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Pensions Bill

My purpose was to group my amendments with Amendment No. 112, that of the noble Baroness, Lady Greengross. I have some sympathy with the amendment of the noble Baroness, Lady Hollis. She has helpfully clarified that she was referring only to employee, or individuals’, contributions, and that did not carry any sense of backdating employer matching for any purpose. That is fine. My concerns are practical rather than theoretical. The amendment will involve considerable additional complexity for personal accounts, which would then have to track records of contributions year by year. That record could extend for up to 50 years if somebody started contributing at the age of 16 and stopped when they were somewhere in their sixties, or possibly even older. This Bill allows contributions up to the age of 75, so I will change that to 60 years or more. Anybody who knows anything about NIRS2, the system for recording NI contributions, as I am sure the noble Baroness, Lady Hollis, does, will know that recording, maintaining and holding details of contributions over these very long periods is neither easy nor cheap. I have a very real concern about the additional burden that the amendment would place on the implementation of this scheme, particularly in the design phase. From what I understand about their attitude, those running PADA would run a mile from that complexity. I am also concerned about the cost of doing this, and the impact on the cost limit that we were aiming at. This was set at 0.3 per cent or 0.5 per cent; we will come to that in due course. That limit is already under some stress. Those difficulties of both complexity and cost pressure are real. At heart, the amendment is sensible, but the practicalities may be very difficult to cope with. My amendments in this group address the broad theme of not allowing personal account schemes to crowd out private pension provision. In that respect, it addresses some of the issues raised by the noble Baroness, Lady Hollis, when she spoke to her amendment. We are concerned, as are such organisations as the Association of British Insurers, that the personal account scheme will become a vortex, sucking in all manner of pension contributions and other savings so that, at the end of the day, existing pension and savings-product providers will find it difficult to compete. To be clear, we stand for healthy competition, but competition from a state and statute-backed backed pension provider may not be healthy if that becomes the default repository for all long-term savings from large swathes of the population. That will, in turn, weaken the UK’s financial services industry, a major contributor to our economic growth. We interfere in this sector at our peril. We agree with the Government—and, probably, with all sides of the House—about the need for greater pensions saving. We are not apart from the noble Baroness on that. We certainly support the creation of the personal accounts scheme if it can be delivered. Our support is tempered by the need not to create some kind of nationalised industry, which brings unfair competition to private-sector providers. Let me deal with some of my amendments. Amendment No. 111A explicitly states that employers should not contribute more than the 3 per cent that the scheme is based on. The noble Baroness is shaking her head, but let me explain. The rationale for this is that personal accounts should be a default scheme for those employers who want to contribute the minimum. If they want to contribute more, they should research something like group personal pension schemes, to allow them to contribute higher amounts to a workplace-based pension scheme for themselves. We must not let the personal account scheme crowd out people who want more than the default, and should therefore go out into the market to find other options for their employees.