Pensions

HL Deb 24 March 2004 vol 659 cc745-79

6.22 p.m.

Lord Fowler rose to call attention to the case for encouraging occupational and personal pension provision; and to move for Papers.

The noble Lord said: My Lords, the debate is designed to call attention to the case for encouraging occupational and personal pension provision. King on defence and Fowler on pensions—it is getting rather like the old days on these Benches. Looking at the list of speakers on our side, I notice that you do not have to be a former Thatcher Cabinet Minister, but obviously it does help.

I congratulate the Minister on being in her place. That is more than the usual courtesy; it is a heartfelt welcome for her punctual arrival.

We last debated pensions in one of these debates in March last year. I said then that, given the current crisis in pensions, we would want to return to this subject. Perhaps I may gently remind the Minister, who seemed to be in some doubt about my position on the previous occasion, that I speak entirely on my own account from the Back Benches. Having spent 20 of my 31 years in the other place being constrained by the official policy of my party, I enjoy the freedom of the Back Benches. Perhaps I may add, in a spirit of across-the-Chamber friendship, that we look forward to the day when the Minister and her colleagues have that same enjoyment.

Since we last debated this issue there have been a number of new developments: first, we have had the publication of the Pensions Bill, and I shall touch on that later; secondly, last week in the Budget speech, we had the Chancellor of the Exchequer deciding that from April 2006 there should be a limit on the capital value of any individual pension provision of £1.5 million. How this will work and the number affected is still, to me at any rate, slightly unclear. Perhaps the Minister will give guidance on this in her reply to the debate.

Let me give an example of one person who is potentially affected; that is, the Prime Minister. Mr Blair has a half pay prime ministerial pension plus his parliamentary pension. He is due, therefore, a pension of about £100,000 a year. The capital value of that provision is, by the Government's calculation, put at something like £2.5 million. As I understand it, if he registers that amount on April 2006, then there will be no extra tax to be paid. But if he continues to accrue after that he will be taxed at a marginal rate of 55 per cent. So he has a rather important decision to make.

I tried to get guidance from the Treasury on this but, sadly, the only advice I received from the Chancellor of the Exchequer was that it would save a great deal of unnecessary trouble if the Prime Minister was to retire before the new system came into being. So I would be grateful for the Minister's guidance on the position.

There has been another development; a further change since last year. The Association of British Insurers is now measuring the public's view on pensions and pensions policy. I want to be fair to the Government because their position has improved. Whereas last year public trust in the Government's pensions policy stood at only 15 per cent, this year it has improved to 17 per cent of people who now proclaim themselves satisfied. If I may put it this way, the debate will therefore touch on the concerns of the other 83 per cent of the nation.

Quite seriously, there should be absolutely no doubt about the public concern that there is on pensions, particularly on occupational and personal pension provision. In 30 years of debating these issues, I cannot remember and have never seen concern greater than it is today—and with some cause. Only 19 per cent of employers now provide a final salary pension to new members; and 41 per cent of all companies operating final salary schemes have closed them to new members in the past 12 months. At the same time, personal savings are close to a record low. It is a dire position which all parties should want to improve.

Let me be clear: I do not blame the Government for each and every part of the pensions crisis—that would be the worst kind of "yah-boo" politics; I accept that—but I do blame them in a number of very important respects. I blame the government for imposing a £5 billion a year pension tax at the very worst time. As the markets went down, the Chancellor and the Prime Minister imposed this massive new tax. It will go down in political and social history as one of the most spectacular misjudgments any government have ever made.

I blame the Government for doing so little to encourage personal saving. As we have constantly pointed out, a simple change would be to end the rule that anyone with a personal pension must, as the rule stands at the moment, take an annuity at the age of 75. The Government persist with that policy in spite of the fact that annuity rates have halved since 1990. I honestly and genuinely believe that they underestimate the feeling there is on this issue among those who have saved all their lives for an adequate pension; and, perhaps even more, they underestimate how the rules now will dissuade other people from saving in the future. In the next few weeks, I hope to introduce a Private Member's Bill in precisely this area.

But, above all, I blame the Government for not having a strategy for occupational and personal pensions. What makes that so odd is that outside government some consensus on the way forward is now beginning to form. Let me give my view, on my interpretation, on where there is substantial agreement and where that agreement would be possible.

