---

Pensions Bill

I welcome my hon. Friend’s support for the policy and I accept his concern, which is shared by Members on both sides of the House. It is worth making two points. From an historical perspective, when David Lloyd George and the Liberal Government introduced the state pension in the early part of the last century, it was payable at the age of 70—the average life expectancy for the people mentioned by my hon. Friend was barely 50—so it was not a brilliant deal. We are not proposing anything as draconian. Secondly, the Pensions Commission identified that problem and suggested that the Government continue to make sure that pension credit was payable at 60. We are looking carefully at that proposal as one way of addressing people’s concerns. It is worth bearing in mind the fact that life expectancy has increased for people in all parts of the United Kingdom, as well as for all occupational groups. We can all look forward to a longer period in retirement, but if we want the state pension to be simpler and more generous—that comes at a price, as we all know—we have a choice. Either we try to find a way of making the additional expenditure sustainable in the long term without the need for tax rises, or we go down the easier route that some hon. Members would advocate by loading it all on to tax rises and passing the bill on to future generations. I do not believe that it is prudent or responsible to pass that problem on to our children and grandchildren, who would pay the cost of the package in extra taxes. That is dodging the issue, and I do not think that we should do so. While it is unpopular to talk about working longer, the simple fact is that if we are not prepared to increase the state pension age, we will create an unsustainable financial burden for future generations which, as I said, is the wrong thing to do. The increase in the state pension age is therefore at the heart of the Bill, ensuring the sustainability of the reform package and locking in the essential stability that is needed in any successful pensions policy. Part 2 implements a number of measures designed to support good quality employer pension provision by reducing the regulatory burden and making the existing system simpler for employers and providers. Clause 14 allows occupational pension schemes to do away with the complexities of the detailed rules on guaranteed minimum pensions by converting members’ rights accrued between 1978 and 1997 into a new scale of benefits. The requirement for the new rights granted after conversion to be of at least equal actuarial value to those that they replace will properly safeguard members’ interests, while the fact that a scheme is allowed to adopt a unified and streamlined benefit structure will enable administrative savings and give members greater certainty about their rights in the scheme as well as greater flexibility to transfer successfully to other schemes. Clause 15 abolishes contracting-out for defined contribution schemes, as recommended by the Pensions Commission. During the Bill’s passage through Parliament, we intend to take powers to enable us to remove the complex rules governing rights accrued in contracted-out defined contribution schemes, following the outcome of the review of the open market option for annuities that we expect to be completed by the end of the year. The removal of those rules will simplify the management of rights for both schemes and members, reducing costs to schemes and supporting our aim of simplifying pensions regulation. In addition to the measures in part 2, our rolling deregulatory review offers the opportunity for further radical change, not merely to rewrite existing legislation but to cut red tape and make it easier to deliver workplace pensions. My hon. Friend the Minister for Pensions Reform today announced further details of the institutional review that will consider how the functions of organisations involved in the regulation and protection of workplace pensions—such as the pensions regulator, the Pension Protection Fund and the Financial Services Authority—can best develop within our new pensions settlement. It will also extend to cover those involved in the provision of advice, mediation, dispute resolution or compensation for pensions.