HC Deb 30 June 1997 vol 297 cc17-8
17. Mr. Wilkinson

To ask the Secretary of State for Social Security if she will make a statement on her assessment of the Chilean national pension scheme as a potential model for reform of the old age pension in the United Kingdom. [4352]

Mr. Denham

The Chilean national pension scheme has serious drawbacks as a model for pension provision in the United Kingdom. Only 60 per cent. of the scheme's members are contributing to it, and administration costs are high.

Our aim is to enable people to avoid poverty and dependence on the state in retirement. We will retain the basic state pension as the foundation of pension provision, strengthen occupational schemes and develop a framework for stakeholder pensions for those who are not able to join a good quality occupational scheme.

Mr. Wilkinson

In the carefree days when the Minister for Welfare Reform, as he is now, led the Social Security Committee to Chile for interviews with Dr. Piñera and other leading pension pioneers, the Committee saw the benefits of a funded scheme for Chile, which is the model that is increasingly being followed throughout the developing and industrialised world. Why does the Labour party set its face against such reform, which in Chile and elsewhere has proved both an agent for growth and a source of prosperity in old age undreamed of in countries such as ours?

Mr. Denham

I suggest that the hon. Gentleman reads the report drafted by the Select Committee on its return from Chile. He will find that my right hon. Friend reached the same conclusion that I have just reported to the House about the failings of the Chilean pension system. It is essential that we are not blind to the defects of pension schemes around the world.

Mr. Corbyn

Will my hon. Friend confirm that the Chilean pension scheme was introduced by Jose Piñera, who was part of the fascist Government of the time, that it was designed to destroy the developing welfare state in Chile and that its whole purpose was to reduce the cost to employers of any kind of national insurance system and make workers' contributions into a private insurance scheme compulsory, which is expensive, inefficient and ineffective in providing them with a decent benefit? It should have no part whatever in any consideration of welfare state development in this country.

Mr. Denham

My hon. Friend is right, I think, about the timing of those events. As we develop our pensions review over the coming months—we will announce the details shortly—we should judge proposals that are put to us, as our proposals should be judged, by their ability to enable people to achieve security in retirement. That, I suspect, will mean that we need the right balance between state and private provision and between the costs that fall on one generation and on another. As part of that, we will need to forge effective partnerships with the private sector to extend pension provision.

Mr. Clifton-Brown

I welcome the Minister to his post. Can he confirm that the pensions review will rule nothing in and nothing out, including the proposal from Dr. Piñera in Chile that we should move towards a funded pension, whether private or occupational? Would it be his view that the Chancellor should make that a priority in the Budget?

Mr. Denham

The details of the pensions review will be announced shortly and will obviously include its terms of reference. It is already a matter of record that we want the process to be open and inclusive; we want to encourage new ideas and innovative thinking while consulting on some of our manifesto commitments, such as an examination of stakeholder pensions and the possibility of a citizenship pension for carers. I hope that the outcome will be the sustainable consensus that this country needs on the future of pensions policy.