Lords amendment: No. 1, in page 2, line 8, at beginning insert
Subject to subsection (3A) below,".
§ The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major)
I beg to move, That this House doth agree with the Lords in the said amendment.
§ Mr. Deputy Speaker (Sir Paul Dean)
With this it will be convenient to take the following Lords amendments: No. 2, in page 2, line 10, at end insert—(3A) In such circumstances as may be prescribed the Secretary of State shall pay minimum contributions to a prescribed person.No. 4, in clause 3, page 4, line 13, at beginning insertSubject to subsection (1A) below,".No. 5, page 4, line 27, at end insert—(1A) In relation to earnings paid with respect to any such employment as may be prescribed, subsection (1) above shall have effect as if the words 'the aggregate of' and paragraph (b)and the word 'and' immediately preceding it were omitted.No. 6, in clause 4, page 5, line 20, after "earner" insertsections 16(2B), 28(7A) and 59(1A) of the Social Security Act 1975 and".No. 7, in clause 5, page 6, line 22, at end insert—section 52C of or paragraph 16 of".No. 8, page 6, line 41, after "29" insert "(2) and".
No. 9, page 6, line 43, leave out from beginning to "were" at page 7, line 7, and insert—to that person and a widow or widower of that person as if any guaranteed minimum pension to which that person or any such widow or widower is treated as entitled under those provisions, and which derives from the minimum contributions, minimum payments (within the meaning of the Social Security Pensions Act 1975) or transfer payment or payments from which those rights derive".No. 10, page 7, line 26, leave out from "pension" to end of line 27 and insert—such as is mentioned in subsection (9) above.No. 94, in schedule 1, page 88, line 15, leave out "or" and insert—pension scheme or protected rights (within the meaning of the Social Security Pensions Act 1975) under an".No. 95, page 88, line 20, at beginning insert "The value of".
No. 96, page 88, line 23, after "which" insert "the value of".
No. 97, page 89, line 15, leave out sub-paragraph (3) and insert—(3) Effect may be given to protected rights by the provision of a lump sum if—No. 98, page 89, line 46, after "amount" insert—
- (a) the lump sum is payable on a date which is either the date on which the member attains pensionable age or such later date as has been agreed by him; and
- (b) the annual rate of a pension under sub-paragraph (1) above or an annuity under sub-paragraph (2) above giving effect to the protected rights and
384 commencing on the date on which the lump sum is payable would not exceed the prescribed amount; and
- (c) the circumstances are such as may be prescribed; and
- (d) the amount of the lump sum is calculated in a manner satisfactory to the Occupational Pensions Board by reference to the amount of the pension or annuity."and the circumstances are such as may be prescribed,No. 99, page 90, line 17, leave out from "with" to end of line 46 and insert—any such requirements as may be prescribed for meeting the whole or a prescribed part of any liability in respect of protected rights under the scheme which the scheme is unable to meet from its own resources—I inform the House that Lords amendments Nos. 1 and 2 involve privilege.
- (a) by reason of the commission by any person of a criminal offence;
- (b) in such other circumstances as may be prescribed."
§ Mr. Major
Many of these amendments are drafting or technical changes to ensure that the Bill works as intended. [Interruption.] However, a small number of amendments deserve particular, but brief, mention, even at the risk of having to speak over the hon. Member for Workington (Mr. Campbell-Savours).
Amendments Nos. 4 and 5 enable regulations to be made excluding some people from entitlement to the 2 per cent. incentive addition to the payment which DHSS Newcastle will make to their personal pensions. That is for a five-year period until April 1993, and it is in addition to the normal contracted-out rebate.
As my right hon. Friend the Secretary of State undertook to do when the Bill was last considered by the House, we have listened carefully to representations about this incentive payment, particularly to the proposition that it should not go to people who have been in contracted-out occupational schemes. While we remain unpersuaded by the predictions of dire consequences for occupational schemes if this modest inducement were to remain available, we certainly do not doubt or question the sincerity of those who find this an issue of principle. After careful consideration, not forced retreat, as the hon. Member for Oldham, West (Mr. Meacher) claimed earlier, we have decided to make these amendments. The principle we are accepting is that the 2 per cent. incentive will not be available to people who have belonged to a contracted-out occupational scheme for a reasonable period and who then leave it voluntarily.
What is a reasonable period? No decision has yet been taken about that, primarily because we wish to listen carefully to the views put to us. The proposals for the regulations will be subject to full public consultation later this year, and I hope that the House will welcome that.
Of less importance, but worth mentioning, are amendments Nos. 1 and 2 which give power to allow outstanding payments from DHSS Newcastle to be made to a scheme or insurer to which a person's pension savings have been transferred. Without these amendments we would occasionally have faced the absurd situation of those payments having effectively no proper home to go to because the person had taken his or her accumulated pension rights elsewhere. The provision commits the contracted-out rebate effectively to follow the pension savings.
