Social Security Benefits Up-rating Order 2021

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Social Security Benefits Up-rating Order 2021.

My Lords, the draft Social Security Benefits Up-rating Order 2021 and the Guaranteed Minimum Pensions Increase Order 2021 were laid before this House on 18 January. In my view, the provisions in these orders are compatible with the European Convention on Human Rights.

The Guaranteed Minimum Pensions Increase Order is an entirely technical matter that we attend to each year. It provides for formerly contracted-out defined benefit occupational pension schemes to increase their members’ guaranteed minimum pension which built up from April 1988 to April 1997 by 0.5%. This is in line with the increase in the general level of prices as at September 2020.

The Social Security Benefits Up-rating Order reflects the Government’s continuing commitment to support working families and pensioners across the nation, especially during a particularly challenging time for many. It will increase the basic state pension and the new state pension in line with the triple lock; increase the pension credit standard minimum guarantee in line with the cash increase to the basic state pension; increase working-age benefits in line with prices; and increase carer’s benefits and benefits intended to meet additional disability needs in line with prices.

In November, Parliament passed the Social Security (Up-rating of Benefits) Act. Without this legislation, state pensions would have remained at 2020-21 levels, because under the existing legislation there is no power to bring forward an uprating order to increase these rates in the absence of an increase in the level of earnings. The legislation allows for state pension, pension credit and widows’ and widowers’ benefit in industrial death benefit rates to be uprated for the 2021-22 financial year, benefiting millions of pensioners.

Under the Government’s triple lock commitment, the basic state pension will continue to be uprated by the highest out of earnings, prices or 2.5%. This year, the Government will draw on the power in the Social Security (Up-rating of Benefits) Act to maintain this commitment to the triple lock. The triple lock has been an invaluable tool in combating pensioner poverty and demonstrates this Government’s commitment to pensioners. This year, the basic state pension will increase by 2.5%, which is the highest of the triple lock figures. The basic state pension will rise to £137.60 a week for a single person. From April this year, the basic state pension will be over £2,050 a year higher in cash terms than in April 2010.

Five years ago, the Government introduced the new state pension, which provides a transparent and sustainable foundation for private saving and retirement planning for people reaching state pension age from 6 April 2016 onwards. We have also committed to increasing the new state pension by the triple lock. From April 2021 the full rate of the new state pension will increase to £179.60 per week.

My Lords, I thank the Minister and welcome the decision to increase the guaranteed pension credit by the value of the cash increase in the basic state pension. Pension credit is targeted at the poorest pensioners, and it has always surprised me that the Government, given their manifesto commitment to the triple lock for the basic and new state pensions, never committed to a protective underpin for our poorest pensioners. Some 1.5 million people receive pension credit, but over a million eligible pensioners do not claim. Now, by not claiming, many will see their annual income reduce by £157.50 when they get their TV licence demand. The BBC, by targeting pensioners in receipt of the pension credit for exemption from the licence fee, perversely excluded over 1 million eligible people for not claiming that credit. Recently there has been radio silence from the Government about how they are progressing and protecting this million, so can the Minister reassure the Committee that they are not walking away from the problem, having handed over policy on pensioners and the licence fee to the BBC?

In the UK, declining levels of household financial resilience were a growing problem before the pandemic and increasingly evident during it, contributing to the easements necessary to create a functioning welfare system. Factors that increase household resilience, such as employment benefits, state benefits, insurance savings and affordable credit, were all weakening. Indeed, only 28% of employers, for example, now provide more than statutory sick pay of £94.25 per week—a reality quickly evident when the virus started to spread. Did the Government give any consideration to increasing the rate of statutory sick pay by more than the 50p in this SI and, if they did, could the Minister share it with us?

I thank the Minister for her introduction and for the letter circulated previously. As far as I can tell, as a non-specialist, the increases are either as required in statute or as promised, with additional discretionary increases that can apply for one year only. That leaves me slightly confused as to what happens after that one year. Perhaps the Minister could explain, as I have not been part of the teams and meetings with her.

Broadly, I do not quarrel with the SIs. Where there are issues, it is with the underlying structures that, notably through the triple lock, reward at a higher rate than those benefits that apply to the harder up. I appreciate that the increase in the basic state pension in cash terms has been transposed over to pension credit but, given that there are other thresholds in play, are there pensioners who will lose out due to the increase in thresholds being less than the 1.9% cash increase?

Regarding the triple lock, can the Minister advise on where we are with the original catch-up idea, which came about because pensions had fallen behind earnings? We have had unexpectedly low earnings rises, and now again through Covid, and there has been low inflation. Originally it was projected that it would take until 2038 for the state pension to reach 26% of national earnings. Is there a new projected date by which that will be reached?

Once again, it is still unfair that the over-70s get the triple lock on only part of their pension and not the whole of it.

My Lords, I congratulate my noble friend on introducing these SIs and her very clear explanation. Of course, I welcome the Government’s commitment to protecting the vulnerable and the poorest pensioners. Indeed, it is really important for us to make sure that we protect pensioners properly.

As my noble friend knows, I find it difficult to reconcile the statements and the commitment to the triple lock when the triple lock does not apply properly to either the oldest pensioners or the poorest. The basic state pension is £42 less per week than the new state pension, which is available only to those pensioners not over 70. Pension credit increasing in line with the cash increase in the basic state pension is welcome, and is certainly better than prescribed in legislation, which would see an increase in line with earnings, which could be a fall or no increase at all. However, this still leaves the oldest and poorest pensioners at a disadvantage relative to the youngest pensioners, who have much better protection from the triple lock.

