House of Commons Work and Pensions Committee Tackling Pensioner Poverty Fifth Report of Session 2008–09 Volume II Oral and written evidence Ordered by the House of Commons to be printed 15 July 2009 HC 411-II Published on 30 July 2009 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Work and Pensions Committee The Work and Pensions Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Work and Pensions and its associated public bodies. Current membership Terry Rooney MP (Labour, Bradford North) (Chairman) Anne Begg MP (Labour, Aberdeen South) Harry Cohen MP (Labour, Leyton and Wanstead) Michael Jabez Foster MP (Labour, Hastings and Rye) Mark Harper MP (Conservative, Forest of Dean) Oliver Heald MP (Conservative, Hertfordshire North East) John Howell MP (Conservative, Henley) Joan Humble MP (Labour, Blackpool North and Fleetwood) Tom Levitt MP (Labour, High Peak) Greg Mulholland MP (Liberal Democrat, Leeds North West) Jenny Willott MP (Liberal Democrat, Cardiff Central) The following Members were also Members of the Committee during session 2008-09 John Penrose MP (Conservative, Weston-Super-Mare) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/parliamentary_committees/work_and_pensions_committee.c fm. A list of Reports of the Committee in the present Parliament is at the back of this volume. Committee staff The current staff of the Committee are James Rhys (Clerk), Emma Graham (Second Clerk), Amy Sweeney and Hanna Haas (Committee Specialists), Laura Humble (Committee Media Adviser), John-Paul Flaherty (Senior Committee Assistant), Hannah van Schijndel (Committee Assistant) and Jim Lawford (Committee Support Assistant). Contacts All correspondence should be addressed to the Clerk of the Work and Pensions Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5833; the Committee’s email address is [email protected] Witnesses Wednesday 22 April 2009 Page Chris Curry, Research Director, Pensions Policy Institute (PPI), and Ev 1 Professor John Hills, Department of Social Policy, London School of Economics. Wednesday 13 May 2009 Mervyn Kohler, Special Adviser, and Sally West, Policy Manager, Age Ev 18 Concern and Help the Aged and Alan Barton, Social Policy Officer, Citizens Advice Bureau. Wednesday 20 May 2009 Rt Hon Rosie Winterton MP, Minister of State for Pensions and the Ev 36 Ageing Society, Charlie Massey, Director for the Ageing Society and Alan Woods, Director for State Pensions and Stakeholder Relations, Department for Work and Pensions. List of written evidence 1 Dr. Ros Altmann Ev 54 2 Anthony Cooke Ev 55 3 Counsel and Care Ev 56 4 Kenneth Molloy Ev 58 5 Unite Ev 59 6 Independent Age Ev 63 7 Dr Edmund Cannon and Professor Ian Tonks Ev 66 8 National Pensioners Convention Ev 71 9 E.ON UK Ev 77 10 Continuing Care Conference Ev 78 11 Parkinson’s Disease Society Ev 83 12 Occupational Pensioners’ Alliance Ev 86 13 Advice NI Ev 87 14 Macmillan Cancer Support Ev 89 15 Lancashire County Council Ev 92 16 Just Retirement Ev 94 17 Association of Consulting Actuaries Ev 96 18 Actuarial Profession Ev 98 19 Department for Work and Pensions Ev 101; Ev 157; Ev 170; Ev 171 20 Carers UK Ev 111 21 eaga Plc Ev 113 22 Age Concern and Help the Aged Ev 116 23 Tony Salter, Andrew Bryans and Colin Redman Ev 123 24 Citizens Advice Ev 127; Ev 162 25 Pensions Policy Institute Ev 134 26 The Royal British Legion Ev 143 27 Equality and Human Rights Commission Ev 146 28 Professor Stephen Pudney, University of Essex Ev 153 29 Mayor of London Ev 155 30 David Luff Ev 157 31 Jeff Williams Ev 172 32 Letter from Mr Terry Moran, Chief Executive of the Pension, Disability and Carers Service to Mr Tom Levitt MP. Ev 175 Processed: 22-07-2009 18:28:36 Page Layout: COENEW [SO] PPSysB Job: 425230 Unit: PAG1 Work and Pensions Committee: Evidence Ev 1 Oral evidence Taken before the Work and Pensions Committee on Wednesday 22 April 2009 Members present Mr Terry Rooney, in the Chair Harry Cohen Tom Levitt Mr Oliver Heald Greg Mulholland John Howell Witnesses: Mr Chris Curry, Research Director, Pensions Policy Institute (PPI), and Professor John Hills, Department of Social Policy, London School of Economics, gave evidence. Q1 Chairman: Welcome everybody to our first up a bigger pile in your pension pot to finance a given evidence session in our Tackling Pensioner Poverty standard of living in the future. This is going to be a Inquiry,a particular welcome to our two witnesses— challenge, so going back to your question is it old friends, you know we do not bite—it is a pleasure suYcient, as a package that creates