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We should focus on clause 3(5), which will enable employers to be exempt from the requirement to offer personal accounts if they offer group personal pensions, or GPPs. Many hon. Members agree that the exemption of GPPs from automatic enrolment, forced on this country by European laws with no control by this democratic Parliament, would be totally unacceptable. I was not at all convinced or comforted by the Secretary of State’s comments in his introduction to the debate. He was quite woolly on the subject, and the Committee will no doubt want to investigate that carefully. The
House should fight back and do whatever it takes to remove that EU enforced exemption and to take control of this Parliament away from unelected EU Commissioners.
We must find a way to reject EU laws that prevent auto-enrolment into GPPs and would, as Age Concern points out, fatally undermine the principle of the Bill by encouraging employers to side step contributions in to personal accounts. That loophole must be closed.
The Bill should protect members from excessive charging and from poor investment performance. Clause 62(2)(d) sets out that
“the cost of membership of a scheme...should be minimised”.
We need to hold down scheme costs to an annual management charge of no more than 0.3 per cent., and less if possible. That limit should be specified in the Bill. We have specified the 3 per cent. that employers must pay, as well as many other things. Why cannot we put a specific limit on the costs?
People must feel that saving in their personal accounts is totally secure and good value, or else the accounts will fail. People will not have that confidence at a time when, sadly, they doubt the integrity of political parties. Public trust in politicians and Government is at an all-time low, so promises from politicians will not help. People must have clear, unequivocal and permanent guarantees that their money is safe in personal accounts and that they will benefit from saving in them and not be punished through the means-tested benefit system.
Advice will be crucial, as we have heard this evening. It is in society’s best interests for the Government to ensure that good financial advice is readily available to everyone, and particularly the low-paid, as they plan for retirement. If people receive good advice and have confidence, we may see personal accounts dramatically improve the levels of pension savings in the UK. That is what we all seek. That will lead to far fewer people retiring into relative poverty and falling on to means-tested state benefits in the future.
Finally, as I have said before, it is time to take the politics out of pensions and to give pensioners the decent deal that they so richly deserve. If the excellent people of Castle Point allow me, I will fight for the better pensions that they need month by month and year by year. I will fight to force this Government—and the incoming Tory Government whom I expect at the next election—to give current and future pensioners specific delivery of the better pensions deal that is promised by the Bill and that is so long overdue.
8.19 pm
Richard Burden (Birmingham, Northfield) (Lab):
It is a pleasure to follow the hon. Member for Castle Point (Bob Spink). I had some difficulty in reconciling his plea to take the politics out of pensions with the content of his speech, especially the early part. Time prevents me from rising to most of his points about the Government’s record. I simply say that, if he was present at the start of the debate, he would have heard my right hon. Friend the Secretary of State referring to our commitment to restore the link between pensions and earnings from 2012. He may also have heard the rumble of discontent that emanated from the Opposition Benches. I heard one hon. Gentleman
saying that the commitment would bankrupt the nation. If there is to be a shift in Tory policy, perhaps the hon. Gentleman should take account of it.
The Bill represents the second stage of implementing the sort of proposals that emerged from the Turner review, and it has much to commend it. The problems, as many hon. Members have said, are stark: more than 7 million people do not save enough for their retirement, and only half those aged 35 or over and only one sixth of 20 to 24-year-olds are saving for a pension. The problem is most acute among low and medium earners.
The Bill introduces several measures to tackle the problem, including reforming private pensions saving to ensure that qualifying workers are enrolled automatically into workplace pensions and providing for compulsory minimum employer contributions. There is much to commend both proposals, but I ask my hon. Friends on the Front Bench to take seriously some of the points that have been made, especially about the level of contribution. As my hon. Friend the Member for Aberdeen, South (Miss Begg) said, there may be a case for staging the amount, but it is important that we take seriously the point that my right hon. Friend the Member for Birkenhead (Mr. Field) made about not allowing a minimum to become a maximum.
Although there is much to commend automatic enrolment, the relationship between that and means-testing is a genuine problem. There are no easy answers and anyone who pretends that there are has missed the point. In addressing the problem, I ask my hon. Friends on the Front Bench to consider a couple of matters. First, when the pension credit was introduced, its main thrust in the 1997 to 2001 Parliament was an incentive to save. Over time, it was merged with the minimum income guarantee, so that when people refer to the pension credit today, they tend to mean the lower rather than the upper element of it. There may be scope for reconsidering and perhaps rediscovering some of the early purposes of the pension credit to try to deal with the problems.
Secondly, and perhaps more radically, I was struck by the point that my hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) made when she rightly asked the Secretary of State to examine the position in Sweden and the value of good pension forecasts covering all elements of pension provision. The answer given was that, although there was something in her point, the pension structure in Sweden is different, and based much more on state provision. There are times when we should reassess the balance between state and private provision. Perhaps we can learn one or two things from the position in Scandinavia.
