House of Commons Hansard Debates for 24 Apr 1995

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them because of the support that it gave to its members. The Maxwell pensioners also deserve congratulation, particularly Mrs. Ivy Needham, who led them. Had she not fought so diligently, their case for compensation would not have been recognised.

Before I came to the House, I served as a full-time union officer for 14 years. I had first-hand experience of employers who abused pension schemes. In many cases, that abuse was unintentional, because they did not understand the framework of the legislation. Those employers did not have the necessary knowledge and training that they required not only as employers but as trustees. I agree with other hon. Members that it is imperative that adequate training is given to trustees because they have a great responsibility.

The impact of pensions on our society is not immediately significant to the vast majority of our constituents. People may not have thought about them until the Maxwell fraud and the equalisation of state retirement age received media attention or until they faced their impending retirement. They then delved into the pensions arena, where they need an aptitude for mathematics and a good understanding of a language all of its own, which is bewildering to mere mortals. The simple principle of pension provision is based on the need to provide adequate resources through pension contribution and investment, so that there is a reasonable income for an individual at and beyond the age of retirement, whatever that age may be. Pensions and their impact on individuals mean much more than that simple principle.

The Goode report offered an opportunity to overhaul pensions in such a way as to re-establish faith in the integrity of pension provision, which has been undermined by the failure of personal plan selling, the failure of regulation and the failure to provide adequate funding and to offer a simple explanation of pension schemes.

Great play has been made of the changes made by the Labour party. There appears to be a Tory identity crisis, because Tory Members consistently ask us for our view of the future when we are discussing their Bills and they are in government. I am sure that they will not have to wait much longer to find out what we will do in government as the election is just around the corner.

The country survives on a mix of provision, which allows flexibility and for the increasing pension burden to be shared. It is important that we have the backdrop of an appropriate state fund. It is essential that pension provision is controlled sensibly, so that huge gaps do not appear between assets and liabilities, which could lead to a pensions nightmare.

I have some concerns about agencies such as Marks and Spencer selling pension plans. I understand that Abbey National is looking to take over the National and Provincial building society. The Government need to study seriously pension provision and the financial sector in general because, in future, people may not understand which companies are providing pensions.

The great worry is that the Government's failure to provide a level playing field will increase future risks. Occupational pension schemes represent 20 million members, for whom, collectively, £550 billion is invested

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to provide pensions. Those members are not encouraged by a Bill that offers them less protection in the future. After Maxwell, the Government promised that more effective regulation would be introduced. Goode recommended an independent, state-funded regulator with adequate powers. Instead, we have been offered the occupational pensions regulatory authority, OPRA, with a meagre budget of £10 million-- [Interruption.] It is a meagre budget when one considers the £550 billion available for investment. Help the Aged has described OPRA as neither a regulator nor an authority. Its powers will not be wide ranging, nor will it be well resourced.

Mr. Jenkin: May we take it that the hon. Gentleman is judging the effectiveness of the regulator by how much money it spends?

Mr. Sutcliffe: Money is a contributing factor, as are the powers of the regulator. According to the powers offered to OPRA, it will not require the same information as that currently requested by the Occupational Pensions Board. OPRA will rely on the whistle-blowing principle and will have the power to deal only with the statutory requirements set down in the Bill. That is why training is vital. Some hon. Members may argue that training is unnecessary, but it is vital that training is offered so that people know what whistle to blow and what problems exist in certain poor schemes.

Breaches of trust will not be covered by OPRA, but will be left to private enforcement through the courts. What will happen to individual pensioners who are unable to meet huge legal costs? The Government benefit from occupational pension schemes as the members of those schemes opt out of SERPS. There is therefore an unquestionable onus on the Government to ensure that those schemes are properly managed.

As other hon. Members have said, the Bill fails to address the make-up of the trustees of the schemes. The Bill is too wide and allows too great a flexibility to employers. Employees and retired pensioners should be allowed adequate entitlement to join the boards of trustees. There should be statutory requirements to allow time off with pay for training of trustee representatives, and that training should be mandatory. Retired pensioners must have a voice to express their worries and aspirations. The number of takeovers that have taken place mean that retired pensioners have not had the opportunity to follow through what has happened in individual companies. Machinery must also be introduced to enable reporting-back procedures to fund members.

The law remains uncertain, even with the Bill, as regards the transfer of schemes in mergers and takeovers. I worked at a company that was taken over by a Swedish company that had no occupational pension scheme. The Swedish company became interested only when it knew of the assets of the existing scheme. Fortunately, that company was taken over again and the pension scheme was sorted out, but no information was available to subscribers, and former employees were left completely in the dark. There should be tighter controls. I also represented members who were in a scheme where the employer borrowed £150,000 from the fund, quite legally. That was agreed to by the trustees, some under the pressure of their jobs because they wanted the company to exist. The company went into liquidation and it became almost impossible to get the loan back.

