§ Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Woolas.]9.30 am
§ Vera Baird (Redcar)
A subtitle for a debate on women and pensions might well be, "A Tale of Poverty and Inequity". As many as 46 per cent. of single female pensioners now live in poverty. I do not feel very happy about the fact that, in the early part of a new century, almost half of single female pensioners are in such a state, but poverty there is. Another 31 per cent. of single elderly women—I assume that that figure is additional, but I am happy to be corrected—are in danger of falling into poverty compared with 25 per cent. of elderly men.
The average single female pensioner has £153 a week; the average man has£194. For couples, the average man gets £248, and the average woman gets £96. The debate is about inequity, not inequality. The situation is particularly harsh in that women make up the majority of pensioners—almost two thirds of pensioners, about 7 million, are women. More women pensioners than men live on their own and therefore have to manage their households out of reduced and limited earnings and 70 per cent. of female pensioners have no private pension. Before I weary the Chamber with more statistics, I shall pick out the last and the first figures: 70 per cent. of women pensioners have no private pension and 46 per cent. of single women pensioners live in poverty. What does that say about the adequacy of state provision for women pensioners?
There are of course cultural and historic reasons why women pensioners are poor. The lifetime model for the generation of women now in retirement would have been to leave school, work for a few years and then marry, stop work, make a home and, usually, raise children. However, not all women wanted to stop work on marriage. Lest anyone should think that by following the cultural norm, those women are reaping their current poverty from having led pleasurable lives of economic inactivity, I shall mention two factors. First, I doubt whether anyone nowadays is prepared to say that caring for a partner and family, particularly and exclusively in the absence of any other role or identity, is either easy or, in a modern sense, fulfilling. Secondly, in many cases it was compulsory for women to leave work not on having children but on getting married. My mother in law had to give up her job as a civil servant not when she became pregnant but on her marriage. I assume that in the post-war era it was regarded as important to preserve jobs for men. Whatever the cultural norm, however, some women simply did not have a choice.
The present generation of pensioners is reaping the result. As women have participated less in the labour market, they have built up less state income in their own right. Until 1978, even when they were working, women 2WH usually paid the reduced rate of national insurance—the women's contribution. They never became entitled to a pension in their own right, but depended instead on a category B state pension—a maximum of 60 per cent. of the full rate. That would be calculated on the husband's contributions, which may or may not have been sufficient. Women's more limited participation in the labour market of course meant lower rates of pay. They either withdrew or worked part-time when they had their children, and part-time rates of pay are lower. Very few women in the generation that is receiving pensions had the opportunity to invest in private pension provision to supplement state provision.
In 1978, there was a helpful change and home responsibilities protection was introduced. It reduced the number of years needed to qualify for the state pension for every year—up to a maximum of 19—that a person looked after children. One can now qualify for a basic state pension after just 20, not 39 years of work.
In the Social Security Pensions Act 1975, Barbara Castle abolished the married woman's option, although she allowed those who had taken it to retain it. In 1975, she called the option the "alibi" for the inferior treatment of women. Ever since, however, the terms of the partial abolition and retention of the married woman's option have remained a source of great contention between older women and the Government. Its removal was non, the unalloyed benefit that Barbara Castle—that truly great pioneer of women's equality—intended it to be.
Eileen, my caseworker in Redcar, is highly articulate and very skilled and she is a case in point. She started work 36 years ago and was told, "You don't need to pay. Your husband's payment will cover you." She told me, "In those days, husbands told wives what was good for them and so did bosses." The chances are—this is certainly true in Eileen's case—that women thought that the man's stamp was for both of them and that it would be silly to pay more. It is eminently believable that that would be the view. However, as Eileen put it to me, women were not covered as adequately.
Eileen opted for the small stamp. In 1989, she took the option to change over, but she has not accumulated enough years to get a proper pension. She worked part-time while her children were young. She never worked less than 20 hours, but she was not allowed to join the company pension scheme, so she lost out there as well. She therefore has no full retirement pension. Her occupational pension is starting to accumulate, but it is severely reduced. She also lost out on home responsibilities protection because her children were born a shade too early for the system to apply. She expects a basic pension of about £30 a week.
We should not rest easy, telling ourselves that these women were simply victims of the bad old days and that we now look at things from a more modern and egalitarian standpoint. We should not simply say that it will not happen again, because women have been given the minimum income guarantee and are supported. As a nation, we treated those women unfairly.
Governments have said that a leaflet was sent out explaining to women that those who did not pay the full stamp would not get any pension, but that is not an adequate response. Everyone understands that women were just starting to emerge into the world of affairs— 3WH by which I mean business affairs. They were unlikely to take that information on board. If they did, their husbands would tell them—again understandably, given the culture at the time—"Of course, the Government have to send information out. Some men are villains, but I'll look after you You're quite safe. There's no point having independent provision."
These women are now likely to be poor and to be on the minimum income guarantee or perhaps pension credit, with its different criteria. They have been left with low incomes by an act of unfairness. The Government should return to the issue when, in pursuit of their Green Paper consultation document, they consider the position of pensioners. They should examine whether it is possible to return to the question of women who paid the small stamp, which was sometimes bigger than the one that would have qualified them for a category A pension. They paid as much as £19 a week for nothing. For instance, a woman who had not paid any stamp would receive a category B pension, based on her husband's national insurance contributions, as would the woman who had paid the£19 stamp.
I invite the Government to consider giving those women, on retirement, some form of accumulation of what they have forgone—whatever proportion it might be practical to disburse in that way. That would help them to remain off state benefit, or less dependent on it, so it would be in the interests of all of us. At the same time it would be fair and would redress a wrong that is harshly felt, particularly in places such as Redcar, for a long time home to heavy manual industry such as steel works, in which gender roles were extremely polarised. Women there were late to emerge in their own right, continuing to be dependent on their men for longer than metropolitan women might have been. They, like my researcher Eileen, now find themselves in a predicament. They were denied financial self-determination in their youth and they were denied it by the culture in their middle lives. If some recompense is not made, they will be denied financial self-determination in their old age and will spend it in pensioner poverty.
