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With regard to the previous speech, I must say that pensioners in my constituency are glad that there is a large gap between the basic pension and the minimum income guarantee. That £20 gap for single pensioners corresponds to £20 more that they have to spend, or £20 for a better standard of living. If the previous speaker the hon. Member for Gosport (Mr. Viggers) was trying to suggest that that is demeaning because it is based on means-testing, all I can say is that it is real money that has a role to play in improving the quality of those people's lives. I am also glad that we have this Government and that they are pursuing that policy, and that the Conservatives are not in government, as they seem to want to remove it.
My main point is to emphasise to my right hon. Friend the Minister that it is important to take on board the remarks made today, such as those of the hon. Member for Bournemouth, West (Mr. Butterfill), about the interface between the arrangements for the stakeholder pension and the pension credit. Like my hon. Friend the Member for Bassetlaw (John Mann), I do not feel that I would want a stakeholder pension if I were earning, say, £13,000 a year. That seems a pretty bad deal. Even if one were to build up painfully over many years a fund that was four times one's income, at £50,000 or so, it would provide an income of about £80 a week, on current annuity rates. When that amount is added to the basic pension of £70-odd, one is left with about 150 quid. One would probably then be just at the edge of the taper for the figures that we have seen in respect of the pension credit and would not, perhaps, get many of the benefits that would be available if one was on the minimum income guarantee as well. One would also be taxed, and various other matters could be relevant. If one was eligible for housing benefit, one would be removed from it and so on. One's quality of life might still end up poorer than it would have been under the minimum income guarantee, even with a pension credit, if the credit was not generous. That calculation is based on the indicative figures that we have seen for the pension credit.
We must think much more carefully about the relationship between the stakeholder pension, the pension credit and the associated systems of benefits, so that in the end there can be a clear incentive for people earning £13,000 a year or thereabouts to make the real sacrifices that they would have to make to build up a fund of quadruple their current income level. I hope that my right hon. Friend the Minister will say that he is going to rethink some of the arrangements relating to the pension credit to ensure that there is a real incentive for people to buy into this scheme.
Mr. Tim Boswell (Daventry): This interesting debate has taken place against a background of two wider economic considerations, both of which are disturbing, and both of which have been created by this Government alone. The first is the alarming overall decline in the savings ratio, which has halved over the almost five years of this Government, from more than 10 per cent. in 1997 to 5 per cent. in the early quarters of this year. It is entirely characteristic of the Labour Government that they concentrate on one vital part of the scenepensions, which we all accept are vitalwhile neglecting others.
The general message that the Government are putting out is one of a disincentive to save. It is hardly surprising that that disincentive generates the conclusion that the annual savings gap caused by these policies is now measured in tens of billions of pounds, and is currently estimated by the Association of British Insurers at £27 billion a year.
Secondlythis is quintessential new Labourthe Government offer inducements in one direction, for stakeholders, while at the same time damaging the market prospects in others. At an early stage of the last Parliament, I was more directly involved in the many debates about the Government's abolition of advance corporation tax and payable tax credits. Those measures took more than £5 billion from pensions every year and, as my hon. Friend the Member for Gosport (Mr. Viggers) has just said, effectively take £200 a year from the average 30-year-old.
Those figures should inform our general concerns in this debate. It has been an interesting one, and it belied the bland comment that I have just received in a written answer from the Minister for Pensions who said, heroically, that stakeholder pensions were designed to be simple. They may be simple enough, but the conclusions for policy are far from simple.
My hon. Friend the Member for Havant (Mr. Willetts) provided a masterly dissection of the subject, emulated, if only in part, by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) and by the right hon. Member for Birkenhead (Mr. Field). My hon. Friend the Member for Havant received admirable assistance and many thoughtful comments from my hon. Friends the Members for Bournemouth, West (Mr. Butterfill) and for Gosport. The hon. Member for Northavon (Mr. Webb) helped to twist the knife in the Secretary of State, and there were further contributions from the hon. Members for Stafford (Mr. Kidney), for Bassetlaw (John Mann) and for Hemel Hempstead (Mr. McWalter).
