Pensions Reform

This is an important debate. I suspect that security in old age is one of the most important issues that the political parties will argue about over the next few decades. Some 40 per cent. of my constituents are pensioners, and it always surprises me when, as often happens, an elderly individual comes to my constituency surgery to talk about their mother or father, who must be even more elderly. We all appreciate that longevity is a growing issue, and people’s understanding of its impact on the pension system is becoming much clearer than it was perhaps five or 10 years ago. In future, the rest of the country may well catch Poole up. By 2050, there will be 50 per cent. more pensioners, and the ratio of workers to pensioners will halve. So we have to get this right and not only provide security in old age for those who retire, but ensure that the burdens on the working population do not become so great that we as a nation are no longer competitive in the world economy. There is a problem, in that, as has already been said today, well in excess of 9 million people are not saving enough for their pension. We have heard that there is a particular problem with one category of person—the self-employed. We also know that there has been tremendous loss of confidence in the pensions industry, which is informing the decisions that people are making today. It is evident that if people have surplus cash they buy a piece of property rather than investing the money in a pension fund, because the experience of friends, neighbours and sometimes family are such that they are put off. The fundamental test of the White Paper, the direction of travel and the recommendations that the Government are making is whether they increase confidence in the pensions system. It seems to me that a number of problems have brought us to the present position; the first is longevity. Some of the accounting rules may have forced companies to take decisions to close schemes prematurely, and the regulatory regime has sometimes led to illogical investment decisions. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said, the changes that the Chancellor made to the advance corporation tax regulations in 1997 have had a major impact on pension fund operations. It has been said that the Treasury got £7 billion per annum from a capital value of £170 billion, and I think that all hon. Members would acknowledge that that has made a massive difference to the economics of pension funds. I am glad that the Government are now examining pensions, but I suspect that, as many of my hon. Friends, including my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) predicted when that change was made, it has caused long-term problems. I am sure that the increase in pension credit has helped many of the poorest pensioners, but as the Secretary of State said, if the predictions that nearly 70 per cent. of pensioners will be in receipt of the credit are accurate, not only will that not be sustainable, but it will be a major disincentive to people continuing to save. What we have to do, in addition to setting up a sensible pensions system, is to reinforce people’s good intentions to save money for all the eventualities of retirement. Unfortunately, predictions that pension credit will be paid to as many as 70 per cent. of pensioners are a major disincentive to saving. I agree with my hon. Friends about the direction of travel. We have to have a consensus because during the period that we are debating there will, no doubt, be changes of Government. It is tremendously important to get Government and Opposition parties signed up to approximately what is decided. I shall not go into the detail of the White Paper—it is extremely technical and many hon. Members have a greater understanding of its provisions than I—but I do wish to welcome some of the proposals. All hon. Members know that women, particularly those who stay at home, have not been well treated by our present pensions system. The White Paper’s acknowledgement of that, and the reduction in the number of years needed to qualify in terms of national insurance, are to be welcomed. I also welcome the strengthening of provision for carers, which has already been mentioned. A person who gives up work to look after a loved one, a relative or a neighbour probably saves the state thousands of pounds, and it is wrong to disadvantage such people in terms of their pension claim. I am glad that the Government have made proposals that will plug that gap. It is inevitable that the pension age will increase. The proposals in that respect are sensible, but there are associated issues relating to joined-up government. Some of my constituents find it difficult to stay in work because they cannot get the operations that they need. We need a national health service that is responsive to people who develop problems as they age and who want to continue to work, but who now sometimes do not have that choice. In addition, the only way that some people will be able to continue in work until they are 67 or 68 is by changing jobs or careers, so training throughout life will be terribly important. The proposals cannot be seen in isolation; they must be seen as part of a package. It is extraordinary that as we are talking about increasing the retirement age, the Government have agreed that the retirement age in much of the public sector will remain at 60. I agree that many people who work in the public sector, particularly in local government, are not well paid, but it is extraordinary to design a system in which the retirement age is 60 for one category of worker but 67 or 68 for another.