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Mr. Clive Betts (Sheffield, Attercliffe) (Lab): My right hon. Friend said that we must ensure that employers who have established a scheme cannot simply walk away from their responsibilities and leave people without a pension when they had expected a decent one. The regulations brought in last June will certainly protect people, and my right hon. Friend has already agreed that the Government might consider further the question of workers whose pension entitlements were dissipated because their firms went into insolvency. However, will he also look at the position of workers whose pensions were diminished as a result of the actions of their employers prior to June 2003? Those workers receive substantially smaller pensions than they were expecting because their firms' pension schemes were wound up.
Mr. Smith: Within the terms on which I have already said that I am examining these matters, I shall, of course, be happy to examine those instances too. They illustrate the problem and the challenge of drawing boundaries around groups and deciding who might receive help and who might not. I repeat the warning that I emphasise on every occasion: I do not want to raise false hopes. Certain things may turn out not to be possible, and although it is right to consider such proposals carefully, we must not raise expectations only to dash them.
In a voluntary system, the protection of rights that I have been talking about must go hand in hand with measures that make it more attractive for companies to provide pensions. That is the focus of the second key area of the Bill. We welcome the commitment of many employers who remain committed to providing pensions for, and with, their employees.
The Bill will achieve a number of cost-cutting simplification measures, such as streamlining the requirements on member-nominated trustees and introducing more flexible dispute resolution procedures and less bureaucratic reporting arrangements, particularly in respect of late payments.
The Bill will also change the cap on mandatory inflationary insurance, bringing it into line with current long-term expectations. At 5 per cent., it is out of line with expectations and has grown disproportionately expensive, which raises the risk that some employers will respond by closing schemes altogether. In deciding to make that change, we took the view that most people would readily trade some measure of inflation protection for the security of knowing that they would get a meaningful pension even if their firm went bust. All the inflation protection in the world is useless if there is no pension left to protect.
Mr. Harry Barnes (North-East Derbyshire) (Lab): My right hon. Friend is going through the details of the Bill, which are all very welcome. For instance, he talked about the first 80 clauses—but only 10 of those will apply to Northern Ireland. He also mentioned clauses 203 and 204, and Northern Ireland is excluded from those, too. Why is so much of the Bill not applicable to Northern Ireland? Northern Ireland measures do not appear in the Bill—those that will affect Northern Ireland will be introduced through the Order in Council procedure. Could not the excluded measures be dealt with in the Bill itself? Then, we could discuss why particular measures are not applicable to Northern Ireland. There may be special reasons why they are not, but those should be made clear to the people of Northern Ireland.
Mr. Smith: My hon. Friend raises some important points, especially for the people of Northern Ireland, and I am sure that the answer to his questions depends on the constitutional arrangements. If it would be helpful, I will ask my hon. Friend the Minister for Pensions specifically to address the extent of coverage in Northern Ireland, and what the procedure is for establishing corresponding rights for people in Northern Ireland where those are not provided in the Bill.
Mr. Tony McWalter (Hemel Hempstead) (Lab/Co-op): Will my right hon. Friend consider freezing the current acquisition of annuities by pension funds under the Pensions Act 1995, so that when his provision for 2.5 per cent. is introduced, annuities will inevitably be cheaper, which means that the funds available for people coming up to pension age will be substantially increased? That might solve some of the problems
associated with people being deprived of pensions for which they have paid during the whole of their working lives.
Mr. Smith: My hon. Friend raises an interesting and constructive proposal, and I am pleased to assure him that we will examine it further.
Clause 212 changes inflation protection, which gives schemes and their members more flexibility to agree together on the form of pension that suits them best, and eases the funding of future liabilities. It is important to stress the fact that there will be no effect on the value of today's pensions; the change affects only future accruals. Together, those reforms will make substantial cuts in red tape and free schemes to offer and operate pensions more cost-effectively.
We are determined to put people in control of planning for their retirement, and that is the third key area of the Bill. We want to raise awareness and make sure that people clearly understand the choices that they face. The measures in part 4 will help people to plan for retirement through the online retirement planner and the planning advisory service, which will for the first time give people the opportunity to see information on all their pensions together—the state pension and the occupational elements—and to explore their options in order to get the retirement that they want.
Sir Archy Kirkwood (Roxburgh and Berwickshire) (LD): The Secretary of State must be aware that there is some concern among pension providers and employers about trying to encourage people to start saving for personal pensions, when the increase in means-testing for pension credit makes it impossible to be certain that people on low incomes and people with debts will be better off in a pension plan in the long term. The industry is worried about that. Will there be scope, either in Committee or later, to make the Bill address that problem more directly than it does now?
Mr. Smith: If I recall correctly, part 6 contains the clauses that deal with the state pension system. The hon. Gentleman and his colleagues may want to explore what they can do within the terms of those clauses.
Sir Archy Kirkwood: Is that an invitation?
Mr. Smith: No, that was not an invitation; it was helpful advice. As for the guts of the point that the hon. Gentleman raised, if we start looking several decades ahead we can make many different assumptions about the basis on which extra assistance for poorer pensioners might operate, but one thing is absolutely clear: in introducing pension credit we have offered a reward for pensions savings, whereas before there was a pound-for-pound withdrawal penalty, which we inherited from the previous Government.
Kevin Brennan (Cardiff, West) (Lab): Will my right hon. Friend give way?
Mr. Smith: I shall take my hon. Friend's intervention, but then I would like to make some progress.
Kevin Brennan: Would it not be further protection against the risk of people deciding not to take out
occupational pension schemes, but to rely on pension credit instead, if the people who have lost out had been assisted? There would not then be thousands of people advising others not to take out occupational pensions because the promises made in the past were not worth the paper they were written on. In any case, should we not offset the cost of any assistance that might be offered against the amount of pension credit that the Government will inevitably have to pay out to those people if they are not assisted?
Mr. Smith: The logic of both those points is impeccable. Of course, what is happening to schemes now, and what has happened to schemes in the past, has a bearing on confidence in the future. That is why we are creating the pension protection fund. In exploring the cost-benefit implications of any proposals, it makes sense, as I said in response to interventions in our debate last week, to judge such matters in the round.
To support our wider aim of increasing the coverage of personalised pension information, we will take powers in the Bill to allow us to require pension schemes to issue combined pension forecasts, where experience and evidence suggest that that is a necessary and effective step.
I must tell the House that, in several areas, we shall need to table amendments. The time factors that have made that necessary stem at least in part from the late publication by the European Union of the occupational pension directive; from the need, which the House will understand, to co-ordinate some of the provisions with the tax simplification measures to be included in the Finance Bill; and from the complexity of the underlying legislation that the Bill replaces or amends.I assure the House that it remains our intention to introduce, as Government amendments, measures such as the immediate vesting for short-term workers and the ending of the requirement to offer additional voluntary contributions. Subject to ongoing work, we shall also introduce easements in section 67 of the 1995 Act to allow the rationalisation of accrued rights.
I can also tell the House today that we will table an amendment to require employers to undertake consultation when they make major changes to pension schemes. I can assure the House that it will be more than a rubber-stamping exercise—it will involve recognised trade unions or approved workplace information and consultation arrangements.
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