Social Security and Pensions — House of Commons, 2017-02-21
Topic: Labor
Deborah Angela Elspeth Marie Abrahams (Labour, Centre-left): I will start with some general comments on the Guaranteed Minimum Pensions Increase Order 2017 before turning to the Social Security Benefits Up-rating Order 2017 Clearly we support the uprating of the guaranteed minimum pension in line with prices. However, I wish to touch on issues raised in last year’s National Audit Office report on the guaranteed minimum pension and the new state pension arrangements that came into effect last year. As we have heard, the Guaranteed Minimum Pensions Increase Order provides an annual increase in the guaranteed minimum pension where there has been an increase in the general level of prices during the period under review When the additional state pension was introduced in 1978, an option was created under which an individual could contract out into another pension scheme on the basis that that other scheme met certain criteria. In that instance, both the employee and their employer paid a reduced national insurance contribution given that they were forgoing the state pension entitlements. Between 1978 and 1997, schemes that took on such new members were required to provide a guaranteed minimum pension—a new test was applied after 1997. Nevertheless, contracted-out schemes still had to provide a guaranteed minimum pension to scheme members for rights accrued between 1978 and 1997 In 2016, the introduction of the new state pension ended contracting out by replacing the additional state pension with a single tier. Working-age people will now have their existing state pension entitlement adjusted for previous periods of contracting out and transferred to the new state pension scheme. Occupational pension scheme providers will continue to revalue any guaranteed minimum pensions that people have built up For people retiring after 6 April 2016, the Government will no longer take account of inflation increases to guaranteed minimum pensions when uprating people’s new state pension. The changes mean any guaranteed minimum pensions accrued between 1978 and 1988 will not be uprated, and the scheme provider will uprate guaranteed minimum pensions built up between 1988 and 1997 only to a maximum of 3% each year The National Audit Office was contacted by people approaching retirement age who had concerns that the new arrangements for a single-tier state pension will leave them worse off than they would have been under the guaranteed minimum pension. People also raised concerns about the lack of notice. Where have we heard that before? The NAO investigated and concluded that there would be some winners and some losers under the new arrangements, depending on the amount of time that people were contracted into a scheme. The NAO also commented that, again, there had been a dearth of information for those new retirees The NAO suggested that those who lose under the new rules may be able to build up additional entitlement to the state pension. The report recommended that the Government, via the Department for Work and Pensions, improve their evidence and analysis of the impact of these reforms, and provide much clearer, targeted information to the public about how they will be affected. I would be very grateful if the Minister updated us on how her Department is responding to the findings of the NAO report The Social Security Benefits Up-rating Order 2017 provides for the annual uprating of social security entitlements excluded from the Government’s freeze to levels of social security enacted in the Welfare Reform and Work Act 2016. This year, the Secretary of State has decided to uprate social security entitlements by inflation under the consumer prices index measure, which is at 1%. As the Minister explained, that covers attendance allowance, carer’s allowance, disability living allowance, the personal independence payment, industrial injuries disablement benefit, bereavement benefits, incapacity benefit and severe disablement allowance, to name but a few. The Secretary of State has also decided to uprate the new state pension in accordance with the triple lock, and pension credit in line with earnings, at 2.4% We would not stand in the way of measures to increase the adequacy of the social security safety net provided by those benefits, especially not after seven years in which the system has been under considerable attack. We will therefore support the uprating order, but I must take this opportunity to expand on my real concerns about the inadequate uprating, particularly in the context of the freezing of many social security payments under last year’s Welfare Reform and Work Act, and the real cuts to some kinds of social security support, such as the employment and support allowance, the support for those in the work-related activity group, the universal credit work allowances, and the widow’s pension allowance, which we discussed yesterday, again to name just a few. This is an erosion of the adequacy of social protection for those who are often the most vulnerable in society.