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5.46 pm
Mr. David Crausby (Bolton, North-East) (Lab): There is much to welcome in the Bill, which will protect members of pension schemes. The Bill contains new rights for those who have been let down and suffered badly because of the insolvency of a scheme. To lose a pension after a lifetime of hard work is devastating, especially when it hits those who are close to retirement and who do not have either the energy or the opportunity to pull it back.
We should be doing everything that we can to persuade young people that it is important to make financial provision for their old age. As my hon. Friend the Member for Aberdeen, South (Miss Begg) and the hon. Member for Chesterfield (Paul Holmes) said, there can be nothing more damaging to that case than young people who know a relative or friend who has suffered the fate of losing their pension.
It must be unacceptable in a fair-minded, 21st-century system for employees, through no fault of their own, to find themselves without a pension after a
lifetime of hard work simply because their employer mismanaged or misunderstood their pension or went missing with the money. With that in mind, the new pension protection fund is extremely welcome, but it is long overdue. It will undoubtedly help to restore confidence and protect future generations from a miserable old age. As many hon. Members have said this afternoon, there are tens of thousands of despairing victims who should have been protected before now.It was as clear as the nose on one's face that, as the stock market boomed and employer after employer took long, luxurious contributions holidays, there would be a day of reckoning. The day of reckoning has come for many, and the Government should have predicted it, because it is not those who encouraged the contributions holidays who will pay the price but long-suffering employees who continued to pay their contributions throughout those years.
Mr. McWalter: Does my hon. Friend accept that many honourable companies took those holidays because they had reached the threshold of 105 per cent. of liabilities and were forced to take a pensions holiday? That is an important component of this debate.
Mr. Crausby: I accept that that is an important point, but such companies had the opportunity to increase benefits.
We should remember that, until the early 1980s, many workers were forced to join pension schemes as a condition of their employment. With that in mind, the Government have a responsibility to backdate the protection that should have been afforded to those who have already suffered so traumatically. The 1980 European insolvency directive placed a clear responsibility on Government to protect workers, and we have both a moral and a legal responsibility to put things right for that relatively small group of people.
Mr. John Taylor (Solihull) (Con): I apologise if I have intervened at a clumsy moment. The hon. Gentleman was rightly and persuasively discussing pensions holidays and the stock market's decline. Does he agree that the Chancellor's £5 billion tax on pensions helped neither pensions nor the stock market?
Mr. Crausby: That is a matter of opinion. It is clear that there was some justice in the measure as employer after employer took the massive benefits of contributions holidays. The question of the effect on the stock market will always be debatable.
I urge Ministers to look to the future and to talk constructively to those groups of pensioners and their trade union representatives to establish the size of the problem, with a view to funding retrospective compensation.
Before I was elected, I was a pension trustee, appointed by my fellow employees in a medium-sized engineering company. I tried to persuade the management of the day that it should not take contributions holidays, but instead improve benefits to bring the funding below 105 per cent. Management defended the non-payment of contributions—
reasonably, at the time—saying that, when more difficult days arrived for the equity markets, the company would be forced to carry the liability and top up the fund with higher contributions. The company is now insolvent, and the pension fund has no one to cover excess liabilities. Those who enjoyed the contributions holidays have long gone. Management had no need to take any notice of me, and they did not, because they always had a majority of tame trustees, appointed by the directors, who had little choice but to do as their American owners insisted. Those trustees understood that, if they did not toe the line, their masters would find someone who would. Change will need more than just education and support for trustees. Sometimes it takes courage and independence, and it is easier to say than do when people feel that their jobs depend on how they act.The 1978 legislation on pensions was a tremendous piece of work. It was a great step forward, but perhaps it was a little naive, with too much concentration on management-appointed trustees. The Pensions Act 1995 took an important step in the right direction by providing a general requirement for members to have the right to nominate their own trustees. I understood—although I did not agree with it—why the previous Government introduced a constraint that only a third of trustees should be member-nominated. It would probably have been a little early—and possibly too risky—to rush into too much change in a hurry. However, almost a decade has passed now and I would have thought that it was time for members to take control of their own money with at least half the trustees being appointed by pension scheme members themselves. I am disappointed that the Bill does not provide for that.
The people best qualified to protect pension schemes are those who have the most interest in the prudent management of a fund. That group must be the pensioners and prospective pensioners themselves, not people who have no long-term personal interest. Far too many schemes that are now in trouble would have been much better protected out of the hands of unscrupulous employers and under the eye of pensioner-appointed trustees with control.
I welcome the legislation, which offers greater protection to existing scheme members, but I am deeply concerned about the lack of motivation for employers to continue to provide pension benefits. I worry that more Government legislation that introduces protection will mean that employers are less inclined to continue their provision, especially of final earnings schemes. We are forced to leave scheme members unprotected or to watch as the number of occupational pension schemes declines. The third option, which I very much favour, is to introduce a measure of compulsion on employers and employees to provide and join pension schemes. It would be much nicer if we could achieve that by persuasion and education, but it will always be difficult to persuade poorly paid young people that they should contribute to a pension from an early age. In a competitive market, employers will also come under pressure.
The Bill is a good one, but it fails to tackle some important questions, especially on compulsion. I am convinced that we shall have to return to those
questions, and it will be a great shame if we leave it too late and act in panic when there are even fewer schemes and even fewer workers opting to save for their old age.5.55 pm
Mr. John MacDougall (Central Fife) (Lab): I, too, welcome and support the Bill and recognise the excellent work that the Government have done over the years to improve the quality of life for pensioners, not only in my constituency but throughout the country.
Like my hon. Friend the Member for Ayr (Sandra Osborne), I welcome the pension credit. In my area, it has benefited pensioners by about £40 a week on average. Things do not end there, however. Mention has been made of the possibility of tying the basic state pension to earnings, but we should consider the broader initiatives introduced by the Government. For example, thanks to the winter fuel allowance, we no longer hear of elderly people dying of hypothermia to the same extent. Such initiatives add up to £9 billion of benefits for pensioners. Ironically, that is almost £6 billion more for pensioners than if we had merely linked the basic state pension to earnings—a point worth making.
I am aware of the time and conscious of the fact that other Members want to speak, so I shall be brief, especially as much of what I wanted to say has already been said. Like everyone else, I want to refer to the pension protection fund. In the light of recent events, it is important to take steps to help to protect vulnerable people. Various Members have told us of constituents who have experienced appalling circumstances owing to the lack of pension protection.
In their contributions to the debate, many Conservative Members suggested improvements, yet, sadly, if they were successful in the action that they plan to take this evening, they would not be able to make such improvements. That would mean that the 10 million people who would benefit from the Bill would be left with the status quo, completely unprotected. That is not good enough.
Even with its imperfections, which can be amended and improved during its progress through the House, the Bill will offer something that does not exist at present, and that will be an improvement. Half of something is better than the whole of nothing.
I have little to add to what has already been said, other than to congratulate my right hon. Friend the Secretary of State on his tremendous work and the brave way in which he has tackled a difficult situation. I am grateful, too, that the Liberal Democrats, although they have some concerns, will support the Bill and give it the opportunity to go into Committee, where I hope that it will be improved so that it can benefit people who have been left unprotected.
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