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Baroness Hollis of Heigham: As we have heard, the amendment tabled by my noble friend Lady Castle would insert a condition that Part I of the Bill should not have effect until comprehensive legislation has been introduced on our wider proposals for pensions reform. Behind this lies a belief held by my noble friend that our pension plans are incomplete and that they are secret--indeed, I think she actually said that our policy was to fragment and confuse. In other words, we need the comprehensive policy laid out so that people can understand where this part of the Bill fits, and only then would she feel able to give it a possible endorsement.

I take the criticism in the point made by the noble Lord, Lord Higgins, that if you were to rely on the document cited in the amendment--namely, Principles into Practice--you would find that it does not say very much about the detail of pensions. Therefore, my noble friend is right: there is no coherent pension policy in it to enable her to put what we are proposing today into context. But, as that document made clear, it was never designed to do so. It was the first document and was subsequently followed by the major pensions document Partnership in Pensions, which came some nine months later. The first document was produced in March 1998, but the latter came out in December 1998 and was introduced by myself by way of a Statement. Indeed, my noble friend was one of the most senior contributors to the debate which followed.

Therefore, I take it as being a little odd that my noble friend should claim that the Government have not produced a coherent policy which they have brought to the House as a framework document within which the policies of the Bill can be understood, appreciated and debated. We did precisely that last December and, as I said, my noble friend was one of those who took part in the debate and who pressed me perfectly properly on her concerns. I hope, therefore, that my noble friend will accept that her basic premise--namely, that the Government do not have a policy, or, if they do, they are concealing it--is simply unfair. She must recognise that fact because she took part in that debate.

My noble friend has rightly said that we need more detail, as indeed have other noble Lords. That is perfectly reasonable. We are producing that detail in a series of consultation documents which will go out to the appropriate bodies. On the basis of that, we shall issue our proposals. That is surely the right way to proceed. This is a highly technical process, involving a major sector of industry and we are handling it in that way. To say that we have no coherent framework simply runs in the face of this document, especially when my noble friend contributed to the debate on it last December.

In that Statement, in the subsequent debate and in this document, we made clear that our approach is to build a modern and affordable pensions system which will ensure that everyone has the opportunity to achieve a decent income in retirement. No Member of the Committee today has disagreed about the substance of

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what we need to do. But if we leave pensions are they are, too many people will passport the inadequacy of low wages into the poverty of old age. My noble friend and I entirely agree in one respect: we want to ensure that today's pensioners and, above all, tomorrow's pensioners can enjoy as comfortable a retirement as possible.

My noble friend obviously prefers to argue the case of the SERPS proposals that she established in 1978. She was right then to do so. SERPS served some pensioners well, but I have to point out that it does not help those who need it most; that is to say, those on low earnings or those who move in and out of the labour market. Equally, as has already been said, occupational pension schemes are one of the great welfare success stories. But, as we all know, they are not available to everyone. Personal pensions can be a useful substitute for those who do not have access to an occupational scheme or those who change jobs frequently. But, again, as everyone knows--indeed, as we have said time and again in this Chamber--they are not suitable for everyone, especially those with moderate or low earnings or where the scheme carries heavy charges that can top-slice 25 or even 40 per cent off the pension of those who contribute for only a modest number of years.

We know that the combination of SERPS, occupational pensions and personal pensions does not now address the problems of the modern labour market. As my noble friends Lord Haskel and Lady Crawley emphasised in their contributions today, we have to adapt that pension framework to pick up those who are currently falling between the holes and the meshes. That is why we produced this document--121 pages of it--laying out where we want to go, followed by consultation papers which have gone to those in industry. We have not gone by the rules for consultation documents because the industry would have been perfectly right to complain.

We know where we are going. I would have hoped that your Lordships also knew where we were going. We seek to deliver a pension promise to those who are at present ill served by the offers in the market-place to ensure security in retirement. We have not been slow in doing that, despite the charges made by my noble friend.

We introduced last April the new minimum income guarantee, which provides immediate help to today's poorest pensioners--often the elderly widow in her late 70s or 80s who has never had the chance to build a decent pension--and we have increased income support by three times the rate of inflation, so that single pensioners receive £75 and couples £116. To ensure that the value of that is maintained, next April the increase will be based on earnings and our long-term aim, if resources permit, is for that minimum income guarantee to be increased in line with earnings, so that all pensioners share in rising national prosperity.

We believe that helping through the minimum income guarantee is the most effective way of helping those currently in need. It makes a real difference quickly to those who are poorest. But that is not all we are doing. In addition, we introduced winter fuel payments at a cost

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of £200 million, increased them in the Budget to £100 a year, and have provided extra help in terms of VAT, scrapping eye-test charges, and so on.

