Retirement Pensions: Policies (Hansard, 21 March 1990)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, I do not accept that government policies towards SERPS have the effect which the noble Lord's Question suggests. We have always attached a high priority to protecting the interests of elderly people and will continue to do so. Nevertheless we have recognised that not all pensioners have benefited from the growth in occupational pensions and have targeted an extra £ 200 million towards 2–6 million individuals— the older, disabled and less well-off pensioners on income support and housing benefit. Also, in October last year we abolished the retirement pensions earnings rule so that pensioners can now draw their pension in full while continuing to work if they wish to do so.

§ Lord Donoughue
My Lords, I thank the Minister for that Answer. Has he read the report by PIRC, the Pensions Investment Research Consultants, published in February? It shows that around 1 million people persuaded to contract out of SERPS were wrongly advised to do so. About one-third of those contracted out are highly likely to be worse off under their personal pensions than they would have been under SERPS on the assumption that the stock markets and investment markets perform as well in the future as they have in the recent past. Is the noble Lord also aware that investment institutions are advertising in an excessive way to persuade people to contract out of SERPS? Will he promise that his department will advertise, advising those for whom it is best to stay in SERPS— that is anyone retiring in the next decade— that they should do so?

§ Lord Henley
My Lords, we are aware of the report and are examining the claims by the Pensions Investment Research Consultants. However I do not necessarily accept their figures. It is obviously a matter for the individual who wishes to take out a personal pension to seek the appropriate advice. There are regulatory bodies in the form of LAUTRO and FIMBRA who will control and regulate those who offer advice to individuals seeking to take out personal pensions. Our own leaflet, NP41, which I believe I have mentioned on a previous occasion, states that there is no guarantee of investment results from the money paid into any scheme.

§ Lord Carter
My Lords, is the Minister aware that the next Labour Government will require that money purchase and pension schemes will only be allowed to contract out of SERPS if they can guarantee a comparable minimum pension? Will the Government now introduce a similar requirement?

§ Lord Henley
My Lords, I believe that the eventuality to which the noble Lord refers is very unlikely, as I told him the other day. He will also know that my right honourable friend the Secretary of State announced further protection for occupational pension schemes only last week.

§ Lord Orr-Ewing
My Lords, is my noble friend aware that whatever promises are made for the future, during the last five years of the Labour Government pensions of old age pensioners rose in real terms by only 3 per cent.? Under this and previous Conservative Governments, they rose five times faster.

§ Lord Henley
My Lords, my noble friend is quite correct. Under this Government the average income of pensioners has risen by 31 per cent.

§ Lord Carter
My Lords, the Minister referred to the recent announcement by the Government. Is he aware that the scheme which did no more than the Government required by way of uprating would cut the real value of pensions dramatically? A pension preserved for 20 years would today be worth less than 40 per cent. of its original value under the Government's new proposals.

§ Lord Henley
My Lords, that depends very much on inflation.

§ Lord Stoddart of Swindon
My Lords, in relation to the question from the noble Lord, Lord Orr-Ewing, is it not a fact that if the Government had retained the Labour Party policy of increasing pensions by the rate of inflation or rather the rate of earnings, a married couple would now enjoy a pension £ 20 more than at present?

§ Lord Henley
My Lords, the link between the basic pension and earnings is not the key factor in improving the income of pensioners. More important to pensioners is the value of their total income from all sources. As my noble friend Lord Orr-Ewing said, between 1974 and 1979 when pensions were increased in line with the higher of movements in prices or earnings, the average total net income of pensioners increased by only 3 per cent. During our first eight years in office the real terms increase was over 31 per cent.

§ Lord Jenkin of Roding
My Lords, will my noble friend confirm that during the period of the last Labour Government the value of pensioners' savings was just about halved? Does he agree that every possible welcome should be given to the announcements in yesterday's Budget not only of higher disregards for capital savings but also of substantial new incentives for saving? That is the way in which people will improve their standard of living in retirement.

§ Lord Henley
My Lords, my noble friend is quite correct. Under this Government the savings income has increased by 130 per cent. Under the previous Labour Government it decreased by 16 per cent. My noble friend raised also the question of increases in the capital limits in income related benefits. There will be around 260,000 individual gainers as a result of the increases announced by my right honourable friend the Chancellor of the Exchequer, over 60 per cent. of whom are pensioners.

§ Lord Carter
My Lords, will the gainers include the pensioners in Scotland?

§ Lord Henley
My Lords, the pensioners in Scotland will benefit in exactly the same way as the pensioners in England. We are uprating the system for the whole country at the same time.