Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Vara.)
It is a privilege to have the debate under your chairmanship, Mr Weir. I asked for the debate because, like many other hon. Members, I have been contacted by many women in my constituency who will be badly affected by the Government’s plans to accelerate the timetable for equalising the state pension age. That has come as quite a shock to many of them. They thought that they were nearing the end of their time in the labour market and had been looking forward to and planning for their retirement.
The Pensions Bill is due to be introduced in the House of Commons shortly, so I am grateful to have the opportunity to talk about the proposal in advance of its being spoken about in the Commons. I hope that this debate will also help to raise awareness of the issue among hon. Members and possibly their wives, sisters and mothers, and among other women who will be affected by the change but have not yet realised that.
All the main political parties accept that overall life expectancy is increasing and that the state pension age for women should rise and be in line with the age for men. I do not oppose the equalisation of the state pension age, nor do many of the women for whom I am speaking. In fact, they have already accepted an extension of the date when they will receive their pension. The issue is how the Government are going about accelerating that. Like many others, I think that the Government’s accelerated timetable is unfair and will have wider implications for our pensions system and for society as a whole.
It is worth taking a few moments to set out some of the background to the debate. Under the current timetable, women’s state pension age was scheduled to rise to 65 to be equalised with that for men in 2020. It was then to rise to 66 for both men and women by 2027, to 67 by 2036 and to 68 by 2046. Under the Government’s new plans, the state pension age for women will follow that schedule only up to 2016, when it will rise to 63. It will then rapidly accelerate to 65 by 2018 and to 66 by 2020.
The overall impact of the change means that 2.6 million women and 2.3 million men will have to wait longer than expected to qualify for their state pension. However, there is a small cohort of women who will be hardest hit by the change simply because they were born at the wrong time. I have to declare an interest as one of the 500,000 British women born between 6 October 1953 and 5 March 1955. They will have to work for another one to two years before they reach the state pension age. The women who will have to wait two years stand to lose £10,000 in pension income and up to £15,000 if they would be in receipt of pension credit. Under the Government’s plans, we will have a deeply unfair situation in which, for example, a woman born on or before 5 April 1953 will reach the state pension age at 62, but those born on 6 April 1953 will retire at 65. Many of the women who have written to me consider that age discrimination, and they have a point.
It is important to note that the proposal was unexpected—it has been sprung on these women. It was in neither the Conservative nor the Liberal Democrat general election pledges and it was not in the coalition agreement. The women who will be affected by the Government’s U-turn will not have enough time to plan for the further change in their circumstances.
Like many other hon. Members, I have constituents who are affected by this issue. For example, my constituent Mrs Janet Davies of Tydfil road, Bedwas, has been to see me and expressed very clearly the predicament that she faces. She was born in February 1954 and, as my hon. Friend said, stands to lose £10,000. What advice would she give Mrs Davies? How should she respond to the situation?
I thank my hon. Friend for his intervention. I totally agree. The unexpectedness of the extension of the time is the problem. I really do not have an answer as to how my hon. Friend’s constituent will manage that. I will put some questions to the Minister later.
The accelerated timetable will start in 2016, so the proposal will affect women who would have previously reached the state pension age in about five years’ time. The worst affected will have to wait a further two years to reach their pension age, so they are seven years away from their pension date, which is well below the 15 years’ preparation time recommended by the Turner commission.
It is important to remember that women are already at a significant disadvantage relative to men when it comes to pensions. The median pension saving of a 56-year-old woman is just £9,100, almost six times lower than that of a man, which stands at £52,800. Women’s pensions are traditionally lower because many have taken time out of paid work to raise children or to care for parents.
Like other hon. Members present, I have been contacted by many constituents on this issue, but I suspect that many more do not realise what is to happen or are only gradually realising and will be contacting MPs more and more. Is it not the case that as well as the obvious effects on incomes, what stimulates their anger is that they feel cheated by what has happened? As my hon. Friend said, the proposal was not in the coalition parties’ manifestos and it was not even in the coalition agreement, so there is no way the Government can claim that they did not know the financial figures and they have to make this cut. They knew what the financial figures were when they did not include the proposal in the coalition agreement, so this is a double betrayal of many women pensioners. Does my hon. Friend agree that as we are now seeing U-turns from the Government daily, perhaps this issue should be the subject of today’s U-turn?
I thank my hon. Friend for his intervention. I agree. As I said, it is the unexpectedness of the change that is the problem. The women affected have worked all their lives and paid into the system, expecting something in return. They feel that they have done their bit, but they are not getting what they agreed to in the first place.
Does my hon. Friend agree that the situation is made more difficult because many of the women have been on low incomes and have not been able to make savings in other ways? Although they may have done the right thing and planned, they are now hit by this double whammy.
My hon. Friend is being very tolerant of interventions. Is this situation not also symptomatic of the flaw in the analysis of why the pension age should be extended? For example, in the debate on Second Reading of the Finance (No. 3) Bill, one of our former Pensions Ministers made the point that if someone has been working from the age of 16, regardless of gender, by the time that they get to 60, they have paid 44 years of national insurance and have probably burned out. Extending the pension age for people who leave university at 25 after a postgraduate degree is not a problem; indeed, they probably have a very good private pension. However, for many ordinary working-class people—men and women—it means that they are being forced to work beyond the point at which their health allows them to carry on working. This is not just a problem for women, although I do not diminish the problem for them at all. It also affects people who have had a long working life in what are probably the hardest jobs in society.
I agree: this is not just an economic issue or a gender issue, but a class issue.
As I was saying, many women have done part-time work or have taken time out of the work force altogether to raise children. Many women worked in part-time jobs at a time when part-time workers were unable to take out a private pension. Those women have worked for 40 years, paying their national insurance contributions. They were looking forward to the retirement that they expected to start at 60. They, and I, were disappointed when it was announced that the age of retirement would go up from 60 to 65 between April 2010 and April 2020, but we accepted that and planned accordingly. Now, these women find that just as they are nearing the end of their time in the labour market, the goalposts have been moved yet again.
Some of the women in my constituency who have approached me about the issue have found out about the changes by reading about them in the newspaper. There has not been adequate information. Does the hon. Lady share that concern?
I certainly do and I thank the hon. Lady for her intervention. It was not that long ago, and it was certainly after the proposal was first made, that if someone went on to the website to look at their pension forecast, it was still set at the old rates. I think that that has been changed now, thank goodness.
As I was saying, there has already been one movement forward so that people have to work longer. Now, there is another one. People are understandably angry about that and feel let down by the Government, because there was a covenant between them and the Government: “If you pay in, we’ll do this.” These people have done their part, but the other part is not coming forward.
Many people who are approaching state pension age have already taken steps to reduce their hours of employment or have taken on caring duties with elderly parents. Where their children are getting married, they have promised to look after their young grandchildren in the next few years, when their children return to the work force.
One constituent, Susan Harris, from Belvedere, was a teacher for 30 years. In 2005, she took early retirement and a reduced pension. She told me she had made calculations based on when she thought she would receive her state pension. She thought she was making an informed decision—she was planning. Sadly, she is now one of the unfortunate women facing a two-year loss in pension income. It is not surprising that she feels the Government are being unjust and have broken their promise to her about when she would receive her pension.
