Pensions Bill

moved Amendment No. 116: 116: Clause 20, page 23, line 43, at end insert— ““( ) In discharging its function under this section, the Authority shall ensure that its actions and advice support the objectives of the scheme that— (a) the overall outcome, taking account of the impact on the existing market, is an increase in the number of people saving and the overall amount being saved, (b) the levels of participation by the groups of individuals who are targeted by the scheme are maximised, and (c) there is no unfair competition with other savings products.”” The noble Baroness said: Amendment No. 116 is about the delivery authority considering the impact of its work on savings. I shall also speak to Amendment No. 122. Amendment No. 116 gives as an objective of the scheme that there is an overall increase in the number of people saving and the overall amount being saved; and both are important. There has been a significant reduction in the savings ratio since 1997. Other economic conditions, such as the squeeze on disposable incomes, are making it more difficult for people to save. Increasing savings in general will not be easy, and increasing savings into the personal accounts vehicle, which locks up funds until retirement, will be difficult. The second leg of the amendment is to maximise participation by the groups of individuals targetedby personal accounts. We debated the targeting of groups under Amendment No. 111, tabled by the noble Lord, Lord Oakeshott, and AmendmentNo. 112, tabled by the noble Baroness, Lady Hollis. It is clear that certain groups will not benefit from being enrolled in the scheme, and perhaps the amendment ought to have been drafted the other way so that the objective is to ensure that non-target groups are not unduly enticed into the scheme, to prevent mis-selling. But the scheme, to be successful, will want to attract some key groups who have no or insufficient private pension provision and whose financial circumstances mean that they will benefit from enrolment and saving. All that my amendment is doing is making sure that the delivery authority is focused on those groups and making it work for them; the converse being that it positively tries to ensure that the savings scheme is not there as a lure for the groups who should be targeted out of personal accounts. The third leg of the amendment is that there is no unfair competition with other savings products. There are a number of strands to that, one of which is the proposed investment cap of £5,000, which is much higher than the Pensions Commission’s proposal of £3,000. I do not want today to debate the correct level of cap, which can await the next Bill, but I do want to explore with the Minister whether the Government believe that the personal accounts savings product should be aiming to mop up most of the existing pension savers. The ABI has estimated that over 90 per cent of existing savers will come within the net if the cap is set at £5,000. When the Minister in another place was asked in February whether the Government agreed with that analysis, he said that he had not seen any analysis on the point. That was four months ago; I am sure that the Minister can give an answer, and I would be grateful for it. Of course, the existence of personal accounts may not lead to unfair competition, though the sheerscale of it may be setting up some hidden barriersto competition, as other providers may not have sufficient scale to compete for additional savings above the amount that will have to go into personal accounts. That is why it is important for the delivery authority to have competition in mind. The scheme could be set up in a way that made it difficult for new entrants to the savings market to satisfactorily address the market. Amendment No. 122 deals with the related issue of how the costs of setting up and operating the personal accounts scheme are to be met. We discussed public subsidy briefly in the context of advice, but this is in the context of the scheme overall. Charging mechanisms need to be set up, and they will be designed during the initial phase, to recover the costs. That is what the amendment seeks to do. In the short term, as the delivery authority prepares for implementation, it will be funded by grant in aid, but some of that money will be used to prepare for implementation, such as tender costs, which should be part of the cost of the whole scheme of personal accounts to be recovered at some point. The amendment is intended to ensure that the preparatory costs are not lost sight of but are recovered as part of the personal accounts scheme. Even though they happen to be in the category of grant in aid for a delivery authority that will not exist in the long term, they are still part of the overall cost of the scheme and ought to be taken into account. I beg to move.