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Pensions Bill

My Lords, I join other noble Lords in welcoming this important Bill. I am pleased that the Government have accepted the Pensions Commission’s proposal in regard to the national pension savings scheme. I rather suspect that the areas of this Bill where we may disagree with the Government could be those where they have chosen to disregard recommendations from the Pensions Commission. We will see. Three key areas have attracted a lot of attention. First, there are personal accounts. We have to be careful that we are not in danger of thinking that one size fits all, and that this will work well for everyone. I am not sure that it will. Secondly, there is the compulsory employer contribution, which I very much welcome. Thirdly, there is the automatic enrolment in pension schemes. This Bill will be good for many people, but there will be those who are left behind and left out of the improvements in retirement that this Bill will bring for many. With increasing longevity, pensions are of growing importance to many more people in our community. When the state pension was introduced, it was worth approximately 25 per cent of the average wage. I remember being part of the Carnegie inquiry into the third age in the early 1990s. The pension was then worth about 17 per cent of the average wage. Today, it is worth about 13 per cent. How much longer do we have to go on before we see the state pension being worth very little? This Bill will help stop that happening and will certainly help many people. As I read the Bill, I wondered how much progress we had made. The Bill provides for a 3 per cent compulsory contribution from the employer, 1 per cent through a tax provision from the Government and 4 per cent from the employee. I have always been brought up to believe that the employer pays as a minimum the same as the employee. A reasonable employer pays one and a half times and a good employer twice what an employee pays. The Bill represents a very clear statement of just how much we have gone backwards in pension provision in the UK from what we have had within most occupational pension schemes during the past two decades. I referred to numbers being left out. I join my noble friend Lady Hollis in concentrating particularly on low-income people, the majority of whom are women. The baseline of £5,035 before one is covered by the personal accounts will be extremely detrimental to women, large numbers of whom have more than one job. All of those jobs are low paid, yet the Bill provides no opportunity to bring them together. When we discussed this matter during the passage of the previous Pensions Bill in 2007, the Minister said that, "““the Government will commit to looking at the range of options in the coming weeks, including the option to buy additional years””.—[Official Report, 24/7/07; col. 695.]" He did not refer to having multiple jobs. Subsequently, on 17 December, the Minister said that the Government had looked at the matter and that nothing was going to change. The inability of the Bill to provide women with that option to buy extra years—““lost years”” would be a better description—linked with the baseline of £5,035, which will preclude many women from being able to contribute to a pension because their earnings cannot be brought together, will prevent substantial numbers being able to provide for a pension in their retirement. As the Bill is so important, we have to get it right here and now. I regret if my opinion differs from that of my own Government, but pensions are so important that you cannot just put them right next year by passing a statutory instrument or further legislation. We have the opportunity to get this right now and we should do so. We have to be careful that the low paid do not fall into a trap because of the possible impact of personal accounts on some benefits. Pension credit, for example, has a £5 disregard, but it has been at that level for some years. Is this not an opportunity to deal with that issue now? The possible impact on housing and council tax benefit means that people could believe that, by saving in personal accounts, they could be better off, but when they retire, they will be poorer in net terms. That is where advice is important. We have to make sure that the Act is fit for purpose without causing too many unintended consequences. Older women in particular may have a problem with the transitional arrangements. The Bill is good for young people and people in their 30s and 40s, but a whole group of people—women in particular—will never feel the benefits of the Bill. A number of us on this side of the House—and I hope that noble Lords on the other side of the House will join us—will propose amendments intended to mitigate some of the exclusions in the Bill for that group of women, both by enabling them to buy extra years and by looking at the lower paid who have more than one job. My noble friend Lady Hollis referred to someone on £12,000 per year being in a much better position than someone who does two jobs each paying £6,000 per year. That cannot be right and we have to deal with that. I welcome very much the extension of the powers of the pensions regulator, particularly in appointing trustees to pension schemes that are in trouble. All too often, those issues are dealt with when it is almost too late to do something substantial about the scheme. If we could do something earlier, it would certainly help. I think that the noble Lord, Lord Oakeshott, talked about giving knowledge and information. This is very important. All too often, people are frightened of going to a qualified financial adviser and there is nothing in between. There are citizens advice bureaux, but many people do not feel that they can get advice there. We need to make sure that when this Bill passes, there are provisions for information to be given to people based on their individual case, because one size does not fit all. That is absolutely essential and it needs money behind it. We cannot expect citizens advice bureaux or other organisations to give advice without being properly funded. They have to be properly funded to be independent, and an independent view is absolutely critical. We should remember the pensions scandals of the past, such as the mis-selling of pensions, when the previous Conservative Government gave people lump sum enhancements to come out of their occupational schemes into money purchase schemes, which led to the mis-selling of many pensions. We do not want a repeat of that, so information is absolutely essential. I do not regard it as a soft option under the Pensions Bill—it is part of the central core. I look forward to the debates that we will have. No doubt the Minister will feel uncomfortable from time to time. However, I hope that he will listen and I hope that he will show flexibility, because the Bill as it stands is not the answer for too many people, most of whom are low-paid women.