Pension Reform (Hansard, 16 September 2003)

§ Mr. Pond

We have recognised the need to reform the pension system of the UK. Our approach has been, in the first instance, to focus additional spending on the poorest pensioners. This means achieving a balance between providing a solid foundation of support for all while targeting support at those who need it most. Pension Credit will, from October guarantee everyone (who applies and qualifies) aged 60 and over an income of at least £102.10 a week for single pensioners, (£155.80 for couples). These amounts will be more if pensioners have caring responsibilities, are severely disabled or have housing costs.

For the first time, Pension Credit will reward people aged 65 with modest savings or income. In the past, those who had managed to save a little were left no better off than those who had not saved at all. People who had capital of £12,000 or more could get no help however low their income.

Pension Credit will change this by giving new money to those 65 and over who have saved. This will be worth up to £14.79 for single pensioners, £19.20 for couples.

Pension Credit is radically different from the Minimum Income Guarantee in that pound for pound deductions will be scrapped. And the credit will reward those over 65 with total weekly incomes up to £139 for single pensioners, £203 for couples. Around half of all pensioner households will be eligible and stand to gain around £400 a year on average.

The basic State Pension will remain the foundation of income in retirement on which to build. Between April 2000 and April 2003 the basic State Pension has increased by almost £10 a week for a single pensioner and £16 a week for a couple. This represents an increase of over 7 per cent. in real terms. We will continue to uprate by either 2.5 per cent. or RPI, whichever is higher for the remainder of this Parliament.

We have recognised the importance of a good second pension by reforming SERPS. From April 2002, 20 million people—2.5 million carers, 2.5 million longterm disabled people and 15 million low to moderate earners—begin to benefit by building up a State Second Pension.

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The Government also introduced Winter Fuel Payments (WFP) for people aged 60 and over. The WFP is £200 a year for qualifying households and will continue to be paid at this rate throughout this Parliament.

People aged 80 or over who are entitled to a Winter Fuel Payment will get an extra £100 per household. This is the 80+ annual payment which will be paid as part of the Winter Fuel Payment, to those who are aged 80 or over in the qualifying week (15–21 September this year).

The Government have also introduced free TV licences for the over 75s and there have been increases above the rate of inflation to the Pensioners' Tax Allowances.

In 2003–04, the Government will be spending around £8 billion extra a year on pensioners as a result of policies introduced since 1997. This includes £3.75 billion more on the poorest third of pensioners. This is almost six times more than an earnings link to the basic State Pension since 1998 would have provided.

We have also recognised that there is a need to address reform of private pension provision. Our Green Paper 'Simplicity, security and choice: Working and saving for retirement' set out our proposals to radically simplify the pensions system including reducing eight tax regimes into one, ensure that individuals have access to the right information to make informed pensions savings choices and ensure that older workers can access the employment opportunities they deserve and balance this with flexible retirement choices.

To build on this, after the largest consultation on pensions ever, we published 'Working and Saving for retirement: Action on occupational pensions' in June which introduced a balanced package of measures to assist employers in providing occupational pension schemes while ensuring protection for pension scheme members. We will set up a Pension Protection Fund, the first ever protection scheme for defined benefit pensions, bring in measures to ensure that where a solvent company chooses to wind up its scheme it will fully buy-out members benefits and establish a pensions regulator that will target badly run and high risk schemes in order to put consumers first.

There is a need to engage with employers to reinvigorate the pensions partnership and that is why we have set up the Employer Task Force to identify and promote employer lead solutions. We also have accepted that there is a need to consider the voluntarist system in the longer term and to monitor progress independently. Therefore we have set up the Pensions Commission to monitor and keep under review the system of private pensions and long-term savings.

There is also a need to make individuals aware of their pension provision—both from the State and private saving. That is why we are extending combined state and private pensions forecasts through a concerted and targeted campaign. We will continue to develop a web-based retirement planner and will pilot a scheme for employer-based information. All these measures will seek to enable individuals to make the right pensions choices from a more knowledgeable position.

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We have recognised the need for pension reform from both a State and private perspective and will continue to press ahead with our proposals of targeting resources and expanding provision.