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Pensions: Personal Accounts

My Lords, like other noble Lords, I very much welcome personal accounts, particularly as they will benefit women working for small employers who very often do not have any pension scheme at all. They are greatly to be welcomed. I want to press my noble friend on an issue that has been raised already by both the noble Lord, Lord Skelmersdale, and the noble Lord, Lord Oakeshott. I refer to the interaction of personal accounts with stakeholder pensions and the degree to which they represent an advance on that thinking. The references in both the regulatory impact assessment and the major report are fairly scanty on this subject. Perhaps my noble friend can help me. It is clear that stakeholder pensions did not have the effect we hoped they would because, first, they were not compulsory and, secondly, there was no employer contribution. The L&G figures show that where the employer contributed there was something like an 85 per cent take-up; where the employer did not contribute there was only a 13 per cent take-up. Thirdly, they were not fully portable, which meant that there were high set-up charges. There was therefore low persistency and quite reduced returns for employees. They also excluded small firms with fewer than five employees. On all of the fronts where the stakeholder scheme failed to go as far as many of us would have wished in the climate at the time, personal accounts are very much to be welcomed. Through auto-enrolment they will offer self-compulsion; they will have a modest—possibly not fully adequate—employer contribution; and they will be fully portable. They should, therefore, allow for persistency, high returns and low charges. I have some questions for my noble friend. First, he emphasised that about 60 per cent of the £8 billion or so the Government expect to go into personal accounts will be new savings. Where is that money coming from? How robust is that figure? Will it come from low-paid women? Will it come from employers with fewer than five employees? Who is paying? Who gains? Who loses? Secondly, is it worth saving? Without going as far as the mis-selling point, there are some complicated interactions between the basic state pension, the state second pension, trivial commutation limits and pension credits which are not explored in any of the reports that I can identify. The PPI report and other research shows that someone who is older, poorer, in rented accommodation or with high debt levels will need very careful advice on whether they should stay in or stay out. I am not yet sure that we will have that generic, if not regulated, advice in place to ensure that there is no risk of inappropriate judgments and actions. Thirdly, what will the pots be worth? The noble Lord, Lord Oakeshott, is right; we need to consider a man on median earnings, a woman on median earnings and on half earnings to see what, when turned into an annuity or possibly into a commuted pot, those sums will be worth. Finally, what happens to people who are possibly above the UEL at £33,000 to £35,000 in a company where there is a shell stakeholder and nobody takes part? Will the employer have to make his stakeholder scheme at least as good as a personal account to produce an opt out, or will a personal account run alongside it? I hope that my noble friend will be able to answer these questions. We need to see how much advance there will be, who will gain and the degree of robustness of some of the assumptions behind the report before we can give it the wholehearted endorsement that we want to give it.