Those are the first steps. We will also set out our plans to reform state and private pensions so that everyone with a lifetime of work and caring behind them will build up rights to a pension that will take them above the minimum income guarantee. That is a safety net and we want to lift people above that safety net as far as we can. How are we doing it? The answer is in two ways: we are going for a state second pension and for a stakeholder's pension. At the moment, SERPS covers something like 7 million people. We expect 5 million of those to go into the state second pension.

As a result, because that state second pension will assume that anyone earning between the lower earnings limit of £3,400 (or whatever) to £9,000 will receive a pension as though they were earning £9,000 a year. It will be more distributive--as my noble friend Lord Peston called for that--than anything we have so far seen in the pension world. Anybody on an income of £3,500, £4,000, £5,000, £6,000 and so on will get a state second pension as though they were earning £9,000 a year. That is something SERPS could never do, because it was earnings related. It gave the least help to those who needed the most help. That is why it is not an adequate framework for our future.

So part of our policy will be a state second pension, with carers and disabled people credited into it. We expect, therefore, that in that new state second pension there will be 5 million people: 4 million coming from SERPS; half a million from personal pensions; half a million from occupational pensions and perhaps 2 million carers. Of the other 2 million people currently in SERPS, we would expect the equivalent number to go into the stakeholder pension, which is safe and financially more generous than people could get under SERPS. That is why we have a two-tier policy. We expect that the state second pensions to attract 2 million from SERPS, plus 2 million from an approved personal pension and, of course, those who are very badly served in the pension market at the moment--the 1 million people who are self-employed.

That is where we see the present SERPS "clientele" going. Those who are among the poorest, earning under £9,000, will go into a second state pension, unfunded, pay-as-you-go, but genuinely and decently redistributed so that the poorest get the same as those who are on £9,000 a year, which SERPS never did. For those earning over £9,000 and up to £18,000 or £20,000, we are for the first time going to offer the stakeholder pension, a second pension in which the rebates have been recycled to produce a pot which will be available for a funded pension which is portable, cheap, secure, properly governed, available to the self-employed and which, if you are out of work for whatever reason for up to five years, you can continue to keep ticking over.

Together, the state second pension and the stakeholder pension will do what SERPS was doing in the late 1970s but which it can no longer do because the labour market and the world around us have changed. Short-term work, part-time work, women's work,

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contract work, low-paid work and being self-employed or moving in and out of the labour market: these were contingencies ill served by the SERPS that we inherited. I know that my noble friend did her best when SERPS was first established to meet some of those contingencies, but those provisions were stripped out.

We believe that in this document we have set out our framework and that in this Bill we are starting the job of initiating stakeholder pension schemes. We do not think it is right to delay until both can come in at the same time. Even a short delay in starting pension arrangements can have a considerable impact on the level of pension which is available at retirement. We are particularly concerned at the lack of pensions suffered by so many people, or the inadequacy of personal pensions. Something like 50 per cent of personal pensions expenditure merely recycles the next rebate, which will ensure that those people will still need income-related benefits in retirement. We therefore need to move as speedily as we can on this. That is why we have brought forward this legislation at the earliest opportunity following the Green Paper. Potential scheme-providers need time to prepare.

The Government need to ensure that the necessary administrative and regulatory arrangements are put in place. We need to act with some urgency and we are also conscious of the need to get the details right. Earlier this month, my right honourable friend the Secretary of State set out proposals for minimum standards, including charges. Further consultation papers will follow shortly.

My noble friend would say that we can do nothing about stakeholders until everything else is in place. As my noble friend Lord Peston said, we cannot do anything until we are ready to do everything all at the same time. I can understand that concern. I appreciate that pensions policy has to be judged in the round otherwise problems arise--very much as happens with yellow lines on the road when the traffic tails back somewhere else down the system. You need to see it coherently.

We believe that the Green Paper sets out all that. We shall take action as soon as we can and as soon as legislative time permits the introduction of the state second pension after this parliamentary Session. We cannot offer guarantees on that, but we hope to introduce it as speedily as possible. In the light of that, I hope that my noble friends Lady Castle and Lady Turner will feel able to withdraw their amendment. We do have a coherent pensions policy. It was shaped here and my noble friend took part in that debate. We are introducing it in two steps, partly because the industry needs the extra preparation time for what are essentially privately provided stakeholder pensions.

We see this as a set of coherent policies. We shall be bringing forward proposals for the state second pension as soon after this parliamentary Session as time permits. In the light of that, I hope that my noble friend will accept that together the two elements--the state second pension, unfunded, and the stakeholder pension--do what she was seeking to do with SERPS, but in a more appropriate way which reflects the conditions of the

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labour market in which we now live. We all want to see security and decency of provision in old age. We believe that the stakeholder pension marks the first step and, complemented by the state second pension, will achieve precisely that.

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