Clause 1 - Entitlement
State Pension Credit Bill [Lords]
6:00 pm
Mr Andrew Selous (South West Bedfordshire, Conservative)
I also want to speak briefly to amendment No. 20. I concur with the comment of my hon. Friend the Member for Canterbury that we did not hear much from the
Minister about the amendment. I believe that he broadly welcomed its intention, but he tried to tell us that there were other means whereby the Department would seek that information.
The Government have said that they want to move from the current figure of 40 per cent. of funded pensions to 60 per cent. Opposition Members thoroughly support them in trying to attain that. That is even more important given the accelerating demise of final pension schemes.
I shall focus on a comment in paragraph 32 of the Select Committee's report, in which the Committee said that it hoped that in future it would always pay to save. Because of the complexity of pension legislation—I am thinking especially of the task facing independent financial advisers and others; some of my constituents recently contacted me to explain the difficulties that they face—rlwe need clarity.
My hon. Friend the Member for Hertsmere described the four categories of people for whom we cannot say that it always pays to save. Amendment No. 20 is important. The first is those with less than a basic state pension. Information from the Department is that 12 per cent. of retiring men currently do not have a basic state pension. However, 75 per cent. of retiring women do not have a basic state pension and will therefore fail to benefit from the savings credit in the Bill. Women aged between 60 and 65 currently number 1.5 million, a figure that it is anticipated will rise to 2.2 million by 2031. They are a second major group that has no incentive to save under the Bill as currently structured. There are more than 3 million self-employed people who, because they do not fall within the ambit of the state second pension, suffer a disadvantage in being unable to benefit from the savings credit in the Bill. Even for those who save £50 a month and are entitled to the savings credit, for the first 10 years or so, there is no benefit. I hope that amendment No. 20 highlights the suggestion in the Association of British Insurers submission that there might be a disregard for the first £10 of saving income. The graphs in its submission to the Select Committee show that if there were, it would always pay to save.
Those issues are important. As the ABI and my hon. Friend the Member for Daventry said, the savings gap is currently £27 billion. The Government have rightly said that they want to move to a ratio of 60 per cent. private occupational funded pensions, reversing the current ratio. We shall not achieve that unless it can be said with clarity that it always pays to save.
I refer to the recommendation in paragraph 32 of the Select Committee's report. We recommend that the Government devote time to looking into the cost of the measures. It is, perhaps, worth noting that we do not know how much the Bill will cost. As Parliament, we have passed the Bill with various scenarios, but we do not know exactly what the total cost will be. The Select Committee has been slightly more cautious and
has asked the Government to look into the costs of the four measures that I have described.