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Mr. Nigel Waterson (Eastbourne) (Con): I hope that the hon. Member for South Swindon (Anne Snelgrove) feels better after that. It is interesting that she, like almost all Labour Members today, effectively attacked the Bill from the left. She described the Bill as an interesting sideshow when potentially it will benefit tens of millions of people. Her description of it was extraordinary. I do not think that it bodes well for the Government's likely response to Lord Turner's final report.
I begin by congratulating my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind) on his good fortune in securing the Bill high up the pecking order of private Members' Bills, and on his elegant manner in describing it from what one of our former colleagues described as the icy wastes of the Back Benches. It was a bravura performance.
For eight years, the Government have presided over a pensions crisis of unprecedented proportions and a collapse in savings. At times they have appeared to be entirely paralysed by indecision. Meanwhile millions of our fellow citizens are in real danger of being condemned to relative poverty in their old age. It is to the Conservative Opposition that people have to come and to whom the British people must come to look for fresh thinking, radical ideas and bold proposals.
Only this morning, we have seen the press reports of the Office for National Statistics. The figures that they contain are chilling. They show that only about half our fellow citizens are making pension provision, that the number of generous final salary schemes has halved in the past four years and, echoing what the Pensions Commission has said, that some 12 million workers are not saving enough, or even at all, for their retirement. I echo the words of Patience Wheatcroft in The Times today. She said of my right hon. and learned Friend:
There have been interesting contributions from a number of Members. I cannot do them all justice. The hon. Member for Yeovil (Mr. Laws), who spoke on behalf of the Liberal Democrats, raised some issues and concerns of his on tax relief. That is not an issue that can be dealt with centrally while discussing the Bill. He spoke also about incentives and drawdown.
My hon. Friend the Member for Weston-super-Mare (John Penrose) is already building a reputation in work and pensions matters. He spoke with particular authority, especially on the funding of further education for older students. My hon. Friend the Member for Putney (Justine Greening) made a thoughtful speech, by
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contrast, if I may say so, with blundering through the handouts from the Government Whips, which has happened during much of the debate. I have already said that much of the attack on the Bill has come from the left rather than from the middle ground.
My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) made the point that the Bill goes with the grain of human nature, something that has always been the fundamental backing of Conservatism. My hon. Friend reminded us of the 12 million people without provision for their retirement.
My hon. Friend the Member for Tunbridge Wells (Greg Clark) made excellent points on the tax incentive system and stressed the real importance of encouraging saving. My hon. Friend the Member for Bournemouth, East (Mr. Ellwood) brought together the issues of young people and attempts to get on the housing ladder, both of which are dealt with cleverly by the flexibility contained in the Bill. Finally, my hon. Friend the Member for Wantage (Mr. Vaizey) eloquently described the way in which the Government's policies have damaged pensions over the past eight years.
I do not think that it is my task to go over all the ground that my right hon. and learned Friend covered in his excellent opening speech. However, it is worth touching on some of the central advantages of the proposed legislation. First, there is the savings and retirement account, which combines simplicity, flexibility and accessibility. Crucially, consumers would have genuine choice about provision for their retirement. The requirement on employers to provide access to the SaRA scheme is extremely important. The fact that payments can be transferred from previous pension schemes to a SaRA has many advantages for individual savers. My right hon. and learned Friend avowedly based his proposals on the Canadian system, but Conservative Members have learned many lessons from the 401(k) pensions system in the USA. It, too, is based on simplicity and flexibility, and allows a drawdown of pension funds for major life events such as house purchase and educational costs. It works extremely well, and has achieved a high penetration among the work force, largely because of its simplicity.
My right hon. and learned Friend has struck a commendable balance between the need to encourage genuine long-term pension saving and the provision of flexibility so that people can withdraw substantial amounts of money for major life events. Clause 5 allows money to be withdrawn to purchase a property, but only if it is someone's principal residence. That contrasts with the Chancellor's generous provision for second homes, perhaps in Spain, under self-invested personal pensions. My right hon. and learned Friend's proposals allow for the purchase of property for a child and for the funding of education, as pointed out by my hon. Friend the Member for Weston-super-Mare, speaking from his experience as governor of a further education college.
