Previous SectionIndexHome Page

6 Dec 2005 : Column 754

Point of Order

4.20 pm

Mr. David Winnick (Walsall, North) (Lab): On a point of order, Mr. Speaker. Obviously, you know that Foreign Affairs questions are due to be answered after the recess, on 10 January. There is a great deal of concern among many people, including hon. Members, about the possibility—indeed, the reports—that the United States is using UK facilities to transport terror suspects around the country. There are also allegations about interrogation centres, or torture centres, in various parts of Europe, although reports do not state that they are located in Britain. It would be useful if, before we break for the Christmas recess, the Foreign Secretary came to the Chamber to make a statement and answer questions.

May I make a final point to you, Mr. Speaker? I am not allowed, as you know, to refer to any internal House of Commons matter, but I thought that, when the procedure changed a few years ago, the wish was that it should be possible broadly to raise topical and urgent matters on the Floor of the House pretty promptly. As matters stand, the Foreign Secretary is not due to answer questions until 10 January. Such things are reported widely in newspapers and on television and radio, yet we cannot discuss them in the House of Commons.

Mr. Speaker: The hon. Gentleman's experience goes back a long way. In fact, he and I first came into the House on the same day. He will know that private notice questions are now called urgent questions, but the granting of such questions remains at the Speaker's discretion. Of course, I will not go into why I refused him an urgent question. Given his vast experience as a parliamentarian, he knows that, if he wishes to bring the Foreign Secretary or an Under-Secretary before the House, he can apply for an Adjournment debate. That would be a nice way of doing things. Again, the Speaker has some discretion in those matters, and there is a very fair ballot indeed.

6 Dec 2005 : Column 755

Employment (Advertisement of Pay and Pension Rights)

4.23 pm

Mr. John Denham (Southampton, Itchen) (Lab): I beg to move,

Having been a Member for some time, I appreciate the way in which the ten-minute Bill procedure enables Members to make proposals that do not claim to revolutionise or transform our way of life but merely aim simply and practically to make things a bit better. I make no more claim for this Bill than that—a simple, practical and small change that would make pensions a bit better.

When I first sought a date to introduce the Bill, I did not realise that it would follow so quickly after the excellent Pensions Commission report. I was understandably nervous that my fox might be shot before today arrived. In fact, I am confident that the Bill would work effectively to support the Pensions Commission's recommendations. This is not the time to rehearse the detail of Lord Turner's proposals, but, as everyone now knows, he proposes a sensible balance between tax-funded, state-paid pensions, sufficient to lift most people out of means-testing, and invested pensions.

Even if—or, as I hope, when—the basic framework of the Turner report is implemented, state pension provision will lift most men and women only just above the basic level of pension income means-testing. A comfortable retirement will depend on the size of their second pension. My concern today is to support invested pensions and Turner's aim of encouraging

through which employers provide more generous contributions than those in the proposed soft compulsion scheme.

The first report of the Pensions Commission showed that good quality employer pension provision is on the decline. It estimated that active membership of defined benefit schemes had fallen by 60 per cent. since 1995. It found that although a quarter of private sector employees were still members of salary-related schemes, only 14 per cent. of new employees were in such schemes. The report concluded:

defined benefit

Of course, when defined benefit schemes are closed, they are usually replaced by defined contribution schemes of one sort or another. Overall, Turner's judgment was that membership of employer provision was flat, or perhaps declining. However, it is clear that the average employer contribution to defined schemes is much lower than that to traditional defined benefit or final salary schemes. Employer contributions to defined
6 Dec 2005 : Column 756
benefit schemes were estimated at about 11 to 14 per cent. of salary, whereas such contributions to defined contribution schemes were about 4 to 7 per cent. Despite that downward trend, it is clear that employees with any employer contribution to their scheme are general much better placed than those with none.

