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Mr. Deputy Speaker (Sir Alan Haselhurst): We now come to the second debate, on the Government's stakeholder pension scheme. I should announce to the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.
I shall briefly remind the House of what the Government promised. The target group for stakeholder pensions are the 5 million people on low and middle incomes who do not have a pension. Lord Rooker, the former Minister of State, said:
We know that 160,000 people have transferred out of the construction industry pension scheme, which is already in operation. The biggest single move into stakeholder pensions has been by the construction industry, from another form of pension provision, which accounts for approximately 160,000 of the 416,000 pensions sold. We are therefore left with about 250,000 people who have taken out stakeholder pensions; perhaps they are in the Government's target group for the new pension provision. Again, the ABI estimates that approximately half the people taking out stakeholder pensions already have private pension provision above the minimum contracted-out level. They may be people who are transferring from some other form of funded pension scheme, or they may be taking the benefits of concurrency. However, it looks as if about 125,000 of the
We are left with 125,000 people. How are the Government doing with them? The total may be a bit smaller, but at least 125,000 members of the target group have taken out stakeholder pensions. The Government said that stakeholders were aimed at people with modest earnings; perhaps they have overachieved on that. We know that approximately 25 per cent. of stakeholder pensions have been taken out by individuals with incomes of less than £7,500 or no income at all. Who are they? We have all been reading the financial pages of our newspapers, so we know that they are the non-working wives of people who have been well advised that the pension is a useful tax relief
Perhaps the Government have at least managed to issue stakeholder pensions to 62,000 people in their target group. However, that is not the end of the story, because there is another group. We know that 15 per cent. of stakeholder pensions have been taken out on behalf of children, usually by their grandparents, accounting for another 37,000 pensions. In fact, a generous assessment of how the Government are doing is that they have managed to issue, perhaps, 37,000 stakeholder pensions to their target group of 5 million. Mr. John Jory of Building and Civil Engineering Insurance, the company which is selling stakeholder pensions to people in the construction industry, said:
What have the Government been doing? First, as we would expect from them, they have been spinningredefining the target group. There has been an elaborate debate about whether the target group are people on low to moderate earnings, or on moderate to high earnings. I will not detain the House with the various prevarications of the Secretary of State and his colleagues about that. Suffice it to say that we can at least be clear, because it has been said time and again, and it is the basis on which the state second pension is constructed, that the target group are those with incomes of £10,000 to £20,000 a year who do not have an occupational pension.
The other great recourse of a Labour Government in trouble is to an advertising campaign. It cost £6.5 millionthree times as much as the entire Department of Social Security advertising budget in the previous year. The Government have tried to tempt people from the target group into stakeholder pensions by increasing awareness of them. I congratulate the Secretary of State. His advertising campaign has clearly worked. The Government have succeeded. During the period of the advertising campaign, between February and June 2001, people's awareness of stakeholder pensions rose by 15 per cent. That was, in part at least, because of the Government's advertising campaign.
Good news, so far, but there has been one problem: the more people have grown aware of stakeholder pensions as a result of the Government's advertising campaign, the more confused they have become about pensions in general. The IFA promotion chief executive, David Elms, said:
I want the Secretary of State to offer the House this evening an account of who is buying stakeholder pensions, whether that is compatible with the Government's objective for the target group, and what he will do to meet the objectives that he has laid before the House for the marketing of stakeholder pensions.
Why have stakeholder pensions proved such an extraordinary flop, after all the publicity, the expenditure on advertising, and the effort that the Government have put in over the past five years? I suggest that there are three reasons. The first is that as means testing spreads further and further up the income scale, fewer and fewer people can be confident that they will be better off if they have a stakeholder pension.
We hear from the Government Benches all the time about the problems of pensions mis-selling, but it would be mis-selling a stakeholder pension if people took one out, perhaps saving out of their modest earnings, and at the end of the day found that they were hardly better off, despite having put aside a few thousand pounds of their hard-earned savings. We have repeatedly asked Ministers to answer the $64,000 question: how much money do people need to have in a stakeholder pension fund in order to be confident that the money that they will receive when they retire will float them above means-tested benefits? The answer could well be $64,000. It could be more than that, but we have never had a figure from Ministers. That is why they run the risk of mis-selling their own stakeholder pension.
Secondly, the Government have imposed new taxes on funded pensions. They have increased the burden of taxation on people who save for their retirement. The Prime Minister told the House last year that we should not worry about the burden of extra taxation. He said that
The third way the Government have made the problem worse is by failing to respond to the widespread demand from all parts of the House, to be expressed in a private Member's Bill promoted by my right hon. Friend the Member for Skipton and Ripon (Mr. Curry), for reform of annuity law. The present position, whereby someone is obliged to buy an annuity at the age of 75, is a further disincentive to people taking out a stakeholder pension or other forms of personal pension provision. For many people, the obligation to purchase an annuity at the age of 75 is an extremely unattractive proposition. There are proposals on the table to tackle that. It is a source of genuine amazement to me that the Government have still not acted on a manifest problem.