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Mr. Butterfill: My hon. Friend will be aware that, in a final salary scheme, the employer has an obligation to pay the percentage of that final salary, come what may. Therefore, the issue of who owns the surplus is very much more complex than he seems to suggest.

Andrew Selous: I bow to my hon. Friend's greater knowledge of this subject. In terms of getting people to take an interest in their pensions and providing them with an incentive to do so, the issue of inheritability merits further study. However, I appreciate his point that it is a complex issue.

According to a report by Oliver, Wyman & Company in September last year, the savings gap in this country at the moment is £27 billion. That is the difference between what we should have invested to treat future generations of elderly people in a respectful way and what we have invested at present. The bad news is that that savings gap is projected to increase by a further £6 billion over the next five years. There are several reasons why that gap is projected to worsen. We have heard about the complexity of current schemes, and about the lack of inheritability. We are also told that there will be a net decrease of 9,000 in the number of financial advisers across the country. It is estimated that about 3.6 million people on lower incomes have no proper access to financial advice.

An independent financial adviser in my constituency contacted me on Friday in despair about the Government's current proposals for independent financial advisers, and about the new proposals that will move on from polarisation. He is in fear of losing his job, and his firm is in a state of paralysis. That means that another group of people will not have access to independent financial advice, which is indeed regrettable.

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I deal now with the subject of means-testing, which is reflected in the motion. Many distinguished Members from all parties understand the problems of means-testing, not least the Prime Minister and the Chancellor of the Exchequer who have clearly acknowledged the difficulties involved, particularly for pensioners. Indeed, the Chancellor of Exchequer has boasted that he would like means-testing for pensioners to be outlawed. We know that 580,000 pensioners do not claim their income support and that 1,215,000 do not claim their council tax benefit. In total, there is £3 billion of unclaimed benefits. We know that older people in particular have a difficulty with claiming benefit. Although they are entitled to it, they worry about going along to the Benefits Agency. We know that that should not be the case but it is the fact, and we must recognise the way in which people regard such issues.

In 1995, only 38 per cent. of pensioners were on means-tested support of any sort. That figure is projected to increase to 57 per cent. by 2003. We have heard the future projections up to 2050, so we know that the trend will carry on in that direction. The Institute for Fiscal Studies has said that recent pension announcements

"look set to create a substantial increase in means testing."

The Select Committee on Work and Pensions, of which I am a member, published a report on pensioner poverty in August 2000, which states:

"The increase in non-means tested pension is inevitable and should be done sooner rather than later."

That was the view of the Select Committee only a year and a half ago. Clearly, the Government have not heeded its advice. As a member of that Select Committee, I hope that the Government will heed our advice when we consider the pension credit, which is the subject of our next report.

9.29 pm

Mr. Tim Boswell (Daventry): In an encouraging clutch of stories about pensions in today's press, both tabloids and broadsheets, I was struck by a remark by Mr. Mark Duke of Towers Perrin who was quoted in The Times as saying:

"People expect a lot, aren't doing enough and don't understand their pensions at all."

I tend to agree. I am reminded of the man who expressed himself confusedly on a complicated topic, was advised to attend a conference, came back from it and opined that he was still confused but at a somewhat higher level. I suspect that the debate will produce the same effect.

There are real and simple points to grasp, and it behoves us all to remember them. The savings ratio is at an historically low level. That is unsustainable. There is an estimated historic gap in savings provision of £27 billion. That is unsustainable. The hit is being taken not by the rich, the poor or any particular class but involves nearly everyone who is still in work and who in due course hopes to retire. One of the most encouraging features of the debate is the sense of mutuality. We all have a common problem to face. It will not be solved within the span of a single Parliament and it requires collective action preceded by collective debate.

The debate has been marked by some interesting and worthwhile contributions by Back-Bench Members. I certainly wish to mention those by Conservative

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Members. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) made a speech of characteristic balance and erudition. He is a loyal supporter of occupational pensions. My hon. Friend the Member for Arundel and South Downs (Mr. Flight) complemented that by chipping in with his knowledge of investment and the City. My hon. Friend the Member for South-West Bedfordshire (Andrew Selous) brings to such debates a passionate commitment to all groups in our society.

I do not want to suggest that my hon. Friends were the sole contributors. As we would expect, the right hon. Member for Birkenhead (Mr. Field) made a magisterial contribution. If we are ever in the business of Government swatting, we may need him to add his voice to ours. The hon. Member for Stalybridge and Hyde (James Purnell) was more supportive of the Government. Nevertheless, he presented with honesty some of the dilemmas that have to be faced. The hon. Member for Bassetlaw (John Mann) also made a characteristic contribution. If the trade unions are not as active in stakeholder pensions as one might have expected, it is possibly because they do not see them as a good deal for their members. We may need to return to that.

The hon. Member for Northavon (Mr. Webb) usually helps us along. He shared some interesting insights with us, as he often does.

Ms Ann Coffey (Stockport): A new alliance.

Mr. Boswell: The hon. Lady must not tempt me. Perhaps she is trying to build a consensus.

The Secretary of State's contribution still displayed his misplaced self-assurance, however. There was a whiff of complacency and inertia in the face of a fast deteriorating situation. How unlike our dear Marshal Foch in 1918. That distinguished generalissimo of the armies, faced with the German spring offensive of that year, acknowledged the problem honestly by saying, "We are in a terrible mess. The situation is excellent. We shall attack." This Secretary of State does not have the spirit for that. He cowers in his bunker and confines his offensive action to occasional sniping exercises at the Opposition.

