Clause 62
Pensions Bill
4:00 pm
Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)
Welcome back to our deliberations, Mrs. Anderson.
This and subsequent groups of amendments are very important, so we must give them the attention that they deserve. I am grateful to the hon. Member for Rochdale for setting out his stall, as it were, on his amendments so carefully and clearly. We are totally as one with him on the need to limit PADA’s scope. As I said earlier, it is not that we have got it in for PADA. We simply take on board entirely the mantra of its chief executive, Tim Jones, about keeping it simple. The less that PADA has to worry about, the better, which is why we want to ensure that in achieving its prime objective of delivering personal accounts to the target market on time, in 2012, at the least possible cost and with the greatest efficiency, it is bound very carefully on how it operates and the principles that inform its activities.
We agree with some of the amendments in the group, but not with others. We do not agree with amendment No. 160 because we think that it would put the concept of a series of principles out of balance. The particular principle proposed in the amendment should not be an overriding one. It is important to establish a group of clear, easily-understood principles, none of which are contradictory. Many of the principles flow from Turner, the Government’s White Paper, and some of the debates on amendments that I proposed to the Bill that became the Pensions Act 2007. We need to get the principles absolutely right.
We are quite taken with amendments Nos. 161 and 106, which are both concerned about, and focused on, the target group, which has to be the sensible approach of the Bill. Mission creep, as it has been called, must be resisted at all costs. The Bill is all about getting cheap, easy-to-understand pension cover and savings to the several million people who are not saving anything, or anything like enough.
I think that I can see where the hon. Member for Rochdale is coming from with amendment No. 162, which would make clear which schemes fall under clause 50. That is broadly the right approach. I wonder whether amendment No. 108 is in conflict with some of the other principles or objectives, but amendment No. 109 is right on the money. Again, simplicity has to be the theme throughout this part of the Bill, so we are very much in favour of that amendment.
I shall spend a little longer on our amendment No. 46, which would insert two principles into the list in clause 62, even though it is important that that list it is not too long. The first principle is that
“the best interests of prospective members in the period prior to 2012 are served”,
which ties in with an amendment proposed by the hon. Member for Rochdale. The second principle is also important. Given that it has not been touched on in the debate so far, allow me to spend a couple of minutes explaining what we mean by
“the levels of saving shall be increased as well as the number of existing savers, and that in general better retirement incomes are achieved”.
The latter part of the provision is almost a direct quote from one of the Pensions Policy Institute’s excellent papers on the likely effects of personal accounts, which also examined the so-called at-risk groups.
Although the Minister for Pensions Reform was slightly evasive when I quizzed him during our evidence sessions, I am sure that both he and the Under-Secretary would agree with the proposition that if personal accounts do not deliver more savings overall, as well as more savers, they will have failed. If the Under-Secretary takes great umbrage at that statement, he can always intervene. It is almost inevitable that the system will produce more savers simply by dint of the process of auto-enrolment. Whether that is 4 million or 5 million, or 7 million, 8 million or 9 million, is, to some extent, in the lap of the gods, but there is no doubt that there will be more savers. Issues such as the persistency of the savers are matters that whoever is in government at the time will have to grapple with.
It is worth reminding the Committee that it could be possible, as is demonstrated by one of the PPI’s pessimistic scenarios, for the number of personal accounts to go from zero to a substantial amount, yet for the overall amount of pension savings in the country to fall. Even if they were to stay the same, but be distributed among more people, that would be a failure for personal accounts. We must guard against that.
The second part of the provision states:
“in general better retirement incomes are achieved.”
That goes back to the issue of levelling down. It is important that people do not come out of defined benefit schemes in which, as we know, the average employer contribution is 16 per cent., into personal accounts in which the employer contribution is much less: 3 per cent. It is vital that we retain a Berlin wall between existing provision and personal accounts, which is why personal accounts will not have been a success if they do not deliver generally better retirement incomes than people had heretofore.
In stark terms, for the great majority of people, that means no retirement income versus that delivered by personal accounts. That must be the result of the project and it is why we tabled amendment No. 46. I shall spend less time on proposed new paragraph (g) in the amendment because such matters have been dealt with under another amendment tabled by the hon. Member for Rochdale. I do not need to repeat his arguments, which I support entirely.
It is important that the criteria for the success and failure of personal accounts are clear in the Bill and well understood by Paul Myners, Tim Jones and all those who will be working hard to deliver on personal accounts by operating PADA and functioning under the Bill. I shall be interested to know whether the Minister disagrees with how I have defined the success or failure of personal accounts.