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Pensions Bill

My Lords, this has been a debate of very high quality—not surprisingly, given the number of experts on all Benches around the House. My noble friend Lord Oakeshott pointed out that seven Peers of each sex have taken part in the debate. He reckons that such sex equality is always welcome when discussing a pensions Bill. The Bill has been given a general welcome, for which the Government must be relieved, although it will not necessarily have an easy passage, as many amendments have been signalled. The Bill was published late last year when there were relatively few signs of economic slowdown, but that is changing and the economic climate is certainly getting chillier, as my noble friend Lord Oakeshott and the noble Lord, Lord Lea of Crondall, pointed out. Who knows what the state of the economy will be in 2012, but the Government must be aware that research done for the Bill among stakeholders may already be somewhat out of date. The Bill was, of course, foreshadowed during last year’s proceedings on the first Pensions Bill, now Act, from the Pensions Commission, and there is broad consensus—although I am nervous about using that word—on the main principles of the Bill, if not on a lot of the detail, as this debate has reflected. The Pensions Policy Institute has produced useful research, including a stock-take of key stakeholders’ views on the main principle of auto-enrolment, which revealed 22 out of 24 organisations in favour. The figure of 90 per cent take-up of auto-enrolment where it exists, compared to 56 per cent where it does not exist, is telling. However, the PPI’s figures also show that not everyone will benefit from a personal account, which has been reflected in all the speeches we have heard today—even those to whom the Bill is aimed; namely, low to median earners. We have heard, too, of the groups at the highest risk of personal accounts being unsuitable. They are probably single people likely to be renting in retirement and having no additional savings. They could fail to qualify for means-tested housing benefit if they have just enough savings in a personal account. The other ““at risk”” groups singled out by the PPI are in a different category, as they would not be auto-enrolled. They are middle-aged single people on low to median incomes without significant savings who are self-employed. The whole question of the way in which personal accounts will interact with means-tested benefits is one of great uncertainty. We have only just received—yesterday—the department’s own projections about this interaction, which I am sure will repay close study. As we all know, the benefits system is extraordinarily complicated, and in 2012, unless the system is simplified, there could be not only a great deal of confusion about whether someone on low to median earnings would be better off opting out of auto-enrolment, but some accusations of pensions mis-selling, as we have already heard. Even the department acknowledges the difficulty of forecasting in this field. It says: "““Estimating the extent of entitlement to different combinations of income-related benefits and how these will evolve over time is a complex task””." We welcome the Government’s commitment to review the interaction of personal accounts with means-tested benefits and urge them to take appropriate action to ameliorate the situation. One step, of course, towards simplifying the benefits system would be the restoration of the link with earnings being brought forward, as the noble Baronesses, Lady Greengross and Lady Turner, said. What better celebration of the centenary of the introduction of the state pension by a Liberal Government, led by Lloyd George, could we have than an announcement that the link with earnings was to be restored by 2010? This brings me on to the matter of generic financial advice and information and why it is vital for a really good system to be in place by 2012. This has been borne in on me very much recently because I have been carrying out my own highly unscientific survey on attitudes about occupational pensions among people I meet. There is tremendous ignorance around the whole subject of pensions. Not only is there ignorance; there is a curious unwillingness to want to know, as though by finding out what pension provision we can expect, we are hastening old age and retirement, and even death. So many people are deliberately putting their hands over their ears. That is why auto-enrolment is so important. But there is also the other side of the employment coin, and the attitudes of small employers to auto-enrolment, even with its phasing in. It will, after all, place an extra burden on companies employing, say, 15 to 25 people, or even fewer. Let us take the scenario of a small firm in the building trade employing 15 people, including a few migrant workers, in a small rural town. I was told that it is very rare for employees in the building trade to have any occupational pension provision. Will this firm encourage its employees to become self-employed? There are those who have criticised the 3 per cent employer contribution figure as inadequate—particularly the noble Baroness, Lady Dean—but to a small employer, and after all they are the life blood of rural employment throughout the country, any higher contribution, coupled with the extra paperwork involved, may be the straw that breaks the camel’s back, so a balance has to be struck. Some people with no existing pension provision are relying on bricks and mortar, as the noble Baroness, Lady Greengross, has mentioned, with the thought at the back of their minds that they can downsize eventually, using the resulting savings in lieu of an occupational pension. And then there are the people who are up to their necks in debt and who are just concerned to get through the next week, let alone the next 30 or 40 years, as the noble Baroness, Lady Hollis, has said. For those people, even 4 per cent of their earnings going towards pension provision will be a burden that they are unable to carry. High quality generic advice—and ideally personalised advice—is just what all these people need, so I look forward to the Government's detailed plans about how this will be provided. I dread the thought that it may come about with a push-button telephone system: ““Welcome to the Government's pensions advice service. Press 1 for information about auto-enrolment; press 2 for auto re-enrolment; press 3 for trivial commutation limits; then perhaps press 4 to make an appointment with a sympathetic psychiatrist””. There must be a really user-friendly free telephone system, using plain English, with enough lines available, especially just before the scheme is due to start in 2012. As far as face-to-face advice is concerned, I have spoken before about the invaluable service provided by citizens advice bureaux up and down the country. I believe that the Government should fund enough advisers so that every CAB can have trained specialists to deal with the many people who will want to know whether it is right for them to enrol in a personal account, as well as giving advice on all the other benefits to which they are entitled. This brings me to the question of the amendment which was overwhelmingly won in this House during the passage of the last Pensions Bill, but overturned in the other place, allowing mostly women to buy back missing years of pension contributions in what has become known as the ““Baroness Hollis amendment””. I would like to raise a parallel point to this because the noble Baroness, Lady Hollis, gave such a virtuoso performance that I do not think her arguments need repeating. My honourable friend in another place, Professor Steve Webb, MP, has been doing some private enterprise on the matter of women being able to buy back contributions—on this occasion in relation to those whom the Government are allowing to do this, owing to the inadequacy of government computer systems between 1996 and 2002. Extraordinarily, the Government themselves seem not to be contacting these women to tell them that they are eligible, even though they hold all the national insurance records needed. Neither do these women need to find a few thousand pounds up front to pay for their missing years. The Government are allowing them to offset the amount they owe against the money they will receive in the form of cash and a better pension. My honourable friend has even had offers of marriage, so delighted were these women to be contacted by him. He has called on the Government, as I do now, to contact these people officially to tell them about their entitlement, and to extend this system of offsetting to the group of mainly women they did write to in 2004-05 about gaps in their national insurance records, but who have not yet responded. Time is running out for this group, and the Government have all the records they need to contact these people again before it is too late. This time, they should suggest offsetting and they will almost certainly get a good response. This has been a stimulating debate and a good many issues in the Bill have been discussed: auto-enrolment in group pension plans, the impact of the Bill on existing pension provision, annual contribution limits and transfers, and, most importantly, the way the scheme is to be run. In the weeks to come, we on these Benches will play our part in helping to make this welcome Bill even better.