Pensions Bill

Like many Members, I welcome the Bill. I am pleased to follow the hon. Member for Amber Valley (Judy Mallaber). Somewhat to my surprise, I found myself in agreement with many of her comments about the benefits of the Bill in bringing women, carers and others who have not been able to secure full state pensions into that category. It has been an interesting debate enlivened at one point by the revelation that my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) has his own shadow in the copycat form of the hon. Member for Yeovil (Mr. Laws). We are getting used to the Government looking to the Conservative party for inspiration for fresh policy initiatives—for example, in this Bill we have the linking of the state pension to earnings rather than prices, which was in the Conservative manifesto at the last election—but now we learn that the Liberal Democrats look to the Conservative party for their parliamentary questions. The Bill seeks to deal with a big demographic challenge that has been ticking away but has not been addressed by any Government for some time. An illustration of the consequences of that was brought home to me in my constituency the other day by the primary care trust, which had put together a report on our community hospitals that pointed out that more than 30 per cent. of the people in south-west Shropshire are now over 65. I accept that that proportion is much higher than the national average, but that is still rising rapidly. Those over 85 are expected to increase by 50 per cent. over the 10 years to 2013. As a result of medical advances and people living longer our future pension provision faces a rapidly growing funding crisis. The Bill is a first step in attempting to deal with that. Sadly, the Bill will do virtually nothing for many years for existing pensioners. Reservations have been expressed to me, and no doubt to other Members, by representatives of pensioner groups about the fact that it is such a forward-looking measure that does so little for existing pensioners. The link to earnings, which the Chancellor has left himself wriggle room to defer until 2015, means that for today’s pensioners a very modest increase in their state pension might be forthcoming in anything from five to eight years’ time. That does not give rise to much enthusiasm in the senior citizen forums that I attend. I welcome the introduction of personal accounts and the prospect of restoring some of the savings culture that has been so weakened, particularly in the past 10 years. When I have raised that with Ministers in the past, they have always tried to brush it aside by saying that it is entirely correlated with the strength of the economy, but it is not purely to do with the economy but with the culture and savings habits of the population. Let me deal with two main difficulties with the Bill. One is an omission and I hope that the other can be tackled in Committee. The omission is the lack of reform of public sector pensions. That is a missed opportunity. For party political reasons, the Government have not dealt with the disparity between public and private sector pension provision and established common rules for all pensioners in this country. When the Secretary of State was challenged about that in the Select Committee, he said that he did not perceive it as a problem because 10 per cent. of civil servants change employment every year. He anticipated that that would continue so that, by 2026, only a minority of people in the civil service could retire at 60. He calculated that, by the time the measures were fully implemented, only 3 per cent. of civil servants would be entitled to retire at 60. That may be the case because the arrangements will be introduced over several decades. In 50 years, no one in the civil service will retire at 60. However, that is far too long a period for bringing the two sectors of society together. The Government have made a feeble attempt to find an excuse for not being prepared to tackle the public sector pension challenge. My hon. Friend the Member for Runnymede and Weybridge referred to the other issue when he mentioned the state second pension. The abolition of the contracted-out rebate and the proposals to move the state second pension on to a flat rate over time have revealed the prospect of many people who are currently in that pension regime saving for no return. The state second pension will effectively be a stealth tax dressed up as equalisation of pensions. That must be tackled, because there is an injustice in arrangements whereby the benefits of a specific category of people go to waste. I hope that we can consider that in Committee and ascertain whether we can introduce provisions to right the wrong. I want to concentrate on two other specific matters. The first is specific or general advice, which relates to the operation of personal accounts. It has been a thorny issue for the Government, not least because of their track record. Other hon. Members have mentioned the parliamentary ombudsman’s devastating critique of pensions mis-selling, which the Government ignored but the public did not. It raises the question of trust. If the Government wish to encourage saving, the population needs to have complete trust and confidence that the governance and structures of the scheme in which it saves are subject to rules of conduct. Advice is key. As other hon. Members said, given the prevalence of means-testing, which will continue to apply to many who consider whether to opt in or out of the personal accounts scheme, it is important that people receive clear guidance about whether it is appropriate and in their interests to participate. The Government have failed to tackle the matter fully, although I expect that it will be picked up when we consider the second stage Bill in the summer. Trust covers so many different aspects. The collapse of final salary pension schemes has posed questions, with which we are all now familiar, about pensions. The Financial Services Authority imposes clear rules and procedures on private sector providers in the savings industry. The Government choose to ignore that when they describe the way in which the personal accounts system might work. That is a great mistake. When setting up a new system, it is vital for the Government to use clear, precise and careful language, especially when they describe what they want to achieve and try to build trust among the population.