§ 8. Mrs. Sylvia Heal (Halesowen and Rowley Regis)What steps he is taking to help low-paid people to provide for their retirement. [115870]
§ The Minister of State, Department of Social Security (Mr. Jeff Rooker)The state second pension will help low and moderate earners to build up increased pension entitlement. Low earners—by which we generally mean those earning less than £9,500 this year—will receive a dramatic boost to their additional pension entitlement; under the state second pension, that will be more than double their entitlement under the current system. In addition, carers and long-term disabled people with broken work records will, for the first time, be able to build up a second pension.
The state second pension will help 18 million people to build bigger pension entitlements. Those people include 4.5 million low earners, 9.5 million moderate earners and 4 million carers and disabled people with broken work records. That is something in which the Government and those sitting on the Benches behind me can take extreme pride.
§ Mrs. HealDoes my right hon. Friend acknowledge that one of the problems with SERPS is that it provides least to those who earn least? Is he aware that many of those low-paid people are women in low-paid, part-time jobs? Will he assure me that the Government's proposed state second pension will ensure that such women will have access to a decent state pension in their retirement?
§ Mr. RookerYes. Most part-time workers and low-paid workers are women. To someone earning £9,500 this year—the upper limit of the low-earners category—the state second pension will be worth double the sum that SERPS currently pays. SERPS was and is good: it delivers excellent pensions to those retiring today, despite the fact that in 1986 and 1995, the Conservative Government cut into it. However, because SERPS is earnings related, it gives least to low earners; the state second pension will correct that.
§ Mr. David Willetts (Havant)May I remind the right hon. Gentleman of the document on which he fought the last election—the Labour manifesto? It states:
Labour will retain Serps as an option for those who wish to remain within it.The proposals are clearly a breach of that manifesto. The Minister claims that everyone will be better off under the state second pension, but he must know that certain groups—those caring for children aged six to 16, who will not receive the promised home responsibilities protection; people with earnings from self-employment and employment; and people in receipt of working families tax credit—will lose out as a result of the changes that he is introducing. He is clearly in breach of his manifesto promise and is clearly disadvantaging many people as a result.
§ Mr. RookerI note that the hon. Gentleman does not deny the fact that there will be 18 million gainers under the state second pension. Nobody earning up to £20,000 a year will lose—that cannot be contradicted. He claims 617 that we are abolishing SERPS, but we are not; we are reforming it, and using SERPS legislation to introduce the state second pension—[Interruption.] If the Liberal Democrats had deigned to attend the Standing Committee on the Child Support, Pensions and Social Security Bill instead of holding themselves remote from it, they would know that SERPS legislation is being amended and reformed to introduce the state second pension.
As for the remarks of the hon. Member for Havant (Mr. Willetts), we have been consistent with our manifesto commitment: even when the state second pension becomes flat rate, as it will after a number of years, the contracted-out rebates will be earnings related and will go toward the second pension of the people involved. To that extent, we are fulfilling our commitment.
§ Dr. Lynne Jones (Birmingham, Selly Oak)In 1980, the basic state pension was worth 23 per cent. of average earnings. According to Government figures, by 2051 the combination of what is left of the basic state pension and the new state second pension will be about 21 per cent. of average earnings. It will be set by the Government at about £85 a week at 1999 figures. The figures suggest that there will be more pensioners reliant on means-tested benefits. Does my right hon. Friend consider that that is a satisfactory aim for pension reform by the middle of the 21st century in one of the richest countries in the world?
§ Mr. RookerIf we do nothing and abandon the pensions reform package, one in three pensioners will retire straight on to the means test in the middle of the century. With the package of reforms of the stakeholder pension, the state second pension and other changes, we can reduce that ratio to one in five. I know that the number of pensioners will increase from nearly 11 million to nearer 15 million, but we want to keep pensioners off the means test. We do not want a system that automatically puts millions of people on to it. We have not quite reached the stage where we can say that our package will eradicate the means test, but we shall be on our way in that direction.