385 Finally, amendment No. 99 replaces paragraph 10 of schedule 1 with a specifically worded power. On reflection, and in the light of advice from some pensions experts, paragraph 10 did not do what we intended it to do. The amendment ensures that there is power to make regulations about the arrangements that a personal pension scheme must make to compensate members if it cannot meet its liabilities because of fraud, theft or negligence. My right hon. Friend invited the Occupational Pensions Board earlier this year to advise on compensation arrangements for personal pensions. We have just received its advice and will consider it carefully, with the other Departments concerned, before publishing consultative proposals later this year. That is in line with our intentions originally set out in the social security White Paper. I commend the amendments to the House.
§ Mrs. Margaret Beckett (Derby, South)
One of the reasons why we have argued that the time for debate on the Bill has been inadequate has just been made plain by the Minister. It is more than ever apparent that in this House, in the other place and again in this House the Government are making up the Bill as they go along. Every time the Government announce some fresh changes, there is buried within them the words that the Government have yet to make up their mind or that they do not know exactly what the change means but sooner or later, in the fullness of time, all will be revealed. Tonight we are being asked to put on the statute book a Bill, many of the details of which remain unclear and will be settled in future.
Despite the changes that the Government have made on the 2 per cent. bribe, we remain of the view that personal pensions are likely to leave many people with wholly inadequate pension provision for their retirement which will inevitably mean that in future many more pensioners will be dependent on the equivalent of supplementary benefit. We remain even more strongly of the view that to offer people a 2 per cent. bribe to encourage them to run the risk of poverty in old age is morally indefensible, and, despite the Minister's concessions, may damage good occupational pension schemes. We shall terminate this bribe at the earliest possible moment after the general election. I do not intend to detain the House further on these amendments.
§ Mr. Michael Stern (Bristol, North-West)
Amendment Nos. 4 and 5 attempt to limit the substantial move towards personal pensions that is generally expected when the regulations are published and come into effect. As a proponent of personal pensions for some time, I must admit that I welcome the amendment through slightly gritted teeth. That is not to say that the occupational pensions industry, which pushed hard for the amendment, has anything to be ashamed of. I pay tribute to the work that the industry has done over many years in building up occupational pensions to the extent that the freedom of personal pensions can take off from the ground work that it has laid. It has little to fear, in the growth of occupational pensions, from the fact that personal pensions will grow also. Nevertheless, personal pensions will grow slightly less slowly if the amendment is passed.
The amendment leaves the Secretary of State with the duty, ultimately, of regulating the time within which a member of an occupational scheme must decide whether or not to leave that scheme and to take out his own 386 scheme. I press my hon. Friend the Parliamentary Under-Secretary of State, the hon. Member for Huntingdon (Mr. Major), to allow a considerable time to pass before he closes the door. Until the advent of the Bill, many occupational pension schemes were compulsory. Therefore, many people in occupational pension schemes will want to consider whether to opt out of those schemes and take out a personal pension.
That consideration will not be taken lightly or quickly. Very few people in occupational pension schemes have studied their schemes to the extent that they can say, off the top of their heads, whether the life cover in the scheme is adequate or whether it is below what is available on the market. Very few people can say whether the accrual rate on investments in the fund compares adequately with alternative accrual rates available elsewhere, or whether —this will be regulated by the Financial Services Bill—the charges levied by the managers of the schemes, especially in the early years, are comparable with those available in other schemes.
As a result of the publicity that will be generated by the passage of the legislation, many people will consider whether to move out of occupational schemes. I believe that in the majority of cases they will decide to stay in their present schemes. It will take a long time to get all the information together and to obtain adequate comparisons.
My comments are even more true of someone joining an occupational scheme after the legislation is effected, when the incentive is available. He will need a considerable amount of time to decide on the financial options. Once that decision has been made, further time will be necessary, in many cases, for the individual pension contributor to negotiate with his employer as to whether the employer will be prepared to make a corporate contribution to his individual pension scheme. All that will take time. Mechanisms must be developed, within the period in which the 2 per cent. incentive is available, to enable that to take place.
When my hon. Friend considers, as a result of consultation, what length of time to allow a pensioner, who may be a compulsory member of a pension scheme — he never had a choice in the matter because he wanted to keep his job—to decide whether or not to take the freedom offered, for the first time, as a result of the Bill, I hope that he will err on the side of generosity. I should have thought that a period of five years was by no means unreasonable.
My hon. Friend is to consult all relevant interests to decide on the time limit. He should not limit his consultations to representatives of existing pension schemes and existing pension scheme providers. As was noted in Standing Committee in a brief debate, to which both the hon. Member for Derby, South (Mrs. Beckett) and I contributed, there is in existence a sort of pensions ombudsman. Although limited in scope, that office is doing useful work. I share the hope of the hon. Lady that the work of that or a similar office will be extended in the future.
That office has considerable experience of what one might call the unsatisfactory occupational pension schemes, about which a contributor who might consider leaving his existing scheme could require advice. I hope that in consulting on such schemes my hon. Friend will consider the experience of people who have complained to that ombudsman and ensure that he allows an adequate time limit.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
I had some difficulty in trying to disentangle the import of amendments Nos. 4 and 5. I was assisted to some extent by the debate that took place in the other place. I welcome the amendment so far as it goes. It would be churlish of me to do otherwise. I raised the point in Committee and it was raised by Lord Banks in the other place.
