Ms Keeble: I apologise for the inelegance of the amendment. I might have drafted it differently if I were a draftsperson and if I had realised that only a bit of it might be selected for debate. However, it has been helpful to talk through some of the issues.
I think that my hon. Friend makes a rash assumption if he thinks that people would choose a levy for a fund the benefits of which they do not yet know over what they understand is proper inflation proofing of their pension. People have a big awareness now of what happens if their pensions are not uprated each year.
What happens with women is very striking. When I first became an MP in 1997, I held quite a few pensioners' surgeries. It must be borne in mind that people have paid for private pensions for a long time, and they have had occupational pensions. Into the surgery came many desperately poor elderly women whose savings and state pensions had eroded in value. Their real problem was that they were widows aged over 80 and their pensions had not kept track with the cost of living. What happens with indexation is an important issue; people are acutely conscious of it. As the hon. Member for Eastbourne said, this is not about a difference between only 2.5 per cent. and 5 per cent. but between 2.5 per cent. and 7 per cent. or more.
If any more thought were given to being a bit more flexible about this—perhaps in the way that my hon. Friend the Minister suggested—that would be helpful. However, this is a technically flawed proposal, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr. Waterson: In light of a couple of things that the Minister said, my remarks can be shorter than they otherwise would have been. I want to commend to the Committee the ''Action Plan on Defined Contribution Pensions'' of the Association of British Insurers. It makes several very sensible proposals, some of which I hope that the Government will take on board. As has been said, it remarks that
It also states:
There is clearly an element of unintended consequences there, with all the ''confusion and additional costs.''
The ABI also offers a variety of proposals, one of which is
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although it also accepts that indexation should remain compulsory for DB schemes because they do not depend on the size of the individual's pension pot. The Minister touched on that.
I am pleased that we shall hear more about this, but we are at the end of the second week of the Committee stage and it is not unreasonable for us to be a little more pressing than we have been with the Government. When will we see the amendments? They are likely to change the shape of the Bill considerably, but I cannot comment any further until I see them.
Mr. Webb: I will not detain the Committee unduly. If the Government cannot produce the amendments, it would be helpful if we were given a steer as to their direction of thinking with regard to defined contribution schemes and indexation. I have only started to appreciate that whereas the indexation burden on a DB scheme falls on the scheme and is, if not a free lunch, good news for the recipient, for a DC scheme member it might be bad news. That is an important distinction, so it would be helpful to have a steer from the Minister about the Government's provisions on DC schemes.
I have looked again at the regulatory impact assessment estimate of the effect of the clause on a typical pensioner and, unless I misunderstand, the £70 seems to be an average over the zeros. I believe that it is a serious underestimate of how much a typical pensioner with a typical occupational pension will lose. If it is £7,000 based on £70 a week and that £70 is averaged over many people who do not have occupational pensions, the typical occupational pensioner could lose far more than £7,000. The scale of the consequences of the clause could be much greater than the regulatory impact assessment implies.
I accept the Minister's point about there being a balance, but he is saying that if we do not lower the requirement or impose another burden or fail to remove a burden, we might force more schemes to close, but inflation indexation might be required because that would be less of a burden and they would be even less likely to close. Clearly, there is a spectrum and the requirement seems to go up to 5 per cent. when inflation averages 2.5 per cent. That is not so onerous and the saving from cutting it would not be as great as the Minister suggests, but the reassurance and protection that it affords, particularly to women, might be, at not that great a cost, worth keeping in the Bill.
Malcolm Wicks: We have had a useful mini-debate. In response to the last points made by the hon. Member for Northavon, which go back to an earlier debate, I urge hon. Members to consider seriously the issues surrounding costs and how we balance them against security. I do not want to exaggerate—I leave that to financial pundits—but there is clearly a long-term trend away from final salary schemes to other schemes. We can debate the pros and cons of that, but a correlated concern is the way in which employers' contributions to many defined contribution schemes average out at about half the contribution to final salary schemes. The issues are serious and when boards might be considering the costs and the long-
Column Number: 317term future of final salary schemes it would be absurd if Parliament started to make those schemes so generous, well indexed and protective in respect of TUPE arrangements in the private sector that we encouraged more boards of directors to make the wrong decisions. If we made those mistakes, we would seriously over-egg the pension pudding. The issues are fundamental.
I must not be churlish, but the hon. Member for Eastbourne raised a serious issue about defined contribution schemes and urged us to think again. We were already thinking again about the issues, but that is part of scrutinising legislation. Having reflected, I made my points, but, having done that, I am not going to pull the specific amendment out of my top pocket.
Mr. Waterson: I will not go into the Minister's tailoring, but he cannot have it both ways. He is a member of the Government with the massive resources of his Department and the benefit of representations from organisations such as the ABI. The problems are apparent to anyone with the slightest knowledge of the matter and he cannot bluster himself out of them. Where are the amendments, when will we see them and does he expect them to be debated in the Committee?
Malcolm Wicks: I have given a clear commitment to think again and to bring forward proposals during consideration of the Bill. I hoped that the hon. Gentleman would be grateful for that, given the way in which he introduced the amendment.
I hoped that we would have a well informed debate about the issues concerning defined contribution schemes and annuities, some of which touch on gender. Were people to have more choice—broadly where we are coming from—the choice to have as much annuity as possible in the first year and not to index it would be tempting. However, informed choice would suggest that people think through the consequences for the future. Similarly, when someone is married with an annuity, or is about to take one out, another choice they have is whether to protect the annuity for the survivor. They are very difficult issues, and I suspect that men in particular may not be taking out an annuity that has a survivor's element.
There are some important issues with gender, and we should not rush in one direction without thinking through the importance of enabling people to make proper decisions about annuities. That includes the option now available to take the annuity from a company other than one's existing company pension scheme. There are difficult issues to consider before we immediately grasp what may seem to be the right way ahead.
We will return to the matter, and when the hon. Member for Eastbourne takes his walk across the beach this weekend, he will know that we need to be patient.
Question put and agreed to.
Clause 212 ordered to stand part of the Bill.
Clauses 213 and 214 ordered to stand part of the Bill.
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