Pensions Bill

The Bill before us proposes to create a more generous, more widely available, less means-tested and simpler package of state retirement benefits. It will address the worst elements of unfairness in the current system and provide a platform for a workplace pension savings scheme intended to rekindle the savings habit, particularly among those on average and below average incomes. We support those objectives and we support the principles of the Bill—although, as I am sure that the Secretary of State would anticipate, there are issues that we will want to examine in Committee. As the Secretary of State acknowledged, the measures to achieve those objectives form a coherent package, and the reforms stand or fall together. Although the Bill contains the substance of only one part of that package—the reforms to state pension provision—and creates the mechanism for further development of the second part of the package, which is the personal accounts workplace saving scheme, we will need to consider the bigger picture as regards the problem that we are seeking to address and the Government’s proposed response to it. The challenge that we face as a society is demographic change. In a nutshell, people are living longer, and in the future there will be fewer workers to support a larger number of pensioners under our pay-as-you-go state pension system. At the same time, with earnings outstripping increases in the basic state pension, the real value of the basic state pension in earnings terms has continued to erode. The Government’s response has been a dramatic expansion of the means-tested, top-up system of pension credit. On the Turner commission’s projections, if nothing changes by 2050, 75 per cent. of all pensioners will be on means-tested pension credit. That matters for two reasons. First, although means-tested retirement benefits have undoubtedly succeeded in taking a significant number of pensioners out of poverty, for many, the system is complex, intrusive and inaccessible. There are 1.5 million pensioners who do not claim the pension credit to which they are entitled. Half of them live in poverty. For them, the combination of the falling real value of the basic state pension and complex, means-tested pension credit means a descent into deeper poverty.