The Parliamentary Under-Secretary of State for Work and Pensions
(Paul Maynard) I beg to move, That the draft Guaranteed Minimum
Pensions Increase Order 2024, which was laid before this House on
15 January, be approved. I feel almost like a Netflix series, in
that people can now binge-watch two episodes of me in a row. I hope
none the less that this matter is worth equal consideration. The
Guaranteed Minimum Pensions Increase Order sets out the yearly
amount by...Request free trial
The Parliamentary Under-Secretary of State for Work and Pensions
()
I beg to move,
That the draft Guaranteed Minimum Pensions Increase Order 2024,
which was laid before this House on 15 January, be approved.
I feel almost like a Netflix series, in that people can now
binge-watch two episodes of me in a row. I hope none the less
that this matter is worth equal consideration.
The Guaranteed Minimum Pensions Increase Order sets out the
yearly amount by which a guaranteed minimum pension pot of an
individual’s contracted-out occupational pension earned between
April 1988 and April 1997 must be increased. Occupational pension
schemes are required to increase GMPs that were earned during
that period and are in payment by 3% for the 2024-25 financial
year.
As this is quite a technical matter, I will provide a little
background information on GMPs, and what they are and are not.
GMPs were created to help make occupational pension provision
more affordable and more secure. As many Members present will be
aware, the state pension used to be made up of two parts: the
flat-rate basic state pension and the earnings-related additional
state pension. The flat-rate state pension was funded through the
national insurance scheme, and paid the full rate to those with
sufficient qualifying years of NI contributions, or pro rata to
those with a partial record. The second part of the state
pension, the earnings-related additional state pension, was
linked to a person’s earnings. The national insurance
contributions paid by both the employee and their employer gave
the employee the right to an additional earnings-related state
pension. That was designed to ensure that as many workers as
possible were able to save for their retirement through a
work-based pension.
However, many employers already offered their workers a company
pension through their own scheme, so many people were already
building up an occupational pension, and an earnings-related
additional state pension in effect replicated that provision.
That was considered onerous and potentially unaffordable for both
employers and employees. It was seen as double provision and
over-complicated. In order to simplify the situation, the
Government of the day introduced in 1978 the system of
contracting out, and the provision of guaranteed minimum
pensions, which are the subject of this order.
Between April 1978 and April 1997, employers sponsoring a
salary-related occupational pensions scheme could “contract out”
their occupational pension schemes from the earnings-related
additional state pension. People who were members of a
contracted-out scheme were taken out of the additional state
pension, so as a result both the employer and the pension scheme
member paid lower-rate national insurance contributions. In
return, salary-related contracted-out occupational pension
schemes were required to take on the responsibility for paying
their members a guaranteed minimum pension as a part of their
occupational pension from the scheme.
The guaranteed minimum pension that the member built up in the
scheme would be broadly equivalent in value to the additional
state pension that they would have received had they stayed in
the state system. The majority of employees would also have built
up an occupational pension over and above the guaranteed minimum
pension amount, but the scheme pension could never be lower than
that guaranteed minimum. The crux of the idea was that, rather
than paying additional national insurance to the state in order
to build up an additional state pension, people could build up a
similar amount of occupational pension through a workplace
pension scheme. The system ran in that way from 1978 to 1997.
Having set out the detail, which I accept is complicated, let me
turn to the order before us.
The order provides a measure of inflation protection for the
guaranteed minimum pension part of an occasional pension built up
between April 1988 and April 1997. Legislation stipulates that,
when there has been an increase in the annual level of prices as
measured the previous September, the order must increase the
guaranteed minimum pension part of the occupational pension by
that percentage or 3%, whichever is lower. As the September 2023
figure was 6.7%, the increase for the financial year 2024-25 will
be 3%. The cap of 3% aims to achieve a balance between providing
some measure of protection against inflation for members and,
crucially, not increasing schemes’ costs beyond what they can
generally afford, in order to avoid undermining the viability of
some schemes and seeing them go into the Pension Protection
Fund.
An obvious question comes to mind: what happens when inflation is
above 3%, as it is currently? Most members who reached the state
pension age before 2016 will still get the same inflation
protection for their post-1988 guaranteed minimum pensions as if
they had never been contracted out. That is achieved through an
uplift that they receive in their additional state pension. For
those reaching state pension age after April 2016, who are
therefore receiving the new state pension, there are transitional
arrangements in place, which are particularly beneficial for
people who are contracted out. These members will therefore still
get the 3% increase from their occupational pension schemes.
I recognise that this is perhaps a very complex and technical
area, but I am satisfied that the order ensures that the burden
placed upon schemes is an appropriate one, but also one that
ensures that recipients get an increase in their pensions that
gives them some measure of protection against inflation. I
therefore commend it to the House.
Madam Deputy Speaker ( )
I call the shadow Minister.