Retirement income fundsRIFsare based on the Canadian experience. On retirement, individuals, regardless of their age, can choose whether or not to convert their pension savings into an annuity or a retirement income fund. By contrast with annuity arrangements, capital as well as income can be withdrawn from the account, with the proviso that people cannot blow the cash in their retirement pot and become an unnecessary burden on the taxpayer and the
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benefit system. That thread runs through all private Members' Bills on annuities introduced by Conservative Members, and it demonstrates the importance of the minimum retirement income.
At least one Government Member was outraged by the fact that someone could name a spouse, a common-law partner or one of their children to receive their RIF assets on death, with those assets being transferred on a tax-deferred basis. We believe in passing on hard-earned wealth to the next generation, and I am surprised that some Government Members still take offence at that. As my right hon. and learned Friend pointed out, the question of annuities is an anomaly only in the United Kingdom. No other country, as far as we know, has a system of compulsory annuitisation. The USA and Canada do not, and neither do comparable economies across the world. Why should we retain the absurd notion that at the age of 75, if not before, people are obliged to act under the requirement, unless they belong to the Plymouth Brethren, whose members can avoid it and whose numbers, I suspect, are rising dramatically as we speak? Why should people be put in that position when it is their money, saved from hard work over many decades?
My right hon. and learned Friend has introduced practical proposals on pension proliferation. Ministers should not find it difficult to accept those provisions, which are a sensible step to meet the needs of the modern era, in which people move from job to job. My hon. Friend the Member for Ruislip-Northwood made an eloquent argument for such arrangements, but he is not untypical, as many people change jobs several times and acquire a number of small pension pots.
As I said, we must look at the Bill against the background of a collapse in savings, the fact that many millions of people are not saving anything like enough for their retirement, and consumers' need for greater choice and greater control over how they structure their retirement.
In conclusion, my right hon. and learned Friend's Bill is especially attractive because it benefits a series of different groups in our society. Previous attempts have concentrated on the annuities issue, important though that is. The Bill will benefit older peoplethose nearing the age of 75plus those still in work who have a variety of separate pension pots. It will also benefit young people, who are strongly turned off the concept of pensions. For young people in work or perhaps just starting work, who are looking for simple, flexible and easy to understand savings vehicles, the SaRA will be an excellent scheme. I am delighted to be a sponsor of the Bill and, on behalf of my party, I wish it a fair wind.
The Minister for Pensions Reform (Mr. Stephen Timms): It is a great pleasure to take part in the debate, which has been much more enjoyable than I anticipated, thanks to some lively and thoughtful contributions from Members in all parts of the House.
I join others in congratulating the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) on his success in the ballot for private Members' Bills and on his choice of topic for the Bill. It covers a range of complex issues which address concerns that are of great importance to many and to the
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Government. I congratulate the right hon. and learned Gentleman and others who have contributed to the debate on the clarity with which they set out their arguments. It has been a thoughtful, well informed and enjoyable debate.
My hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) was right to remind the House of the dramatic and welcome reduction in pensioner poverty since 1997. She pointed out that there were hundreds of thousands of single pensioners in 1997 whose total income through income support was £69 a week. Today everybody who is a single pensioner is entitled to an income through pension credit of at least £109 a week, and there has been a sharp fall in the proportion of pensioners who are below the threshold for poverty, as a result of that change in particular. The proportion of pensioners in relative poverty has fallen dramatically at a time when income through earnings has risen sharply. My hon. Friend the Member for South Swindon (Anne Snelgrove) made that point powerfully.
My hon. Friend and neighbour, the Member for West Ham (Lyn Brown), was right to emphasise, as did many of my hon. Friends, the importance of a solution to the pensions challenge ahead of us that works for everybody, not just for some. We set up the independent Pensions Commission chaired by Lord Turner to make recommendations on how to achieve that. The commission will publish its final recommendations in just over a month, so it is not a long time to wait. Also, over the past few months we have engaged in a national pensions debate around the country, which we want to continue over the coming months.
That debate is vital for raising awareness of the tough choices that we need to make in the near future. We want people to have a good understanding of the options available to us and to build as broad a consensus as possible, so that we can develop a solution that people can be confident will last for the long term. I welcome the opportunity today to pursue that debate and to help build towards a consensus. My hon. Friend the Member for Worsley (Barbara Keeley) rightly highlighted the importance of the consensus that we are aiming for, and to do that through the vehicle of today's Second Reading debate.
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