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Pensions Bill [HL]

My Lords, I have high hopes for the thrust behind these amendments, given that all sides of the Committee today share a similar take on the problem. I know that the Minister shares this view and I hope that he can give us some positive indications of ways forward. I am particularly happy to follow the noble Lords, Lord Stoneham and Lord Boswell, on this. We discussed earlier the question of the number of job changes and we know that, as I said, the median number of job changes is around 11—25 to 26 per cent will have between 11 and 15 job changes and others will have even more than that. That means, depending on the rules of individual schemes and how long people are required to work before they can join a scheme—it could be two years or up to two years, or your contributions could be returned to you and you might decide to hold them in a pot—that it is likely that low-paid employees and some not necessarily low-paid employees, but people who have moved a lot in their first five, 10 or 15 years of earning, will build up some pension entitlement in five of those jobs. At, say, £11,000—half women’s average earnings—with a fairly conventional DC scheme, which I know applies in a lot of the charitable or voluntary world, a five plus five would mean that such a woman would have something between £1,000 and £1,200 a year in her pot for each year in her job. That could mean that she had five or six pots of anywhere between £1,000 and £3,000, depending on the rules of the scheme. The question then is what happens to those pots. I am cross with myself because I missed a trick and I should have put it down as an amendment, because one way to approach this, obviously, is to follow in a slightly larger form the thrust of the argument of the noble Lord, Lord Boswell, which is to raise the trivial commutation limit, which at the moment is £18,000— 1 per cent of the lifetime savings allowance. A trivial commutation limit of, say, £25,000 or £30,000 would pick up quite a lot of these very small pots without having to hassle about whether they were at or above a certain level. Of course, some providers—some banks and so on—will allow you to bring together five or six small pots and consolidate them, because they are then worth handling. In addition, the Government propose in due course to remove annuitisation at the age of 75. However, the Treasury—bless it—has insisted on a quite absurd de minimis figure of £20,000 income. That is quite unnecessary; it merely needs to be about £8,000. Of course, if the new state pension comes into play at £140, you will not need any de minimis for failing to annuitise, because it will float you off all public funds, apart from housing benefit. Therefore, with, I hope, the new state pension of £140, not only would NEST be safe but so would all other small savings schemes. You would not then need things such as trivial commutation rules because the choice would be left entirely to the individual. We would be kicking out a lot of silly mess and tangles that have been imposed by the Treasury, which is more concerned to avoid £1 being lost through manipulation of the tax system than it is to encourage £10 being gathered into the savings system. I consider that to be really rather sad. I am sorry that I missed that point, but we will come back to the trivial commutation issue later if it seems worth doing so. If the person in question cannot trivially commute and she is handling pots of, say, £3,000 each, she will be getting somewhere between £1 and £4 a week from each of those small pots. The Pensions Advisory Service—I should declare an interest as a board member of TPAS—has been very concerned about what noble Lords have called ““orphan assets””. At the moment, a poor woman can use these small pots altogether, but she may end up with, say, £20,000 or £25,000 in her NEST pot, have three, four or five other pots of £3,000, £2,000 or £1,000 and lose all those small pots, which are above the trivial commutation figure, are too small to be annuitised and cannot be bundled together. She would effectively lose a third of her lifetime savings, even though she is on a very low income. No one would regard that as decent. Therefore, I think that she should be able to bundle or consolidate her various pots. For this purpose, I am talking about NEST but I am perfectly happy for it to be any willing provider. The important thing is that she can access all her savings. What would be the advantage of my proposal? It is very simple. First, above all, the person in question retains the full value of all her savings, rather than possibly losing some of them. Secondly, it represents simplicity for her in retirement, as she could be handling just one flow of pension income rather than multiple flows of small pots. Thirdly, there is a sort of best-value option going on here—a version of the open-market option. In this Bill we have not yet talked about disinvestment strategies, but I suspect that she would get a better return on disinvestment were she to purchase an annuity if all these small pots were bundled together and consolidated into one scheme, rather than if she were trying to play around with various small pots to avoid losing them. In my amendment, I stipulate that the transfer should be able to take place the year before retirement simply to recognise the concerns—they may be exaggerated but they certainly exist—among some pension funds that existing scheme providers will not want a wholesale flood of money from their schemes under management going earlier into NEST, possibly because NEST will appear so much more attractive in terms of the reduced fees that will be charged and therefore the amount that will be available for accumulation. I do not mind that, but they might, and therefore it may be a price that has to be paid. Given the support around the Committee today, given that I know that the Minister is sympathetic to the issue that has been raised and given that we have produced two or three different ways in which we can approach this problem, I hope that we will get a sympathetic hearing from the Minister.