I support the Bill, because I want to see good-quality defined benefit pensions maintained in the public sector, even at a time when the private sector is experiencing a wholesale shift away from final salary and defined benefit schemes. In the mid-1990s, 5.5 million private sector employees were in some form of defined benefit scheme, yet membership of such schemes had fallen to 2.1 million by 2010, with only 1 million in schemes that were still open to the public. Longevity, low stock market returns and accounting rules have been blamed for the switch, but the last Labour Government’s decision to end the repayment of dividend tax credits also had a huge impact, taking £3.5 billion a year from the income of the pension funds. From a total asset value of £650 billion, that represents a significant drop in income.
Treasury papers from 1997 that were published in 2007 under the Freedom of Information Act revealed civil service concerns about the impact of that decision on private sector pensions and a fear that it might accelerate the shift towards defined contribution schemes. The Labour Government believed that the stock market would continue to rise, and therefore make up any loss to pension funds caused by the loss of the dividend tax credits. The FTSE index stood at 6,900 in 1999, whereas last night it stood at 5,876. It is still more than 1,000 points below its peak in 1999.
I believe that the proposed final agreement negotiated by the Government will result in public service pensions that are still the best available. They will be defined benefit pensions and will still be regarded as good schemes by the trade unions, even those that have still to accept the negotiated settlement. Chris Keates, the general secretary of NASUWT, has said:
“Our advice to our members…has to be that they must opt into the scheme.”
This is a very good Bill. It reflects a good outcome to the negotiations on the reform of public service pensions, and it means that the public sector can be assured of good-quality defined benefit pension schemes that are sustainable in the long run and that address the main concerns raised in Lord Hutton’s report.
6.53 pm