What assessment has the Minister’s Department made of the proposal’s effect on the number of unpaid carers and child minders in the UK? The accelerated timetable means that many people who would have taken up caring for relatives or providing child care when they retired so that the next generation could join the work force will not be able to do so, because they will be at work for another two years. The Government must consider that important social policy impact.
I would also be interested to hear the Minister’s thoughts on what the proposals will mean for volunteering and the big society. People who have retired are not inactive; they volunteer at local libraries, charity shops and lunch clubs. They also act as school governors and provide much needed care in our communities. If they are kept in the labour market for longer, they are less able to volunteer in those ways. In pushing people to work until they are much older, we are in danger of compromising activity outside the labour market, which we value very much.
It may not be easy for the women affected by the proposal to get another job or to increase their hours to fill the two-year gap, especially at such short notice. I am sure that I am not alone in receiving an increasing number of letters from constituents in their 50s who are willing to take any kind of work, but who are finding it impossible to get a job. It is not easy for people to return to the labour market once they have left, and it is becoming increasingly difficult to hang on to a job in later years, too. If women are expected to work longer, there needs to be work for them to do, and that is particularly important given the current economic situation and the rise in unemployment. In looking for work, these women may well be competing against their own grandchildren in the labour market.
Many women will not have enough savings to fall back on if they cannot hang on in the labour market. Women who have been employed in low-pay work, or who have taken time out to have children or to act as carers, will have few savings to cover them for the period between when they expected to retire and the proposed state pension date. Those women now face an uncertain future. Will the Minister outline the measures the Government plan to introduce to help them work longer? Will he comment on how women who are not in work are meant to balance their finances in the two-year gap, given that they will be eligible for jobseeker’s allowance for only six months if they have savings and will not be eligible at all if they have a small occupational pension?
I want to focus for a moment on women who have worked in low-pay or manual jobs, because class differentials need to be taken into account, as my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) said. The Minister has defended the accelerated timetable on the basis of fairness and has said that a balance must be struck as life expectancy continues to rise, because we cannot expect the workers and companies of today to shoulder all the costs. However, while overall life expectancy has increased by 5.5% for women and 6.5% for men, it has not increased uniformly, and there are still deep socio-economic and regional differences in average life expectancy. Office for National Statistics figures show that women’s life expectancy at the age of 65 is highest in the royal borough of Kensington and Chelsea, where women can expect an additional 26 and a half years. However, in Greenwich and Bexley—the two London boroughs that cover part of my constituency—the figures are much lower, at 20 and 21 years respectively. Women’s life expectancy at 65 is even lower in Glasgow city, where women can expect just an additional 17 and a half years. The 2010 Marmot report into health inequalities found that people living in the poorest areas live seven years less on average than those living in the richest areas.
Women in poorer areas, many of whom are from working class backgrounds and have been in low-income jobs, will be hardest hit by the accelerated timetable. They are the least financially equipped to deal with the change, and their lower life expectancy means they will get less time to enjoy their retirement. There is also the issue of women manual workers, who will struggle to continue to work if their jobs are physically demanding. A constituent in Plumstead recently wrote to me, saying:
“It is particularly hard on me because I am a manual worker. I have already been ‘pacing myself’ if you like, for my retirement. I don’t think I will physically be able to continue fork lift driving and hulking boxes around at the later age. If I’d known I would’ve changed my job but it’s too late now. It’s not fair on me.”
I was hoping that my right hon. Friend the Member for Croydon North (Malcolm Wicks) would be able to make the debate, because he has done some excellent research on the impact that the accelerated timetable will have on men and women of different social classes. I hope the Minister is aware of that research and that the Government will take it into account.
Although the proposed accelerated timetable directly affects a comparatively small group of women, its impact will be felt more widely. Extended family members may have to contribute financially to help women cover the costs of the period between when they expected to get a pension and when they actually receive it. The change will also affect many men of pensionable age because they cannot claim pension credit until their wife or partner reaches pension age. The change will therefore affect the whole household.
The Government need to think carefully about what they are asking of a small group of women who have worked hard all their lives. These women are being told to pay a disproportionate cost with little notice. They have earned a decent retirement, but many fear they will be too old and frail to enjoy it. A constituent from Belvedere wrote to me recently to say:
“I have been working since I was 16, have paid all my contributions and was looking forward to enjoying my retirement. But now it looks like I will be too old to do anything except watch telly if they keep altering the age. I suppose the Government does not care about the people who vote them in.”
Does my hon. Friend agree that one of the wider consequences relates to trust in the pensions system? When daughters see their mothers being somewhat misled, and when they see the Government change their plans in this way, they lose faith in our pensions system, and we can ill afford that.
I want to pick up the point raised by my hon. Friend the Member for Wirral South (Alison McGovern). A constituent in Wollaton told me that she has always worked full time. She was raised on national assistance as the fifth child of a recently widowed mother. She lived by the rules as she knew them, she saved and she made pension contributions. When she heard the Minister on the radio, she rightly felt that she did not want to be claiming benefits at the end of her life; she wanted a pension that she had contributed to and earned. Is that not absolutely right? As my hon. Friend said, many people will feel that it simply is not worth making contributions to a pension if it is going to be pulled out from under them just when they need it.
I thank both my hon. Friends. That is exactly the point I was coming to. Moving the goalposts at the last minute has implications for public confidence in our pensions system, which has already taken a knock as a result of the changes to public sector workers’ pensions. The unfairness of the Government’s accelerated timetable could undermine some of the more positive changes in the Pensions Bill. Clauses 4 to 9 are about automatically enrolling people in a workplace pension and creating the national employment savings trust. That is a positive step, which will do much to boost confidence in our pension system and address the low take-up of pensions, particularly among low-income workers.
However, the accelerated timetable will make it harder for the Government to achieve that, because people will note that Ministers are happy to change the pension rules at the last minute. That will undermine confidence in the pensions system, which already suffers from low confidence among members of the public. Like the change to public sector pensions, the proposed change undermines public trust. People are likely to think, “If they move the goalposts again at the last minute, why bother? We may make our contributions now, but who’s to say the money will be there at the end when we expect it?” That is the opposite of the Government’s intentions on pension reform, but it is a distinct possibility. Will the Minister consider that point? I hope he will address it in his closing remarks.
The proposal has been developed too quickly. In the past, pensions Bills have been the product of detailed reviews that have taken an holistic approach to pension reform. Pensions policy needs to be planned stage by stage and for the long term through reviews such as the current workplace retirement income commission, which is led by Lord McFall. I am concerned that the Government’s hasty inclusion of the current proposal in the Pensions Bill will mean that key issues, such as socio-economic and regional differences in life expectancy, are not given the proper consideration they are due.
In making any changes to legislation, the Government should ensure that no group is disproportionately impacted on, and none more so than the post-war generation of women, who have had to battle for rights all their lives—from the Equal Pay Act 1970 to the Sex Discrimination Act 1975 and the Employment Protection Act 1975. Women born in the 1950s have seen so much change that they did not expect to be battling still—battling against a rapid acceleration of the pension age, which falls purely on their shoulders. I ask the Government to pause and look at the bigger picture before making these unpopular changes.
