A very warm welcome to this oral evidence session of the Work and Pensions Select Committee, which is the final session of our inquiry on the transition to state pension age. It is a pleasure to welcome the Minister for Pensions, Torsten Bell. He is accompanied by Cathy Payne, who is in charge of the state pensions policy, and Nicholas Warrington, who is on the Keep Britain Working team. Welcome to both of you as well. I do not think either of you have been to the Committee before, so a special warm welcome to you both. Minister, we know that the first independent review of the state pension age recommended bringing forward the increase of the pension age to 68 to between 2037 and 2039. However, the second independent review pushed it back to 2041 and 2043, in the light of the decline in projections around life expectancy. To what extent do you see the state pension age as a means of controlling spending? Or is it more a question of ensuring that people have at least a third of their working life in retirement?

The first thing I should say is that everything in this space matters a lot. It matters a lot to all of us because we are all aiming to have a retirement, it matters a lot that we have the certainty of planning for that, and we would all like to have as much life in retirement as possible. I am going to start on that, and then I will come directly to your question. There is some good news on that front, which is that if we take the longer view, at the point at which the state pension was introduced only about half of people were expected even to get to state pension age. That rose to 84% when the Labour Government reduced the state pension age in the 1940s, and it is 93% now. The existence of retirement through the 20th century is one of the big benefits we have had, and the SPA and the existence of the state pension is the main bulwark for that, particularly for lower-income households. It is very important. I’m afraid the answer to your wider question on what we are considering is both. We want to make sure that we have a sustainable state pension for the longer term, because one of the most worrying things, if you look at the data at the moment, is the reduction in trust in the pension system. That is partly to do with a transition from a well understood DB landscape to a less well understood DC landscape, but it is also manifesting as lots of people saying that they do not believe the state pension will be there in its current form. I do not think that is true, in the sense that I think there is a strong cross-party consensus about lots of the core features of the state pension, but we need to rebuild that trust, and making sure that it is seen as sustainable is part of that. Fairness is a very central part of why the state pension exists, and the design features of the state pension show that that is also something of cross-party consensus.

We will be asking more questions on the state pension itself in a moment. Suzy Morrissey is currently conducting her review of the state pension age, and she is due to report in the spring, which is quite a wide timeframe. This is an interim report before her final one at the beginning of next year. When do you expect to receive the interim report?

We have asked the independent review—you can see this in the terms of reference—to consider the framework for thinking about the right level for the state pension age. Obviously, the statutory requirement is on the Secretary of State to conduct a review of the SPA. I am not going to get into the timings for that today. There is a formal process for that. I have not received the independent review yet, but it is set out in legislation that we will need to finish the Secretary of State’s review by March 2029.

You mentioned the increase in life expectancy on average, and yes, it has increased at all levels of the income spectrum, as has healthy life expectancy, but it has increased much more slowly for low-income households and for particular groups in the country. Given that, which considerations are going to be taken into account? There has been a fall in life expectancy in areas like mine, in Oldham. It is slightly increasing now, but over the last seven or eight years it has been in decline. What considerations will be given to those groups?

A lot. State pension age increases have been going on, for different reasons, since the early 1990s. If you take the long view, there is to some degree a consensus that as you see increases in longevity, there will be consequential changes in the state pension age. Sometimes that has flipped too easily into being relaxed about that and not weighing that. You can take seriously the fiscal constraints and the need to support people working into later life, while taking very seriously the consequences, and the distribution of the consequences, of increases in the SPA. If I look at the changes in 2011, for example, and some of the comments I saw from Ministers at the time after very fast accelerations of the state pension age, I will say they were not weighing those consequences seriously enough in the way they went about it.

Good morning. Many people argue that in order to understand whether we have the right pension, we need to understand what the objective is. Is it about setting a quality of life? Is it about tracking against some other measure, like wages or inflation? What is your view on whether we need some measure of adequacy?

Do you mean the entirety of retirement adequacy in the round?

Just the state pension.

The state pension age? Okay. There are two ways of thinking about that. The Government’s revealed objective is that we want to see a slightly higher level of the state pension relative to earnings, which is being delivered by the maintenance of the triple lock over the course of this Parliament. That is the £30 billion increase in state pension expenditure over the course of this Parliament. That needs to be seen in the round with the Pensions Commission work, which is explicitly looking at how we think about adequacy. One thing I have talked about in that space is the fact that if you look at projections for retirees’ incomes in the middle of this century, you are seeing projections of lower private pension income in 2050 than in 2025. The reason I am raising that is that you can see what the overall objective is on the state pension. Again, that is a matter of cross-party consensus. If we look at either overall adequacy or the inequality issues that the Chair has rightly raised, the biggest gaps today are on the private pension side. That is where the largest gaps are. That does not mean we should not be looking at all of it. We should definitely, when we think about the SPA—which is a defining feature for poorer households’ retirement choices—be thinking about longevity rises. However, if you are asking overall on adequacy and on the inequality challenges, we have to look hard at where we are up to on the private pension side.

Do you support the idea of the Pensions Commission setting some adequacy measure or lifestyle measure, even if it might be fulfilled by tracking—

It is an independent commission and I do not want to prejudge what it should do. We have discussed it with them, and they are looking at how to think about adequacy in the round, not just in respect of the state pension. That is obviously right. The commission will publish an interim report, and I have not seen it, but I am sure it will look at how to think about adequacy. You have discussed at this Committee before some of the measures that are out there, some of them industry focused, and in the end they tend to collapse into two buckets. I think both are important and that people who think you should just look at one are missing the point. There is absolute adequacy, or the minimum level of income we are happy to see pensioners living on, and then there is relative adequacy, relative to people’s income, smoothing their income during their working life. Both of those are important features of what a pension system should be delivering.

Do you see a potential conflict or challenge? If you are setting a lifestyle adequacy, it is open-ended and hard to set its limits, whereas if you say, “I’m going to track inflation,” or, “I’m going to track wages,” it is a precise objective. Do you see a potential tension between those two?

I do. I think that most measures that are trying to do what you are saying in the first will, over the long time period, track earnings quite closely. In my previous life I spent time looking at living wage rates and other metrics that are calculated on what people would see as acceptable baskets, trying to track relative incomes compared to the typical person in the population, which is what is generally going on in those metrics. Those will tend, over the long term, not necessarily year to year, to track earnings quite closely. That is what I mean by relative: how we are thinking about what is happening to the population over time. Why was it a mistake to decouple the state pension from earnings in the 1980s? Because the relative income of pensioners fell back relative to the population as a whole, in periods when you were seeing fast wage growth. That is why you ended up with over 30% pensioner poverty. We should care about relative and we should care about absolute too.

Good morning. The Women’s Budget Group told us that policies that assume a uniform capacity to remain in paid work risk deepening existing inequalities. Do you agree with that? If so, to what extent does it apply to the universal state pension age?

As a statement of fact, it is true across all age groups or every age cohort that there are big differences in people’s ability to work, either for their whole lives or in different phases of their lives. The degree of that varies significantly for individuals over time and it varies across societies over time. Let me provide some evidence for that. If you look at what has happened in employment rates in the last 15 years, you have seen in the UK pretty large increases in employment rates, driven not just but particularly by women across the life course, and particularly women in later life—50-plus. Things that people said maybe were not possible have happened. You have also seen, though, that the employment levels we have today remain probably lower on average, even though our overall employment levels are now pretty normal by advanced economy standards. They are higher than lots, and definitely higher than the United States and France, for example. However, among those who are 50-plus, if you were comparing that to other northern European countries, you would still say that higher is possible and in lots of cases desirable. For people in their 50s, you would certainly say that. Policy is an important part of that. If you look at the number of 55-pluses on NHS waiting lists, we should all be horrified. We should absolutely be horrified. It is all well and good shouting at people and saying that everybody should be working, but you see the waiting lists rise year after year after year. They are falling now in England and Wales, although sadly not in Scotland. The long waits are a particularly big problem, particularly for women, in Wales, where you have people waiting for hip operations and the rest. We are seeing the longest waits be brought down. Is there a lot further to go? Absolutely. Do those things impinge on people’s ability to work? Yes, and it obviously runs both ways. People’s health affects their ability to work, and their work affects their health, as I am sure you will have heard about from the Women’s Budget Group, which has written a lot about that.

Independent reviewers have taken different views on allowing early access to the state pension in limited circumstances. Baroness Neville-Rolfe recommended considering that, and John Cridland had not seen any workable proposals. Where do you sit in relation to early access to state pension benefits?

