Pensions Reform

I welcome the White Paper. Of all the White Papers that I have ever read, it is probably the most lucid exposition of a complex subject. The exploration of the social, demographic and behavioural context of pension policy is illuminating and has informed our debate today. I congratulate Ministers on tabling this motion so that we may have a full debate before legislation, so that we can tease out the different issues and address the points made by all the parties. I hope that we will achieve consensus on the subsequent legislation as a result. This is a hugely important debate. I congratulate the Government on what they have done to lift pensioners out of poverty—several Members have recognised the positive effect on pensioner poverty of pension credit and other Government provision—but the model that has been successful in the past few years in raising the poorest pensioners out of poverty is not necessarily adequate to meet the demographic changes of the future and the behavioural issues that we need to address to ensure that we have decent pension provision in the next few decades. In the past, as the hon. Member for Weston-super-Mare (John Penrose) said, legislation in this area has been piecemeal and complex. If we are to establish a consensus, it has to start here and then be recognised by the public. The White Paper provides a basis for achieving that. Any new provision has to be so obviously fair and command such wide public support that future Governments are not tempted to tinker with or remove its basic elements. Above all, the scheme must also be affordable, so that future state pension provision is insulated from the vicissitudes of economic ups and downs that might otherwise tempt a Government to change it. There will be less reason to change a scheme that is affordable. I recognise that the measures that this Government have taken to lift pensioners out of poverty mean that there is no immediate crisis, but profound problems remain that must be tackled if these proposals are to be successful. A combination of social attitudes to saving, what the White Paper terms ““behavioural economics””, the complexity of pension provision and a lack of faith in the savings industry is making it very difficult to establish in people the commitment to pension saving that is going to be needed if we are to resolve the difficulties in the future. The first matter that I want to deal with is the live now, pay later culture that several hon. Members have mentioned already. Yesterday, I saw a news item celebrating the 40th anniversary of the introduction of the credit card. I confess that I was alive and around in that era and can remember that buying things on hire purchase was not really respectable. People did it, but it was frowned on, especially in tight working-class communities. What a revolution there has been. People in our consumerist society are bombarded with expectations of a certain quality of life, irrespective of their incomes. That, combined with the accessibility of easy credit, has changed everything, and our well-documented spending culture does not sit well with the level of pension provision that we want for the future. The Government can change the culture by changing the way that state provision is made, and the child trust fund is a good example of that. I spoke today to the chief executive of one the fund providers, who told me that there is considerable evidence already that people are adding to the funds—even those allocated by the Treasury—and using them for saving purposes. The jury is still out on the child trust fund. It is still in its early days, and people might say that I was bound to support it, but the initial signs are encouraging. The fund is an example of how the state, through the way that it implements support, can change cultural habits and encourage people to save rather than spend. The same is true for pensions. The national pensions saving scheme has automatic enrolment, which means that it can harness people’s inertia about pensions. I do not want to sound contradictory, as that inertia has been a bugbear in the past and a reason why people did not get around to sorting out their pensions. However, the automatic enrolment in the pension savings scheme means that that inertia can be used to assist saving, rather than the opposite. That is crucial to the scheme’s success, but I echo what my hon. Friend the Member for Bradford, North (Mr. Rooney) said earlier. He is not in his place just now, but he was right to say that it is possible for unscrupulous small employers operating on tight margins to undermine the scheme by urging their employees to opt out. I am the last person to advocate a heavy regulatory regime to enforce the scheme, but I hope that Ministers will raise this very important matter in the discussions that I know they are having with the small business community. The history of the savings industry has damaged how people perceive that industry, as well as their incentive to save. Pensions mis-selling, problems with endowment mortgages and the collapse of so many defined-benefit company schemes have led many people to believe that saving is just not worthwhile, as they will not get value for money. In common with many other hon. Members, I have a company in my constituency where decent, honest, working blokes who saved in a scheme for many years have lost all the benefits that should have accrued to them. They qualify under the financial assistance scheme, but no pay-outs have yet been made. I know that the Department is looking at ways to speed up the administration of the scheme and the payments made under it, but changing people’s perception of the value of saving requires us to bear in mind that every failed scheme is a personal tragedy for those involved. It is also a huge public relations disaster and a massive disincentive to future pensions saving. All that must be sorted out if we are to re-establish confidence in saving for pensions. Finally, I come to the question of the retirement age. I believe that a large proportion of the public wants to work later in life. People may not want to do the same job that they have done for most of their lives, or even to work full-time, but a huge number feel that they can still contribute to the economy and the community when they reach retirement age. They want to enjoy the sense of self-respect and well-being that goes with working. If the retirement age is to be increased, part and parcel of that must be the provision of support for people in their 50s and 60s—and older than that—so that they can find the sort of jobs that they need. In my area of West Bromwich, West the history is one of heavy industry, with demanding jobs, poor health and a life expectancy much below average. The Government must look at the provision for people like those in my constituency, who will not enjoy the same post-retirement lifespan as others. I welcome the White Paper’s commitment to examine whether the guarantee credit and the pensions credit could remain available at age 65, and I welcome, too, the Government’s determination to undertake proper monitoring of what is going on so that people such as I have described do not lose out. In conclusion, I believe that the Turner report carried real weight. It was robust and received wide support from all groups. The White Paper builds on and refines its recommendations. It is robust and constructed in such a way that we cannot remove certain proposals and go ahead with the rest, as they are all interconnected. The complex combination of funding and payments and the construction of different schemes is such that if one element is removed the whole is weakened. I urge Members to recognise, whatever their feelings, that the package is good; it is fair and robust and can command consensus not just in this place, but in the country as a whole. It will be a huge improvement on what has happened previously, so we should all work to give future generations something that past generations never enjoyed.