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Baroness Hollis of Heigham: My Lords, on the last point, I am disappointed that the noble Lord, Lord Marsh, whose expertise on pensions I much respect, sees fit to revisit ACT issues. I would expect it from the noble Lord, Lord Higgins, but not from the Cross Benches. I am also intrigued that when talking about ACT and 5 billion the noble Lord never brigades this, as the critics never do, with the offset in

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corporation tax which occurred at the same time, such that as far as I am aware we have the most supportive corporation tax regime in the OECD, and certainly in Europe. It is never mentioned. Funny that.

The noble Lord made a point about my speed of delivery with regard to the Statement and particularly the action plan, for which I apologise. But the noble Lord will be aware that the Secretary of State delivered the Statement to the House of Commons at 12.30 p.m. today, over three hours ago, and from the time he rose to make it the action plan introduced in it was available to all Members of your Lordships' House in the Printed Paper Office. Three hours is not a bad run at it, although I accept that the matter is very complicated and will require the continuous and ongoing attention of your Lordships in the future.

Lord Barnett: My Lords, my noble friend will be aware that the Select Committee on Economic Affairs in this House is looking at the economic aspects of ageing. Her Secretary of State will give evidence in a few weeks' time. Therefore, I do not want to take up—indeed, one could not—the whole of such a major Statement as she has just made.

In answer to a question, my noble friend mentioned the serious point about giving confidence to employees to save for retirement. Does she accept that such confidence can be given in the long term only if there is all-party agreement on the kind of pensions system we are putting in place? I was sorry that both the noble Lord, Lord Marsh, who I never suspect of these things, and the noble Lord, Lord Higgins, tended to make one or two party political points, which are not appropriate on this occasion if we are to achieve that cross-party agreement.

My noble friend talked about the noble Lord, Lord Higgins, seeming to argue that the taxpayer would have to subsidise employees and employers in pension schemes. I am sure that that was not what he intended, and I see him shaking his head in agreement. But how does my noble friend think one can give a total guarantee to any pension scheme, in order to give confidence to employees, without at least a backstop of a government guarantee of some kind?

Baroness Hollis of Heigham: My Lords, at the core of this matter is the fact that pensions are a voluntary partnership between employers and employees. It is for the trustees of the companies concerned, operating in future under the broad-brush regime to be established by the new kind of regulator, with the professional advice of actuaries and so on, to introduce into their schemes arrangements for the levy on employers and employees which will make the schemes financially viable according to scheme-specific funding.

Over and beyond that, we have told employers "If, however, your company"—and we all know which company we are referring to—"is fully solvent and walks away, as from today you may not walk away without making your liabilities fully paid up". We are also saying to employees, who may be worried that the company's pension fund may become insolvent, that

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we have rearranged the order of wind-up priorities, and that we have also introduced, through the pension protection fund, a levy, policed by the industry and provided by the industry, which should meet its obligations. We have also done other things to encourage security, from TUPE arrangements to cash equivalent transfer values for people who have been in schemes for a very short period of time, and so on.

What we are telling employees is "Because this is a voluntary arrangement into which you have entered with your employer, we cannot protect you against depredations resulting from what may happen to the stock market". We all know that if the stock market index were at 6,000, or something like that, this dimension of the debate would lack much of its urgency.

What we can do, as the Government, is to try to get the balance right. On the one hand, we can try to ensure that employers continue to provide such schemes. Also, through the proposals that I have outlined—the new kind of regulators, the enhanced role and training for trustees, the pension protection fund, the full pay-out requirements for solvent companies and the like—we can say "We will give you best security, provided employer and employee meet their obligations". If an employer fails to do so, we have these insurance networks in place.

I was asked whether the Government would act as standby. I have already addressed that point, and we may simply have to disagree on it.

Lord Crickhowell: My Lords, the Statement was about a complex package of protections, insurance and guarantees. The sums involved in totality must be very large. What estimate have the Government made of the total cost impact of this package on industry—employers and employees? The noble Baroness the Minister surely cannot be saying that it is all covered by a relaxation of the indexation allowance.

