Pensions Bill

My Lords, I welcome the Bill. Above all it contains the long-awaited recognition—if not yet quite fairly enough—of the contribution of women, as both employees and carers. Thankfully, too, the pensions’ link to earnings is to be restored, albeit later than recommended by the commission, and automatic enrolment is to be introduced, recognising that far too few people currently save for their retirement. The most recent figures that I have seen suggest that some 7.4 million save nothing at all and another 4.8 million only small amounts, for which we have heard many reasons. Be that as it may, most importantly the Bill directly addresses the double-pronged agenda that can simply not be escaped, as the Minister has pointed out. First, we have the consequences of an ever-ageing population with, as a result, longer—much longer—retirement and a relatively shorter working life. Unless we change that—my noble friend Lady Greengross and the noble Baroness, Lady Thomas of Winchester, have already made a very good case for such a change—there will be an ever-growing dependency ratio as between retired drones—however reluctant we may be to place ourselves in that category—and wealth-creating workers. It is especially for this aspect of our approach to future pensions policy that I join other noble Lords in paying tribute to my noble friend Lord Turner—and his fellow commissioners—for the clarity of the guidance that he continues to provide in this field. When I was in my very first job, in the post-war years when the welfare state was still being shaped, one name was still on our lips. Despite what the noble Lord, Lord Fowler, said, that was none other than William Beveridge. Today’s equivalent deserves to be Adair Turner. I say ““equivalent””, but, thinking about it, there has been at least one big change in the conditions in which those two gurus have been considering the problem. Beveridge did not have to worry too much about the one word that we, in this generation, have learnt to neglect at our peril: inflation. He was able to take for granted—or so he thought—the given of price stability. The average wage and the price of a loaf of bread or of a pint of milk did not differ all that much in 1945 from what it had been in 1918. How very different are the conditions with which we have to cope today. The Bank of England’s inflation target, set by the Chancellor of the Exchequer, is 2 per cent a year. None of us seems too dismayed that it is already bumping 3 per cent. That does not sound too bad, I suppose, to those of us who have had to struggle during our lifetimes with inflation at 10, 15 or even 20 per cent—but at 3 per cent a year over the next 20 years the pound sterling will have lost almost half its value and at the end of 50 years, with inflation at that rate, it would be worth no more than 22p. A change of that scale is obviously of huge significance in the context of pensions. If the pound that a 20 year-old saves today for his retirement almost 50 years from now will be worth then no more than one-fifth of what it is worth now, how much more should that person be saving now and in the years in between? Perhaps the Minister will give me an answer to that. I cannot help wondering what the answer to that question does to all the arithmetic underlying the figures on which today’s proceedings must be founded. In that regard, I hope that the Minister will not mind my asking what must seem a pretty naïve question. What are the inflation rate assumptions on which the arithmetic is founded and how much difference does it make to the reliability of the arithmetic if we get it wrong, even by just one or two percentage points? Whatever the precise answer to that question, it certainly confirms my willingness to applaud what may be the single most important provision in the Bill—the proposed increase in the retirement age for male pensioners, which has been mentioned by other noble Lords—taking place alongside the other rise in the retirement age for women to bring them into line with men. We, or rather our younger colleagues, men and women alike, will look forward to an era in which the age of retirement and basic state pension entitlement will be set, regardless of sex, at 68 years old. That will at least reduce significantly the overall cost of this ambitious project. I suspect that it may turn out to be anything but the last step in that direction. Two other questions follow from the recognition of that prospect. The first has already been raised by the noble Lord, Lord Oakeshott—and it is of course not unimportant. For just how much longer will or should our society continue to maintain the obviously two-nation concept, whereby most of those in the public sector will expect to start drawing a substantial index-linked pension a full five or more years ahead of their fellow citizens? Do the Government visualise taking action to tackle that unfair anomaly—and, if so, when and how? The second question brings me to my central point, which noble Lords will have heard me raise before. It follows from the fact that women are being called on by this generally benevolent Bill, in at least one respect, over a period stretching many years ahead,to face a double disadvantage. First, their basic retirement age will rise by five years to come into line with that of men. Secondly, it will also have to rise in due course by a further three years to the common basic retirement age of 68 years. Against that particular background of female disadvantage, will a Minister standing at the Dispatch Box forever continue to defend the gross sex-based inequality that is still by statute applied to retirement annuities? I hear what the noble Lord, Lord Fowler, said about what should be done at 75 to ease some of these problems, but it does not address the point that I am making. Surely we must now put into practice the principle of equal opportunities for men and women on retirement annuities, agreed more than 30 years ago. The law currently requires a percentage of the benefit of any private pension scheme to be taken as an annuity. Yet a woman with a pension entitlement that is identical in all respects to that of a male employee, except on the basis of sex, will receive by law in this context a smaller annual sum on the narrow basis that women live longer than men. Yet even that tiny life expectancy gap is narrowing, or at least fluctuating, if other noble Lords are going to disagree with me about the numbers. Surely it is time for this basic discrimination to be finally outlawed. I would love to hear from the Minister that some attention is at last being given to this quite pernicious situation. I should not wish to close my remarks on this important Bill on such a negative note. I welcome the Bill as a necessary and intelligent, if far from easy, step forward. As I have made clear in earlier debates, I also welcome the legislation because of its proposed inclusion of all carers and non-lifetime employees. For historical reasons, the majority of people in both those categories are women. That too is changing, not least because younger men want to play a more active and involved role in bringing up their children. Thankfully, the Government have now recognised that this is important in keeping families together. As your Lordships will know, the UK does not have a very good record in this respect. Whatever their sex, the role played by all carers is quite invaluable and the cost to the state, if they all chose to work full time, would be incalculable. The EOC, in its briefing, have put childcare providedby parents and grandparents at a cost of at least£220 billion. That is just childcare; think of all the other forms of care. Carers certainly deserve tobe both appreciated and, much more important, supported in practical as well as financial ways. I am sure we shall be returning in Committee to that point, to examine some of the points raised by Carers UK in its excellent briefing to your Lordships. A particular concern is that a substantial number of carers’ responsibilities will not entitle them to the new earned pension credits, unless entitlement is based on a carer’s circumstances, rather than on those of the person they care for. I was not quite certain whether that point was fully answered by the Minister at the beginning of the debate. For those reasons, among many others, I welcome this vitally important legislation and look forward to debating these and many other issues that will be raised during the latter stages of the Bill.