Pensions Bill

My Lords, I am grateful to all noble Lords who have spoken in this short debate, and, despite some adverse comments, for the warm acceptance that these provisions have elicited. I am also grateful for the praise that has been universally, and quite rightly, heaped on my noble friend Lady Hollis. I say to the noble and learned Lord, Lord Mackay, that I have shared his experience of being defeated by the noble Baroness. One trepidation I have is that, now that this campaign is won, what on earth is my noble friend going to move onto next? Perhaps I will think about that later. My noble friend talks about these things not in terms of aggregates and numbers, but how they will affect real people’s lives. I know that is what drives her passion. She makes the point also about the importance of a secure basic state pension. I will come to the issues around the price of class 3 contributions. Irrespective of this measure, post-2010, people will be able to buy one thirtieth of a year with a year’s contributions, rather than a forty-fourth or a thirty-ninth, as at the moment. This means that there should be an adjustment in class 3. However, this should not be seen as an increase. I am grateful for my noble friend’s comments about James Purnell, who was pensions Minister when we debated this, in relation to the Pensions Act 2007. He is now the Secretary of State. I say to my noble friend, Lord Clarke, that I understand his point, which I believe the noble Lord, Lord Skelmersdale, dealt with in part. When changes are made in legislation—and the changes we made last year will be a very significant improvement in the pensions outcome for women—there is always an issue about the extent to which you apply resources and effort to unpicking the inequalities of the past. One issue we looked at was whether we could apply the 2010 rules to all existing pensioners. However, noble Lords will remember that the price tag for that was very substantial, and unaffordable. Inevitably, there will be a cut-off point and some people will fall one side of it rather than the other. However, I am mindful of my noble friend’s comments and am certain that we will do all that we can to help people who fall outside these provisions. In particular, we will ensure that they are able to benefit fully from the reliefs and pension credit that would otherwise be available. I thought that the noble Lord, Lord Skelmersdale, said that we were reluctant to recognise the inequality in the pension system. However, the whole thrust of the Act that we passed last year was to dramatically change the landscape for women whose working lives would be wholly or substantially under the new regime. We are very proud of that, although the noble Lord made the point that changes such as this inevitably produce cliff edges. He asked several questions. Certainly, the measures that will make the change cost-neutral will be applied only to class 3 national insurance contributions. They will be applied to all class 3 contributions, which I think is what he asked. He also asked when this would all take effect. The detail is still being worked on but it is ultimately for the Treasury to deal with these matters and I expect them to do so in the normal way at the Pre-Budget Report. The noble Lords, Lord Skelmersdale and Lord Oakeshott, pressed me to say what the cost will be. Initial modelling suggests that the price increase will be around half the existing rate, but I should also stress that the existing rate is a substantial reduction on the actuarial value. The current cost of a class 3 contribution is £8.10 a week but its current actuarial value is something like £45, so there is still a substantial gap between the two.