a minimum and to have you with us. I am going to kick oV. Do you a system on which people can build, yes, but as think that the reforms and legislative processes we something that will automatically provide the kinds have had since the Turner Commission have of income that people might expect in retirement, we suYciently addressed the issues that were raised? have to do more. Professor Hills: Shall I start, having been partially Mr Curry: If you look back to what the original responsible for that? It depends what you mean by proposals were and what has been implemented “suYciently”. As a Commission we always regarded since then—and the Government has taken almost a the proposals we put forward as being the minimum straight lift as it were and stuck very closely to what acceptable package that would allow people to build was the original proposal put forward by John and a secure retirement income for the future. We made the other commissioners—there has been a clear, for instance, in the discussion of levels of fundamental shift in the framework of pension contributions to personal accounts or indeed provision and retirement income provision as part of contributions towards employer schemes that that, so the big benefit of the report of the Pensions figures like an 8% contribution on top of the state Commission and the way it has been taken forward, system that will eventually emerge were an absolute not just by the Government but by the consensus minimum and that to meet most people’s aspirations amongst the political parties is a recognition of the for a retirement income they would have to save type of system that we want to end up with in terms rather more than that, in fact sensibly probably twice of having a much stronger and firmer state system as much as that. One of the big things that have underneath, although potentially not as generous as changed looking forward is that the whole business it might have been to higher earners in the previous of providing for future retirement income has system and, as John alluded to, building a become a great deal more expensive. If one of the framework on top of that to allow people to provide eVects of the credit crunch is the realisation that for their own retirement income. Whether we need to investment returns were not as high as some people go further once that system is in place and build that would hope they were, that makes putting aside framework up and change the practices within that income for the future to provide a particular level of system is something that we are still working out as income for the future a more expensive exercise, and we go through the current economic situation. one of the things one has to think about very carefully is whether the issue of long run rates of 1 Q2 Chairman: John, you were saying that essentially return of 32% in real terms are robust as we emerge the system that we have now legislated for will from the crisis. If they are not the implication is that provide just a minimum platform and people will people will have to save more or they will have to have to supplement it. If you go back to Beveridge work longer. There is no escape from that and the he said that the state pension on its own would never great diYculty we have is that having explained to be enough to live on and people would have to people on the one hand—and it is something we will supplement it with savings or private insurance, and have to keep on doing, explain to people—that as nobody took any notice. Are we just recreating that people’s life expectancy has increased we have got a problem, I accept from a slightly higher base? longer period to provide for if you retire at any given Professor Hills: We have moved forward from age—that is already a big shock to people’s Beveridge. You can see as far as the state system is expectations and something that people simply have concerned that once we have the basic pension not been aware of—we may now have a further earnings linked, and once we move towards the state shock in explaining to people that annuity rates are second pension essentially being a flat rate addition going to be lower in the future than they might to that, for many people the state system will look otherwise have been and therefore you need to build rather similar to the flat rate system that Beveridge Processed: 22-07-2009 18:28:36 Page Layout: COENEW [E] PPSysB Job: 425230 Unit: PAG1 Ev 2 Work and Pensions Committee: Evidence 22 April 2009 Mr Chris Curry and Professor John Hills envisaged.