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Lord Borrie: My Lords, first, I welcome the reincarnation of the noble Viscount, Lord Trenchard. I recall sparring with him in the 1990s on the Competition Bill, for example, and am glad that we had the pleasure of hearing him today and will, no doubt, on many other occasions.

We all know that there are huge gaps in living standards among the elderly. The poorest are overwhelmingly dependent on state benefits and the better-off receive the bulk of their income from occupational and private pensions. I regret to say at the beginning of my speech that I disagree with my noble friend Lady Turner of Camden, because the Government have been right to concentrate state help on the poorest among the elderly by way of pension credit. Despite powerful criticism from people such as the much respected and vociferous Lady Castle of Blackburn, when she was still with us, Government policy has been more socially just by concentrating help on the poorest, rather than by giving an across the board increase in the basic state pension for everyone. That would have involved a hugely expensive total outlay, including to the better off, each of whose income would only have been minimally enhanced.

For better off and future pensioners, whose main income comes from private sources, the Government have had to take account of the fall in public confidence in private pension provision, which they have in the Bill. Too many workers have found that their employers are no longer supporting final salary occupation pension schemes and have closed such
 
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schemes to new members. Even during the passage of the Bill in the other place some 60,000 workers have recently lost some or all of their pensions when their employers' schemes collapsed.

In the other place MPs from all sides expressed concern at that existing problem. They could not expect and it would not have been right, I am sure noble Lords will agree, to have sought to make retrospective the pension protection fund that the Bill introduces. How can one make a protection fund—an insurance scheme—retrospective? But the Government have reacted positively with a financial support scheme, about which there are many questions to be asked, as others have said. None the less Clause 274 is an indication of the Government's realisation that something must be done for those who have already had that misfortune happen to them in the course of their working life. That has put a blight on their prospects in terms of what will be available to them when they retire.

The central part of the Bill creates a pensions protection fund to deal with future cases where bankrupt companies are no longer in a position to pay out retirement pensions. In principle, all sides of the House would agree that that must be the right course, but it is important to recall the underlying reasons why pension funds have so often been in financial difficulties in recent years. They include major falls in the stock market, the introduction of the new accounting standard FRS 17, the minimum finding requirement under the Pensions Act 1995, reluctance of people to save adequately for retirement on a voluntary basis and, of course, increased longevity—although none of us, especially in this House, would wish to regret that.

The world today is so different from the forecasts of the Beveridge report of some 60 years ago. The pension protection board, which will be set up by the Bill, will control its own income through what will in due course—that is a vital point—be to some extent a risk related levy. Compensation will comprise 100 per cent pension benefits for those already over pension age and 90 per cent for others, with a cap of £25,000 a year. But that cap is equivalent to the pension expected by those on a final eligible salary of some £40,000 to £60,000 a year. To have a cap at all is to put a limit on the burden placed on good employer schemes and recognises the reasons why so many schemes have been in financial difficulty in recent years.

How much will the levy be? According to the Bill's regulatory impact assessment, it is £300 million a year, presumably passed on to employees in higher contributions. Is that an underestimate and will it be yet another factor that discourages employers from providing final salary pension schemes? The Government say that the levy and the existence of the pension protection fund will make it easier to recruit, retain and provide staff with a greater incentive to save, but that is all a matter of perception for employers and employees. The Government have a great task to perform, because if employers think—even if they do so wrongly—that the fund and the levy are overburdensome, it will discourage employers
 
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from providing defined benefit schemes. It is most important—and I agree with some noble Lords who have spoken—that the risk-based element of the levy or premium is introduced as soon as possible and is perceived to be imminent, whatever date is chosen, because employers with well managed schemes will strongly resent underwriting their weaker brethren.

Your Lordships will wish to probe all the details of the proposals but as a matter of general principle, despite the problems of the cross subsidy and moral hazard, it is difficult to see any alternative—and no one on the other side has suggested one—to something like this insurance and protection scheme if the risks of insolvency and underfunding are to be adequately covered. The reliability of having the insurance of a pension—or the "reliability of your pension" if you are mid-career, to repeat a phrase used by the Minister—is most important.

From my earlier incarnation as head of the Office of Fair Trading, I fear that I am something of a regulation buff and have supported the Government's recent efforts to improve regulation in, for example, the Utilities Act 2000 and the Communications Act 2003. My only connection with pension regulation was as a non-executive director of the Mirror Group, which I hesitate to mention, but in the post-Maxwell era. A brilliant rescue effort was undertaken by one of my fellow directors, the executive director and former editor of the Times, Charles Wilson. When he was managing director of the Mirror Group he worked hard to ensure that pensioners who had been robbed by Maxwell were able to recover most of their money. The later report by the eminent lawyer, Sir Roy Goode, proposed a regulatory body to help to avoid the misappropriation of pension funds in future, and, of course, the 1995 Act created the regulatory authority.

Reviews in recent years have suggested that the regulator needs to be more proactive and to become involved before the damage is done, focusing, as the department has said, on protecting the benefits of pension scheme members against fraud and maladministration. I am not sure that I like the title "pensions regulator" to replace the OPRA. In a sense, it is a welcome simplification, but anyone outside the Westminster village may be somewhat misled into thinking that it is a one-man band. In fact, the pensions regulator is, as is customary nowadays with regulatory bodies, a corporate body with a chairman, a chief executive and at least five other members, and so on.

I do not think that the Government have explained entirely why this recent development, which is so popular in modern corporate governance in the private sector, should necessarily be read across into the public sector so that, every time we have a regulator or a regulatory authority, we have to have the full assembly of executive and non-executive personalities, and so on.

But one thing of which I am sure (I say this, in particular, to the noble Lord, Lord Higgins, who took a rather different view in his opening speech) is that the new wide range of powers—the repertoire of powers to
 
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cover improvement notices and freezing orders—seem to be very useful alternatives to what I might call the "nuclear option" of winding up a pension scheme. They will be useful weapons, enabling the regulator to be proportionate, if I may use a fashionable word, and to adopt action for the occasion which is appropriate to the situation. I say to the noble Lord, Lord Higgins, that that, to my mind, is not a set of draconian regulations; it is a set of proportionate regulations.

It is commonplace to say that people are not saving enough to ensure a reasonably comfortable retirement. Related to that question is whether it is desirable for people to be able to postpone the age at which they retire. To that extent, I share the point that has just been made by the noble Lord, Lord MacGregor, concerning the age at which the state retirement pension should be paid. The Government may need, at some stage, to seize the opportunity to deal with that matter.

As the noble Lord, Lord MacGregor, indicated, certain worries would be attached to Part 4 of the Bill, which concerns forecasts, if it involved some kind of government responsibility for the forecasts and illustrations and if those turned out to be incorrect. However, on the basis of encouraging people to save and to understand their position according to what they are doing at present, it must be a most useful proposition.

At the next general election, the majority of voters will be either retired or within five years of retirement. No subject is more relevant to the electorate than pensions, and this Bill is one strand of government strategy that we should support.

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