Pensions Bill

moved Amendment No. 111: 111: Clause 20, page 23, line 27, at end insert— ““(2A) In discharging its functions under this Part, the Authority shall publish, no later than 31st December 2007— (a) estimates of the percentage of those people without existing occupational or personal pension provision who would be subject to means-testing if enrolled in personal accounts; (b) estimates of the percentage of people who will be auto-enrolled into personal accounts who can be expected to secure returns of— (i) £2 or more for every £1 saved, (ii) £1 or more for every £1 saved, (iii) less than £1 for every £1 saved; (c) a breakdown of the target groups for personal accounts that are most at risk of low returns on their savings; and (d) plans for the delivery of free generic financial advice to those people who are liable to be auto-enrolled in personal accounts.”” The noble Lord said: This amendment asks the authority—in a moment I shall explain why I think it is appropriate for that body—to give estimates of the percentage of people who will be subject to means-testing if enrolled in personal accounts, to estimate the percentage of people with varying returns from their savings, and to provide a breakdown of the target group for personal accounts of people who are most at risk of low returns. All this is intimately linked with the plans for the free delivery of generic financial advice, which will be particularly relevant for low-earning people. I thank the Equal Opportunities Commission, particularly for its joint briefing with the Pensions Policy Institute, whichdoes exceptionally valuable work year in and year out on these issues, and the Resolution Foundation, particularly on generic financial advice. I remind the Committee that the PPI has made it clear, as we all do, that in principle personal accounts are a very good thing, as they provide a low-cost pension for many people who increasingly are not covered as our private pension provision declines inexorably. But equally, some individuals run a high risk of getting back little more, or possibly even less, than the value of their own contributions protected for inflation. Again, this is because we are not getting away from means-testing, or reducing it nearly as fast as Members on these Benches would like, so the risk of that unsatisfactory outcome is increased. Herewe are talking particularly about women and the self-employed. As the PPI points out: "““A combination of career breaks and low earnings can increase the risk of finding Personal Accounts unsuitable. People in their forties and fifties today may get less value than today’s younger people from Personal Accounts””." It may be that even for those in the high-risk category, it is still advisable in some cases to save, but theywill need very clear information to help them make informed decisions about whether they should stay in or opt out of personal accounts. What worries me most about personal accounts, and this is where the generic financial advice point comes in, is that many people today are chronically indebted, if I can put it that way. The statistics on the number of people who fail to pay off their credit card balances each month are horrific; I believe it is something in the order of 40 per cent. Those people are at serious financial risk because the real interest rate on credit card balances is well up in the teens at a time when realistically, over the long term, no one can expect a return of more than the middle to high single figures in real terms on their long-term investments. Even when additional employer contributions and tax relief are allowed for, for most people it is still a bad bet to be making pension savings on the one hand and paying high-teens interest rates on their credit cards on the other. That is why generic financial advice is so critical. The Resolution Foundation’s briefing is very helpful on that. I want to press the Minister, as my honourable friend David Laws and I have pressed James Purnell on a number of occasions, on how the advice is going to be delivered. I know that a working party is looking at it, but time is pressing and we really want to see an indication that Ministers are aware of the scale of the problem. Again, I stress from these Benches that when delivering generic financial advice, it is much better to build on a trusted brand. Here I suggest in particular the citizens’ advice bureaux, a brand people know. Integrated debt and pensions advice centres could be developed alongside the bureaux, building on their system rather than trying to design an entirely new structure. The reason why we propose that this report should be from the Personal Accounts Delivery Authority rather than from the Secretary of State or an independent commission, as later amendments suggest, is that as the authority is designing and delivering these products, it is absolutely vital that it knows exactly what its consumers’ needs are. That would be a proper, consumer-based approach. I beg to move.