I hope to show today that the campaign against the Government’s accelerated timetable has broad support. Earlier this year, I tabled early-day motion 1402 urging the Government to drop the timetable. It has already been signed by 138 Members from all political parties. Charities such as Age UK and companies such as Saga are also campaigning against the accelerated timetable, and it is very rare for the Daily Mail to back something that I am saying, so we really do have broad support. Some 10,000 people have signed the Unions Together “Hands Off Our Pensions!” petition, and I can see that many of them have contacted their local MP to ask them to attend the debate today, and I am grateful for that.
I hope that the Minister will consider carefully the points I have raised and those that will be raised by other Members, and, most importantly, listen to the voices of the women themselves. I strongly urge him to drop the unfair plans to accelerate the equalisation of the state pension age—it is a shabby way to treat Britain’s grandmothers. People will embrace change, but only if it is implemented slowly and fairly.
I congratulate the hon. Member for Erith and Thamesmead (Teresa Pearce) on securing this debate. It is not only important, but potentially timely given that we all need to come together to address what I think is an injustice, and one that perpetuates injustice over time.
I feel empowered to speak on this issue because, although I am well out of the age bracket affected by this latest injustice, I automatically signed up for married women’s contributions. All Members here will have had women come to their surgeries absolutely distressed because there is nothing that they can do about their pension. It has been said that it was all explained properly and it was a choice—people are told that it was an “informed choice”—but of course it was not, and once someone is in that position, there is nothing that can be done about it. That is how we treated women in the 1960s. Are we doing any better today?
I am sure that other Members have met women who worked part-time in the public sector who had to have their rights recognised through the courts; even then, the publicity, the information and the time scale were not published in a way that was effective for everyone concerned. I agree with the hon. Member for Erith and Thamesmead; as part of the reserve army of the work force, women working part-time have been used, and it has affected their pension rights very badly.
I was interested in the reference to public sector workers. Does the hon. Lady agree that there is no such thing as a gold-plated pension for public sector workers, and that the issues that women face are all the greater because they do not really have a pension to look forward to, even if they served 40 years in public service?
I made that particular point because those women could get justice and redress only through the courts, which is important.
A more recent instance of an injustice to women occurred during the time of the previous Government. The reduction in the number of contributory years for a full pension, to 30 years, was very welcome—it clearly helped women and so has to be welcomed. When it happened, only three in 10 women who reached state pension age drew a full pension in their own right, so that change alone should have raised the proportion to more than seven in 10—it was a good move. However, again, there was an injustice to a group of women whose birthday happened to be at the wrong time.
I am perplexed. The hon. Lady said that she would cite an injustice and then cited a tremendous change by the last Labour Government to give seven in 10 women pension rights after 30 years. As a Liberal Member who is part of the betrayal now, can she find any evidence that this Government will not withdraw the 30-year rights because they are looking to save money now?
I ask the hon. Gentleman to wait for me to identify the injustice. My point was about the cliff edge; there could be two women living next door to one another with one day’s difference in their birthdays, and there would be a cliff edge. Changes need to be phased in. In 2007, there was no phasing in, so some women missed out on as much as £28,000 over the course of their retirement because of one day. Whenever there is a sharp cut-off date, there is an injustice.
I want to make a fairly brief speech.
We have a long history of injustice towards women and I am illustrating that with a few examples from the past. On many of those issues, the Minister has an excellent record in fighting for the cause of women, particularly the married women’s contribution and the cliff edge, so I feel that we could get a very sympathetic hearing today.
As the hon. Member for Erith and Thamesmead said, women born between 1953 and 1954 particularly will be hit very hard. Some 500,000 women will have their state pension age delayed by more than a year, 300,000 women will have it delayed by 18 months or more and a small but badly hit group of 33,000 women will have it delayed by exactly two years—just because they happen to be born in a particular month. That picks up my point about the cliff edge of the previous change, because there are parallels with this change. We should not say that because it happened in the past, there will always be a one-day cliff edge. There are always opportunities to look at things again.
I agree that there is an injustice for people born within a day of each other when there is a sudden change, but there is a difference between this change and the one to which the hon. Lady refers. That change increased the number of women who had an opportunity to get a full pension, but this change will negatively affect some women. When people feel an injustice, the difference is this—if someone gets a good thing, it is not completely fair, but if all of us get an appalling thing, it is certainly unfair.
I am sure that the hon. Lady appreciates that I am trying to show that there are a lot of instances in which women have had a very unjust settlement, and this is yet another instance of that. We all have an opportunity to speak out against it now, when there is time to do so.
Obviously, the proposals to speed up the increase of the pension age will deny large numbers of people the notice they need to plan effectively for a later retirement, and I am concerned that the poorest and the unemployed could face real hardship as they struggle to manage without the state pension and benefits on which they were relying. As other Members have mentioned, this particular change is not in the coalition agreement. I shall give one example of the effects of the change on one of my constituents:
“My birth date is 10/11/1954. I reluctantly accepted the raise of my retirement age to 64 years and 7 months…Now I am shocked to hear I will now have my pension at 66 years of age. I have had no opportunity to plan for this increased time scale, what do I do?????”
That is the question: what do these women do?
“I have no private pension and I am now being forced to work another 18 months after starting work at 15 years of age!!!!! I’ve already missed out on retiring at 60, like my mum. The older we get, the goal posts are continually being moved.”
For me, that says it all.
We know that this is not about a large number of people, so money could be found by the coalition Government. We need to know how much it would cost to even out matters. This is an opportunity for the coalition Government to say, “We really do care about giving equal treatment to the citizens of this country.”
It is a pleasure, Mr Weir, to speak under your chairmanship this morning. I warmly congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this debate and on her excellent introduction. I am pleased that so many Members are here to participate; this is an important subject, and many will be affected.
I start by saying how many of my constituents in Sunderland Central have contacted me about this issue. Over the past couple of months, I have been overwhelmed by the number of people contacting me who are worried and anxious, and oppose the Government’s plans to speed up the equalisation of the state pension age. Many have written giving their own stories of what they are about to lose.
Average life expectancy in this country is increasing. That is a good thing, but it is why reforms to the current pension system are necessary. No one disagrees with that. We live in an ageing society, and the pension age needs to rise to ensure that people’s retirements remain financially secure and enjoyable. However, I cannot support the changes that the Government propose, as speeding up the timetable for equalising the state pension age in that manner is unfair to my constituents.
Does my hon. Friend agree that the golden principle running through our legal system is that legislation should not be made that results in offenders not knowing what sentence they are going to get? In a similar way, in civil law those who enter into a contract, such as in employment, should know exactly what the terms and conditions are. Retrospectively to change those terms and conditions is manifestly legally and morally wrong.
I totally agree with my hon. Friend. It is that feeling of injustice—almost that people have been conned; they thought that they were contributing to one thing, but were getting something else—that is so stark in these proposals.
I shall give a few examples to explain the problems that the proposed changes will bring to the lives of many women in my constituency—and, I am sure, across the country. The first is of a woman who has worked, planned and saved, but will still be caught out. She has done everything that people are being told to do. She has worked from the age of 16, with a couple of intermissions to have children, although in those days maternity provisions were not as good as they are now.
This woman has three small private pensions from her various places of work; in some ways, she is in a good position compared with many, although two of those pensions will be deferred until she is 60. A couple of years ago, her parents became ill. She did all the calculations; she could release the private pension from her current employment, and she had some savings, so she decided that she could manage with her deferred pensions being paid at 60 and her state pension not being paid until she was 63. She did all that, and left work a couple of years ago.
