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Sir Robert Smith (West Aberdeenshire and Kincardine): I want to clarify an issue that a constituent recently raised with me. His company pension scheme will give him a reasonable pension. He has also invested in a free-standing additional voluntary contribution and has been told that because of various rules he has to take out the annuity at 65. His argument is that the company pension scheme will give him a reasonable basic retirement income and he wants to keep reinvesting to save up an additional sum so that he has something to fall back on when he is in his seventies and may be in greater need of it. Will that be dealt with in the review?
Mr. Darling: We will give the hon. Gentleman and his constituent ample opportunity to make representations. For obvious reasons, I am wary of giving advice, especially across the Floor of the House, on the hon. Gentleman's constituentnot least because I am not authorised to do so under the Financial Services Act 1986. The document sets out the options that might improve the annuities market. The Government remain of the view, however, that the principle of annuitisation is important. We are determined to ensure that any changes that we implement benefit the majority of the pensioner population. As I said during Question Time last week, it would be a great pity to make changes that benefited only a handful of people, especially if that had an adverse effect on the pensioner population as a whole. The document sets out the principles against which we will judge any changes. The hon. Gentleman and his constituent will have ample opportunity to consult. The object of the consultation exercise is to ensure that we receive representations with a view to legislating in this year's Finance Bill.
On pension credit, the Conservatives' ambivalence is again becoming apparent. We do not know from Conservatives Membersat least, those in this Housewhether they are for or against it. I am convinced that it is
As I said in response to an intervention, our pension policy has to be seen in the context of what we inherited. Too many pensioners were living in poverty; about two in five people of working age were making no voluntary provision for retirement; and too many people were not saving enough. Not enough was being done for the low paid, people with broken work records, the widowed or the divorced. We have put in place reforms to help all those people. Above all, with the pension credit, we are removing the disincentives in the social security system that hit pensioners with modest savings or modest occupational pensions who should be rewarded for their effort and thrift, not penalised because of it.
We have tackled pensioner poverty through the minimum income guarantee, which the Conservatives have always opposed. As a result of that, some of the poorest pensioners will be at least £20 a week better off than they would have been under the Conservatives. We reformed the state earnings-related pension scheme through the state second pension, from which 18 million people will gain. We have introduced new savings options, such as individual savings accountsagain, condemned by the Tories when they were introducedand stakeholder pensions. We are ensuring that it pays to save. All those changes are necessary.
My final point is that, almost gratuitously, the hon. Member for Havant commented on public services. It is difficult to understand where that fits into the Conservative party's pension policy. All I can say is that the Conservative party, its leader and its shadow Chancellor are committed to reducing public spending to 35 per cent. of gross domestic product, which equates to about £60 billionalmost as much as we spend on health or education. [Interruption.] The Conservatives do not like it when I point out their policiessome are agreeing, some are saying that I am wrong. No wonder they are a
We believe that public investment in pensions and other public services is justified and necessary. We will carry on with it and make the necessary reforms along the way. It is just a pity that the Conservatives do not face up to what their policies mean. After all, they have only to contrast what happened in their 18 years in government and the mess that they left behind with the difference that we are making to millions of people in this country.
Mr. Steve Webb (Northavon): I congratulate the Conservatives on raising such an important topic and broadly support their motion. The hon. Member for Havant (Mr. Willetts) rightly referred to the amount of money in funded pensions, which is the linchpin of the Government's pension strategy. They have described occupational pension provision as the great success story of the welfare state. If private provision is to form not 40 but 60 per cent. of final retirement provision in years to come, we clearly need a growing foundation in the private sector.
That is why at the beginning of last week I tabled a question to the Secretary of State querying the dubious figures on the amount of money going into funded pensions. The Minister for Pensions has cited the figures repeatedlyin good faith, I am surebut they have never quite rung true. They have always seemed a bit fishy. So, at the start of last week I asked him to break down those figures and to say where they came from. It will not surprise the House to learn that I have received a holding answer. Whether it was my intervention or that of the hon. Member for Havant that prompted the Office for National Statistics to withdraw its statistics, it is clear that the revision is so radical and so queries the fundamental basis of the Government's claims that we need accurate figures. The hon. Gentleman raised an important issue.
Mr. Oliver Heald (North-East Hertfordshire): Does the hon. Gentleman agree that it was appallingly complacent of the Government, knowing that the figures were different by £100 billion not to ask the ONS why? What were they doing?
Mr. Webb: The hon. Gentleman is right; the Government are complacent. They say that they want to rely increasingly on the private sector, which still means predominantly occupational pension provision, but when asked questions about occupational provision, they say, "That is for companies and the market to decide."
To give an example, the Secretary of State mentioned the FRS17 accounting standard, which is having a profound effect on company pension provision. Pensions Management, to which he referred, highlighted the fact that most pensions professionals cite that as the single biggest issue in pension provision. However, when I tabled a question to the Treasury about FRS17,
Mr. Webb: The Secretary of State may say, "Well it is," but if the Government are to rely increasingly on private provision, most of which will be occupational, and that provision is being undermined, resulting in lower not higher coverage, they cannot just sit and watch. If they have a target, they must have the means to achieve it.
The Government have watched such things go on. The Secretary of State referred to the long-term trend towards a decline in final salary schemes, but is it accelerating? Do the Government know? I am happy to give way if the Secretary of State knows the answer. One assumes that such schemes are declining. Given that major employers are closing their final salary schemes to new employees, one would imagine that that was so. If the industrial restructuring that the Secretary of State is talking about is carrying on, one would imagine that that was so. Do they know? Do they care? Are they doing anything? We have had no answer.
The theme of the debate is the disappointment caused by Government pension policies. I want to highlight just three quite large groups of people who will be let down and disappointed by the Government's pension policy.