| Previous Section | Index | Home Page |
Mrs. Lait: I shall speak to new clause 14 and amendments Nos. 64 and 96, but not to amendments Nos. 91 to 94, as we want to move on. May I say how sad I was that the hon. Member for Birmingham, Selly Oak (Dr. Jones) did not join us on the Committee? We noticed the offer that was made to her, and were looking forward to some entertaining debates.
Mrs. Lait: I see that the Minister agrees. Unfortunately, the iron hand got in the way.
It is obvious from what the hon. Members for Northavon (Mr. Webb) and for Selly Oak said, and from new clause 14, that there is serious concern in the House about the state second pension's ability to keep people off means-tested benefits. All of us would agree that that is what we want to achieve. We had endless debates in Committee on this subject, and we received many reassurances that the state second pension would achieve that.
Last week, in Westminster Hall, we had an exchange on this subject, when the right hon. Gentleman pointed out that, if a couple were both on at least the state second pension, they would be above the minimum income guarantee level. We acknowledge that, but the problem is that not everyone will be in that situation. Often, only one of a couple is left at retirement age. I regularly argue that, when people are earning a moderate income and the children are at their expensive stage, if it is a question whether to spend money on a pension or on the kids' trainers, the trainers usually win. However flexible we make the state second pension or the stakeholder pension, those people will unfortunately find it difficult to save.
The hon. Member for Northavon referred to the attraction of the state second pension or the stakeholder pension in 2025 or 2050. There is much doubt about how much extra pension people will get, and whether, being rational economic beings, they will decide on the balance of probability that they are better off with a pension than relying on a minimum income guarantee related to earnings. There are problems with trying to make the state second pension in particular sufficiently attractive for people to want to save for their retirement under such a scheme.
I wish the campaign on the minimum income guarantee well. We shall keep an eye on its success, and will monitor it to see how effective it is, because we can always learn good techniques to encourage people to do the right thing. If we truly believe that people should have a pension and not benefits, we should address the issue of the interaction between the MIG and the state second pension.
I believe the Minister of State because he is a most determined and clear-thinking person. I believe that he is seriously committed to the success of the state second pension, but I have a feeling that there is a lack of understanding and that the Government are not prepared to admit that there is a flip-side to this argument, which is that people may opt for income support in retirement.
Our suggestion is another version of the variations proposed by the Liberal Democrats and the hon. Member for Selly Oak. We have come up with yet another way of making the state second pension more attractive to people.
We suggest that, if someone is deemed to have had four years' credits towards a state second pension and/or four years of working entitling them to credits towards the state second pension, they should get an extra year's accrual. The objective is to lift those people out of the area in which income support is more attractive.
A knee-jerk reaction is that this must cost money but, set against the cost of income support, the cost of the extra year's accrual would be modest, and would moreover be worth while in giving people the self-respect that having their own pension would confer. It would also give people an incentive to save for that pension.
In Committee, I presented a proposal which, I freely admit, may not have been drafted as well as it might have been. I am equally prepared to admit that amendment No. 64 may not have been drafted as well as it might have been, but, as we are not going to press it to a vote, it may be useful to have an exchange about it.
Amendment No. 64 suggests that those who are over the inflexible age of 65 for the purposes of the state pension--for women, 60, moving up to 65--should, if they wish to continue working, be able to contribute further, through national insurance, to enhance their state second pension. Obviously, we want to encourage people to have a better second pension, but we also want the state to recognise, as it does not, that there will almost inevitably be a need for people to retire flexibly as demography changes.
Fewer and fewer younger people will enter working- age groups. Meanwhile, those whom we have historically regarded as being of an age to retire will want to work, will be well enough to work, and will present great value to employers because of their knowledge, experience and steadiness. They will also play a key role in charitable and voluntary work, for which more and more people are being paid. It would seem sensible to allow people over the state pension age to contribute if they wish to.
As for amendment No. 96, let me pick up some of the points made by the hon. Member for Selly Oak about the success of the stakeholder pension before the target group moves from the state second pension. We have received many assurances from the Minister--I believe him--that, before stage 2 of the state second pension is reached, when everyone goes on to a flat rate, there will be a debate in the House, and the success of the stakeholder pension will be assessed. What we have not heard from the Minister is a description of the target market.
No one puts a new product such as this into the market without having a clear idea of what the market is. In simplistic terms, we are talking about people earning between £9,500 and £21,000 a year, but subsequent clauses and amendments suggest that not just that group is involved. Excluded from it are people who could potentially take advantage of a tax break. There are people who may be earning a small amount, but whose husbands or wives are earning a reasonable income. Are they part of the target market? How many people are in the target market? From what circumstances are they meant to be able to benefit in the target market?
We are asking the Financial Services Authority--which, because of its wide experience of different financial products, will understand markets--to help the Government to define the target market, and to say whether it represents a good deal. We have a serious concern about whether the stakeholder pension and the
state second pension will be a good deal, and about whether, rationally, people should not go on to the minimum income guarantee.
Before people make those decisions, they should go through the process illustrated in a decision tree, and the Government have rightly included types of decision trees in some of their consultation documents. However, the purpose of any decision tree is to guide people through a series of yes/no questions, whereas the decision tree in the Government's document regularly states, "Seek help," "Always seek help," "Ask your employers for details," "Should seek help," "Probably will be a better choice for you--seek help." The Government's decision tree regularly admonishes people to seek help, but it does not assist them in making a decision.
Unless the Government are careful, they are in grave danger of setting themselves up for another mis-selling scandal. There is a danger not only because the Government are encouraging people to make a decision that would perhaps not be in their best interests, but because they are not encouraging people to make a more fundamental decision. There is a presumption that a pension is best for everyone. Although I would not disagree with that, there are those whose best interests may be served by being on income support.
I suggest most humbly that, if the Government wish to encourage people to choose a state second pension or stakeholder pension, people should first be clear in their own minds about whether that is the best choice for them. The decision tree that the Government are encouraging people to use should deal with those basic issues.
I hope that the right hon. Gentleman will be able to deal with the points that I have made on those three amendments. I look forward to hearing what he has to say.
Mr. Jim Cousins (Newcastle upon Tyne, Central):
I support amendments Nos. 67 and 69, with which I have identified myself. I do not intend to detain the House for very long.
I have a slightly different view on the issues that we are debating from some of my hon. Friends who have spoken in the debate, broadly speaking, from below the Gangway. The opinion that I expressed in the debate on Second Reading--I hold it even more strongly now--was that the state second pension proposal is a fundamental and significant innovation for two reasons. The first is that it will extend the network of the state pension to spheres that the current contributory system simply does not reach. The proposal is therefore extremely radical. It will affect those who live in social conditions that are not reached at all by the state pension system. I give great credit to my right hon. Friend the Minister of State for his part in developing the proposal, which is a powerful mechanism for the future.
I tell the hon. Member for Northavon (Mr. Webb) that many people will accrue entitlements to the state second pension when they are experiencing particular responsibilities or obligations that they do not have in other times of their lives. Therefore, the state second pension will continue to top up a pension entitlement that, in other times of those people's lives, was generated by quite different mechanisms. It is an extremely important aspect of the proposal.
| Next Section
| Index | Home Page |