One could argue that my constituent has saved the state money by looking after her ailing parents. However, she now finds that her state pension will be delayed. She has done everything right—she has worked, saved and contributed—but is being penalised, and will somehow have to find the shortfall. She is incredibly worried about that. She has never been well paid, but has been cautious in her financial planning.
Another constituent who contacted me is set to lose more than £7,500 of the state pension, something that she has worked hard for over many years. She is now required to work a further 74 weeks. She understandably feels let down by the Government. In her letter, she said that she has worked extremely hard all her life, yet her retirement age seems consistently to move further away. Frankly, the changes to her pension have left her feeling robbed. She is not in good health, and wonders whether she will be fit enough to work those extra years. She may have to go on to benefit, something that she has never wanted.
The third of my constituents to write to me says that she had planned to work until she was 60. She began saving, and started contributing towards her pension when she was 18—38 years ago. She has worked hard and contributed to society; she paid her taxes and her national insurance contributions. At the age of 56, she was looking forward to a relaxed and financially secure retirement. The Government’s plans mean that she will now have to work until she is 66, six years longer than she expected. Her health is failing due to the stress of her job, and she is not financially prepared for the change. She wonders how she is meant to prepare for it at such short notice, and why the Government have let her down in this way. I am sure that she also wonders why the Government are going back on their promise in the coalition agreement.
A common theme runs through the letters that I have received from constituents. They do not disagree about the state pension age rising; they recognise that increasing life expectancy makes that logical. However, they say that moving the goalposts at such short notice is creating serious financial harm and causing real worries. As a result, some are considering working beyond their state pension age. However, that should be a choice; it should not be forced on them. Retirement, and especially the age at which people decide to retire, should be about choice, but choice has been stripped from those affected by these changes.
In my constituency of Sunderland Central, 1,100 women aged between 56 and 57 are among the 33,000 women whose state pension will be delayed by two years. I wrote to the Minister, asking about his plans for the state pension age. In reply, he said:
“While overall there are some aspects of the change that will affect women more strongly than men, we consider the effect is not disproportionate”.
I disagree with him. No man will have to wait longer than a year, but 500,000 women will. If that is not disproportionate, what is?
When it comes to the state pension, women are already at a disadvantage. The median pension saving of a 56-year-old woman is almost six times lower than for a man of the same age. Women will have decided to have children and work part-time to raise families. That is a valid decision and one for which they should not be punished—indeed, they should be praised. However, under these proposals such women do not have enough time to adjust their financial plans for retirement. Many have already decreased their hours in preparation for retirement, and some will have done so because of ill health.
Retirement is an opportunity for those who have contributed all that they can to society to rest with peace of mind, knowing that their contributions will be recognised and that they will be adequately provided for. However, I worry about the long-term costs for these women. I suspect that there will significant hardship, with anxiety and stress about financial matters. I also worry about the ill health that results from working to an older age.
The Turner Commission recommended 15 years of preparation before such changes are implemented. I would be interested to know why the Minister disregarded that and opted for far fewer years. Current plans will result in very different outcomes for women of similar ages. I know that the line has to be drawn somewhere, but deciding a person’s pension eligibility by their birth date suggests that the entire reform is being introduced too swiftly. The Government should stick to the original timetable, with equalisation at 65 in 2020, and not increase the state pension age to 66 until after that.
Once again, I congratulate my hon. Friend the Member for Erith and Thamesmead on securing such an important debate. I look forward to the Minister’s response.
I congratulate the hon. Member for Erith and Thamesmead (Teresa Pearce) on bringing this important matter before the House.
I start by declaring an interest. As a man born in 1954, I will be affected by the increase in state pension age. However, the extra time that men will have to work is slight, and the change is being brought in gradually. I can therefore accept that change. The real problem created by the Government’s proposals is for women born at about the same time as me. They will have to work considerably longer before they can collect their pension, and they are being given short notice to prepare for the extra work.
As others have said this morning, the Turner commission recommends 15 years preparation. The Government have had to make many difficult decisions because of the record-breaking deficit that they inherited from the previous Government. The Government’s aim is to eliminate the deficit by 2015, but this proposal will not help them to achieve that goal, because it does not come into effect until well after 2015. Therefore, they cannot put forward the argument that the proposal will help to eliminate the deficit.
The proposal will also not bring any long-term recurring benefits to the public finances. Equalisation and the increase in the pension age to 66 will take effect in the long term and this proposal will only bring a benefit over a few short years. The proposal is not needed for the Government’s overall strategy. It is also not in the coalition agreement, which said that equalisation should not take place before 2020.
Does the hon. Gentleman remember the Minister speaking in the House last month? He said:
“If we want to encourage pension saving, the key is getting the state pension system right.”—[Official Report, 4 April 2011; Vol. 526, c. 795.]
There is an obvious anomaly here and this section of getting the system right has not been achieved. Today’s debate gives the Minister an excellent opportunity to rectify what is an obvious anomaly.
I obviously agree that we must get the pension system right. The Minister has an excellent track record in campaigning for justice for pensioners. As the proposal is not in the coalition agreement and is not needed to eliminate the deficit by 2015, I hope that the Minister will go away and reflect on the matter before the Pensions Bill comes to the House.
I congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this debate. My constituents in Blaenau Gwent are worried about the Government’s plans. At a recent surgery in a supermarket, one constituent told me, “I am one of the people who are affected by the proposed change. Also, having recently lost my job, I am finding it difficult to get another job in the current climate.”
In an e-mail, another constituent said:
“I have worked all my life. I have never been a burden to this county and I have always paid my own way. I was widowed 14 years ago so I have no-one else to support me, therefore, I’m dependent on my pension. I work for the Local Authority, so am unlikely in the current economic climate to retain my job until I’m 64.”
These women are fearful of what their future holds and angry that the goalposts have been moved.
The House of Commons Library estimated that about 800 women in my constituency will be affected by the proposals. Age Cymru said:
“These proposals are unfairly discriminating against women of this age group, as they are not providing them with an adequate amount of time to plan for these changes.”
I hope that the Minister listens to those important concerns today.
I congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this debate on such an important and unjust matter and on her early-day motion 1402, which has secured 138 signatures from across all the main parties.
I also congratulate Age UK on the campaign that it has been running. Those of us who get the tube to work in the morning and come up the escalators and into Portcullis house will have seen the posters that adorn the walls. They tell the stories of some of the women who will be affected by these changes. Some of those stories have been related by hon. Members from all parties this morning.
My hon. Friend spoke about some of the organisations that have provided support on this matter, such as Age UK, which I have already mentioned, and Saga. There have also been supportive articles in the Daily Mail and The Guardian. There is a broad coalition against the proposal, and we hope that the Government will take on board some of criticisms of the Pensions Bill, especially of clause 1 and the increase in the state pension age.
People who are approaching retirement say, “This is a bit like a horizon. You can always see it in the distance, but you can never quite get to it.” As my hon. Friends the Members for Sunderland Central (Julie Elliott) and for Blaenau Gwent (Nick Smith) have said, the goalposts just keep moving, and that does not seem fair, especially when people are trying to make the right decisions. They plan, contribute, bring up families and care for relatives, yet they are being penalised.
