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Thousands of older women could now face a retirement in poverty following a devastating Government u-turn on pensions reform.

The Government suffered an overwhelming defeat in the Lords earlier this year, when an amendment to the 2007 Pensions Bill was passed by 179 votes to 86.* The amendment, tabled by Baroness Hollis and supported by Age Concern, was designed to give people the chance to buy back up to nine years of National Insurance contributions – potentially boosting the income of thousands of women and carers, previously penalised by an unfair and outdated system.

Pensions Minister Mike O’Brien had said the Government hoped to deliver the outcome intended by the amendment given the strength of feeling expressed in the Lords. But this week, the Government quietly backtracked, announcing that “no changes to the current rules to allow individuals to buy additional National Insurance contributions” would be made.

Michelle Mitchell, Age Concern’s Communications Director, said: “This is a slap in the face for thousands of women in or approaching retirement who are being penalised for taking time out of work to care.

“There’s no doubt that reforms to the pensions system from 2010 will be good news for women born after April 1950 but this will be cold comfort for the thousands born before this date. Even when the reforms come into effect in 2010, a quarter of women reaching state pension age will still not receive a full basic state pension.

“Everyone approaching retirement should be given the opportunity to make more flexible National Insurance contributions, to ensure an adequate income in later life. The Government’s shameful u-turn on this important amendment will condemn many more women to poverty.”

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Notes to editors

• The vote was passed in the House of Lords on 4 July 2007.

Hansard, 17 July 2007: Column 239

Mike O’Brien: My right hon. Friend Baroness Hollis proposed the amendment in the other place. We understand, and are very sympathetic to, the objectives of the amendment, and hope that we can deliver its aim of helping women in this country if at all possible. The Government have always been clear about their desire to provide fairer outcomes for women and the measures in the Bill demonstrate that commitment. We recognise the strength of feeling expressed in the other place and we are keen to find a solution that may bring more people into the contributory system for the first time. However, this is a complicated issue, and it is important to explore the complexities and possible implications of the range of options, including the proposal in my right hon. Friend’s amendment.

Parliamentary question, 17 December 2007

Baroness Hollis of Heigham asked Her Majesty’s Government: When they will report on their commitment, made during the passage of the Pensions Act 2007 through Parliament, to help women to buy back additional national insurance years.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, the Government committed to look at a range of options to help individuals who have gaps in their national insurance contribution records to purchase additional voluntary contributions. This work is now complete. The options were analysed in terms of fairness, affordability and simplicity. The Government have concluded that none of the options considered passes these assessment criteria and none is particularly well targeted, and therefore have decided to make no changes to the current rules to allow individuals to buy additional national insurance contributions.

Baroness Hollis of Heigham: My Lords, I am profoundly dismayed by that Answer. In my view, it will not do. Does my noble friend accept that there are coming before the Commons, and therefore to your Lordships’ House in due course, the National Insurance Contributions Bill and the personal accounts Pensions Bill and that, if this House agrees, we will continue to fight to ensure that women who have been carers do not find themselves penalised by going into retirement with an incomplete, poor pension?

Lord McKenzie of Luton: My Lords, I well understand the disappointment of my noble friend and others in the House, particularly as she has campaigned so effectively on this issue, but the position is as I have outlined. We should not lose sight of what has happened under this Government in improvements to pensions, particularly for women. For example, the reduction in the number of qualifying years needed for a full basic state pension is 30—a key measure—and, for the first time, paid and credited contributions for caring will be recognised equally for basic state pension and state second pension. Those are important developments, but I am well aware that this debate is quite likely to continue with those two pieces of legislation.