Pensions Reform

I am fascinated to hear that. If the Minister looks at the Hansard report, he will see that a clear commitment was given to the hon. Member for Newcastle upon Tyne, Central that the NPSS would not be introduced until the earnings link was restored. I hope that we have been given some reassurance today, although I fear that the hon. Member for Newcastle upon Tyne, Central will not be very pleased to hear what has been said. The Government have not made the case for a delay in the earnings link and I hope that we shall return to that when we consider the legislation. As the Minister can read in Hansard, the hon. Member for Newcastle upon Tyne, Central said on the day of the statement"““I hope there will be no attempt to cherry-pick Turner so that the personal savings scheme starts in 2012 and the earnings link ""does not. Will my right hon. Friend assure us that the two dates will be coupled… ?””—[Official Report, 25 May 2006; Vol. 446, c. 1659-60.]" The Secretary of State’s answer was simply ““Yes.”” Will the Minister clarify another issue relating to the earnings link? Although it may seem to affect only a small number of pensioners, it is hugely important to a growing proportion of the pensioner population. As the Minister will know, about 1 million pensioners out of a total of about 11 million live abroad. At present, the pensions of half of those people are linked to prices, while half receive no uplift each year even in relation to prices. Does the Minister intend to uprate in relation to earnings the pensions of those who currently receive the prices uplift? If so, the current unjust difference between the pensions of those living in different countries will widen significantly in the future. If the Minister already has a clear view, we should be grateful to hear it. In his helpful speech, the hon. Member for Bradford, North identified many concerns about the NPSS and the personal accounts. I have already said that I hope that there will be close co-operation between all the parties in the framing of the scheme. There are numerous risks. There is, indeed, a risk the people will perceive the risk itself as Government-backed, and against the thrust of the proposal for personal pensions that do not rely on the Government. There is also the fundamental issue—mentioned by the hon. Member for Runnymede and Weybridge—of means-testing. On page 105 of the White Paper, the Government say:"““Problems with incentives could… develop if a pensions system evolved in which a significant majority of pensioners were entitled to Pension Credit in the long term.””" We know that that was very carefully written, and we know that the Government now aspire to cap the extent of means-testing at 50 per cent. at the highest, and think that they can push that down to below 30 per cent. However, there is also much doubt about the nature of those figures, notwithstanding the changes that have been made to savings credit. I repeat the request by the Conservative spokesman that the Government should look closely at the modelling on the number of pensioners in means-testing and that if people come up with other, perhaps more realistic assumptions, the Government will run them through their model. Surely the point is that even if the Minister is successful in reducing the number being means-tested to below 50 or 40 per cent., many of those individuals are those least likely to save. In other words, the 30 or 40 per cent. of people we are talking about will be those who will have to make difficult decisions about whether to save. We do not care about the top 10, 20 or 30 per cent. because we know that they will save anyway and, indeed—as several hon. Members have pointed out—there are already generous incentives for them to do so. The 30 or 40 per cent. we are talking about will have to make a difficult choice, but they are the very people who are already struggling financially, as Labour Members well know. Those people may be borrowing money at very high rates of interest from mortgage companies or on credit cards in the struggle to purchase a home. They have many other things to do with their scarce earnings. Some will not receive any employer contributions, as the Select Committee Chairman mentioned. Others will see all the employer contributions wiped out by means-testing. I seriously doubt whether many of those people will choose to save in a scheme of this type, especially as I do not think that they will easily understand the risks. Therefore, the auto-enrolment aspect—also mentioned by the Chairman of the Select Committee, in what was a very interesting contribution—is crucial to ensuring that huge numbers do not simply opt out. The issue of means-testing is not just how high we can get the basic state pension, or its affordability or its simplicity—it is also fundamental to the whole thrust of what the Government are trying to achieve.