Pensions Bill

I will speak to Amendment No. 140. All the amendments in the group point in the same direction. In his winding-up speech at Second Reading, the Minister said: "““The whole package of reforms is based on the fact that people need clarity and certainty about the future in order to plan and save for retirement. A standing pensions commission would undermine this by creating a vehicle for permanent re-examination of the framework and of policy and would be an unnecessary and expensive quango with little to do in the short to medium term. We will carry out periodic reviews drawing on a range of independent expert advice””.—[Official Report, 14/5/07; cols. 89-90.]" In those words, he somewhat elaborated on the brief dismissal of the proposition in paragraph 2.52 of the White Paper. I hope that the Government will think again about their position on this. The future is inevitably unclear and uncertain. Inescapably, changes to policy will have to be made from time to time. If you put pensions policy on autopilot, you will run into turbulence. That will be uncomfortable and, indeed, dangerous. My noble friend wants to continue the pattern of the past, with officials commissioning masses of research, studying the reports of the professional institutes and think tanks and quietly advising Ministers. The difficulty with that arrangement was that it did not work well enough. The Pensions Commission stated on page 42 of its final report: "““British pension policy for decades has been bedevilled by a lack of continuity””." Some courageous and good decisions were taken,but too many bad decisions were taken or shirked. Governments thought that they had got it right and then found that they had not. Moreover, arcane discussion among professionals and officials leftthe public poorly informed, and the quality of public debate was inadequate. It was too easy for governments to fudge and prevaricate, to take the line of least resistance and to base their policy on comforting assumptions. The noble Lord, Lord Turner of Ecchinswell, provided a recent instance of that in his contribution to the previous debate. The reality that the Government must face is that, after the past 30 years, the public do not trust government on pensions; hence the sarcasm in the title of the Parliamentary Ombudsman’s report, Trusting in the Pensions Promise. The second reportof the Pensions Commission, under the heading ““Securing long-term sustainability and consensus””, stated: "““The effectiveness of the UK’s present pension system, both state and private, is undermined by low levels of understanding and trust. Many people do not understand what the state pension system will deliver: many do not believe that the present state promise will be maintained and many do not trust the financial services industry to sell good value products””." The report added: "““These problems have arisen because of: Multiple past changes to the state pensions system … which aimed to reduce the generosity of future promises but in a non-transparent fashion … The failure to explain openly the challenges and implications of changing demography … People intuitively grasp that the state is going to do less for them, but neither understand nor trust the precise plan …The mis-selling scandals of the 1990s, which in return reflected a misguided attempt to extend personal pensions to segments of the market where the economics only appeared to work in periods of exceptional capital return””." So policies of hugger-mugger and ad hoc-ery will not do. If we are to build trust, we will need openness and independence. The Pensions Commission has been a successand has started to construct public confidence. The facts and the issues were plainly laid out by the commission, commentators and the public have become seriously interested, and the quality of the analysis and the good sense of the recommendations have helped us move towards consensus. That has made it possible for the Government to grasp nettles and take far-sighted decisions. We should continue with this successful model. We should have a standing pensions commission. Its role would be to keep the evidence under systematic review and to publish the evidence at sensible intervals, with thoughts as to its implications. That would regularly renew responsible public engagement, reassure a sceptical public to the extent that they found that policy was set fair and prepare the public and the political system in good time for modifications of policy, as and when the need for that became evident. Such reviews would be helpful to all of us intellectually and could only be of help to the Government politically. They would be analogous to the quarterly inflation reports produced by the Bank of England. Far from being, in the words of my noble friend the Minister, "““an unnecessary and expensive quango””," a standing pensions commission is a necessary means to create trust and would be very good value for money. To decry such a body as a quango is not an argument but a rhetorical tactic. Indeed, quangos and boards of trustees are means of enlisting very able and well qualified people of the calibre of the noble Lord, Lord Turner of Ecchinswell, Professor Hills and Ms Drake to serve the public interest at a very modest cost. Whatever the cost of the Pensions Commission so far—perhaps the Minister will tell us what the figure is—the cost of getting policy wrong, as has happened so often in the past, will be incomparably greater. What was the cost to public expenditure, the pensions industry, the economy and, most important, tosavers of the twists, turns, contrivances and errors of policy of past years? There were the costs of the mis-selling of Maxwell, the leaflets, the collapse of ASW and other schemes and of the financial assistance scheme, compounded by the recommendations of the ombudsman and the ruling of the court. There was also the implosion of defined benefits schemes, the collapse of Equitable Life and people being forced back on to social security. What have been the costsof a system so complicated that people could not understand it and failed to save enough? What have been the costs of a system whereby, until pension credit, the poor were penalised through the benefits system for their savings, while the rich were rewarded for theirs at the expense of the Exchequer via tax relief? Do not let us stumble on like that in future decades. If we had had a standing pensions commission 30 years ago, vast amounts of money and misery would have been saved. If we had a standing pensions commission in the next 30 years, it would be a very worthwhile investment. It would routinely assemble and publish information on the relevant issues for both the public and the private pension sectors—the whole array—as I believe is right. What would be the key issues and the terms of reference? I shall not go into detail. The final report of the Pensions Commission of the noble Lord, Lord Turner, made one set of suggestions—at figure 18 on page 43—and in several appendices in his second report the noble Lord spelt out the data requirements. The White Paper suggests, at paragraph 340, what the recurring topics might be for its private reviews. The NAPF, in supporting the thrust of the amendments, has suggested simple terms of reference to monitor the adequacy and sustainability of the pensions system. Amendment No. 140 offers some suggestions; Amendment No. 142 in the name of the noble Lord, Lord Fowler, which seems to me to be similar in purport, offers a variant. That can be debated, but the range of data and issues that we would expect a pensions commission to keep under review is evident. The regular publication of such reports, together with the requirement that the Government should publish their response, would, I believe, produce immense benefits. It would promote public understanding and responsible attitudes, and it would help to engage the Government as a whole—the Treasury, the DTI and, indeed, the DfES and the Department of Health, alongside the DWP—in a fuller, more intelligent and more coherent response. The policy on pensions is not just relevant to security in retirement but crucial for the health of the financial markets and for the investment that should create prosperity for everyone throughout life. The reports would make it much harder for the Government to prevaricate, and they would improve public confidence in pensions. I believe that if we had a standing pensions commission in the future, we would then be likely, instead of unlikely, to have coherent, timely and far-sighted policy for pensions.