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Mr. Binley: You are very kind in giving way. I understand what you are saying about the people whom—

Mr. Deputy Speaker: Order. I am always very kind, but I think that the hon. Gentleman is referring to the hon. Lady.

Mr. Binley: I am indeed, Mr. Deputy Speaker. I understand what the hon. Lady is saying and she is speaking for such people particularly well, which is appreciated. I am not sure, however, that her defence of them is an argument against the Bill proposed by my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind). In what
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way are her observations an argument against trying to help the many millions of people that this Bill will benefit?

Sarah McCarthy-Fry: If Members allowed me make progress, they would perhaps see where my argument is leading. This is a question of the differing priorities of Members in different parts of the House.

One thing that this report had in common with its predecessor was the acknowledged role of credit unions in helping to tackle financial exclusion. Throughout the English-speaking world, credit unions have been highly successful in extending low-cost financial services to communities, particularly those not well served by mainstream providers. As of September 2003, there were 665 registered credit unions in the UK. Based on either a geographical area or a work force, credit unions operate as co-operative savings and loans agencies. A credit union is required to establish a "common bond" between its members, and in recent years this has been taken to include whole cities, including my own constituency.

In Portsmouth, Pompey Savers Credit Union has proved a valuable tool in tackling social exclusion by helping people to learn the value of making regular savings, however small, which the union then uses to provide a source of low-cost credit. That is particularly valuable for those who have difficulty borrowing at affordable rates of interest from mainstream financial providers, and who might otherwise turn to loan sharks.

Mr. Vaizey : The hon. Lady is talking the language of priorities, but is she aware that when this House debated the Consumer Credit Bill, her Government resisted calls from Conservative Members for an interest rate cap on loan sharks? Surely she should address her remarks to Government Front Benchers, who missed the huge opportunity provided by that Bill to crack down on loan sharks.

Sarah McCarthy-Fry: Credit unions are a way of tackling loan sharks, and recent financial services legislation greatly enabled credit unions to make progress in this regard.

As a co-operator, I have long supported credit unions. They are financial co-operatives, which are part of Britain's long-established co-operative movement. Since the Rochdale pioneers of the 19th century, people have been working together to share skills and resources and to make their communities a better place.

People in low-paid jobs need security and flexibility over day-to-day financial decisions—putting food on the table and paying the electricity bill. They do not have the luxury of massive amounts of disposable income to save, but please do not think that I am ignoring the needs of those members of our society who do. However, those people do not need yet another uncosted savings scheme offering tax breaks, when we already have one—the individual savings account or ISA, which is the Government's primary vehicle for tax-free savings outside pensions. It has worked well and more than 16 million people currently have an ISA. More than £180 billion has been subscribed to ISAs since their launch in 1999 and it has been supported by about £1.6 billion in tax relief for savers. In short, the
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Government's aims of targeted support and incentives for saving from childhood through working life and into retirement are, I believe, already met by the current products on offer.

As for the retirement income fund, it seems to me that, like the savings retirement account, it favours those with above-average earnings. I am struggling to see how it would benefit those for whom it is difficult to build up pension entitlement, particularly women, as my hon. and learned Friend the Member for Redcar (Vera Baird) mentioned. The incomes of female pensioners are lower than those of men because, historically, pensions have been tied to the workplace and the national insurance system. That has disadvantaged women because so much of the work that they have traditionally done—caring and bringing up children—is in the home and is unpaid.

The Labour Government have recognised that and given many women, as well as other carers, low earners and disabled people, the chance to build up a decent pension for the first time by introducing the second state pension. That is particularly important for low earners and those with caring responsibilities, since they are credited as if they had at least £11,600 a year. The second state pension is at least twice as generous to low earners as the previous state earnings-related pension scheme and, of course, SERPS completely excluded carers and disabled people from building up a decent state pension.

I am not convinced that the proposals in the Bill offer an advantage, even to those people it purports to help—namely, the better off—because the new rules for income drawdown and alternatively secured pensions that come into force next April will offer additional options that are easier and simpler to administer. In addition, they will allow a tax-free lump sum when benefits are taken.

Justine Greening: In my Putney constituency, the average voter age is 34, and I believe that the Bill would greatly help the 20-somethings and 30-somethings. In the context of what is being proposed, there is ample evidence in Britain that such people, who are trying to get on the property ladder, often prefer a mortgage product with a huge amount of flexibility to allow for stopping payments or drawing down lump sums in order to invest in a property. Surely that suggests that the sort of savings and retirement vehicle offered in the Bill is precisely the product and tool that many of my constituents would like.

Sarah McCarthy-Fry: Once again, it comes down to priorities. We are talking about pensions and the fact that we are asking people to prepare a secure pension for when they retire. I believe that the vehicles already on offer under the present Government meet those requirements.

In conclusion, given that the Government already offer—[Interruption.]

Sir John Butterfill : Before the hon. Lady concludes, does she really think that the existing annuity rules are tenable in the long term? Does she agree that no independent financial adviser would, if there were no compulsion, advise anyone to buy an annuity, particularly if they had limited life expectancy through
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a severe disease? Yet some people are being forced to buy an annuity when they know they may die within two years.

Sarah McCarthy-Fry: The right hon. and learned Member for Kensington and Chelsea has already said that, in the majority of cases, purchasing an annuity would be the best option. I would also draw the hon. Gentleman's attention to the fact that we are varying the annuity rules that come into effect next April.

Given that the Government already offer significant incentives to save via tax relief and national insurance relief—

Mr. Nick Hurd (Ruislip-Northwood) (Con): Specifically on that point, the hon. Lady talks about the Government's record on delivering incentives to save. Does she agree with the Pensions Commission, which found that

Sarah McCarthy-Fry: In my constituency, means-tested benefits have lifted an inordinate number of pensioners out of poverty and enabled them to live an independent life. Many pensioners living on £69 a week in 1997 have told me that, now, they have never been so well off.

If one takes the view, as I do, that tax reliefs on pension savings should be used to provide a secure income in retirement, not to build up a capital asset to pass on to one's heirs, I consider the Bill to be unnecessary. Notwithstanding that, I also consider it to be premature, as we are shortly to see the publication of the second report of the Pensions Commission.

We are all aware of the serious demographic challenges facing us over the next 50 years. Quite frankly, we are all living longer, and that trend looks set to continue. Back in the 1980s, a man could probably count on an average of 14 years of post-65 retirement, but on current trends, we can expect that to be 22 years by 2051. If we set that trend against a falling birth rate, it easy to see why there will be a large increase in people of pensionable age and the challenge for the Government is to find a solution that tackles poverty, that is open to all, but which keeps Government expenditure at sustainable levels. That, of course, is the reason why the Pensions Commission was set up. It seems to me to be premature to bring forward this Bill in isolation—given that it is narrowly focused in favour of the better-off—in advance of the wide-ranging debate that I am sure we will have when the Pensions Commission report is published.

11.6 am

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