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We have been made aware of many aspects of the Bill that need to be considered in greater detail. I welcome, as do other hon. Members, the position on the war widows pension, but I wonder why the United Kingdom is the only country in Europe that does not pay a war veterans pension. If one compares our pension schemes, pound for pound, with similar schemes in Europe, the quality of ours is well below the standard that is acceptable in the rest of Europe. We also need to consider pension fund investment policies, because they have a substantial effect on our economy. We need to ensure that we know where those pension funds are investing. I hope that, during the passage of the Bill, we shall have the opportunity to discuss that more fully.

The Secretary of State spoke--with some arrogance, in my opinion--about the way in which British pensioners have never had it so good. He should talk to some of the pensioners in my constituency, who feel aggrieved about the level of their state pension and about the amount of unemployment in my constituency, in the wider Bradford region and, I believe, in many other hon. Members' constituencies. We need to examine state provision properly and to ensure that people receive an adequate pension. In this 50th anniversary year of the ending of the war, many of the pensioners of today who fought for this country feel aggrieved that they have not received the benefits to which they were entitled and that promises that were made to them, that they would live in a land fit for heroes, have not been kept. If Robert Maxwell has done nothing else, he has inspired the Government to formulate a Pensions Bill, but as has been evident from the contributions that have been made by other hon. Members, it still has a long way to go. I look forward to the passage of the Bill to its next stage.

7.42 pm

Mr. Nigel Forman (Carshalton and Wallington): I am grateful to have caught your eye, Madam Deputy Speaker, and I shall endeavour to be brief. I have sat through the whole of the debate, which has been interesting. The range of arguments made from both sides of the House reflects the breadth of the long title of the Bill and the fact that almost anything to do with pensions is in order while we are discussing the measure, but it is a matter for you, Madam Deputy Speaker, to decide whether that is true.

If I may say so to the hon. Member for East Kilbride (Mr. Ingram), who is on the Opposition Front Bench, it is a pity that the Labour party saw fit to oppose the Bill and then to table the reasoned amendment. Having listened carefully to the speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar), which I thought was very good, I think that it would have been better if the Labour party had supported the Bill, in the ecumenical spirit that is necessary, in my opinion, to long-term pensions legislation, and had then argued, properly, for its suggested amendments or changes during the proceedings in Committee.

I was interested in what was said about the idea of a flexible decade of retirement, which appears to continue to be the policy of the Labour party, as far as one can tell. It appears to me sensible for the Government to maintain

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the opinion that there needs to be a set retirement age, and I am glad that, under the terms of the Bill, it is being equalised, over a future period, at 65 for men and women.

However, a distinction should be drawn. Although one has a set retirement age, and that is sensible from an actuarial and from a policy point of view, none the less, in policy, all Ministers should take account of the drive towards flexible pension arrangements, which are much more flexible these days than they have ever been, to take account of the growing variety of individual and family circumstances. I shall return briefly to that subject later. Naturally, like other Conservative Members and indeed hon. Members on both sides of the House, I warmly welcome the concession made by my right hon. Friend the Secretary of State on war widows in clause 117. That can only do good in the broadest sense. I would advise him and his Front-Bench colleagues to consider carefully the question of the splitting of rights to pension assets on divorce. I think the best way forward would be to take the advice of the Institute of Actuaries, with which I had lunch last week. [Hon. Members:-- "Oh."] That is the extent of my interest in the Institute of

Actuaries--simply to take note of the argument that the Institute of Actuaries has made that, on balance, there is a strong argument, much of which has already been made, for the clean-break principle on divorce to be applied to the capital assets of a pension fund. That issue having been, as it were, on the agenda for the past 10 years or so--the Lord Chancellor was talking about it a full 10 years ago--it might be sensible for the Government to take slightly more time over the matter and ensure that they get it right. The best formula would be to say to the House, either when replying to the debate tonight or subsequently, that, yes, in principle the Government accept this approach to the matter, but they wish to get it right and to spend slightly more time getting the detail right. It is a complicated issue, as our right hon. Friend the Secretary of State said earlier.

I shall now briefly discuss a couple of the things that the Secretary of State said. I was very struck by my right hon. Friend reminding the House that in 1979, 43 per cent. of the relevant population had occupational pensions, whereas the latest figure is approaching 70 per cent. I hold the opinion that this leaves--even at today's figures--30 per cent. or thereabouts who do not have the benefit of those very secure and, on the whole, desirable forms of income stream.

I hope very much that my right hon. Friend the Secretary of State will use an opportunity at an appropriate stage to urge our right hon. and learned Friend the Chancellor of the Exchequer to inquire whether it would be possible to have a carefully ring-fenced boost to the income of that dwindling minority of people who depend solely on the state pension. I believe that the way to do it is to relate any income boost to the age of the potential beneficiaries, rather than to their income, so that the problem, to put it crudely, solves itself with the passage of years as that generation fades from the scene.