We have asked for an independent review, and then there will be the Secretary of State’s review. I do not want to pre-empt the independent review, for politeness reasons, and I do not want to pre-empt the Secretary of State’s review for legal reasons, seniority reasons and all the rest as well. But it is a very good question, and I think we should take that seriously. To offer you some thoughts—I do not want you to think I am just giving you a process answer to your question—this goes back to where the Chair started on the inequality challenges. The inequalities are sometimes at an individual level, such as nature of employment. Sometimes they are at a geographical level, such as Oldham versus Stockport, or other parts of Greater Manchester. You would certainly see that. Even within Swansea I see very different life expectancies across small geographies. That definitely needs to be weighed seriously, because whatever you think that means for the state pension, it means a lot for other parts of the state. Remember that you want there to be a state that is supporting people who are too ill to work, whether they are 25, 45 or 66. That is important to have in mind. You want a system that means people are getting help. We have chosen, for good reasons, to have a big difference in the level of income support provided to people over the state pension age and under it, in big-picture terms, because the work incentive issues are different and all the rest. When it comes to considering—obviously the Select Committee does this all the time—the adequacy of our system in the round, we should see it in the round. It is about the support you are providing to people with different characteristics. Some of that should be age-dependent, but I do sometimes worry, and I will give a concrete example. People rightly raise challenges around how any of us would cope with the challenges of terminal illness, either for ourselves or in our family. I am sure you have heard versions of that. Some people’s response to that is to allow early access to the state pension at particular ages—65 or 66—but there are 45-year-olds with terminal illnesses. The reason why that thought pattern goes through the state pension is because of the big changes in relative levels of the state pension versus other parts of the benefit system over time. I understand why it is there. However, stepping back, I would encourage you to think that it is the characteristics of the people that matter, and then about how they are supported.

Thank you for coming to speak to us today. The Health Foundation said that the failure to address the factors contributing to the low employment rate for people with health limitations would undermine the long-term viability of a higher pension age. To what extent do you agree with that statement?

The failure to support people in ill health or with a disability to work or participate in whichever is the right way for them is a massive problem for all of society. One aspect of that may be interaction with the state pension age, but it is not the biggest one. The others are to do with people’s actual lives right now and with the employment rates of all kinds of age cohorts, not least because of what I said about the circular impact of health, work and all the rest. There is a real challenge on that front. In other inquiries you have looked extensively at some of the challenges the country faces in terms of ill health, and we do need to do much better on that front. That is why we are making that a focus within the work of this Department and in the engagement of this Department with the Department of Health. That is what the WorkWell programmes are engaged in. It is why you have a whole host of things—the Secretary of State touched on these when he came to see you—where we are stepping back and saying that health is proving to be a bigger barrier for how we engage, not just between the benefits system and the world of work but between the health service and the world of work, and we have to do a better job on that front. Charlie Mayfield is looking at that, obviously. To flag something sitting behind the Mayfield work, the public discussion tends to focus on, “This person is out of work because they have ill health or a disability. Should they be provided with more help to get back into work or, to view it from another perspective, a sharper incentive to do so?” In the real world, quantitatively, helping people who are already in work but at risk of falling out is very important. The flow, not just the stock, is a material difference. It is one of the biggest differences between us and other countries. If you look at what happens in the Netherlands and Denmark, you have much closer alignment between employers and employees when there is a challenge on the health or disability front, to make sure that you have a shared objective and a shared conversation, not barriers between the two, to make sure that we help to support people. All that is a long way of saying that on the big picture I agree with the Health Foundation: we should be taking the health impact on all of the welfare state and on the labour market incredibly seriously.

That’s useful. One of the things that is frustrating, particularly when you look at the health impact, is that some jobs can flex to support somebody with a health condition, and some just cannot. As an employer, I employed somebody who managed a health centre and somebody who was a direct care worker. They had the same health condition. Managing the person who was managing a health centre was much easier because their job was not as physically demanding. How do we start to think about the impact of health conditions and the work people are doing, because that has to have an impact?

That is absolutely right and that is a good example. All employers—and most individuals, because they have experience of friends and family in similar situations—would agree that the interaction between any health conditions and disabilities and the nature of your job is very context dependent. That is why duties on, for example, reasonable adjustment are duties in general terms to adjust. They are not, “You are entitled to A, B and C,” because the nature of the job and so on will matter. That does pose some challenges for a welfare state that tends to impose rules about who is entitled to what that cannot take into account every single part of people’s lives, and that is absolutely right. One thing that brings together lots of the bits of work we are doing—whether that is the employment support provided by Jobcentre Plus, Connect to Work, WorkWell, or the work on Pathways to Work that we are putting in place at the moment—is that employment support does not have to follow the same rigid rules. It is about more personalised support to take into account the differences people will have in the kinds of work they can do, how their conditions will interact with different kinds of work, and how employers need to respond to that. That is fair. We need to do a better job of offering a level of personalised support that takes that into account.

Researchers at the University of Edinburgh told us that later-life work is beneficial, unless you have to do it because of financial necessity. What thoughts do you have around that statement?

The second part of that is quite a blanket statement. What do I think? In general, work is better for people’s health. You will have seen all the very strong correlations between people’s mental health in particular, but not just mental health, and whether they are in or out of work, but that is obviously a circular pattern. It is absolutely true that if you look particularly in later life, you see a strong correlation between individuals’ wealth—I mean wealth in aggregate, not just pension wealth—and their work status. You are much more likely to be retiring early if you are a wealthy individual than you are if you are poorer. That is partly for the reason you are pointing out, which is that the financial requirement to keep working is higher. That is absolutely true, and that is probably slightly truer in the UK than other countries, because our household wealth, relative to income, is much higher. Pension wealth is private, not public, so your ability to access it is higher. Housing wealth is higher, for example, than in Germany. You are more likely to see richer households having greater choice about when they choose to start retirement, and you see that with precipitous declines in employment rates once you are heading into your 60s. That is absolutely right.

We will come on to that next. Before we move on, the state pension is starting to increase to 67 in April; what advice has been sought from the chief medical adviser on the potential impact on health and frailty?

The decision to increase it was obviously taken by the last Government, and the acceleration of it was also put in place by the last Government, so you will have to ask them who they spoke to at the time. They did publish an impact assessment along with the 2014 Act, but it is not for me to talk about. There are other people representing parties in the room who were involved in that; you could ask them who they spoke to. The general point, which is about whether we are considering the health consequences of decisions in the pension space, is very well taken, and that will absolutely be part of how we act.

The IFS found that the increase in the state pension age from 65 to 66 increased employment. However, that was mainly due to people who were already working. There has been no real impact on people getting a new job or getting back to work. My casework proves that, and it is certainly a problem. What conclusions do you draw from that about people being able to re-enter the employment market in later life? What assessment do we make of that?

I probably would not think about it quite like that, in terms of re-entering. As you say, evidence will show that the main effect over time of higher state pension ages—taking the three-decade view—is that it will increase your employment rates through the life course, and most of the effect does happen over a longer time. It is not like it comes in one year and then loads of people come back into work. That is not the main effect. That is what the study you are referencing shows. That is probably what we should expect. You are not looking for it to be a policy that comes in in one year and has those effects, and then it is done. For example, if you look at women’s employment rates after changes in the state pension age, you will see increases that build over time. They do not all come in one year, which is what we should expect. We are humans and we respond to what we know. Maybe we wish that everyone had even better information about the state pension age, but once people are into their 50s and 60s you tend to see quite high levels of awareness of their own state pension age, leaving aside controversies in the recent past. People do respond to that over time, which is why you see changes in 55-year-olds’ employment rates, not just changes in 65-year-olds’ employment rates.

When we look at getting people who are unemployed into work, there is generic support for all ages; do you think we need to improve support for older workers? What limitations do you think that might have?

