Pensions Bill

My Lords, I declare my interest as chairman of Beachcroft Regulatory Consulting and the other entries in the Register of Lords’ Interests—and the fact that next Monday is a significant birthday, as I become entitled to draw the state pension. Like many other speakers, I offer the Bill a broad welcome in the sincere hope that it will be effective and not too little, too late. Today is a Second Reading debate, so we are discussing the broad underlying principles, but on these matters there is a consensus. We all agree that something urgent must be done to induce people to put more of their money aside for old age. At present, citizens are distorting and unbalancing their asset portfolios by overstretching on their mortgages and undersaving into pension schemes and other financial vehicles that effectively defer income. That the Government should have seen fit to address that is something that we all welcome—on that there is a consensus. So far, so good. But when we look at some of the details—and there have been some powerful speeches in this debate, highlighting key areas—I hope that Ministers will recognise that a consensus has to be earned; it cannot be taken for granted, nor can it be imposed, even with a ““big, clunking fist””. If Ministers truly listen, we shall make this journey together. The spirit of our age is one of borrowing, spending and living for today, which does not encourage people to exercise discipline by putting money aside for the rainy days of senescence that most people now expect to experience in the fullness of time. One may think—looking at it from the point of view of the Minister—woe betide the politician who goes against that grain by preaching the doctrine of deferred gratification and calling for a more self-denying, longer-term approach to human existence. That would be a courageous policy, as Sir Humphrey might have it—hence the general reticence about compulsion. It is good that the Government are addressing a pensions crisis to which, as my noble friend Lord Skelmersdale pointed out, they have themselves contributed. I believe that there is now even a consensus on that, with the possible exceptions of the Chancellor of the Exchequer and one or two of his close colleagues. However, even soft compulsion is likely to meet with some resistance. That is why it is all the less surprising that Ministers should want us all to steep our hands in the gore. There is no getting away from the fact that consensus suits Ministers better than it suits the Opposition, so the onus is very much on Ministers. We on these Benches certainly accept our share of the long-term responsibility for the well-being of our fellow citizens. This House is customarily less partisan and frenetic than another place and I hope that we shall be so on this Bill. But there can and will be no blank cheques on consensus, and I shall now touch on some areas that cause concern. In doing so, I regret that in the other place timetabled Motions have prevented discussion on important parts of this Bill and some of the important issues. We have come to accept that, but it does not mean that we cannot complain about it from time to time. If this measure is to be successful, it must achieve comprehensive take-up with minimal collateral damage. By that I mean that we must act to minimise the phenomenon known as levelling down. On take-up, using inertia in the form of auto-enrolment is a clever device that may work for those who really want to do the right thing and just need a helpful nudge. But we must not underestimate the difficulties that so many households face. When the car breaks down, the washing machine is broken or the children need new shoes, stopping pension contributions to fund higher credit card repayments is the way to remain solvent in the here and now. Being auto-enrolled again in three years’ time may induce people only to repeat the cycle. Auto-enrolment attacks a symptom but not the underlying cause. It cannot by itself turn a spending culture into one of saving. It is not only retired politicians, civil servants and senior company executives who adopt portfolio careers. The less well-off often need to take two or three jobs, whether full-time or part-time. Sometimes they hop rapidly from job to job. They will not be well served by the arrangements under this legislation. I am also concerned that there is so little clarity about how the new system will interact with state benefit structures. There is a dangerous whiff of moral hazard hanging over all this. I think that I understand why Ministers have rejected the notion of a flat-rate citizen’s pension, but I remain unconvinced about how incentives to save or dissave will operate under the new system. There is now plenty of research available demonstrating that levelling down is a clear and present danger, but we see little or even nothing in the Bill to address it. It would be a very sad day indeed if serviceable money purchase schemes were closed and their members dumped into personal accounts simply in the name of efficiency. It may be argued that all this will be dealt with in due course, as and when Ministers come forward with their second pensions Bill, but I make the point that this Bill gives us an opportunity to address some of these issues. The terms of reference of the proposed delivery authority are sketched out in the Bill, and there is a powerful case for setting out in it the duty of the authority to focus its efforts on its identified target market. There are other outstanding issues with regard to the proposed authority. I ask Ministers to reassure this House that they recognise the scale of the challenge that the authority will face and that the board and senior management chosen to lead the authority will be up to the job. Many of us would also like to know whether the door is still open for public subsidy of the set-up and running costs of the authority. Some very challenging points have been raised in this debate, and I look forward to hearing the Minister’s response. In a way, we have kept up the standard of debate that was achieved here in this Chamber on Saturday, when, under the careful guidance of the noble Baroness, Lady Hayman, the Lord Speaker, we had the finalists from the 800 schools who competed for the English-Speaking Union Schools Mace. The standard was very high but, in this debate, we have managed to match it. I offer two cheers to this Bill: one for the fact that it exists at all and one for its broad outline. But the third cheer must be withheld until the process of parliamentary scrutiny has taken place. I hope that there is a consensus on that.