One might do that elegantly by relating a special supplement for very elderly people to all those born, let us say, before 1920, which would effectively, in the year of grace 1995, link it to people aged 75 and over. That would be much appreciated, and it happens to be the part of the retired population in which the greatest poverty is concentrated. There might be objections. People would draw attention to the fact that Lord Hanson would qualify,

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but Lord Hanson pays quite a lot of tax, even if he orders his affairs well. It seems to me that the neatest way of dealing with the issue would be to make the supplement age-related in this way. I also sympathise, in the same spirit, with the argument made by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) when he spoke about a special pension credit for the super-elderly, as it were. I believe that he was seeking to hit much the same target as myself, and I hope that Ministers will consider it carefully. On another subject that has been mentioned many times in the debate, I am very sympathetic to the idea that there should be some type of amendment, perhaps in the Bill, to allow spouses to retain as much as half of the occupational pension of the couple when the other spouse has to enter long-term health care or residential care. The suggestion has repeatedly been drawn to my attention by my constituents, and there appears to be a great deal of common sense and natural justice in the arguments that have been made. The Bill deserves a Second Reading in the House because, first, in the light of the Maxwell scandal and the other scandals and disasters, it will make pensions more secure than they would otherwise have been, by introducing a clear framework of statutory obligations and the powerful new pensions regulator, together with the compensation scheme in the event of eventual insolvency.

Secondly, I hope and believe that the Bill will encourage greater flexibility and choice in pension provision, making money purchase or appropriate personal pension schemes more attractive across the age range. I hope that it will allow pension holders to draw down their funds between the ages of 60 and 75 without tax penalties. That is a good step and moves some way towards the American idea of an individual retirement account. As many hon. Members will know, such accounts can be used for a variety of different contingencies under American law.

Thirdly, the Bill will enable the House and Parliament to fulfil their obligations in European law to equalise pension rights for men and women in the light of the Barber judgment. It will also make legislative provision for the equalisation of the British state pension age at 65, phased in from 2010 to 2020. To my female constituents who are concerned about that change, may I place on record the fact that no woman born before 6 April 1950 need be affected by the change. There is ample opportunity for those born after 6 April 1950 to begin to make the sort of prudent provision for their old age that I would imagine any woman would wish to make. Against this background there are three significant issues that need to be touched on: first, the question of how to strike the right balance between improving pension security for pension scheme members while avoiding excessive extra costs, both financial and regulatory, on employers and those, such as auditors, who have been given whistle-blowing duties. I do not know whether I shall be fortunate enough to be selected for the Committee, but I declare an interest as the parliamentary adviser to the Institute of Chartered Accountants. Clauses 90 to 95 cause considerable concern to the accountancy profession. I shall return to that issue if I am chosen to sit on the Committee.

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It is important that we get the balance right between the benefits of security and the costs of regulation. The matter was expressed succinctly in the brief provided for the debate by the Association of Consulting Actuaries. It said:

"We are concerned that the right balance should be struck between improving security for scheme members and avoiding excessive extra costs on employers who, after all, provide occupational pensions on a voluntary basis.

Any `toughening up' of the Bill has to be seen against this backcloth and is likely to damage future occupational pensions at a time when Parliament should be doing everything it can to encourage private pensions."

This issue should be taken seriously.

Secondly, the House must be clear that we should see how to avoid the selling of inappropriate pension schemes of a money purchase variety to people who, for their own interests, should remain in SERPS, while encouraging greater flexibility and choice in the pension market to reflect the significant changes in the labour market. I wonder how many hon. Members have caught up with the extent to which the labour market has been changing.

The House of Commons Library provided me with some interesting figures from the labour force survey that clearly demonstrate that in the period as recent as 1984-94, the proportion of all part-time employees has increased by about 27 per cent., and the proportion of all those who are self- employed has increased by 22 per cent. while, over the same period, the proportion of those in full-time employment--the traditional model--has increased by only 4 per cent. It is right and proper that the changing nature and pattern of the labour market should, after due delay, be reflected in the changing and more flexible nature of pension provision. With less permanent lifetime employment, more part-time and casual employment and much more self-employment, it is only logical that pension arrangements should broadly reflect those changes.

I welcome the tougher line recently taken by both the Securities and Investments Board and the Personal Investment Authority in trying to deal with the problems of mis-selling and bad advice. If there is to be a greater reliance on personal pensions and appropriate pensions and less reliance on SERPS or the state pension, it is vital that people should not be vulnerable to financial sharks who give them advice that they take in haste and repent at leisure. That will provide an important part of the answer to the problems.

