My Lords, I shall speak to Amendments 90 and 91, which carry further the spirit of Amendment 96, which was tabled by the noble Baroness, Lady Janke. My amendments call on the Secretary of State, within six months of the passage of the Bill, to conduct two reviews: on how legislation could provide for people to receive a contribution towards auto-enrolment pension savings when they
are relevant carers—what is now popularly called the carers’ top up—and on the sex equality impacts of auto-enrolment in workplace schemes and how legislation and policy could correct any inequalities identified.
I start by giving recognition to the DWP and the Pensions Regulator for the successful rollout of auto-enrolment. It is true that many more people, including women, are now saving, but various sources of data evidence show a persisting gender pensions gap. The message, whatever the source of the data, is the same. The gap arises from design features in the pension system and as a consequence of the systemic problems that too many women and carers face. In summary, carers are subject to a financial penalty in their income and pension because they are undertaking caring responsibilities, which is reinforced by stereotyping, cultural norms and employer behaviour.
Some newly published research on pensions by the Pensions Policy Institute, which was sponsored by the master trust Now: Pensions, puts the case for further reforms and reveals that on average, women have 55% lower pension income than men. The average annual private pension income for men aged 55 plus is £8,620; for women, it is £3,920—a considerable gap. Despite the record number of women in employment—now 72.4%—many will reach retirement age with significantly less. The figures vary, but they are in the same ballpark of £100,000 less saved than men. Women are more likely to work part-time or take time out of work while caring for children or, further down the line, to care for elderly or ill relatives, leaving them with interrupted pension contributions and limited earnings opportunities. Inequalities experienced during working-age life deliver lower incomes in retirement. Even when women work full-time, they still, on average, earn almost £6,000 less than men.
There are compelling figures here: 36% of women in the labour force work part-time. Of the 13.4 million employed women in the UK, around 3 million—23%—fall below the qualifying earnings threshold of £10,000 in any given job to get access to the benefits of auto-enrolment. Only about 37% of the population eligible for auto-enrolment are women.
The noble Baroness, Lady Altmann, is campaigning on how the tax system disadvantages a significant number of low-paid women and men, consequently reducing their pension pots. Millions of people at some point in their lives will have given up work or worked part-time to care, most of them being women. Carers’ savings pots are not only smaller, but evidence shows they are often used to cover the cost of the caring they are undertaking. The economic contribution of carers is still insufficiently recognised in UK public policy.
We need women to have children. If they did not, the economic consequences would soon become apparent. We need carers to take responsibility for kinship children, saving the taxpayer considerable cost. If carers did not look after their elderly or disabled relatives, the health and social care cost borne by the state would rise exponentially. In fact, Carers UK estimates that the economic value of the contribution made by carers in the UK is £132 billion a year.
Caring responsibilities impact carers’ participation in the labour market, but they also damage their long-term earnings potential—it just carries on through. It is estimated that for each year out of employment, the hourly wages of women decrease by approximately 2% for women with A-levels or above, and 4% for women with fewer qualifications. Amendment 90 is directed at a reform whereby a carer’s financial credit is paid through the social security system towards their private pension. I will take a little time on this because there is quite a big community out there which believes that this is an important issue and really wants Parliament to hear its strength of feeling on it.
Prior to the introduction of the flat-rate new state pension in 2016, carers were credited with entitlements in both the first-tier basic state pension and the second-tier state earnings-related pension. However, now that the earnings-related system has transferred out of the state to the workplace pension provision through auto-enrolment, that second-tier carer’s pension has been lost, It has just gone; it sort of fell through the crack in the totality of reforms. We had a hard-fought victory for women to secure the public policy principle that caring was an economic contribution for which pension credits were given in both tiers of the pension system—the basic tier and the earnings-related tier. Until that principle was restored, carers had been relatively disadvantaged, adding to the pensions gap. I am a bit reluctant to start in 1902, but if we start with the fight to get women these carer’s credits in both the pension systems, when the earnings-related system was introduced in 1975, something called the home responsibilities protection was introduced, It was not as good as a full carer’s credit but it was a start, although it applied only to the basic state pension. Then in the Conservatives’ Social Security Act 1986 they planned to extend that home responsibilities protection to the second-tier earnings-related pension but they never laid the regulation, so it never happened.