I welcome the fact that these benefits are increasing but urge my noble friend, in line with the comments of the noble Baronesses, Lady Drake and Lady Bowles, to look at whether there is an appetite in the department to ensure that pension credit for the poorest pensioners is covered by the triple lock.

On the subject of pension credit, I acknowledge the point made by the noble Baroness, Lady Drake, about the problem of low take-up and the poorest pensioners not necessarily receiving the free TV licence intended for them because they do not take it up. Does my noble friend agree that there might be merit in encouraging the BBC itself to make sure that there are promotions for increasing take-up of the pension credit?

My Lords, I want to comment on work-related benefits. I served on your Lordships’ Select Committee on Food, Poverty, Health and Environment. As we have seen in the past 12 months, one of the growing factors in front of us every day is more children being in poverty and unable to get proper food. UNICEF was even prepared to come into the United Kingdom for the first time. In these circumstances this year, while I fully support the principle that work must pay, I believe that there is an appetite in the community generally to tolerate a modest increase in tax and to target any revenue to eradicate what is a stain across our entire community.

Obviously, there are things I welcome in these instruments, but I must point out that we face the challenge of a whole generation losing out, and not only on school. At least two academic years have been disrupted and who is to say that there will not be a third? On top of that, we have the growth in food banks and people such as Marcus Rashford trying to target children’s needs in recent weeks. In the difficult economic circumstances that they face, I urge the Government to consider that there is, I believe, a preparedness in the community to tolerate a modest increase in tax, even for a couple of years in this Parliament, to ensure that that stain is removed from the United Kingdom.

My Lords, in my two minutes, I have only one issue to raise: the take-up of pension credit. The Minister will recall that many of us were concerned about the loss of free TV licences for those aged over 75, which broke a Conservative manifesto promise. Now only those on pension credit get free TV licences but, as my noble friend Lady Drake said, about 1 million people are eligible but do not claim, so they also lose their right to a free TV licence.

The Minister will also recall that some of us suggested to her a new take-up campaign—a much more vigorous and innovative one than any we have had previously. She kindly arranged for some of us to meet her and the Pensions Minister, Guy Opperman, in November, when they promised action. But more than two months later, apparently nothing has happened. Will the Minister now agree to get together urgently with those representing the interests of older people—Age UK, Age Scotland, Independent Age and all such organisations—and their media representatives to discuss how to launch a new, innovative, exciting, forceful and participatory campaign to get more people who are eligible to take up pension credit? The Minister may also notice that I have, I hope helpfully, tabled an Oral Question for answer on 8 March. That will give her an opportunity to report back on the success of such a meeting and the introduction of this campaign.

My Lords, I declare an interest as a trustee of the parliamentary contributory pension scheme. Looking at the detail of the Guaranteed Minimum Pensions Increase Order 2021, one has to remember that it applies only to those who retired before 6 April 2016. I looked at what would have happened if I had retired on that date and at life expectancy data. It would mean that I got 29 years: that is not a small financial commitment for Her Majesty’s Government.

I want to talk about the triple lock. If one thinks about the challenge to the Treasury—in effect, the taxpayer—it is almost a triple whammy. There is the basic state pension, based on national insurance contributions; the additional state pension, which is partly earnings-related; and all final salary schemes for public sector workers. The financial cost in the past three years has gone up by 21%, which is over £1 trillion in real money. Has not the time come for the Government to review the employee’s contribution through national insurance, and for the public sector as well? This seems fair, not least because a pension—one that is pretty old—is a really good deal. Of course, the cost of that state pension is forecast—admittedly over 50 years—to rise from 4.9% of national income to 6.9%. We need a clear positioning paper, produced by the interested parties in the Government and the pension industry, to look at the financial options for the national pension and state employee pensions.

I offer one saving: the £10 Christmas bonus. This year, after the pandemic, the Chancellor can say, “Father Christmas has run out of money and there will be no Christmas bonus for this coming year.”

My Lords, I want to highlight three issues. First, on pensions policy, I welcome the Government’s proposal to increase pensions by 2.5%, in line with the triple-lock policy. Despite criticism, that triple lock helps to redress intergenerational unfairness and keeps pensioners’ incomes higher than they would otherwise be, given the relatively low basic level of state pension in the United Kingdom compared to other countries.

Secondly, regarding the Guaranteed Minimum Pensions Increase Order, I want to highlight the unjust frozen pension policy that affects some 500,000 pensioners who, despite paying into the system—and in many cases serving their country—have had their pensions frozen since they moved to places such as Canada, Australia, South Africa and so on. This is a wrong that needs to be put right. Will the Government explain whether action will be taken at long last to pay these pensioners what they are entitled to?

Thirdly, I refer to the £20 a week uplift to universal credit and the working tax credit given last year. Of course, legacy benefits should also have seen the same uplift and the Government should explain why people on legacy benefits have not seen a similar increase. The extra £1,000 and more in universal credit has been very important in helping to support people facing terrible financial disruption from increased unemployment, as well as from increased food, utility and other unavoidable costs as a result of living and working from home. It is clear that the disruption and financial hardship due to Covid will continue beyond April. I urge the Government—I know that this is not a part of today’s instrument, but it is a very relevant issue when we are talking about the uprating of benefits—to announce as soon as possible that the uplift will be extended, rather than waiting nearly until April, when we are approaching a cliff edge.