Thirdly, we must consider how to address the demographic prospects of an aging population that is largely dependent for its income in retirement on saving enough during its working years and, in the case of the most elderly, on transfer payments from those in work at the time. We must do so without, at the same time, overreacting and damaging the engine of consumption or imposing an intolerable burden on inter-generational transfers.

An interesting article appeared in The Sunday Telegraph yesterday, quoting some research done by Ian Shepherdson of HSBC Markets. It said that, over a long period, until recently, the proportion of consumption in gross domestic product had been steadily increasing in this country and the proportion of investment and exports had been consequently declining. But now the long-term trend seems to be pointing in the reverse direction. The latest figures suggest that the proportion of consumption

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as a percentage of GDP is now falling--it is about 63 per cent. today and is likely to be well under 60 per cent. by the year 2000. This trend could continue. As consumption is the engine of the economy and as consumption helps to contribute to economic activity, which in turn enables a pay-as-you-go system to be funded to pay for pensions, it is important to attempt to achieve the right balance between savings and consumption in the interests of today's and tomorrow's pensioners.

In broad terms, the burdens of a pay-as-you-go system can be relieved by the change in the Bill to a uniform state pension age of 65. They can also be relieved by the growing build-up of occupational pension rights among new pensioners, notably the growing proportion of women who, I suspect, are and will be working full time rather than part time and over a longer period. They will build up more substantial pension rights.

My right hon. and hon. Friends the Ministers are to be commended on introducing the Bill as it is probably the most significant measure in this Session of Parliament. It is a long-term measure that shows a due sense of prudence and responsibility towards the future. If the policy turns out to have been too cautious--if we err too much on the side of the Treasury phobia about public expenditure--it can always be relaxed in future if we can afford to do so.

We shall need to keep the closest watch to minimise the risks of regulatory overload on personal and private pension providers because, in terms of occupational pensions, regulation will fall disproportionately on employers, scheme members and the professionals involved. We must remember that, ultimately, the price has to be paid by someone. That may mean greater contributions if the regulatory overload is too great or lower benefits than would otherwise have been the case.

Having expressed my broad reservations, may I say that it is a good Bill and definitely deserves the support of the House.

7.57 pm

Mr. Clifford Forsythe (Antrim, South): As the Ulster Unionist spokesman on the subject may I say that my party gives the Bill a general welcome, but aspects of it should be changed to make it more effective. Unfortunately, due to the lateness of the hour and the time available, I shall have to keep my remarks short and the House must forgive me if my speech sounds a little disjointed.

When we examine the Bill we must bear in mind the events surrounding the Maxwell fraud, and the despair and heartbreak felt by many of the pensioners involved. We must also take into account the fears of other pensioners and deferred pensioners who are not directly involved, but who are worried that their pension scheme may not be as secure as they thought it would be. Having had the honour to serve on the Select Committee on Social Security which investigated the Maxwell scam in detail, I can fully understand their concern, and I share it.

While listening to and reading the evidence given to the Committee over many sittings, my most worrying impression was that, of all those who were officially connected to the Maxwell schemes in one way or another, no one was responsible for the shambles discovered when Robert Maxwell went overboard from his yacht and drowned. No one else--not the trustees, auditors, accountants, actuaries, solicitors, managers or directors--

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had seen, heard or had their attention drawn to any sign of trouble or to any hint that things were not as they should have been. I also thank the Secretary of State, Sir John Cuckney, the Maxwell Pensioners Trust and the civil servants involved for their great work in recovering the funds that had disappeared.

Perhaps the House will forgive me for taking a rather jaundiced view of those parts of the Bill that I do not believe will remedy problems, such as the Maxwell fiasco, which may arise in the future. I draw the attention of the House to the law which governs the present pension schemes--and I disagree with other hon. Members on this point. Trust law, with modifications, will continue to guide the proposals in the Bill. I firmly believe that we have lost an excellent opportunity to replace trust law with a new, specific statutory trust regime for the administration of occupational pension fund schemes.

I have listened to many opinions about the matter and I believe that the legal framework of trust law is inadequate to deal with pension fund schemes. After all, trust law was developed in the middle ages as a means of preventing the dispersal of large estates and protecting the interests of children and widows who were thought to be unable to administer their own assets. Like clause IV, surely the time has come to bring such laws up to date and into the modern world.

I am very disappointed that the Bill does not contain a new legal framework. Even with the new modifications, employers are still largely unrestricted in the way in which they decide to set up schemes. Accepting for the moment that trust law may continue, I turn to the Bill's proposals for trustees.

My party disagrees with the proposal for only one third employee representation on trustee boards. We strongly support 50 per cent. employer and 50 per cent. employee representation by right, coupled with the undertaking that one of the employee places should be allocated to a pensioner trustee who is democratically elected by secret ballot from all of the scheme's pensioners. That arrangement would be widely accepted outside Government, particularly as the one third representation arrangement carries with it the possibility of an opt-out.

