§ Mr. Kerry Pollard (St. Albans)
I beg to move,
That leave be given to bring in a Bill to make provision about pension clawbacks.
I am delighted that so many Members share my interest in this issue.
It is appropriate for me to begin by defining what is meant by "clawback". Different bodies use various terms—abatement, integration or clawback—that mean the same thing, and although there are others, those are the most common. Clawback is a term used in respect of pension schemes to describe what happens when a certain amount is deducted to take account of the state pension before the pension is calculated. It can be a deduction from pensionable pay, from the pension itself, or from both. Clawback applies only to final salary schemes, in which the pension is linked to earnings at, or close to, retirement. It is not relevant to money purchase schemes, in which the pension depends on investment results.
The essence of my Bill, which is similar in scope to one enacted in the Republic of Ireland some four years ago, is that any future increase in state pension could not be clawed back. For example, if the state pension increased by £10 per week, that increase could not be clawed back in the manner of previous increases. As a result, over time the disbenefit of clawback, particularly for the low paid, would gradually disappear. This arrangement has been in place in the Republic of Ireland for some time without civilisation as we know it coming to an end.
When my right hon. Friend the Member for Makerfield (Mr. McCartney) was the Minister for Pensions, I tried to persuade him of the case for introducing such a Bill. Although he was sympathetic, he said that he was unable to put the Government's weight behind it. I pointed out the existing, potentially discriminatory effects and the impact on part-time workers, but he was stony-hearted. I also pointed out that the Chancellor of the Exchequer could well benefit through a small but significant reduction in benefit claimants. Those on low pensions would not need as much council tax relief, housing benefit subsidy or pension credit. Despite even this, my right hon. Friend remained unmoved.
My hon. Friend the Member for Ilford, North (Linda Perham) took up the cudgels on behalf of the many pensioners and soon-to-be-pensioners who will be subject to clawback by organising an early-day motion and a very useful Adjournment debate. She and I have worked closely with our trade union colleagues in UNIFI, the GMB and the TUC to persuade companies to stop clawback altogether, or to effect gradual change to the benefit of scheme members. There have been successes; for example, Barclays and BP have amended their schemes. Indeed, Jim McNulty, a constituent of mine, is £1,500 a year better off as a result of our work. He is of course delighted.
I recently received a letter from the Royal Bank of Scotland Group pensioners association, which continues actively to lobby the company to stop clawback. It has had some modest success, in that the company has agreed to limit the impact on part-time 193 staff. At the company's recent annual general meeting, two pensioners lobbied the board. The public response was that the bankwould not consider the abolition or abatement of clawback".So there is still some work to do.
Many schemes practise clawback, but thanks to pressure from trade unions, particularly UNIFI, some schemes are now abandoning the practice altogether or, like Barclays, amending it. Individual scheme members often do not know about clawback. Not everyone reads the small print, and by the time they realise that they are subject to clawback, it is too late to make other arrangements.
The practice of clawback is quite common. According to the most recent survey by the National Association of Pension Funds, just under half of all private sector schemes include clawback; in the public sector, the figure is much less. Blue chip companies that practise clawback include British Aerospace, Cornhill, GKN, General Electric, Imperial Tobacco and Unilever.
Why does clawback matter? Scheme beneficiaries usually assume that on retirement they will be better off by the amount of the state pension, less tax. Clawback also discriminates against the lower paid, particularly part-time workers. I shall give three fictitious but worked-out examples to demonstrate the disproportionate effect on the low paid. With clawback, John, a senior manager on a £45,000 final salary with 40 years' pensionable service, would receive a pension of £27,712, which is equivalent to 61.5 per cent. of final salary. With clawback, Bob, a shop floor worker on £15,000 and with the same length of service, would receive a pension of £7,712, which is equivalent to 51 per cent. of final salary. With clawback, Cathy, a part-time cleaner on £8,000 and with the same length of service, would receive a pension of £3,045, which is equivalent to 38.1 per cent. of final salary. These typical examples show that the lower a person's pay, the more they are penalised by clawback.
Some schemes are now being run pro rata to help the lower paid and part-time workers. [Interruption.] If people realise in good time the effect of clawback on their pensions, they may be able to do something about it, such as paying additional voluntary contributions to make up the gap. If they discover the problem only upon retirement, however, it is too late and they must live on a far lower pension than they expected. [Interruption.]
§ Mr. Pollard
Our Government have tried to face up to the challenge of pension provision through initiatives to 194 help the least well-off pensioners. There has been further significant progress, in that company schemes now have in place a safeguard, should they cease to be able to provide payments to pensioners who are entitled to draw on them. In addition, a substantial amount of taxpayers' money has been earmarked for company schemes that have failed to help those who, in good faith, paid into such schemes over the years, believing that that was the safest way to protect themselves in retirement. One such company is Dexion, which is based in Hemel Hempstead. I pay tribute to my hon. Friend the Member for Hemel Hempstead (Mr. McWalter), who did sterling work in persuading our Government to put in place a package of help.
I recently attended a National Pensioners Convention meeting, at which we celebrated the 91st birthday of Jack Jones, who has done more for pensioners than anyone else whom I know. Also there was Rodney Bickerstaffe, who has taken Jack's place as the voice of pensioners. Both Jack and Rodney told me that they fully support our campaign to abolish clawback.
UNIFI has been the leader in the campaign to abolish clawback, and I pay tribute to Ed Sweeney, Rory Murphy and Dai Davis, who have done much to secure the limited success that has been achieved so far. Our Government have done much for pensioners, the least well off and those on company schemes that might fail in the future. They have allocated a substantial sum of taxpayers' money to alleviate the plight of those pensioners who will not benefit from the new legislation.
One further way to help hundreds of thousands of pensioners directly, without cost to the Exchequer, is to enact my Bill. It is a simple measure that is already practised successfully in the Republic of Ireland. It would help the lowest paid and part-time workers, and it could have a beneficial effect on benefit claims. It would stop future increases in the state pension being clawed back, and I commend it to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Kerry Pollard, Mr. Tony McWalter, Linda Perham, Mr. Ernie Ross, Mr. David Chaytor, Jim Dobbin, Mr. Harold Best and Mr. Mike Wood.