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Sandra Osborne (Ayr): I am one of the women whom the hon. Gentleman is talking about. Before I came to the
House, I did not have an occupational pension as I was working in the voluntary sector—that is typical for both men and women in that field. I am always interested in the hon. Gentleman's remarks about the position of women in relation to pensions. Precisely what are his proposals for a rapid improvement in the situation?
Mr. Webb: I shall address that point in a second.
Either something dramatic is going on that warrants proper investigation or the data are dodgy, which also warrants investigation. The Government cannot continue to take the approach that they have taken in written answers to me—they cannot say that they will collect data for a few more years, then think about the position. By then, they will have been in power for seven or eight years. If something serious is going on in declining occupational pension receipts from women pensioners, eight years is a long time to let that continue.
The hon. Member for Ayr (Sandra Osborne) quite properly asked what the Liberal Democrats would do about the situation of women. We want the basic state pension to be far more of a foundation than the Secretary of State suggested, which means that there would be price indexation. We particularly want the basic state pension for older pensioners substantially increased; the majority of older pensioners are women.
The hon. Lady may say that before she is old, she will be newly retired, and that group of women need providing for, as well. With a substantially better pension at 75, women with small amounts of saving could buy a much better pension with it if they had to buy it only for the years between 65 and 75, instead of for the rest of their life. They would get roughly double the pension from a 10-year pension than from a lifetime pension. If the state guaranteed a good income for women at 75, they could get double the private pension at 65. That is one of the possibilities that we want to consider.
There are no easy answers. Making sure that contributions were mandatory at some level over the longer term might ensure that some women were provided for. Also, many women have paid at the married women's reduced rate, and there are still a huge number of them working their way through the system who do not know what pension rights they will accumulate. We believe that the Government should contact those women now to alert them to that fact.
Kali Mountford (Colne Valley): Will the hon. Gentleman give way?
Mr. Webb: I am about to conclude, if the hon. Lady will forgive me.
The Conservative motion wrings its hands about aspects that it would not reverse and offers practically nothing of substance to take the debate forward. Yes, the Government have been complacent. There are just the stirrings of one or two movements in the right direction. We welcome the Pickering review, such as we know of it, and the prospect of Inland Revenue reform to encourage people to be more flexible in their retirement.
When the Minister looks at funded pensions and the overall pension regime, I urge him not to forget women. I urge him to look at where women are heading and the trouble that is building up for them—which the state second pension will not address for 40 years, and even
then, only in a very limited way—and not to condemn women to a retirement of means-testing, but to help women in particular, and people of working age in general, to have a decent income in old age. That should be the goal, and it should be the measure of progress in pensions policy.
Madam Deputy Speaker: I remind all hon. Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench speeches.
5.7 pm
Paul Flynn (Newport, West): Those of us who are old lags at pension debates must have listened with incredulity to the opening speech from the Opposition. It is curious that there was such excitement among Opposition Members about a tax change that has resulted in a £5 billion loss to the pension industry, yet we are to ignore entirely 18 per cent. of £450 billion, which is a result of factors beyond the control of any Government—the change in the stock exchange. We are expected to get excited about £5 billion a year, and ignore the sum of £86 billion that has gone the same way.
I listened with amazement to the idea that 1997 was year zero. I shall deal with more positive developments later, but the wreckage of the pension prospects of a whole generation—people in their 20s, 40s and 60s—originated mainly during the years from 1979 onwards. In 1980, the break was made in the link between pensions and earnings. In 1985–86, SERPS was cut in half. That wonderful scheme was one of the great achievements of the Labour Government, and was introduced by the Minister, Barbara Castle, whose life we shall celebrate a week today at 12.30 pm in Central hall. I hope to see everyone there, and we will bring our banners along. SERPS was one of our major achievements, but one that we neglected to respect and nurture under the present Government.
Mr. Butterfill: The hon. Gentleman is perpetuating the myth that it was the Conservatives who first broke the link between pensions and earnings. He neglects to remember that it was Labour who did not implement it. Labour Back Benchers, some of whom are present today, to their credit castigated their own Government for not implementing that link because they fiddled the figures. All the Conservatives did was to formalise what Labour was already doing.
Paul Flynn: I did not suggest for a moment that the Tories were the first to break the link, but they broke it in every year from 1980 until the time that they went out of office, so it was a continuous period and the result was a huge loss. However, they did worse things than that.
One of the points in the thoughtful speech of the hon. Member for Northavon (Mr. Webb) was that many people who are not involved in the pension debate—those who are working, between the ages of, say, 25 and 50—face a bleak future. The main reason for that is that in the 1980s, occupational pension schemes were compulsory for employers. The Conservative Government decided in the name of choice to make them voluntary. Many young people, in the belief that they were immortal and would never grow old and need a pension—they were likely to have been in the child-rearing, furniture-buying days of
early marriage—did not contribute to their occupational pensions, even though they were good pensions; they were not only final salary schemes, but were index-linked in many cases. Millions of those people now find themselves without the benefit of any contributions made in those years, and if they start contributing in their 40s and 50s, it is almost impossible for them to catch up without paying 20 or 25 per cent. of their salary. There is a massive crisis on the horizon, and the problem was the result of the actions of the Conservative party.The great crime was on personal pensions. I fondly remember a golden moment when I was sitting on the Benches where the hon. Member for Bournemouth, West (Mr. Butterfill) is sitting now and challenging the then Prime Minister about personal pensions, which were being wickedly oversold by very deceptive advertisements. Mrs. Thatcher told me that I was against choice because I was a socialist, but the choice that she gave people was that of jumping over the cliff and abandoning guaranteed schemes that would have given them a final salary pension that was index linked in many cases, and moving on to the hopeless gamble of personal pensions. That was the great sin of the Conservative party.
