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Pensions Bill

This is a genuine attempt by the Government to tackle the serious problem of under-saving, too few contributors and insufficient contributions. Some 7 million people have not saved enough for their retirement. Half of them are over 35, and only a sixth of 20 to 24-year-olds are saving for retirement. Only 40 per cent. of people earning between £5,000 and £30,000 a year are saving towards their pension, so there is a serious problem. In the short time available, I shall make some brief points. First, contributions are too low. Turner said that contributions of 8 per cent. would bring about a 45 per cent. replacement rate—someone's pension level, compared with what they earned—which is a long way from the figure of two-thirds that most people regard as acceptable. I think that the figure will be much lower, because someone who has not saved enough at 30 will not get anywhere near 45 per cent. There will be much less for people who have undergone periods of unemployment. The figure depends on unspecified stock exchange gains and on administrative charges being kept down. That might not happen, so it is likely that employers' contributions will have to be increased. The state may have to target measures on low-paid and older workers. Tax relief of 1 per cent. may not be enough, especially for the low-paid. Those on low incomes are of most concern to me. They may not benefit as they should—in some cases, not at all—from the personal accounts system. People may be ineligible because they are too poorly paid and have multiple jobs. The way in which the system has been set up is wrong. Individuals who are over the lower limit—perhaps they have two jobs—will not receive money from their employers to match their contributions, which is not reasonable. A great deal has been said about the issue of older women, who have sought entitlement to a higher basic state pension. It is not right that the Government should cut their options and not provide that higher basic state pension. I hope that the Government will make a commitment to return with proposals to help those women increase their pension entitlement. The relationship with the means test is important. There are two splendid articles by experts in the current edition of Parliamentary Brief. May I say to Ministers loud and clear that saving must be worth while for low-paid individuals who contribute to personal accounts? It is not right that they should be caught up in the means-testing problem and end up with nothing. I urge Ministers and the Secretary of State to look at the issue to ensure that they get something. Hopefully, the Bill can be changed in Committee or afterwards. I agree with the point that my hon. Friend the Member for Luton, North (Kelvin Hopkins) made about higher-rate taxpayers. The Bill provides for the overall reform of pensions, and for them to be left out so that they can carry on receiving their £21 billion or whatever—the figure is the in tens of billions—is not right. The overall reform package should be skewed towards low earners so that, to coin a phrase, we end up with pensions and pension tax relief for the many, rather than the few. The Bill is a laudable effort, but significant reform was required, not just because of the crisis in savings for retirement but because of the other side of the balance sheet. We are going to raise the state pension age, which will go up to 66 in 2024; to 67, 10 years later; and to 68, 10 years after that. Those changes might not have consensus anyway, but they certainly will not if the other side of the reform package is not generous enough. Again, I urge Ministers on the issue. There are still issues of differences in life expectancy and health inequalities, especially for the lower socio-economic groups, and they must be addressed. I am concerned that the raising of the state pension age will affect the poor the most; one independent organisation said that it would be immoral to force the poorer sections of the population to wait longer for their state pensions just to save those who are richer some tax. As I said, the reform needs to be much more substantial for the socio-economic groups at the bottom of the ladder.