Personally, I also support identifying one existing trustee who would look after the interests of deferred pensioners. We support the view that all trustees should be trained properly and should possess a final certificate testifying to their competence to carry out their duty to the scheme. That would be in the best interests of everyone, including the employer. That training should be in the hands of the occupational pensions regulatory authority.

We welcome the establishment of that authority, but we believe that it should have stronger powers. Although the Bill makes modifications to the existing trust law, the authority's rights and duties appear to be fragmented. It also appears to have little jurisdiction over those areas which continue to rely on trust law. Perhaps the new authority will convince Government that the best way to encourage scheme members to monitor the performance of their schemes is to insist upon their being sent an annual report by right.

Perhaps the Government will consider funding the authority by way of 50 per cent. state funding matched by 50 per cent. industry funding. I think that that would ensure greater independence for the authority, while at the same time preventing the full cost falling on the taxpayers. As other hon. Members have said, we would like the

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authority to be more proactive and thus be in a position to monitor pension schemes. That would be better than depending on the whistle-blowing abilities of actuaries and auditors--an arrangement that I believe will create a great deal of difficulty and resentment in the future.

The authority is expected to act, even in a whistle-blowing circumstance, only if the assets have been reduced by illegal acts. I remind right hon. and hon. Members that assets can be reduced drastically without illegal acts--the Church of England can testify to that fact. I contend that a more proactive authority could pick up such things at an earlier stage and perhaps prevent honest, well-meaning people from being their own worst enemy.We welcome the arrangement which will allow OPRA to co-operate and share information with the Department of Social Security, the Inland Revenue and other regulators. However, we are disappointed that the Bill does not propose independent custodians for pension fund investment assets. We are also puzzled that the suggestion that the ownership of all such assets should be clearly designated has not been included in the Bill. Bearing in mind the difficulties experienced in tracing assets belonging to the various Maxwell pension schemes, it is an even more surprising omission from the Bill. Anyone who heard or read the evidence presented to the Social Security Select Committee about Maxwell's missing assets would have thought that the stable door would be closed at the earliest opportunity.

Changing the minimum solvency requirement to a minimum funding requirement has considerably weakened the reason for its inclusion in the Bill. Watering it down in that way means that what was once regarded as a key safeguard no longer offers very much for scheme members. The compensation scheme established by the Bill is very welcome, although its effectiveness will become apparent only when the regulations relating to the list of prescribed offences are published. We welcome the arrangements whereby scheme members will be given notice of the trustees' intention to return a surplus to an employer and such members' right to refer decisions taken about such a surplus to OPRA.

We believe that it would have been useful to consider amending the Inland Revenue surplus regulations at this time in view of the Pension Law Review Committee's recommendation. We hope that some consideration will be given to the position of early leavers when the regulations are published. We look forward with interest to hearing what the prescribed period will be where due payment has not been met.

As to raising the pension age for women to 65 years, we support a decade of retirement between 60 and 70 years of age for everyone. Of course, that raises the question of finance, as it could be argued--it was mentioned in the House--that it would be an invitation for everyone to retire at 60. That need not necessarily be the case as many men and women are anxious to work to 70 years and beyond. Surely the law of averages would even out retirement in a way that would benefit most people and the country as a whole. I welcome the Secretary of State's acceptance of the amendment regarding war widows but draw attention to other aspects of that category, which I hope will also be considered. We also support pensioners residing overseas and trust that their position will be speedily addressed.

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Perhaps the Minister can say why the Bill does not extend to Northern Ireland. It would be most unfortunate if all its safeguards were introduced in Great Britain but pension funds such as that of Harland and Wolff--about which we took evidence--were omitted. They will probably be included by order, but I wonder why Northern Ireland has been left off the face of the Bill.

As the Bill progresses in Committee, I hope that the clear message will be sent that it supports pension schemes already known for their good practices, but that it will come down hard on schemes that indulge in bad or illegal practices. Above all, I hope the pensioners will feel that their future benefits will be much safer because the House has passed the measure. The Bill may not be all that we want, but it is all that we have. We will support the Bill and amendments that seek to improve it.

8.10 pm

Mr. David Shaw (Dover): I welcome this necessary Bill. Having served on the Social Security Select Committee and been involved in eight reports over the past few years, it is clear to me that not all was well in the pensions industry. Maxwell accounted for much of our work, but that inquiry identified many problems that were repeated elsewhere. The hon. Member for Antrim, South (Mr. Forsythe) took us to Northern Ireland to study the Harland and Wolff pension fund and we were shocked at the way in which some members of that fund were treated. We took evidence also in relation to Belling and other pension funds.

