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Pensions: Automatic Enrolment

My Lords, I declare an interest as president of the Pensions Policy Institute and head of the UK International Longevity Centre. I, too, congratulate the noble Lord, Lord Kirkwood, on securing a very timely debate. He has raised some important issues and asked some significant questions. I also congratulate the other speakers today, who have been quite exceptional. I know that those who follow me will be the same, so my comments will be brief. I am supportive of auto-enrolment but above all of the important consensus that has emerged about long-term pensions issues. Personal accounts may not be suitable for all employees due to their interaction with means-tested benefits. This particularly applies to workers over 55 years of age, who will always have insufficient time before retirement to accumulate a significant fund under the scheme. However, they may have just enough pension to reduce any benefit entitlement, including passported benefits, such as council tax relief, pound for pound. As I have said previously, this does not mean that people should not be auto-enrolled, but it implies that people will need, as the noble Lords, Lord Kirkwood and Lord Fowler, said, clear information and generic advice to help them to make informed decisions about whether they should stay in or opt out of personal accounts The noble Lord, Lord Fowler, pointed to the extraordinarily awful levels of ignorance among the general public. The issues are who pays for the information and who will provide the information and advice, particularly down the line at the decumulation stage when employment has ceased. An important test of the personal accounts policy will be whether it is possible to design information and generic advice in a simple and easy-to-understand way to help people to decide whether they should opt out of personal accounts. There are policy options that the Government could consider to improve the incentives to save for some groups, particularly those who are heavily at risk. I hope that the Minister will be able to indicate some of the thinking along these lines. Increasing the trivial commutation limit or introducing a limited pension income disregard could improve the returns from personal accounts for some individuals at a cost of increasing government expenditure on means-tested benefits. I know that these are difficult decisions for the Government to make. I agree with the noble Lord, Lord Kirkwood, that a working group of experts to consider some of the important issues that have been raised today might be helpful in taking things forward. We must get this right in the long term as well as the short term.