HC Deb 28 July 1997 vol 299 cc12-3
11. Mr. Sayeed

To ask the Secretary of State for Social Security what assessment she has made of the impact on the state earnings-related pension scheme of the abolition of the advance corporation tax credit. [9038]

Mr. Denham

The Budget measures will encourage stable economic policies, sustainable economic growth and the long-term performance of investment and of British companies. Companies providing occupational pension schemes will benefit from the reduction in corporation tax and other measures announced in the Budget to encourage investment. The advance corporation tax credit change will have no direct impact on SERPS, which is not a pre-funded scheme.

Mr. Sayeed

Now that the Labour Government have increased the cost of pensions by more than 15 per cent., do they intend to encourage or compel people to save for second-tier pensions? If so, why should people do that when they do not know whether a Labour Chancellor will rob them yet again in the future?

Mr. Denham

Opposition Members are not in a good position to talk about the value for money that people receive from their pension schemes, given the large number of people who lost out through the mis-selling of personal pensions—which the last Government encouraged—and the high fees and charges that have been visited on many people with low incomes and intermittent earnings through personal pensions. When we carry out our pensions review—in which we shall consider ways of extending the coverage of value-for-money funded second-tier pensions—we shall set out to ensure that savers get real value for money for their hard-earned savings, and can benefit from that when they retire.

Mr. Flynn

Has not the Budget removed the unfair circumstances in which people in SERPS did not have the advantage of a handout from the taxpayer, unlike those with personal pensions? When examining new pension schemes, however, would it not be better for us to build on the advantages of SERPS? At worst, 2 per cent. of its charges are spent on administration. Could not that advantage be built on with a new, funded SERPS, since in the case of present private pensions at least 25 per cent. of charges are spent on administration? Would it not be better to build on SERPS, as a funded scheme, rather than go into private pensions?

Can my hon. Friend also explain one puzzle? Why do we hear that one of the people who was responsible for mis-selling personal pension schemes on a large scale is to advise the Government? Will experts on national insurance schemes be included to advise the Government on their pensions review?

Mr. Denham

My hon. Friend asked a lot of questions, which I doubt whether Madam Speaker will allow me to answer in full. In our manifesto, we are committed to retaining SERPS for those who want to remain in it. Clearly, it is for individuals to decide which is the best form of provision for them. My hon. Friend is right to focus on a central issue, which is whether people will get value for the money that they put aside as savings. How will that be reflected in their final pension and will they feel that they have had a good deal at the end of the day? It is clear that many people who have set out to save for their pensions in recent years do not feel that they have had a good deal for the money that they have put aside.

Mr. Duncan Smith

The hon. Gentleman knows from previous statements that the changes in the Budget affect the rebate, which will affect SERPS and is likely to leave people in SERPS rather than wanting to come out. On that basis, will he say once and for all whether the pensions review will consider SERPS in total and whether, if it concludes that SERPS should be phased out, the Labour Government will do so? Or, will they stand by their manifesto commitment to do no such thing?

Mr. Denham

Our pensions review will study the future of all second-tier pension provision, but the statement made in our manifesto is clear. The hon. Gentleman mentioned the rebate. I must point out to him that his Administration spent about £17 billion more—largely from the national insurance fund—to encourage people to opt out into personal pensions, than will ever be saved in the future on SERPS expenditure. I can assure him that we will aim to protect the integrity of the national insurance fund as we take our review forward.