Nothing in my contribution is intended to be critical of the Government. They have done an enormous amount, quickly, to pour money into the poorest pensioners, predominantly women. Nevertheless, about 1 million women pensioners are on the MIG. When pension credit comes in, two thirds of those entitled to it are likely to be women, although that is designed for those who are slightly better off than those on whom I have focused. The Government have acted, and they have acted well.
§ Lynne Jones (Birmingham, Selly Oak)
Recalling my hon. and learned Friend's comments about her case worker, who has a small occupational pension, is she not concerned that Eileen will not receive the benefits of pension credit because she does not have a full basic pension?
§ Vera Baird
I suspect also that because the pension credit is assessed on Eileen's income and that of her husband, she is likely to be outside its limitations. That 4WH is another problem with pension credit—the incomes of both parties are aggregated in considering whether they qualify. I thank my hon. Friend for that point.
§ Mr. Oliver Heald (North-East Hertfordshire)
Does the hon. and learned Lady agree that one concern is the low take-up of minimum income guarantee and pension credit? About 770,000 households do not take it up with the result that, despite what the Government have done, the income of single pensioners as a percentage of national average earnings has remained exactly the same since 1997 and the gap between the richest and the poorest pensioners has widened.
§ Vera Baird
I am not sure that the hon. Gentleman's figures are right, but I shall leave it to my hon. Friend the Minister to correct them if necessary. It is a continuing problem that older people are reluctant to take up benefits such as the MIG. It is difficult to get them to do it, and nobody could have tried harder than have the Government. The hon. Gentleman makes an opportune intervention. This Saturday, a team of Labour party activists in Redcar, led by me, will go out to try to encourage better take-up of those benefits by older people. We Labour MPs have good relations with our pensioners' forums. From them we get advice on the best ways to encourage take-up.
§ Mr. Heald
I am grateful to the hon. and learned Lady for giving way to me again. Is she aware that in 1996 the number of pensioner households not taking up income support was 600,000 and that now, despite all the efforts that she has mentioned, the figure is 770,000? Is that not a sign that despite the best efforts of Governments we have not cracked the problem of getting the money to those who need it?
§ Vera Baird
As I said, the difficulty is almost intractable. There are problems with the complexity of forms, although many of those have been substantially tackled. The leader of my pensioners' forum tells me that although the application form is quite a few pages long, it is now just over a third of what it used to be. Many unnecessary questions have been cut out. One cannot fault local authorities, the Government and Labour councillors and MPs who have gone to the trouble of setting up such liaisons to find out what the problems of take-up are.
§ The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)
On a point of information, the minimum income guarantee claim form has been cut from 40 pages to 10—questions such as, "Are you pregnant?" have been removed. It is a quarter of its former length.
§ Vera Baird
I thought it was a third, but I shall leave most of the figures to my hon. Friend, who is a mistress of figures.
§ Mr. Mark Francois (Rayleigh)
On the complexity point, most pensioners receive their pension over a post office counter. Many pensioners, many of whom are women, are extremely concerned that the Government have made the process of collecting their pensions more complex by insisting that pensioners have some form of 5WH bank account at their post office. That is highly unpopular with pensioners. The system was not broken, so why on earth did the Labour party have to fix it?
§ Vera Baird
The hon. Gentleman is being somewhat unfair. It will still be possible to pick up pensions and associated benefits at a post office by using a card. I have received few complaints about that. I have heard concerns about the closing of post offices, and that is entirely natural, but I have not heard many concerns about pensions no longer being available.
Limited take-up has more to do with the complexity of the forms and the process than being unable to find the way to one's local post office. Fortunately, the process has become less complex. I suspect that hardest for all Governments to get to grips with is that older people are reluctant to apply for anything that they do not regard as absolutely theirs by right. That is a hopelessly intractable problem. All we can do is improve our literature and our efforts.
Moving on to future women pensioners, I shall quote the Green Paper and raise some concerns about it. It says on page 57:Much of the improvement in the pension provision of future female pensioners will come from labour market improvements—higher employment rates and better pay.I detect a worrying tinge of complacency there. However, the paragraph after that readily concedespension provision will still lag behind that of men for some years.My concerns are not allayed by the next sentence, however, which states:Many of these problems flow in part from a lack of awareness and understanding of the pensions system.It is not a good idea to blame the victim. Had I done a PhD on "Pension Planning for Women in the 21st Century" it would not be of much use to me if I were one of the 40 per cent. of women who earn less than £100 a week. Let us consider women earners and not women pensioners. Knowing a lot about how pensions work would not be a great deal of use to me if I were one of the 40 per cent. of women who still earn less than£100 a week. Consequently, with the thesis that we will rectify the poverty of women on pensions by gradual trickledown, I have some concerns. I appreciate that the document is a Green Paper and so the Government are open to argument. However, the suggestion that the problems that women face about pensions will decline and eventually disappear in time is a myth. There are still fundamental socio-economic differences between men and women that will impact on their financial provision in retirement for a generation.
Women still suffer from a gender pay gap, which is not really closing. The first reason for that is because there are 1.4 million women who are below the lower earnings limit and are not in the national insurance system at all. There are far more women than men in that position. The Equal Pay Act became law in 1970, some 33 years ago. As the Green Paper says, the real landslide that has taken place since then is that average female pay is no longer two thirds of average male pay but is now four fifths. The average weekly male pay for a full-time worker is £100 more than the average weekly female pay for a full-time worker. Again, that figure is from the Green Paper.
6WH Although we have the highest female participation in the labour market in Europe, only 40 per cent. of it is full-time. When the average male and female wages are compared, taking into account part-timers, the gap is £200. Calculations by the Fawcett Society and the Women's Budget Group clearly show that, at that landslide rate of progress, it will be 75 years before there is anything approaching equal pay between men and women.
There is no doubt that the increase of hourly pay for young women has progressed well; it is now about 95 per cent. of the hourly pay for young men. However, that is not reflected in the incomes of women over 40, which have simply not moved. Between the two—earning reasonably close to what men earn in one's 20s but substantially less per hour in one's 40s—is the second socio-economic difference between men and women that stops women from trickling down to having good pensions, which is the career break. After she has been out of the labour market for a year, the average woman's drop in pay is 16 per cent. That is a wage penalty that is apparently double that to which men in the same situation succumb.