Mr. Francois: I shall not contest for a moment the suggestion that the hon. Gentleman is a socialist, as his record is perfectly clear. I have listened to his argument, but does he accept that many people rely on a final salary scheme from their employer? Whatever he says about the 1980s, it is undeniable that in the past year to 18 months, company after company has been abandoning those final salary schemes. There must be a reason for that. We would argue that it has happened because of the different tax treatment introduced by the Government. Does he not accept that the abandonment of a large number of those schemes is a very serious issue for the people who work in the companies in question?
Paul Flynn: The hon. Gentleman knows that there is a stampede away from final salary schemes. I agree with the hon. Member for Tiverton and Honiton (Mrs. Browning) that that is likely to be irreversible and will continue. It is very difficult for us to say to young people in their 20s that they should invest in schemes that will lock up their savings for several decades, which will turn out to be money purchase schemes and will be likely to provide very poor value. What we currently tell our young people—I am sure that we all do so—is that their best way of ensuring prosperity in old age is to go into property. That is another reason why the savings ratio has gone down. The advice is that it would be sensible for grandparents to have stakeholder schemes for their grandchildren, but that it would not be sensible for the young people themselves to do so, for reasons that we know about and because of the way in which things have developed.
SERPS and the basic state pension were the two firm foundations and they have both crumbled a little in recent years. The Labour Government, to their credit, have given increases across a range of benefits for retired people. The amounts are far greater than anything that has been given for at least 30 years, so we can take credit for that, but what retired people now want is the promise, which no party is currently giving to them, that the basic pension that they receive will not fade away with inflation. They are rightly terrified of a disappearing income that will reduce their ability to buy.
SERPS was our creation and I appeal to my right hon. Friend the Secretary of State to re-examine it and rediscover its virtues, which were summarised by the National Pensioners Convention in evidence given to the 1997 pensions review. First—he made the same comment in answer to one of my hon. Friends—it gave this point as one of the main virtues of SERPS:
- "Compared with salary-related occupational schemes, it offers total portability and a fairer method of calculation than final salary."
- "Compared with money-purchase schemes, it offers defined benefits . . . Compared with either, it offers the possibility of . . . enhancing pension rights during periods of non-earning."
- "as a pay-as-you-go scheme, it is not dependent on the vagaries of investment markets."
It is not yet clear how successful stakeholder pensions are likely to be in reaching the low-to-middle earners for whom they were intended, and about whom many of us are very concerned; but the need for a high-quality state earnings-related pension scheme has never been more obvious. The debate gives the Minister an opportunity to clarify the Government's intentions. Do they still intend to destroy the best of what remains of SERPS in a few years' time? If not, will they consider seriously what changes are needed to re-establish it on a firm financial basis and restore public confidence in the scheme?
Poor old SERPS has never been sold. It has never been promoted. Indeed, during the 1980s there were campaigns running it down. The Midland bank, for instance, urged people not to take it up when they could have a £5,000 gift from the Government. But here we have a scheme of quality with guarantees at the end—a scheme that we are allowing to be run down.
The other part of the foundation is the basic state pension. Over the last five years, we could have increased it by the top level of inflation or the level of earnings. We have done that with a number of other benefits—we have delivered for pensioners—but if only we had taken the small step of restoring the link for as long as possible, and given the current inflation rate we could probably have done so for the foreseeable future, today's pensioners would feel much more secure.
I believe that the main lesson of the past 30 years is the failure of the private pension industry. A vast amount of money is lost in administration, selling and commissions, whereas the basic pension scheme represents good value in that less than 1 per cent. is lost in administration. We should recognise the multiplicity of
crises affecting all the groups of people involved, and realise that we can tackle them only by restoring the basic state pension, restoring the link and restoring SERPS to its old level, and by investing in that. We should not depend on the private pension industry: we have seen the way in which the wolves in some of those companies have ravaged the pensions of millions over the past few years.The only way in which we shall achieve a pension guarantee for the future is by using compulsion at many levels of society. I do not believe that, without that compulsion, we can convince the young and middle-aged generations of the need to make the massive contribution to their pensions that will assure them of an adequate income in retirement. We must also face up to something which, although it is obvious, we rarely address—the need for a flexible retirement age. The Queen, who says in her mid-seventies that she intends to go on and on, is a magnificent example to us all as she approaches the prime of life. Many of us have similar ambitions. To achieve them we must go on earning and not raid our pension schemes, allowing others to take advantage of them.
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