HC Deb 08 February 1999 vol 325 cc16-8
12. Mr. Ian Pearson (Dudley, South)

What proposals he has to encourage saving for retirement. [68017]

The Minister of State, Department of Social Security (Mr. Stephen Timms)

The reforms described in the pensions Green Paper published on 15 December should raise the incentives to voluntary saving through better-quality, better-value second pensions and restructured state support.

Mr. Pearson

I congratulate the Government on the pensions Green Paper. It is about time that someone grasped the nettle of modernising this country's pensions industry. I am confident that the proposed new framework will be a major improvement. When working out the detail, will my hon. Friend ensure that those who change their jobs frequently or take career breaks are not penalised and are given effective options? Will he also ensure that the Government lead the way and build in a right to an employer contribution to a pension plan for any employment funded indirectly through grants, such as the single regeneration budget programme?

Mr. Timms

My hon. Friend is right. There has long been a need for the changes that we have proposed. For far too many people, a good-value funded pension—or one that they can access on reasonable terms—is not available, and they are exactly the people at whom the stakeholder pension is aimed. We are committed to ensuring that everybody who can afford to save for retirement should have every encouragement to do so, and the proposed framework will have that effect. I will be happy to have a look at the question of the single regeneration budget, to which my hon. Friend referred.

Mr. Peter Viggers (Gosport)

Is it not becoming increasingly clear that the combination of the guaranteed minimum pension and the increase in means testing will mean that many people who have saved for their retirement will be worse off than people who have made no provision for themselves at all? The Secretary of State may shake his head and Ministers may duck and weave, but that is a fact, and the Government are creating a monstrously unfair system. Is the Minister aware that, when people look behind the bland words of Ministers and see the facts, they will be deeply resentful?

Mr. Timms

The hon. Gentleman is mistaken. The aim of the framework proposals is that those who are able to save should do so, but that there should be security for those who are not able to save. The state second pension is a 100 per cent. contributory scheme which will ensure that everyone who has worked and contributed throughout his or her life will retire on an income above the minimum income guarantee level, which will mean that he or she has the full benefit of all their savings. There is no disincentive to save; we are increasing the incentive to save. I hope that Conservative Members agree that even the least well-off pensioners should share in rising national prosperity.

Mr. Lawrie Quinn (Scarborough and Whitby)

Will my hon. Friend reassure those on low and modest incomes that the Government's proposals for modernising pensions will target them, and afford them the same support that the vast majority of people in this country get at the moment?

Mr. Timms

My hon. Friend is right. The state second pension will provide modernised support for people on low incomes, and will double the accrual rate on the state pension for people on £9,000 a year. It will treat people on incomes below that level as if they had been earning £9,000 a year throughout their working lives. That will be done on the basis of the existing 4.6 per cent. state earnings-related pension scheme contribution, without any addition. That is a very important step forward for people on low earnings—those about whom my hon. Friend is rightly concerned.