Pensions Commission Revival Speech by Work Secretary

INTRODUCTION

Thank you much. It's really good to see you here today. Some new faces, and old colleagues here too…

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Nowhere is that task of change more necessary or more urgent than in relation to the welfare state.

I'm obviously going to focus on pensions later on in this speech, but I think it's important to set this in a wider context.

Because reforming the welfare state is never easy and always contested. Let's be honest, the last few weeks have made that pretty clear.

But while the path of reform is inevitably bumpy, it cannot be avoided

…because as society evolves and new challenges emerge, the welfare state must adapt to meet the reality of people's lives if it is to retain legitimacy and last for generations to come.

Now, during our first year in office, we have begun the hard work of reform … for children, for working age adults, and for older people.

First, we're supporting families with children, as part of the first UK government strategy to tackle child poverty for fifteen long years.

Delivering free breakfast clubs.

Extending free school meals to half a million more children whose parents are on Universal Credit.

And securing funding for holiday food programmes.

So we feed poor children during term time, and out of school too.

And we're giving parents more support, and children better chances in life, with 1000 more Best Start Family Hubs right across the country.

Second, we are embarking on the biggest reforms to employment support in a generation.

Which, of course, is vital for the future of pensions because if you're not working and earning, you're not likely to be saving for your retirement either.

So we are overhauling jobcentres to become places where you sign up for work, not sign on for benefits.

Rolling out our youth guarantee so all young people are learning or earning, including with a big expansion of foundation apprenticeships.

And we're tackling work disincentives in the benefit system, legislating for a new right to try, and we're quadrupling investment in back to work support for sick and disabled people to £1 billion a year.

And thirdly … we are delivering security in retirement for today's and tomorrow's pensioners.

Our commitment to the pensions triple lock for the entirety of this Parliament

… means spending on the state pension is set to rise by £31 billion a year

… with up to £1,900 a year more for the full new state pension.

Our commitment to the poorest pensioners

…. has seen the biggest ever campaign to increase Pension Credit uptake

…. with an extra 60,000 awards, meaning many pensioners are now getting thousands of pounds more a year to which they are entitled.

And we are also accelerating workplace pension reform too, with vital new legislation that our Minister for Pensions, Torsten Bell, is getting through Parliament now, to ensure today's workers get more in retirement from their hard-earned savings.

REFORMING THE WELFARE STATE

I am proud of everything we have achieved so far, but these are just the first steps.

We have much more to do to deliver the changes that people voted for and the country is crying out for.

The original promise of the welfare state was to provide support from cradle to grave …

… based on a social contract between individuals, state and society …

… where everyone contributes and plays their part …

… and which in return, provides the foundation of security, a springboard for opportunity, and hope for a better tomorrow.

This core purpose, and those guiding principles, remain as true today as they were after the second world war.

A welfare state that is there for us: at the beginning of life, towards the end of life, and during our working life in between.

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Preventing and reducing child poverty, so every child gets the best start in life - no matter their background.

Providing opportunity through good work so people can fulfil their potential and build a better life for themselves and their family.

And ensuring security in retirement so that after a lifetime of work, people can look forward to the next chapter with hope, not fear.

[Redacted political content]- we must reform the welfare state to deal with the huge social, economic and technological changes that we see all around us.

And do so in a way that that recognises the essential contributions of individuals, society and the state.

NEW SOCIAL CONTRACT FOR A CHANGING WORLD

So much has changed since the original post war settlement.

Developments in public health and medicine mean we are living for longer, there are more disabled people, and more of us are living with one or more long term health conditions too.

Advances in science and research are transforming our knowledge … about the importance of the early years for how the young brain develops; the benefits of good work for physical and mental health; and how getting older does not have to be a period of decline but a time for personal development and growth.

Alongside this, changes in society mean more women are working than ever before, but we're also caring for longer …, and let's be honest, still too often struggling to balance work and family life.

Technology is transforming how we work, access services and interact with people in all aspects of our lives.

And along with a welcome decline in deference, there is rising scepticism about the ability - and legitimacy - of government to solve complex social problems.

These changes have transformed society in profound ways since the original architects built the welfare state.

But in many cases, politics has been too slow to keep up, and too timid in tackling problems right before our eyes.

At the same time, some injustices remain as deeply entrenched and persistent as they were 80 years ago.

Inequality - in many forms - still denies too many people, in too many places, the chances and choices they deserve to build a better life.

These inequalities are rooted in incomes and resources, but ultimately, they are about the power, control and freedom people have to choose their own path.

Addressing all these challenges means rejecting the argument that the welfare state undermines personal responsibility and creates dependency.

But it also means remembering that the real purpose of the welfare state, in protecting against risks and preventing poverty, is - or should be - a liberating one.

Not doing things to or for people.

But ensuring they can forge their own path, build their own future, and enjoy the freedom that real power and control brings.

I have always believed that whilst there is much that only the welfare state can achieve, through the power of active government, there is much of value that is beyond its reach.

Individual initiative, effort and contribution.

Family, relationships, love and care.

Social, community and civic responsibility.

The truth is, it's only when citizens, the state, businesses and wider civil society work together that real and lasting change comes about.

I believe in a strong welfare state that expands security and opportunity, alongside a responsible society where everyone participates, contributes and plays their part.

So the reforms to the welfare state that this government is pursuing seek to renew our social contract …

… to adapt and respond to the changes taking place all around us …

…[Redacted political content], of security and opportunity as the route to ensuring people having power and control over their lives …

… and to approach the urgent task of reform in ways that seek to harness the vital but distinctive contributions of citizens, wider society and the state.

