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Mr. Smith: Yes, indeed. My hon. Friend makes some wise comments. On his second point on security, it is worth highlighting what Alan Pickering says in the foreword to the report:
- "Our proposals will lift the regulatory burden on employers, but it remains incumbent on those employers to keep their side of the bargain with employees and meet their pension promises."
The more one reads the report and sees its careful structure and inbuilt balances, the more one realises that it pays to reflect carefully on it before reaching conclusions.
Mr. Tam Dalyell (Linlithgow): The sobering if joyous fact is that, in the year that I was elected to this House, the Queen sent 200 telegrams to those who had reached their 100th birthday, but last year, she sent 3,900 such telegrams. Does that not reflect the size of the problem? Will my right hon. Friend consider the difficult issue of whether equivalent pension benefits are to be commuted at the discretion of trustees, unless a member objects? That is an urgent problem.
Mr. Smith: On the first point, which my hon. Friend puts characteristically graphically, greater longevity is of course one of the challenges that we are addressing. It is great news that so many people are living much longer, and that many are receiving telegrams from Her Majesty, but as I said in my statement, that presents us with some remorseless arithmetic. Given that we are living longer, and that we want to maintain a high standard of living in retirement, we must either work more, save more, or a combination of both. I have noted my hon. Friend's concern about equivalence, and I shall certainly reflect further on it.
Mrs. Cheryl Gillan (Chesham and Amersham): The Secretary of State is doubtless fully aware of the problems with which my local Buckinghamshire authority must deal in respect of pension funds, and of the fact that local council tax payers face the prospect of having to make up the shortfalls out of their diminishing pension income. Does he plan to review local authority pensions, will the
forthcoming Green Paper deal with that issue, and does he consider that the Pickering report has any implications for such pensions?
Mr. Smith: As the hon. Lady should be aware, the system of allocation to local authorities through standard spending assessments is under review, and where relevant, the pensions aspect will doubtless be factored in. However, we are talking about a matter for which public authorities have to pay from their allocated budgets. As with other public bodies, it behoves local authorities properly to meet their responsibilities in this regard.
Mr. Andrew Dismore (Hendon): So far, we have heard nothing about the self-employed, 54 per cent. of whom have no additional pension provision. Does my right hon. Friend see anything in the Pickering report to encourage the self-employed to take out pension policies? Can he confirm that the consultation will address this issue in particular, and will perhaps consider the question of compulsion?
Mr. Smith: My hon. Friend points to an aspect of the current pattern of provision that warrants re-examination. In the past, the general assumption has been that the self-employed are responsible for making their own provision. However, as he says, many do not—at least, not through pension products—although they might be building up other assets. As we draw up the Green Paper, I shall look closely at the position of the self-employed, along with other categories of workers.
Mr. David Ruffley (Bury St. Edmunds): Has the Secretary of State ruled out making a second pension compulsory for everybody?
Mr. Smith: The statement is about Pickering, pensions and regulation. As I said in relation to the forthcoming autumn Green Paper, I am not ruling matters in or out, being just a few weeks into the job. However, I am not setting hares running on extending compulsory state second pensions.
Mr. Andrew Miller (Ellesmere Port and Neston): As someone who, in a previous life, negotiated with large companies on pension matters, I know that many people will welcome simplification and better information in the workplace; indeed, that is mission critical to the success of future schemes. However, like my hon. Friend the Member for Burnley (Mr. Pike), I have had to deal with the sad case of a scheme that was abused by an employer, H. H. Robertson. [Interruption.] The Minister for Pensions, my right hon. Friend the Member for Makerfield (Mr. McCartney) nods—he is obviously familiar with the background. When my right hon. Friend removes the parts of the legislation that he proposes to remove, may I caution him to ensure that he does not diminish the protection provided to workers under the Pensions Act 1995? Does he recognise the need for greater transparency so that employees can see problems arising earlier than they can at present?
Mr. Smith: I am not proposing to remove any parts of anything, because we are at present considering the recommendations that Alan Pickering has made. However, my hon. Friend makes an important point. It is
appalling when workers who have placed confidence in the conduct of their employers have that shattered by the sort of behaviour that he mentions. I agree that workers will welcome simplification and better information in the workplace, and that is one of Alan Pickering's recommendations that we will wish to take forward, in conjunction with the Financial Services Authority, in terms of education and information. I agree that more transparency is important and, as we prepare the Green Paper, we must also keep a close eye on the security dimension.
Mr. Jonathan Sayeed (Mid-Bedfordshire): I thank the Secretary of State for the balanced tone in which he presented his statement and for responding so positively to the attempt—often made from this side of the House—at a constructive engagement with the long-term problem of pensions. Does he accept that if company pension schemes are freed from some of the performance indicators, it is likely to mean that final pay-outs will be lower? I was pleased to hear that the Secretary of State did not sound too keen on the proposal to ditch the obligation to pay benefits to the widows of pensioners. That would be an anti-family proposal that would hit middle-aged women who have spent their life bringing up their family.
Mr. Smith: I welcome the tone in which the hon. Gentleman poses his question. He is right to say that if company schemes were given greater flexibility, that might result in lower final pay-outs, but the tough choice that the Pickering report invites us to consider—and which we would be wise to consider—is how far some modification, within certain limits, is preferable to the closure of schemes on the likely pretext of greatly reduced contributions, or is an essential element in making schemes simpler to administer so that we can overcome the layer cake of complexity to which I have already referred. Without ruling anything in or out, I have already given a clear signal of how I feel about the important question of survivors and widows. It is also important that when we prepare the Green Paper in the autumn—and I have already briefed my officials on this point—we have a comprehensive analysis of the implications for women of present private and occupational pension provision and the reforms we might entertain.
Miss Anne Begg (Aberdeen, South): If the Government are to achieve their stated aim of a ratio of 60 per cent. private and 40 per cent. state provision of pensions, the issue of public confidence and trust is important. There is no doubt that the best way to provide for one's old age is through an occupational pension with employer contributions. However, does my right hon. Friend agree that at the end of this long process—and it will be long—if people of working age are to invest their hard-earned cash in occupational pensions, they will have to have a guarantee that the money will be there for them when they reach retirement age?
Mr. Smith: Yes, that is why I have said that security in retirement is one of the objectives against which our preparation of the Green Paper will be judged.
Miss Julie Kirkbride (Bromsgrove): It is a sad fact that in my constituency, the issue of pensions is fast
becoming the biggest in my postbag. People are concerned about the collapse of occupational schemes, as the Minister for Pensions will know, as well as their closure to new entrants, so speed is of the essence.On a more specific point, can the Secretary of State promise my elderly constituents that the forthcoming Green Paper will contain plans from the Government about the reform of annuities?
Mr. Smith: Yes, that is our intention. The hon. Lady will be aware of the consultation that we have already undertaken on the future of annuities, and we are considering the responses. We shall be making a further statement on this as part of the Green Paper. However, I do not want to raise the hon. Lady's expectations as she might subsequently be disappointed, and we would do well to remember that an annuity is still the only way of guaranteeing an income throughout retirement. That said, there are important changes in terms of encouraging a better, more competitive and responsive market in the sorts of annuities that are available, so that they suit individual preference. We will respond to that matter in the Green Paper.
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