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Mr. Nelson: I acknowledge immediately that this does not deal entirely with my hon. Friend's point, but one answer is that people can opt out of an occupational pension into a personal pension scheme. When an

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individual decides to be a member of an occupational scheme, it is implicit that he understands--or at least, one hopes that he does--the implications of being part of a collective scheme, which has benefits as well as obligations. It also has risks and involves exercising a choice.

About 90 per cent. of people in occupational pension schemes have defined benefit schemes rather than money-purchase schemes. Only a small proportion of those in occupational pension schemes decide to translate into annuity the benefits that they receive and very often do so because it is more certain and easier for them to do so. It may be only a minority but it does not make it any less important that individuals should have as much flexibility as possible. However, I repeat that we are not aware that there is a problem or that anything inhibits deferral, provided that the scheme decides to take that line and offer deferral to its beneficiaries.

Mr. Butterfill: I accept that there are at present more defined benefit schemes than money-purchase schemes but the Minister will be aware that the trend is going the other way. There are virtually no new defined benefit schemes being set up and major companies such as BP are suggesting that they may move from defined benefit schemes to money-purchase schemes.

Mr. Nelson: My hon. Friend, who is well informed on this and related matters, is absolutely right, and I take his point seriously. If there proves to be a problem in practice, we shall certainly reconsider the matter but we think that the flexibility for retirement annuity contracts and for occupational pensions is adequate. Therefore, though worthy, the amendment is unnecessary. For that reason, I hope that the hon. Member for Edinburgh, Central will withdraw it.

Mr. Darling: I would not be too confident about that. I thank the Minister for his remarks about schedule 11. I accept entirely that if tax reliefs are given we should ensure that we are not subsidising saving in a way that does not apply to other savings products. However, the Government will have to explain why 70 per cent., as opposed to 65 per cent. or any other figure, is the appropriate one. Having said that, it is fascinating that the Minister and a number of Conservative Members--although not all of them--take as their touchstone for whether a scheme is good or bad what the industry--the product providers--have to say about it. The hon. Member for Carshalton and Wallington (Mr. Forman) and the Minister were at pains to point out that no one was forced to transfer. Indeed, no one is forced to buy a pension; it is always possible to go through life without one and then wait and see what happens when one retires. People may not be forced, but the Minister should reflect on the point made by Labour Members and one or two Conservative Members. Although people are not physically forced to transfer, many may feel that they have to because there is no flexibility in the scheme that they have, whether that is an occupational scheme or any other sort. It is not good enough for the Minister to say that he has spoken to nine companies which have said that people can transfer as long as they move to one of their schemes. That is precisely what we do not want; we do not want employees to be able to transfer only to one of the

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schemes that a company happens to have on offer. The alternative scheme which has the flexibility may not be the best --another company may have a better one.

The Government must sometimes ask not only what is good for business but what is good for the general public. The Government say that they have a compliance test and seek to check business costs and red tape. That is a good thing and perhaps they will apply the same principles to the rest of the evening's debate.

Yes, let us ask the industry and the product providers but let us consider, too, the effect of such policies on people in general. Parliament is supposed to be representing the people at large, not only those in business. We must not take what the industry says as the last word on the matter. We must consider the wider interests, something that the Minister and the hon. Member for Carshalton and Wallington failed to do. However, I shall look to my new ally, the hon. Member for Bristol, North-West (Mr. Stern), for support.

Mr. Stern: The hon. Gentleman is wise to do so. I was going to take his point a little further. Does he agree that the Government are not only looking purely to business but are going further and saying that two classes of policy holders will be entitled to a say, whereas a third class of policyholder will have the option either of not accepting the flexibility being offered or transferring willy-nilly? We are offering freedom to some but not to all.

Mr. Darling: The hon. Gentleman makes a good point and, in so far as he is allowed to, I hope that he will return to it in Standing Committee. For the Government to say that no one is forced to transfer is not adequate.

The fundamental issue that has been touched on repeatedly is regulation. Again, it is interesting that the Minister and one or two other Conservative Members take as their touchstone the increasingly minority view that there is nothing wrong with the Financial Services Act 1986 and that no change is needed. The Minister said that any change would mean a revolution and central control of resources but no regulatory system on this earth seeks to control resources in that way. The fact is that a growing number of people recognise that the 1986 Act will have to be amended and the sooner the Government face that, the better.

We believe that we should build on what we have but it is nonsense to try to continue with the fiction of self-regulation. The Minister cannot say that the system is working because many problems have been identified. Indeed, many of the problems that arose with pension transfers were due to the fact that the system was not working and was driven by the industry, which knew that bad practices existed but too many of those involved chose to do nothing about it.

Mr. Forman: The hon. Gentleman is referring to a point that I made in an earlier intervention. I was trying to tell the hon. Gentleman that it has taken the best part of nine years to perfect and improve the system of self-regulation within a statutory framework. It would be very unwise, in the interests of this country and the financial services sector, to tear that up by the roots again, as I understand that his party would seek to do were it to come into office.

