Security and confidence, protection, complexity and increased choice in place as quickly as possible—the Secretary of State for Work and Pensions has made it clear to pensioners that those are his objectives. I certainly support those ideals and ambitions and welcome much that is in the Bill.
This debate should not be a point-scoring exercise because it is too important. Having listened to hon. Members' contributions, I believe that the Bill can be springboard to encourage people to make provision for their retirement. Nevertheless, I hope that the Minister will acknowledge in his response the many fears and concerns that have been expressed.
The issues involved in pension provision are complex, as is the nature of pensions. The Bill is to do with the past, the present and the future. In the past, it is true that many of my constituents lost their pensions through the failure of a pension scheme and that that has created an enormous void in their current situation. It is important, however, to place on the record our congratulations to the workers who have kept this issue in the minds of the people, including trade union representatives and Members of this House. I pay tribute to the contributions made by my hon. Friends the Members for Sittingbourne and Sheppey (Mr. Wyatt), for Cardiff, West (Kevin Brennan) and for Ayr (Sandra Osborne) in ensuring that all. Members recognise the problem.
We need to encourage employees and employers to work together to create a pension for their retirement. The state pension was never designed to make up for an absence of savings when we retire or to be a substitute for what we earn in full-time employment. Various people who have been unable to save have been given the support of the pension credit. I remind hon. Members that the state second pension offers 20 million people—including 2.5 million carers, 2.5 million long-term disabled people and 13 million low and moderate earners—the prospect of building better pension entitlement than previously. That is important in terms of how we move on.
The Opposition decry the pension credit and the minimum income guarantee, but I believe that those initiatives have been invaluable in protecting pensioners. I hope that the Government will continue to increase pension credit in line with average earnings—that is an important factor that must be taken on board. The loudest voice among pensioner organisations calls for the restoration of the link with earnings. The Conservatives scrapped that, but now that it is popular they have decided to reintroduce it. My advice to pensioners would be to beware because those promises might never take effect—they should never trust a Tory.
Is it possible to restore the link and to maintain the pension credit, but to use the taxation system to recover funds from those pensioners who do not need the basic pension to ensure that their standard of living is maintained? Some company directors and MPs have a pension that is way beyond that which some pensioners could ever hope to receive. I ask the Minister seriously to consider that proposal. However, it should not be paid for by condemning young jobless people to a lifetime of unemployment through scrapping hugely successful schemes such as the new deal. If we are to convince young people to involve themselves in pension schemes, we have to create the opportunity for occupational schemes to be re-established and to grow.
There is currently a crisis of confidence in pension schemes. There are many reasons for that, including pensions mis-selling in the 1980s, the problems of Equitable Life and the squandering of pension scheme surpluses by companies. Many companies raided pension schemes in the halcyon days of stock market growth. Indeed, they were aided and abetted by the previous Government, who legislated for any surplus of more than 105 per cent., based on actuarial assessments, to be taxed at 40 per cent. That encouraged companies to become predators, remove surpluses and take contribution holidays irresponsibly, without caring or recognising that stock markets can go down as well as up.
I had practical experience of such matters when I worked at Hoover. When Chicago Pacific bought the company, the first thing it considered was the £200 million surplus in the pension scheme. It attacked that and tried to take it from the scheme. That sum was more than it had paid for the company.
Many current deficits are the product of earlier over-eagerness by pension schemes. Previously, they adopted a balanced investment strategy, but in the 1980s and 1990s there was a dash towards equities. By the mid-1990s, pension schemes held the majority of UK shares—then the bubble burst. My right hon. Friend Alan Howarth made the point that we must have a balance between contributions and investment in pension schemes.
There is hope. A survey that Hewitt Bacon and Woodrow published on
"then leading companies on average may find that their pension deficits have gone".
It is important to take that on board when pension schemes are wound up in the next few years. We must recognise that if the FTSE 100 reaches the required level, the deficit will be wiped out.
The Minister must consider how best to implement good investment practice. Perhaps we will decide to ensure that pension schemes should hold a more balanced portfolio of bonds and shares, or at least that they should be more transparent in decision making. We must take account of that.
I welcome many of the Bill's proposals. The new regulator, which the Pickering review initially proposed, will focus on issues of greatest concern and have real teeth, which will be an important step forward. However, there are several matters about which I should like reassurance.
I have several concerns about the working of the pension protection fund. The Department for Work and Pensions stated that it expects the cost of the fund to be offset by savings in administration costs that will be brought about by the range of simplifications in the Bill. Discussions that I have had with representatives of pension schemes suggest that they believe that there will be few, if any, cost savings through the simplifications. I should like reassurances from the Minister that he is convinced that there will be cost savings.
Concerns have been raised that the cost of the fund will be prohibitive, with costs of up to £40 per scheme member a year. Given that Watson Wyatt estimates that the average cost of administering a large pension scheme is currently about £28 per member, I hope that the Minister can reassure us about that.
I also hope that the Minister can reassure me that the fund will protect an adequate level of benefit rather than simply an arbitrary percentage, that safeguards will be established to ensure that the fund is not allowed to slip deeper into the red and that the risk-based levy will not be the straw that breaks the camel's back for the pension schemes of companies that are already struggling to provide final salary schemes. It would be tragic if providing the fund destroyed some occupational pension schemes.
I hope that the Minister will confirm that he would not normally expect the powers to enforce a freeze period on a pension scheme to freeze pensions that were already being paid. Although I welcome the proposals on member-nominated trustees, I hope that the Minister will outline the way in which the Government will encourage ordinary employees to take on that role, educate them about fulfilling it and ensure that individual trustees are adequately protected, for example, through periods of grace, with regard to the requirement for knowledge.
I have one point to make in conclusion. I should like the Minister to instruct his civil servants to conduct a thorough audit of those affected by pension schemes that have wound up in deficit since 1995, the value of the pensions lost and the circumstances in which those schemes have been wound up. Although I understand his point that it would be wrong to give false hope, he must look at what can be done to solve the problem of the people who have lost their pension entitlement. Morally, that is the correct thing to do.
I shall close on that point, because I am sure that the Minister needs time to resolve the problems that we have raised.