Pensions Bill

My Lords, I am grateful to the noble Baroness, Lady Noakes, first, for tabling the amendment because it allows associated issues to resurface and, secondly, for being so fastidious in her fairness to the Minister. I want to make three points, though I am more confident of the first two. On the third one, although I am batting technically out of my range, I suspect that the noble Lord, Lord Oakeshott, will be able to confirm my apprehensions in this area. My first point is about stranded pots, raised by the noble Baroness. Perhaps I may remind your Lordships of the example which I gave in Committee of a hairdresser who might pile up £18,000, say, in a personal account and have £2,000 and £3,000 in two other small pots as a result of previous employment. Currently, the £18,000 in the big pot means that she cannot commute the little pots, but the little pots are too little to annuitise. Without the right to transfer the two little pots into the bigger pot, she loses them altogether. Effectively, it is theft—bureaucratic theft, if you like. Presumably, the money will go to the members of the original scheme and their defunct assets. My noble friend the Minister and other Members of your Lordships' House were sympathetic to this issue. We need some way of ensuring that a man or woman with modest savings does not lose a modest but sizeable chunk of them simply because they are too large to commute but too small to annuitise. There must be some way of corralling them. I take the point that we do not want to destabilise existing schemes and I understand the five-year rule, but I hope that my noble friend will reassure us that at the point of retirement—whether it is before or after 2017, and given the roll-up time for personal accounts it will probably be after then—when there is no risk of destabilising any existing arrangements, smaller pots where the provider is not willing to annuitise may be imported into the bigger pot which is above the trivial commutation limit. That seems the only way not to lose those funds. My second point relates to Amendment No. 49. I do not think that it will happen often, but there could be circumstances in which someone would wish to bring into play a personal account contribution for a missing year. They may have taken a year out to have a child, for example, and in the following year be able to make that up from savings. I am not suggesting that the employer will, but the employee may. I hope that my noble friend can assure us that that can be the case. With my third point I am very much out of my range, so I would welcome any comments from noble Lords on whether my apprehensions are valid. This is a growing issue which has been raised with perhaps two or three professionals in the field. It is that when prospective companies buy out defined benefit schemes from employers, they engage, or increasingly are likely to engage, in a form of cherry picking by encouraging enhanced transfer value—to encourage people not to stay in the DB scheme but to leave it. They do that and make it attractive by adding a cash bait to take up the transfer and not to stay in the scheme. The evidence is that in these hard-pressed times the cash bait—putatively, £5,000 on a transfer of £50,000, for example—is proving considerably attractive and will destroy people’s pension entitlement. I was told by a pensions professional that this scandal is beginning to emerge and could turn out to be as serious as that of policy protection insurance. I do not know whether that is an overstated claim—it is not my field—but I know that at least one exceedingly major company is engaged in this practice. It is alleged that some other companies are considering whether they should follow suit or whether they regard it as unethical. I do not expect my noble friend to have an answer on the spot now, but I would welcome comments from Members who know much more about this field than I do whether that is a valid fear. I am grateful to the noble Baroness, Lady Noakes, and I ask my noble friend the Minister to confirm that we will be able to make decent and fair arrangements for standard pots along the lines I have suggested. Will he also confirm that someone could make good missing years on their contributions into personal accounts before 2017 and continue to do so thereafter? Thirdly, does he share my worries about bribing people out of DB schemes with a cash bait associated with transfer values? If so, what will the implications be for long-term savings and pension provision?