Pensions Reform

That is what our health inequalities agenda is about. My constituency suffers from exactly those problems that the hon. Gentleman described, with people dying 10 years earlier than elsewhere, but it is impossible to deal with such problems without raising the state pension age. I assume that he is not proposing differential state pensions for people in different socio-economic classes, and I am sure that he will accept that life expectancy has risen in all socio-economic groups. Although it is right that we must look at how a rise in the state pension age might be implemented, it is clear that it will have to be introduced. The second major issue in the debate had to do with personal accounts. My hon. Friend the Member for Bradford, North (Mr. Rooney) made some very good points about that, as did the hon. Member for Bournemouth, West (Sir John Butterfill). Questions were raised about employer contributions, governance, charges, generic advice and compliance, and we want to discuss those matters with all parties in the House. We have said already that we want to invite Opposition Front-Bench Members to our pensions summit, when the details of our policy will be explored. My hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) spoke eloquently about a matter that worried a number of hon. Members—the interaction between means-testing and automatic enrolment. How can we automatically enrol people if we are not certain that they will be better off in retirement? Our response is that that is not the test that should be applied. No saving is certain, and people never know for sure what their careers will hold. They do not have 20-20 foresight about when they will work, how much they will earn or when they will be unemployed. Instead, the real test of automatic enrolment is whether it will give people a reasonable expectation that they will be better off on retirement for having stayed in the scheme. We believe that we can provide some very good answers to that. In response to the specific request from the Conservative spokesman, the hon. Member for Runnymede and Weybridge (Mr. Hammond), we assure the House that we will be happy to publish the research that we used to make our decision, so that people will be able to look at it and make up their own minds. There are two reasons why we believe that people will have a reasonable expectation of being better off under our proposals. First, those who leave their money in a personal account will immediately have it doubled by the employer contribution and the state contribution. Secondly, the charges on personal accounts will be much better, so people will be able to keep much more of their pension pot in retirement—we think about 25 per cent. more—than is the case with other forms of saving. The return on personal accounts should compare favourably with other forms of saving, and we believe that that, interacting with our reforms to state pensions, will help us to convince the vast majority of people that they will be better off. The key point is that although, under our proposals, as a base case, a third of people would be means-tested, only 6 per cent. of them would be on the guarantee credit alone and thus facing 100 per cent. withdrawal rates. Those people may not have known that they would end up in that situation, so they will be better off due to the existence of the guarantee credit. The alternative would be to tell them, ““We know that you do not have a good state pension but we will not provide a safety net for you””. We shall be able to publish evidence to show that we can give people a reasonable expectation that they will be better off, but the scheme will not involve compulsion. People will be able to make their own decisions, so it is right on the one hand to enrol them automatically—to use inertia for the saver culture—but on the other to leave them with a choice about whether they continue to save.