Rowing forward, we had the Child Support, Pensions and Social Security Act 2000, which introduced the second state pension to replace the existing SERPS earning-related element. It provided for carer’s credit for the second earnings-related pension in addition to the state pension. That was a victory. A lot of hard work went into winning that principle, and it applied to carers who looked after a disabled person for more than 35 hours a week or a child under six, but still people argued that it should be improved again beyond that. In the Pensions Act 2007, which, importantly, brought in a major part of the state and auto-enrolment reforms, carer’s credits and how they operated for the basic state pension and the earnings-related element were improved considerably for carers of children up to the age of 12 and the qualifying threshold for carer’s credits for caring for disabled people was lowered to 20 hours.
Those principles, that you credit carers because it is an economic activity—it is a real contribution to the economy—and that you do it in both the basic state pension and the earnings-related pension, were a victory that people thought they had banked, but suddenly, as a consequence of the reforms, that crediting is only in the basic state pension—it no longer exists through
auto-enrolment and workplace pensions. The Fawcett Society, along with an increasing number of other organisations—there is quite a build-up of consensus around this—supports the introduction of a carers’ top-up, re-establishing the principle that people thought had been achieved and consolidated in 2007.
A seminal report from Insuring Women’s Futures, the product of a voluntary market-led programme under the Chartered Insurance Institute, looked at improving women’s financial resilience. It has brought in a range of people—business leaders, policy experts, regulation experts, academics and so on—and looks at the root causes of women’s lack of financial resilience.
I am probably using a lot of words to say it, but the report basically says that more needs to be done to allow all women access to pensions, to support women in attaining an adequate pension—reflecting their whole contribution to society and the economy—and to allow them to enjoy pensions parity in the workplace. It also says that the complexity of pensions, together with the wider financial risks in life that have an impact on women’s pensions journey, means that women need differentiated support and guidance at moments that matter, such as when they step out from or step down in their engagement with the labour market because they are doing the economically important job of caring.
Much was achieved by auto-enrolment—it is tempting to say that I would say that—and the Government were right to focus their energies on its successful implementation. I never argued with a Conservative Minister who said, “That is the priority and that is what we must do”; that was right. However, this gap in the pension position of many women relative to men persists, and there is a growing consensus—it is not just a few arbitrary voices—saying that the issue needs fresh attention.
A principle embedded in the reform of state and private pensions is that women should accrue retirement income in their own right. That is reflected in the fact that, since 2016, women no longer accrue state pension rights through their spouse’s entitlement and that, in a DC world and with pension freedoms, women’s hopes of depending on their partner’s accrued long-term savings are much weaker. The environmental factors shout out that the Government have been successful in consolidating auto-enrolment. However, this is an area of outstanding weakness and needs a new look because, in summary, women make a huge economic contribution by caring, for which they face financial penalties. There is an expectation that they will accrue pensions in their own right, but the support given to them to achieve that still has significant weaknesses.
My amendment and that of the noble Baroness, Lady Janke, ask the Government to review and report on the nature of the pensions gap and on further measures to address it, because the demographics clearly show that the one thing that the state depends on is that women will be carers—even more so going forward. However, as a consequence, they end up with reduced financial resilience when they come to retirement.
I am conscious of there being competing issues on Report; there are some very important issues in this Bill that noble Lords wish to return to. I am trying to
take that into account. There is, however, a growing consensus. It is not aggressive; it is just saying—as I saw when I ran through the history of how we built up the carer’s credit—that the Government need to give this attention. There is consolidated auto-enrolment and a range of areas where the Government are reviewing what they can do, but they have not put centre stage how efficiently this is working for carers; they need to look at that.
Again, conscious of the competing demands on Report, I urge the Government to respond to the noble Baroness, Lady Janke, and myself as positively as they can to show those communities that are building up together—the gender alliance can be quite formidable when it gets truly organised—that there is a responsiveness that says, “Yes, we will review these issues.” I have loads of emails that say, “I am so glad you are raising this”, and, “Say this and say that.” I have probably overindulged and not covered half the list of things that people want to say. They will, however, be listening to the Government’s response because they want the Government at least to accept that they should give some attention to this issue again.
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