Pensions Reform

I do not often disagree fundamentally with the right hon. Member for Birkenhead (Mr. Field), but I do on this issue, because I think that the Government are fundamentally right in what they are putting forward in response to Turner. Although it has lots of things that need tidying up and clarifying, the proposed scheme will be for the benefit of the nation as a whole. However, he was right to point out the damage that has been done by the Government’s refusal to acknowledge the findings of the ombudsman’s report, which is sad. Perhaps that is one of the reasons why Scottish Widows announced today that voluntary pension saving for personal pensions has fallen in the past 12 months by no less than 10 per cent. That flags up the urgency of doing something about the issue. It also emphasises that the Government cannot have it both ways: they cannot appoint an ombudsman and then completely disregard the ombudsman’s recommendations. There are ways in which the Government’s proposals can be improved. What the Government propose—particularly delaying the link with earnings until 2012—is pretty unsatisfactory. At the moment, we have a group of people in this country who are the main recipients of pension credit. I am talking about the very elderly—the people born before 1930, who are already in their late 70s and will be in their late 80s by the time the Government’s proposals come into effect. They represent—probably predominately—the very poorest in our society. Not all of them are very poor, but I am talking about the majority. We should do something now for those people. We should say that those born before 1930 should have a higher pension than the rest of us, although that should not roll on to people born before 1931 and people born before 1932. We should recognise that that generation grew up in a war period or an immediate post-war austerity period and were not able to make the same pension savings that most of us have been able to make. By recognising those people’s needs with a special pension, we could reduce considerably the bill for pension credit and help the whole process to go forward. Equally, we could introduce measures that would enable us to reintroduce the earnings link sooner than the Government propose. The Government were right to go a little further than Turner and bring forward the age extension that he proposed, so I congratulate them. The scale of change to the pension age that was suggested by Lord Turner was rather conservative, although he was largely motivated by the need to integrate the retirement ages of men and women. However, there is scope to make the change more rapidly still. We will wait too long if everything is ultimately left until 2050, so we could compress the process further and thus bring in more money to allow the earlier establishment of the earnings link. We must also persuade the rest of the public sector to follow the example of the House. On 3 November 2004, the House voted to end Members’ right to retire at 60 without any reduction in pension. That will apply from 2009, rather than 2013, which is the date proposed for the rest of the public sector. I know that such a change will be painful, but the House has already voted for it. We thought that by setting an example, we might strengthen the Government’s hand when trying to convince the remainder of the public sector that such a change was necessary. It would not mean that people would have to work much longer. However, if people choose to retire earlier, there is inevitably a cost. If people live longer, the cost to taxpayers is much higher. Such measures would enable us to do more—and do so earlier—for those who are most needy. They would create a greater prospect of not needing to move endlessly towards putting more and more people on means-tested benefits. As the right hon. Member for Birkenhead said, that has to end eventually because we cannot continue on that road indefinitely. I agreed with some of what the right hon. Gentleman said about the scheme that the Government are proposing. If we have a complex scheme with many investment choices, there might be a danger of mis-selling. The scheme is aimed predominantly at those who are not very high earners. Those high earners can afford to take the gamble of going for risky investments because if everything falls down, they will still have enough to live on. However, ordinary working people do not have that luxury, so they need a guarantee that they will be saving in a safe vehicle. I thus respectfully suggest to the Government that there should be a single investment pot from which everyone in the national pension savings scheme would draw their pension. We could have a large number of investment advisers. The Government should use expertise in the private sector and encourage bids for the right to be an investment adviser. Such a process would be competitive. It would keep people on their toes, and those who did not perform well would get the sack, which might allow others to get a job. That would maximise the return to the NPSS and its beneficiaries. I do not think that the Government have quite decided whether there will be a single scheme or multiple schemes. I hope that they do not envisage having multiple schemes because the examples from countries that have done so are not especially edifying. Anyone who worries about such matters should consider the experience in Australia, where there was massive mis-selling and an awful lot of suspect activity. No one wants that, so we should have a single provider with multiple advisers. The resources of the private sector could be used in the administration of the scheme. There is massive expertise in the pensions and insurance sector, and that sector also has existing computer systems that work. No one wants the Government to set up yet another major public sector computer scheme because they have not yet found one system that works properly. One only has to look at the Child Support Agency to find real evidence of what can happen. We would be mad to try to set up a new scheme when there is plenty of expertise outside the public sector, but given what can be done, there is a genuine prospect of us being able to create something very worth while. However, I reiterate that, as the right hon. Member for Birkenhead said, there is a danger that the floor will also become the ceiling. We therefore need to encourage the private sector to continue to offer pension saving for its employees. The only way we can do that is by giving it some incentive, and I hope that the Government will see that to do so would be an act of enlightened self-interest.