Basically, yes. I will bring in Nicholas in a second. Yes, we definitely have to do more to take into account the different circumstances, particularly the one you are talking about where it is not about retaining you in employment but maybe, as in the example you have given, where someone has a health condition that makes a particular occupation difficult, which involves a different kind of change. That is a different challenge to saying, “Please come and sign in.” In terms of work in that space, we have our 50-plus champions, whose main job is to support work coaches, but they also partner with local authorities, charities and employers in the local area for exactly those reasons. Some of that is about helping individuals and some of that is about helping the world in which those individuals are operating, so that employers understand the benefits of having older workers—higher retention rates—and what it requires to recruit them, such as adverts that do not include language that says I only want someone who is in their late 20s to be applying for this job, and the flexibility we have talked about. We absolutely need to keep doing that. There is also the midlife MOT, which is mainly for those who are on universal credit but is available to everybody online. That looks at health, pensions and work. The jobs and careers service is obviously the most live part of the work on that at the moment. Remember that a lot of people may be out of work and relying on a private pension at, say, 64, and they may well not be claiming universal credit. We need to have systems that are out there to provide support for people who want to look for work but are not within the benefit system as it is normally thought. The jobs and careers service will be looking at that wider cohort and is designing personalised support. We will be bringing that forward with a report in the spring to set out how we are thinking about that work, for exactly the reasons you are raising. Nicholas, is there anything you want to add? Nicholas Warrington: The only thing I would add is thinking about the intersectionality around this as well. We have the 50-plus offer that the Minister set out, but you also have the Pathways to Work programme that is going forward at the moment. We have 1,000 pathways advisers in place now to support people with their health and disability needs, and this age group particularly has challenges around that. They are there to provide that needs-based approach, having those conversations with people to help them back into work or help them nearer to the labour market, and understand what they need in those areas. You have support conversations there. Also, under that pathways banner you then have the regional offer. You have the WorkWell programmes and you have the health and growth accelerators, which are looking at the local systems and how you bring them closer together so that you are getting a more holistic approach across the system. That involves the health system, the local authorities, and being able to signpost to the right services at the right time for those individuals. It is not directly aimed at 50-plus but has big impact on those groups as well.

I want to ask a couple of questions about the Mayfield review, but more generally, I get a lot of comments, as I’m sure we all do as constituency MPs, from people who are critical of or worried about the increase in the state pension age. Do you think that successive Governments, including this one, have done a good job of explaining to the public why the state pension age is increasing?

You have started from what we hear as constituency MPs. I think two things are true. One is that people basically do know why the state pension age is increasing in aggregate, which is that we are an older society and we tend to live longer than we did in the 1940s and the 1920s. But then people have been worried about how those decisions are taken, what it means for them, and what it means for different people in society. I think both those things are true. On the latter, my lesson from the past is a quote from George Osborne that has always stuck with me. He said something along the lines of, “Whacking up the state pension age in the coalition Government was one of the least controversial things I have done and saved squillions of pounds.” He basically said a version of that. I do not think that is a great way—people should not have been making decisions in a flippant fashion about a thing that has huge consequences for very large numbers of people. I would say that, in so far as people have noticed, it will have affected people. It is not just about how that decision is taken but the length of the notice period for some of those changes. Some people had as little as five years for the increase to the state pension age for women, and then I think seven would have been the minimum notice period for the increase. I think we should think hard about the big lessons from that. There are obviously lessons that we have said we need to learn about the communication of state pension age increases. I do not think, though, that the goal is that any changes ever feel like an easy decision. It is a very consequential decision where you are weighing up a wide range of factors, which should be taken seriously, and I am sure we could do a better job of showing how we weigh those factors, including the inequalities within that. I think that is different from people understanding that there are things that come with us being an older society, which I think people do.

How is the Department engaging with the Mayfield review and its implementation? In particular, what we are doing to ensure that any changes are beneficial and supportive, particularly for older people on lower incomes?

On the Mayfield review specifically?

Yes.

Nicholas should come in on that, because he is spending his life on it and it is obviously not in the pension space. Overall, I would say most of what is happening in the Mayfield review at the moment is focused on employers and providers who recognise that we have a challenge, that we are letting people down and missing out on opportunities for those employers, in terms of their workforce, to take forward work about how we do things differently, mainly in terms of how we are supporting people to both stay in work and then be returned to work. That is the main focus. That is what the vanguards are working on. If you had said to me a year ago that you would see the level of enthusiasm we have seen from employers to engage in that, I probably would not have believed you. Of the initial 70, we have seen a doubling of that since the launch of the Mayfield review. That is a good sign. Obviously, in the end what matters is the outcome of that work, not the level of enthusiasm for it. Nicholas, do you want to add anything else?

I will talk more broadly. We have three Secretaries of State supporting this work at the moment across Work and Pensions, Health and Business and Trade, so I guess we have moved over the last couple of months from an independent review into working with Charlie on the next phase of this more within Government. I think the Department’s role is to support it, and that means both providing the resource to work with Charlie and interacting with the vanguards and build that programme. But also, the Department holds several of the policy levers that overlap with things Charlie will be looking at. Charlie is not Government, so the Department will need to work with him on changes he recommends and that sort of thing. That is how I see the interaction. We are there working with Charlie, but we are also there working with the Government to deliver the things that he recommends and then the Government choose to take forward.

Do you see that as a priority for workers on low incomes in precarious employment?

I think there is a wider question, which is probably more in the bigger labour market question. It is the traditional relationship between an employer and an employee. It is the value of retention of built-up skills. That is what is sitting behind a lot of our wish to ensure that we have this alignment of incentives between employers and employees, as I said, learning from other countries that have done a better job of that in a world where you do not have those long-established relationships, either because you are in short-term contracts, in shorter hours, and the nature of the relationship is more transactional, or because you have seen a big shift towards self-employment in that sector. These will all be challenges. The move in all those areas has been more focused at the lower income end. That is why I would encourage you to think about the wider labour market work, some of the changes that are coming in over the coming years, about how we are changing that to make sure that you cannot leave someone on a two-hour-a-week contract when they are working 20 and then if they get sick say, “Well, that’s not our problem.” That will not be possible after we have made the changes we are making to zero-hour and short-hour contracts.

The only thing I would add, which loops back to the comments around the job quality and that sort of thing, is that I think we need to look at trying to take a system approach to the Mayfield work—the Keep Britain Working work—so that it works for everyone. If you look at the indicators of job quality and those sorts of things, they are multifaceted. While there are certain things that certain roles might not be able to impact, they can impact on things such as relationships and support, and better conversations around what you need. You can have conversations around flexibility, and there has been work in the past—I think Timewise looked at how you do that in some of the harder sectors. There are a lot of things that you can do even if you cannot do everything. That is part of what we want to look at in the Keep Britain Working work on how to create a system where that happens more often. That should then help those lower-income or more precarious roles, or those that are more typically at risk in those sectors.

Sir Charlie Mayfield told us that we should not expect any tangible results for three to seven years, but we are hearing—and everyone is aware—that older workers now face ageism and disablism in the workplace. You have touched on this briefly in previous answers, but what is the Department doing now to help older people as they approach state pension age?

A lot, and that goes back to the question earlier about how seriously we should take age and some of the cross-cutting characteristics that are disproportionately visible among older groups. As I say, I do think this is about all of Government. If you do not have an NHS that is functioning, people cannot get an appointment. One thing that will always stay with me is a woman I met who was out of work, but she had been in work. She needed a knee operation. She had been waiting I think for nearly two years, so she had put on weight, because it is quite hard to move when your knee is not working. That had damaged her mental health. It was the collapse in her mental health that had led to her to exit the labour market. Then, when someone came round to say that she could now have her knee operation, her weight was a problem for having the work done. The state functioning, most importantly in the health service, is a very important part of how we get on with that. If you look at a lot of the measures—this is different across the wealth distribution, and it is definitely different between men and women—in aggregate among older workers we have not seen a huge deterioration in health for individuals over the last 20 years. What we have seen is a huge deterioration in how we are supporting that. How about we save the NHS?

Turning to private pensions and savings, clearly mandation as part of pensions schemes was a very controversial topic. However, I understand that you said recently that you were going to clarify the position on the use of that power in the Bill. Can you elaborate on how that is going to happen? Is it going to be at the Lords Report stage? I understand there is nothing tabled presently on that, but are you going to make a statement of intent to the House? Could you clarify your position?

I am slightly surprised, Peter, that you are saying that the Bill is controversial, because the Conservative party decided, very unusually, not to vote against it on Second or Third Reading, so you must think it is an excellent Bill and in fact—

That is not quite true.

I will answer your question and then you can come in. Very exceptionally, the Conservative Opposition—and I am glad to say the Liberal Democrats as well—did not oppose the Bill, so it obviously has exceptional levels of cross-party support. It is a shame to see you changing your mind on that late in the game for some cheap opportunism, but that is a choice that you will have to make, and your Front Benchers had to make. On the overall policy, I have been very clear with you and others in this room, in the Committees, and on Second Reading, that the only purpose of the reserve power is to make sure that the Mansion House accord proposed by the industry itself operates, and that is what we are going to do.

As you well know, most of the Bill was progressed under the previous Government. There are lots of good parts of that Bill that will help to increase the savings of pensioners. That is why we did not vote against Second Reading, but we did propose amendments on the mandation point that were voted down by the Government. Given that Australia, Italy and Japan all have significant amounts of domestic investment in their own funds, why do we need a mandation power that could put pensioners’ savings at risk?

