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Mr. Gregory Campbell (East Londonderry) (DUP): I join other hon. Members in commending the Ministers and officials responsible on the successful outcome on the collapsed pension scheme. The broad thrust of the Bill is imaginative. The time bomb that has existed for many years was, as several hon. Members said, like a nettle that had to be grasped, and the Government are to be commended on grasping it.
None the less, my concern about vulnerable groups has not been assuaged, even though I have listened to Ministers and various Labour Members elaborating on it. Many hon. Members have said that we are talking about a group of people who have no interest in pensions. The people involved are mainly female, many of them are in low-paid and part-time employment, and some of them are in periodic bouts of employment. No matter how much we say that an interest in pensions is desirable and beneficial, and is in their own financial interests, they are simply switched off to the concept.
Until we change that mindset, and however much we establish even the automatic enrolment, if an opt out is available on the basis that a small employer finds that it would be advisable and advantageous, at least in the short term, for the employee to avail of it and that that would save the firm and the employee some money, and if it is a matter of signing one or several forms, the onus and incentive will be on that employee, who may have no interest in the concept anyway, to sign the form to secure what they believe to be a short-term gain.
Many other employees stand to benefit if gaps can be filled through the delivery authority. More clarity is required in that regard and I hope that will be provided as the various stages of the Bill unfold. We need to get a Government response on an issue that has been raised by several hon. Members. If we go through the painI believe that it is right to do soof automatic enrolment and we help most people in society, that will be good and beneficial. However, if a hard core of female, part-time and low-paid employees see this as not being a desirable process for them to engage in, if we miss them and still do not target them, and if they are being told, and they are saying, that there is no point anyway because they will be no worse off opting out from a process that they do not feel part of anyway, that will only compound the problem that the Government tell us they are attempting to address. I want to see and hear more tangible ways of ensuring that that hard-to-reach section of employees will be reached as a result of the Bill. If we can achieve that through a process of Government engagement with the various parties, that will be progress made.
I listened with some interest to the hon. Member for Northavon (Steve Webb) who spoke of the women who do not have pension entitlement because of the national insurance contributions issue. I hope that the Government will respond positively to those points, but if they do not I and other hon. Members will be in touch with the hon. Gentleman to see how we can help those women. The Government should be targeting and writing to those women to ensure that they get their entitlement.
Mr. Quentin Davies (Grantham and Stamford) (Lab): I shall start with the Opposition, because we had a truly characteristic and classic performance from their Front Bench this afternoon. We heard a lot of vituperation and aggressive epithets, but no policies, no ideas, no commitment and no sense of conviction. I shall give some concrete examples.
We all know that means-testing is a problem and poses potential difficulties, but should we have it or not? We heard a litany of complaints about means-testing, but no indication of whether the Conservatives would abolish means-testing or increase its use. We all know that generic advice is not ideal and it would be splendid if we could pay for everybody to have customised advice. The Opposition complained about the generic advice proposals in the Bill, but they did not say whether they thought that the taxpayer should pay [ Interruption. ] They do not like being criticised,
but they must understand that they will be. I see that the Opposition Chief Whip is now to be my audience on behalf of the Opposition. We never heard what their view is on generic advice. Would they prefer the Bill to provide for customised advice? In that case, who would pay for it? We did not hear that. Or do they want no advice at all? I presume that that is not the case.
Another example is automatic enrolment, about which we heard much from the Opposition spokesman. He mentioned it over and over again and appeared to be totally against it, but he never said that he would table an amendment to remove it from the Bill. There was a complete abdication and a void where we should have heard some solid and concrete proposals from the Opposition if they want to be taken seriously. It is no use just complaining about things or saying that life is not perfect. We all know that life is not perfect. Compromises have to be made and decisions taken. If one wants to be in government, one has to be prepared to face decisions and come down on one side or the other. We had none of that.
By contrast, the Government deserve to be congratulated on the Bill. It is a historic Bill. It is the first time in our history that we will have a contributory pension scheme that covers the whole work force, every man and woman who is working, unless they specifically opt out. That is a special moment in the history of pensions in this country. It means that everybody who is working will have a stake through the contributory pension system and the equity market in the prosperity of this country. Indeed, through the international equity market and diversification, they will have a stake in the future wealth of the world, and that is enormously important.
In another important achievement, the Government have succeeded in doing something that no other Government have even attempted, which is to provide for compulsory employer contributions. What is more, the Government have managed to do so through negotiation, and that is a fine achievement. Many people would not have put the Governments chances of success very high, but they have succeeded. It is against that background that I wish to make one or two points on issues that are left open by the Bill.
We all agree that there is a problem with means-testing. Some people should not contribute under the scheme because they would be better off relying on means-tested benefits. But the important point is that they are in the minority. It would not be sensible to throw the baby out with the bathwater and say that because that minority will not benefit we should deprive the majority of these new, positive measures. It is however right that some flexibility should be provided, and the Government have done so in allowing people to opt out and through the provision, which the House has so far rather missed in the Bill, for trivial commutation. However, the amount is not actually trivial; it is £16,000.
