HL Deb 29 January 1991 vol 525 cc544-5

3.6 p.m.

Lord Jay asked Her Majesty's Government:

What will be the cost to the National Insurance Fund over the period 1988–93 of the special incentive to contributors to opt out of the State Earnings-Related Pension Scheme.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, the Government Actuary estimates that the revenue forgone by the National Insurance Fund in respect of the 2 per cent. incentive for the period 1988–93 will be £3.7 billion. This is on the assumption that by the end of 1990–91 the number of people with personal pensions reaches 4.5 million and the number of members of newly contracted-out occupational pension schemes will be 1 million and that these figures remain unchanged through to 1992–93.

Lord Jay

My Lords, is it not deplorable that the Government, in their desire to damage the state insurance scheme, have expended nearly £4 billion of public money in bribing contributors to contract out? Many of the latter seem likely to contract in again.

Lord Henley

My Lords, I totally reject what the noble Lord has said. The Government's incentive was a perfectly valid one to bring forward when we were introducing new proposals in the pensions field. The success of the policy is shown by the fact that some 4.2 million people have already taken out personal pensions. As I have said on earlier occasions, the noble Lord might congratulate the Government on that achievement.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that those who opt out opt in to other schemes which are on the whole more generous? As a result there is a substantial increase in savings and investment.

Lord Henley

My Lords, my noble friend is correct. It gives me great delight to agree with everything he says, which makes a refreshing change.

Baroness Turner of Camden

My Lords, I thank the Minister for his response. Will he tell the House what the Government's attitude is to the future of the State Earnings-Related Pension Scheme as they have bribed people to opt out of it and have substantially worsened it in social security legislation? I am particularly interested in the Government's attitude in view of a statement by a former Secretary of State earlier this week, who said that the State Earnings-Related Pension Scheme should disappear altogether. What are the Government's intentions for the scheme for the future?

Lord Henley

My Lords, as I have already said, we have not bribed people to opt out of the scheme. We produced an incentive in much the same way as the government which the noble Baroness supported did in 1975. We have produced an incentive that allows people to widen their choice of pensions. As I have said, some 4.2 million people have taken up that choice. I cannot of course speak for my right honourable or honourable friends in another place who might put forward their own proposals on SERPS even though they are not members of the Government.

Lord Jay

My Lords, do the Government now propose to legislate further? How will they get out of the muddle which they have created?

Lord Henley

My Lords, there is no muddle. As the noble Lord knows, the rebate will be reconsidered with the quinquennial review by the end of April 1992. A new quinquennial review will come into effect from April 1993 and the incentive will then be phased out.