REFORMING THE PENSIONS SYSTEM

And nowhere are these principles more important than the next stage of reform to our pensions system.

Being retired should be a time of great joy - when after all your hard work, you finally have the time to do the things that you love, with the people you love.

But the truth is, this is not the reality facing far too many of our fellow citizens.

So alongside protecting today's pensioners - through the pensions triple lock - we also need to renew the social contract for tomorrow's pensioners.

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… delivered the new State Pension, which is fairer and more generous to those who had previously lost out, especially women

… and led to 10 million more people saving into a workplace pension and benefiting from employer contributions, through auto-enrolment.

The original Pensions Commission was a huge public policy success.

Why? Because it was founded on rigorous evidence and the facts…

… based on a strategy of consensus building, with genuine engagement of all the major stakeholders, employers and employees

… and driven by strong leadership from the three superb commissioners - Adair Turner, Jeannie Drake and the much-missed John Hills.

A generation on, we need to take this approach again.

Because - despite the success of auto-enrolment and the progress on the state pension - the job is not yet done.

Put simply, unless we act tomorrow's pensioners will be poorer than todays.

Because people who are saving, aren't saving enough for their retirement.

And - crucially - because almost half of the working age population isn't saving anything for their retirement at all.

That is some 18 million people.

The opposite of the promise on which the welfare state was founded. Not what the Turner Commission envisaged.

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Just because pensioner poverty has fallen does not mean all the problems have gone away.

Far from it.

Women who are now approaching retirement have half the private pension wealth of men.

So the average woman in her late 50s can expect a private pension income of just over £100 a week compared to £200 a week for men.

Only 1 in 5 of the self-employed are saving into a private pension- down from half in the late 1990s - meaning over 3 million self-employed people currently aren't saving anything at all for their retirement.

Auto-enrolment has brought more than 8 in 10 of those aged between 22 to 29 into pension saving…

… but among 18 to 21 year olds, who aren't covered, the proportion plumets to only 1 in 5.

And for the very lowest earners in the private sector on less than £10,000 a year - who are also outside auto-enrolment - three quarters aren't saving for their retirement at all.

Many of these are women, often working in vital sectors like hospitality, retail or social care.

On top of all of this, there has also been a fundamental shift in where retirement risk lies: from employers - under Defined Benefit - to individuals in Defined Contribution pensions as well as through greater pension freedoms.

So rather than having a secure, reliable pension income for life, many people now retire with a savings pot, leaving them with complex decisions about how to deploy their pension wealth - often without much help at all.

Three quarters of people with savings pots don't have a plan. And half of all saving pots are now being taken as cash.

Now the message from all of these challenges is clear.

If we fail to act, too many future pensioners will face incomes that are too low, risks that are too high and a system that is too unequal.

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That is why I am very proud today to announce that we are reviving the Pensions Commission.

Tasking it to confront these challenges. Build consensus about a long-term pathway of sustainable reform. And finish the job it started 20 years ago.

I am absolutely delighted it will be led by Baroness Jeannie Drake - who served on the original Pension Commission - Sir Ian Cheshire and Professor Nick Pearce, who all bring a wealth of knowledge and experience.

I have asked them to set out a long-term route map to deliver adequate incomes in retirement for future pensioners, based on the state and private pension systems working in tandem, which has always been the British way.

Now, I'm under no illusions about how difficult this will be.

Cost of living pressures mean many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long, long way away.

And many businesses face huge challenges in keeping profitable and flexible in an increasingly uncertain world.

That's why we have already said there will be no change to minimum auto-enrolment contribution rates during this Parliament.

The task I and our brilliant Minister for Pensions, Torsten Bell have set the Commission is to build consensus about adequacy over the medium and longer term, with a clear timetable. Because experience from this country, and around the world, shows this is the best way to make sustainable changes to the savings rate.

In doing so, we want it to propose ways to broaden access and tackle inequalities in pension saving - to help young people, low earners and the self-employed in particular.

This includes looking at ideas that have already been explored, like lowering the age and earnings threshold at which people are brought into auto-enrolment.

And considering the potential of innovative solutions like sidecar savings, where people save for their pension alongside an accessible liquid savings account, to help them cope with financial pressures without damaging their retirement.

Learning from its previous success, we want the Pension Commission to engage widely, and work closely with key stakeholders.

In particular, the CBI and TUC who will meet regularly with the Commission to support its work.

We expect the Pension Commission to provide its recommendations in 2027.

And alongside this, I am today also formally announcing the next statutory Government Review of the State Pension age - in order to meet our legal requirements as set out in the 2014 Pensions Act.

To inform this, I have commissioned an independent, analytical report from Dr Suzy Morrissey.

CONCLUSION

In conclusion reviving the Pensions Commission is a crucial part of this government's commitment to delivering change for all the generations…

… and to reforming our welfare state with a new social contract so it's fit for the future and lasts for years to come.

Because the one thing I have learnt during my long and busy time as an MP, is that the battle for progressive politics is never won.

It needs renewing for each generation.

And that requires reform.

Because we must not squander the potential of millions of children whose talents and ambitions are being held back by poverty and inequality.

We will not write off millions of our fellow citizens who want to and could work if they got the right help and support to do so.

And we do not accept tomorrow's retirees being poorer than today's. Because we all deserve to look forward to our retirement with hope, not fear.

Retiring isn't just the end of your working life, it should be the start of something that is new and joyful.

The Spanish word for 'retired' - jubilado - I think that sums it up best.

Old age should be jubilant.

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That will only come when we renew the social contract - between state, citizens and wider society - on which the future of our country depends.

Thank you.