I am again grateful to the Women's Budget Group for calculating that a woman who starts contributing to a pension when she is 25 and takes five years out when she is 30 will have a fund worth 20 per cent. less than it would have been had she worked consistently. If the woman waits until she is 38 before having a child, the reduction is 18 per cent. A woman who does not start paying until she is 30 will build up a fund worth 25 per cent. less at 60 even if she does not have any break at all. Despite the HRP all that time ago in the 1970s being almost fully operative, women who take career breaks still face real problems in saving for their retirement.
§ Angela Watkinson (Upminster)
The hon. and learned Lady is bringing back all sorts of memories. I started work in 1958. I remember very well the days when there were two different salary scales for men and women doing the same job. On the reduced stamp for women, when I married in 1961 I was persuaded to go on to a reduced married woman's stamp, but I did so in full knowledge of the implications. After quite a substantial career break, during which I brought up my family, I was given the option of going back on to a full stamp. Again, I made a fully considered decision to do so. The literature that was available at the time was clear and I knew exactly what I was doing, so it is not fair to paint all women as victims who did not understand the implications of the reduced women's stamp at that time. That is rather a dangerous generalisation.
§ Vera Baird
I do not accept that. On what the norm was, I have my informant Eileen, who is my caseworker and was my predecessor's caseworker too. Over the years, she has dealt with a large number of women who were in exactly the same position that she is and who were of exactly the same understanding, namely that they needed to do more than rely on their husbands for future resources. Although I entirely accept what the hon. Lady said about her state of mind, I simply do not accept that that was widespread.
On future pensioners, the second state pension will be immensely helpful to future women pensioners and will assist carers. I understand that it is passported via child 7WH benefit until the youngest child is five. Passported by the presence of an invalidity care allowance, the second state pension will assist 2 million carers, almost all of whom are likely to be women, to accrue some more pension. However, it is a relatively modest step—I think that the fund is £2.3 billion. Although that is progress, it is small progress that will make some difference but not an enormous amount.
I shall quote a few more figures to try to make that point. At present, to avoid making a claim on minimum income guarantee, it will be necessary to have a stakeholder pension—a third party pension income—of about£30 a week. By 2060, that figure will be about£100 a week. Someone who saves from the age of 25 will have to put aside about£22 a week to be able to receive that income. A person who saved for only 20 years of their life before retirement would need to put aside£62 a week to get that level of income. Given the figures on equal pay that I have quoted, it is self-evident that many women will not be able to set aside that amount of money every week. If they have that money at all, they will have far more pressing needs for it and some apprehension about locking it away in a fund that is not easily liquidated if there is further need.
Those figures show how difficult it will be for many women to climb significantly above the minimum income guarantee. They also point to this truth: that unless radical change is made toward pension financing for women—way beyond what I slightly unkindly characterise as the trickle-down theory on page 57 of the Green Paper—women will not in the foreseeable future be able to acquire significant pensions to keep them out of poverty in old age. Again, the Green Paper says that the Government currently finance 60 per cent. and the private sector 40 per cent. of pension provision. However, it is key to switch that ratio around, so I point again to the figures to which I referred and to how difficult that switch-around will make matters for women in low pay.
What is to be done? First, let me excuse myself by saying that the document is a consultation paper and I introduced the debate not because I have cut-and-dried answers to the problem but because I am keen to put forward a few pointers and suggestions and anxious that others should also put forward their pointers. Certain facts seem plain to me. At present, only the state can remove the unpredictability of women's working lives in relation to pension provision. If both current and future generations of women pensioners are to come out of poverty, it is essential that the basic state pension should be improved, for example, by increasing it at least to the current level of means-testing, by linking it to earnings growth and considering raising age-related additions.
Obviously, the remaining gaps in basic state pension coverage must be plugged by changing the eligibility criteria. The system was designed around a post-war breadwinner-dependent model of work, which is in radical need of updating. It does not fit many men's work patterns these days and it certainly does not fit women's. The requirements have now become unrealistic. People are going into education for longer and starting work later. Further minor but important proposals include reconsidering the lower earnings 8WH limits. At present, 1.4 million women earn less than£75. At that rate, they will never accrue any NIC credits at all.
Clearly, the number of years of paid employment that is required for entitlement to a full basic state pension should be reduced. I suggest that the definition of "contribution year" could be altered to allow for some sort of aggregation of part-time work into the contribution rate. As I understand it, the Government currently contribute£60 billion to pensions but, in a different sense, they also contribute£20 billion through the tax relaxations available for investors in private pensions. That money could be better used to redress the imbalance in pension provision. I fear that if none of those ideas is taken up and if more radical steps are not taken, in 15 or 20 years, when Eileen is retired on her£30-a-week pension and I have retired on my gold standard—relatively speaking—parliamentary pension and we tune into the Parliamentary channel to hear someone talking about women and pensions, the appropriate subtitle of the debate will continue to be "A Tale of Women's Poverty and Inequity".
Mr. Deputy Speaker
Order. I intend to start the winding-up speeches at, or just after, 10.30 am. I think that four hon. Members want to catch my eye in the debate, so if they are self-disciplined and speak for six or seven minutes each, we shall get them all in.
§ 10.3 am
§ Annabelle Ewing (Perth)
I congratulate the hon. and learned Member for Redcar (Vera Baird) on securing this important debate. As has been said, the majority of the poorest pensioners are women. There are several reasons for that, including the well-documented pay gap that women experience during their working lives, even if they are working full-time. Many women work part-time, mainly because they have commitments to look after children, older relatives or both. In addition to receiving lower pay for such part-time work, those women are also unlikely to have any pension provision additional to that of the state pension. Many women have incomplete national insurance contributions records. What should the Government be doing to deal with those problems and ensure that women have decent pensions and are not forced to live in poverty?
In light of the time constraints this morning and the fact that other hon. Members wish to contribute to the debate, I shall simply examine a couple of issues. First, the married woman's stamp is a matter of concern to many of my constituents. Were women who paid the reduced stamp made fully aware of the consequences? Many of my constituents were unaware of the consequences of exercising that option in any detail and they now find themselves facing a bleak future. Does the Minister think that that is equitable and do the Government intend to offer any hope to women in such a position? What plans do the Government have to provide women who have not yet reached pension age and who have incomplete national insurance contributions records with pension forecasts? That would be a useful exercise.