I mainly want to concentrate on confidence. My right hon. Friend the Member for Birkenhead spoke graphically about the “walking newspapers” of the families of the 125,000 members of collapsed schemes. If their position had not been addressed, there would have been a gaping hole in confidence in pension provision in this country. I want to add my thanks to Ministers for grasping the nettle. I especially thank the current ministerial team, but I want to say something about previous Work and Pensions Ministers—one of them, now the Minister for Competitiveness, has just sat down on the Front Bench—because although I, and doubtless others, crossed swords with them for many years about the need to do more, it is fair to
acknowledge that they were trying to do what they could at the time. I therefore pay tribute to their efforts, but particular credit must go to the current ministerial team for grasping the nettle and concluding the years of campaigning just before Christmas.
The matter says something about the way in which we achieve political change in this country. It was partly to do with Ministers and partly to do with colleagues in this place, who maintained the pressure, month in, month out and year in, year out; it was certainly to do with the unions, which kept up the pressure and the campaign from outside, and with the tireless campaigners outside this place. It is worth mentioning Ros Altmann and her campaigning. Her representations were not always comfortable, but she was tenacious and her commitment is unquestioned. Ros Altmann urged us for years to consider the position of the existing assets of the failed schemes and putting them to use. That became a vital part of the Young review.
Most of all, we need to thank and pay tribute to the members of the collapsed schemes. Kalamazoo, one of the firms whose pension fund collapsed, is in my constituency. Members of that pension fund and those of other schemes, such as that of ASW, put in effort at which many of us can only marvel at a time when they were worried about not only their futures but security in retirement for their families. They kept up the pressure and refused to take no—or even maybe—for an answer. People such as Peter Wheeler and Brian Mealings, former Kalamazoo employees, were at the centre of the campaign from the word go. It is right to pay tribute to them.
All the people whom I have mentioned played a role in bringing the issue to a conclusion. As I said, that says something about the way in which we achieve political change in this country.
I welcome much of the Bill. Many hon. Members referred to the detail—doubtless, many issues will be considered further in Committee. The measure will provide a framework for stronger pension provision than we have had for some time. However, difficult decisions will still need to be made, not only about what is right but about the protections that will be needed—not tomorrow or next month, but in 20, 30 and perhaps 50 years. That will need to be combined with decisions about what is affordable.
There are many issues to consider, but I want to refer briefly to Baroness Hollis’s proposal in another place. The Government presented a powerful argument about the affordability of her proposal and whether it would achieve the intended aims. However, the problem of women’s pensions remains. If the method of tackling it in Baroness Hollis’s proposal is not correct—it may not be—it nevertheless remains unfinished business. I hope that, as the Bill proceeds, Ministers will revert to the issue and tackle it in the coming weeks and months.
8.27 pm
Mr. Graham Stuart (Beverley and Holderness) (Con): It is a pleasure to take part in the debate and to follow the hon. Member for Birmingham, Northfield (Richard Burden).
The debate is against a background of pension tax, which devastated and undermined what at least one Labour Member recognised as one of the strongest
pension systems in Europe. As my hon. Friends have said, we have witnessed the calamitous loss of defined benefit pension schemes, partly as a consequence of such undermining. The hon. Member for Nottingham, South (Alan Simpson) powerfully showed that under this Government a massive escalation in personal debt has eclipsed the amount of national wealth created in a year. We must consider the Bill, which appears to be fair and on which a degree of consensus has been built up, against that backdrop.
The Secretary of State tried to use the consensus, which is based on the need to encourage saving for the future because things are so uncertain in the future, like a hammer to oppose anyone who questioned him. The consensus is that those with the least in our society need to have a stake in society and security in old age, but that will not come from filling in long, complicated documents to obtain their council tax benefit, to pay their rent, to purchase food or to buy a present for their grandchildren. That is the current situation, when 1.5 million or more pensioners who are eligible for benefits do not claim them for reasons that hon. Members on both sides of the House decry.
When the Minister for Pensions Reform winds up the debate, I ask him not to suggest that anyone who thinks that there are problems with the specifics of how the Bill will work is engaged in political point-scoring, which is the last thing that anyone wants to do. I am certain that my hon. Friend the Member for Epsom and Ewell (Chris Grayling) did not seek to do that in his measured, solid and serious contribution to the debate, which, sadly, followed a weak effort, which would have been hilarious if the issue were not so serious, by the Secretary of State. The Secretary of State’s contribution was poor.
Mr. Stuart: I will press on, because I want Ministers to tackle the substance of the issues.
When the Minister for Pensions Reform intervened on my hon. Friend the Member for Epsom and Ewell, he sounded angry and indignant that anyone would suggest that there is an issue with low-paid people paying in for long periods of their lives when they cannot afford it and ending up with no benefit at the end of their lives. Surely Labour Members have some care and some concern—the old Labour party would have done so. Perhaps Labour Members of 20 years ago would have shown more social conscience.
Few current Labour Members have worked in the private sector. It is outside their safe, cosy work environments, which are normally very close to the Labour party, so they have no idea about the harsh realities for the people whom the Labour party traditionally sought to represent. The abnegation of responsibility for those people and the failure to tackle means-testing are the central problems.