We could debate the reasons for the decline in the best quality pensions at some length. There are many factors, and as a former Minister with responsibility for pensions I would have to include among them well-meaning regulation passed by Governments of both parties in response to the fears and concerns of our constituents. However, probably the most important factor is simply the changing nature of the competitive economy. The type of larger company that traditionally provided a good pension scheme is in long-term decline. It might be that the best final salary schemes never made hard, bottom-line economic sense, but such schemes were widely seen as part of companies' corporate social responsibility. By having such schemes, those companies made a significant contribution to not only their own success, but the wider economy.

Today's economic environment is much harsher and more globally competitive. Although many employers still understand the mixture of altruistic, paternalistic and self-interested arguments for good pension schemes, they are increasingly likely to be challenged by shareholders and accountants. In a competitive economy, some companies compete for business by cutting pension provision, or not making any provision at all. As always, the worst can drive down the standards of the rest.

We will still need good employer provision, even when Turner is implemented. The Pensions Commission report makes it clear that its proposals for state pensions and the soft compulsion of the national pension savings scheme would give average earners pensions of just under half their salary when they retire—and that would be at the older retirement age. If people want to receive traditional benefits such as those from a final salary scheme, or if they want a pension that is big enough to allow them to take early retirement, or a less pressured or part-time job before they get their state pension, they or their employers will need to make additional contributions.

If we want to retain the best employer provision that we can, we need to examine new ways to encourage and support good employer provision over and above the minimum that all employers should be required to do. We need to look at ways in which employers can see a clear business case—a clear labour market advantage—from a good pension scheme. That is precisely what the Bill is intended to do. It aims to make the value of employer pension contributions explicit to potential employees. By doing so, it will give better employers an edge in the labour market.

Most people simply do not realise how much a good employer's pension scheme can add to the value of a job. As a result, the quality of pension provision appears to play little role in determining the attractiveness of an employer to potential employees. However, it should, and this Bill would help to ensure that it did.
6 Dec 2005 : Column 757

Let us consider a job that would normally be advertised at an average salary of about £24,000 a year. According to Union Pension Services, a good typical final salary scheme is worth an extra £3,400 in employer contributions each year, so the job would be advertised not at £24,000, but at £27,400, which is an increase of 14 per cent. A typical public sector final salary scheme—of course these are now closed to new entrants, but I had to do these calculations on the figures available—is worth about an extra £2,900 in employer contributions, so the job would be advertised at a combined value of £26,900. A typical money purchase scheme is worth an extra £1,200 in employer contributions, so the job would be advertised at a combined value of £25,200. In comparison, a job that paid £24,000 a year where the employee is in the state second pension scheme but receives no additional contribution would be advertised at £24,000. For information purposes, a self-employed person would need to receive about £24,700 a year to gain the same financial benefit as an employee in the state second pension.

The Bill is a small practical step that will reward good employers by helping them to recruit and retain staff. It will make sure that the best employers can easily be identified by potential employees. It will also help to guard against the danger of the 3 per cent. employer contribution to the national pension savings scheme proposed by Turner becoming the standard employer contribution, rather than the baseline or a minimum. Any lasting pension reform will require a good deal of consensus across parties and outside the House, so I am pleased that my Bill has cross-party support. I pleased, too, that it has received the support of the National Association of Pension Funds—the leading voice of workplace pension provision in the UK. There are 10 million working people in NAPF member schemes,
6 Dec 2005 : Column 758
and about 5 million pensioners receive retirement income from such schemes. The NAPF chief executive, Christine Farnish, said:

Age Concern, too, has welcomed the Bill and has referred to research from the Labour Research Department showing that more information about company pension schemes was the most common demand from people who have not yet joined a scheme.

Of course, the Bill would not place any additional burden on employers. I envisage that a standard actuarial approach would be agreed across the economy and that guidance to employers on the calculation of benefits would be provided each time the scheme is revalued. This is not a revolutionary Bill but it is a small, practical step that would make some improvement to pensions, so I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. John Denham, Ms Sally Keeble, Rob Marris, Dr. Alan Whitehead, Mr.   Richard Benyon, Chris Huhne, Mr. Frank Field, Huw Irranca-Davies, Nick Herbert and Mr. Philip Dunne.

Next Section IndexHome Page