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20 Jan 2003 : Column 67continued
Lynne Jones: The hon. Gentleman is a keen advocate of compulsion in pension contributions, for which the TUC is also campaigning. However, does he agree that, for the reasons he outlined, it would be wrong to make it compulsory for workers to contribute to an employer's scheme if there were no separate state earnings-related scheme that they could choose to join instead?
Mr. Webb: I half agree with the hon. Lady. We are in favour of compulsion, but on top of what? What is the
We have heard of the ASW case. In my constituency, BAE Systems is a major employer. It projects that, in three years, its pension fund will be £1 billion in deficit. We have heard about a fund that will be £2 million in deficit, but the figure could be £1 billion for BAE Systems in a few years. The Secretary of State for Defence queries whether it is genuinely a British company and is perhaps thereby softening us up for not giving it a contract. There could be a combination of a fund in huge deficit and a company that faces commercial difficulties. The system cannot cope with funds that are vastly under-financed and companies that get into trouble. I was slightly disappointed that the Minister did not go further and outline some of his proposals in the Green Paper that could cope with such a problem.
I want to emphasise the human cost of the problem by mentioning the case of a constituent who came to see me only yesterday, unaware that the House would debate the issue today. She is two years from retirement after working for her employers for more than 20 years. Last June, the pension fund was closed. The company will not wind up the fund because it is solvent and if it wound up the fund, its under-financing would mean charges that would drive it out of business. It is possible to transfer out, but the value of doing that is woefully inadequate.
My constituent was expecting a pension of £22,000 a year. She has been told that the transfer value will buy her a pension of £4,000. She was devastated and asked whether I could do anything. I said that we would debate the subject in the House the following day, that I would bring the circumstances to the Minister's attention and ascertain whether any aspect of the Green Paper or any other proposal could deal with the problem or offer my constituent consolation.
I was tempted to be rude about the Conservative motion but I realised that I helped to draft it. However, I am an academic and could therefore probably do both.
Bob Spink: Does the hon. Gentleman realise that shortfalls in pension schemes were almost unheard of when the Conservative party was in government?
Mr. Webb: Clearly, the state of the stock market puts pressure on funds. It has been performing badly and is a specific cause of underfunding, coupled with the dividend tax credita policy that the hon. Gentleman did not propose to reverse.
I began to consider the origins of the motion. At the beginning of December, Conservative Members tabled early-day motion 304, which gave an uncritical welcome to the proposals of the National Association of Pension Funds to change the order of priorities when a scheme
Distance from retirement is therefore not the only factor that matters. People who are close to retirement cannot do much else, but most of their pension eggs may not be in the current employer's basket. Length of service therefore matters as well as proximity to retirement. I therefore amended early-day motion 304 and advocated introducing
The refined position therefore takes account of people's closeness to retirement, because they will have no time to make other arrangements, and the number of eggs that are in a specific basket. Both aspects matter and should be taken into account.
As the Minister highlighted, Conservative Members cannot be allowed to get away with the start of the motion, which I did not write. It states:
One of my concerns about the motion is that it is extremely narrow. In other words, it takes a point at which there is not enough money in a fund, and proposes a very narrow debate on who should get a share of that money, and who comes first in the queue. I intervened earlier on the hon. Member for North-East Hertfordshire and gently suggested that, if those who were near retirement and with long service received a higher claim, we should all be honest with them. We should be saying to every one of today's retired occupational pensioners that they might receive less pension. In other words, we would be giving new security to a group of people who might, perhaps, have
Mr. Brazier: It is, of course, the case that 90 per cent. is the level of underpinning guarantee for those who are on even as protected a form of income as an annuity, under the terms of the protection provided by the different annuity companies, so there is a good precedent for that in relation to pensioners with private sector schemes.
Mr. Webb: I take that point. Indeed, 90 per cent. is not an arbitrary figure. It is a figure that is already used in protection schemes. The point that I am trying to make is that, at a time when there is a crisis of confidence in private sector pensions, we must all bite the bullet together and say to all Britain's 5 millionsomething of that order; several million, anywayretired occupational pensioners that they will have a less high priority when the funds are divided up and that they might get less next year than they would have got this year. We should not try to pretend that that is not a consequence of focusing our help on those close to retirement and with long service.
The hon. Member for North-East Hertfordshire was, regrettably, absolutely silent on how we should ensure that there is enough money in the pot in the first place. By all means, let us have a debate on how to carve up an inadequate fund and give it out more fairly. Of course we should do that, but what can we do to ensure that there is enough money in the first place? The Government are proposing fewer actuarial valuations, as a measure to reduce the regulatory burden on employers who run schemes. That is the goal towards which they are heading. That worries me, because a fund could satisfy the minimum funding requirement at a particular point in time, but things could then go wrong. The stock market could fall, for example, and life expectancies could increase. The fund might then have insufficient money in it before it was wound up. So, at the point at which it was wound up, things could have gone horribly wrong without any corrective action having been taken.
I am not sure whether the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle), will be responding to this debate
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle) indicated assent.
Mr. Webb: I am pleased to see that she will be. Will she clarify whether that measure will provide sufficient safeguards? Regular valuations are, one would hope, like an amber light. They are a warning that something needs to be done. If valuations were infrequent, things could go badly wrong and a scheme could be wound up at the wrong time. It would then be frozen, and nothing could be done about it. I hope that the Minister will be able to satisfy me on that point.
We have not talked much about the regulator. My hon. Friend the Member for Newbury (Mr. Rendel) raised with the Occupational Pensions Regulatory