My Lords, I shall take advantage of the helpful peg of this amendment moved by my noble friend Lady Hollis. I completely accept that moving more rapidly to a flat-rate pension will bring losers and gainers. However, we need to have some confidence about the initial value of the single-tier pension and how its value will be maintained over time, in order to have confidence about the assessments of gainers and losers.
The figures and statistics that we have are based on the assumption of triple-lock uprating, which is far from assured over time. We know that the single-tier pension has to produce a series of outcomes: it has to be above the guarantee credit to address the disincentive to save; it has to be set at a level which reduces reliance on means-tested benefits; and it has to provide a firm foundation for private saving. However, whether it achieves those intentions depends in part on the starting value of the single tier and how its value moves over time. The White Paper therefore suggested that a single-tier pension should be worth £144 in 2012-13 earnings terms, but the extent to which the single-tier pension figure is to be set above the pension guarantee credit is very unclear.
At the time of the White Paper’s publication in January 2013, the illustrative £144 was only £1.30 higher than the guarantee credit—less than 1%—which was lower than the figure in the Green Paper, when the £140 illustrative figure was £7.40 above the guarantee credit, which is nearly 6% higher. In 2013-14 earnings terms, £144 would be worth £146.30—just 90p above the guaranteed credit of £145.40. We therefore have a lack of confidence about what the level of the single-tier pension will be at its introduction, what its uprating is likely to be over time and what its relationship with the guarantee credit is likely to be.
The rate of the new state pension will be set in regulations, and it is important to have some confidence about government thinking. The Delegated Powers and Regulatory Reform Committee commented that,
“we draw to the attention of the House that, for the first time, the rate of the state pension will be specified only in subordinate regulation”.
The Government’s impact assessment assumes uprating by the triple lock, but the assumptions about gainers and losers and pension adequacy could be significantly different if the triple lock were not applied. I also note that, when it comes to assessing gainers and losers, the notional figures include the previously contracted-out individuals. In one of the very helpful briefing sessions that we have been afforded, I asked whether we could see the notional figures for gainers and losers, excluding those contracted out at April 2016, in the hope that we could get a clearer picture of winners and losers. I was particularly interested in understanding more clearly who the winners and losers were from the base of the actual amounts that contracted-in individuals receive. I was interested to read a report this weekend, albeit in the Corporate Adviser. I quote from the article:
“The figures for mean gross state pensions, which give the clearest official picture of the level of combined basic and secondary pension of contracted in workers, have been omitted from the ONS’s 2013 Pension Trends paper”.
I understand that the reason for that is information provided by the DWP. For the sake of debate and for clarity, net state pension figures are only those payments paid directly by the state, whereas gross state pension figures are estimates of the total entitlement to additional state pension, which include those elements paid by private pension schemes that are contracted out.
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The most significant paragraph in the article states:
“But the 2013 Pension Trends paper only shows net figures, meaning contracted-out and contracted-in individuals’ benefits are combined, giving no clear picture of winners and losers. It shows net state pension payments of £145.52 per week and to women of £111.95 per week, but these figures do not include payments made to pensioners that were contracted out of the additional state pension, and therefore do not show the actual amounts contracted-in individuals are receiving”.
It would be helpful to have the Minister’s comments on these observations, because I am concerned that we should understand how the analysis on gainers and losers relates to the base of the actual amounts that contracted-in individuals are receiving.
I shall make a point almost as an aside, but do so because it is something that I will probably come back to in a later debate. If private sector employees are going to meet the high national insurance contribution
costs of both the employee and the employer through lower private pension benefit accrual, then what we are seeing is a transfer to the state system of pre-funded private saving rather than an actual gain for the individual. I accept that it is transferring a liability to the state and will reflect in the level of state pension that an individual gets but, in motive terms, I think that for some individuals overall it will not necessarily be seen as a gain. I would certainly be interested to hear the Minister’s comment on this use of gross and net state pension figures, and how that impacts the analysis of gainers and losers.