Let me deal with our main concerns about the pension scheme, which are touched on in our substantive motion. There is an extraordinary black hole in pension provision, as revealed in the brilliant forensic introduction to the debate by my hon. Friend the Member for Havant (Mr. Willetts). However much the Government try to puff up the level of current contributions to pension schemes, they have had to reveal a staggering deficiency of £100 billion in the value of funds that were in pension schemes in 1999. Frankly, that could enter the "Guinness Book of Records" as the biggest accountancy write-off of all time. Were Oscar Wilde here, I am sure that he would say that to lose £100 million by statistical adjustment might be seen as a misfortune, but to lose £100 billion looks like carelessness.

If the answer is to shoot the messenger, take the statistics away, and attack the Opposition for daring to say that there is something odd, that shows a gross misconception of our role. I hope that the matter will be sorted out, and for a reason that I will touch on in a moment, there is a systematic problem that merits closer and more reflective discussion.

Let us remember at any rate that any such reduction in pension funds, whatever the size, is a hit on the value of funds, and, in the real world, reflects funds' collective

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ability to service pensions. We have only to think of the consequences of the write-down for Equitable Life pensions to see that the value of the funds really matters.

Pension funds also cast some doubt on the veracity of the figures for contribution inflows, to which the Secretary of State referred. I am highly suspicious and sceptical that if, on our calculations, self-administered arrangements, which account for 6 million occupational pensioners, bring in £14 billion annually to the party of contributions, that must logically mean that that group and personal pension schemes, which account for fewer pensioners, must bring in £58 billion; that seems implausible. There must be an element of double-counting and asset transfers.

The second area of grief is the inexorable decline in defined-contribution schemes. That was well set out in the National Association of Pension Funds annual survey, which broadly coincided with our last pensions debate. Every week, the pensions press brings further bad news. For example, this week, Professional Pensions leads with the story, "Ernst and Young closes DB plan amid FRS17 fears". I apologise to non-regular readers for the rather terse and technical presentation, but perhaps I can draw out two salient points from the article.

First, Ernst and Young is rightly described in the text as an "accountancy giant". Presumably, therefore, even if I do not know, it at least knows what it is talking about. Secondly, the problem identified is Ernst and Young's worry over the new accounting standard FRS17, which is only now beginning to work its way through the system and will doubtless involve many other firms in unpleasant decisions, as they look at their profit and loss accounts, the provisions that they will need to make, the profits that they can declare and the dividends that they can pay, with the consequential effect on pension schemes and the incomes thereof.

Let us note, too, that the Ernst and Young decision does not merely close the defined-benefit scheme to new entrants. It starts the process of winding up the scheme altogether and the transfer to defined contributions. However good, that replacement defined-contribution scheme must at least increase the element of risk to the individual pension investor.

Then, perhaps, we should look at what is happening to defined-contribution or money purchase schemes themselves. The same front page, which I offer to the Minister to save time if he has not been able to read the whole analysis, adjacently reports the study by actuarial consultants William M. Mercer, which predicts that up to 3 million occupational scheme members and individuals will contract back into the state second pension scheme over the next five years because, according to its Mr. Dick Strattan, the Government's contracting-out rebates

"fail to take proper account of current market conditions, such as lower interest rates and investment returns."

He goes on:

"On our calculations, they account for considerably less than the full value of the state pension foregone—in some instances, arguably as little as half."

That of course rings a bell with those already familiar with the stakeholder pension situation. We discussed that in detail last time, hence its relatively lower profile in this debate.

My hon. Friend the Member for Havant showed that most of the uptake lay outside the target groups. [Interruption.] It is no good the Secretary of State

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attempting to laugh it off—he does not know where there has been uptake. In any event, uptake is rather disappointing. A trickle of money continues to go in, but Ministers are dragging their feet. They are most reluctant to give a now overdue answer to my question about measures to improve uptake—they do not know whether they want to improve it, or, if they do, how to do so.

Ministers have been less than frank about pointing out that proper advice on whether to take out a stakeholder pension might be charged as independent advice, and so be extra to the 1 per cent. administration charge of which they are so proud. None the less, the Government continue their lavish advertising campaign on general pensions awareness, which is costing almost £10 million. The authentic voice of new Labour is heard in a written answer given to me last week by the Minister for Pensions. It states:

"Changing attitudes towards planning for retirement is not a straightforward task and will take time. We are planning to continue pensions education activity."—[Official Report, 31 January 2002; Vol. 379, c. 537W.]

We have been warned.

The Government have, however, made it clear that they intend no major activity in respect of annuities. They are bent on disregarding the view of the House so clearly expressed on 11 January in giving Second Reading to the admirable Bill introduced by my right hon. Friend the Member for Skipton and Ripon (Mr. Curry). By so doing, they deny choice to pensioners.

The Government cannot even manage to get their own consultation paper out on time. It is to come out tomorrow, but that is at least six weeks late, which is typical of the Government's dilatoriness. I understood that the outcome of the annuities consultation exercise was to be published before Christmas; I might be misinformed, but I understand that Christmas was approximately six weeks ago.

If the Secretary of State does not get his administrative act together, the new pension service, of which Ministers are all so proud and which will have to service 11 million pensioners and 5 million pension credit beneficiaries, might, as Age Concern warns, prove unequal to the task.

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