I do not think we are going to use the power. I think the industry itself is saying that it is in savers’ interests for the UK pensions industry to look more similar to those in the rest of the world. They currently do not have a significant exposure to private assets. They think that for the same diversification reasons as you would think on geography. That is what the industry has said. I think the industry is right. I think the industry is delivering that and I do not think we will need to use the power at all.

So are you going to make the amendment part of the law? Are you going to make a statement of intent? What are you doing?

It is for the Lords. What I have always said to you is that there is only one purpose for this power. I know the Conservative party is enjoying deciding late in the day it does not support in its entirety a Bill it supported all the way through, but that is to do with the consistency of your own decision making. I have been completely consistent: the industry has set out what it thinks is in the interests of savers and we are absolutely supporting that, 100%.

Turning to broad policy, like many MPs I had a surgery at the weekend. Someone came to my surgery and expressed a lot of concern that I have raised previously about the scope of inheritance tax now encompassing private pension provision. He said to me he was going to essentially draw down huge amounts from his pension and spend it abroad so that that money would not be spent in this country. The money would no longer be invested in this country because it is no longer in his pension scheme and, therefore, he would escape the high levels of tax when he passes away. What is going on? What would you say to my constituent?

I would say it is unfortunate that he had a Conservative Government that was confused about the purpose of pensions. There is a long-standing understanding that the purpose of pensions, and why we provide exceptionally generous tax relief—which we rightly do, of about £70 billion a year—is because we want people to have a decent income in retirement. That is what it is for. That is what it was always for. The previous Government were obviously confused about that, because that is less true for richer households who have more fungible wealth, so in 2014 they introduced confusion about that point. The result was that you saw advisers encouraging people to use pensions not to provide a decent income into retirement but to avoid—you asked a question, so you are going to hear the answer—inheritance tax. That is a very bad idea, because you do not want to see pension vehicles and how they operate getting confused about what the purpose is. We saw that causing real problems and confusion. Obviously it needs to be done in the right way. All that the changes are doing is bringing us back to the world that we have always lived in. I am sure you provided your constituent with that clarity about why the changes happened.

There is a disparity. This gentleman came from a very modest background—a single-parent family. He invested a lot of his savings during his lifetime in saving for his later years, and now that is going to be brought into the scope of inheritance tax. Do you see that the incentive has been taken away for people who strive and aspire because now, if they do the right thing all their lives, they are going to be hammered for it?

Absolutely not. You should definitely not mislead members of the public about the very strong incentive that exists to save for their pension, because it is on all of us to provide that trust in the system. There is a very strong tax incentive to save for our pension. It is very important that all public representatives are clear with people that that incentive is there. It has been put in place, and it was a matter of cross-party consensus, because we want people to be able to smooth their income over their life. That is what it exists for. It is not there for for advisers to make money by saying to some people, “Don’t use your pension to provide an income in retirement. Use all your other wealth, maybe even sell your house, and do other things in a contorted fashion, because for some reason we have decided that a pension is not about providing income in retirement but is an inheritance tax avoidance vehicle.” If you are confused about that, you will provide bad advice to your constituents and you will also provide bad policy for the country, which is what happened under the last Government.

On the state pension age for those approaching retirement, and particularly those in ill health, you touched earlier on whether they use their savings or the means-tested benefit system; can you elaborate further on what policy we are looking at in this area? I have another constituent who is in their early to mid-60s, health issues have arisen, and they cannot work or draw the state pension. There is this gap. What is going on in this space?

I think there is a lot more agreement on that challenge. We have all had constituents or even family members in those situations. That is why I was saying earlier that we need to think about the benefit system in the round. I am sure you will have had this in your surgeries as well, but you will have 55-year-olds in those situations too. How should we think about that? As I say, we have a benefit system that is there to support in those circumstances. In practice those are different circumstances for different people. We have a means-tested benefit system aiming to provide some support but, as you are rightly hinting at, at a significantly lower level than we do to pensioners, but then we also have parts of the benefit system that are aiming to target ill health or disability characteristics that could affect all age groups but are more likely to affect those in later life. That is why we have about 500,000 people in England and Wales on PIP who are 60 to 64. It is true to a degree that that profile has changed over time. Traditionally you would have seen more or less a linear relationship between age and your propensity to claim sickness and disability benefits, or reporting that you are not working for reasons of ill health. There was basically a straight line. The older you got the more likely that was to be the case. That has changed a bit, particularly in the last 10 years, under the last Government where you are seeing more of a U shape. I do not want to overdo it because you are still most likely to at older ages, but we have people in their 20s who are now. That is a system aiming to provide for the characteristics that have those barriers. In big picture terms, that does have some challenges. I am not pretending otherwise, and those cases exist. I think that big picture judgment, though, is still probably broadly right, in that you do want to target the characteristics not specifically the ages. I do worry that we do need to think about the 45-year-old or the 55-year-old, not just the 65-year-old, in those circumstances. You are absolutely right. The other thing I would say is that over time, because basically wealth grows over the life course, you do see more variation in how people can respond to those things. Better-off people are better able to respond to ill health in their mid-60s, versus poorer households, relative to their late 20s.

The £16,000 asset test has not been uprated for 20 years. Do you have a view on that?

As I say, that is not an area I am responsible for, but you are broadly right. The way universal credit works, and was designed under the last Government at the beginning of the last decade, is to provide strong incentives for those with assets, or in fact people with pensions. The private pension does not count toward the asset test, but there is a very strong incentive, if you are in the means-tested benefit system, not to start drawing down your private pension, which is what I think you are probably getting at. There is the savings test itself, other savings, and then how we take into account private pensions savings, which, remember, for lots of people—particularly in, say, 10 years’ time—will be the largest savings. As we go forward over time, defined contribution savings will become the biggest part of people’s wealth, outside of housing. Those will be the two big bits of people’s wealth. Neither of these is counted for the means test, and I think that is important. But there is an interaction, which is that if you are on means-tested benefits, it makes no sense to draw down your private pension because it is a one-for-one reduction in your universal credit if you draw down a private pension. That is for a reason. That is to encourage people to save into, not draw down a private pension prior to pension age. You are absolutely right that it does have the consequences you are talking about. There is a different treatment for carer’s allowance. In carer’s allowance the only thing that is means tested is pay, not savings income. There are different parts of the system and then there is the reality, which is that there will be people falling through the cracks of any welfare state. That is why support like the household support fund, which is about to be replaced by the crisis and resilience fund, is so important.

In response to our pensioner poverty report, you talked about plans to share additional data with local authorities. Can you give us a progress update? Is that programme on track?

It is. Most of that is in the short term. I am focusing on the work we have talked about before in terms of the interaction between housing benefit and pension credit. That is our focus at the moment, but there will be lots of other things where that can be relevant that I will be happy to talk to the Committee about. In terms of an update on what has happened since we last discussed the work programme to take forward, the administrative engagement between housing benefit and pension credit is our focus.

Thanks for being here today. Back in 2011, the DWP concluded that any disproportionate impact of the statutory pension age increase to 67 on lower socioeconomic groups was likely to be small. Given the trend for more insecure work, disability and poor health over time, do we still stand by that conclusion?

I am not standing by anything the Conservative Government did in 2011 or that the Lib Dems supported them in doing. As I said, I opposed the acceleration of the state pension age at the time because it was done with too little notice and with too little thought. I will answer for what we all do, which is to take very seriously the inequalities that you have raised. We have raised longevity, but you have raised quality of work and the rest. Those are really important. I would say a large conclusion is: let us improve the quality of work. That is what the Employment Rights Bill is about. That is why we are in the business of doing that. If you look at job satisfaction over the last 30 years, it is broadly flat, with the exception of the earnings squeeze of the last 10 years for workers overall, but for low-paid workers it falls. That is on all of us to make sure that we improve the quality of work. When people say we do not care about work incentives, I say, “No—better jobs is how you improve work incentives.”

The Department’s 2023 state pension age review concluded that the timetable for the increase to 67 remained appropriate and it would keep the position of those unable to work under review. What options for mitigation were considered and which were rejected? I acknowledge the fact that it wasn’t you.