The second key issue, to which the hon. and learned Lady alluded, is the provision of a decent basic state pension. The lack of a decent basic state pension 9WH penalises those women who have an incomplete employment history. The Government's latest approach to the issue is the pension credit, but it is difficult to see how that is compatible with ensuring a decent state pension for all because it is premised on a massive extension in means-testing of pensioner benefits. As I have said many times, the massive extension of means-testing runs contrary to the Labour party's 1997 manifesto commitment.
§ Annabelle Ewing
Today, we are talking about the Government's policies. The Scottish National party is arguing for a decent basic state pension and we are not in favour of the massive extension of means-testing proposed in the State Pension Credit Act 2002. The Minister will be aware that I voted in favour of that Act, but I did so having expressed concerns about the effect of means-testing on take-up, concerns that I have expressed again today.
§ Annabelle Ewing
I will not take another intervention because I have only a few minutes left if I am to allow time for other hon. Members to speak.
That is the key issue for dealing with pensioner poverty and women pensioners in the long term. Means-testing demeans pensioners. They feel disinclined to take up means-tested benefits. The system is incredibly complex. It acts as a disincentive to save and has a negative impact on take-up. The Government's record on the take-up of means-tested benefits is poor, as is their record on tackling pensioner poverty. Indeed, in Scotland, after six years of a Labour Government, one in four pensioners lives in poverty. That is a scandal at the beginning of the 21st century. The most effective way to tackle pensioner poverty, including poverty among female pensioners, is to set the basic state pension at a decent rate.
§ 10.9 am
§ Lynne Jones (Birmingham, Selly Oak)
I congratulate my hon. and learned Friend the Member for Redcar (Vera Baird) on raising this important issue. Women are, and are destined to be, among the poorest pensioners. I am old enough to have paid the married woman's stamp for a short time. I did so simply because I was just starting my career and life was tough. Every penny saved was welcome and I did not look beyond my immediate needs. That must apply to many women.
As my hon. and learned Friend said, many people who carried on paying the married woman's contribution ended up contributing more than they would have done had they paid earnings-related national insurance contributions. I hope that my hon. Friend the Minister will respond to that point. It is important and relevant to the fact that women who do not have a full pension contribution record will not benefit in full from the Government's pension credit. Something should be done to recognise that fact and to improve married women's basic state pension.
10WH The pension credit is a useful mechanism to assist men and women on small occupational pensions who feel aggrieved because, having put by savings for an occupational or personal pension, they find themselves no better off than if they had relied on the state. Instead of being penalised 100 per cent. for every additional pound of savings, they are to be penalised by only 40 per cent. However, I echo the calls from both previous speakers that a more effective way of dealing with the problem would be to set the basic state pension at the same level as the means-tested benefit. There is a growing clamour for that, not just among old socialists such as myself, but increasingly in the pensions industry.
The Government said that they wanted to increase the proportion of pension savings from the private sector and reverse the current balance of 60 per cent. state and 40 per cent. personal, but they will not succeed unless the basic state pension provides a secure platform so that people can have confidence that everything that they save will benefit them in the long run. It is not only the Institute for Public Policy Research—the so-called favourite left-wing think tank—that is calling for that measure, but other bodies, pension experts and organisations such as the Pensions Policy Institute and the Faculty of Actuaries. That is crucial if we are to have a stable, long-term pensions policy.
The Government have made pensions so complex that people can have no confidence in what the future will bring. I hope that we shall have a Labour Government long into the future, but if no one understands the pensions system it is easy for it to be undermined by future Governments. That occurred with the state earnings-related pension scheme, which the previous Tory Government undermined and, to some extent, the basic state pension with the removal of the right to earnings-linked basic pension and the link to prices.
It is now possible for people to receive annual statements and if we still had the system that Barbara Castle put in place it would be difficult for future Governments to undermine it because people would receive a statement of their entitlement year on year, but that is not the case with the current complexity. It would be difficult to tell people about the interaction between their private, personal pension and the state pension. When I ask parliamentary questions on that matter, the Government always shy away from answering them. We are to require occupational providers to give an annual statement, but there is no provision for giving information about the interaction between the occupational or personal pension and the loss of state entitlements to means-tested benefits because of small pension savings.
In my book, the Government need to be more concerned about the pension savings of people on low incomes than of people on higher incomes, who can take care of themselves. People in this Chamber have access to a good pension and the interaction with mean-tested benefits is of no interest to them. It is of interest to the people for whom saving for a pension means doing without other basics that we take for granted. It would be wrong for the Government to encourage people to embark on personal and private pensions that will leave them no better off than the pension they would have received had they relied on the state. That is the great danger of the Trades Union Congress campaign for 11WH compulsory pensions. We could find ourselves forcing people to make savings for pensions that will leave them little or no better off than if they had saved in other vehicles.
If future generations are to be better off than today's pensioners, we will all have to save more than we do. The question is how we make those savings. It is essential that we have a strong platform of state benefits, which will enable people to make personal savings with confidence. That particularly affects women, who, as my hon. and learned Friend explained, earn far less and have a shorter earnings span than their male counterparts. If women have private pensions and are not fortunate enough to have good occupational pensions with defined benefits, which will increasingly be the case, they will find that if nothing is done on average their personal pensions will be 10 per cent. less than men's, because of the difference in annuity rates.
The Green Paper touched on that matter, but the Government have shied away from doing anything about it on the basis that because women live longer it would be wrong to require that their pensions from annuities be set at the same level as men's. On average, wealthier people live longer, but if anybody suggested that a rich person should have a lower annuity rate people would be outraged. The Government should deal with that question and make it illegal to discriminate against women in relation to personal pensions.
The Government do not need to worry too much about more affluent people setting money aside for their pensions, but they need to do more to encourage people on low incomes to do so. According to a parliamentary answer on the cost of giving tax relief on pension contributions to higher rate taxpayers, if that tax relief were withdrawn and tax relief were given only at the basic rate, it would save about£1.7 billion. I strongly advocate that, in the interests of having a more robust pension system, the Government should consider redistributing that money to encourage people on low incomes to make more pension savings, perhaps by having a£1 Government contribution for every £1 of savings that people make. That would be much easier for people to understand than current tax relief arrangements. I welcome the proposals in the Green Paper to simplify the tax basis for pension contributions, but there is no real proposal for the distribution of Government support for pension savings. I hope that the Minister will consider that matter.
