Pensions Reform

It is a pleasure to follow the hon. Member for Weston-super-Mare (John Penrose). I say that because those who can speak in this Chamber without notes are to be admired. I hope to be here until I am of pensionable age, and perhaps can match that on one occasion at least. The pensions issue has an impact on almost every household and is of importance to today’s pensioners. The White Paper, ““Security in retirement: towards a new pensions system”” is very much about looking to the future and the pensioners of tomorrow. I hope that the whole House would agree on two aspects of pensions provision. The hon. Member for Weston-super-Mare mentioned one of them—the sustainability of anything that we introduce into the pensions system. It must be sustainable, as Members would not be prepared to accept the option of going back to the levels of pensioner poverty that this country has witnessed in the past. Equally, on the second aspect, Members have referred to what the Government have done for today’s pensioners. There was much to be admired in the introduction of the minimum income guarantee, followed by the pension credit and the savings credit. Like many other Members, I have met pensioner groups in my constituency. In all fairness, we get some stick about what the Government have done, but many people in my constituency—people from a solid trade union background and people with roughly the same political leanings as myself—do not always recognise how redistributive the Government were in what they did for the poorest pensioners. Nevertheless, although we have done some positive things, I always admit that there remains much more to do. I want to reflect on what has brought us to the current stage of unrest, uncertainty and disappointment. Occupational or works pensions are one important issue, and how some companies reached their current position is another. A significant number of final salary pension schemes have been closed. Speaking as one who worked for 23 years with a multinational company—or rather I was employed for 23 years, as working and being employed by a company are two different things—I witnessed what happened when it wanted to reduce its numbers. Of course, the big advantage was a good redundancy package, but an additional carrot was access to a pension scheme. The company I was employed by was not alone, as it happened right across the country during the 80s and early 90s. When people get early access to a pension scheme and people are living longer, it undoubtedly puts pressure on the schemes. I have to say that the same thing happened in the public sector. As a councillor for 11 years during the days of Mrs. Thatcher, I experienced the squeeze on local government spending in the late 80s and early 90s, which was also pursued by her successor, John Major. Council departments across the country were asked to reduce numbers, but those who decided to leave were the people on high salaries with big pensions. Pension funds cannot sustain the sort of numbers that we saw moving out of the public sector, especially local government, over those years. The Government are trying to put a message across about the importance of preparing and saving for old age. I regret to say that some of today’s pensioners send out the wrong message at our surgeries, although I understand why they feel angry. Irate pensioners sometimes complain about the couple down the road, neither of whom work and who are in receipt of pension credit, getting exactly the same money or perhaps even more than they do. The big argument then is whether it is worth saving for old age. The answer has to go out loud and clear from this Government from this Chamber that it is indeed right to prepare for old age. The country is witnessing a significant demographic shift like never before. In my constituency of Dumfries and Galloway, it is projected that about 4,000 or 5,000 jobs will not be filled between 2012 and 2015, simply because people are growing older and more people are retiring in the area, while at the same time many young people are leaving the locality due to the lack of decent, well paid jobs. That brings me to my first point about the White Paper. I represent a part of the country that is recognised as having a low wage economy. I believe that, had it not been for the introduction of the national minimum wage, we would still have wages of about £4 an hour in my area. The minimum wage has made a difference, but it is still very much a low wage economy. I applaud the concept of a national pension savings scheme—or personal accounts, as they are called in the White Paper—but we must not forget those on low incomes. We really need to deal with the issue of how to get over some of the problems of low earners. The most obvious barrier to saving for many people is poverty and low income, as they have to think about the necessities and essential spending. Saving for retirement is not an option for those people. More than half of all the households identified by the National Association of Citizens Advice Bureaux as having serious debts have incomes of less than £7,500 a year. More than 12 million people—about 43 per cent. of the working population—are not saving enough in a private pension for their retirement. That figure is on the rise; it was only 36 per cent. in 2003. Currently, an estimated 7.5 million people are not saving at all and just under 5 million save only small amounts. Those on the lowest incomes—less than £15,000 a year—account for 3 million of those who are not saving at all. If personal accounts are to succeed for all employees, they will have to provide the guarantee of a state-backed pension scheme, so employers must contribute. Lord Turner’s report set out a model, but it would have been preferable if the Government had come out in its favour. I have been a trade unionist for more than 30 years, so the Minister will not be surprised to hear that I greatly agree with the position of the TUC, which emphasises that a good scheme definitely needs to meet a number of criteria. Costs must be kept to a minimum, which can be done only through a simple system that minimises regulatory advice and marketing costs. There must be a simple default option available to all and it must make sense for the vast majority of NPSS savers. There must be other choices, but it is important to have a straightforward lifestyle option. Savers should have their own pot and should feel that it belongs to them. They should have representation in scheme administration and stewardship, as with trustee stakeholders. Employers should not choose NPSS suppliers for their staff as there are too many opportunities for mis-selling and it is a burden that employers do not want, although employers are free to do better with their own schemes.