I am grateful to the hon. Gentleman for that plug for my pamphlet. I do not believe in a demographic time bomb. There are good arguments for leaving SERPS and encouraging personal pensions that do not depend on the demographic time bomb arguments. I believe in people registering claims on future resources for their retirement through private contracts and private savings. That is the Conservative approach to pension provision and that is the argument for personal pensions and against SERPS.
The figures that the Labour party has bandied around about the expensive rebates for people leaving SERPS are not consistent with the argument that we have heard today about the supposed problems of people who have left SERPS to take out personal pensions.
It is widely accepted that the financial benefits of leaving SERPS are particularly strong for younger people. We all acknowledge—it is a something that the Government are reviewing as they move towards age-related rebates—that younger people are most likely to benefit from leaving SERPS and taking out a personal pension. The figures prepared by bodies such as the Institute of Fiscal Studies and the Carnegie inquiry into the Third Age clearly show that the typical person leaving SERPS is someone at the beginning of his working career. A research paper for the Carnegie inquiry states that the take-up rate for personal pensions among men aged 22 to 26 who have left SERPS
approaches 50 per cent. whilst for those aged 47–51 it is little over 10 per cent… high take-up rates among younger workers are not surprising if individuals engage in a rational economic calculus of future returns from various types of pension schemes.
By and large, those leaving SERPS have been younger workers who have probably taken a rational economic decision.
It has made sense for younger workers to leave SERPS and more than half of them have done so in order to take out personal pensions. They have many decades ahead of them during which their personal pensions can accumulate in the saving schemes that they have taken out, whereas under SERPS they had only 20 best years during which to accumulate an entitlement.
My final point about SERPS is that the Labour party's feeling for it is rather odd given that SERPS is essentially a negative means test. It is not a system that gives most to those with least; it is earnings related and gives most to people who earn most. One of the problems with SERPS is that people with low and intermittent earnings do not accumulate much of an entitlement. Admittedly, such people will accumulate modest entitlements to personal pensions, but they are not well served by SERPS either. Personal pension provision simply reflects the bias within SERPS—both are clearly earnings related.
Another problem that has caused much concern is people who had occupational pension entitlements. That is a much smaller group than the many millions who opted out of SERPS to take out a personal pension, and people's worries about it are much better founded. It seems odd for anyone whose employer was contributing to his or her pension scheme to opt instead for a personal pension with no employer's contribution. Many personal pension providers now accept that personal pensions taken out in those circumstances are unlikely to be as favourable as remaining with an occupational pension.
Another category is people who have already left an occupational pension scheme, perhaps because they are no longer in employment, or have changed employment. What were those early leavers to do with the lump sum remaining in their original occupational pension scheme? Those people are subject to scrutiny in the notorious KPMG document circulated by the SIB, entitled "The KPMG Study on Pension Transfers". Some of the Labour party's interpretations of the document are simply not consistent with a clear and close reading of the text. As my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) pointed out, the study is essentially concerned with evidence on whether clerical procedures have been followed. Although there may be a problem, we cannot be sure of its size simply on the basis of that study. It is concerned with evidence about record keeping, but that is not the same as saying that there is evidence that bad decisions were taken.
Opposition Members have no evidence that I am wearing shoes, but that does not mean that they have evidence that I am not wearing shoes. If, after much careful scrutiny, an extremely pedantic accountant comes up with a report saying that they have no evidence that I am wearing shoes, it would be no basis for their announcing that the Conservative Benches are full of people who, sadly, do not possess footwear. That is one of the ambiguities that Opposition Members have been shamelessly exploiting in the past few hours.
We must also recognise the crucial point made at the beginning of the report:
There is no automatic connection between a client's file not evidencing compliance and the client suffering financial disadvantage. But non compliance will, in some circumstances, result in financial disadvantage.
Of course it will in some circumstances. The crucial question is how many people are in those circumstances. This much-touted report simply fails to deal with that.
May I consider some of the policy issues that arise from this debate? A parallel can be drawn between the story of personal pensions and the story of personal share ownership. One of the Government's successes in personal share ownership was spreading it widely. The focus was then on ensuring that share ownership was also deeper, which was the origin of marvellous initiatives such as personal equity plans.
The same story applies to personal pensions. The initial success was spreading personal pensions much more widely. The objective must now be to make people's personal pensions deeper—worth more. That means that, alongside taking the rebates that were available from the national insurance fund, we must also ensure that many more people contribute from their own savings and that employers contribute. Instead of always looking at the bad news, we should welcome the fact that a third of people with personal pensions already contribute directly from their own savings. I hope that a consequence of this debate and the debates that have gone on for the past few months is that, in future, more people will recognise that if they want a substantial pension when they retire, they must be prepared to save up for it now.
I also hope that employers will contribute to personal pensions. Looking ahead, there seems to be a sensible compromise between a pure, stand-alone personal pension and traditional occupational pensions which do not take account of changes in the labour market. That sensible compromise is a group personal pension in which an employer identifies a personal pension provider and contributes a top-up for those who take out a personal pension with that provider. Such schemes have lower administrative costs than when individuals take out their own free-standing personal pensions. At the same time, they have the crucial advantage of personal pensions, in that every individual accumulates his or her carefully defined pot of money.
The Department of Social Security's research reveals clear evidence that many employers have been worried about advising on pension matters and encouraging group personal pensions because they were afraid of breaching the terms of the Financial Services Act 1986. Many of the Opposition's criticisms of that Act are misconceived. The problem is not simply that some financial advisers have not followed its terms, but that it created a monopoly by saying that only certain categories of people could give financial advice, excluding others who may in the past have been happy to do so. Employers felt that, unless they were prepared to go through the cumbersome procedure of registering under the Financial Services Act, they could tell their employees nothing about pension provision.
The speech by my right hon. Friend the Secretary of State at the beginning of this debate made it clear that employers can give advice to their employees. If employers feel able to give that advice, and if they work with their employees in developing group personal pension schemes, personal pensions will not just be widely taken up in future, but will also deepen. Thus we shall fulfil the Conservative vision of people accumulating their own pot of savings, through their efforts and assisted by their employers, to ensure that they have a high standard of living in their retirement.