Time is short, so I shall make my final point. The Green Paper shows that the Government recognise that low-paid and part-time working women may face difficulties in accruing sufficient individual rights for their state pension. It also said that the Government would continue to review the effect on overall entitlement to contributory and other benefits in retirement. Would the Minister give us some idea of the Government's thinking on the matter?
Mr. Deputy Speaker
Order. Before I call the next speaker, I wish to thank the hon. Member for Perth (Annabelle Ewing) for her self-discipline. Unfortunately, just as she sat down, I was advised that a Member who I thought was seeking to catch my eye 12WH had to leave to go to a Committee of the House. Therefore, there is not as much pressure on time, but I thank the hon. Lady for her self-discipline and co-operation.
§ Mr. Mark Francois (Rayleigh)
I shall still attempt to abide by your earlier instruction, Mr. Deputy Speaker, not least because the subject is highly complex. If I keep my remarks relatively brief, I will allow more time for the real specialists to discuss it in their winding-up speeches.
I congratulate the hon. and learned Member for Redcar(Vera Baird) on securing this important debate. I was intrigued to hear that she and a team of Labour activists will be out pounding the pavements in her constituency on Saturday. I would be genuinely fascinated to hear about the results of their endeavour as I suspect that they could be in for a fairly lively morning, given present circumstances.
If we are to have a broad debate on pensions, we must debate them in the context of what is happening to all pensioners, whether they rely solely on a fixed state pension or also belong to a final salary scheme or have made private pension provision. We must discuss pensions against the background of, effectively, a collapse in the stock market in the past few months. At the close of business last night, the FTSE had fallen below 3,500, compared with a peak some two years ago of, I believe, well over 6,000 points. That has several important implications for people with private personal pensions, which, obviously, are largely dependent on stock market values.
It is fair to ask what the Government have done to influence such matters, and it is impossible to ignore the Chancellor of the Exchequer's£25 billion raid on pensions, which began during the first Parliament of this Labour Government. At that time many people, particularly Conservative Members, warned that such an act was not as simple as it first appeared and that the Government could not take£5 billion a year in taxation without important knock-on consequences. That has proven to be exactly the case. Many final salary schemes have closed and that has affected many women.
Mr. Deputy Speaker
Order. The thrust of the speech of the hon. and learned Member for Redcar (Vera Baird)—and, therefore, the subject of the debate—is pensions and women, not pensions in general. As long as the hon. Gentleman relates his remarks to women, he will remain in order.
§ Mr. Heald
Does my hon. Friend agree that one of the hopes for the future for women's pensions had been the fact that 66 per cent. of women in work have some private provision and that 58 per cent. have occupational pensions? Does he agree that the effect of the Chancellor's raid on pensions and the disastrous impact that that has had on the stock market has damaged women's prospects in a very real way?
§ Mr. Francois
I entirely agree with my hon. Friend. As he pointed out, many women are very reliant on that 13WH type of pension and took reasonably rational decisions to invest in them some years ago when the stock market appeared to be performing in a particular way and, crucially, against a certain set of taxation rules. Those have now, in effect, been altered by the Chancellor with his grab raid.
§ Mr. Francois
I will in one moment, when I have finished my point. Now that the Chancellor has altered those rules, many of those women, who took perfectly rational investment decisions at the time, have suffered mortally.
§ Maria Eagle
Given that the hon. Gentleman is discussing my right hon. Friend the Chancellor's taxation regime, will he mention the£3.5 billion a year offsetting corporation tax reductions that my right hon. Friend instituted at the same time?
Mr. Deputy Speaker
Order. I really do not think that the hon. Gentleman needs to respond to that question, as it is not entirely relevant to pensions.
§ Mr. Francois
I thank you for your guidance to the Minister, Mr. Deputy Speaker. I am sure that she has listened to it carefully.
Many female pensioners live on fixed incomes, as the hon. and learned Member for Redcar mentioned. Any sudden increase in taxation can therefore have a particularly adverse effect on them. They often have few financial resources on which they can fall back to pay the increases. I realise that we are debating not council tax this morning, but pensioners living on fixed incomes, many of whom are women. They will suffer in particular when large council tax increases are introduced in April. I shall not dwell further on that matter.
I intervened on the hon. and learned Member for Redcar on picking up pensions at post offices and her reply did not entirely satisfy me. At a post office on pension day, the majority of people picking up their pensions with their giro books are women. A straightforward system has been in place for many years, under which pensioners take their giro books to the post office every week to pick up their pensions. That is beautifully simple and everyone can understand it. Several hon. Members have pointed out that pensions are complicated to begin with. The Government have now complicated the matter further. When those women pensioners go to the post office to pick up their pensions, they will no longer be able simply to use their giro books, which they have been accustomed to for many years. They will either have to have a card or open a bank account at the post office.
We are not debating post office closures this morning, although I think that the hon. and learned Member for Redcar thought that that was the point that I was seeking to make. Several female pensioners have come to my surgery to protest at the change because they are very anxious about it. I have also had quite a few letters from anxious pensioners. Their simple point is that the system works very well and is not complicated. They want to know why they have to go through all these new-fangled arrangements when the old method worked 14WH well. I have written to Ministers to try to get that argument across and have been met with, in effect, a stone-wall response.
Given that we are debating the complexity of pensions this morning, my real point is that the system is complex enough, but that one aspect of the payment of pensions to our pensioners, many of whom are women, was delightfully straightforward. This Government, who cannot resist meddling, had to go in and fix something that was not broken in the first place.
§ Mr. Francois
I will in a moment, but I have an eye on the clock.
The change has caused a great deal of distress to pensioners who do not think that it is necessary. It has worried them and it did not need to happen.
§ Vera Baird
So far, the hon. Gentleman has ranted about the stock market, post offices and taxation. I am beginning to think that the Conservatives are not interested in the topic of this debate, which is women.
