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Pensions Bill

I, too, am an optimist and a glass-half-full person; that is why I welcome the Bill. Some of the tone of the debate so far has suggested that there has been a lot more criticism than one gets a sense of from all the briefings from various organisations in the financial sector and charities that work with older people. In most cases, those briefings welcome the principles of the Bill. As the Secretary of State said, the issue of pensions is not about old people; it must be a young person's issue. For the first time in this House, the Bill looks far into the future, dealing with how future generations will make provision for the pensions system. As my hon. Friend the Member for Nottingham, South (Alan Simpson) said, this is about demographics and biology as much as anything else. As the hon. Member for Ryedale (Mr. Greenway) pointed out, we must make it easier for people to save for their retirement and make their own contributions to the pension pot. If the demographics determine that more and more people are not paying into their own pension provision, the state will not be able to deliver anything, no matter whether one believes that the state pension should be linked to earnings, that it should exist at all or that it should be uprated. We must ensure that it is as easy as possible for future generations to pay as much as they possibly can into their pension. I want to concentrate on two areas that the Government have to get right in order for the system to work: first, preventing any kind of levelling down; and secondly, getting the costs right by ensuring that they are as low as possible. Several hon. Members have mentioned their fear of levelling down. Personal accounts will work only if they are targeted at the particular audience that they are aimed at, which is not the 40 per cent. of people who already have occupational or private pensions, but the 60 per cent. who have no extra provision other than that which they pay through national insurance contributions or the state second pension. The Bill will have done nothing if all it does is transfer people out of very good or even quite reasonable occupational pension schemes and into personal accounts. The scheme is not for them. We must be clear that the Government are not saying that all occupational pension provision should be delivered through personal accounts, because those who are in good occupational schemes with contributions of 16 per cent. or more are able to deliver up to two thirds of their earned income as their retirement income. Personal accounts must be a floor, never a ceiling. Eight per cent. is only half of 16 per cent. I hope that once the system beds down in the years to come, if the consensus is right and this is the way forward for pension provision, Governments of the future will try to raise the contribution level beyond 8 per cent. For the time being, however, it must be seen as a floor, and it is clearly not aimed at employers who already provide good occupational schemes. The scheme will be aimed at those who are on low or medium incomes. A large number of the people who are missing out on occupational schemes are women. This will improve the coverage that women have in terms of pension provision. The whole system will fail if few people enrol in the new personal accounts and the savings ratio does not shift at all. We need more people to enrol and to make higher contributions than at present.