5.20pm
(Wirral South) (Lab)
Hopefully, the House will be relieved to know that I do not
intend to repeat the explanation of this order that the Minister
has just given. As he said, the statutory instrument addresses
the needs of a specific group of pensioners. We support the
measure and will therefore obviously support the order. I will
just take a very short amount of time to raise a few other
related issues.
Further to the debate that we had on the previous order, Madam
Deputy Speaker, you will remember that under Labour we saw an
historic fall in pensioner poverty. Unfortunately, that has been
rising recently, which is alarming after nearly two decades of
decline: one in six pensioners are now living in poverty, with
the figure rising to one in four among those who are single. I
hope the Minister agrees that Britain should be one of the best
countries in the world in which to be a pensioner, so the fact
that many are still spending their later years in poverty does
not reflect well on us.
Labour in power introduced pension credit, ensuring that
pensioners’ weekly income reaches a minimum guaranteed level
while offering a whole host of benefits, such as free dental and
optical treatment. However, as we have discussed many times
across the Dispatch Box, despite highly publicised campaigns,
statistics released in October show that 40% of those eligible to
claim pension credit are still not doing so. Given that I am sure
the Minister shares my concern about this matter, will he confirm
what more the Government are doing within their powers to make
people aware of their potential pension credit entitlements?
Since we have just rehearsed all of the arguments about the cost
of living, I thought the Minister might like to take a moment to
reflect on what more the Government can do. As we know, social
security systems cannot perform their most basic function if
entitlements are eroded by inflation or, worse, not taken up at
all. Further to the debate that we have just had, we also need to
end the speculation about uprating. Pensioners should not be put
through that, any more than anyone else should.
As we all know, the key to a good retirement starts in the
workplace, when retirement can often seem like a distant concept.
We need people to consider their future early on, which was the
logic behind automatic enrolment —a massive policy success
started under the last Labour Government, which has driven up the
number of people saving. However, too many people are still
falling through the net.
In September, the Pensions (Extension of Automatic Enrolment) Act
2023 received Royal Assent with cross-party support, giving
Ministers the power to abolish the lower earnings limit for
contributions, and reducing the age for being automatically
enrolled from 22 to 18. At the time, the pensions Minister, the
right hon. Member for Sevenoaks (), said:
“We will consult on the detailed implementation at the earliest
opportunity”.
We have not had further information about that implementation,
and I wanted to give the Minister the opportunity to share any
information about what is happening with those powers. I hope
that all Members across this House will agree that the extension
of auto-enrolment is a good thing, and that we should crack on
with it.
I will make one final point: the roll-out of collective
defined-contribution schemes, which provide an income for later
life while giving members greater certainty about retirement
outcomes that they could achieve, is certainly to be welcomed.
However, more needs to be done to ensure that the proper
framework is in place for companies that express an interest in
CDCs, while ensuring that those who can still join a
defined-benefit scheme do so. I would be grateful if the Minister
commented on that.
(North East Fife)
(LD)
Very briefly, the Pensions Minister will know, because there was
a Westminster Hall debate on this a couple of weeks ago, about
some of the issues experienced with defined-benefit pension
schemes with companies such as BP not applying the limits that
have been recommended by the trustees. Does the shadow Minister
agree that we need to ensure that companies that have made
promises to pensioners actually pay out?
I am not entirely sure whether that intervention was for me, so I
will let the Minister respond when he winds up. However, on
companies keeping their promises, that seems like one of the
basics to me.
As I said before, we support these measures and will not oppose
the Government’s proposals, but I would very much welcome the
Minister’s comments on the questions I have raised.
Madam Deputy Speaker ( )
I call the SNP spokesperson.
5.26pm
(Glasgow East) (SNP)
When the Minister was making reference to a Netflix series
earlier, I did think that the pensions uprating debate would be
an unusual backdrop for Netflix and chill. I do not know whether
that is the first time “Netflix and chill” has been referred to
in Hansard—I am at risk of getting myself into trouble now, so I
will move on quickly.
As with the previous order, my party will not oppose this order.
In the previous debate I focused my remarks on poverty more
broadly. Now I want to speak about the number of pensioners in
poverty, which rose between 2020-21 and 2021-22, with pensioners
on low incomes among some of the hardest hit by the cost of
living crisis. The Joseph Rowntree Foundation’s report, which I
cited earlier, revealed that 2.1 million pensioners were living
in poverty in the UK in 2021-22, with the poverty rate for single
pensioners almost double that of couple pensioners and about one
in six pensioners overall living in poverty. I know this is felt
acutely in communities such as Carmyle and Sandyhills in
Glasgow’s east end.
The reality, according to Age Scotland, is that 9% of over-50s
are skipping meals due to financial pressure, and 65% of people
aged between 60 and 64 are having to dip into savings to meet
unexpected rising costs. I met the Trussell Trust just this
morning, and it is certainly seeing a larger number of pensioners
using its service than before. This is of course the case for
many WASPI women, given that the ombudsman found that there was
indeed maladministration in the communication from the Department
for Work and Pensions, with the cost of living crisis certainly
making matters much worse for women born in the 1950s.
