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I think that the noble Lord, Lord Oakeshott, talked about giving knowledge and information. This is very important. All too often, people are frightened of going to a qualified financial adviser and there is nothing in between. There are citizens advice bureaux, but many people do not feel that they can get advice there. We need to make sure that when this Bill passes, there are provisions for information to be given to people based on their individual cases, because one size does not fit all. That is absolutely essential and it needs money behind it. We cannot expect citizens advice bureaux or other organisations to give advice without being properly funded. They have to be properly funded to be independent, and an independent view is absolutely critical. We should remember the pensions scandals of the past, such as the mis-selling of pensions, when the previous Conservative Government gave people lump sum enhancements to come out of their occupational schemes into money purchase schemes, which led to the mis-selling of many pensions. We do not want a repeat of that, so information is absolutely essential. I do not regard it as a soft option under the Pensions Bill—it is part of the central core. I look forward to the debates that we will have. No doubt the Minister will feel uncomfortable from time to time. However, I hope that he will listen and I hope that he will show flexibility, because the Bill as it stands is not the answer for too many people, most of whom are low-paid women.

4.47 pm

Lord Vinson: My Lords, I rise to reinforce what the noble Baroness, Lady Dean, said about the importance of a high level of disregard. Unless the disregard is set

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fairly high, a great many people will ask, when they retire, “Why did I bother?”. I and others know of hard-working couples who have saved all their lives and have a pension, who live in a council house, pay their council tax and pay full rent. Next door are people who have not saved a penny, who get their council tax and rent paid and who go on holiday to the south of France, whereas the couple I know cannot afford to. We have to be careful not to penalise savings—whether for pensions or general savings—and it is vital that a disregard is set sufficiently high to encourage people to save and not be penalised when they retire. I am sorry for intervening at this point.

4.48 pm

Baroness Howe of Idlicote: My Lords, like other noble Lords who have spoken, I am glad to welcome, in principle, this next step in the Government’s legislation for pensions. It follows logically from the Pensions Act 2007 and helps to meet a number of concerns raised by my noble friend Lord Turner in his report. As the Minister said, it is intended to create a retirement savings framework that no longer excludes those on low incomes, or those with erratic earnings, and which establishes a framework for savings that far better reflects the increasingly flexible and changeable world of work. Almost no one today has the same employer from the moment they start work to the moment they retire. That gives you a tiny flavour of how fast everybody moves in and out of jobs, even if they are working full time, as they gain more experience and move on to the next thing. But, above all, I hope that this Bill will make it possible for the less well-off, and particularly carers, whether of children, the ill or the aged, to make maximum retirement savings from their inevitably interrupted job opportunities throughout their working lives. As we all know, the majority of carers are women, and it is women who also form the majority of pensioners living in poverty.

A vital question that Which? and others stress in their excellent briefings on the Bill is whether carers will be able to join personal accounts and on what terms—and in particular, if they deem themselves self-employed but unpaid, whether they are eligible. That was a point raised by my noble friend Lady Greengross. If this crucial group is really to be excluded from the benefits of this important retirement scheme, it simply beggars belief, and we must clearly go back and look harder at that area.

We know that already there are nearly 5 million UK citizens aged 75 and over, and this number will increase by more than two-thirds in the next 25 years. Unsurprisingly, against that background, we are all being encouraged to work and pay taxes and national insurance well beyond today's statutory retirement age, which is anyhow due before long to rise dramatically—and, I emphasise, for both sexes. We know, too, that the state of citizens’ finances today is not good, for all the reasons mentioned by other noble Lords. However, equally, as we heard during Question Time earlier, any form of further and higher education, except for a very few, costs a lot. That has to be paid for. That is something that my generation, thankfully, did not have to pay for; we had that ability for free and could start our savings from that point.

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It is surely sensible, therefore, against that relentless background, to give individual citizens in low-income groups every kind of encouragement to save now, via this limited and means-tested scheme, and particularly those who are currently saving the nation huge sums by their caring responsibilities. Amendments to this Bill to clarify the whole situation will be essential, unless the Minister can reassure the House on this point.

It is obviously good news that the employers’ federation, the CBI, is firmly behind the principle of auto-enrolment. I take the point of the noble Baroness, Lady Dean, and have some sympathy with it, when she talks about rather more coming from the individual than from the employer. But that percentage will be able to be paid either to the new personal accounts scheme or to a qualifying workplace pension. It is clearly good news, too, as I think I have understood it, that auto-enrolment is agreed as lawful under EU law. I hope that I am right about that, because I do not think that I have heard many people mention it. But equally, the CBI's emphasis on minimising other costs, reducing bureaucracy and increasing flexibility—and, incidentally, maximum flexibility seems a vital ingredient for all the parties that briefed us—is also right. So, too, is the need, which again the CBI emphasises, for the Government to put in place a targeted support package for the very smallest firms, because some of them will be badly hit.

There is also clearly a need for stronger powers for the pensions regulators, not least to judge the quality of proposed schemes. That was emphasised by the unions and the third sector. There is a need, too, for expert advice on choice of schemes to be available to employees from outside their own employing companies. Above all, there is a welcome determination by everyone involved to ensure that savers get a fair deal, with emphasis on the theme “it pays to save”. One of the suggested amendments from Which?, that certainly makes sense to me, is to include among PADA principles a duty,

There are clearly many hours of debate ahead of us as the Bill goes through its various stages. Apart from general support, I am particularly glad to welcome it for two quite different reasons, but, above all, for the opportunities it provides to return to the attack on these other fronts. The first of these has already had full support from noble Lords on all sides of the House, as well as very determined lobbying from Which?, Age Concern and, indeed, the People’s Pensions Coalition and the women's pension network. I refer, of course, to the superbly argued amendment of the noble Baroness, Lady Hollis, during the passage of the previous Pensions Bill, which would have allowed people with interrupted work patterns, mostly of course women who have had caring responsibilities, to buy back up to nine years of national insurance contributions and thus improve their state pension.

For the Government, with their otherwise excellent record on support for equal opportunities, not to have followed through the clear hint that was given at the time that this amendment would be accepted was nothing short of disgraceful. This time, unless the

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Government have realised the error of their ways, it is clear that they will have an even more determined fight on their hands.

Alas, I cannot say that I expect my second additional reason for welcoming the Bill to receive quite the same universal support. I refer, of course, to the current unequal treatment of men and women in pension annuities. But if I fail again, do not expect me to give up the battle—if I am still around—when the next pensions Bill presents itself.

I shall make the case as briefly as possible. If equal treatment for men and women is to have any substance, it should surely apply to that portion of an individual's earned retirement pension which the Government rightly require each individual to take as an annuity. That is not the present position; on the contrary. Although a man and a woman will have equally contributed to identical retirement pensions, the annuity sum paid annually to the women is currently less than that paid to the man because of a presumed longer life expectancy, and even that, until last year, has been closing. It is that difference in the annuity payable that is really unacceptable.

The suggestion is not that the insurance industry should bear the cost of correcting that inequality, but that the cost of the differentials involved should be spread evenly between men and women. In order to help the state cope with the considerably higher costs of the longer life expectancy that I and other noble Lords have mentioned, anticipated for both sexes, men and women are rightly being required to move towards a higher, but ultimately the same, statutory retirement age—a hike of considerably more years for women than for men. But still they will receive unequal annuity payments. Surely, it is high time to get rid of this unjustifiable sex discrimination.

4.58 pm

Lord Judd: My Lords, this is an entirely sensible and necessary Bill. As such, I warmly welcome it. There is just one respect where an opportunity has been missed and where the Bill could be strengthened. That concerns socially responsible investment and how it will relate to the new personal pensions plans being drawn up under the Bill. I hope that my noble friend will be able to deal with this when he replies.

In the United Kingdom and beyond—both domestically and internationally—great attention is being devoted to socially responsible investment. Almost every major institutional investor and international organisation has had to consider the promotion of good governance, sustainable development, human rights protection and climate change. This is in response to rapid growth in transnational corporate activity and recent scandals. Many companies of course have extensive operations around the world.

Sadly all too often we hear of how some corporate operations have involved environmental degradation, human rights violations and social instability. Our laws do not govern corporate activity abroad, so corporations are not prevented from exploiting volatile conditions to maximise profit. To their considerable credit, many institutional investors would certainly

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prefer not to invest in corporations that profit from human misery. Yet there is considerable confusion in the investment community about the extent to which investors can take human rights and environmental, social and governance issues into account when taking investment decisions. There is surely a great opportunity for the Bill, which is designed to create one of the largest pension funds in Britain and by extension a powerful institutional investor, to give an imaginative lead in clarifying the legal position.

For this opportunity to be seized, two amendments are necessary. First, institutional investors, charged with investing funds under the new personal pension plan scheme, should be required under Clause 10 to sign up to the United Nations principles on responsible investment—UNPRI, as they are known for short. The UN principles were drawn up as a toolkit for investors to use when considering environmental, social and governance issues—ESG—in their investment decisions. The principles are not prescriptive. They are voluntary and aspirational and do not dictate what should be invested in or where and when specific action is necessary.

Secondly, institutional investors charged with investing funds under the new personal pension plan scheme should be able to disinvest from or not invest in companies which can be seen from credible information available to the public to have links to crimes against humanity, war crimes or genocide as defined in the Rome statute of the International Criminal Court and adopted into English law by the International Criminal Court Act 2001.

The UNPRI have already been debated extensively in the Commons both in Committee and on Report, where the Government’s objections to their inclusion boiled down essentially to concerns of cost and simplicity, financial returns for investors and the need for the Personal Accounts Delivery Authority—PADA—to be as free as possible to draw up its own policy on socially responsible investment. Most reasonable people agree that the public pension scheme should be as clear and simple as possible on the costs, system and choices available under the scheme. Signing up to the UN principles would not be contrary to that aim. The evidence suggests that the costs of doing so are relatively insignificant, involving the employment of a quite small number of staff to examine the environmental, social and governance issues that arise and perhaps a subscription to research services. They are also proportionate, considering the good returns that can be achieved with ethical investment.

Rather than damaging the rate of return for investors, paying attention to ESG issues in investment decision-making can improve returns. Last year, the Co-operative Society’s ethically invested fund was the best performing fund in the United Kingdom all-company sector. Mainstream investment can, by contrast, make catastrophic mistakes, as we have sadly seen in the cases of Enron or WorldCom. These mistakes might well have been avoided had there been greater scrutiny of the corporate governance of those companies.

It has been widely acknowledged that there will be a default fund, and a limited number of alternative funds, administered under this scheme. One of these

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would, it seems, be administered under Sharia law. If that is permissible, why not also have one administered under the UN principles with regard to international human rights law? In the other place the Government apparently suggested, by implication at least, that ethical investment based on religious belief is more important than ethical investment on a non-religious basis. Surely that must be highly questionable.

Moreover, SRI is entirely consistent with government policy in other areas, including sustainable development, particularly related to Africa; protection of human rights domestically and internationally; and tackling climate change. Surely it is counterproductive for the Government to try to address those other issues while they defend the right of their public pension scheme to invest in companies that make these problems more acute.

The Government have said that they do not consider PADA, the pension scheme, to be the appropriate body to be covered by the UN principles and that this should be the responsibility of the trustee board itself, once it is appointed. However, between now and 2012 PADA will be the authority that will draw up the whole basis on which personal accounts are to be administered. Surely there should be a clear commitment to SRI from the beginning. I reiterate that the UN principles are not prescriptive and are merely a toolkit for investors to use in the decision-making process.

The business case has already persuaded many asset owners and managers, with approximately $10 trillion of assets under management, to become signatories to the UN principles. Currently, the UK Pension Protection Fund, the French Fonds de Réserve pour les Retraites and the New Zealand Superannuation Fund are all signatories to the principles. All are large national schemes. It is clear to me that there is a heavy responsibility for the Government to take a similar lead with what will eventually be the UK's largest pension fund, especially given that some UK pension funds and a number of major UK asset managers are already signatories.

The safe-harbour amendment, as with the UNPRI amendment, is permissive rather than prescriptive. It protects investors from legal action in the event that they choose to disinvest from companies with links to disturbing breaches of international human rights law, crimes against humanity, war crimes and genocide, as defined in the Rome statute of the International Criminal Court. I need hardly draw the House's attention to the vital necessity to protect and promote human rights worldwide and to the increasingly critical attention given to corporations working in developing countries which do not have regard for international human rights law in their operations. Crimes against humanity, war crimes and genocide can be among the most horrendous breaches of international human rights law. I believe that it is necessary to make it legal for trustees and investors to exercise their judgment in these narrowly defined areas of international criminal law.

