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Pensions Bill [HL]

My Lords, I thank my noble friend for her amendment. I know that she is very committed to this proposition and she has enunciated it with a particular focus on gender issues, which we understand. However, the noble Lords, Lord Boswell and Lord Flight, both pointed out that it is a wider issue and one that is not just for NEST but for pensions across the board. We support the Government’s call for evidence on allowing early access to pension savings, evidence which would consider benefits to individuals and the impact on aggregate saving levels. As my noble friend pointed out, there are various policy models—loans and withdrawals, permanent withdrawals, feeder funds and early access to lump sums—which I think is the model that my noble friend is particularly focused on. But of course these have different impacts and outcomes in terms of the propensity to increase savings, or indeed in some instances, the propensity to reduce savings. There are few data on how an early access policy might impact on individual behaviour or the pensions industry. Behaviours in other countries—401(k) has been mentioned in respect of the US—give only a limited guide to the UK. The PPI says that for real conclusions for the UK, further research within the UK context is needed. Is there an appetite for early access? Would it encourage savers to save more? What proportion of people would access savings early? These questions need to be considered in the context of other current developments—auto-enrolment, the removal of the requirement to annuitise at 75, changes to taxation, and so on. Where is the balance between encouraging more saving and reducing pensions in retirement? We need also to think about the application to DB schemes and how that would fit. If we have something that is attractive to DC, what does that mean in terms of DB schemes? I am quite sure that technically something could be provided to work for DB schemes as well, but I think it would be quite complex. In terms of its application, the noble Baroness focused on pension pots of £10,000. I do not know what data there are about ““running away money”” at aged 30 or 40; I am not sure whether I was enthused by the concept or not. How many people would have a pension pot of £10,000? When we were debating annuitisation at 75 I remember data that showed that only 5 per cent of people had pension pots in excess of £100,000. Those data may be a little old, but they are illustrative. How many people at the age of 30 have a pension pot? If you are talking about 25 per cent of £10,000, that would not pay for one year’s worth of university fees. We have to explore what the appetite would be for this and how it would work, but it seems to me that it is not altogether straightforward. There is an issue about whether it changes the paradigm with employers. If you have something which is seen more as a saving scheme than a pension scheme, that will impact on employers’ willingness to fund. I do not assert that it would, but it is an issue that ought to be explored as part of this journey. We all know the Treasury line—I am sure that the Minister has it in his file that pensions are about long-term savings. That is why there is generous tax relief and any deviation from that should not be contemplated. I do not have to follow that line any more as I am not in the noble Lord’s position, but there is an issue about how it would impact on the tax regime for pensions. We also need to be careful about the risks of tax avoidance by these mechanisms. If someone paying the 50 per cent rate gets half of that paid on the way into the pension pot and you can get 25 per cent of it out tax free straightaway, that would seem to be a pretty good deal. Rather than simplifying the tax system, one can see the complexity of the rules that would need to be put in place to deal with that and the constant challenges there would be to those parameters. We should thank my noble friend for introducing the amendment. I hope and believe that it is probing in nature because the time is now right for this to be fully examined and it seems that the Government are on a path to do that. However, we need more information on a number of issues before I or my party would officially be able to say that this is something we support. But it is certainly something that deserves examination for the sort of reasons that my noble friend has advanced.