct action when pensioners have needed it, both through the pandemic and now with the rising cost of living. That includes the £650 cost of living payment, paid in two instalments, to help those on pension credit with the rising cost of living. As we all know—and I would like to emphasise this again—it is not too late for pensioners who are not already getting pension credit to qualify for the second instalment. That is because a claim for pension credit can be backdated for up to three months, provided the entitlement conditions are met throughout that time. To ensure that a successful backdated claim falls within the qualifying period for the second cost of living payment, we are urging people to claim pension credit as soon as possible, and by no later than 18 December.

David Linden

I appreciate that the Minister will not necessarily have the figures to hand, but would she be willing to write to me with information on how much the Government are spending on, for example, billboard campaigns and radio advertising to encourage pensioners to take part—in the same way they do with the levelling-up campaign?

Laura Trott

I would be more than happy to do so. I know that we spent £1.2 million over the summer. I have signed off a campaign for this winter, with more coming after Christmas, but I will write to the hon. Gentleman with the exact amounts.

That leads me nicely on to the hon. Member for Battersea, who referred to the take-up campaign. We have had a huge take-up campaign over the summer, and we have done one recently as well. We have further communication planned. It is something I am very focused on, and I would like to work with all hon. Members who are interested to ensure that it happens.

Marsha De Cordova

Is any work being done to measure the impact of the summer campaign on the take-up of pension credit? Going forward, I am very happy to work with the Minister on this.

Laura Trott

We know that claims for pension credit have tripled since the summer. On average, we used to get 2,000 claims a week—that has gone up to 6,000. The seven out of 10 figure that everybody uses comes from the family resources survey, which was last done in 2019-20, which has caused the difficulty with exact details on eligibility. Because of the pandemic, the survey has not been repeated, and there is an 18-month delay on the figures. It is very difficult to get up-to-date data on actual eligibility levels, which is something that we need to address over the longer term. In the interim, though, we have the numbers of people who are making the claims through the line, which, as I have said, have gone up threefold.

Matt Rodda

Could the Minister explore the issue of pensioners who do not have English as their first language and other hard-to-reach groups whom Government information often struggles to reach? There have been success stories in the past where particular approaches have worked with some minority groups. Perhaps the Minister could write to me and other colleagues present on that matter.

Laura Trott

I am very happy to do so. If there are any specific approaches the hon. Gentleman thinks the Government should be taking, I am very open to any ideas he may have and would happily take them forward.

The £650 cost of living payment is one of a number of measures in the Government’s £37 billion cost of living support package, which will ensure that the most vulnerable households will receive at least £1,200 this year. The package also includes a £400 reduction on energy bills for all domestic electricity customers over the coming months, plus a £150 council tax rebate for 85% of all UK households.

In addition to the steps we have taken to address the cost of living for pensioners, we have also made long-term reforms to the state pension and introduced automatic enrolment to boost private saving. In 2016, the Government introduced the new state pension, which forms a clear foundation for individuals’ private savings to provide the retirement they want. At the heart of its design, we sought to correct some historic unfairness in the previous system, in particular for women, self-employed people and lower-paid workers. More than 3 million women are set to receive an average of £550 more a year by 2030. State pension outcomes are also expected to equalise for men and women by the early 2040s—more than a decade earlier than they would have aligned under the old system.

I want to pause here to mention pensioner poverty, which was brought up by a number of hon. Members. I know it is something we all care deeply about. The Government are committed to action that helps to alleviate the levels of pensioner poverty. We are forecast to spend more than £134 billion on benefits for pensioners in 2022-23, which amounts to 5.4% of GDP and includes spending on the state pension that is forecast to be over £110 billion in 2022-23. Thankfully, there are 400,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10, but there is, of course, always more to do.

Automatic enrolment, as mentioned by the hon. Member for Cynon Valley (Beth Winter), is transforming private saving. More than 10.7 million people have been automatically enrolled into a workplace pension and more than 2 million employers have complied with their duties to date. This has helped to supply around an additional £33 billion into pensions savings in real terms in 2021 compared to 2012. I want to bring up the findings of the 2017 review of measures for automatic enrolment, as the hon. Member for Battersea mentioned her support for the lower earnings limit. The 2017 review of automatic enrolment set out the ambition to enable people to save more and to start saving earlier by abolishing the lower earnings limit and reducing the qualifying age for automatic enrolment to 18 by the mid-2020s. We have always been clear that changes would be made in a way and at a time that are affordable, balancing the needs of savers, employers and taxpayers, and the Government are absolutely still committed to that.

Together, the new state pension, automatic enrolment to workplace pensions and the safety net of pension credit will provide a robust system for pensioners for decades to come. A number of Members talked about international comparisons; OECD rankings show that, thanks to this Government’s reforms, the UK pensions systems will provide future workers with income replacement rates comparable to the OECD average and higher than countries such as Switzerland, Norway and Germany.

Let me turn to the second suggestion: decreasing the state pension age to 60. The Government have no plans to reverse changes to the state pension age. Previous reforms have focused on maintaining the right balance between affordability, the sustainability of the state pension and fairness between generations. Changes to state pension age were made through a series of Acts, and by successive Governments, from 1995 onwards. Those reforms followed public consultations and extensive debates in both Houses of Parliament. The state pension is funded through the national insurance and tax contributions of the current working-age population. Like increasing the state pension, reducing the state pension age to 60 would massively increase the tax burden on the current working-age population and carry significant cost.

David Linden

I wonder whether the Minister might put on record the point that she just confirmed. In the debate on Scottish independence, Unionist campaigners often talk about how the UK somehow furnishes pensions. However, as the Minister just pointed out, the state pension is funded by ongoing national insurance contributions each and every day, which rather bursts the myth that is made by the Better Together campaign in Scotland.