I will give you my lessons from that and then you can go hunting for ex-Ministers to ask them what they did and did not think back in 2023. The lessons are that notice is really important, quality of communications is really important, and quality of what the state is doing on the health and employment support side are really important. In the longer term—I am not pretending levers can be pulled in the shorter term—housing policy really matters. That is something that we do not talk about normally, but it really matters. Lots of us have complex lives, even as individuals or as households, in our 50s and 60s, but it is much easier for people with stable housing situations. The reality is that all that should be considered. What I am responsible for right now is the fact that the rise to 67 is happening over the next two years. The conclusion from that report was that the Government should go ahead with the rise to 67. That is taking place. That is what is on us to do well. We are doing a lot on the communication side. I was cycling in this morning and went past one of our adverts encouraging people to go and check their state pension age. I do not think they just put it where they know I will be cycling. I have faith that they would not do that. I also have faith that the state is not good enough to target my cycling route with its adverts, so I think those are widespread. There are digital tools that enable people to know their state pension age. All people need to do is put their date of birth into the Work out your State Pension age tool and it tells them straight away. I wish that had existed in the 1990s and 2000s. It does exist now. There is one particularly encouraging survey that I saw the other day, on the percentage of people who said it was easy to find their state pension age, and 96% of 60 to 64-year-olds now say it is very or fairly easy to find their state pension age. That is good news. Our wider work is to drive people to those tools. Some of that is around radio campaigns—you will probably hear some of those—where the evidence shows it is most likely to have an effect. They have higher trust in radio advertising than others. To be fair to the last Government, in 2016 they wrote to everybody who was in this transition phase—everyone who was in the two years over which the roll-out of the move to 67 happens received a letter back in 2016. I have made sure that we are writing to everybody that follows from that. Three million letters have already gone to people who will be in the 67 cohort—the ones that are coming after 2028. I am sure we need to keep doing more on that front. We are working closely with employers. We work with HMRC, who have bulletins that go directly to employers. It is important that it is not just about individuals knowing about the state pension age. Part of this is about employers expecting workers to either need or want to work later, so the communication is also with them.

The need for around 10 years’ notice means that there may be significant changes between the time of the original impact assessment and the implementation. Is there anything that is done to look at that impact closer to the implementation as opposed to relying on the impact a decade before?

That is a really important question. We must balance two things here: certainty for people and responsiveness to the world data. The legislation requires the SPA reviews to happen reasonably regularly. Since the 2014 Act that made the last set of decisions there have been two independent SPA reviews, and the last Government concluded that they wanted to go ahead with this rise, so they did have opportunities to look at the data in the round. That process is there to do that. That is obviously without prejudice to people’s views about whether it should have concluded that or not but that is the process. What is the truth? On decisions like this, which are long term, they should not be made in a way that is so sensitive to one bit of data moving this way or that way. This is not like the decision about your local authority providing for the number of kids in different schools and what you are then doing about your funding. This is about long-term decision making, giving people certainty over the long term. Your decisions should not be just looking at that one data point and, if it happens to move in the next five years, that would be a very bad way to make decisions. It would obviously be right that keeping them under review is sensible. This is me defending some of the last Government, but the 2014 Act does require regular reviews. That is probably a sensible thing so long as it does not flip to the other side, which undermines certainty for people. None of us in this room would ever do this, but I occasionally see people basically scaremongering on the state pension, either about state pension existence, means testing or short-notice SPA changes. You do not want that.

The Social Security Advisory Committee has described the quality of DWP’s equality impact assessments as variable, with more work needed in some cases to think through the logic of policy and avoid a narrowly data-driven approach. What work has the Department done to reach its own judgment on this?

Cathy should come in on this. You obviously have people here working on the pension side of it, and I think that is referring to the totality of impact assessments across the piece. My experience of that is in the Pension Schemes Bill that Peter was asking about earlier, where there is a very large impact assessment—I will just give you my experience with that—cutting across a number of areas. We discussed parts of that—not all of it, because it is quite long—in the Committee phase that some people here went through on the Bill. If you did read all of that, what would it tell you? It would tell you that what is aiming to be a quantitative process would give you good insight into a lot of things, but it will do that with uncertainty, particularly in the pension space where the changes are really long term. In some benefit policy spaces I could say that if you change that lever like this, I can draw you the chart of the effect it will have on different parts and different people. On wider changes, for example, what are the long-term effects of moving to a system of bigger and better pension schemes over the course of the next 10 years, which on average will drive up returns for a host of reasons? Again, that is a matter of cross-party consensus. The exact point estimate of how big the effect is is highly uncertain, and then there will be other areas where a better qualitative consideration of it will be more appropriate, because it will vary across issue areas. We have a wide range of analysts in DWP. As someone who likes that side of the world, I know that the DWP has a very large number who take this kind of work very seriously. A lot of work went into that impact assessment, and they engage heavily. In the case of pensions, when we come to thinking about the Secretary of State’s review, that kind of work will obviously be incredibly detailed. It will definitely look at a lot of issues that we have been discussing today—poverty, work incentives, inequality of distribution, and across the distribution, not just point estimates about what it means on average. That kind of work absolutely does happen, but can we do more? I’m sure we can.

On the specific question of how we are responding to SSAC, I am afraid I do not know the answer. All I would do is reiterate what the Minister has said: we do take our analysis very seriously. I am a policy expert, but I work daily with my analytical colleagues on these sorts of issues. We think very carefully about impacts and also think about how we can get better at doing impact assessments. We certainly have those sorts of training and support in the policy group, but ,we will have to come back to you on the specifics of what we are doing in relation to SSAC.

For many people the increase to 67 will mean another year on means-tested working-age benefits. Carers UK told us that for unpaid carers the differential was quite stark, at £134 a week. What justification can there be for such a wide differential in support?

First, I should say that there are a lot of carers throughout society, and they tend disproportionately to be concentrated among older people. You will see a clustering right the way through the 50s and 60s and through state pension age and beyond. We will all have supported people—I hope we are doing this—who are entitled to attendance allowance, and then their partner may well be entitled to carer’s allowance as well. We obviously spend a lot of time collaborating with the third sector to make sure that support happens for post-retirement, post state-pension age, but the same applies to before state-pension age, with PIP and with carer’s allowance, which obviously is not means tested. Neither of those is means tested at all. That is the most important support we provide, and the sector does a lot of work in that space, through the local authorities, and that is to be encouraged. To your wider question, which is harder, over the last 40 years we have chosen to have a bigger gap between the basic level of out-of-work benefits and both the state pension and ill health support. That is what happened. That has had consequences. You are raising one of them. The other one is the strong incentive for people in the benefit system to be labelled as too sick to work. We think that is a very bad incentive to have built in as strongly as it is. We are delivering the first real-terms increase in the basic rate of unemployment support in decades. That is what is coming into place in April this year to make sure that we are rebalancing the system, but it does not take away from the point you are making, which is about people who are relying on the means-tested benefit system in their 60s. That is absolutely right, but all I am trying to say is that that is the same consequence as applies to everybody who is reliant on the means-tested benefit system. They are affected by the state pension age rise, though, so we should have that in mind. The underlying challenge is about the level of support we provide.

What assessment have you made of the impact on health and on poverty in retirement if people’s savings are depleted?

Those issues are considered inside the Department. I can speak for what we will be doing as a Government, which is that the Secretary of State, in carrying out his SPA review, will be focused on that. Rightly, he asks me those kinds of questions all the time about what it means for different people and again, that is absolutely right. People exit work for different reasons. Overwhelmingly, poor people are exiting work before the SPA for health reasons and richer people are exiting work for having income—for wealth reasons. They are very different reasons, as you see very starkly if you look at the data, and we absolutely are taking both of those into account. There is obviously a positive side, which is people having choices. It is not a bad thing that in the UK, on average, people have higher levels of personal wealth than those in most of Europe—such as higher home ownership rates among that cohort—and that gives lots of people more choices. Remember: this is the highest home ownership cohort ever, and their wider private household wealth does give people options. That is not a bad thing. It is a good thing in lots of ways, because life’s complicated and messy. In the French system, where the entire system is within the state and is much more binary, saying “This is your pension date” can have more serious consequences. This is why I don’t agree with some people who say, “Low earners should not be saving into a pension,” because none of us knows what our lives look like. We are not pinpointing, “I will do exactly this many years in exactly this job, and then I will just hit the SPA and retire and then I can do some nice maths.” That is not how the world works. It is messy. People will need to cope with consequences. The welfare state is there to provide support with that, but so are private savings and so are pension savings. That is what we are doing when we are all trying to protect ourselves. I do not think we should see that as a bad thing, but it is obviously not available to everybody in the same way.

What assessment have you made of the downstream impacts on services like health and social care?

The Secretary of State has not carried out his review yet. We will set out our considerations at the time, but I am not waiting for the assessment of that. We are starting on sorting out the health service and social care. It is about impact assessment. It is about the policy to actually make sure the services are there for people now.

