14 September 2004

Alan Johnson MP, Secretary of State for Work and Pensions

Speech to Congress 2004

(CHECK AGAINST DELIVERY)

Congress - One of the first things I did, on becoming Secretary of State last Wednesday, was to ask the General Council if I could make my first speech as Secretary of State for Work and Pensions among fellow trade unionists - at the Trades Union Congress.

During my time as a TUC delegate the priority was work – now it has rightly switched to pensions.

A combination of circumstances have propelled this issue up the political agenda. There was a certain complacency in the 1990s. It wasn’t just the over dependency on a booming stock market – it was the fact that Inland Revenue rules encouraged a short term approach and nobody was seriously facing up to the enormous changes that had affected society since the creation of the welfare state.

The average person now spends more time in education, fewer years at work and far longer – over twice as many years – in retirement as they did 50 years ago.

As well as celebrating this success we need to deal with its consequences.

But be in no doubt – the biggest problem we faced when we came to power, the real and deep seated crisis was pensioner poverty.

The State Pension had increased only once in real terms in 18 years.

The poorest pensioners were generally the eldest pensioners. Most of them women who had been adults when the welfare state was created and who had incomplete contribution records.

Two things were certain. The first was that they suffered a mean existence on as little as £69 per week. The second was that they could not wait years for a solution.

We were right to make these 2 million pensioners our priority.

Under the Tories, many had faced the stark choice of eating or heating. Now Winter Fuel Payments of £200 – and £300 for those over-80 – means a tax-free payment to all households on top of the Basic State Pension.

The Minimum Income Guarantee provided a stop gap but its replacement Pension Credit means no single pensioner need live on less than £105 a week and no couple on less than £160. And for the first time, pensioners are rewarded for having saved, rather than seeing their savings taken off their benefits.

In less than a year, 3 million of our poorest pensioners are being paid Pension Credit with an average of £1000 arrears being paid as a tax free lump sum.

What’s more, Pension Credit is accessible – one phone call and it’s sorted for five years. And if pensioners can’t call, The Pension Service will make a home visit.

The Pension Service is dedicated to helping pensioners access their entitlements in their local communities. It’s a personalised service which has led to the take up of Attendance Allowance, Carer's Allowance, Council Tax Benefit and Housing Benefit increasing dramatically.

As a result of this Government’s reforms since 1997, we will this year spend an extra £10 billion on pensioners in real terms – that’s over £7 billion more than if the Basic State Pension had simply been linked to earnings.

And we’re targeting this extra money at the poorest pensioners. Almost half of it is going to the poorest third of pensioners, who – compared with the 1997 system - are better off in real terms by on average £1750 a year.

That’s 1.8 million pensioners lifted out of poverty – but we’re going further.

Under the Tories, carers, the long-term disabled people and those with incomplete contribution records who I’ve already mentioned lost out on building up rights to the state pension. In the main these are women.

We have addressed this injustice by creating the State Second Pension. Providing a second pension that is up to twice as good as its predecessor SERPS - the State Earnings Related Pension Scheme.

It is benefiting some 20 million carers, disabled people and lower income earners. These are the people who didn’t benefit much from SERPS – including 5 million long-term disabled people and carers.

The agreement we reached at the National Policy Forum in Warwick included an important statement of what more we need to do to tackle poverty and increase confidence in pensions. We will honour that agreement.

The Pensions Bill already contains measures which the TUC has argued for in recent years.

The ground-breaking Pension Protection Fund will mean that for the first time ever, people in defined benefit pension schemes based in the UK will be protected if their company goes bust and leaves the pension scheme underfunded.

The trade unions have championed the cause of those men and women who have suffered terribly because of the absence of such protection and this Government – and my predecessor Andrew Smith in particular – has listened and acted.

Making the Pension Protection Fund a reality will mean bringing real security and peace of mind to over 10 million members of defined benefit schemes.

And the Financial Assistance Scheme will bring significant help to people who have lost out already. The details are being finalised in consultation with the TUC and others but it is a piece of retrospective help that few people thought would ever be achieved.

The Pensions Bill does even more to protect the pensions of workers. The new flexible and pro-active Pensions Regulator will further bolster security by tackling the risks to members’ benefits while enabling well-administered and secure schemes to continue without unnecessary regulatory burden.

The Pensions Bill will place in law TUPE – style protection of pensions for workers affected by company transfer or merger. And we’ve laid full buy-out regulations so that trustees can require a solvent employer who wants to wind up their pension scheme to buy out members’ rights in full.

Defending those with decent pensions is at the very heart of what the union movement is about.

But it is only part of the challenge. Given greater confidence and security to save for retirement, our next challenge is to make people aware of the need to make provision for their retirement and support them in doing so.

Our informed choice programme is focused on giving individuals the information they need to empower them to take control of their retirement planning.

Earlier this year, we issued our one millionth combined pension forecast and we have stand Number 66 here at the Conference which I hope many of you will visit.

Because of the spotlight now shining onto this issue, today’s workers – tomorrow’s pensioners – are worried about the level of income they will have in retirement and concerned that they will either have to save more or work longer.

Our approach is to give people greater flexibility to make decisions about when and how long to work.

Our Age Discrimination Legislation, combined with State Pension Deferral, will break the cliff-edge between work and retirement and give people greater opportunity and greater rewards for working longer if they wish to do so.

One thing we are already doing – which will be of particular interest, given one of this morning’s motions – is to change regulations to allow employees to continue working for the same employer whilst drawing their occupational pension. This part of your conference policy has already been met in this year’s Finance Act.

Flexibility is crucial – to empower people to decide for themselves how long to work is key. This Government will not raise the State Pension age. This Government will not force people to work to 70 years of age.

But we do have to face up to the problems of many people not saving nearly enough for retirement. That’s why we set up the Pension Commission, adorned by my former Deputy General Secretary Jeannie Drake, to examine the current pension landscape, to analyse the underlying trends and to consider whether we need to move towards greater compulsion.

I look forward to receiving their first report in October which will set the scene and make an important contribution to the wider national debate on pension provision.

But this debate will take place against the background of a wider programme of work that involves Government, employers and, of course, the Unions.

We’ve committed to go further in our examination of women’s pensions and during the Committee stages of the Pensions Bill, we committed to producing a specific report on this next year.

And we’re working to increase the involvement that employees have in the running of their schemes.

The Pensions Bill includes a measure which will ensure that employees who are active members of a scheme and/or their representatives will have the opportunity to feed in their views on proposed changes to their pension arrangements before the employer makes a decision.

This Government really believes in the value of employee involvement. And I should like to conclude my remarks this morning by saying a word about Member Nominated Trustees.

Everyone agrees that Member Nominated Trustees are a good idea. They add a different perspective to the trustee board and they allow trustee boards to have a wider range of skills and experiences to draw upon.

If members are involved in the running of their scheme it can make them feel that they have a real stake in their pension provision.

I can announce today that we have decided to take a power in the Pensions Bill to enable us to move to ensure that 50% of pension scheme trustees are member-nominated.

We have common objectives:

I cannot pretend that on my sixth day in this job I’ve found the pouch of fairy dust that will allow me to instantly resolve the challenges we face.

But my understanding of these challenges has been enhanced by listening to this debate.

Thank you for giving me that opportunity and I look forward to working closely with you in the weeks and months ahead.

top of page