Laura Trott

State pension entitlement is obviously built up through contributions over a period of time, but equally there is a huge burden on the state, and that has to be met at a given point. As we have discussed, pension pots are funded widely by both the working-age population and people later in life.

The Government previously estimated that, had we not increased the state pension age for both men and women, the total additional cost to taxpayers—in 2018-19 prices—would have been around £215 billion for the period from 2010-11 to 2025-26. Lowering the state pension age is clearly unaffordable, and would place an ever-increasing and unfair burden on taxpayers. That would not be right, particularly as life expectancy continues to rise.

A number of hon. Members mentioned the Parliamentary and Health Service Ombudsman. The PHSO is undertaking a multi-stage process, and it has not given its final findings on the overall investigation. If the PHSO finds injustice, it will move on to stage 3 and consider any recommendations. The DWP will wait before taking any further steps.

The UK has an ageing population and workforce. The proportion of people aged 50 years and over compared to those aged 16 and over is projected to increase from 42% in 2010 to nearly 50% by 2035. That is nearly 29 million more people. Older workers will bring a wealth of skills and experience to the workplace, and they are vital to the economy. By working for longer, older people have the opportunity to improve their retirement income and benefit from the social engagement that employment brings. The hon. Member for Battersea was absolutely right that we need to support workers in later life, and BEIS is working on exactly that.

In conclusion, I welcome today’s debate and acknowledge the proposals set out in the e-petition. As I have mentioned, the Government provide wide-ranging measures to support people in retirement. Our recent announcement of plans to apply the triple lock this year demonstrates our commitment to providing a strong foundation of support for pensioners.

December 13, 2022
Matt Rodda – 2022 Speech on the State Pension

The speech made by Matt Rodda, the Labour MP for Reading East, in Westminster Hall, the House of Commons, on 12 December 2022.

It is a pleasure to serve under your chairmanship, Sir Robert. I thank my hon. Friend the Member for Battersea (Marsha De Cordova) for her work on this important issue. I also thank other hon. Members who have spoken in the debate. Above all, I want to thank the hundreds of thousands of people from across the country who signed the petition that led to this debate. Constituents have expressed their concern for older people, so it is right that we consider this matter today.

Pensioners face the worst cost of living crisis for over 40 years. The cost of food and fuel is up, and the cost of living as a whole is going up. Yet, at the same time, support for pensioners is failing to keep up with the severe pressure on older people. Those who have worked hard and contributed all their lives deserve to receive a decent state pension in retirement. The official Opposition support the triple lock and have repeatedly called for the state pension to rise in line with it during the last two years, but the Government’s approach has fallen well short of what is expected by pensioners and the country as a whole.

I will set out the scale of the cost of living crisis and then address the Government’s failure in this regard. It is clear that this crisis is the worst squeeze on the incomes of families and pensioners since the 1970s. Sadly, inflation has hit over 10%—something unheard of in living memory. The situation facing people on low and fixed incomes is particularly difficult. Pensioners and others on modest incomes spend more of their disposable income on food and fuel, the prices of which have increased to a far greater extent than those of other goods. The prices of staples such as bread, cereals, tea, meat, dairy produce and eggs have all risen rapidly, and some have increased by far more than the headline rate of 10%. As is well known, the same is true of energy. Not only has the price of gas risen dramatically, but so has the price of electricity and heating oil. In the meantime the Government have dithered and delayed, and put off addressing these important issues.

I turn to the Government’s poor record and to the lack of—indeed, the delays to—support for poor pensioners. Despite raising the state pension in line with the triple lock being a manifesto pledge, Ministers repeatedly failed to meet that commitment. Last year the Government said that earnings appeared to have grown by a larger amount, because the return to work after furlough created the impression that earnings had increased by 8%. They used that as an excuse for disapplying the triple lock, preventing pensioners from getting the rise in the state pension that they clearly deserved. We repeatedly challenged the Government, but they simply would not listen to our concerns.

To make matters worse, this year Ministers refused for months to commit to increasing the state pension in line with inflation. Campaigners repeatedly pressed them on the issue, and the official Opposition raised the matter in Parliament a number of times. As a result of the Government’s dither and delay, pensioners were left wondering what would happen to them at a time when they were facing a very difficult winter. After months of delay, and considerable pressure and stress for older people, Ministers eventually confirmed at the autumn statement that the state pension would rise in line with inflation. Those failures and persistent delays let pensioners down badly, so I hope the Minister will find time to apologise for them when she replies.

The Government have failed pensioners on a number of other matters relating to the state pension—for example, pension credit and some of the problems relating to the energy price guarantee. I want to raise those related issues, because both policies should be offering far more help than they do at present.

Pension credit tops up the incomes of some of the most vulnerable pensioners, who receive a particularly modest income. However, about 1 million pensioners who are entitled to the benefit are not claiming it. Will the Minister explain why the Government are still failing on this matter? What more can be done to ensure that pensioners claim pension credit to raise their incomes, as they deserve?

Although help is now available with heating costs, there are gaps in the scheme—not least that it will be scaled back next year. In the meantime, payments for some pensioners in rented accommodation are still not being passed on by landlords. Concerns have been raised in my constituency, and I am sure Members across the House have experienced the same issue. I hope the Minister will respond to that point.

Time is pressing, but I want once again to thank the members of the public who signed the petition, as well as my hon. Friend the Member for Battersea, who spoke so eloquently, and other Members from across the House. I look forward to the Minister’s reply.

December 13, 2022