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Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): Oh no, not you as well.
Sir John Butterfill: The hon. Gentleman says, "Oh no", but one must keep referring to that point because the sum of money is significant—it equates to about £600 a year for every pensioner in an occupational scheme in this country.
Mr. Jim Cunningham: The hon. Gentleman refers to a money grab, but if he goes into the House of Commons Library he can find out why the Chancellor acted on pension schemes. Companies were creaming off profits and were not reinvesting; it is not a political point, and the hon. Gentleman will find it in the Library.
Sir John Butterfill: The Chancellor's explanation will not comfort many pensioners. This morning, I received some figures relating to that point from the Association of Consulting Actuaries. About one third of defined benefits schemes remain open to new members. Despite the Government's attempts to persuade people to choose other forms of pension saving, other schemes have not been frightfully successful. On group personal pensions, for example, only 44 per cent. of firms offer such arrangements, and the combined contributions of employer and employee are about 8.6 per cent., which is nothing like enough to provide an adequate pension in retirement. As for stakeholder schemes, only 37 per cent. participate in those or other stand-alone schemes and the average combined contribution is only 4.8 per cent., which will produce hardly anything and certainly will not reach the level of the Government's pension guarantees.
Only 36 per cent. of defined benefit schemes in smaller firms are open to new members. Worryingly, the fall-off in defined benefit schemes—which are the best form of pension for employees, provided that the company or scheme does not go bust—is greatest in the small schemes. That is because they cannot cope with the level of regulatory burden. However, we have increased that burden. My party did it in the Pensions Act 1995 and the Government will repeat that in the Pensions Bill, which
is in other ways an excellent Bill. The Government do not understand the cost and the impact of the burdens that are likely to be imposed.I shall not address the entire Pensions Bill today, because we shall have another day in which to do so in rather more detail. However, I shall give an example. One of the problems with the Pensions Bill is that it inserts into our legislation, almost in toto, the draft directive from the European Union. The draft directive was created by Commissioners from countries that do not have occupational pensions in the same way that we do. Only the Netherlands and Ireland also have significant local schemes. Most of the others have only sophisticated state schemes. However, the Commissioners see fit to publish regulations that apply principally to us, even though this country has more in pension savings than any other. The Dutch have more per capita, but we have more in total.
The level of burden that the Bill will impose is huge and it will drive more and more small employers out of defined benefit schemes. Clause 200, for example, will take the requirement for knowledge for trustees to a professional level. Historically in this country, trustees have been ordinary people, including pensioner trustees or trade union-appointed trustees, who have no specialised knowledge but good common sense and sound judgment. They take advice if they do not know something. They know that they have to appoint a scheme actuary and a scheme lawyer, and consult investment advisers and fund managers. Under the Pensions Bill, the trustees will have to know all that themselves. Clause 200(4) states:
- "An individual to whom this section applies must have knowledge and understanding of . . . the law relating to pensions and trusts . . . the principles relating to . . . the funding of occupational pension schemes, and . . . investment of the assets of such schemes, and . . . such other matters as may be prescribed."
Mr. Watts: Does the hon. Gentleman agree that part of the problem that we face is that many people who had responsibility for pension schemes did not have the knowledge that they needed to manage them? We need trustees who know what they are doing. The problem is companies that do not wish to invest in their employees. Employers are good at looking after their own pension schemes and pay, but they are less likely to want to invest in providing proper pension schemes for their employees.
Sir John Butterfill: To a degree, the hon. Gentleman is right, but there is a great advantage in having trustees who are not particularly specialist. There could be an ordinary pensioner representative, as there is in our scheme, or there could be trade union or work force representation. That is a good thing. All those people may not be experts, but they can employ experts. Perhaps there should be a minimum standard for trustees. Hon. Members' trustees, of whom I am one, are all taking the examination in essential pensions knowledge of the Pensions Management Institute, which is a good thing. I suspect, however, that we shall be among the minority of such trustees.
The Pensions Bill would place such burdens on trustees in terms of required knowledge that no ordinary trustee will be able to take them on. Firms will be able to comply with the measure only by employing professional trustees. If they do that, the input of those with an intimate relationship with the scheme will disappear and the costs will go up enormously. Only the bigger firms will be able to cope.
Mr. Jim Cunningham: I readily acknowledge that the hon. Gentleman has greater expertise on pension funds than me. I have some sympathy with his point about trustees. Trustees in the trade union movement have a degree of training, but I should not like them all to be financial experts at the expense of the people they are supposed to be representing. We need to find a balance, so I have sympathy with what the hon. Gentleman says.
Sir John Butterfill: That is absolutely right. Trustees should have a minimum standard of knowledge. I should be happy if the Government were to say that all trustees must have obtained the certificate of essential pensions knowledge from the PMI or something similar, which would limit the requirement under the Bill to something that most trustees could probably achieve. If, over six months, they did a bit of homework and spent some of their free time learning the subject, they could probably obtain that qualification, but the open-ended provisions in the Bill are ridiculous. They have been lifted straight out of the draft directive, which is madness.
In Committee, I hope that we can take such silly burdens out of the Bill and get on with the good things that it contains.
6.2 pm
Rob Marris (Wolverhampton, South-West) (Lab): I had not intended to speak in the debate, but as a member of the Select Committee on Work and Pensions I am interested in the subject.
The Secretary of State told us that about 60,000 people are affected. Constituents of mine and of my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) were done out of their pensions by what went on at Chart Heat Exchangers Ltd., formerly IMI Marston Ltd. There are serious questions to be asked about who was, or was not, minding the shop for that scheme, but that must be for another day as there are legal considerations.
I am heartened that we have the figures, but we need to put them in perspective. Devastating as the individual stories of our constituents are, we are talking about only 0.5 per cent. of pensioners. There are 12 million pensioners in the United Kingdom; we are talking about 60,000 people—a small, albeit important, proportion.
Kevin Brennan: Will my hon. Friend clarify that point? We are not talking about 0.5 per cent. of all pensioners; we are mainly talking about deferred pensioners—people who have not yet retired.
Rob Marris: I am setting the figure of 60,000 against the 12 million total. The figure includes some prospective pensioners, as well as some people who should be receiving a pension but are not.
I am heartened by the Secretary of State's remarks today, as, in response to a question from my hon. Friend the Member for Cardiff, West (Kevin Brennan), he did not seem entirely to close the door to assistance—the word we now use rather than "compensation". Farmers received compensation for foot and mouth; assistance is what we hope some of our constituents might receive for what went on in some of those pension schemes.
The motion refers to the "crisis in occupational pensions". That assertion has not been backed up by evidence—for example, that less money is being saved in schemes. In fact, more money is being saved in pension schemes. There may be difficulties with confidence, but there is no structural crisis in pensions in the UK.
The pension protection fund proposed under the Pensions Bill—I will not say much about that Bill, as we will shortly debate it on Second Reading—will further increase confidence. It clearly cannot be retrospective, yet the Government are criticised by some Members who wish to have it both ways. They say, "Ah, well, all the pension protection fund premiums should be risk based"—the implication being that its start should be deferred until the risk figures are available and can be taken into account when setting premiums—yet the same Members criticise the Government for not setting up the fund before next April. They should not try to have it both ways, and I welcome what the Government are trying to do to get the fund off the ground quickly and generate the information. We ought to look at pensions more broadly than we often do in the House.
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