Pensions Reform

In recent weeks, the Work and Pensions Committee has taken evidence on the Pensions Commission report and the White Paper. I have attended far too many breakfasts, lunches and evening events. I have stopped eating, but the phrases keep going round in my head. We seemed to hear the same arguments time and again. Nevertheless, we were very grateful for the enormous number of submissions that we received. Not surprisingly, there were some very, very vested interests. Generally speaking, the employers’ side was anti-compulsion and the TUC was anti any increase in the retirement age. One can understand the position that they are coming from, but the Secretary of State has made the case positively that this is a package of measures, and if one starts to unpick one bit, everything else unravels, and we need to be resilient in our arguments for the total package. I want to concentrate for a minute on the issue of the state retirement age, because at the moment, once one goes beyond 55, the economic activity rate plummets. It has been increasing in the last couple of years, which is partly down to the new deal for the over-50s, but at age 60, about 50 per cent. of the population are in economic activity. There must be a strengthening of training provision for the over-55s and of healthy workplace initiatives, and careers advice must be available. The general architecture must change—we need to start doing that now in preparation, because there is already a problem—to ensure that not only is the retirement age 68, but that people can work to that age and beyond if they wish. We need to ensure that they are physically capable and trained to take those employment opportunities. That participation rate must be a key indicator of the progress that we are making. Among all the submissions, most gratifying was the general agreement on the principles in the Pensions Commission report. The argument is around the architecture and the implementation. There was fairly unanimous support for the proposals around the state scheme, and I do not propose to dwell on them. The difficulties are around whether we call it a national pension savings scheme or personal account. This is a classic case—I am not looking for work—for a draft Bill. There are many areas of debate and discussion to be had on that, and that would help the case. The overwhelming message that comes through from all organisations is that there has to be simplicity and transparency in the scheme; primarily simplicity to reduce the cost. We had lots of argument over whether there should be 30 basis points or 50 basis points. We would settle for five. But if it is 50 basis points, as against 1.25 per cent. for stakeholders, that increases a person’s pension pot by 20 per cent. That is what we should be looking at—the individual’s pension pot at the end of the day. That should be the driving factor, not any submissions from vested interests. That is a key indicator that we should be looking at. In this initial round we must also consider key groups such as the low paid, those in multiple jobs, each of which may be paying less than £5,000, which would exclude them from the NPSS, but which cumulatively takes them over, and those with continuing health problems. There is a laudable target to get 1 million people who are currently receiving incapacity benefit into work, but how will their broken work records affect contributions into the scheme? There is also a huge issue, which I do not think that the White Paper addresses, around the self-employed. I am not blaming anybody, but they seem to have been left out of the debate by both sides of the House and by outside organisations. Around 7 million people are self-employed. They are probably the most under-pensioned group of all and I dare to suggest that they are probably a group with greater means for pensions than others, but I take it no further than that.