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The Minister for Pensions Reform (Mr. Stephen Timms): I want to thank all those Members on both sides of the House who have contributed to the debate for their thoughtful and constructive contributions.
There has been general agreement that the Pensions Commission has done an impressive job. It sifted a great deal of evidence, spoke to a wide range of people, weighed a great variety of opinions and carried out some impressive analysis of its own. As we have been reminded, there were three commissionersa former director-general of the CBI, Lord Turner, last year's president of the TUC, Jeannie Drake, who was mentioned by my hon. and learned Friend the Member for Redcar (Vera Baird), and a distinguished social policy academic at the London School of Economics, John Hills. In producing a unanimous well-thought-through report, addressing all the issues that people have been raising, they have done us an enormous service. We should put on record our thanks to them. They have succeeded in pushing the subject dramatically up the public agenda, causing many more people to reflect on these questions, thereby helping build
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momentum for reform. That opens up the chance of an enduring pensions settlement for the UK, which we all agree would be an enormous prize.
At the start of the debate, my right hon. Friend the Secretary of State for Work and Pensions set out the priorities for pension policy that we identified in 1997. We have dramatically reduced the extent of pensioner poverty, particularly through the introduction of pension credit in 2003, with especially large gains among older womenperhaps one of the most important of all the big social improvements that we have seen since 1997. He was right to make the point that that has made a big change to the landscape, which opens up new possibilities for pensions reform. We have taken steps to bolster confidence in occupational pensions through the Pension Protection Fund and the financial assistance scheme.
Mr. Quentin Davies: It is a pleasure to debate pensions with the Minister again after all these years. When he says that the pension credit has taken a lot of older people out of poverty, he is absolutely right, but does he see it as a one-off achievement, as I do? Do we not now need to return to a rational system in which the means-tested pension does not rise at a faster rate than the contributory pension? Or does he consider that this means-testing must go on
Mr. Timms: I certainly do not agree that we should return to the arrangement whereby large numbers of single pensioners were living on £69 a week. Were we to go back, that would be the position. At the moment, every single pensioner is entitled to an income of at least £109.45 per week, and the Turner report proposes that auto-enrolling people into the national pension savings scheme will enable them to build up savings and a pension, which, over time, would reduce the extent of means-testing. We certainly must not, as the hon. Member for Grantham and Stamford (Mr. Davies) was calling for, go back to the time when large numbers of people were on extremely low incomes. I, too, am delighted to be debating these matters with him again. His earlier contribution took me back to 1999.
We have introduced the state second pension, greatly boosting the savings of those on low incomes and carers. We have also introduced stakeholder pensions, which the hon. Gentleman mentioned, of which there are 2.5 million, making an important contribution and enabling people who could not save economically in the past to do so.
We now have a foundation that opens up the chance of an enduring pensions settlement for the UK. I hope that the optimism expressed across the Chamber today will be fulfilled over the next few weeks as we move towards proposals for reform and a consensus about what we should do.
The hon. Member for Runnymede and Weybridge (Mr. Hammond) was right to draw attention to Lord Turner's statement that there was no immediate crisis for pensioner incomes. I think he was trying to make out that there was a crisis, but I believe that Lord Turner was right.
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I welcome the hon. Gentleman's commitment to a constructive contribution on his party's behalf. He asked a question about something that he has mentioned to me a couple of times, about which I know he has written to my right hon. Friend the Secretary of State. He wanted to know whether he and his colleagues could have access to PenSim2. He will have a response from my right hon. Friend tomorrow. I believe that the position is not entirely straightforward, but my right hon. Friend certainly wants to be helpful.
My right hon. Friend the Member for Birkenhead (Mr. Field) expressed some clear views about what was the right way in which to proceed. He was very critical of the Turner proposals. He mentioned a worry to which a number of people have drawn attention, about the danger of levelling down. That is an important point, although given that many employers currently make significant contributions to defined-benefit and defined-contribution pension schemes, I do not see why, if we made 3 per cent. the minimum, employers would necessarily think it appropriate to reduce their contributions.
The hon. Member for Yeovil (Mr. Laws) described the challenges as he sees them. He is in a slightly difficult position. Shortly before the publication of the Turner report, he committed his party to the citizens pension. When the report was published, he read on page 8 that the citizens pension had been rejected. He tried to welcome the report and say that he agreed with Lord Turner, while still presumably supporting the policy that he announced two weeks before the report's publication. I understand why his speech did not contain a great deal of detail, but look forward to further discussions with him over the next few weeks.
My hon. Friend the Member for Bradford, North (Mr. Rooney), who chairs the Work and Pensions Committee, rightly spoke of the need for a broad consensus, not simply across the House but across society. It will be important to secure consensus across the House as far as possible, as a basis on which to build the necessary confidence that the arrangement will endure. I agree with him that a settlement that lasted for only a few years would not be a successful outcome.
I know that the hon. Member for Grantham and Stamford follows closely what happens in the United States, where there has been a dramatic reduction in coverage of defined-benefit schemes, just as there has been in the United Kingdom. I believe that there has been an even faster reduction in Australia. I know that he heard the speech made by his hon. Friend the Member for Gosport (Peter Viggers), who rightly cited dramatic and continuing increases in life expectancy and stock exchange volatility as the principal drivers of change.
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My hon. Friend the Member for Coventry, South (Mr. Cunningham) was right to refer to the improvements in tackling pensioner poverty. He spoke for many in expressing concern about Turner and Newall. If Turner and Newall does become insolvent at some point in the next year or so, it will enter an assessment period for the purposes of the Pension Protection Fund. I know that that will reassure many people who are in the position that my hon. Friend described.
The hon. Member for Gosport spoke with authority on a number of matters. He suggested that the impact of the tax change in 1997 was £3 billion rather than £5 billion, and that is probably a more accurate figure. Like the hon. Member for Grantham and Stamford, he argued for compulsion, in contrast with the view that his party has advanced. I do not share his pessimism about the Pension Protection Fund. It is important that we keep an eye on the level of the levy that the fund will impose, but the levy will be capped at 0.5 per cent. of scheme assets. That step has reassured many funds.
My hon. and learned Friend the Member for Redcar (Vera Baird) made some important and valuable points about the way in which the pension system has dealt with women. She is right that home responsibilities protection is a cumbersome and odd construct. Her point that a week's work entails losing a year's HRP is not correct, but the way HRP works has all sorts of strange effects. I am certain that, not least because of her efforts and those of our hon. Friends, the question of how women fare under the reform proposals will be one of the main yardsticks in the public debate that will follow publication of the proposals in the White Paper in the spring.
The hon. Member for Ludlow (Mr. Dunne) spoke from the basis of a good deal of knowledge of investment management. I do not entirely agree with what he said about the savings ratio. At the moment in the UK, it is about the same as it was in the 1960s and it is twice as much as it is in the US. The question of what the savings ratio should be is quite a difficult one. I agree that we want more people to save for a pension, but do not believe that having an element of means-testing makes that impossible. Indeed, we have had means-testing of pensioner incomes in the UK since 1908, and it has not been incompatible with adequate pension saving in the past.
We have had a good discussion. The national debate will culminate with the large-scale national pensions day that my right hon. Friend the Secretary of State has announced, which we plan for March, when there will be the opportunity for a large number of people to engage with Government to discuss the commission's recommendations and to consider the choices that we have to make. I am very optimistic about what we can achieve over the next few months, but no Government can solve the pensions challenge on their own. Broad agreement will be key to securing the confidence that we need. I am grateful for the evidence in the debate that, across the House, hon. Members are willing to contribute to that goal.
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