Pension Yields (Hansard, 13 January 2003)

§ 11. Dr. Julian Lewis (New Forest, East)
What his estimate is of trends in average pension yields over the next decade. [89710]

§ The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)
The Government do not make an official estimate of future investment returns. Over the past 10 years, overall pension investment returns have been 7.5 per cent., and private sector estimates suggest that they will be around 7 to 8 per cent. over the next 10 years.
What is clear is that people need to put sufficient aside for their retirement and regularly monitor their level of saving. Many of the proposals in our recent Green Paper "Simplicity, Security and Choice" will help them do this.

§ Dr. Julian Lewis
It is surprising—is it not?—that one? can have an answer to a question like that without any mention of the £5 billion a year taken from pension funds by the Government since they abolished the tax credit on dividends in 1997. The Under-Secretary was waxing eloquent about the iniquity of firms in closing final salary schemes, but does she accept that the Government's pensions raid has little to do with those firms doing what they have done? They could have absorbed it, they should have absorbed it, but if the Government had not taken that action, the problem might not have arisen.

§ Maria Eagle
No, I do not accept that. The Conservative party is for ever talking about the £5 billion without mentioning the offsetting corporation tax cuts, for a start. As is well known in the House, throughout the industry and by anybody who considers these issues, many factors have led to some of 403 the problems in respect of defined benefit schemes and their closures, not least the stock market falls that have been taking place over the past couple of years.

§ Kevin Brennan (Cardiff, West)
I know that my hon. Friend is aware that the pension yield for ex-Allied Steel and Wire workers from Cardiff over the next 10 years may be as low, according to some predictions, as 16 per cent. of the pension they expected on retirement. I know that she will want to join me in welcoming last week's announcement that Celsa is reopening the steel plant in Cardiff, which will save many hundreds of jobs. Will she also agree to look at the plight of those workers who lost their pension as a result of losing their jobs at a time when the pension fund was at a low ebb?

§ Maria Eagle
Yes, and I know that my right hon. Friend the Minister for Pensions has met some of the workers affected in this particular case. Much of the Green Paper deals with issues that have been raised by right hon. and hon. Members on both sides of the House in respect of those who work and save into occupational pensions and whose legitimate expectations are not met. We must get right the changes that will arise following the consultation on the Green Paper. If we do not, it is much less likely that people will be confident enough to save into occupational pensions the amount of money that they need to ensure a secure retirement.

§ Dr. Vincent Cable (Twickenham)
Does the Minister agree that the fall in pension yields has been particularly serious for annuitants? As the Government have held at bay the amounts for compulsion in other elements of pension policy, why do they cling to compulsion in this area rather than allowing pensioners to make their own investment decisions?

§ Maria Eagle
The hon. Gentleman will be aware that annuities are the only way of securing an income for the lifetime of a person who has saved, and of course we all celebrate the fact that people are living longer. That is what pensions are for, and that is why annuities are important. I am sure that the hon. Gentleman and his party will be responding in full to the Green Paper consultation, and I look forward to seeing what they have to say.