The hon. Member for Antrim, South mentioned the recent report on the Church Commissioners, which showed that even the Church has not had a full understanding of pension arrangements to ensure that people enjoy the benefits that they expect. The big problem is that too many people in pension funds have not enjoyed the benefits that they were expecting and should have received in justice. We as constituency Members of Parliament have to deal with smaller-scale problems than that of Maxwell.

I congratulate the Government on the way in which they dealt with Maxwell. Interest was shown by more than 100 Back Benchers. Apart from the Social Security Select Committee, an all-party committee was established to monitor the general situation. As a result of much lobbying and activity, the Government made a good response. The Maxwell pensioners unit was also formed, resulting in £400 million being obtained from a variety of sources, including some recoveries. Much of that money came from extra- statutory contributions from a number of financial institutions in the City. It was rumoured that one particular institution made a contribution of £100 million. I called for that some years ago, and I was pleased that Sir John Cuckney, by whatever method, managed to make certain that such contributions were obtained. Members of Maxwell pension schemes have not lost out, as was originally expected, but have seen a full recovery. One wonders whether they will enjoy the growth that they might otherwise have enjoyed. It is certainly to be regretted that Maxwell happened at all.

Maxwell gave rise to too many concerns for us not to pay attention to the lessons to be learnt from that case. I hope that the Bill reflects many of those lessons--not least the provisions dealing with whistle-blowing. Several people had knowledge that something was wrong at Maxwell. No one had the complete picture--probably

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only Robert Maxwell and one or two other individuals, whom we cannot mention because of sub judice laws, had an overall understanding--but a number of people had an inkling of what was going wrong. Quite a few knew that there had been minor breaches of the law. A lot of legal and accounting advice was being taken and there should have been some whistle-blowing much earlier.

It is gratifying that this country has the best pension system in Europe. We know that we can probably meet the country's liabilities. I say "probably" because there is no certainty that even the British pension system and SERPS can meet their liabilities because many more people in the next century will be claiming pensions on the state. Other countries in Europe are facing the reality that their pensions commitments are greater than their assets--whether they are tax revenues from pay-as-you-go systems or funded, they are still insufficient to meet the liabilities. Europe has hundreds of billions of pounds of unfunded pension liabilities. They are so great that it is unlikely that there could be a single currency before the year 2000 at the earliest. Not many people have made that their cause celebre or understand it.

I hope that the Treasury will calculate in the not-too-distant future Europe's unfunded pension liabilities; people may then begin to understand that a single currency is not a simple concept that can be implemented in the next few years but something far more complex. Because Britain has a much more sensibly funded pension system and is in a stronger position, France is desperate to enter a single currency--if possible, next year. If it were not for Italy and Sweden, France would have the worst-funded pension system in Europe. Sweden's system is so bad that the foreign currency bond markets do not want to buy its debt, which is being rapidly downgraded.

In considering the strength of the German economy, I hope that people will bear it in mind that although that country's pension system is just about able to pay its way now, in 2005 a greater proportion of Germany's population will be elderly and of retirement age. Germany will then have immense difficulties meeting its pension liabilities. If it wants to enter a single currency, it must do so by 2005, when Germany's liabilities will hit. One may ask who will pick up those liabilities in the next century, if a single currency exists.

Mr. John Greenway (Ryedale): We will.

Mr. Shaw: My hon. Friend is absolutely right. Britain will have to pay for the liabilities of Italy, France, Sweden and Germany because they have not properly funded their pension systems. The Bill is about making sure that Britain can meet its commitments. I want to make sure that we do not end up meeting the commitments of other countries, which a single currency would bring about.

Many people argue that 50 per cent. of trustees should be pension fund members, rather than one third. I remind the House that 50 per cent. of Maxwell's trustees were fund members. The issue is not numbers or quantity but quality. That is not to say that Maxwell trustees--pensioners or members--lacked quality; they simply lacked the ability to do the job. It was not a question of their personal abilities; it was a question of their access to information, and of their training. I know that the Opposition have some sympathy with this point. We must

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ensure that trustees are properly trained and are given proper information. We must also ensure that there are people to whom they can go with that information.

It is at this point that the regulator's interaction with pension trustees will be critical. It is not an issue of quantity. Trustees must have the ability to question and they must have full access to information. If there is one part of the Bill that I want tightened up--even though it is a good Bill--it is the ways in which we can make sure that trustees have more access to information about how funds are invested and about the custodial arrangements for them. There should be plenty of declarations of all such arrangements in the accounts and the annual report. Everyone should know that there is an annual report, filed somewhere. At one point I thought that it should be filed with the regulator; I then realised that such a large number of reports was involved that he or she would be wasting time on massive amounts of paperwork. Still, it is important that outsiders-- journalists, if necessary--should be able to get hold of sets of accounts. There must always be a healthy debate whenever there is a legitimate public interest in how pension funds operate. I suggest that the regulator should not be too bureaucratic. Yesterday, The Observer , not known as a right- wing newspaper, carried an article under the heading "Pensions Watchdog Too Costly", suggesting that the costs of regulation could be as high as £80 million a year. I do not want too much regulation. We discussed this in the Social Security Select Committee. Over-regulation could cause many pension funds to close and upset the balance between occupational, private and other pension funds. Such a move would be a major mistake.