Mr. Darling: We are not proposing to tear it up by the roots but to reform and to strengthen it. I agree with the

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hon. Gentleman that the regulatory system has improved dramatically, especially since Mr. Andrew Large became chairman of the Securities and Investments Board. The Minister cited Mr. Large's review as a major step change. Indeed it was, but the Minister might be candid enough to admit that poor Mr. Large had to conduct his review in the straitjacket of knowing that the Government would not introduce any new legislation.

The Government have always made clear to anyone who cared to ask that they would not legislate. That is because they are not confident of getting a Bill that is committed to self-regulation through the House. Not only Opposition Members, but Conservative Members have doubts about the whole philosophy of self-regulation. It is expensive, it is cumbersome and it does not work.

The debate has been extremely useful, in that I think that the Minister is now in no doubt that we are looking for flexibility to be extended universally across pension provision. The sooner that the Government do that the better. I very much welcome the fact that the Government have admitted, perhaps not in clear terms, that they would make the necessary changes if it turned out that there was some fundamental problem in allowing that flexibility. I hope that the Minister will report to the House further as and when discussions continue.

6 pm

The Government have nothing new to say about regulation. Yet again, they seem to be in the pockets of a minority of providers in the industry. They are not prepared to face up to the fact that the public and, increasingly, a large section of the industry, have lost confidence in our regulatory system. Until that is put right, sales will continue to fall and people will continue to lack the confidence to make provision for themselves--the sort of confidence that they ought to have--because they will have doubts about the integrity and the efficiency of the regulatory system. That must be put right. For that reason, if for no other, we shall certainly press our amendment to the vote.

Question put, That the amendment be made:--

The Committee divided: Ayes 215, Noes 275.

Division No. 53] [6.00 pm


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Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Alton, David

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Ashdown, Rt Hon Paddy

Ashton, Joe

Austin-Walker, John

Banks, Tony (Newham NW)

Barnes, Harry

Battle, John

Bayley, Hugh

Beckett, Rt Hon Margaret

Benn, Rt Hon Tony

Benton, Joe

Bermingham, Gerald

Berry, Roger

Blair, Rt Hon Tony

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Boateng, Paul

Boyes, Roland

Bradley, Keith

Brown, Gordon (Dunfermline E)

Brown, N (N'c'tle upon Tyne E)

Bruce, Malcolm (Gordon)

Burden, Richard

Byers, Stephen

Caborn, Richard

Callaghan, Jim

Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)

Campbell, Ronnie (Blyth V)

Campbell-Savours, D N

Canavan, Dennis

Cann, Jamie

Chidgey, David

Chisholm, Malcolm

Church, Judith

Clapham, Michael

Clark, Dr David (South Shields)

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Clarke, Eric (Midlothian)

Clarke, Tom (Monklands W)

Clelland, David

Cohen, Harry

Connarty, Michael

Cook, Robin (Livingston)

Corbett, Robin

Corbyn, Jeremy

Cousins, Jim

Cunningham, Jim (Covy SE)

Cunningham, Rt Hon Dr John

Dalyell, Tam

Darling, Alistair

Davidson, Ian

Davies, Bryan (Oldham C'tral)

Denham, John

Dixon, Don

Dobson, Frank

Donohoe, Brian H

Dowd, Jim

Dunwoody, Mrs Gwyneth

Eagle, Ms Angela

Eastham, Ken

Enright, Derek

Etherington, Bill

Evans, John (St Helens N)

Ewing, Mrs Margaret

Field, Frank (Birkenhead)

Fisher, Mark

Foster, Rt Hon Derek

Foster, Don (Bath)

Fyfe, Maria

Galbraith, Sam

Galloway, George

Gapes, Mike

George, Bruce

Gerrard, Neil

Gilbert, Rt Hon Dr John

Godman, Dr Norman A

Golding, Mrs Llin

Gordon, Mildred

Graham, Thomas

Grant, Bernie (Tottenham)

Griffiths, Nigel (Edinburgh S)

Grocott, Bruce

Gunnell, John

Hall, Mike

Hanson, David

Harman, Ms Harriet

Harvey, Nick

Heppell, John

Hill, Keith (Streatham)

Hinchliffe, David

Hodge, Margaret

Hoey, Kate

Home Robertson, John

Hoon, Geoffrey

Howarth, George (Knowsley North)

Howells, Dr. Kim (Pontypridd)

Hoyle, Doug

Hughes, Kevin (Doncaster N)

Hughes, Robert (Aberdeen N)

Hutton, John

Illsley, Eric

Ingram, Adam

Jackson, Glenda (H'stead)

Jackson, Helen (Shef'ld, H)

Jamieson, David

Janner, Greville

Jones, Lynne (B'ham S O)

Jones, Martyn (Clwyd, SW)

Jones, Nigel (Cheltenham)

Kaufman, Rt Hon Gerald

Keen, Alan

Kennedy, Jane (Lpool Brdgn)

Khabra, Piara S

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