§ Mr. Francois
The hon. and learned Lady is entitled to her opinion, but I have some bad news for her. It is because of such actions that the Labour Government's poll rating has imploded in the past 18 months. Labour Members do not like it, which is why I am delighted to mention it. With that, I conclude my remarks.
§ Mr. Steve Webb (Northavon)
I sincerely congratulate the hon. and learned Member for Redcar (Vera Baird) on bringing this subject to the Chamber this morning. It is vital that the position of women and, in particular, the married woman's stamp, to which I shall return, are considered as an all-party matter. We are all hearing from our constituents about the matter and I hope that the Government will respond positively.
The hon. and learned Lady signed early-day motion 131 on the married woman's stamp, as have other hon. Members who have spoken this morning. It has been signed by more Labour Members than those from other parties and I hope that that will send a signal to the Minister that both sides of the House believe that the issue needs to be addressed. I shall return to the married woman's stamp because one aspect of it is not understood as well as it might be in terms of how we might deal with the problem.
I have a couple of suggestions to the Government on pensions policy that would particularly benefit women. The first relates to the basic state pension. As the hon. and learned Member for Redcar said at the outset, she would like the basic pension to be substantially increased for everyone and referred particularly to older pensioners. Increasing their pensions substantially would be a step in the right direction and would profoundly benefit women. When I asked written questions about that the Government replied that their minimum income guarantee strategy is more effective at targeting the poor.
The Minister should be aware, as I am sure she is, that the computer models used by the Department to estimate the effects of the minimum income guarantee 15WH policy assume that everyone takes it up. As a result, two inconsistent policies are compared. Everyone takes up the age addition policy because we know that the pension take-up is, as near as damn it, 100 per cent. It is assumed that the minimum income guarantee take-up is 100 per cent. when another arm of the Department assumes in its public spending projections that two thirds take it up. Both cannot be right. The Government say that they are doing more for the poor because the MIG goes only to the poor. My answer is that the poor who receive it obviously do better, but the poor who do not receive it do not receive a penny. When age additions are used, they are all taken up, predominantly by women, and that is the only guaranteed way of getting money to the poor. Some will spill over to woopies—well-off, older people—but that is the price for guaranteeing that money goes to the poor. There is no mechanism for guaranteeing money to old, poor people other than through the basic pension.
§ Maria Eagle
Does the hon. Gentleman accept, as my hon. and learned Friend the Member for Redcar (Vera Baird) certainly would, that some younger pensioners are also poor? How would age additions help them?
§ Mr. Webb
The Government have decided that the extra money they give to pensioners, instead of going on the basic pension, will go on earnings-linking the MIG. That is a legitimate policy choice, which the Tories accepted in the 1990s. They decided 'to put more money not into the pension but into the means test. That benefits young and old alike if they claim it, but one third of those who are entitled to it do not benefit. My strategy would get money to all older pensioners, many of whom are poor and form the majority of the poorest pensioners. I am not suggesting that we scrap the MIG but asking that when a decision is made about the marginal pound it should go on age additions.
§ Maria Eagle
I thought that the hon. Gentleman's party wanted to scrap the pension credit, which is the MIG.
§ Mr. Webb
We are saying that, starting from here, when the pension credit has not come in, we would have spent that£2 billion on age additions and extra pensions for older pensioners. However, the pension credit will be introduced next year. We would not scrap it, but in time we would reduce dependence on it by increasing pensions for older pensioners. That is our strategy and I hope that it is clear.
No one is denying that there are poor pensioners in their 60s, but the Government's approach fails to realise that non-take-up is predominantly a female phenomenon. Most pensioners who do not take up the MIG are female and most are old. Only age additions are guaranteed to get money to them.
My second point concerns compulsory private pensions. I agree with the hon. Member for Birmingham, Selly Oak (Lynne Jones) that we must ask the question, "Compulsion on top of what?" Compulsion on top of a pathetic basic pension that only brings people up to a means test is a dud deal. However, compulsion on top of a basic pension that is worth living 16WH on is a pro-women policy. In Australia, where that is done, the people who gained were those who had not previously been covered by occupational provision, and guess who they were—women and part-timers. Therefore, in Australia, mandatory employer contributions to pensions have boosted those who were previously not pensioned, and they are predominantly women. If the state does its bit through redistribution and by paying a decent basic pension to older pensioners, in particular, mandatory private provision need not be a pro-men policy. It can fill the gaps, which predominantly affect women. Compulsion can therefore be a pro-women policy.
I was delighted that the hon. and learned Lady mentioned the married woman's stamp, which is my main topic. I raised it with the Paymaster General in Committee last Thursday, when we debated a regulation on the rate of that stamp. Other hon. Members and I opposed the decision to increase it by 1 per cent., and the House will have a chance to vote in a deferred Division on Wednesday on whether to increase the rate. We took the view that we should not increase it because it is unfair and already too high.
The interesting exchange between the hon. Member for Upminster (Angela Watkinson) and the hon. and learned Member for Redcar about whether women knew what they were doing when they signed up for the married woman's stamp demonstrated that some did know and some did not. I do not pretend that no one had a clue what they were doing. However, I have had thousands of letters from women throughout the country who say, independently, that the issue was not explained at the time. As the hon. and learned Lady mentioned, their employers did not explain it to them. They would be 19 or 20 and would have just got back from their honeymoon when the man from payroll would come round and say, "Did you have a nice honeymoon, love? Sign here. You're a married woman now and this is what married women pay." I do not pretend for a second that no one knew; I am simply saying that some people did not. That said, we will not get far with that argument because no one can prove anything now.
Incidentally, the Paymaster General told me that she paid the married woman's stamp but later realised that she had made a mistake. If someone that financially literate made a mistake, one wonders how clear the choices were. None the less, the Minister will no doubt tell us, "All these women signed a form, read a leaflet and knew what they were doing." Even if we suppose that that is true, we must remember that women subsequently had to decide whether to carry on paying the married woman's stamp, and various changes to the women's pension regime made the stamp less attractive.
The hon. and learned Lady mentioned home responsibilities protection, but her caseworker would not have got it even if she had had her children later because women on the married woman's stamp were excluded. As they say, not a lot of people know that. Once HRP came in, many women who were on the married woman's stamp in the early 1980s should have switched back and got it. That said, the hon. and learned Lady was talking about the end of the 1980s, by which time a lot of the damage would have been done to her caseworker's pension record. In the early 1980s, many 17WH women could have switched back but they did not do so. The issues were too blooming complicated and women did not get proper explanations.
