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Pensions

My Lords, I thank the noble Lord, Lord Fowler, for the opportunity to debate this vital issue; but given the imminence of the Turner commission’s final report, I feel that this debate can fairly be described as a curtain raiser for future debates. Like a successful West End show, this one will run and run! I congratulate the noble Lord, Lord Hunt of Kings Heath, if congratulations are the right thing—it is a bed of nails. I do not think it is as comfortable as that; at least you can get off a bed of nails. I am not sure whether he can escape from his present position. I also congratulate the noble Baroness, Lady Hollis, on her former contribution in the department. Pensions in the public and private sector cannot be discussed in isolation from developments in the state sector, and I hope that noble Lords opposite will not be suffering from a bout of collective amnesia when it comes to acknowledging their contribution prior to 1997. As a precautionary measure, we should remind them of the dire pensions legacy inherited by this Government. It was a Conservative government who abolished the earnings link, leaving millions of pensioners in poverty relying on a decreasing state pension in real terms, in a system that massively discriminated against women because they were the principal carers in a family. Their other masterstroke was the decision to allow people to opt out of first-class protected pension schemes, allowing them to become prey to the perpetrators of pensions mis-selling. Thousands of my members who worked in British Telecom and the Post Office were persuaded to invest in schemes that were vastly inferior to their final salary schemes. That is a fine example of what someone once described as the unacceptable face of capitalism. I notice that the noble Lord, Lord Fowler, was more cautious when he attributed the collapse of final salary schemes to the abolition of advance corporation tax. The noble Lord, Lord Freeman, was perhaps a bit bolder in ascribing that as the principal cause. The Turner commission’s first report, after a detailed analysis, did not come to that conclusion. It said that the collapse of the longest equity bull run that we have seen, certainly post-war, was a major influence. Of course, we cannot ignore the question of mortality. In the contribution by the noble Lord, Lord Freeman, he seemed to ignore the fact that companies had benefited from the reduction in corporation tax. I seem to remember that many companies enjoyed pension holidays, despite the fact that in my trade union capacity we tried to remind them that surpluses in pension schemes were no guarantee that they would exist over the longer term. In addressing the current problem, it is true to say that the crisis is not with us now, as the Turner commission first report said, but it probably will be in 20 or so years’ time unless we take action now. We should not over-egg that particular situation. Creating the conditions for a pension scheme that will last for the next 50 years is no easy task. Inevitably, the complexity of trying to achieve a coherent, integrated approach will be subject to the law of unintended consequences. Can we square the circle of providing a good state pension for everyone while encouraging people to save for their retirement? We know that the demographics are an additional challenge that we should welcome. Due to substantial improvements in public health provision and the general quality of life, men and women are living longer with the inevitable impact on the provision of pensions and care of the elderly. With the number of people in work supporting an ever growing number of those in retirement, can we encourage people to work longer, albeit in a different capacity—either part-time or making a valuable contribution to society in the voluntary sector? Flexibility has to be part of the solution. The current cliff-edge approach to retirement is neither sensible nor efficient. I welcome the Government’s decision to seek a consensus approach, based on the work that the Turner commission will finally produce. I think that it was unfair of the noble Lord, Lord Kirkwood, to say that the Government ran away from the problem. Would we really have had a sensible debate on pensions during a general election? I wish it were true. Rather than them running away, I think that they took a sensible decision, as we would not have had a sensible debate. As people have said, the Turner commission’s first report told us about the unavoidable choices. Future pensions will be poorer unless we decide to raise taxes or national insurance. Someone has calculated that if you want to raise the pension to about £103, you will probably have to raise taxes and national insurance by 3 per cent. I wonder how popular that would be. We know that we need more savings. Do we have to increase retirement age—it looks like that is the conclusion—or can we encourage flexibility, which I hope has not yet been dismissed? My plea is for the Government to try to reduce the complexity if they can. I praise the Government for their action in the interim. They have taken millions of pensioners out of poverty. Although we hear lots of talk about means-testing and its iniquities, the reality is that the Government have reduced its complexity. When they took office, we had a universal benefit form that was 40 pages long, but it has been reduced to 10 pages. My plea would be for the Government to look carefully at the Turner commission’s recommendations, and imaginatively at what future work patterns could be like. People might prefer a sabbatical in the mid-term of their lives rather than retiring early. The Government should look at ways of encouraging employers to contribute and, if that does not work, we will have to address the question of compulsory contributions. I agree with the noble Lord, Lord Hunt of Wirral, that we have to get the figures right in these circumstances, which is difficult. Once again, I thank the noble Lord, Lord Fowler, for giving me the opportunity to contribute to the debate.