Pensions Bill

moved Amendment No. 113: 113: Clause 20, page 23, line 27, at end insert— ““( ) In carrying out its functions under subsection (1), the Authority shall have an objective of the continuation or creation of personal pension schemes or occupational pension schemes which provide for higher levels of contribution or higher levels of benefits than are likely to be provided by the relevant proposals about personal accounts.”” The noble Baroness said: We come to a seriesof amendments designed to ensure that when the delivery authority gives advice to the Secretary of State or prepares for implementation—the two things set out for it in this Bill—it focuses on the right things. I am sure that the Minister will say to all the amendments that we are about to discuss that this is not the Bill in which these issues should be debated and that we should wait for the next pensions Bill, which will enshrine the Government’s proposals. Although we accept that detailed legislation for personal accounts will have to await a later Bill—and we look forward to that—we believe that, as the authority goes about its tasks under this Bill, it should be guided by some clear objectives and principles set out for it in statute; otherwise, the delivery authority would be operating in something of a vacuum with no guiding principles to assist it when it is considering the Secretary of State’s proposals or undertaking its implementation preparation. In this and several of the other amendments to which we shall come, we based our amendment wording on the remit that the Government themselves said they would set up for the delivery authority. There was an explicit commitment at paragraph 84of the White Paper, on personal accounts, that the objectives for the delivery authority would be set out in statute. That seems to have escaped the notice of parliamentary draftsmen, so we hope that these amendments will be accepted by the Government as the constructive way in which to give effect to the Government’s intentions. Amendment No. 113 gives the delivery authority an objective for its work of, "““continuation or creation of personal pension schemes or occupational pension schemes which provide for higher levels of contribution or higher levels of benefits””," than those from personal accounts. Put simply, the delivery authority must ensure that when it advises the Secretary of State on the proposals, it does so from the perspective of not squeezing out private provision or triggering a levelling down in the private sector. I do not think that personal accounts will have much of an impact on defined benefit provision in the private sector, because there is not much of it left. A Written Answer from last month showed that only1 per cent of employers now have defined benefit pension arrangements open to new members and only 8 per cent of the private sector workforce were active members of an open defined benefit scheme in 2005. So that is not the focus—it is a thing of the past. However, personal accounts could be used by those currently operating defined contribution schemes, because the employer could find it was less hassle and cost if it simply encouraged employees into the personal accounts system—and that was an end of it. The Minister’s department has pointed in the past to research indicating that employers are not very likely to level down, but the ABI commissioned research showing that one-quarter of employers contributing more than 3 per cent would introduce a new lower rate of contribution. Levelling down may not happen overnight, but the cumulative effect of people changing jobs into a lower provision offeredto new employees could be very significant overtime. Similarly, if we look at new employers setting up—and it is a feature of the economy that new businesses are always being set up—what is the likelihood that those employers will do anything other than the bare minimum as set out in the personal accounts scheme? I see no easy way in which to prevent levelling down in either of those circumstances—that is, for those in existing defined contribution arrangements or from new employers—but the dangers of that need to be fully recognised by the delivery authority when it considers the Secretary of State’s proposals, offers its advice and prepares the detailed plans for implementation. That is why we think it very important that this should be brought firmly to the attention of the delivery authority as it carries out its work by hardwiring it into the Bill, as my amendment proposes. I beg to move.