I should like next to discuss minimum funding and solvency requirements. As soon as the Bill was published, I lobbied the junior Minister--not because I have a vested interest but because, when I did my sums on the back of an envelope to find out whether there would be any Government gilts in the next century, it became obvious to me that if Governments stick to this Government's anti-inflation policy, there will not be enough gilts around to meet the minimum solvency and funding requirements that were originally included.

Many of us are also worried that the Government will be forced to issue gilts to ensure that pension funds can meet their minimum solvency requirements. I could not support that; I want the Government to stop issuing debt and to start balancing their accounts. The fact is that the bond markets show no great enthusiasm for taking up Government debt these days. We should therefore not be issuing large amounts of it.

I am delighted that the Government have accepted the point about war widows. It is a great tribute to them that they are paying for something that no previous Government have managed to fund. [Interruption.] It occurs to me now that I need to truncate my speech, even though I was asked earlier to deliver a slightly longer one by those who dictate--or request-- these things. I now find myself being asked to shorten comments that I took the trouble to write out at great length. That is one of the oddities of the operations of this place.

SERPS was based on commitments to be made today for the next century-- commitments that no Government could sensibly make. With fewer children being born and fewer people available to pay the bills for the elderly in the next century, we were going to have a shrinking tax

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base with ever greater demands on it. The statistics in the Government Actuary's report are amazing. Sadly, I suspect that it will not prove to be a bestseller; it is called "Pensions Bill 1994: Report by the Government Actuary on the Financial Provisions of the Bill on the National Insurance Fund". Appendix E may prove to be even less widely read, but it informs us that, by the year 2040--without a change in the pension age--there would be 17.4 million pensioners. That compares with about 11 million pensioners today. Even with the proposed changes to the pension age, there will be 15.6 million pensioners. That is a serious problem that must be met and a heavy burden that will have to be borne by taxpayers of the next century. The problem can be dealt with only by the Government's proposed changes. The Opposition are wrong to propose a flexible decade of retirement. We simply cannot afford it.

It is a pity that the hon. Member for Leyton (Mr. Cohen) has had to leave the Chamber, because I welcomed his suggestion to have a probing amendment. If I am chosen to serve on the Committee, I shall join him in tabling such an amendment on divorce reform in this context. The present system is not fair, and something must be done about it. It will not be easy; there are plenty of problems associated with it. We already have a high divorce rate, and it could be argued that the current system encourages it. It encourages husbands to drop their wives and take their pensions with them. I should like to believe that that does not happen, but the fact is that many wives are not aware of their pension rights or of how much pension they are losing--

Dame Elaine Kellett-Bowman: Their solicitors should tell them.

Mr. Shaw: My hon. Friend, who is a lawyer herself, makes her own suggestion. Sad to say, my experience of the legal profession is that it has not always properly advised wives. The Child Support Agency has shown that wives have taken houses without realising that they have given up pensions. They have been badly advised.

I come finally to an important subject that needs dealing with--low-paid and part-time workers. Although I do not support some of the judgments emerging from Europe, I was rather pleased to learn that part-time workers are to be involved in pensions. Many more people should be brought into the private pension system. For that, we need low-cost private pensions. I am delighted to see that Marks and Spencer and Virgin are looking at this area. I suspect that they will cause a bigger shake-up than the Pensions Bill. I should like many more low-cost schemes for those on lower incomes, to enable them to get into private pensions. The friendly societies have a significant role to play. I hope that the Government will take steps to encourage an expansion of this facility.

I support the Bill's Second Reading. I believe that the Bill will result in better and safer private pensions, and that the public sector will have a much more realistic liability in the next century, so that we as a nation are able to afford it.

8.27 pm

Mrs. Jane Kennedy (Liverpool, Broadgreen): I was planning to confine my remarks to the subject of trustees

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and how their role will change as a result of the Bill, but some of the comments by the hon. Member for Carshalton and Wallington (Mr. Forman) cause me to begin by discussing the equalisation of retirement age. What we are actually talking about is equalising entitlement to state pensions. For many people, the effective date of retirement comes much earlier than that.

It was my privilege to work with Liverpool city council social services staff during the 1980s, when I was an elected representative of the National Union of Public Employees. I spent a lot of time working with home helps. Women who work for local authorities, if lucky enough still to be fit and well and able to continue working, will often keep going until the age of 65. If they have been able to join an occupational pension scheme, they will not receive their benefits from it until they are 65, so many of them continue working, and find it in their financial interests to stay in work until they are 65. Many of those home helps in their 60s would say to me, "Is there nothing you can do about reducing the age of retirement of men to 60 so that I can get my occupational pension at 60, as well as my state pension?" As home helps, the people whom they looked after, for whom they did the shopping and the housework, were often younger than they were. The home helps pointed out the anomalies of that and said that it really was ridiculous.

