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Mr. Frank Field (Birkenhead): The hon. Gentleman says that we should not have more debate, and that we should get on with the business of bringing relief to those of our constituents who are being affected adversely by the winding up of their pension schemes. Is he not aware that I have a Bill before the House on the winding up of pension schemes? If the Opposition are so keen, why do they not adopt that Bill and use some of their time to advance it through this House?

Mr. Heald: The right hon. Gentleman is constructive in this area, and I am always very happy to discuss with

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him detailed proposals that will help those throughout this country who are involved in pension schemes. Equally, I hope that he will help us by canvassing the Government's support for what I am proposing today.

Mr. Field rose—

Mr. Heald: If the right hon. Gentleman will allow me, I shall outline what we are talking about a little more fully.

The vast majority of problems have arisen where final salary schemes are being wound up and the employer is in liquidation. Of course, there are also cases where solvent employers are winding up, and I shall deal with cases such as Maersk later in my remarks. However, it is in cases involving liquidation and a forced wind-up where the problem is perhaps most acutely felt. The rights of pensioners who are already receiving their pensions, including their right to receive future increases in pensions, are placed above the accrued rights of continuing workers, however long they have been with the employer. So employees who are approaching retirement find that they will receive only a fraction of the pension that they were expecting.

Of course, it is true to say that all future pensions would be paid in full if there were enough money in the scheme, but the pension schemes of insolvent employers are all too often underfunded. The importance of this issue was shown through the recent experience of Allied Steel and Wire, which went into receivership on 10 July last year. Within days, on 18 July, it was announced that the pension schemes for the Cardiff and Sheerness plants were to be wound up. The operation of the priority rules—putting those pensions in payment first—meant that many employees of long service at both Cardiff and Sheerness were told to expect pitifully low levels of pension: 15 or 16 per cent. at Cardiff, and no more than about 50 per cent. at Sheerness.

The plight of ASW's workers has touched the hearts of people throughout the country, particularly following the "Panorama" programme "How Safe is your Pension?", which was aired on 17 November last year.

Kevin Brennan (Cardiff, West): As the hon. Gentleman knows, as the MP for Cardiff, West, I am well aware of the issues that he raises. Does he agree that, in addition to examining the rules governing the way in which the pension fund is distributed on wind-up, we should also look at the role of the independent trustee? Do the hon. Gentleman's proposals include putting a cap on the percentage of fees that the independent trustee pays himself on the winding up of pension schemes?

Mr. Heald: I certainly agree that there is concern about that. Reports have shown that substantial fees are being charged by professionals. We should consider that to see whether we can find a way of lowering those costs. What I am trying to do in this short Opposition day debate, however, is to urge the Government to deal quickly and discretely with a small matter, so that the worst excesses of the problem at ASW do not happen again in the coming months while the Government consult at leisure on their Green Paper.

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The "Panorama" programme highlighted the experience of John Benson, who described coming home to his wife to tell her that he had lost his job, thinking that his pension was safe, and then about 10 days later having to tell her that in fact he was only to get a tiny part of his pension and that the family were in trouble. He did not understand why he had ended up in that situation.

The Mail on Sunday highlighted the situation of Bernie Tarpar, aged 54, who has 28 years service at Sheerness. He is a technician who hoped to retire at 62, with over 35 years service by then, and to receive about half his salary in pension and have a lump sum with which to visit his family in Australia. He said that he felt bitterly let down. He said:

"Over the years we have shown great loyalty to our employer, who has rewarded us with good pay. But the winding-up of our pensions leaves us devastated and extremely worried."

I have had letters from hard-pressed ASW victims, as other hon. Members will have done, and I have had the opportunity to talk to several of them. I know that the Minister has met John Hayter, to whom I have spoken. He is 58 and has been in the scheme for 28 years. He expected to retire on half salary, but he has been told that he will get half of that. He said:

"We have followed the rules all the way along and then bang—it is taken away . . . They never said my pension might not be safe, not once."

Mr. Steve Webb (Northavon): I have a lot of sympathy with the cases that the hon. Gentleman raises. Does he accept, however, as we must all accept, that we are dealing with a pot of money that is inadequate to pay everybody, and unless more money is made available, the flipside of paying more to the people whom he describes, who have suffered badly, is to pay less to retired pensioners? Does he accept that that would create new uncertainty for those who have already retired? Is he saying that if the Conservatives returned to office, everybody drawing an occupational pension from a private company would be at risk of having their pension cut if the firm went into liquidation?

Mr. Heald: I am about to outline what we are proposing. There is an issue of justice. Somebody who has worked for longer than they planned to, perhaps because they have been asked to do so to allow the company to restructure or to move into administration, can receive far less—half their pension or less—than a person who worked for fewer years and retired early. As I shall make clear in a moment, there are cases in which directors seem to have retired in a remarkably prescient way, taking millions of pounds from the scheme ahead of a change. I shall develop my argument, and I am happy for the hon. Gentleman to intervene if he thinks that there is anything unjust about it.

There are other such cases, such as that of British Federal, where the scheme has a shortfall of £2 million. The National Association of Pension Funds warns us that a large number of schemes are moving towards wind-up. In many cases, existing pensioners are safeguarded, as are rises in their pensions, but employees, who may have longer service, may receive half their pension or less. It is often said that the best workers, those who are vitally needed in the company, suffer most. We hear anecdotally that some of those workers are even encouraged not to retire.

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Why are pension funds so underfunded? There is no doubt that a key factor is the loss of £5 billion a year, taken from funds by the Chancellor in extra taxes after he scrapped the dividend tax credits. The Association of Chartered Certified Accountants made a point that is not boring, even though I notice that some Labour Members are yawning because they have heard these things so many times before. They will hear them many more times. The association stated:

"The withdrawal of the tax credit is, in our view, the most important single contributory factor in the problems that currently afflict . . . schemes."

The CBI makes the same point. David Rosser, its Welsh director, said:

"The Government put us in this mess by taking out, through taxation, £5 billion a year from company pension schemes."

Ken Jackson, a union leader, said the same thing a year ago. The London chambers of commerce have said it.

Mr. Bill Tynan (Hamilton, South) rose—

Mr. Heald: Does the hon. Gentleman say it?

Mr. Tynan: I thank the hon. Gentleman for giving way. Do the Opposition have any plans to restore the tax dividend?

Mr. Heald: The disincentives to save—[Hon. Members: "Answer the question".] I shall answer the question. The disincentives to save have been described as massive by many people throughout the pensions world. They are caused by the widespread extension of means-testing. The first thing to do is try to find a way of removing some of the disincentives to save. Employers who might be considering investing in a pension scheme know that employees earning less than £20,000 would receive the same amount through means-tested benefits, so what would be the point of them saving for their employees? There are massive disincentives.

I agree, however, that we need to consider incentives for employers to save in pension schemes. We are actively looking into that—the sad thing is that the Government are not. They have taken £5 billion a year out of the schemes so less money is available, while at the same time they have widened means-testing so that there are massive disincentives to save. A consensus on how to proceed is emerging in the pensions world—on how to simplify the system and provide greater incentives to save and to remove some of the disincentives. But what are the Government doing? They sit by complacently and are not even prepared to discuss the matter.

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