The legislation to increase the state pension age to 67 passed in 2014, and we have known since 2022 that poverty doubled for 65-year-olds at the last increase. Why have no mitigations been put in place before now?

For the rise to 67 that is happening now? They absolutely have. That is why we are doing lots of the things we are doing in terms of supporting older workers in the labour market. Why is the Secretary of State coming to talk to you about how much focus we are putting on WorkWell, on Pathways to Work and Charlie Mayfield? This is all part of us as the Department for Work and Pensions understanding that it is our job not just to administer a benefit system, but to make sure that we are supporting people with more personalised support. That is true for lots of groups, but it will be particularly acutely true for the groups you are talking about today. We do owe people better support, and we are not waiting to do that. We are getting on and doing it.

I want to carry on with the subject of mitigation of the state pension age increase. You mentioned that you are already taking action. To pick up on the numbers that are expected to face poverty, can you tell us how many people would be lifted out of poverty because of the interventions that you mentioned you are already making?

I do not have that number. You can look at what happened last time the Department published an assessment. The impact assessment was done through the legislative process, and then alongside subsequent independent reviews and state pension age reviews by the Secretaries of State—the regular reviews we have been talking about—they carried out assessments of what happened in practice. Those are the numbers you are quoting. It is a good thing to be in the habit of making sure we are providing quantitative evaluations of things that happened, and I put more weight on those than on guesstimates of what happens in future, but we do not have a particular estimate on that. As for what we are doing, we are saying we will provide notice of any changes we support. The comms on that need to be right. I have set out some of the things that I think have improved on that front, including the health investment and the availability of benefits. We have written to every local authority and we are making sure we are clear with DWP staff in our communications.

These are really important steps and inputs, but we are interested in understanding how you are signalling the departure from what has gone on before, and what we want to see happen. You have rightly talked about the issues we are concerned about, including geographical differences in terms of employment for those in older age, gender inequality—a massive problem that has already been picked up—inequality, disability, the terminally ill. There is a raft of different indicators that mean you have differential outcomes for those who are heading towards the increase in state pension age. The question then, which we would be really interested in understanding, is how those collective interventions go to mitigate and then where the gap is, which takes me to the next point. You may have been involved in respect of the IFS data on there being a saving of about £10 billion with this change. Depending on what additional mitigations are put in around UC or health-related benefits further on, it could be between £200 million and £600 million. How much thinking is going on in Government about the kind of merits of making those sorts of interventions with that kind of investment in order to offset worse outcomes, given what we know about the disadvantage certain pensioners will face?

I will try to do justice to that question. You are right: the OBR’s number is roughly £10 billion a year in steady state from the changes. The investment we are putting into some of the wider support I am talking about is really significant. The Pathways to Work spending grows to £1 billion by the end of this Parliament, which is the same time when you are roughly talking about the £10 billion. That is separate from any change in terms of higher means-tested or non-means-tested benefit support that will be happening across that phase. If you look at the amount being spent on the NHS, just in England, so not in Wales, you are talking about a £29 billion increase in investment. So yes, we should see those numbers in the round, but let me go back to where I started. The reason why I said it is really important to weigh SPA decisions heavily is because they will have consequences. We are elected representatives; we are not running think tanks or campaign groups, as some of us did in our previous lives. We cannot just be like, “We’re going to increase the SPA, but don’t worry: this thing will happen, so there’ll be no consequences.” There will be consequences from a higher SPA.

With the greatest of respect, as you know, the IFS has produced some very good work, and I do not think we should dismiss it. We want to see as much action as possible, and it is good to see that there is that focus on mitigating and smoothing out the inequalities, because it is a big problem. We talked about working-class employees. Some of the kinds of work that people do mean that they—poorer people—are more likely, as you said yourself, to have health issues. These are serious issues that I appreciate you are taking seriously. What I am really interested in is how we make sure we are getting the outcomes we want. The health interventions are important. The question that I am really keen to know the answer to is about the longer-term mitigation actions. You mentioned some of them. Are there others that you think the Government should be taking to mitigate those disparities—the legitimate ones? There will be some that we might want to leave aside, but there are others that are very serious and that need to be mitigated.

There definitely are, I absolutely agree with that, and you mentioned some of them. It is also true that you see big differences in ethnicity. In general, you see lower life expectancy for white households, quite significantly in some cases. We obviously do look at that and that is considered in both the decisions and then in what you are calling the mitigations—although I slightly prefer to call it doing the right thing by the state generally. I think I have talked about the big one, which is taking your SPA decisions in the right way, with a lot of notice and with good communications, which gives people time to plan. I would not underestimate the interaction with the private system, as Peter asked about earlier. The changes to the state pension over the last 15 years, overall, have removed a lot of the largest inequalities. That is certainly true by gender, where we are basically now at equality of state pension outcomes. It is not remotely true on the private pension side, you have only got about 55% of people saving anything to a private pension and that does affect people’s ability to cope with, say, a year of ill health before the state pension kicks in. That is why I think it is right that we have most people contributing into a private pension. As for the rest, I have nothing useful to add on the health side other than to say that for too long in the past people have thought about the Department of Health doing this and the Department of Work and Pensions doing that, and what I am trying to set out is that we have learned that lesson. The NHS needs to do its job and be rescued, but we are all in this together. That is why you have the accelerators that the NHS is running about how it incentivises and works with NHS providers to take these issues seriously, but it is also about how Jobcentre Plus itself changes, and that personalised support you will see in the Pathways to Work stuff. You will see it with the 50-plus champions, but you will also see it with the development we are doing right now on the jobs and careers service.

To come back to the point about how many people may still face poverty, over and above the interventions you are making, do you think there is a case for short-term changes around means-tested support for those who remain at risk because of this change? I appreciate that these are not changes that this Government have made—the previous Government made them—but we have a responsibility to support those who are then impacted by it.

We do, and we obviously consider benefits. As with tax changes in the round, I have set out some of the changes we are making, which include—

Are there others that you think should be announced?

I am not going to announce other changes to the benefits system in this room, no, but I can talk to you about the ones we have actually made, which is the first increase in real terms in the basic level of unemployment support in decades.

Are you confident that those changes will be sufficient in not having a sizeable number who continue to face poverty because of this change?

I am confident that when we make our SPA decisions they will be based on a wide range, taking exactly that into account. That is what the Secretary of State will be doing when he does his review. I am not going to speak for previous Ministers when they do that. What we are doing is making sure that we can do everything we can to support the increase in the SPA that we have inherited. I think awareness levels are significantly higher, and that is a good thing, but the most important thing is making sure that we have awareness of that among not just workers but employers. We are doing everything we can on that front, and it is about rebooting how DWP does everything it does to make sure we provide better support to older workers, but particularly older workers with health conditions.

Yesterday, the Secretary of State made a very welcome announcement about tackling youth unemployment—those who are in the NEET category—and at the other end obviously we are trying to get older people into work. We have a massive structural change in the labour market, particularly in relation to AI’s impact on different kinds of jobs, including those that are being done by middle-class employees. To go back to your analysts in the Department and Government, how much work has been done to set out what that trend looks like and the impact of that for those who are in the older category, or across the population? What implications are there, if any—I presume there are—in relation to pensions, the increase in pension age and the wider structure of the labour market? What work is being done to think about how we prepare for that?

The Secretary of State made a statement in the House of Commons yesterday, but at the same time the Chancellor was giving her Mais lecture at the Bayes Business School. One of the things she was talking about was setting up an AI economics unit in Government whose job it is to be exactly monitoring those things. I am not going to get into forecasting future changes to the labour market. I can tell you what I can see in the labour market data, which is big picture. If you compare employment levels across the age spectrum today versus the 2000s, under the last Labour Government, what you will see are much higher levels of employment among those who are in their 50s and 60s and lower employment among those who are under 25. That is where the biggest problem has emerged. We are seeing increased employment for older workers. Under the last Conservative Government, you never saw youth employment recover to the levels it saw under the last Labour Government. That is a big worry. You saw NEET numbers rise very significantly, by about 250,000, between 2021 and 2024. You saw youth apprenticeship rates fall by 40% under the previous Government. That is the legacy. If you are looking at the labour market as a whole, employment levels are high in Britain. If you look at the employment level last year, 2025, it is about 75%. There have only been two years in the last 100 years when employment levels in aggregate have been higher than they were last year. So ignore the headlines. I know people need to play their politics, which is fine, but it is garbage to say that people are not working in Britain. There were only two years in the last 100, outside of the second world war, where you have had higher employment levels than last year. The problem is among younger people and some specific sectors, who are rightly raising that with us, and that problem was building through the 2010s and got really serious under the last Parliament. What the Secretary of State set out yesterday is that we are going to do something about it.