Does my hon. Friend agree with my constituent who said that she felt discriminated against when she started work 30 years ago because she was barred from joining a personal pension scheme? She feels discriminated against now because of her date of birth and the fact that her pension will be delayed.
I could not agree more. That is a big issue and one that I will address later. For a number of reasons, this group of women are particularly ill-equipped to deal with the changes that the Government are trying to force upon them.
I want to pick up on a couple of points raised by the hon. Members for Argyll and Bute (Mr Reid) and for Mid Dorset and North Poole (Annette Brooke). The proposals go against the coalition agreement, which states:
“The parties agree to…hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.”
These changes bring forward the equalisation of the state pension age to 2018, which is not mentioned in the coalition agreement, and they raise the state pension age for women to 66 in 2018—two years earlier than promised in the agreement.
Although there is increasing pressure on the Liberal Democrats to stick with the coalition agreement, there is no obligation on the Minister to support this breach or for coalition MPs to vote for it. No one in the country voted for this at the general election a year ago, and it is not what coalition MPs signed up to when they made their promises in the rose garden. We have heard a great deal from Liberal Democrat Members today. I hope that that means that people who are approaching retirement can feel that their MPs will not support these proposals.
To reiterate points that have already been made, 2.6 million women and 2.3 million men will have to wait longer for their state pension than they previously had been told. Some 500,000 women will have a delay of a year before they get their pensions and about 300,000 women will have a delay of 18 months or more. Unfortunately, 33,000 women who were born between early March and early April 1954 will have to wait another two years before they receive their state pension. I have been lobbied by a huge number of women on these issues, not least by my own mother who was born on 30 March 1954. She very much hopes that the Minister will be listening to every word that I say today.
There is fewer than five years’ notice before these changes take effect. The Turner report says that people should be given at least 15 years’ notice, and the Pensions Policy Institute believes that these changes do not give enough notice. Women need longer to prepare for changes in the state pension age because they tend to become part-time workers sooner than men of the same age.
As of April 2011, the basic state pension is worth £102.15 a week. Pension credit is worth £137.35 a week. Those women who are seeing a delay in their state pension age of two years face a loss of pension income of more than £10,000. For those in receipt of pension credit, that loss is closer to £15,000. That does not take into account the passported benefits that come along with a pension.
Longevity is increasing and Members from all parts of the House welcome that, but we cannot move the goalposts every time an actuary changes his forecast. Six months before the election, the Minister himself said:
“Pension policy needs to be stable and predictable years ahead, not made up on the back of a cigarette packet.”
I agree with the Minister. Although his words are still on his website, he is now making policy up on the back of that cigarette packet and it is hitting women particularly hard. Indeed, the recently published Green Paper on the flat rate pension consults on reasoned mechanisms for increasing the state pension age, which is a recognition of the unfairness that is being imposed on women by the Pensions Bill, which is just about to come to the House. That Green Paper does not include consultation on arbitrary changes with five years’ notice. The reason that it does not consult on those types of changes is because the Minister, his Department and the Government know that they are unfair. So why is he forcing them upon women who are 56 or 57 years old?
My hon. Friend the Member for Sunderland Central talked about the savings of women who are 56 or 57. There is something particularly perverse about targeting that specific group, because those women who are 56 or 57 now have average pension savings of £9,100, compared to the average pension savings of men of the same age of £52,800. At retirement, pension savings of £9,100 work out at £564 a year or £11 a week. The reasons for the difference in the average pension savings of men and women are varied, but the key point is that these women I am talking about are not in a financial position to absorb the changes being proposed at such short notice.
These women have earned far less during their lives than men of the same age. In 1980, the gender pay gap was 28.5%. When these women were in their 20s, they were earning on average almost 30% less than men of the same age. The gender pay gap has been closing since 1980 and it is now about 16%, but the point is that these women have suffered inequality throughout their working lives. They now face a double whammy and are paying the price for getting us there too quickly.
In addition, a lot of these women have worked part-time at some point in their life, particularly when they were bringing up children. In fact, many of them are also working part-time now, to help to care for elderly parents or grandchildren. As other Members have said already, these women are the big society. They are doing the caring work that we value as much as their work in the workplace. Of course, many of them have also had interrupted careers and have not paid full national insurance contributions. The Minister’s own Department estimates that women are entitled to receive £30 less in their basic state pension than men. All those points show that these women are more reliant on the state pension than their male equivalents, first because they have much lower private occupational pension savings and secondly because they are in not such a good position as men to increase their savings in the next five years.
The hon. Lady quite properly raises the issue of the big society by talking about volunteering, caring and so on. Under our proposals, the equalisation at the age of 66 will be in 2020. Under Labour proposals, it would be in 2026. In 2026, every single point that she has just made would also be true, would it not?
The point is that these women will have time to prepare for changes if they happen in 2026. Changes in 2026 were legislated for in 2008, which meant that the people we are talking about today had 18 years’ notice of any changes. That is very different from the changes that the Government are introducing because they will start in 2016, giving people just five years’ notice. That is the point that Members are making today. We are not saying that we do not think that there should be any changes to the state pension age, because with increasing longevity it is right that people should work longer, but it is not right to move the goalposts and leave people so little time to prepare for changes.
As I said earlier, the loss of pension income for someone who has to wait two more years for their state pension is about £10,000, or it can be up to £15,000 if they are on pension credit. It is not feasible that that group of people can make up that difference in a five-year period, yet that is what the Minister is asking them to do.
In Newport, 1,500 women will be affected by this change. Some of them have contacted me to say how betrayed they feel about it. Presumably, however, hundreds of them are unaware that it will happen. Is it not true that many women are not only not being given enough time to prepare for the change but are unaware that it is coming in a very short period of time?
Yes. That is another point that my hon. Friend the Member for Erith and Thamesmead made earlier. Many of the women who will be affected by this change have written to us, but even more women have not done so. The reason they have not written to us is not because they are happy and fine with these changes. By and large, it is because they are not aware of them. They are aware that they will have to work for longer than they had previously thought, because of the changes made in 1995 that will equalise the state pension age for men and women by 2020, but they do not know that those additional changes are coming down the line. So they are making changes now—as I said before, many of them are moving to part-time work so that they can care for elderly parents or young grandchildren—unaware that these additional changes are coming down the line. I think that people will be particularly worried or scared about what the future holds for them.
I thank my hon. Friend for giving way. Does she agree that, if those women do not hear the Minister say that he is revising these proposals because they represent an unintended anomaly, they can only conclude that they are being selected as the victims of an intentional injustice and that they are to suffer a drive-by hit on their pension rights?
Yes. The hon. Gentleman’s intervention also touches on a point that my hon. Friend the Member for Wirral South (Alison McGovern) made earlier when she talked about the importance of people having trust in the pensions system. Unless we trust the pensions system and can have some certainty about what the future holds for us, it is very difficult for people—both men and women—to prepare for the future.
I want to quote something else that the Minister has said. In October 2009, he said:
“The Tories still seem to think that as long as women have husbands they don’t need to worry about their pensions.”
I wonder whether he has changed his views now that he is in government with the Conservatives. As the hon. Member for Mid Dorset and North Poole said earlier, women have been consistently badly served by the pensions system, both occupational and state. In opposition, the Minister campaigned for women pensioners, but now that he is in government he is hurting them hard. I wonder why he is doing that, when he is under no obligation to do so. I repeat that these changes were not in the coalition agreement, so he has no reason to support them.
