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Pensions Act 2007 (Abolition of Contracting-out for Defined Contribution Pension Schemes) (Consequential Amendments) (No. 2) Regulations 2011

My Lords, I welcome these orders. It is important to note that the so-called amendment orders No. 1—I will not read the whole title out—have been laid by negative resolution at virtually the same time as these regulations for affirmative resolution. That is good practice for the House because it means that noble Lords will be able to understand and see the whole picture, and be able to work on them together. I commend that action from the Government. Secondly, concerning the transitional arrangements, clearly this is a commitment made by the last Government being enacted by the present Government and so has a great deal of political support right across the boundaries, as it did when it first came before your Lordships’ House at the time of the Pensions Act in 2008. I wonder, though, what would happen should there be an amendment needed or an error found outwith the three-year period. It might be, for example, that something was discovered beyond the three-year period. Is there any measure by which that can be dealt with? I am pleased that the Government are introducing this measure because it will of course mean that small amounts of money will not need to be paid where the cost of administration is greater than the amount paid out. I hear what my noble friend says about the online methodology that will not be affected. However, when it comes to mechanical methods by which sums below £15 would be encountered, I dread to think what it will cost to administer a payment of £15: I am sure that it will be considerably more than the cost. Therefore, it is welcome that that area is covered. I broadly welcome the thrust and direction of travel in these orders. They lay a route march towards the proposed flat-rate pension on which the Government are now consulting. Again, there is widespread support for that broader pension provision, and certainly this will make it a lot easier to undertake. I have a small number of questions for the Minister. I have already asked about errors. Clearly the regulations make a big change to the pensions of a substantial number of people. They effectively take money paid into a private pension scheme, reducing national insurance contributions, and put it into a state pension scheme. Some of us hope that that will lead to an enhanced single flat-rate pension in future. Of course people will need to understand the consequences of the change. A sum of money will be taken from their private pension pot and put into a different pension pot: people will want to understand that. Perhaps the Minister will tell us what arrangements are in place to help pension fund contributors understand what the changes will mean for them, and whether they will be able to detect and understand, by means of going to the DWP's website or whatever, the differences in what it will mean for them. I come to my final question. SAGA responded to the government consultation and stated: "““The rules for contracting-out are the most complex part of a whole pension system, which is itself the most complex system in the world””." I wonder when we will lift ourselves off the bottom of the table for having the most complex system in the world. The key sentence in the SAGA statement is: "““By sweeping this away, future pensions will be far simpler””." I say amen to that. The statement continues: "““Also, of course, workers and employers will all then pay the same rate of National Insurance, regardless of what kind of pension arrangements they have. which is far fairer””." I do not think that that is quite true, because defined benefit systems are excluded from the scheme. I wonder whether SAGA has inside information that we do not know about on whether this will lead to all employers and workers paying the same rate of national insurance. Given the earlier statement from the Minister, I suspect that the answer is no. There is one issue that runs through the documentation. The impact assessment talks about ““actuarial neutrality””. I understand what that means. However, perhaps what it means for some people will be different from the average of what it will mean based on a large number of years of contributions. Perhaps when the Minister tells me how the Government will portray these changes to pension fund contributors, he will explain also how the actuarial neutrality will play out. One reads on the bottom of any savings scheme policy which one buys that the value of shares can down as well as up. Clearly people will have to make a judgment on the safety of the government scheme as against the relatively movable feast of a private pension scheme. That may be part of the process that the Minister will tell me about when he explains the changes for pension contributors. I welcome the regulations and order because they remove complexity and make life easier. In a world where we have the most complex system, I hope that they will make it more understandable and perhaps lift us up from the fourth division to the third.