To take a concrete example: at 8 per cent. the total contribution of someone on £20,000 will be £1,600 a year, so it would take 10 years of cash contributions to reach £16,000. Making a reasonable assumption about the normal market return of those contributions, and as compound interest is rather low at the beginning of a contributory scheme, it would be about eight years before there was any danger of someone losing contributions at all now that the Government have provided for a so-called trivial commutation level of
£16,000. That gives people a long time to think again in the light of changing personal circumstances or different rules about means-testing or pension contributions.
Finally, I should like to express something that the Government may not be able to say so easily. I have no idea what is in their mind on the matter and no idea of the substance of their discussions with the CBI and employers organisations, but it seems to me highly desirable, and natural over time, that the 3 per cent. compulsory contribution by employers should increase. The Australian superannuation system is interesting. It started at less than 3 per cent.it may have been only 2 per cent.but has risen to 9 per cent. over many years; there has been only a slight increase in the burden each year so that it could be absorbed. The House will see immediately that in so far as the compulsory and global contributions increase from a total of 8 per cent. at present to 10, 12 or 15 per cent., we will reach a point when not only will the proceeds of the sums invested through the contributory scheme in terms of an annuity available on retirement be much more significant than at present, which is highly desirable from all obvious points of view, but the means-tested problem will have been relatively eroded over time. Fewer people will find themselves in the perverse situation of having no incentive to contribute to the scheme.
It would of course be highly desirable if the Government could make sure that in future there will be no increase in means-testing, as that would go against the whole logic of the scheme. I congratulate them on a major move forward in that regard, for which they received little credit in the debatedeciding to restore the link between earnings and the contributory national insurance pension. That is an anti-means-testing measure and will enable people to improve their pension income globally without its being negated by the loss of pensions elsewhere through the means-tested system.
Hywel Williams (Caernarfon) (PC): We welcome the Bill, albeit with some reservations. Many of us have long awaited consensus on pension provision after the difficulties and complications of the past 25 years, beginning with the Thatcher Governments disastrous decisions about the state earnings-related pension scheme and the breaking of the link between pensions and earnings.
In the interim, pension provision, particularly for the least well-off, has too often been characterised by confusion, missed opportunities, mis-selling and sharp practice or, disastrously, no provision at all for many people, including many of the self-employed, some of whom are my constituents. That has left pensioners with a well-founded sense of grievance.
Unfortunately, public trust in pensions in general has been undermined, which is reflected in the growth of forms of investment that are obviously less safe. Recently, I was ill for a week and watched some daytime television. I was amazed and dismayed by the property programmes, because so many people thought that investment in what looked like extremely dodgy foreign property would be a more desirable nest-egg than investing in a pension.
The Bill has particular relevance for Wales and Scotland. In Wales, we have proportionately more pensioners and lower pensioner incomes, and there is significant under-claiming of means-tested benefits. Twenty-two per cent. of Welsh people are over 60 and the number is projected to rise to 29 per cent. in 20 years time. Many of those people will be very elderly and, as we know, elderly people have smaller incomes.
Pensioner incomes in Wales and Scotland are lower than those for the UK as a whole. Let me give some figures for the past three years. The net income per week for pensioner couples is £338 in Wales, £347 in Scotland, £365 in the UK and, interestingly, £445 in south-east England. Single pensioners net weekly income is £164 in Wales, £170 in Scotland, £171 in the UK as a whole and £189 in outer London. Obviously, we would welcome any steps towards improving pension provision, particularly for the less well-off. I have not even taken account of lifespan issues, which are particularly relevant.
I am glad to say that there has been great progress in reducing poverty in Wales in the past 10 to 15 years, not only in income terms, but through measures such as free bus travel for pensioners and free prescriptions for all. In 1995, a quarter of low-income households in Wales were pensioner households; now it is a fifth. The figure is down from 25 per cent. to 20 per cent., which is welcome. However, 150,000 pensioners in Wales are still in poverty. Significantly, 30,000 of them would be lifted out of poverty if they took up in full the means-tested benefits to which they are entitled. I shall make a general comment, as the Secretary of State for Work and Pensions is also the Secretary of State for Wales: given that the Government are irrevocably wedded to means-tested benefits, I would welcome a vigorous take-up campaign to make sure that pensioners take up the money to which they have a right.
Hon. Members will have heard the Minister for Pensions Reform assert in Question Time that the start date will not slip from 2012. I hope that he will not regret those words at his leisure. I also hope that he will reassure the House that employers will not see the Bill as an opportunity to establish a ceiling, rather than a floora point that other hon. Members made, too.
I now turn to my main concern, which is the relationship between existing provisions, particularly means-tested benefits, savings and other pension provisions. That relationship can seem fiercely complicated to many people, and that leads to confusion, badly uninformed decision making and subsequent potential loss of income. The advent of personal accounts may complicate matters in the minds of some people. There must be careful consideration of the relationship between personal accounts and means-tested benefits, not least, as has been said, to make sure that it pays to save.