Let us consider the reality in small firms. Again, I understand that Ministers have no understanding of what it is like to run or work in a small firm, because so few Labour Members are involved in private business. The 3 per cent. contribution by small businesses may have a serious short-term impact, as the final Pensions
Commission report stated, but ultimately it will come out of what would have gone in pay to the employee. The money will not magically appear from the employer’s secret pot. Employees of small businesses are often on low earnings and might have student debt or credit card debt, which has been promoted in the past few years. The employer will have a conversation with an employee who earns £16,000 a year about whether that employee should take out one of the pension schemes. Can any hon. Member on either side of the House say that they would advise someone who earns £16,000 a year and whose career trajectory does not suggest that they will ever earn vastly larger sums that they would be better off contributing towards the scheme, when we have no vision of a future picture of means-testing?
The Secretary of State lashed out angrily, but he gave us no light. We need certainty and a consensus on what will happen with means-testing over the next decade so that people can make a rational decision about whether they should proceed. The truth is that many people who should be saving for their pension will not do so, because it will become known that it is not a wise thing to do. Ministers have singularly failed to tackle that issue.
Turning to the powerful and devastating speech by the right hon. Member for Birkenhead (Mr. Field), we are at risk of a double whammy. Ministers are laughing, because they are so out of touch with ordinary people that people making contributions and losing out is of no matter to them. They say, “The consensus is all. We must be seen to take action.” We face levelling down, because the minority who currently have decent pension provision in the private sector will see it decrease and the contribution by employers reduce in tough times. At the same time, those who should not be contributing to such a pension will be doing so out of very low earnings, when they have high levels of personal debt and their personal situation does not suggest any long-term benefit to them. They will do so, and will lose out. If Ministers do not take some of the issues raised across the House seriously, we could end up with a Bill that causes double damage to the British pension system.
Another topic that we have not heard anything about—I will be interested to hear from the Minister about it later—is protection. It is easy for us in this House to say, as the hon. Member for Aberdeen, South (Miss Begg) and other hon. Members did, that pensioners must be protected. Quite right. We all want them to be protected, but how will they be protected? What is there in the legislation that gives them protection? We have heard the rosy views of Ministers about what the return will be on the investment of the moneys put into this fund, or some aspects of it, but what if those returns prove to be disastrously poor? What guarantees are there? We could end up with a triple whammy, where people on low earnings who have made a contribution receive very little back, and who end up finding that the money they have invested has also done extremely badly, so that they lose out yet again. It is a serious issue, and I hope that the Minister will return to the question of what we can do to guarantee the benefits for people who invest in such a way.
I have to disagree with my hon. Friend the Member for Castle Point (Bob Spink), who suggested that it should be easy for us to support the idea of people being able to contribute lump sums—although he did
say, to be fair, that they should do so with the right advice. Having read the Bill, and on the basis of the provisions we have seen so far, we can have no certainty about such advice being properly available for those who are most vulnerable and likely to take a bad decision. Without that certainty, and reassurance on that point, we should not support a measure involving lump sums.
The Secretary of State talked about auto-enrolment. He said that it would be extremely difficult for someone to opt out. We have just talked about the many people who could find that it is not in their financial interests to opt in finding it extremely difficult to opt out. I would like the Minister of State to expand on what is meant by that, and on what the mechanics will be to prevent it from happening. I expect that there will be a form. Many employers of people on low earnings, or of part-time workers, women workers or people with broken careers, would be quite likely to have such a form available in a filing cabinet. They will pull it out, put it on the table and say, “What do you want to do about this reduction of 4 per cent. from your earnings, then?” The answer will be, “I’d rather not have that loss of 4 per cent. when I’ve got credit card debts, Christmas coming up and I’m in serious financial difficulties trying to look after my family.”
The truth is that such a form will be on the table. It will not be extremely difficult; people will just sign it. We then have the prospect of Ministers of this Government—it would be sad if they were still in power—desperately going round trying to prosecute employers for their irresponsible encouragement of people opting out of a scheme, which, as far as their employees are concerned, is highly unlikely to be of benefit. I will be interested to hear the Minister respond on that point.
It is in the detail that we will find out whether more people will benefit from the scheme than lose out because of it. Much of that detail is left to regulation, and we could do with hearing from the Minister—we did not hear from the Secretary of State—about whether regulations will be subject to affirmative resolution, or whether the Government will be able to push such measures through. This matter will be of enormous importance for millions of people for a long time, and it is important that the House scrutinises any regulations made by Ministers.
The right hon. Member for Birkenhead described this Bill as dangerous. He suggested that there was a chance of a serious mis-selling scandal, but there would be no one to take to court over it, apart from a discredited Government who would be long gone. That is no position from which to move forward on the basis of consensus for the long-term benefit of people in this country, not least those who have least, whom we should be concerned about the most. One would have thought that a Labour Government would be concerned, but, as my hon. Friend the Member for Castle Point pointed out in his powerful speech, the amount spent on the elderly by the Government as a percentage of GDP has reduced over time. This Government need to take seriously all the contributions made, and the criticisms of the current situation, if we are to have a proper set-up for the future.
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