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Pensions Bill

It is a pleasure to follow the hon. Member for Aberdeen, South (Miss Begg). She is right to mention the special problems that women face with regard to pensions, but perhaps that is not a debate for tonight. Giving pensioners a fairer deal, which means a greater share of the nation's wealth, is long overdue. I warmly congratulate the Government on the pensions review and their response to the Turner report. However, let me set the Bill in context. The incoming Labour Government in 1997 took over one of the strongest pension systems in Europe, which is now one of the poorest. They committed an appalling robbery on people's private pensions, which still costs pensioners some £7 billion every year and has added to the downfall of many schemes. One of the most damaging and surprising failures of the Labour Administration since 1997 is that their policies have led to a fall in the share of British national wealth that goes to pensioners. Frankly, I expected better from Labour on that. Pensioners see £25 billion thrown at the Northern Rock problem and wonder at the absence of the financial constraints that the Government always claim to be under when pensioners need help. What about the Government's failure on the Equitable Life debacle and their breach of trust on police pay? I put it to the House that this is no time for politicians to say, ““Trust me, I'm a fairly straight sort of guy””, as Mr. Blair once infamously did. It is time to get all-party consensus on a decent system to take politics out of pensions and to take more pensioners out of relative poverty. It is particularly galling to see, as we do, our pensioners' share of Britain's wealth falling, when they built Britain's institutions and national wealth after they won national and international security in world war two. Hon. Members do not see things in that way, but pensioners do. It is against that legacy that people's trust in Government policies, particularly on pensions and savings, must be viewed. I acknowledge and welcome the fact that the Government have followed the Pension Commission's recommendations on the broad scheme design. While the Bill needs fine tuning, I support its key objectives to encourage more people to save in workplace pension plans and to create a new system of personal accounts. I turn now to the specific principles of the Bill. It is right legally to force employers automatically to enrol their eligible employees. The Government should guarantee the quality of those workplace pension schemes and, through the Bill, deliver a strong framework for the introduction by 2012 of well-governed personal accounts. The scheme must be flexible and avoid the baffling complexity that dogs the current pension saving systems. That will help to target specifically the needs of below-average earners, thereby ensuring the highest economically sound levels of participation. Savers must not lose because they have saved. That issue must be addressed. It is crucial to ensure that the interaction between means-tested benefits and personal accounts does not lead to benefit losses and thereby act as a disincentive from saving for low earners. I accept that if it is designed correctly the scheme can give millions of low to moderate earners first-time access to secure and worthwhile workplace pensions savings with decent and affordable contributions from their employer. I believe that the 3 per cent. level given in clause 18 is right at the moment. There must be stability on that point, at least in the medium term if not for ever. As the hon. Member for Aberdeen, South and the right hon. Member for Birkenhead (Mr. Field) pointed out, the Government must find a way, if possible, to prevent employers from reducing the current contribution levels. Clause 53 will enable the Secretary of State to set an annual contribution limit for personal accounts. I believe that £3,600 has been mooted. That may be inadequate; the figure should perhaps be higher. In addition, there should be flexibility so that individuals can, from time to time, pay in lump sums when they can afford to, if it is financially sound for them to do so and providing that they receive proper independent advice. The Government should find a way to ensure that they do. That would help people who start saving for a pension later in life, and who need to make up for lost time. Those people represent a significant number of workers. I agree with Help the Aged, Age Concern and the People's Pensions Coalition that there should be a distinct lifetime lump sum limit alongside the annual contribution limit. That would allow people to pay money into their pensions from small inheritances, divorce settlements, redundancy payments and other windfalls. I do not see how that could be wrong provided that the people—particularly low earners—who chose to do so received proper advice. We should also consider the transfer of limited existing pension pots into and out of personal accounts to help people with various small pension funds. Again, that is not an unusual situation. The Government must deliver on consolidating people's existing state pensions, including the state earnings-related pension scheme, graduated retirement benefit and the state second pension. We must enable people to see more transparently what state pension rights they have accumulated thus far, which should help to encourage further pension savings. We should focus on clause 3(5), which will enable employers to be exempt from the requirement to offer personal accounts if they offer group personal pensions, or GPPs. Many hon. Members agree that the exemption of GPPs from automatic enrolment, forced on this country by European laws with no control by this democratic Parliament, would be totally unacceptable. I was not at all convinced or comforted by the Secretary of State's comments in his introduction to the debate. He was quite woolly on the subject, and the Committee will no doubt want to investigate that carefully. The House should fight back and do whatever it takes to remove that EU enforced exemption and to take control of this Parliament away from unelected EU Commissioners. We must find a way to reject EU laws that prevent auto-enrolment into GPPs and would, as Age Concern points out, fatally undermine the principle of the Bill by encouraging employers to side step contributions in to personal accounts. That loophole must be closed. The Bill should protect members from excessive charging and from poor investment performance. Clause 62(2)(d) sets out that"““the cost of membership of a scheme…should be minimised””." We need to hold down scheme costs to an annual management charge of no more than 0.3 per cent., and less if possible. That limit should be specified in the Bill. We have specified the 3 per cent. that employers must pay, as well as many other things. Why cannot we put a specific limit on the costs? People must feel that saving in their personal accounts is totally secure and good value, or else the accounts will fail. People will not have that confidence at a time when, sadly, they doubt the integrity of political parties. Public trust in politicians and Government is at an all-time low, so promises from politicians will not help. People must have clear, unequivocal and permanent guarantees that their money is safe in personal accounts and that they will benefit from saving in them and not be punished through the means-tested benefit system. Advice will be crucial, as we have heard this evening. It is in society's best interests for the Government to ensure that good financial advice is readily available to everyone, and particularly the low-paid, as they plan for retirement. If people receive good advice and have confidence, we may see personal accounts dramatically improve the levels of pension savings in the UK. That is what we all seek. That will lead to far fewer people retiring into relative poverty and falling on to means-tested state benefits in the future. Finally, as I have said before, it is time to take the politics out of pensions and to give pensioners the decent deal that they so richly deserve. If the excellent people of Castle Point allow me, I will fight for the better pensions that they need month by month and year by year. I will fight to force this Government—and the incoming Tory Government whom I expect at the next election—to give current and future pensioners specific delivery of the better pensions deal that is promised by the Bill and that is so long overdue.