Of course, the Minister has claimed that these women have jobseeker’s allowance to fall back on. But as hon. Members have already said, that does not seem to be the point. Talking about JSA is an insult to those who have worked their entire lives, especially because JSA only provides about half the income that the pension credit provides and about two thirds of the income that the basic state pension provides. These women do not want a handout. They legitimately want to receive the pension that they have contributed to on the date that they were promised it. Again, that brings us back to the issue of trust. It is so important that people have trust in the pensions system.
We have heard a lot of stories today about how these changes will affect great numbers of women, because every one of those 500,000 women who will have to wait an additional year before they receive their state pension has a personal story. We have heard some of those stories already. I want to tell Members two stories that I have heard that I think are particularly powerful. The first is from Barbara Bates, who says:
“From the age of 15, I have worked every day of my life, apart from a few years when I stayed at home to care for my disabled husband until his death in 2003. Since 1995, I have thought that I would retire in 2018, when I will be 64. I have based all my plans for the future on this. I now have to wait an extra two years to retire—in April 2020, when I will be 66. I feel robbed—robbed of two years of freedom, and robbed of more than £10,000 that I would have received as my state pension. The basic state pension will be my only retirement income, and I have no extra means of coping financially. I will have no option but to try and carry on working. I have osteoarthritis in my thumbs and wrists now, which makes the lifting and cleaning work in my job harder: I’m not sure how I’ll manage to the age of 66.”
I will read out another story, from Linda Murray:
“I started working at 16 and have worked full-time ever since, apart from a brief period of part-time work when I was caring for my mother. I work in a very physically demanding job, at a dry cleaners, for 46 hours each week just to make ends meet. I have never had the means to save for a private pension. When I started work, private pensions were not readily available for ordinary workers. We paid our contributions and assumed that we would draw a state pension and that it would be sufficient. Due to my circumstances, I know that full retirement is no longer an option. My plan was to greatly reduce my hours when I received my pension and return to part-time work. Now I estimate that I would need to save at least £12,000 just to be able to work part-time from the age of 64. Saving anything is impossible. I will not be able to continue working these demanding hours until the age of 66 and I am deeply worried about my future.”
It is people such as Linda and Barbara who I think most of us went into politics to serve, yet the Minister, who in opposition campaigned so much for women, is now hitting them hard, as I said earlier. These are stories, not numbers, and they hit home hard. It is wrong to hurt a group of women disproportionately, by giving them such little notice of a change when they have such little chance of making up the difference in income that they will lose.
Labour accepts and celebrates increasing longevity and therefore we accept that there is a need to increase the state pension age, as we did when we implemented the recommendations of the Turner report. However, making changes to pensions must be done in a fair way, giving people enough time to prepare for them.
What Labour now proposes is no more changes before 2020 and, if the Government accept the amendment to the Pensions Bill that they rejected in the House of Lords, we will support the state pension age increasing from 65 to 66 between 2020 and 2022. That would achieve a £20 billion reduction in expenditure, would affect equal numbers of men and women and, crucially, would affect 1.2 million fewer people than the Government’s current plans. It would give people nine years—not just five—to adjust to the changes, and no one would have to wait more than a year longer than expected to claim their state pension, to which they had contributed throughout their lives.
We will not let this matter go and nor, do not think, will the women affected. We must hold the coalition to account on its agreement.
We will hear from the Minister in a moment, but we heard the arguments being rehearsed when the Pensions Bill was debated in the House of Lords. We are told that we first need to reduce the budget deficit but, as other Members have said, these provisions will not change that deficit in this Parliament and if the Government’s plans to eliminate the structural deficit in this Parliament come true, I do not see why changes on this scale will be needed in the next Parliament.
The Government’s other claim is about longevity, but longevity is not especially increasing for women aged 57, so why are we particularly targeting women of that age? If the Government wanted to look more broadly at longevity and increases in the state pension age, they would, I think, get cross-party support for that. It is particularly unfair and disproportionate to harm a group of women who have five years to prepare for the changes and have so little chance of making up the difference in lost income, which is what the women who have been writing to all of us are saying.
My final quote from the Minister is:
“a pension promise made should be a pension promise kept.”
He and his colleagues should heed that, and we are not alone in our thinking. Age UK, the unions, Saga, The Guardian and the Daily Mail are all arguing for the Government to think again, and Age UK has organised a mass lobby of Parliament for a week today.
The change to the pension provision was not in the coalition agreement and will do nothing to reduce the deficit by 2015. It will, however, as my hon. Friend has said, hit 5 million hard-working people, 500,000 of whom are women who will suffer particularly harshly. Does she agree that this is another example of hard-hearted Tory policies hitting the ordinary working person?
I agree, but I would also go a bit further: not only was the change not in the coalition agreement—reached just a year ago—but it contradicts it. The agreement states that the state pension age for women will not start to rise to 66 before 2020, but under these proposals that rise will start in 2018. For that simple reason, coalition MPs from both the Liberal Democrat and the Conservative parties are under no obligation to support the changes.
The lobby of Parliament organised by Age UK for a week today will give a voice to those who are adversely and unfairly affected, and I hope that the Minister will spare some time to meet some of the women who are hit by the changes and are coming down to Westminster to oppose them.
The Bill has had its First Reading in the Commons and we are awaiting its Second Reading. I once again urge the Minister to honour the coalition agreement to which he signed up, to admit that the impact of the proposals is unacceptable, and to revise the timetable so that no one has their pension delayed by more than a year and trust can be restored in the pension system, a system which the Minister, in his heart, believes is so important.
I congratulate the hon. Member for Erith and Thamesmead (Teresa Pearce) on securing this debate, and I very much welcome the fact that so many Members from both sides of the House have attended. I agree that the matters we are debating are important, and the hon. Lady has made her points in a measured and thoughtful way. I will try to respond to each of those points in turn, and also to some of the other contributions that have been made.
I shall start with what appears to be an element of consensus, although the more one looks at it the less of a consensus it seems. It has been welcomed that people are living longer, and there is an acceptance that state pension ages need to rise, and as far as I can see that is about the limit of the consensus. The current schedule for raising the state pension age, which is to 66 in the mid-2020s, 67 in the mid-2030s and 68 in the mid 2040s, is incredibly slow relative to the improvements in life expectancy that we are seeing. The Turner commission, which has been mentioned, said that one could look at a principle for raising the state pension age, for example fixing the proportion of life spent in retirement, but the schedule that we have inherited does not deliver on that. We need, therefore, to look at more rapid increases in the state pension age to 66, 67 and 68.
It has been implied that what we are doing is somehow extreme, but if we think back to 1990, for example—before the Pensions Act 1995, which increased the state pension age from 60 to 65—the typical woman retiring at the age of 60 would get a pension for 24 years. Even with our plans, in 2020 the typical 66-year-old woman will get a pension for 24 years. That context is important, because the improvement in life expectancy to which we are responding is astonishing. It is not just that we are all living a bit longer and life will carry on as before. Life will not carry on as before, not for the Government, society, the health service or the pension system. We are moving into a totally different world, to which very gradual incremental change will not respond sufficiently. The previous Government did not grasp that fact, and simply pushed it off into the middle distance.