Before I hand over to John Milne, let me ask about what the Pensions Commission has said about bringing forward pension credit. What is your view on having access to pension credit a couple of years before state pension age?

The Pensions Commission has not delivered its interim report to us yet, and the final report will not happen—

My question was about the first Pensions Commission.

Oh, so you mean back in the 2000s?

Yes.

Unfortunately, one of the sad things is that we have lost John Hills, the Chair of that commission, so I have not had the chance to talk to him about that; otherwise I would be talking to him about that and lots of other things. I do not think I have a lot to add on that beyond what I said earlier, which is that I totally understand the thought pattern that led to that recommendation. I am not going to prejudge the Secretary of State’s review, but I would think really hard about whether the underpinning issue that is being raised is about characteristics or is really about age. I read a lot of people saying this for this age group, and I am saying that the thing you are raising can affect 40-year-olds and 50-year-olds and 60-year-olds. Basically, it sometimes feels like it is a way of saying, “I want to argue for this change, but I’m only prepared to argue it for a small section of the population,” and I am slightly reluctant to go along with an easy ride on that front.

Fair enough.

To follow on from some of your previous answers, the coalition Government did two big things in pensions. One was to signal the rise in state pension age, which I suspect you are rather glad of, actually. The other, of course, was the triple lock. The two things are related. There is a trade-off or a tension between having more generous pensions and extending them to wider numbers of people in lower age groups. What is your view on future increases in the retirement age beyond what is already in the system?

I do not know how much that was explicitly the trade-off, but I agree that if you step back—

In practical terms.

If you step back and look at not just that period but that whole period of government from 2010 to 2024, that is a reasonable characterisation of what happened. I think I mainly would say what I said at the beginning, which is that people thought about that too flippantly and did not weigh sufficiently how big a deal it was to change people’s SPA at very short—

Maybe so, but there is still an essential flip, whatever the tone in which it was done, there is that—

It is not the tone. I don’t think if you focused on the question really seriously, you would have chosen to make an acceleration with less than five years’ notice. I do not think that is a choice people would have made. That is abstracting from your wider point, which is about the right level in the longer term. Are there trade-offs between the payment and when you can start accessing it? I totally accept the point you are making on that front, but the timing of the decisions is also important. The most controversial bit is not about the absolute level of the SPA; it is about the timing of when the changes happened, the notice people were given, and the rest. On the wider question, I think you are right, but I think basically the Chair answered this in her opening statement, even if she phrased it as a question: there are real consequential distributional effects of that choice. From a fiscal perspective, it might look like those two things round out. From a human perspective, there will be very different consequences, and that is for all the reasons that you have all raised with me, which are about different longevity, like how many years people are receiving a given amount, which will have very different consequences for different parts of the population. We should be considering all that in the round, not just doing an aggregate fiscal trade-off and saying, “Okay, fine. If this is the level of the state pension, I will just whack up the state pension age to pay for it.” That is not a good way to think about the challenge.

Related to that, do you think we should keep the triple lock?

We going to be keeping the triple lock, yes, through this Parliament.

Through this Parliament. Who knows beyond that?

A manifesto is a manifesto. I hope to be the Pensions Minister in 2050, but we will find out, won’t we?

That would be close to your retirement.

I am definitely hoping to retire as well.

To go back to possible mitigations, what would be the pros and cons of providing additional support through the working-age benefit system as we rise to 67?

I do not think I have anything to add on that, beyond what I just said to the Chair. The Secretary of State will do his review. I am sure that will be raised with him, because it has been raised in previous independent reviews. We will make sure, obviously, because I have heard very loud and clear from this Committee today that you value these decisions being taken fully informed by the evidence, both in a forward-looking sense and in evaluations afterwards. I completely concur with that. That is what we are endeavouring to do. What I will also take away from this is that there is even more we can do on that front, given the focus on that this morning, and the Secretary of State will certainly be receiving advice on those points. As I just said to the Chair, I would distinguish between things that are actually about that and things that are about your views on the wider system. I would encourage you to also think outside the benefit system, because I am sure lots of us see people in our surgeries every single week who are struggling to get the health support or employment support they need, and that is then interacting with their ability to live the life they want to live through their 60s. I think we need to be moving on all fronts.

The IFS has suggested two specific options, with one costing around £200 million, if you target just those on disability benefits, versus £600 million if you go for a wider group. Overall, the potential savings from increasing the age are £10 billion. Do you think that is an acceptable price to pay or mitigation?

I am not going to pre-empt anything else, but all I would say on that is I do not think that is a good way of thinking about it. You should not be comparing x million mitigations with y million savings. You should be thinking about what the right benefit system is, and you should definitely be prepared to explain why you have a different view about the support that should exist for x versus y people if you are making those recommendations. The report does not engage with that at all.

I agree that you need to think about the purpose, but the bill at the end is not irrelevant.

John, I always enjoy these conversations with you, but we will do that when we make our decision. It was the Lib Dem coalition who made the decision in 2014 who should have been thinking those through. Our job is to make sure we make our decision in the round in the right way for our review that is due by 29 March. We will do that, and in the meantime, we will make sure that, rather than having waiting lists rising, they are coming down so that people are able to live the life they want to in their 60s. In the longer term, I am going to make sure we have a private pension system that is there for those retiring in the 2050s, so that more people have flexibility about how they live their lives.

I think you have partially answered this question, but what are the arguments for targeting support at defined groups such as carers and people with long-term health conditions or disability, as opposed to increasing the standard rate for everyone on UC aged 66 and above?

Obviously, there is a strong case. That is what I was talking about in terms of having a system that recognises the characteristics of people, not just their ages. You have raised two of the really important ones that play a very large part in our benefits system, which is people with ill health or disability and people looking after those people or others. It is right that we do that, and it has a particular bearing on people in their 60s, but it is right for a decent society, for everybody.

Thank you very much.

We are going to move on to the impact of pensionable age on mixed-age couples. The previous Government introduced the policy that benefits would be dependent on the working-age person in a couple rather than on those people of pensionable age. Independent Age told us about a 79-year-old who was on universal credit due to the mixed-age couple rule. Can you provide us with an updated assessment of the number of couples who are affected?

Yes, and I promised to do that, I think, when I last saw you. The straight answer to your question is that 70,000 households are affected. As you said, it is a decision made by the previous Government. There was a problem with the previous status quo, which was around what the work incentives were for the younger person in the couple and the fact that the system was therefore offering them, if they were out of work, no support at all to work. I do not think that was a good status quo either. It is also important to say that one of the consequences of that would be that if the pre-SPA individual in the household was out of work, they would not be receiving support to work, but they obviously would not be saving for their own retirement either. Remember, an average earner is putting about £3,000 into their pension pot each year, so it is not just that they would be needing some money to cope with the years they are pre-SPA themselves, but if they are out of work, they are less likely to be contributing. We definitely saw that happening, so that is a challenge. Obviously, it is important to say that the pensioner in that mixed-age couple household is receiving the state pension.

I understand that, but obviously the household does not then qualify for pension credit. If they were both over retirement age, there could be a pension credit assessment. Overall that household would get less money than if both members of the couple were of retirement age. Do you think there is an option to review that policy, as 70,000 seems to be a relatively small number? Is it time to think again?

I recognise some of the challenges you are raising. We are not reviewing that policy at the moment, partly for the reason I have raised with you, which is that if we want adequate retirements, we need to make sure that we are encouraging and supporting people before pension age to be saving into a pension, not drawing it down, which we discussed at the beginning of the session, and that is what will happen in lots of cases in that world. However, I recognise the trade-offs that you are rightly raising. I think they are real trade-offs, but the answer is that we are not reviewing that policy at the moment.

My questions are on the Parliamentary and Health Service Ombudsman. This gets to the heart of the culture of the Department. You have mentioned, Minister, the lessons you have learned around the importance of communications. When the Secretary of State made the decision in January, he did not reverse the decision but he seemed, as the PHSO has said, to qualify the view that there was maladministration. I am using the language the PHSO has used. Do you see that as a problem in terms of what that means for the relationship with the PHSO?

