My Lords, I am grateful to my noble friend Lady Turner for her amendment, which, as your Lordships will have noticed, is grouped with an amendment in my name and that of my noble friend Lady Sherlock, which calls for a review of the phasing.
For the sake of some chronology in our thinking, a similar amendment to this was considered in the House of Commons after Clause 4. That was to the benefit of the debate in relation to it. The call for a review really belongs with Clauses 3 and 4 because it relates to transition whereas, as I have indicated earlier, Clauses 2 and 3 relate only to people whose qualification in terms of contributions has been achieved post-2016. In the words of the Pensions Minister, that makes it much easier and simpler to understand Clauses 2 and 3 than it does Clauses 3 and 4, which are significantly complex. However, my noble friends will be pleased to hear that I do not intend to go into the detail of all the elements of the transition. There are complexities there, some of which it would be helpful if the Minister explained to the Committee so that we had an understanding of the complexity and the consequences of it for individuals.
I will first address the amendment in the name of my noble friend Lady Turner, which challenges the imposition, as it were, of a qualifying period of 35 years so soon after we changed the law to reduce the qualifying period for the state pension to 30 years. It would be to the benefit of the Committee’s understanding of the Bill and the policies that instruct it if the Minister addressed himself, as I am sure he will, to the way and the processes by which that figure of 30 years was arrived at. It was probably best explained by the Pensions Minister at col. 141 of the House of Commons Committee stage on 2 July. He set out broadly that the existing state pensions structure had two elements to it: the basic state pension, for which there was a 30-year qualifying period, and then the additional pension—as we have come to know it in terms of the Bill, but which has different elements depending on which years one looks at—which could be built up from rights that have been built up over as much as 49 or 50 years of a working life.
The Minister then explained that in arriving at a period of contributions that should entitle one to an amalgamation of these two rights, he looked for a “weighted average”. He was challenged, probably correctly, as to why in earlier consideration of where it should lie he had favoured or indicated—at least in his evidence to the Select Committee—the figure of 30 years as opposed to any later figure. He was asked pointedly by my colleague Gregg McClymont whether there was a financial consideration as opposed to just some broadaxe approach at trying to work out somewhere that was appropriate, and which could do justice to those two elements as they were brought together.
The advantage that my noble friend Lady Turner gives the Committee is that she gives the Minister an opportunity to explain in more detail how the 30-year figure was arrived at and how it can be justified, as opposed to some broadaxe, weighted average-type judgment. If it is just a judgment that had to be made for speed and efficiency, the Committee ought to know that it is about the right figure and there is nothing more to it than that. That is the strong implication of the way in which the Pensions Minister approached his explanation in the debate in the House of Commons.
We on these Benches support the single-tier pension and recognise that at some stage, judgments have to be made, but it is much easier to support judgments if there is an explanation of the reasoning behind them to convince us why it should be 30 years rather than 32, 33 or whatever. Those figures are very important.
I do not think I will detain the Committee for nearly as long as my honourable friend Gregg McClymont engaged the Committee in the other place on the amendment that now stands in my name and that of my noble friend Lady Sherlock. However, in introduction, I want to tease out one or two observations about the amendment that I think should properly lie in our discussion after the debate about Clause 4, to explain why a review is necessary. Once one gets a sense of the complexity of the transition and the interaction of different calculations, one begins to realise just how important it is to have a review informed by reality. Of course, a part of that reality is the level at which the single-tier pension is fixed so that one knows who are the losers and who is being affected
What really instructs the review is a defeat of expectations. The Pensions Minister engaged with the perception rather than the reality. I am not keen on trying to argue policy changes on the basis of perception. That is principally because for two years I was a Minister in Northern Ireland, where I was repeatedly told, “In this country, Minister, you have to understand that perceptions are much more important than facts”. No matter how good my arguments were, I was told, “But that is not how it will be perceived” in one community or another, and that perceptions were much more important than facts—so much so that I thought for a period of having one of those famous signs on the desk that Ministers and executives often have made, reading, “In this office, facts are more important than perceptions”, but I thought that that might have been provocative and decided that it would not be a good idea.
Greg McClymont argued, and I support him, that there is a significant group of people who have a similar experience to that expressed in the e-mail that coincidentally I received this afternoon—people who have a set of expectations that are defeated. Unless there is engagement with those issues and some sense of fairness, the fairness, simplicity and other measures that the Government have set for these changes will not be met.
In this case, there is a group of people who have an expectation that they will get the full rate of whatever the state pension is after 30 years of work or 30 years of national insurance contributions. They will be met with the reality that it now requires 35 years. I will come to this in some detail—I am not going to take that long about it—but I know that one can say to them that 30-35ths of this figure is more than 30-30ths, or more than 100%, of the figure that they were expecting. However, they are retiring into an environment in which other people are getting not 30-30ths of the figure that they were expecting but 100% of what the new figure will be. That is an important point to make.
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When we engaged with this issue earlier in the Commons, the Minister suggested early on in his contribution that this matter was easy to deal with and that this challenge of moving to the new system while honouring the past could be dealt with without any sense of grievance, if we all went out and said this:
“You used to need 30 years for £110 plus something else”—
an interesting phrase—
“and now you need 35 years for £144”.