We had to take a judgment about not affecting people who were within a few years of retirement, those who were 58, 59 or so and were set to get their pensions in their early 60s. We took the view that change for them would be too soon, which is why nothing at all changes before 2016. However, having gone past that initial point, the crucial group—the one-month cohort, which a number of Members have mentioned—will, assuming that the Bill gets Royal Assent this summer, get six years and eight months’ notice of the change. I accept that notice, which has been mentioned by several Members, is the key issue.
The issue is not only the pace of change. It is the context of a lifetime of low pay and inequality faced by many women, and the old-age problems that are a cumulative effect of that. The Government had an opportunity here to tackle women’s inequality in old age, but so far they have, instead, arbitrarily targeted women born in 1954.
I am grateful to the hon. Lady for raising the position of women in the pension system. Assuming that some of the pension reform proposals in the Green Paper that we published last month go ahead, for example the single flat-rate decent state pension, the group of women most affected by this change would be the first group of women to benefit, and potentially very substantially. At the moment, women draw a state pension of £40 a week, on average, less than men, but under the single-tier pension proposal, which I have been very involved in introducing, many women would be the main beneficiaries.
Various Members have raised the important issue of women whose pension rights have been hampered by time spent bringing up children or caring for relatives, and under the single-tier pension proposal a year spent at home with children or a relative will be worth just as much to a state pension as a year spent running a FTSE 100 company. So much do I take the view—in government as I did in opposition—that the work that men and women do, whether paid work or bringing up a family, is of equal value, that for the first time we are proposing that that be manifest in the pension system, and that will be transformative, particularly for women.
Will the Minister agree to publish figures? I am interested in what effect the single-tier pension will have on women, and I am finding it difficult to work out how many women will be affected by the abolition of the state second pension and the cost of their different contributions. I am unaware of any figures working out how many women and men will be affected by the change respectively. I am not as sanguine as he is that all women will benefit. There are many women whose contributions to the state second pension are important to their retirement.
On how the proposed single-tier pension will work, it is a Green Paper with options, so the sort of detailed figures for which the hon. Lady asks will be produced when we have identified which of the two options we will go for and refined the proposition. That information will be made available when the proposition is refined further.
To clarify, at the moment, many women in the age cohort that we have been discussing will have spent time at home with their children before the state second pension was introduced. Whereas the state second pension offers protection for time at home with children, the state earnings-related pension scheme did not. That set of women is approaching pension age. People have accused me of moving the goalposts. I am indeed moving the goalposts for those women, but in their direction. They will draw a state pension—yes, later, but for an average of more than 20 years. Compared with when we first started debating the changes in state pension age last summer, that is a significant difference.
If the Minister is so confident that the changes that he is introducing will be so beneficial, have not the Government failed to communicate that fact? Throughout the election campaign, I met women on the doorstep who were angry about what he describes as the changing of the goalposts, because they felt that it was against their interests, not in favour of them.
I accept entirely that although what we propose is a lot simpler in a sense than what came before, that is not massively well understood because pensions are so complex. As we refine the proposition, we will have a lot of communicating to do. However, it stands to reason, for example, that paying a flat-rate state pension rather than an earnings-related one will, on average, benefit women. It must, because women earn less on average. Crediting years at home with kids towards the full pension, not just the basic pension, will and must benefit women on average. There can be no doubt that the options presented in the Green Paper would substantially benefit women, on average, out of the overall pensions budget. I look forward to the hon. Lady’s help in communicating that to her constituents.
I am grateful to the hon. Gentleman for raising that point, and for his self-restraint in making a brief and thoughtful contribution in order to allow others to speak. He is right that we need to make people aware of the changes. Our dilemma is that none of this is law yet. We must tell people that it may happen, but we cannot say on Government websites, “These are the new rules,” because Parliament has not approved them yet. The current website describes the current legislative position, as we are required to do, and then it says, “However, important changes are being discussed in Parliament. Click here if you want to find out what is being proposed.” As soon as the changes go through—this summer, or whenever—we will, of course, publicise them. We routinely write to people before they reach state pension age, and in a time of change we do it more.
I agree entirely that we need to communicate. One frustration of mine is that I get letters saying, “You’ve put my pension age up by six years.” Anyone who is going from 64 to 66 had their state pension age raised from 60 to 64 some 15 years ago, but they did not notice, because when they were 42 or so, they were not interested in pensions. That is our challenge. People close to pension age are interested in pensions and follow such matters; younger people turn off as soon as they hear “pensions”. Communicating to people further ahead is a challenge.
I thank the Minister for giving way again; he is being generous. Surely the fact is that if the pension generally will improve, as he says, it will improve for everybody. I was born in 1961—I am not afraid to admit it—and my retirement age is still 66 under the proposals, as it was before the election. I will benefit from the more generous pension that he plans to offer, but women born between 1953 and 1960 are still being singled out, in that they will have to wait longer than they planned before getting that more generous pension. They will still lose out, and they are still being discriminated against.
I suspect that the hon. Lady will not benefit from our proposals, as I imagine that she would have received a full basic state pension anyway, whereas the proposals will help some women who would not have received it. By being employed here, she is also contracted out of SERPS, resulting in a deduction from the £140. I do not actually think that she would benefit.
I do not dispute for a second that that set of women will be affected by the changes, but the pension that they will get under our proposals will be significantly better on average than that received, for example, by women who retired a few years earlier. We can do all sorts of comparisons between this group and that group. Some things will be better for some and some will be worse. What I am saying is that several hon. Members have said, “You used to campaign for women’s pensions, but you don’t care any more,” but I have spent all my time as a Minister working on proposals that will benefit women pensioners specifically.
Will the Minister answer a specific point? He made it clear that the reason why he felt compelled to introduce further changes was that what he inherited did not meet the terms of the Turner review. The Turner review advised allowing people 15 years to plan for changes, but women in our constituencies have had much less time than that—barely five years—to plan. That is not fair. Will he explain why his Government are doing that to women in our constituencies?
The things that Turner recommended are not consistent with each other. We cannot, for example, have a consistent percentage of income during life in retirement and give 15 years’ notice at the same time, because longevity is increasing much faster than that. Something somewhere has to give.
One point that has been missing during this debate—the only time that it was mentioned was when an hon. Member quoted me from last week’s debate—is that if we delay till 2020, as the hon. Member for Leeds West (Rachel Reeves) proposed, we will have to find £10 billion. My hon. Friend the Member for Argyll and Bute (Mr Reid) raised an important point, and he is analytically correct: that does not help us in the comprehensive spending review period or help the long-term structural deficit, because the age would have been 66 anyway. However, it does do one thing: it takes £30 billion—or rather, £10 billion; the whole change amounts to £30 billion, but the difference between the two of us is £10 billion—off the national debt. As he knows, servicing the national debt is one of the most crippling things that this Government must do. That is why such difficult decisions must be made.
Our changes will take £30 billion off the national debt. I do not know what the interest rate on the national debt is, but let us say 5% for the sake of round numbers. That is just to make the numbers add up; I do not suppose for a minute that it is 5%. That is £1.5 billion extra every year to spend on services or whatever rather than on the national debt. I think that that would be the hon. Lady’s preferred solution.
Yes, we have. All our costings make assumptions about the proportion of people who would find themselves on benefits. Hon. Members have asked what people will live on between 64 and 66. Clearly, there will be a range of responses. Some people will go on working longer. Seven out of 10 people in the cohort that we are discussing—those born in 1953 and 1954—are in work at the moment.
