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Vernon Coaker (Gedling): My right hon. Friend mentions the impressive figures for stakeholder pensions, but will he take this opportunity to remind people of the equalisation of pension ages that will take place between 2010 and 2020? As I have found in my constituency, that is an important issue, but I am not sure that many people's pension planning has taken account of the equalisation.
Mr. Darling: My hon. Friend raises an important point, which perhaps highlights the problems that arose following the changes to the SERPS rules. It is obvious that all Governments of whatever political colour need to do far more to tell people about pension rules and about changes in pensions. I attach importance to that issue. I suspect that, whereas some people know that the state pension age will start to be equalised from 2010, the vast majority of the population, who tend not to talk about pensions every day of their lives, will not yet be aware of the change. We shall have to attend to that matter. No doubt, members of the Conservative party will complain about the advertising that will be necessary, but we will have to spend a considerable time telling people about that and other changes.
Mr. Paul Goodman (Wycombe): According to the Secretary of State's latest figures, what percentage of the stakeholder pensions sold have been sold to the target group? What improvement has there been on the previous distinguished figure of 1 per cent. sold to the target group?
Mr. Darling: The answer is that we will not know until later this year. The Inland Revenue collects the statistics and examines the contracted-out figures and it will know the figures then. It is too early to say what they will be. When stakeholder pensions were introduced, Conservative
Members told us that no one would sell them. In fact, many providers are selling the pensions. Conservative Members then said that no one would buy them, but more than 637,000 stakeholder pensions have now been sold. I expect to see the figure improve year on year, but we shall know later this year exactly who has bought them. I will be happy to debate the matter with the hon. Gentleman if he is still here then. [Interruption.] I shall say nothing more on that and proceed.The hon. Member for Havant made much of his point about pension funds. It arose from the fact that an article appeared in today's Financial Times, although not in other newspapers despite his best efforts to hawk the story round yesterday, headlined:
- "Tories warn of £100 billion hole in pension funds".
The hon. Gentleman is, of course, a clever man, but although he had given the story to the Financial Times, the newspaper reported:
- "Mr. Willetts said he suspected a falling stock market and statistical error might be partially responsible for the drop."
I am sorry that the ONS has done that, but I have no control over it because it is entirely independent of Government. However, I understand the hon. Gentleman's problem. He has given the story to a newspaper and he has now had to backtrack because it does not stand up. In fact, the total invested in United Kingdom pensions exceeds £1,000 billion, so he has got it completely wrong yet again. He is now having to explain himself.
Mr. Darling: I will give way if the hon. Gentleman is going to apologise.
Mr. Willetts: The cheek is quite breathtaking. The Secretary of State, who believed until a month ago that we had £783 billion in our pension funds, produced figures on the same day suggesting that we have £679 billion. This evening, the ONS has withdrawn its figures, because it does not have the faintest idea how much is in pension funds. None the less, the Secretary of State asks us to apologise. He should apologise to the pensioners of this country.
Mr. Darling: The ONS is independent of Government. It produced figures that it now says are wrong. My point is that, yesterday, the hon. Gentleman tried to hawk a story round the journalists of the Sunday newspapers. He managed to get it into the Financial Times, but the Conservative party's central allegation—
- "Tories warn of £100 billion hole"—
Mr. James Gray (North Wiltshire): Will the Secretary of State give way?
Mr. Darling: Perhaps later, but not at the moment.
I want to deal with some of the other points that the hon. Member for Havant made. He referred to the fall in the proportion of pensioners with income from an occupational pension. I concede that the figure has fallen slightly. It was 60 per cent. according to the last figures, but it is now 59 per cent. We shall have to wait to see whether that is statistically significant but, when one takes the incomes coming from occupational pensions, private pensions and pensions as a whole, the figure is actually 73 per cent. Whatever point he was seeking to make, it does not seem to have much strength.
The hon. Gentleman's second main point related to something that is undoubtedly true—there has been a decline in the number of people in defined benefit schemes since the mid-1960s. The number has declined for a number of reasons, including the shrinking public sector and the fact that there are no longer so many very large corporations, which typically used to run such pension schemes. Other factors undoubtedly have an effect. The introduction of the international accounting standard—FRS17—no doubt shows up pension funds in company accounts differently from in the past and companies are reacting accordingly.
There is no doubt that the reforms that the Conservatives introduced in the 1980s, which removed the compulsory nature of employers' schemes and enabled people to contract out, had an adverse effect, as did the changes that they introduced under the Pensions Act 1995. The hon. Gentleman is right: there has been a long-term decline and it has been going on since the 1960s.
We have done some things that, I hope, will help. For example, the rebate has been increased by £11 billion over the next five years and we have also set up a review—I think that the hon. Gentleman welcomes it because he referred to it in the article in Pensions Management—that is designed to examine the regulatory burden on pensions. I have said before that the fact that some products are tightly regulated and the selling process is also regulated could result in some products becoming more inaccessible than they should be. That is why I asked Alan Pickering, formerly of the National Association of Pension Funds, to produce recommendations on reducing the regulatory burden. That is the right approach.
Mr. Butterfill: I welcome the appointment of Alan Pickering to conduct the review, which has been long delayed by the Government. Does the right hon. Gentleman accept that, according to the NAPF, the principal reason for the decline in such final salaries schemes is the impact of the increased regulatory burden, especially in the past five years?
Mr. Darling: To be fair to the NAPF, it also attributes the long-term decline, which has been going on since the 1960s, to a number of causes. I have made it clear several times that we should now look at the regulatory regime. For good reasons, successive Governments have introduced regulations to prevent mis-selling, especially after the scandalous events of the 1980s. If products are regulated—stakeholder pensions are an example of a product that is fairly tightly regulated—and the selling process is regulated, we could have too much regulation and the product might become inaccessible. Other matters,
such as the contracted-out rebate regime, need to be considered. Alan Pickering is doing that and we will have his report later this year.The hon. Member for Havant did not mention annuities, which is surprising given that he feels so strongly about them. The consultation document on annuities, which was mentioned in the pre-Budget report, will be published by the Department for Work and Pensions and the Inland Revenue tomorrow. I hope that it will provide an opportunity for people to examine the options and will encourage them to save more for their retirement. It should also give them the chance to understand annuitisation better and consider the options on offer so that they make the right choices.
Although we will maintain the principle that for most people annuities are the best way to ensure security in retirement, we are prepared to consider options for change. We are determined to ensure that any changes will increase the retirement income that people can expect to receive through an annuity. We also want to ensure that the funds that are saved with the benefit of tax relief are used to provide a secure income in retirement. It is not our aim that people who have money saved for their retirement and who become entitled to income-related benefits should not use their pension for the purpose for which it was intended. The consultation paper will be published jointly by the Economic Secretary and me tomorrow and no doubt we will return to it.
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