If estimates have been made, will the Government publish them? These are very big costs which will fall on industry, and they will have an impact on industry's ability to fund pension schemes in the future.

Baroness Hollis of Heigham: My Lords, broadly, the answer is in the annex—"Summary of funding and administrative savings and costs"—to the document. We estimate that the scheme costs may go up by between 300 million and 500 million and the savings will be of the same order. It is cost-neutral, because we are not just talking about LPI, which is only a proportion of it. We are also talking about significant administrative savings in Section 67, the arrangement of AVCs and quite a lot of the other "techie" aspects of pension handling which produce such a high cost to employers. Our best estimate, in good faith, is that this will be broadly cost neutral to industry as a whole.

Baroness Turner of Camden: My Lords, I thank my noble friend the Minister for introducing the Statement. It should be warmly welcomed, because it

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shows that the Government are making a real attempt to deal with what a number of us regard as a crisis in pension provision.

There are a number of matters that we need to discuss in much greater detail when we have had the opportunity to look at what might be called the small print of what the Government now propose.

If I understood my noble friend correctly, she said that the intention was to offer full TUPE protection to pensions in the event of mergers and take-overs. If that is the case, it should be very much welcomed, because the unions have been asking for that for a considerable time.

As for the pension protection fund, we should like the opportunity to debate it in more detail, because a number of noble Lords, including the noble Lord, Lord Higgins, have raised some very pertinent points about it. When there was some discussion of the Green Paper among those of us who are interested in pensions, it was suggested that a scheme providing some sort of insurance or backup cover for final salary pensions in the event of insolvency was likely to get off the ground or be welcomed only if the Government stood behind it. This is a problem that we shall have to look at when we have the opportunity to discuss the matter in more detail.

My noble friend did not say much about stakeholder pension provision. Employers have only to offer access; they are not bound to make any contribution. Probably for that reason, the take-up of stakeholder pensions has been rather disappointing. Can my noble friend tell us a little more about that?

Generally speaking, this indicates that the Government are making an attempt to deal with what is a very real problem in pension provision. As my noble friend knows, I am a great supporter of final salary schemes, which were one of the great successes of the last century. Because of those schemes, many retirees today are enjoying far more comfortable retirements than they might otherwise have done. Indeed, perhaps their retirements are more comfortable than some people may have in the future. Everything possible should be done to encourage employers to maintain final salary schemes, and even to put them into operation where they do not have them. They provide a means of ensuring that people enjoy a more comfortable retirement.

However, compulsory payments into employer schemes, which were suggested in one of the papers we discussed recently, would not be welcomed by scheme members unless they were sure that the investment they were making was sufficiently secure. That is why I welcome the steps being taken by the Government in that direction, but we need to discuss them in much more detail. I hope that we shall have the opportunity to do so.

Baroness Hollis of Heigham: My Lords, I am grateful to my noble friend for her comments. Speaking as a former member of the Occupational Pensions Regulatory Authority, she has great experience in this field, in particular its regulatory

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aspects. I thank her especially for her comments about TUPE. Along with other noble Lords, my noble friend has called for the Government to stand behind the pension protection fund. I continue to put it to noble Lords that, aside from all the issues regarding taxpayers' responsibility, that would seem to increase the risk of moral hazard rather than to reduce it.

Her substantive point concerned stakeholders. Of course she is right to say that although a substantial and valuable number of people have taken up stakeholder schemes—some 1.25 million or thereabouts—it is obvious that for many companies the schemes have not been delivered; that is, they have become shelved schemes. Although I do not know whether the statistics I received a few months ago are still up to date, they revealed the difficulty that, in a stakeholder scheme where the employer did not make a contribution, take-up stood at only around 13 per cent. Where the employer contributed to such a scheme, the take-up was in the order of 83 per cent. The moral here is that it is not the stakeholder framework that is at issue; rather it is ensuring that employers within a voluntary partnership scheme recognise what I believe to be their moral obligation to meet the future pension needs of their employees.

I think that those were the major issues raised by my noble friend, but I am sure that we shall continue the debate on these matters.

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