If we just keep using that phrase to people, the Minister said,
“there would be no confusion”.—[Official Report, Commons, Pensions Bill Committee, 2/7/13; cols. 164-65.],
assuming that everybody knows what “plus something else” means along with £110. The fact of the matter is that people do not.
We have already heard a considerable number of noble Lords in Committee this afternoon saying that the complexity of this is beyond some of them. I pick out the noble Lord, Lord Kirkwood, because he engaged with the complexity of it, but he served for many years in distinguished fashion as the chair of the very Select Committee engaged with all of these knotty issues. If he is struggling to be comfortable immediately with all this, what expectation can we have for people who, as the Minister suggests, do not even engage with this normally to ask the DWP for a statement of their pension entitlement?
We have an obligation to engage with these issues in a way that at least gives us the opportunity to get on record words of reassurance, rather than just of assurance. We should not just assert that everything will be fine when it may not for individual people who have an expectation. The debate was engaged with in that fashion and we were told that there was no need for confusion: it was a matter of perception, when the facts would be entirely different. I have no doubt that the Minister has a long speaking note in which all this explanation is set out. However, what has happened since that point of the debate in the Commons is extremely interesting. First, the Committee there was engaged for about one hour and 15 or 20 minutes in debating it. It started off as being relatively simple but it took about an hour and 30 minutes to debate it, when almost everybody in that Room understood that 30-35ths of £144 is more than 30-30ths of £110. However, there were complexities there.
Much more importantly from our perspective in dealing with this, since it was debated in the Commons—indeed, since our Second Reading—the Bill team and the Minister have, very helpfully, provided us all with this interesting briefing paper. It is headed:
“The move from 30 to 35 qualifying years and the transition to the single tier”.
Its introductory paragraph starts by saying:
“Some people have interpreted the move from 30 to 35 qualifying years as potentially disadvantaging individuals reaching State Pension age after 2016 and who may only have 30 qualifying years and were expecting a ‘full state pension’. This note sets out why people cannot be disadvantaged by the change in qualifying conditions”.
I will not go on, as others can read it. We have all got it.
So I picked this up with an expectation that it would solve all my problems for me and leave me with no confusion, no concern and no sense that anyone out there could have any degree of grievance. I have to say that it is well written—it flows and it is logical—but it is very difficult to keep up with. It is not straightforward. It is a bit like reading a Russian novel, where you have to keep going back to the first couple of pages to see who the characters actually are because they have so many names. The Joes, the Bills and the others in the worked-through examples that we are given are slightly difficult to keep up with, and there is a substantial non sequitur on page 3 or 4, where you have an expectation that you will turn the page and it will all be resolved, but that is it—you are not getting any more information about these two related people and you have to make up your own mind as to whether one is better than the other.
I do not want to go into this in any great detail, but I just point out this eight-page explanation followed the Minister saying, “All you really need to say is that the 30-35ths of £144 are more than 30-30ths of £110. There is no confusion and no need for a review, because it is already clear”. People who really know what they are doing, and who to a degree instructed this policy, set out to try to explain it. Eight pages later, they have done a very good job but what they have not done, which is extremely interesting, is engage with the one example provided by one of my colleagues in the debate in the House of Commons, about a constituent of hers whose working circumstances had left her in a situation where, like my correspondent today, she had a shortfall of national insurance contributions and no apparent way of making it up because she believed that she could not afford to buy them, but she was not poor enough to be on some form of benefit that would give her credit. I do not need to go into the detail of all that—I know that the Minister’s officials and he will be well aware of it—but in eight pages of engagement, the one example put to the Minister in the Commons could not be engaged with.
I share all that with the Committee for this purpose: to say that if, from the information that we have, we cannot answer these questions being put to us by others’ constituents or people who we engage with about how to bridge the gap and get into the position where you are no worse off, when you fundamentally believe that you are; and if we cannot reassure these people, who are not insignificant in number and are approaching this deadline—this cliff edge—knowing that they have fewer years than they need to qualify for what everyone else would consider the state pension, whatever we call it, then there is an argument for some other mechanism. That other mechanism should be a review. It does not really matter how it is done, but it should be a review.
For the reasons that came out clearly in the engagement between the Minister and my noble friend Lady Drake, such a review cannot be done until somebody fixes this pension rate because it is not easy to see. It is perfectly clear that the pension rate is not going to be fixed until
very near the date of April 2016. It could perhaps be done by anticipation to some degree, but it seems at least arguable that it is best done as a review of the effects of phasing of the transition and the requirement for 30 years. Then one can see whether we should all be satisfied that there will be no confusion and that nobody will lose out because everybody is at least as well off as their expectations should have encouraged them to be.
I have one slight hesitation about that. That is that at one stage in the debate, the Pensions Minister said: “The problem with a review in this phasing is that if it makes recommendations, there will be an expectation that they will be implemented. If they are to be implemented, that will issue a degree of uncertainty into a system that we have spent a lot of time making much simpler and trying to get certainty into because it is to be the base for pensions income going forward and to encourage saving”. That makes me believe that he may think that a review might recommend change. Why would he deploy that argument otherwise? If he is as certain as the briefing paper that we received and his simple explanation of no confusion suggest that there is no reason for anybody to be confused, they should all just be satisfied that they will be as well off as they were entitled to expect to be.