It is important to recognise that the Government are assuming a wide power. I ask whether the wide powers that will be assumed by the Government will be used to exclude the 2 per cent. incentive for anyone who, after a "reasonable" period as a member of a contracted-out occupational scheme, decides of his own volition to leave it in favour of an "appropriate" personal pension. If that is the clear intention of the amendment, I support it and endorse what the Government are doing.
The definition of the word "reasonable" in that context should be relatively short. I draw the Government's attention to a possible comparison in length with the cooling off period required under the Financial Services Bill. As the Minister is probably aware, that is intended to cover those who join a contracted-out scheme but regret the decision and change their minds. That is the reasonable period that we would have in mind as a sensible way to proceed. If the word "reasonable" is interpreted in the regulations as longer than that, my enthusiasm for the change would quickly wane.
Because of the wide-ranging nature of the power, I seek an assurance from the Minister that there will be the fullest possible consultation with the industry and other interested parties before introducing the regulations, which will be extremely important to the way that the schemes work. That is a minimum requirement for my continued support of the amendment.
The hon. Member for Derby, South maintains the use of the pejorative word "bribe" in relation to the 2 per cent., but I am prepared to start considering it more in terms of an incentive than a bribe.
§ Sir Brandon Rhys Williams (Kensington)
I wish to speak only briefly because the House knows that I have serious reservations about the principle and many of the details of the Bill. As the Bill stands, it contains provisions that will have serious disadvantages for a large number of my constituents in Kensington where many poor families have to pay exceptionally high rents and rates. They, in particular, stand to suffer from the Bill if it is passed in the form that seems likely.
I pay tribute to Ministers who have listened to our debates and made many important improvements in Standing Committee and in another place. I thank especially my hon. Friend the Under-Secretary of State, the hon. Member for Huntingdon (Mr. Major), in respect of the 2 per cent. "inducement", or whatever word one might wish to use, which was originally intended to lure pension scheme members away from occupational pension schemes to private provisions.
I listened carefully to the comments of my hon. Friend the Under-Secretary of State and am glad that he has taken on board the criticisms made in Parliament and outside on this subject. No final decisions have yet been taken on the 2 per cent. inducement. I hope that, in the further discussions on this point, the Government will take account of the fact that contributions to the private sector 388 schemes are not enough, even for the long stayers, and need to be very much increased, but not by a little manoeuvre of this kind.
Early leavers and personal pension scheme members get a still worse deal than those who belong to group schemes as long stayers. This 2 per cent. subsidy from the taxpayer to encourage members to leave collective schemes is an ungainly and unwarranted intervention in the working of the capital market which will persist until April 1993. It would be better to withdraw the proposal altogether. I hope that that will be the Government's conclusion by the end of their deliberations.
It would be far better to induce the Treasury to regard the employer's entire national insurance contributions as the employee's deferred pay. That would significantly help to lift private sector pensioners from dependence on supplementary benefit. At the moment, the money flowing into occupational schemes in the private sector is not enough to do that. The problem of the millions of people on supplementary benefit in retirement is, I am afraid, likely to remain with us as the Bill stands. The Bill's object should be to reduce dramatically the number of people dependent on means-tested benefit through case work. I am afraid that, as the Bill stands, it will only add to their number.
§ Mr. Major
With the leave of the House, I shall reply briefly to some of the points that have been raised.
I am grateful to my hon. Friend the Member for Kensington (Sir B. Rhys Williams) and to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) for their welcome of amendments Nos. 4 and 5. I note the cautionary words implicit in the remarks of those hon. Members about the definition of the word "reasonable" and the conclusion of the consultation period. I assure the hon. Member for Roxburgh and Berwickshire and my hon. Friend the Member for Bristol, North-West (Mr. Stern) that we shall consult widely before laying the regulations on the 2 per cent. incentive. We plan to publish a consultation document later this year and to consider representations before publishing the regulations. I shall take careful note of the other important points made by my hon. Friend the Member for Bristol, North-West.
The hon. Member for Derby, South (Mrs. Beckett) rather uncharitably accused us of making up the Bill as we went along. 1 simply remind her that we are at present responding to representations made, not least by the Opposition, and I had hoped that the hon. Lady would welcome that. I remind the hon. Lady, who is clearly concerned about the number of regulations that spin off from this legislation, that it is in the nature of pensions legislation—both this and prior legislation—that many matters are best left to regulations. There is nothing novel in that concept.
The hon. Member for Derby, South said that she and her hon. Friends, if given the opportunity — which I think is unlikely — would remove the 2 per cent. incentive as soon as possible. She did not define what was meant by "as soon as possible". She did not on this or on previous occasions answer the question whether the Labour party would take similar action with the remainder of the contracted-out rebate. I hope that at some stage Labour Members will make clear their position. I hope that the amendments will be approved.
§ Question put and agreed to.
§ Lords amendment agreed to. [Special Entry.]389
§ Subsequent Lords amendment agreed to. [Special Entry.]