Several people raised the important issue of different socio-economic groups. Across the socio-economic scale, life expectancies are rising. We cannot use the fact that there are differences between different groups—as there have been probably for ever, and certainly for the past century—as an argument for doing nothing. That argument would apply under the proposals of the hon. Member for Leeds West. If we raised the age a year to 66 in 2020, it would have exactly the same impact on the different socio-economic groups. Her proposal would have exactly the same impact on the numbers of carers and volunteers aged 64 to 66. Many of the points made by hon. Members in this debate about the impact on that age group would apply exactly, only four years later, or six years later under her proposals. We need to make a distinction between things that will be inevitable as the state pension age rises and the consequences of doing it more rapidly, which has been the focus of this debate.
Members have asked about caring responsibilities. We might not have expected this, but it is striking that the number of women within this age cohort who say that they have caring responsibilities is falling, partly because of social and demographic change. In 1993, of the women who are now in the 55 to 59-year-old age cohort, 15% had caring responsibilities, but, in 2010, the figure halved to 7.1%. Again, that suggests significant changes and that people are living longer and working longer. I suspect that caring responsibilities are being taken on, but that that is happening later in life than it would have previously.
Does the Minister agree that it is possible that the percentage of those with caring responsibilities is falling because they already have to work longer to get their pension? It is not because their lifestyles have changed or because they are different types of people, whether older or younger. The fact is that they cannot take on that responsibility, because they already have to work well into their 60s.
That does not apply to the figures I quoted, which relate to the difference between 1993 and 2010. All of the women in 1993 had a state pension age of 60, but all of the women whom I was talking about are under 60—they are currently in their late 50s. A diminishing proportion of the women about whom we have been talking have caring responsibilities, although that may change.
The issue of moving the goalposts has been mentioned and I think that one Member said that we are happy to change the pension age at the last minute. We have set out in our Green Paper a consultation on how we should do this beyond 66 in the longer term. In other words, what is the right balance between notice, keeping up with longevity, and fairness for those who have to pay national insurance for the increased longevity? There is a dilemma. Ideally, we would give people huge amounts of notice.
That is not what the previous Government did. We would love to be able to say to people who are 40 or 45 years old, “This will be your pension age.” However, if we said that to 45-year-olds, who have another 20 years or more before they retire, and another 20 to 25 years of life in retirement, we would be locking in what we know about longevity now for pensions that we will still be paying in 50 years’ time. That is just not viable.
In a moment. The pace of improvement in longevity is breathtaking. Between 2004 and 2008—the longevity projections of 2004 are, I think, what the previous Government’s legislation was based on, and those of 2008 are what we have now—life expectancy at pension age increased by well over a year in just four years. It is almost like a runaway train. We can always say, “Let’s wait another decade,” but one of the problems is that there is a trade-off, because, as I have said, what has been missing from this debate is the people who have to pay.
Delaying for 10 years, which is what I think the hon. Member for Leeds West is suggesting, does not mean a free lunch. It would mean a £10 billion national insurance hit on today’s workers and today’s firms. If she were wearing another hat, the hon. Lady would be saying, “The recovery is fragile and we need to do more for jobs and to boost the economy,” but what she is saying is that we should levy another £10 billion of national insurance on today’s workers, including low-paid women who do not have much pension, and today’s firms, which may have to lay off people who will not then be able to build up decent pensions. There will be no free lunch if we delay.
If, as figures last week suggested, the Government fail to meet their own target to balance the books over the course of this Parliament and we still have a deficit for which the Government have not planned in 2015-16, will we have more pensions Bills to push people’s pensions further back in order to incorporate what the Minister has said about being fair to those who are paying now?
We have made it clear that the age-66 changes are in the present Pensions Bill, which will be legislated for long before the end of this Parliament. We are also consulting in the Green Paper on a systematic mechanism for going beyond 66 that takes account of all the factors that we have talked about. That will try to strike a balance between notice, which is important, and fairness for those who bear the cost of increased longevity. The intention—this is something that no previous Government have done—is for the further changes to do it in a more systematic way. The 60 to 65 equalisation was a response to a legal case. The previous Government’s plans for 66, 67 and 68 were not ad hoc exactly, but there was no mechanism in place to respond to subsequent improvement in longevity. What we are trying to do as part of our reforms, which we are consulting on at the moment, is give people the certainty that future Governments will not just pass a law and change things, but that there will be a structure in place and that they will know how it is going to be.
I was on the Committee for the Bill that became the Pensions Act 2008, which, as the Minister has said, set out the changes recommended by the Turner report. He says that the approach that he wants to introduce is systematic, but does it not mean a constant shifting of the goalposts that will leave most people, however much notice they are given, with a constantly changing picture of when they should expect to retire?
I hope that the hon. Lady will respond to our consultation on the right process. She raises the important issue of how we strike a balance. The fact is that one in six of us alive today will live to be not 88, but 100, and that figure is increasing all the time. How do we strike a balance between that and giving people notice? We could have a principle of always giving people x years’ notice, which would mean that it would not matter if longevity improved dramatically after that point. That is part of what we are consulting on and there are trade-offs. I hope that the hon. Lady will respond to that.
We are moving into a world in which pension ages will not be the rock-solid certainty that they have been in the past, because they cannot be. The hon. Member for Bolton South East (Yasmin Qureshi), who has left the Chamber, said that this is like someone starting a job but having their contract changed halfway through. On that basis, people start paying national insurance at 16, have a guaranteed pension age for the next 50-odd years, and have another 20-odd years after they start drawing a pension. Therefore, the second that they are in the system at 16, nothing can change until 70. That is economic madness. There has to be some adjustment, but I accept that it has to be done in a measured way, which is why we are consulting on an appropriate mechanism.
I fear that, at this rate, the Minister will start sending pensioners back to work if they live too long. Returning to the review, would it not have been better to have done it and find out what the right trade-off is before increasing the state pension age for 57-year-old women with such little notice?
The Minister says that Labour is saying that we have to find another £10 billion or £30 billion for these changes. This is about cutting spending—the Government are cutting £30 billion of spending. I do not want additional spending. First, Labour wants to halve the budget deficit in this Parliament. Secondly, our proposals would cut £20 billion-worth of spending, so we are not asking for additional spending. I would like that put on the record.
Unless there is some free money to be had somewhere, delaying for 10 years must cost somebody something. It is fantasy economics to think that we can get 10 billion quid from somewhere. The hon. Lady must agree that that £10 billion would have to be paid by today’s workers and today’s firms. It has to come from somewhere—perhaps the hon. Lady thinks that it could be magicked from the air—and there is a trade-off between today’s workers and today’s pensioners.
Time is short, so I will conclude my response to the debate. I welcome and recognise the point that, ideally, we would give people more notice than we have. I fully accept that. The difficulty is that delay, which is always the easy option, has a huge impact on the state of the nation’s finances and on our response to a world in which people are living substantially longer. Our goal is to strike a fair balance. I will certainly reflect further on the contributions of my hon. Friends and other Members. As has been said, throughout my career I have campaigned for a fairer pensions system for women. I believe that some of the proposals that we are talking about for the next generation of retiring women will make a huge difference to their quality of life. Some of the points that have been put on the record today have been made forcefully and effectively.