Group Personal Pension Schemes (Hansard, 12 February 1996)

§ Lord Mackay of Ardbrecknish
My Lords, the Government are keen to promote all forms of private pension, both occupational and personal, including, where suitable, group schemes. We have produced a range of leaflets on private pension provision which includes information on group personal pensions. We are assisting the financial services regulators to develop suitable guidance on the sale of those products. We are also examining whether further steps are needed to promote the growth of group schemes among employers otherwise making no pension provision for employees.

The Earl of Clanwilliam
My Lords, I thank my noble friend for that very encouraging reply. I congratulate him and his right honourable friend on the start that they have made with the group personal pensions. It is vitally important that employers should he encouraged to provide pensions for employees. In that respect, does he have any special plans, such as rebates on NICs, to encourage employers to start up such schemes? Secondly, in view of the fact that there is an upper limit to personal pension provision, does he agree that it might also be an advantage to indicate a basic minimum?

§ Lord Mackay of Ardbrecknish
My Lords, I am grateful to my noble friend for his remarks about group personal pension schemes. Certainly they are very suitable for smaller and younger companies which do not have occupational pension schemes. They are a way of providing a scheme with reduced administrative costs and of facilitating an employer's contribution. If the scheme is approved, it will be eligible to receive the contracted-out rebate which is for both employers and employees. If I heard my noble friend aright, I must tell him that we have no plans to give employers a national insurance contributions rebate in order to encourage them.
On my noble friend's last point, it is an interesting idea that we should recommend a minimum payment. Of course there is a minimum payment which is compulsory and is, in fact, slightly under 5 per cent. It is the sum going to SERPS or to contracted-out 395 provision for an appropriate scheme. I am not convinced that it would be appropriate to raise that figure and go for some kind of compulsory saving via a pension scheme.

§ Lord Haskel
My Lords, does the Minister recall that the last time that the Government became involved in promoting private pensions, it resulted in the misselling of pensions on a large scale'? Is he aware that the process of sorting out the problems associated with that have hardly made any progress at all? Does he agree that with such a record it is best for the Government to keep out of promoting anything to do with pension plans?

§ Lord Mackay of Ardbrecknish
My Lords, I certainly do not agree with the noble Lord's last point. It is vitally important that we give every person in this country the opportunity to belong to a second, preferably funded, pension scheme. That was one of the principles behind the Pensions Act which I took through your Lordships' House last year. I believe that the misselling of personal pensions is now a matter largely in the past. Investors are now better able to make informed choices. There are new and tougher rules on disclosure of charges, commission and policy surrender values. Higher standards of training and competence set by the financial regulators will underpin those changes. One aspect to which I referred in my original Answer is that we must, of course, ensure via the Securities and Investments Board that any selling of group personal pensions is conducted in a rigorous manner as well.

§ Lord Shaw of Northstead
My Lords, can my noble friend say how much has been put aside nationally to meet the future needs of pensions in this country? How does that record compare with the record of other countries?

§ Lord Mackay of Ardbrecknish
My Lords, we have been extremely successful in this country in the build-up of funded pension schemes. In fact, on the last valuation, we had something like £600 billion of funded pension schemes set aside for retirement and future retirement. That is more funded pensions capital than the whole of the rest of the European Union put together. Indeed, a recent OECD report contrasted our position with that in many other developed countries. We were in an extremely favourable position. By the year 2030, our position would be hugely better than that of France, Germany and Japan, to name but three countries.

§ Baroness Farrington of Ribbleton
My Lords, will the Minister comment on the Government's decision in the light of his reply? Does he agree that they have accepted the need to tighten up and ensure that people are sold schemes which are genuinely in their interest and that they have changed the way in which that is done? Do the Government accept any responsibility for those people who under the previous lack of regulation were sold schemes which are not in their interest?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Baroness asks me about the present situation of 396 those people who were missold pension schemes. As she is aware, the Securities and Investments Board introduced a programme to secure redress for investors who opted out of or transferred funds from occupational pension schemes and suffered loss as a result of advice which fell short of the regulatory standards then in force. We believe that the people who gave that advice should pay to redeem the position for those to whom they gave it.

§ Lord Taylor of Blackburn
My Lords, if, as the figures the Minister produced indicate, we are doing so well with our pension schemes, is there any chance of our subsidising other EC countries at a later date?

§ Lord Mackay of Ardbrecknish
My Lords, I should jolly well hope not.

§ Lord Stoddart of Swindon
My Lords, can the Minister give an absolute assurance that, if we join a single European currency in the third stage of EMU, through taxation transfers we will not in fact be doing exactly what my noble friend suggested'?

§ Lord Mackay of Ardbrecknish
My Lords, both noble Lords raise a serious point of which we arc well seized. We, as a government, will certainly guard against any proposition that would enable some of our European friends who have not the same sensible pension provision as ourselves to tap into our taxpayers to make up for their shortfalls.

§ Lord Haskel
My Lords, can the Minister tell us what progress has been made in sorting out the problems referred to by my noble friend Lady Farrington, rather than simply telling us what are the Government's intentions?

§ Lord Mackay of Ardbrecknish
My Lords, as I said in response to the noble Baroness, Lady Farrington, the Securities and Investments Board introduced a programme; that programme is making progress. Certain problems arose involving insurance, but I understand that some of those have been resolved. Letters are going out and progress has been made.
It is worth underlining that not every personal pension was missold. For many people, unlike what the party opposite think, a personal pension was the only way for them to obtain a second pension. Either they were not employees or they were employees of companies which did not provide a personal pension. One wonders whether the Opposition would like people to have remained pensionless in those circumstances.