The argument is not about motives, as we all want to increase the proportion of income being put aside for the retirement years. We have little option on that. We must also offer a fair deal to those making the saving, and we need to see whether the current arrangements, much hyped by the Government, are working.
The first conclusion that I have to draw is that there is and remains a radical confusion at the heart of the Government as to the target group for stakeholder pensions. One of my hon. Friends referred to the Secretary of State's original statement in February 1999 that people in the middle and lower ranges were the target group.
The former Minister of State, Lord Rooker, has been mentioned several times and, in particular, he referred to the target group as those on moderate incomes of between £10,000 and £20,000 a year. That is 5 million people. By definition, almost all those persons will be on below average earnings.
The Government's new definition, set out in their amendment to our motion, defines the target group as "moderate or higher earners". On the formula that they have given, that means anybody earning £10,000 a year or more, and the sky is the limit. In new Labourspeak, lower means higher or, if it means that someone can meet a target, the target changes to meet the concept of the day. I knew someone who consumed an inordinate amount of mothballs. When the shopkeeper asked why he had been back to the shop four times in a week, he said, "You can't hit them every time."
Secondly, the stakeholder scheme, by any standard, is hardly selling like hot cakes. Let us take first the employer gatekeepers. Remember, they are under a legal obligation to designate schemes for any business with more than five employees, yet on the statutory date of 8 October it was estimated that at least a third fell at the first fence as they had not registered by the deadline.
The Occupational Pensions Regulatory Authority is responsible for policing those defaulters and Ministers must hope in their hearts that it does not feel too many collars, because it could be overwhelmed. That would send a disturbing signal to those Ministers who want to pose as the friends of business.
The Minister of State and I have debated employment law, and I am interested in whether an individual employee with a grievance about non-designation could pursue a case through the already overloaded employment tribunal system because he had not received his rights. I am not sure whether that has ever been clarified.
It is hardly surprising that take-up is relatively disappointing, with only 416,000 stakeholder policies sold to date. Many were no doubt transferred from other schemes. I am interested in a written answer received last week by the hon. Member for Northavon, although he did not refer to it. Despite all the effort and expense involved in advertising in the first place, Ministers now say that they are not specifically advertising stakeholder policies. That is not a ringing endorsement.
Figures on stakeholder pension charges published last week by the Financial Services Authority show a wide disparity between providers. In many cases, a personal pension still offers better value, although that of course depends on the circumstances. I do not know whether it suits the Government to say that they have targeted the workers by hand and by brain, but they have a achieved a positionI have to say that I have no interest to declarewhereby the rational purchaser of a stakeholder pension is me. I have a brand new granddaughter, and I can make provision for her 60 years down the track. Therefore, Government policies could succeed only if they operate as outdoor tax relief for the financially sophisticated. All that is of a piece with the Government's other failures in pensions policy. Like other private pension holders, stakeholders will have to go through the annuity hoop referred to by my hon. Friend the Member for Bournemouth, West and others. There is a strong Treasury interest in trying to secure public funds at minimal cost.
Then there is the whole issue of the minimum income guarantee. That has been just as much a flop in practice as the stakeholder pension, with a take-up of only one fifth of the target group to date. Of course, Ministers pray in aid their forthcoming pension credit. They should ask themselves whether they are absolutely sure that those changes can be financed with no losers, and with significant beneficiaries but at no Treasury cost. Even if they can achieve that, are they happy about subjecting more than half of pensioners to the inevitable means-testing?
Last but not least, the overall number of pensioners in occupational schemes has fallen year on year under this Government. Many also face a retreat from quality, having to move to less generous schemes. It is no accident that the IPPRnot normally a friend of those on the Conservative Benchesconcluded in August: