Pensions Reform

The policy solution is to create a more attractive regime for occupational pension schemes so that employers can see that such a scheme is to their benefit—that a more generous occupational pension arrangement works for them as a recruitment and retention tool. It would be helpful if, when he winds up, the Minister of State made clear the scope of the review of the regulatory environment. Some of his recent statements on the record have been slightly ambiguous, and it would be helpful to know how wide he expects the review to go. The Government have, rightly, signalled that the workplace savings scheme that they are introducing will be targeted primarily on median and lower earnings. We look forward to engaging with the Government in a debate over the summer on the potential benefits of such a scheme and the risks of an auto-enrolment model. The extent to which the Government should become involved in the delivery of a workplace savings scheme is not clear. The key debate—on the personal account system—is likely to revolve around the degree of state involvement, and thus the degree of personal responsibility and choice. The danger, which Lord Turner has spelt out recently, is that a high degree of Government involvement in the delivery system will be interpreted by users of the system as a Government guarantee of investment outcomes. I am sure that the Secretary of State would be as keen as we are to ensure that that does not happen. It would be useful if the Government could say what level of saving in the workplace saving scheme they would regard as a success. The White Paper implies an expected opt-out rate of about 38 per cent. The New Zealand Government are warning, in relation to the proposed Kiwi savers scheme, that opt-out rates could be as high as 75 per cent. The success of the auto-enrolled scheme will be a key measure of the success of the entire package. We must have a clear measure of what will count as success and what level of opt-out will trigger a review of the arrangements. No part of this reform package will work unless we restore trust in the pension system and public confidence in its fairness. Two broad issues must be addressed if public confidence is to be restored. The first is the Government’s response to the ombudsman’s report. Acceptance of the ombudsman’s finding of maladministration would cost the Government nothing. The ombudsman is an officer of Parliament. She was put in place to adjudicate on claims of maladministration. It is unacceptable for the Govt to reject the finding that she has made. To do so is to challenge the right of Parliament to scrutinise the Executive and deliver judgment upon its activities. In response to the ombudsman’s recommendations the Government have announced, as the Secretary of State said, an increase in the funds available for the financial assistance scheme. However, he knows very well that the benefits available under the scheme still fall far short of the demands of the pensions action group and of the recommendations of the ombudsman.