I have recently met the PHSO. It is a very important organisation. Parliament has put it in place for a reason. It is unusual, but not unprecedented, for us to come to a different conclusion from them. It is clearly for the PHSO to come to judgments on maladministration, and we have reflected that in how we have engaged with it. We have obviously come to a different view on remedy, and we have set out the reasons for that at great length, so I promise not to do that again this morning. However, I do not think that should be taken to say anything about the seriousness with which we take the PHSO generally. It is not just me meeting with the PHSO; the permanent secretary has and there are regular meetings at the moment with them on our action plan and the rest. On the broader importance of the PHSO, which provides an important route for those who have exhausted other sources of complaints processes, it has a really important role to play. I have made that very clear to the PHSO myself.

That is heartening. I’m going to pursue the point about the PHSO’s concerns about it being a qualified opinion. In the Secretary of State’s response, it is acknowledged that the Department, back in 2007-08, agreed that communications needed to be made about the change in the state pension age. That then did not happen, but the Secretary of State has argued that even if it did happen, it would not have made any difference. The PHSO is saying is that the Department at the time agreed that communications would be undertaken. The Department failed to deliver, and then has basically said that it does not matter because it would not have worked. That is what they are referring to in terms of a qualified view from the Department. You have probably heard from the PHSO herself about the concerns about that. Setting that aside, the next point is about the action plan that the Department has with the PHSO. Can you share with the Committee where you are up to with that? There have been concerns about how the Department has been functioning on the issue of communications with 1950s women on their state pension, but more broadly as well. Can you share the Department’s commitment to a changing culture with different agencies that play an important role in ensuring that the policy is delivered as it should be?

Absolutely. Again, it is not for me to speak for previous Administrations, but as I have said—and said very clearly to you—we take seriously the role of the PHSO. We take very seriously our relationship with the PHSO. That does not mean we will always agree on everything, and that is probably as it should be. I do not agree with the phrasing of “qualified” on the maladministration judgment. We have accepted the maladministration judgment. That is why we have apologised. On the action plan, for exactly the reasons you are highlighting, because obviously the Secretary of State was considering the decision, we had to pause the work on the action plan, and stop the work on it at that point. We did make sure that the PHSO—

Can you explain why you had to pause it, Minister?

Part of the first decision made by the previous Secretary of State was to put the action plan in place, and if we continued with it, we did not want to leave the idea that we had prejudged the decision. I think that is right thing to have done. The PHSO, though, did see the action plan before Christmas. I would have liked them to be clearer with this Committee that that is what they have done in some of their communications with you, but they did see a copy of that before Christmas. Once the Secretary of State’s decision in January was made, we sent a copy of the action plan to the PHSO. We have had their comments, and I am aiming to publish that as soon as we can.

Thank you; that is very helpful. This is, again, about something that was not done in your time, Minister, but it needs to be mentioned because it gets to the heart of the issues and the culture within the DWP. I know that you and your ministerial colleagues are very committed to ensuring that the culture is improved, but we are still awaiting the response from the Equality and Human Rights Commission about the investigation into the DWP. I think it is four years now since the original issues were raised, particularly about discrimination against disabled people. The Committee is very committed to looking at the culture in that context. Recent press reports suggest that some state pension forecasts may be inflated due to an HMRC error, which meant that they did not show deductions where people were contracted out before 2016. Can you explain what happened, how many people are affected, and what is being done to fix the problem?

I can tell you some of those things. I will do my best to do all of them. I have seen the same press coverage, obviously, that you have seen, and obviously some other things. The issue being raised, for the sake of the Committee members who have maybe spent less time focusing on it, is to do with customers who were contracted out and therefore would have been receiving the kind of equivalent of their earnings-related part of their state pension through their private pension system. The system that was providing state pension forecasts—admittedly, with caveats, to be fair to the last Government, it would have been clear that it was not like an entitlement—provided forecasts that did not take into account that contracting out had taken place in all cases. I cannot tell you exactly how many people have been affected, because that will depend on how many people used the forecast model. We are obviously looking at that, but no one can give you a number for, “We know this many people in this year.” We are talking about largely people contracting between 2016 and about 2021. That is the phase we are talking about. In terms of fixing it, yes is the answer, in two ways. First, the previous Government stopped providing forecasts and encouraged people to ring instead, when they were worried that people might be affected by this some time ago, and then secondly, we have now put in place permanent fixes that mean that people are getting forecasts that take into account their contracting-out status.

Very good. Thank you so much.

One other thing, actually, which is a bit of public messaging, is that if anybody thinks they are affected, they can always contact the HMRC, and they will take that into account in enabling them to buy any years missing in their state pension.

Thank you; that is very helpful. If there is any additional information about the numbers affected, that would be helpful, if you come across that.

Your decision to provide indexation on pre-’97 benefits for FAS and PPF members from January 2027 is very welcome, but the lack of any retrospectivity means that the indexation will apply only to a fraction of their original entitlement. Would you continue to consider the case for a one-off uplift to at least partially restore the value of what they lost?

You and I have discussed this lots of times, John, and I have had lots of MPs, including on the Labour side and lots in South Wales in particular, raising the issue with me in the year and a bit that I have been in post. I am the first Pensions Minister to meet with a lot of the campaigners on this for a long time, and I am the only one who has done something about it, so it has happened. I am hoping that the House of Lords will pass the Bill with all the cross-party support that it deserves, Peter, in the coming weeks. This is a serious point. People who oppose the Bill now are opposing those vulnerable people in the PPF receiving indexation in the future years. Any delay to that Bill will mean they will not be receiving it, so I would encourage those who are enjoying playing games with a Bill that in practice they support not to hold up a Bill that has some very important consequences for some poorer households that have not had the indexation that I think in retrospect we probably wish they had, but unfortunately previous Pension Ministers chose not to act on that over the course of the last 14 years. I also have decided that it is really important to be straight with those people who are affected. Many of them have been through years of campaigning for this, and what I have said is very transparent: we are not in a position to give you everything you would want, but you are for the first time going to see action. I wish I could go back and undo every bad decision the previous Government made. That is not what we are in the business of being able to do. Our business is doing the best we can to start putting those things right. I wish the waiting lists in the NHS were down to zero now, back to where they were in 2010. That world is not available to us. We are doing the hard yards of actually fixing some problems, and I think I owe it to the people who are rightly campaigning for it, and I have listened to them, and I have listened to you as well, John, about wanting more. That is a completely reasonable thing to be saying. We would all be saying that, I think, if we were those individuals. What I am saying is that given the balance of those interests that are important to this, and the balance of the PPF reserves, and the balance of the taxpayer impact of the FAS, this is what we are taking forward. But I fully expect people to keep campaigning on it, and I totally understand why they are doing it.

So the answer is no?

The answer is that change is coming. We are actually delivering an actual change, not a theoretical talking point, and people should keep campaigning. We live in a democracy, and I want people to keep campaigning for more, and if I was them, I would probably be doing the same thing. What I am doing is doing what I can do.

There have clearly been some problems with civil service pensions administration. The Government have acknowledged that the delays are totally unacceptable. When do you expect the service to be stabilised?

Responsibility for the civil service pension scheme lies with the Cabinet Office, so I am not involved in that beyond the same way that you are, Peter, which is as a constituency MP. We are obviously all hearing cases like that, and I absolutely recognise the frustration of people who have given their life to public service, in lots of cases. I have the DVLA in Swansea, as well as DWP offices in another part of Swansea, so I absolutely understand. Let me say one other thing, which is that in the shorter term, from our own Department, we are making sure that hardship loans are available to our pensioners, and that is being put in place. In the Treasury part of my life, I have signed off making sure that all Departments are in a position where they can offer those hardship loans, so that is what I have done and the bit that I am responsible for. In terms of what I can see happening across Whitehall, it is taking it very seriously. You have Cat Little, the permanent secretary of the Cabinet Office, and the second permanent secretary of HMRC, Angela MacDonald, now running a process to make sure that we can deliver what people rightly expect as soon as possible, but I’m afraid I am not involved in the operational side of that.

Do you foresee any learnings for the Pensions Regulator, which is responsible for overseeing the governance going forward?

I think there is a wider question for us all—I would obviously always be interested in the Committee’s views on this as well—which is that on the policymaking side, and in the pensions’ ecosystem generally, pensions administration does not get the attention it probably deserves. I see very good examples of pension administration, and I see very bad examples, and we are talking here about quite a concentrated market where the barriers to moving between providers are really quite high. You are kindly raising one of those that is visible right now. I think we probably should spend more time thinking about that. We have been consulting on some questions in that regard, on the pensions administration side, over the last few months, covering trustees and governance of administration, so I would be interested in the Committee’s views on that.

Thank you. That concludes all our questions for the Pensions Minister. Thank you so much, all of you, for coming along today, for such a thorough briefing to us all, and for being so thorough in your answers.