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Pensions Bill

I welcome the opportunity for a brief Second Reading debate about the principles of the Bill, and welcome the general thrust of the amendment. However, I fear that it sets out only a partial story about the general objectives of our reform. For that reason I hope that the noble Lord, Lord Skelmersdale, will not press it in its current form. Together, this Bill and last year’s Pensions Act provide an integrated package of reforms that build on and carry forward the analysis and recommendations of the Pensions Committee. I place on record, again, our gratitude to the three Pensions Commissioners, the noble Lord, Lord Turner, Jeannie Drake and Professor John Hills for all that they have done to help us face up to the challenges, and legislate for solutions that are affordable and sustainable in the long term. Last year’s Pensions Act provided a simpler, more generous and widely available state pension. It addressed and corrected the historical inequalities in women’s state pension entitlement, provided for gradual increases in state pension age, and ensured sustainability in the long term. Taken together, these reforms set out a solid foundation upon which people can plan for retirement. This Bill, as the noble Lord recognised, makes changes primarily to the private pension system. As the amendment sets out, the Bill ensures wider availability of pension savings opportunities, but I suggest that it does more than this. In establishing a personal accounts scheme, it specifically targets a market that has been poorly served by existing pension providers. Those on low to moderate incomes will—many for the first time—have an opportunity to save for retirement in a simple, low-cost scheme. In encouraging people to take personal responsibility for their financial security in retirement, our policy on auto-enrolment will help individuals to overcome such barriers to saving as inertia. The Bill provides safeguards on auto-enrolment, such as the right to opt out, the definition of a jobholder, and enforcement and compliance provisions to ensure that the policy is not undermined. The core policy principle is to make inertia work to the benefit of individuals, not against them. Another key feature is to give people an incentive to save for their retirement, requiring the state, the employer and the individual to contribute towards pension savings. Finally, and importantly, in protecting and maintaining the existing market, we propose a number of measures that ensure that the personal accounts system stays focused on the unserved target market. These measures will minimise the burdens on employers in complying with the duty to register qualifying schemes and to contribute 3 per cent; roll back some of the regulatory burden on existing schemes to simplify their administration; and foster compliance by providers, employers and individuals in a light-touch but effective way. I acknowledge—and we will surely debate—the points made by the noble Lord, Lord Skelmersdale, about levelling down, savings incentives, auto-enrolment, to which I have referred, and issues of low cost. The noble Lord, Lord Oakeshott, suggested that they would be better debated in Grand Committee than in this Chamber, which is a fair point. I would have preferred to debate them in Grand Committee, but the decision is not ours and we are happy to debate them wherever the powers that be determine. The noble Lord, Lord Lyell, specifically raised the issue of increasing longevity. One of the issues at the heart of Turner commission’s report, on which this Bill and last year’s Act are built, is the need to make sure that this is addressed and we have a system that is sustainable in the long term. I quote some statistics, which I have quoted once before. DWP statisticians have worked out that somebody alive today, aged 59, most likely a woman, will live to be 120. That means that next year, halfway through her life, she would get her state pension. That encapsulates the challenges of pension provision. We will debate the detail in the coming weeks, but the broad objectives of the package, which go further than the noble Lord’s amendments, are built on lengthy discussions in Parliament, with interested external organisations and with the general public. The commitment and effort, shown on all sides in the other place, to raising awareness, deepening understanding and widening the circle of consensus is exemplary. It is a key consideration if we are to give people confidence and certainty for the long term. I applaud and warmly welcome that effort and commitment and I do not think we disagree about the general objectives of these reforms in terms of what they are or should be, but I do fear that the amendment is not an entirely full reflection of those objectives. On that basis, I would ask the noble Lord not to press it.