Equal retirement age agreed

The Commons yesterday took what, according to Peter Lilley, will be the biggest spending decision of this Parliament when it endorsed the equalisation of the retirement age for men and women at 65.

Europe requires equal treatment for men and women, but had the qualifying age for the state pension been fixed at 60, by 2030 it would have cost the Exchequer an extra £12bn a year. The common age of 65 will be phased in over 10 years from April 2010.

The change forms part of the Pensions Bill which was given a Second Reading by MPs. A weighty measure of 162 clauses, it establishes defences against fraud and misuse of occupational pension funds by latter-day Robert Maxwells, and gives incentives to employees to remain in private pensions rather than opt back into the state scheme.

Without a blush, Mr Lilley, Secretary of State for Social Security, dressed up as patriotic munificence the Government's decision to bow to a defeat during the Bill's passage through the Lords, restoring a war widow's pension to 16,500 women. The concession to war widows who remarried and were then bereaved again, or divorced or legally separated, will cost about £40m a year - with widows entitled to almost £143 a week. Claims will be dealt with from October.

"In this 50th anniversary year the whole nation wants to recognise those who sacrificed their lives so we could be free," Mr Lilley said. "I am sure this announcement will be well received by the country ... demonstrating this nation's recognition of the debt we owe to so many."

Donald Dewar, Labour's social security spokesman, said the amendment had been supported in the Lords by Labour. "The only part of the House that voted against it was the Government front bench." To jeers, Mr Lilley replied: "I'm sorry Mr Dewar tries to make a party political point out of an issue of national importance altering rules which have been in force for 50 years under a variety of governments."

Mr Dewar suggested the minister was making a virtue of necessity: "According to the newspapers, there was a battle in Cabinet committee between the Treasury and the DSS, so perhaps I ought to congratulate Mr Lilley on beating the Chancellor. I suspect it had a lot to do with the approaching anniversary".

Sir Andrew Bowden, Conservative MP for Brighton Kemptown, joined Labour backbencher Alf Morris in calling on ministers to go further to address the grievances of war widows, some of whom existed on a one-third pension. All governments since the end of the war "should hang their heads in shame at the way they have treated war widows".

Mr Lilley made his own party points on pension age, saying Labour had refused to commit itself. Though the Labour- appointed Social Justice Commission had supported the Government's approach, Mr Dewar had "hedged his bets" in arguing for a flexible retirement age between 60 and 70, he said.

Justifying 65, Mr Lilley said: "People are living longer, healthier lives. Women are increasingly expected to have to work and earn their own pensions. We want a system which offers the best chance of security for pensioners while not placing unsustainable burdens on taxpayers."

But, picking up a Tory theme, Mr Dewar said the emphasis should be on choice. "The idea that you have a retirement age where everyone is expected to shuffle obligingly off into the shadows is strangely old- fashioned." There still had to be a pivotal age - one of 63 would be cost-neutral and have an element of equity. Leaving the question open for a Labour government, Mr Dewar added: "I don't have the kind of actuarial resources available to the Government, it is obviously something we will review when we get there."

Frank Field, Labour chairman of the Social Security select committee, argued against choice as he stressed the need for people to back up their state pension with a private one. "The Treasury is going to hope that everybody is covered, leaving it perhaps to taxpayers at a later stage to pick up the bill. I hope our position will be one of compulsion so that everybody is both within a state and a private scheme."