Many years ago, I was involved in advising claimants. Some hon. Members will remember the infamous better-off calculations that we used to do, to determine whether people were better off on unemployment benefits or family credit, as it was then called. The calculations were fairly complicated for benefit advisers, but for ordinary claimants they had the character of one of the lesser branches of mediaeval theology; people just did not understand. I repeat the plea for the wide availability of good-quality information. Advice must be available, and not just from the personal accounts delivery authority. As the Minister will know, Age Concern is pressing for
that, as are other bodies. People will need detailed, clear, face-to-face advice, if that is possible. It is expensive, but we are talking about peoples income for the far future. The advice should cover all provision, including savings, and not just personal accounts.
Lastly, I have two points of a more local and domestic nature. I shall take this opportunity to make my traditional demand that all the information and advice services in Wales be made available in Welsh and English, particularly given the linguistic preferences of many of my constituents, and the linguistic preferences and abilities of some older people in Wales. I urge the Government to liaise with the Welsh Language Board on those matters at an early stage. Finally and happily, I am sure that the Minister will welcome the announcement at the weekend of the appointment of Ruth Marks as Commissioner for Older People in Walesthe very first such commissioner in the world, as far as I know. The commissioner is appointed specifically to work on the remit of the National Assembly for Wales. However, I hope that the Government will assure us that they in London will not raise artificial barriers, but will work closely with the Assembly and the commissioner on matters to do with older people.
Harry Cohen (Leyton and Wanstead) (Lab): This is a genuine attempt by the Government to tackle the serious problem of under-saving, too few contributors and insufficient contributions. Some 7 million people have not saved enough for their retirement. Half of them are over 35, and only a sixth of 20 to 24-year-olds are saving for retirement. Only 40 per cent. of people earning between £5,000 and £30,000 a year are saving towards their pension, so there is a serious problem.
In the short time available, I shall make some brief points. First, contributions are too low. Turner said that contributions of 8 per cent. would bring about a 45 per cent. replacement ratesomeones pension level, compared with what they earnedwhich is a long way from the figure of two-thirds that most people regard as acceptable. I think that the figure will be much lower, because someone who has not saved enough at 30 will not get anywhere near 45 per cent. There will be much less for people who have undergone periods of unemployment. The figure depends on unspecified stock exchange gains and on administrative charges being kept down. That might not happen, so it is likely that employers contributions will have to be increased. The state may have to target measures on low-paid and older workers. Tax relief of 1 per cent. may not be enough, especially for the low-paid.
Those on low incomes are of most concern to me. They may not benefit as they shouldin some cases, not at allfrom the personal accounts system. People may be ineligible because they are too poorly paid and have multiple jobs. The way in which the system has been set up is wrong. Individuals who are over the lower limitperhaps they have two jobswill not receive money from their employers to match their contributions, which is not reasonable. A great deal has been said about the issue of older women, who have sought entitlement to a higher basic state pension. It is not right that the Government should cut their options and not provide that higher basic state pension. I hope
that the Government will make a commitment to return with proposals to help those women increase their pension entitlement.
The relationship with the means test is important. There are two splendid articles by experts in the current edition of Parliamentary Brief. May I say to Ministers loud and clear that saving must be worth while for low-paid individuals who contribute to personal accounts? It is not right that they should be caught up in the means-testing problem and end up with nothing. I urge Ministers and the Secretary of State to look at the issue to ensure that they get something. Hopefully, the Bill can be changed in Committee or afterwards. I agree with the point that my hon. Friend the Member for Luton, North (Kelvin Hopkins) made about higher-rate taxpayers. The Bill provides for the overall reform of pensions, and for them to be left out so that they can carry on receiving their £21 billion or whateverthe figure is in the tens of billionsis not right. The overall reform package should be skewed towards low earners so that, to coin a phrase, we end up with pensions and pension tax relief for the many, rather than the few.
The Bill is a laudable effort, but significant reform was required, not just because of the crisis in savings for retirement but because of the other side of the balance sheet. We are going to raise the state pension age, which will go up to 66 in 2024; to 67, 10 years later; and to 68, 10 years after that. Those changes might not have consensus anyway, but they certainly will not if the other side of the reform package is not generous enough. Again, I urge Ministers on the issue. There are still issues of differences in life expectancy and health inequalities, especially for the lower socio-economic groups, and they must be addressed. I am concerned that the raising of the state pension age will affect the poor the most; one independent organisation said that it would be immoral to force the poorer sections of the population to wait longer for their state pensions just to save those who are richer some tax. As I said, the reform needs to be much more substantial for the socio-economic groups at the bottom of the ladder.
Mr. Nigel Waterson (Eastbourne) (Con): It is always a pleasure to follow the hon. Member for Leyton and Wanstead (Harry Cohen), who always speaks with total conviction on these matters. This has been a wide-ranging debate and I thank all hon. Members on both sides of the House who have taken part.
As we enter a new year, we see that the Government have learned nothing new. The age of spin is still alive and well. In his press release about the Bill, issued this morning, the Secretary of State seemed to be in total denial about the real and current problems in pensions. In it, he talked about the
nightmare of a future pensions crisis.
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