I do not expect the Minister to pay much heed to me, but I urge her to listen to her colleagues, more than 70 of whom signed the early-day motion. I urge her to get the Government Actuary to examine the issue independently—there is no need to listen to me or to anyone else. The Government Actuary should look at the value for money, or otherwise, of the married woman's stamp, how changes in the women's pension regime in the 1970s and 1980s affected the attractiveness, or otherwise, of that stamp and whether people had the necessary information to make an informed choice.
The Minister will tell us that officials wrote to women in 1977 and 1989, but even now, with all the advantages of decades of technology, the Government do not know where half of them live. I therefore do not believe that in 1977, or even in 1989, the Government could have written to all those women telling them how the system worked so that they could make an informed choice.
You will have gathered that I could drone on all morning, Mr. Deputy Speaker, but I will not do so and I am sure that you would not let me. I enormously welcome the fact that the hon. and learned Lady discussed the married woman's stamp in such an informed way. Married women's pensions are on the agenda and a chapter in the Green Paper listed the problems quite well, although it contained virtually no solutions. There are things that could be done. Age additions benefit women and mandatory private provision for the long term benefits them, too. Action on the married woman's stamp would also be hugely beneficial.
We are calling for a fair return for married women, not something for nothing. These women paid thousands of pounds in national insurance and they should get a fair return on their contributions, rather than nothing.
§ Mr. Oliver Heald (North-East Hertfordshire)
I should declare an interest. As a barrister, I practised in the area of divorce law, and I want to make a point about pension sharing.
We have had a good debate and I start by congratulating the hon. and learned Member for Redcar (Vera Baird) on raising one of the most important issues to do with pensions. My hon. Friend the Member for Rayleigh (Mr. Francois) said that we could not ignore the background to pensions when considering the position for women. It is true that the present situation has many depressing features. However, it is especially sad that the positive picture and hopes for the future—the predictions that, by 2025, women would receive on average 90 per cent. of the basic state pension rather than the current 70 per cent.; the fact that two thirds of women now have private sector provision; and the fact that more younger women are investing than younger men—have been so grievously undermined by the Government's policies.
There is no doubt that the Chancellor's raid on pension funds will have a special impact on women. That is because 58 per cent. of the two thirds of women 18WH who have private provision do so in occupational schemes, which are closing at a record rate. According to the National Association of Pension Funds, the rate has doubled in the last year. The association is warning that many schemes are to move towards wind-up. We face a depressing background, given what might have been had the Government not acted as they did.
I agree with the hon. and learned Member for Redcar that every person, man or woman, should have an adequate pension. At the moment, we are in a period of transition from an earlier age, when a spouse tended to rely on the main earner's pension, to the current—and, let us hope, permanent—stage, when everybody has independent pension provision of their own. At the moment, women receive on average only 71 per cent. of the basic state pension. The Pensions Policy Institute recently published "The Pensions Landscape", which shows that the poorest pensioners are older, single women. As the hon. and learned Lady said, the Fawcett Society has recently produced a survey that shows that 46 per cent. of single women pensioners are in poverty, which is a sad and unsatisfactory position for a modern, civilised, western society.
The Government's response has been to load their hopes on to means-testing. However, the sad fact is that the approach is failing. On page 14 of "The Pensions Landscape" there is a good survey of what has happened between 1996–97 and now, which shows that the income of single pensioners as a percentage of national average earnings has not changed at all since 1997, and that the gap between rich and poor pensioners has widened. Means-testing is failing. Some 600,000 households were not receiving income support in 1996. Now, 770,000 do not receive the minimum income guarantee.
For all the talk of take-up campaigns and other things with which we would all agree, the policies have failed and the predictions and targets for the future are even more depressing. The Government's target is for 1.8 million households not to receive pension credit, which replaces the minimum income guarantee, because those households will not take it up. Even by 2006, the Government's target is for 1 million households not to receive the benefits
There is a sleight of hand in all that. The Government like to say how generous they are through their various means-tested benefits, while recognising that large numbers of people—a third—will not take them up. The Government get a very good press release at a modest price. I worry that that is the reason for such an approach. It is worth pointing out that a consensus is emerging, through Help the Aged, the National Association of Pension Funds and the CBI, that we should be considering whether we could simplify the state system to make it of more benefit to women and men so that they have an incentive to save on top of the basic state pension.
The hon. Member for Birmingham, Selly Oak (Lynne Jones) made an important point about giving people genuine, attractive incentives and flexible methods of saving. The lifetime savings account, which was announced at the Conservative party conference last year as a step in that direction, would allow Governments to add contributions to individuals' savings. People could withdraw money for important events, such as a deposit on a house or a school trip; indeed, for anything. Provided that they had returned 19WH the money to the account by the time they retired, they would get the Government contribution. It is worth considering whether the present savings system, with its very tight lock-in arrangements for pensions, will encourage the maximum number of people to save.
It is worrying that young people are deferring the decision to invest in a private pension scheme. Every five years, fewer young people go into pensions. They may be saving for other things and find it impossible to put money aside at that age for their retirement. However, a flexible lifetime savings account would enable us to tackle that problem by allowing the money to be withdrawn and returned while retaining the incentive.
Two thirds of women are in an occupational pension scheme, and the concern must be that the collapse in the occupational pensions sector will damage women more than men. It would be a good thing if the Government could find ways of helping those who did not understand the married woman's stamp system when they entered into it. I will listen to the Minister with great interest on that.
It was thought that one of the reasons that women did not have the pensions they should have had was that, on divorce, they did not receive adequate provision to have a pension of their own. Pension sharing was introduced to tackle that. However, there are problems with how it works. The cash equivalent transfer value that is used to value the assets of the pension at the time of divorce can be valued in a way that causes surprise in many cases. The cash equivalent transfer value is often very low considering the sort of benefit that it is supposed to be marked against.