The Government have repeatedly expressed their commitment to promoting and protecting human rights worldwide. For example, the Prime Minister has described Darfur as,

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Yet as the Aegis Trust—which has been doing so much focused work on Sudan, and to which I am very grateful for its help in preparing for this debate—has stressed, western investors, including those in the United Kingdom, continue to invest in corporations working in Sudan which do not benefit ordinary Sudanese civilians, which demonstrate no corporate social responsibility regarding the Darfur crisis, and which continue to provide the Sudanese Government with revenue that can then be used to carry out their policy of ethnic cleansing in Darfur. Surely, as the Aegis Trust and others argue, if the Government are truly committed to the ending of the crisis in Darfur, they should want to ensure that UK investment is not fuelling that crisis.

Such an amendment would encourage and reward good business practice in relation to breaches of human rights, particularly in developing countries, and thus protect the most vulnerable people in these societies. It would also help to clarify an area of socially responsible investment that is currently unclear, namely whether and when disinvestment is appropriate and permissible. Some experts have argued that modern portfolio theory makes disinvestment permissible. However, trustees and investors remain nervous because of the uncertainty over the applicability of old case law to modern investment practices.

The Government have suggested that the burden of the cost—which I have already argued would be minimal and proportionate—would fall on the poorest in our society. I hope that this amendment would achieve the protection of the most vulnerable people in the world, who are subject to the worst human rights violations. The vital security of our own pensioners in retirement—and I take second place to nobody in my commitment to how vital that is and believe I have shown that it will still be protected—should surely never come at the expense of the world’s most vulnerable, deprived and abused people. I hope my noble friend and his colleagues in government will look favourably at what I propose.

5.12 pm

Lord Lea of Crondall: My Lords, I shall make a brief contribution. I apologise for going out for a meeting at 4.30 pm.

I think this will be seen historically as a red letter day. It has taken a great many years to put together the work of the Pensions Commission under the distinguished chairmanship of the noble Lord, Lord Turner, who is not in his place. He has done a remarkable job alongside his other public work on climate change and for the Financial Services Authority. These issues have one thing in common—they require action to be taken in this generation for events 20 or 30 years hence. It is not easy to get this generation to take ownership of those responsibilities, particularly, as people have pointed out, when there is a credit crunch. Some people may say that this is the worst possible time to get people to pay 4 per cent more. I would say that this moment of truth for intergenerational responsibilities has to be taken on the chin, certainly in terms of the price of carbon and living on tick—for example, thinking that if you withdraw equity from your house, £100,000 will appear out of nowhere. These are obvious fallacies of

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the financial services industry, which have created a climate of mistrust that presents us with an even more difficult jigsaw puzzle than would have been the case otherwise.

One thing that shines through all of this is compulsory saving, like Lord Keynes’s post-war credits, which is guaranteed to have a return in the economy. Whatever people say about big government, that is what people are going to trust at the end of the day. So if there is trust and confidence and as long as the economy can develop, both main parties and the Liberal Party would say that that has to represent some sort of consensus and presumption. Without being too awkward, I shall pick up what is perhaps a debating point made by the noble Lord, Lord Skelmersdale. Surely the very fact that it is difficult to sell a product satisfactorily to people with limited resources means that things will be difficult for those people. However, if you look at the analysis made by the noble Lord, Lord Turner, this is one of the ingredients as to why we have arrived at this solution. I hope that this consensus will continue.

The noble Baroness, Lady Noakes, will, no doubt, comment on the degree to which consensus remains. I very much hope that it still stands between all the parties, although I am beginning to be a bit nervous about it. The degree of consensus may not be quite as strong as one might have hoped, because after the noble Lord, Lord Skelmersdale, mentioned consensus, he spent the next five minutes saying “but” a lot. Perhaps the noble Baroness, Lady Noakes, can tell us whether there is still a consensus between the TUC, the CBI, Help the Aged and everyone else, including the Engineering Employers’ Federation, which is not normally known for being soft on workers’ rights and collective bargaining.

Lord Skelmersdale: My Lords, before the noble Lord leaves that point, does he accept that in virtually all the briefings that we have received, there have been questions of detail that are so disparate that they can hardly add up to a consensus?

Lord Lea of Crondall: No, my Lords, I do not agree with that formulation. Nearly all the briefings have said that we have a robust consensus within which particular issues have to be sorted out. To make my point, I shall provide a couple of examples of issues raised by the TUC within its very robust support for the Bill. The first relates to the compliance regime. The TUC states:

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