Many hon. Members may feel that such people should, perhaps, value more the opportunity to work until that age. We talk about the flexible decade of retirement, of people being given the chance to choose when they can retire, but for many women occupational pension schemes have been irrelevant. The majority of women with whom I have had the chance to work have not been able to join such a scheme because they have not worked sufficient hours for it to be of any value to them. The supervisors, I am sad to say, of many women who worked for more than 20 hours a week in their local authority, did not regard them as being "proper" people entitled to join such a scheme. The benefits and value of their joining were never sold to them, and therefore they never joined. So there are many women who have been let down by occupational pension schemes.

The Bill was an opportunity--perhaps we could take this further in Standing Committee--to change the rules of occupational pension schemes to make it much more beneficial for women to join them. I am looking forward to discussing that in Committee, should I be selected for that role.

Mr. Alan Duncan (Rutland and Melton): Does the hon. Lady accept that the best way to tackle the problem is to admit that her objective, which is shared on both sides of the House, should be to encourage more women to qualify for, or take up, a pension rather than join a campaign for the state pension age to be brought down to 60, which at the end of the day we all know is something that will not be delivered and is a complete con?

Mrs. Kennedy: I do not accept that it is a complete con to argue that the state retirement age should be reduced to 60. I accept that the cost factor involved must be taken into account, but when one takes into account the fact that the value of the state pension is being eroded over time anyway, the actual costs are perhaps not as great as stated. In fact, the hon. Member for Havant (Mr. Willetts) produced an interesting pamphlet on that, which discussed the much-vaunted demographic time-bomb that we were

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said to be facing. He said that many people now approaching retirement age are better off than they have ever been, particularly men, who have been able to enjoy a sustained period of employment in one job. They have been able to build up sufficient benefits in an occupational pension scheme, so, for them, the state pension is a small part of their income.

There will increasingly be, in my view, people who will not have the opportunity to work to that age, either because they cannot find employment or because their health breaks down. I see in my surgery many examples of men and women who are not fit to continue to work up to the age of their entitlement to state pension, and therefore I feel that the point made by my hon. Friend the Member for Birkenhead (Mr. Field) needs to be underlined. We need to develop a system of benefits that allows people to face their future with equanimity, not the fear of poverty, which I believe we will face unless we do something to deal with the reducing value of the state pension. I now deal with trustees. The Select Committee, on which I was fortunate to serve for a short time, said, in response to the Goode report:

"It is important to the well being of pension schemes that the Pensions Bill reserves such powers to the trustees as are necessary to ensure that the scheme is operated in the best interests of its members and is not open to manipulation by the employer." I accept that it is now established that there are a number of beneficiaries from an occupational pension scheme, including the employer, but the Bill waters down the suggestion in the White Paper that schemes could opt out of the one third requirement of member trustees if the members demonstrate by a referendum that they could do so. The White Paper watered down the Goode committee's suggestion of having a third of the members of trustee boards as elected or member trustees. I am not discussing here what happens to money purchase occupational pension schemes. The White Paper watered that down. The Bill takes it even further. Clause 17 relaxes the White Paper's suggestion further by allowing employers to continue with existing arrangements, and placing the onus on members to take an acting stance of opting in if they want member trustees.

Why is it so important that we have member trustees, or even pensioner trustees, on the boards of the occupational pension funds in Britain? We heard a lot of evidence in the Select Committee, from pensions groups in particular. I remember the pensioners who came to us from BT after it was privatised. The company wished to lose much of its work force, to shed labour. It had a vast surplus in its pension fund, and the employers and employees' representatives--the employee members--on the trustees board conspired to use the surplus to put together a very good package for its current employers, who were active members of the scheme, to take early retirement. For those individuals, it was a very good scheme indeed.

The pensioners from other companies--we heard this time and again--however, felt aggrieved that their assets, the funding that they were relying on to pay their benefits, were being manipulated in a way which they felt unable to influence. That is why I believe that it is important that a number of the trustees, or at least one, should be pensioner trustees.

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I accept that there is a continuing inconsistency in the requirement to have members of the trustees board as representatives of a particular group. Once they become trustees, they have effectively to shed that responsibility. I echo the comments that were made by the hon. Member for Gloucester (Mr. French) on the need for properly trained trustees who are able to fulfil their function properly. They will be able to do that and to stop being delegates or representatives only if they have the required training. Failure to train them properly will leave them entirely dependent on the help and support of the group whom they represent.

8.36 pm

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