In one recent example, an investment yield of 11.22 per cent. was used as an assumption in achieving a cash equivalent transfer value. The Government's Green Paper contains a presumption of 6.55 per cent. The effect of the transfer value being too low is that when the woman's share is paid out—if it is a woman—the capital that she receives is much too low to establish the sort of pension that the court thought it was establishing for her. There is a real issue of fairness there, and I should be grateful to know what the Minister says about it.
The second point is that, all too often, if the wife's share remains in the scheme it is a money-purchase share, whereas the husband's is a defined benefit share. He gets a return of 10 per cent. and she gets a return of 5 per cent. What does the Minister have to say about that?
I want to move on to equivalent benefits in public sector schemes. If the husband can take his pension at 50 but the wife must wait until she is 60, as is the current position, the husband can have lost his pension share and be receiving a lower pension at 50. A court can require him to pay maintenance to the wife until she is 60 and can receive her pension share, but his income is inadequate to pay her a reasonable level of maintenance. I am interested to hear what the M inister says about that.
Are we to move to a situation where private pension provision must be taken at 55 rather than the current age of 50? Several existing court settlements have been achieved on the basis that maintenance will be paid by the husband until the age of 50, at which point the wife will receive her pension share and rely on that. Will 20WH provision be made in any change to reflect the fact that existing court settlements have been based on the current law and that there may be some disadvantage to women if those settlements cannot be continued?
This has been a fascinating debate, but my time is up.
§ The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)
I agree with one thing that the hon. Member for North-East Hertfordshire (Mr. Heald) said, which is that this has indeed been a fascinating debate. As ever on such occasions, we never have time to get through all the points that need to be raised. I apologise in advance because I will not be able to answer all the questions that have been put to me. I will, of course, try to write to hon. Members who have not had an appropriate response by the end of the debate.
First, I congratulate my hon. and learned Friend the Member for Redcar (Vera Baird) on securing the debate and also on the way in which she set out her points. I shall try to answer some of her main points. She is absolutely right that the demographic features and realities that face us today are obvious; people are living longer and women live even longer than men.
As we are all living longer, our pensions system must be able to deal with that by funding longer periods of retirement. That is a challenge for men and women alike. However, if a woman retires at 65—as will shortly be expected of her in any event—her life expectancy thereafter is 19 years. It is salutary to bear that in mind. The general challenge of extended lives is a good thing I am not advocating shorter lives—but extended lives present a challenge to the state and the private pensions system of which we must be aware.
Of course, it is not just this country that is facing up to those challenges. In many ways, this country is in a better position than others that have large, unfunded, pay-as-you-go state systems. Despite the doom and gloom that one hears, we have a relatively high level of privately funded pension provision in comparison with international standards, and with European standards in particular. Therefore, the combination of targeted state support with a well-developed private funded pension system puts us in a relatively strong position.
We are still in the consultation period, and I am sure that today's debate will be taken as a contribution to that. I have said that we are in a strong position, but the Green Paper recognises that there are particular issues that make it harder for many women to build up adequate pension provision. We are alive to those issues and are actively consulting and taking views from organisations such as the Fawcett Society about what we might do to improve the situation.
There are specific challenges that face women that can be expressed in a nutshell as lower employment rates and longer life expectancy, as my hon. and learned Friend the Member for Redcar put it. However, it is not all bad news. Women in full-time employment are just as likely to have occupational pension coverage as men. In fact, 60 per cent. of women in full-time work have occupational pension coverage, the same percentage as for men. So, there are some good signs. Those women will benefit from many of the proposals in the Green Paper in the same way as full-time working men.
21WH Also on the positive side, the employment rate for women continues to rise. Between 1979 and 2002, the employment rate for women aged 25 to 34 rose from around 52 per cent. to over 70 per cent. and childbirth and child care now have a far lower impact on women's employment rates than they did in the 1960s and 1970s. That should have a positive impact on tomorrow's female pensioners.
We have to face up to some issues, particularly in respect of existing pensioners. Pensions are an intergenerational contract; they must be fair and equitable between generations and affordable and sustainable in the long run if the regime that we end up with is to last long enough to enable people to plan. We have to keep in mind the intergenerational importance of the pensions promise.
§ Lynne Jones
Does my hon. Friend consider that the current melange of provision can continue for the next 30 to 50 years?
§ Maria Eagle
I certainly think that it is affordable. One of the main elements that a system needs if it is to last is affordability. The others are fairness and equity.
I should like to deal with some of the issues that have been raised. The first is the married woman's stamp. Since 1997, women have been unable to elect to pay married woman's reduced rate contributions and those who had already elected to do so have been unable to continue paying at that level. Many hon. Members—not only my hon. and learned Friend, whose researcher is in that position but the hon. Member for Upminster (Angela Watkinson) and others—have made it clear that it is a difficult issue. There is no doubt that people had different perceptions. I receive as many letters from those who tell me that they knew exactly what they were doing and that those around them opted to pay less because they did not want to pay as much—knowing what that would mean for their pensions—as I do letters saying, "I did not have a clue what I was signing up for."
Many hon. Members have suggested that we should enable those who made that election to go back and make a different choice. The difficulty—administrative 22WH issues aside—is what that would mean for those who made a different choice. Should we also give them the opportunity to go back and choose again, and to rejig their contributions? I have only to mention that to put across the problem that we face in trying to do anything. One has to be fair to the entire population, which is not easy.
I do not accept that those married women received nothing in return for their contributions. They paid a much smaller stamp and have always been eligible for widows' benefits. They later became eligible for statutory sick pay and statutory maternity pay, although I agree that that election affected their pensions most of all. Nevertheless, married women who opted to pay reduced rate contributions made an informed choice. They were required to give written notice of their decision and had to complete a form saying that they had read information. At any time since, they could have opted back in to the full rate. It is not true that they made a once and for all decision and nothing more could have been done. I accept that there are aggrieved people around, many of whom are now seeing the consequences of their decisions, but it is not easy to deal with the matter in the ways that have been suggested.
§ Maria Eagle
The Government accept that the issue has to be considered; we are always willing to do that. However, there is no easy solution and none that would be fair to women of all ages. We are considering not only the women who elected to pay the reduced rate stamp, but those who, in full knowledge, did not; they wanted to make pension contributions. We have to be fair across the board, which makes the issue very difficult. I shall have to answer the many other points that have been made by hon. Members by writing to them.