Pensions Bill

The hon. Gentleman and I have spent so much time in each other’s company that he can read my speech even from his sedentary position: that was precisely the issue to which I was about to come. As he knows, the level of the annual contribution is something on which we are consulting. As my right hon. Friend the Secretary of State has made clear, we are reconsidering the matter in the light of the responses. However, we want to look at those responses in the round. The hon. Gentleman will have received representations about the issue from his new-found friends, the Association of British Insurers, but representations have been made from a range of directions. The Engineering Employers Federation said that there should be no cap at all; the TUC, the Equal Opportunities Commission, Age Concern and other organisations backed the £5,000 limit; while others said that it should be £3,600 or £3,000. For once, I stayed rather longer than the hon. Gentleman at the seminar at the Scottish Widows event on Monday, so he will have missed hearing Jeannie Drake say that the Turner commission would be perfectly happy with the £5,000 figure. It is not a question, as some have claimed, of the Government being at odds with the Pensions Commission. The question is really how to achieve the twin goals of focusing the scheme on the target market while also allowing people to make extra contributions if they want. The Pensions Commission has always been very clear that the level of automatic enrolment is a minimum for people to contribute. We want to give enough headroom for people to be able to contribute above that and achieve a higher pension in retirement. We want to balance that with the aim that we have stuck to of targeting the scheme at the market. We will look in great detail at the responses to the White Paper and come back with proposals, which we will be happy to discuss with Opposition Front Benchers, to achieve that balance. I hope that I have answered the points raised in the debate about personal accounts and the scheme. The remainder of the debate has focused particularly on means-testing, so I would like to spend a few minutes on that subject. The argument about means-testing often sets up what I believe to be a false choice between whether we should or should not have means-testing. The truth is that all parties know that, whichever Government are in power and whatever scheme they come up with, there will always be a certain amount of means-testing. The question is therefore not whether there should or should not be means-testing, but what is the right balance between universal benefits and means-tested benefits and how fast should we taper away those means-tested benefits. I believe that the argument about means-testing is very simple. The argument that I shall seek to develop in the rest of my speech is that we are trying to give people the ability to provide for themselves in retirement and to be well above the level for means-tested benefit. The poverty prevention level or safety net will be there for people if their life does not work out as they hoped and they are not able to make sufficient provision for themselves in retirement. I also want to bust a couple of myths about means-testing, because the Opposition sometimes talk as though means-testing has exploded in the past few years. The truth is that the proportion of pensioners who claim means-tested benefits is far lower than in the past. Today, about a third of pensioner families claim means-tested benefits; in 1979, nearly two thirds did so. If our pension system has been affected by the level of means-testing, it should have been affected positively by the trends that have occurred. Indeed, the proportion of pensioner families who claim means-tested benefits has fallen since 1997. The question is not what that has done to saving today, but what can we do to encourage saving in the future. That is exactly what the Pensions Commission considered. It was never our intention to continue the current policy framework indefinitely. It was introduced to deal with a problem that we inherited—the level of pensioner poverty—but we recognise that, if it had continued indefinitely, as the hon. Member for Eastbourne said, almost 80 per cent. of pensioners would have been entitled to pension credit in 2050. That is exactly why we never intended to continue it for that length of time.