Occupational Pensions

Part of the debate – in the House of Commons at 12:30 pm on 11th June 2003.

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Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions 12:30 pm, 11th June 2003

I thank the hon. Gentleman for his positive welcome—for the most part—for our proposals. He put it to us last week that he might be applying for the job of Pensions Minister, and if that was his first interview, perhaps he is making some progress—but it is still a case of "Don't call us, we'll call you." He asked about the timing of the measures. As I said in my statement, as far as the proposals on the wind-up of solvent companies are concerned, we are publishing the regulations today and they will, after consultation and due process, take effect from today. He will understand that that is an essential corollary to bringing in the pension protection fund. Firms will have to meet their obligations in full if they wind up their schemes. We shall be laying the regulations relating to the priority orders shortly.

Yes, of course there will need to be a period between now and when the legislation takes effect in which to set up the pension protection fund. As I said, we will introduce those provisions just as soon as parliamentary time allows. No one is more seized than I am of the importance of getting on with this. To return to a point raised by Mr. Willetts about a pensions crisis, I have to tell the House that I would not be introducing these wide-ranging radical measures if I did not accept the scale of the challenge, and the scale of anxiety that is afflicting pensioners in this country—[Interruption.] We are taking action, whereas the Conservatives have no alternative remedy to offer.

Mr. Webb asked about inflation protection. As I explained in my statement, the 5 per cent. mandatory cap was brought in at a time when long-term market expectations of inflation were running at 5 per cent. They are now running at 2.5 per cent. This is therefore a reasonable adjustment. To put it in even more commonsense terms, I believe that the person in the street would readily trade some of their inflation protection for the knowledge that they have security for their pension scheme, which they do not have at the moment. People are worried that other firms will go the way that some already have, and that they will lose their pensions altogether. That is why it is so important that the Government act to introduce these proposals.

The hon. Gentleman referred to the analogy of holiday protection and motor insurance, but I think that he actually reinforced my argument. If people can count on the fact that firms providing that kind of insurance will be covered if they go bust, surely it is much more important that we have protection for pensions. Yes, the pension protection fund will have to deal with very large sums of money indeed. I am confident, however, having learned from the American experience—rather than replicating it—that we can make the fund work very successfully here on the basis that I have set out.