(Glasgow South West)
(SNP)
I am grateful to my hon. Friend for mentioning 1950s-born women
such as my constituent Kathy McDonald. Does he not agree that
there could have been plenty of time today for us to discuss the
plight of those 1950s-born women, and to see what justice and
compensation we should be delivering for them?
My hon. Friend is right. I know Kathy McDonald, one of the 1950s
women, who is a force of nature and does an incredible service
for women born in the 1950s. It is frustrating that we can have
these debates about 1950s women, but I am clear that what 1950s
women want is not necessarily words from this place, but action
from this place. I think that challenge will be put to the two
main parties at Westminster as we come towards the election, and
I encourage all those 1950s women to press their candidates on
the need for fair and fast compensation, as well as for wider
action to tackle the unacceptable gender pension gap that is so
pervasive.
As Age UK highlights, the state pension is the largest single
source of income for most pensioners, so retaining the triple
lock is the very bare minimum. I was glad to hear the comments in
the previous debate from the hon. Member for Amber Valley () on that. The British
Government must urgently address the shockingly low state pension
levels, as they are already providing a lower state pension than,
frankly, most other advanced economies relative to average
earnings.
As with the issues we face with the social security system, the
only way I can see our bring truly able to protect pensioners and
treat older people with the basic dignity and respect they
deserve is through the powers of a normal independent nation,
where we can both improve state and occupational pensions, and
set the state pension at an appropriate level within a Scottish
context. That is the most crucial point I want to finish on,
because constituents in communities I represent, such as
Sandyhills and Carmyle, know one thing: for as long as Scotland
remains within this Union, the state pension age will continue to
climb and the state pension itself will remain pitifully low,
leading to more pensioners being placed in the invidious position
of choosing between heating or eating. That says everything
people need to know about this Westminster Government, who the
people of Scotland did not vote for.
5.30pm
With the leave of the House, let me thank those who have
responded to this debate. There has been a bit of speculation
about uprating, but does that start from those on the Government
Benches and come from nowhere else? It does not; it starts on the
Opposition Benches and it is sheer political opportunism, nothing
more. It will happen year after year, just as the sun shines and
the rain falls.
The shadow Minister made some interesting points that I want to
try to respond to, particularly on pension credit, where I know
there is a shared desire to make sure that we always maximise
take-up. Through the things we have been trying to do lately,
besides the television campaign we have been running involving
footballers such as Harry Redknapp and so on, every time we write
to people about state pension uprating—we are still legally
obliged to do so, to 11 million pensioners—they get a piece of
paper about pension credit as well. We are trialling writing to
pensioners on housing benefit to ask them to apply, to see
whether they also are eligible. We have not seen the outcome of
that work yet. I am really interested to see it, because it will
be a good indicator of whether we can use other datasets to get
more people involved. We are seeing much higher claims levels—80%
higher than a year ago—so a lot of what we are doing is
generating more interest. That does not always feed through to a
successful claim, but it is showing that there is more
interest.
There is no disagreement on this point about pension credit. I
just gently ask the Minister to go back to his officials and
re-examine the paper form for pension credit, which runs to some
232 questions. Given the nature of the demographic dealing with
pension credit forms, there must be a way of trying to simplify
them. Does he agree that it might be possible to slim down 232
questions, so as to get more people their pension credit?
I very much take the point. I was sitting down today with people
from a range of charities to discuss that very point: how do we
get access to those who are least inclined to apply at the moment
and what groups in society are we missing? The discussion was
very much about how an overreliance on IT can often be a barrier
and so this is very much part of our thinking.
The shadow Minister also asked about the 2017 reforms, and the
extension of auto-enrolment, investing from the first £1 of
income and so on. Those things are a personal priority to me. I
would love to give her a date for when she will see that; “in due
course” is never a good answer to give at the Dispatch Box, but I
am afraid that it is the answer at this stage. However, I am
pursuing this within the Department, so she has my personal
pledge that I am pushing it is as hard as I can. I am also
enthusiastic about CDCs, as I know she is. She will be aware that
Royal Mail already has a scheme “ready cooked”, and I am keen to
see how it progresses, but I want to make sure that other
businesses that are also showing an interest can input into the
formulation of the more sustainable regulations.
Finally, I come to the point about BP made by the hon. Member for
North East Fife (). Unfortunately,
commitments given in the Chamber do not always align with
ministerial diaries as to when I am due to meet people, so on all
the things I promised I would raise, I have yet to have a chance
to meet the pensions regulator to have that fuller discussion.
This is still a case of “watch this space”, but I stand by
everything I said in Westminster Hall and it is still on the
agenda. On that note, I commend this order to the House.
Question put and agreed to.
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