My Lords, I am grateful to the Minister for giving in his opening remarks a reply wider than the amendment before us merits. I have no particular objection to the amendment, in so far as I understand it, but a few issues were raised in the debate last week that I do not think the Government have yet fully answered, even given the Minister’s speech today.
We have a difficult situation here. Everyone understands that contracting out has to cease in this respect, but the way in which it is done is vital. The Minister referred to the measures for private sector occupational schemes being tightly constrained by technical regulations. They definitely need to be tightly constrained because the Bill provides the ability to override trustees in all circumstances, to avoid any form of negotiation, and to place the full cost of any replacement of the contracting-out benefit on the employees. The cost of contracting out will jeopardise the solvency and therefore the future of many of these schemes. As we discussed at some length, and as was pointed out by my noble friend Lord Browne in particular, there is also the question of statutory protection in some circumstances in certain fairly significant schemes.
The Minister continues to justify doing all this on the basis of a negative resolution procedure. This is quite a revolution that will be imposed by this statute on private sector occupational pension schemes. There is not even, for example, a provision that states that there should be no retrospection. The whole principle of pension scheme regulation is that at any given point, benefits accumulated by an individual until that point will be frozen, even if changes are made by the trustees, by statute or whatever. That is not written into Schedule 14, as far as I can see. We need some reassurance on that.
The wider point is the one I raised last week. Where do the Government think we are going on private sector occupational pension schemes? The Minister said—perhaps not with relish; I would not put it quite like that—that it was a matter of inevitability that the decline in the number of people covered by defined benefit schemes had already reduced from more than 2 million to 1.6 million, and that the figure was expected to be roughly 0.9 million in a couple of years’ time. The Government seemed to regard that with some complacency. Of course changes will have to be made to those schemes, but it is not right to say that this imposition will have an effect only on defined benefit schemes, because the lack of trust in the future for any form of scheme is affected by the way that the Government can change solvency rules and the prospects of this scheme so drastically.
I am grateful to the Minister for offering us a meeting between now and Report. We will probably wish to take up that offer, and some schemes may wish to write to the Minister, but my point is that it is
extraordinary that the Government seem to be relaxed about the prospect of the whole occupational pension scheme sector being undermined without any serious guarantees to beneficiaries or a clear strategy as to where we are going on the pensions scene.
The proposal is even odder coming from a Conservative-led Government, because these private sector schemes allow individuals to provide savings for the whole of their working lives. They are a way of providing security in retirement. They are a form of collaboration between employees and the employer in providing that. They defer pay in a way that, because it is in the pension pot and not in the pay packet, reduces inflationary pressures. Of course, they also create funds that will be the long-term investors in our business and industrial performance.
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I cannot quite understand where, from a Conservative Party point of view, there is something wrong with that. We face the prospect in 20 years’ time of having everybody in the state scheme and very few people, except some highly privileged ones, in the private sector at least, in an occupational pension scheme. I would not have thought that that was the vision that this Government really wanted. It is certainly not one that I want.
Occupational pension schemes have provided an enormous degree of security which, up until 30 years ago, ordinary working people could never expect to achieve. It is time the Government took a step back from this and looked strategically at it. Therefore, if we have a meeting, I hope that we will look more widely than the precise terms of this clause, these amendments and the potential technical regulations that will come from them. Certainly, I would look forward to that.
I am also grateful for the Minister’s offer to talk to people on the public sector pension side. I know he is going to have a meeting with the LGA tomorrow, which I very much welcome. I am sorry I cannot be there myself. Public sector pension schemes may or may not survive in the future, but the impact of this on private sector direct-benefit schemes is lethal, and trust in all forms of scheme is being seriously undermined. There is a very serious issue underlying the changes made via Clause 24 and Schedule 14, which we have not fully addressed in Committee; perhaps it is not possible to address it fully in Committee. Certainly, the Government need to think about it and so, indeed, do the rest of us.