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Dr. George Turner: Will the hon. Lady advise the House which tax people are or are not getting back and when it was paid?
Miss Kirkbride: I refer to the tax that has already been paid by a company through corporation tax, which is a tax on profits, and is then returned to the individual. I am sorry that the hon. Gentleman is so ignorant that he does not understand that, but I am happy to explain exactly to what poorer pensioners are entitled.
As the hon. Member for Northavon (Mr. Webb) pointed out in what was an excellent contribution, as always, 300,000 pensioners are in that position and 250,000 of
them will not be eligible for the minimum pension guarantee because they have too many savings. The minimum pension guarantee, which is typical of the Government's hype about their policies, affects very few people because the vast majority of those to whom it will apply already receive that money in one form or another, such as through income support. They are not that bothered whether the money is called a minimum pension guarantee or income support, but they need to know that it is on its way. The Government create policies and pretend that they have a huge impact when they clearly do not.
I reaffirm the points that have been made by several hon. Members about the difficulties of the Government's proposals to create an incentive to save. The operation of the state second pension alongside the basic state pension will mean that very poor people will be eligible for the minimum pension guarantee. As I understand it--the proposals are complicated--those who are earning between £3,000 and £9,000 a year will be eligible for the state second pension and will end up receiving pretty much the same amount as the minimum pension guarantee, which the Government propose will be 20 per cent. of real earnings. All those people will get the same, irrespective of their contribution.
Due to the Government's commitments, what will happen to those who will be earning £10,000 a year--just above the point at which they would be eligible for a state second pension? They will be encouraged to take out a stakeholder pension, yet they will be earning very little--less than £200 a week. They are very poorly paid once tax is deducted, yet they will have to save through a stakeholder pension--or any other vehicle that the Government suggest in their various weird and wonderful schemes, which we do not particularly understand.
Such people would have to earn, say, £41,000 a year to make up for state benefits. Indeed, they would need extra income because, if they are not eligible for income support, they are not eligible for passported benefits either. Therefore, such people will have to save a great deal of money if they are to be comfortable in their retirement. It is difficult to see how people on an income of about £10,000 can do what the Government, and we all, hope that they will do. The major and fundamental problem with the Government's proposal is that they are turning their face away from compulsion.
My hon. Friend the Member for Arundel and South Downs (Mr. Flight) knows much more about occupational pensions than I do, but I know that there are great fears that the system that the Government are introducing will undermine the occupational pension sector. That trend has already started, and it will get worse. There is a massive incentive for employers to introduce stakeholder pensions, to which the Government have not said that companies should contribute.
Mr. Leigh:
My hon. Friend is making a good point about employers. A point has occurred to me about employees, which I am not sure that the Government have answered. There will be a rebate of national insurance contributions for those entering a stakeholder pension of 9.2 per cent., starting at £9,000 a year, falling to4.6 per cent. Surely that will be a further incentive to take
Miss Kirkbride:
I would not be so bold as to offer an answer on the Government's proposals. I am sure that the Minister will be happy to answer my hon. Friend's relevant point.
The stakeholder pension will affect the very people whom the Government want to help. When looking at their balance sheets and considering how expensive it would be to maintain occupational pensions, employers will be encouraged to offer stakeholder pensions because there is no requirement on them to contribute to those pensions. As a result, very many people will find themselves in a worse position.
Kali Mountford (Colne Valley):
I had been in the House for a mere few weeks when we had a pensions debate, in which many Opposition Members concentrated on pension funds. Since many of them are pension fund managers, that was not surprising. I am, however, a little surprised that they have continued to confine the debate so narrowly and have not moved on in their thinking. I am also surprised to find that their attachment to private pension schemes has not altered, in spite of our experience of them. Someone asked earlier who is benefiting from private pension schemes. That is a conundrum; none of us knows. Nobody is yet receiving a pension or benefiting from such schemes, which have been operating for only 10 years, although a number of my constituents are having a great many problems as a result of mis-selling.
A very large company of financial advisers in my constituency told me of its problems due to pension mis-selling: it has to put the matter right--and quite right too. Why should pensioners bear the brunt of the problem? I admire the way in which the company is going about that task in training financial advisers. That should have happened in the first place. Conservative Members can offer no lessons in that regard.
The other thing that really upsets me about these debates is the concentration on a group of people who at least have the capacity to contribute to pension schemes--whether occupational, private or otherwise. The genuinely poorest people are those who are entitled to income support but do not claim it. I have made that point before, and make no apology for repeating it. The hon. Member for Bromsgrove (Miss Kirkbride) thinks that we become emotional about those matters, but that is not surprising.
She may argue that pensioners are made poor when, in receipt of private pensions, they encounter problems with anomalies in the system, but they are not the genuinely poorest people.
The Government have rightly introduced the minimum pension guarantee because we need to find a way in which to address the problem of the poorest pensioners. The genuinely poorest pensioners cannot wait until tomorrow for a new scheme. They have no opportunity to make any new contributions to a scheme. It is therefore right that we find a way in which to address that poverty. Connected to that task--I have said this to my right hon. Friend the Secretary of State and make no apology for repeating it--is the conundrum of the poverty trap. Being a listening Government, I think that they would want to avoid that. I will not accept from Conservative Members that the poverty trap became apparent just today. We inherited that problem, and must find a solution to it.
The problem of passported benefits, which is not confined to pensions, affects people who live just above the poverty line. It is right that the Government should consider the disregard. The Conservative party took away the benefit tapering system, so it is a little absurd for Opposition Members to tell us that they are concerned about the poverty trap. They did little about it in government. Indeed, they took away at least one of the supports that dealt with the problem.
Of course some pensioners who have saved for their old age feel resentful when they find that their neighbours, who through no fault of their own were unable to save, receive income support and the benefits that accrue from it. But, that is no reason not to introduce a minimum pension guarantee. Let us remind ourselves what that means. It means an increase three times higher than could have been expected and a guaranteed income.
Mr. Rendel:
Will the hon. Lady give way?
Kali Mountford:
I am sorry, but time is preciously short. I am upset that I am having to speak so fast in the first place.
We must listen to people if we are to improve benefit take-up. Let us take cognizance of the fact that 28 pilot schemes are finding out what older people themselves think should be the answer. Why do people not rush to fill in their benefit claim forms? What are the possible solutions? How can a community pull together to support older people?
In this debate, we have heard details of the other measures in the support package, such as those relating to eye tests and health care. They are worth mentioning. However, we need to find a way to ensure that pensioners access the whole range of benefits and services available to them, and we must do something about the stigma attached to benefits such as income support, so that pensioners are willing to accept those benefits. Members of the Opposition are trying to denigrate the Government for having made a vital move in that direction; but the Government should be congratulated.
The second state pension is a masterstroke. I cannot understand why Opposition Members object to it. As those Members seem to have difficulty understanding the concept, I commend to them page 41 of the Green Paper, "Partnership in Pensions", which contains a graph which specifically shows how much easier it will be for
pensioners in future to have their guaranteed pension as of right. That takes away all the stigma and the problem of take-up that we have had for many years. When, at Prime Minister's Question Time this afternoon, I heard the word "redistribution", I thought about that graph, because it specifically shows how money will be redistributed to the poorest pensioners, who need it most.
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