Pensions Bill

Well, I will not actually be standing at the next election, but I will be campaigning, and I hope to do so on as good a pensions package as possible. I do not anticipate that the change will be delayed until 2015—it is just that the Government have not specified whether it will be 2012 or 2015. I certainly hope that it will be well before 2015. Where could we obtain the additional resources to improve the pensions package proposed in the Bill? The Turner commission pointed out that we spend large sums of money on tax relief, which it described as costly and poorly focused. It did not advocate one rate of tax relief for pension contributions for various practical reasons, and my right hon. Friend the Secretary of State was right to point that out. However, at one of the all-party group meetings with Lord Turner, I had the opportunity to make my point about the large sums of taxpayers’ money that go to some of the richest people in the land. Apparently—and the figures come from my right hon. Friend the Member for Birkenhead (Mr. Field)—5 per cent. of the population get half of the tax foregone through tax relief on pensions. Lord Turner suggested a way forward that I commend to the Government. He suggested that the total pensions pot that is eligible for tax relief—now some £1.25 million—should be frozen. I noticed in the last pre-Budget report that my right hon. Friend the Chancellor projects an increase in that sum to £1.35 million—that is what I recall the figure to be, although I stand to be corrected. We have the opportunity, therefore, to shift our priorities from tax relief for those in the very highest income brackets—who are not necessarily the highest income earners—and use the money released to benefit the majority who are on fairly low incomes and depend on state provision. Ros Altmann makes a similar point, but she also points out that if the contracting-out provisions were abolished, £10 billion could be released annually. As I have said, the proposals would involve an increase of £3 billion annually by 2050. Another submission to the Work and Pensions Committee suggested that we could consider reducing or abolishing the tax relief on lump sum payouts by private pension provision. If the Government really wanted to prioritise improvement in state pension provision, they could do so. I endorse the comments by the hon. Member for Solihull (Lorely Burt) about the money that we will waste on a computer system for identity cards, which would be better spent on this issue. I could add to that the cost of replacing our nuclear submarines, but I shall stick to the possibilities for redirecting funding from within the pension system itself. If we do not improve the basic state pension and remove means testing more than the Bill proposes, all we will do is ensure that we do not have any more means testing by 2050 than we have at present. We all know the present disincentives to private saving, so I urge my right hon. Friend the Secretary of State to try one more time to bend the Chancellor’s ear on this issue. If we do not make the improvements that I have outlined, we will not build a truly firm foundation for private pension saving. In addition, people being auto-enrolled into the national pensions scheme could discover, when they come to retire, that continual means testing means they are still no better off.