Parliamentary Under Secretary of State for Work and Pensions (Kit Malthouse)
The Government’s continuing commitment to the triple lock for the length of this Parliament means that the basic state pension rate for a single person will increase by £3.65 to £125.95 a week from April 2018. As a result, from April 2018, the full basic state pension will be £1,450 a year higher than it was in April 2010. We estimate that the basic state pension will be around 18.5% of average earnings—one of the highest levels relative to earnings for more than two decades.
In 2016, the Government introduced the new state pension for people reaching their state pension age from 6 April 2016 onwards, with the aim of making it clearer to people at a much younger age how much they are likely to get and providing a solid base for their saving and retirement planning. We are committed to increasing the new state pension by the triple lock for the duration of this Parliament. As a result, the full rate of the new state pension will increase by 3% this year, meaning that, from April 2018, the full rate of the new state pension will increase by £4.80 to £164.35 a week—around 24.2% of average earnings.
Significant measures have been taken by the Government to deal with pensions and, in particular, pensioner poverty over the last few years.
All in all, the Government will spend an extra £4.2 billion in 2018-19 on uprating benefits and pension rates. With that spending, we are upholding our commitment to the country’s pensioners by maintaining the triple lock on their state pension, helping the poorest pensioners who count on pension credit, and providing support to disabled people and carers. I commend the orders to the House.
Debbie Abrahams (Labour)
Moving on to the pensions element of this uprating, I welcome the uprating of the state pension via the triple lock. I am glad to see that has survived, given the Government’s indifference to it last year, but I want to put on the record concerns about the public’s levels of understanding of the new single-tier pension and the paucity of information the Government have made available. As we know, there are both winners and losers as a result of the Government’s changes and most new pensioners will not receive the full single-tier pension. Before its introduction, it was estimated that only around 22% of women and half of men reaching state pension age would be entitled to the full single-tier pension. Will the Minister update the House on that?
In addition to the numerous social security payments subject to the Government’s benefits freeze and not uprated in this order, there are some very significant further omissions. Although the state pension is being uprated, people who have frozen pensions are excluded from the uprating and will not see an increase in their state pension in line with inflation. Pensioners living abroad face very different circumstances depending on whether their country of residence has a reciprocal agreement with the UK for the uprating of state pensions. Pensioners in countries without this arrangement see their pensions frozen at their initial retirement level, which means that the value of their pension falls in real terms every single year.
More than half a million people currently have their pensions frozen, mostly in Commonwealth countries such as India, Australia, Canada, parts of the Caribbean and New Zealand, and in countries with strong family and historical links to the UK such as Pakistan and parts of Africa. The Opposition believe that their pensions should be protected in the same way that the pensions of other UK citizens living abroad are in the future, yet the Government are choosing to withhold the pension uprating in this order from 550,000 recipients living outside the UK. This is a chance for the Government to make an historic change to our pension system and support our policy to end future arbitrary discrimination against some British pensioners living overseas by uprating in line with inflation from this point. Will the Minister look again at that issue and take action to address that inequality?
Not only have the Government failed to support pensioners living abroad; they have failed to address the current injustice faced by many millions of women born in the 1950s. It is important that the Government not only recognise the real injustice that women born in the 1950s have been dealt as a result of Government changes to pensions policy, but take action to remedy this injustice.
In the context that I have set out, a 3% uprating of some social security entitlements is unlikely to do much for those who are “just about managing”. As a matter of principle, the uprating should apply to all entitlements, not just the ones that the Government have cherry-picked. In the meantime, although we regret the limit on the groups who will benefit from the uprating, we must support the order, because otherwise those identified will lose out.
The old state pension had two main components: a basic state pension; and a state earnings-related pension. People who made national insurance contributions at the full rate built up a basic state pension, but an option created in 1978 enabled people to contract out into another pension scheme, either voluntarily or via their employer on their behalf, on the basis that the other scheme met certain criteria. Between 1978 and 1997, schemes that took on such new members were required to provide a “guaranteed minimum pension”. The guaranteed minimum pension system was discontinued by the then Government in 1997.
In 2016, the Government’s introduction of the new state pension ended contracting out by replacing the additional state pension with a single tier. Working-age people now have their existing state pension entitlement adjusted for previous periods of contracting out and transferred to the new state pension scheme. For people who have guaranteed minimum pensions rights under an old pension scheme but who reached retirement age after April 2016, the Government no longer take account of inflation increases in guaranteed minimum pensions when uprating people’s new state pensions. The changes mean that 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.
Neil Gray (SNP)
On pensions, Ministers will not be surprised at my disappointment that another year has gone by without any action on frozen pensions or to sort out the state pension inequalities faced by women. Accompanying the order are regulations—they are brought forward annually under the negative procedure—ensuring that the state pension uprating will not apply to people entitled to the pension living in certain countries around the world. My right hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) and my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) have been pressing the Government on this matter since their election in 2015. It is an injustice that some people, who have earned the right to their pension like everyone else, have their payments frozen at the rate they first received for the rest of their life abroad. It is just not right that the pensions of those who live in some countries continue to rise while those of others are frozen. Some 550,000 British pensioners are affected, who represent 4% of all recipients of the state pension and half of all those drawing their pensions abroad.
Jim Cunningham (Labour)
I agree with the hon. Gentleman about overseas pensions. I am sure he recalls—I think this was last year [ICBP met up with Jim Cunningham in Nov 2016 - he seemed unresponsive at the time, but clearly remembers the meeting!] or the year before—that a number of representatives from different countries came to lobby us about this situation, which has been ongoing for a number of years. I am sure that we have all received many emails on the subject.
Neil Gray (SNP)
We have indeed, and I am sure I have been copied into the same emails that the hon. Gentleman has received. It is wrong that people still face this glaring injustice, and the new DWP team must look at it again to ensure that there is action upon it.
Kate Green (Lab)
While I too am pleased that a number of benefits have been uprated in the Social Security Benefits Up-rating Order 2018, overall I am disappointed in it for the reasons outlined by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) and the hon. Member for Airdrie and Shotts (Neil Gray). In too many cases, in failing to offer any uprating at all of certain benefits it serves to embed meanness in our social security system, particularly against the backdrop of rising prices that we have heard about.