My Lords, this Government are committed to enabling tomorrow’s pensioners to have security in retirement, which is why we announced the landmark pensions review days after coming into office in July. The first phase will boost investment and economic growth, with two consultations live since November, and we are committed to a second phase focused on retirement adequacy, of which we will provide further details in due course.
I very much welcome my noble friend the Minister’s reply, but of course she will be aware of how this works. Last weekend there was a series of stories in the national press, from the FT to the Sun, suggesting that the second phase had been put on hold, presumably to provide some assurance to those who are concerned about the high costs of employment. The problem is that without an urgent definition of an adequate pension on a clear and evidence-based basis, much of the debate that we can have on pensions is facile and empty of content. You cannot know which way to go unless you know where you are going. Does the Minister agree?
I think I can agree with the last statement firmly. I will try to avoid being facile and empty of content; I cannot make permanent promises, but I will do my best. I understand the point my noble friend is making, but I can perhaps offer him some reassurance. The pensions review is going to be conducted in two phases, and it matters that they are structured in the right way. The first phase, which was launched by the Chancellor in July, is aiming to boost investment, so it offers a win-win. It will boost investment for the country and provide better saver outcomes, alongside economic growth.
Phase 1 launched two significant consultations: one about DC schemes and the other about the Local Government Pension Scheme. It is right that we focus on delivering the first phase before moving on to phase 2. But the second phase, my noble friend will be glad to know, will focus on pensions adequacy and further measures to improve outcomes for pensioners. I take his point about the need to be clear about what adequacy means, and I will take that back. The scope of the second phase will be announced in due course, but I will take that comment back to my colleagues as that is being developed.
My Lords, will the Minister confirm that the pensions review will cover the ombudsman’s recommendations for WASPI women, on which subject I declare an interest?
I fully accept that the noble Baroness may not be alone in this place in that declaration of interest. The ombudsman’s review is something to which the Government have already made their response. It was published yesterday, and I repeated a Statement in the House that was made by my right honourable friend the Secretary of State.
As noble Lords will be aware, the Government looked very carefully at the evidence that was provided to and by the ombudsman, and we concluded that while we accept the specific case of maladministration by allowing a 28-month delay in sending out personalised letters to women born in the 1950s, the Government could not accept that that created the impact the ombudsman had described and therefore could not accept the recommendation on injustice and remedy. I am also very aware of the widespread concern among many women who had hoped to retire at 60 and found that they could not, which is a mixture of the decision back in 1995 to equalise the state pension age and the decision of the coalition Government in 2011 to accelerate those changes. That was not a subject of the ombudsman’s review, and nor is it the subject of the pensions review.
My Lords, the Minister talks about the two stages of the pensions review, which is very important. Can she confirm that the modelling by the Government Actuary—and I stress that—shows that the measures in stage 1 of the pensions review will, at best, only slightly improve member outcomes? Those are his words, not mine. Can she give me some reassurance that stage 2 will be given the priority it deserves? Can we get a timescale for when we will get to stage 2? I know the Minister cares about pensioners, and this review is necessary.
I thank the noble Lord. We share that; we both care about pensioners. This Government are absolutely committed to making sure that outcomes for pensioners from private pension savings are as good as they can be. Both phases matter. It matters absolutely that we get the pensions market working properly the first time around. The noble Lord will be aware that measures have been announced for the pensions Bill, but there are live consultations on a range of measures that can enhance both growth for the UK and outcomes for savers.
It really matters. We want to end up, as our proposal suggests, with fewer, but better and bigger, pension schemes. All the international evidence suggests that consolidation and scale produce better results for savers. That, in the end, is what will drive private pension incomes. If we can get the market working well, we can try to get people saving as much into it as they need to.
My Lords, I congratulate the noble Baroness on her promotion. I understand that stage 2 of the review, if it does go ahead, focusing on pensions adequacy, might recommend that pensions contributions increase from 8% to 12%, meaning that employees would continue to contribute 3%, but with employers increasing their contributions from 5% to 9%, which is a very heavy burden, especially on hard-pressed small businesses. In addition, for employees opting out of auto-enrolment, which is their right, the recommendation might be that employers would still pay their side of the contribution. Why did the Chancellor not think holistically about all the costs that businesses have to bear in employing staff when she made the decision in her Budget to raise the national insurance contributions?
My Lords, I thank the noble Viscount for his kind words. I am very grateful; it is very gracious of him. He is asking me to comment on speculation about something that might be recommended in the phase 2 review, which has not started yet, so I hope he will bear with me. We think that getting this the right way around really matters. Phase 1 is about trying to get the market working as well as it should, both the DC side and the consultation on the Local Government Pension Scheme. If we can get the market functioning well and drive more scale and consolidation, looking at what they are doing in Canada and Australia, we can then have a better-functioning market and better returns. At that point in stage 2, we can look at matters of adequacy and at what money is going into it.
My Lords, we live in a country where 50% of the population own less than 5% of wealth and the poorest 10% own just 0.02%. What plans do the Government have to improve the share of wealth of a substantial part of the population to enable them to save for a private pension? Surely such things cannot be left to the market.
I think that might be slightly above my pay grade. The Government want to make sure that everybody can save an appropriate amount for retirement. For that to work, one of the starting points is that people have to earn enough in their working lives to be able to have an option of saving anything. The measures that the Government have taken, in our plans for jobs and in looking at what we are doing with the national living wage and to try to drive good work, are about trying to drive economic growth, get more people into good jobs and help them to stay there and to grow in their careers. The work has been done around the Get Britain Working White Paper. All the plans around that are trying to get people to develop in their working life and to be more productive to drive economic growth. That is a win-win. It is good for the country and good for individuals and their families.