First, I believe that we should make the basic state pension as generous as possible. It is a well understood pension, which is more than can be said of so much of the other state pension provision, and it is capable of floating many, many people off income-related benefits. I congratulate my party's spokesman in the other place, David Willetts, on the brave step he has taken by promising an earnings-related state pension inside his pension policy, which I think is more relevant to today's needs.

Secondly, I have supported since the 1980s—and the Government continually quote my support—some form of pension credit. Having myself introduced family credit for families with children, my view has always been that extra help was necessary, particularly for those pensioners who, through no fault of their own, had not had the opportunity of building up their own pension. That was often because the opportunity simply did not exist for those pensioners.

I know that there were reservations in my party on the pension credit introduction, but I am very glad to see, to know and to understand that my party has now pledged to continue with the pension credit. That is good news. For although we all hope that as many pensioners as possible can be floated off income-related benefits, this will frankly not happen overnight.

Thirdly, and crucially, I believe that we should do everything in our power to encourage and help everyone to build up a pension of their own. Here I part company with the Government. They have abolished the state earnings-related pension scheme—SERPS—and I certainly agree with that policy; that will come as no surprise to the Minister. However, they have replaced it with an alternative second state pension, which is just as full of complexity as its predecessor. I wonder how many people covered by that second pension actually understand it. I remember carrying out a survey for SERPS; it was quite clear that the majority of the people who were covered by SERPS did not understand what it was about. Indeed, most of them did not know that they were covered by it in the first place. I do not think that that is a very satisfactory position for pension provision.

I would much prefer the second pension to be built up by the individual, with a fund of his own, outside the state organisation. Contributions from the employer and the employee, yes—but there is no reason why the Government cannot contribute to such a pension by matched contributions for low-paid employees and outright contributions for carers.

Let me say in parenthesis—and here I probably part company with both Front Benches—that I do not run away from the idea of a compulsory scheme. I am sceptical that we will ever persuade all those who should be saving to save. Currently, many who could be building up a second pension with matched employer contributions—such pensions are actually on offer—are not doing so. For those who say that this is a very startling proposal, let me remind them that nearly 20 years ago, in our 1985 Green Paper on pensions, the Conservative government advocated such a course, and no one backed that more strongly than the then Prime Minister, my noble friend Lady Thatcher. Sadly, the solution was too radical for those times, but I think its time may have come.

Of course, I accept, following everything I have said, that there is an implied and major responsibility on the private sector and the life insurance companies. Let me make my position on that absolutely clear: I have no sympathy whatever with companies which either knowingly or through incompetence fail in their duty to the public. All too often, the failures of the past 50 years have not been the failure of systems but the failures—and worse—of executives and salesmen who have exploited the public. That was certainly the case with the mis-selling of personal pensions, and it was quite right that those companies should have had to put the position right. So I will back any sensible measure of control and supervision in this area and also any watertight compensation arrangements where mistakes have been made. That is how I will judge the Pensions Bill—whether that protection is adequate or not.

However, such legislation is, by definition, for the future. We also have the present to deal with. We have cases in which a number of pension schemes have been wound up when companies have gone into receivership, leaving their members with very much lower pensions than they were promised. I have in mind the position of employees in ASW, Dexion, United Engineering Forgings and Blyth & Blyth. A typical example is of one man, now aged 59, who spent 38 years working for Dexion but now looks set to lose 80 per cent of his pension entitlement.

And of course we have the case of Equitable Life. I do not want to argue the case in detail—that has been done this afternoon in the other place. Suffice it to say that there are very few people who were happy with the Government's initial response to the Penrose report. My view is that the fault lies not so much with the regulatory system—pre-1997 or post-1997—but with the lack of action of some of the regulators and, most of all, with the company itself. I suggest that the question now is how we take that issue forward—how we restore confidence and how we find some justice for thousands of pension savers who have found their pension entitlements so cruelly reduced.

I have one suggestion to make, which comes from my misspent youth as a Minister. In the early 1970s, it became clear that action was needed to help railway pensioners because of the deficits in their funds. In an entirely bipartisan way, the Conservative Government of Ted Heath introduced legislation to make very substantial grants to the British Rail pension fund. That legislation was overtaken by the 1974 election and was reintroduced by the Labour government of Harold Wilson.

The only concern was that very big lump sums were being paid over to the British Rail pension fund. In my Transport Act 1980, I kept to the agreed policy of compensation but, in effect, paid on a pay-as-you-go basis when the liabilities became due. That seems to me a way forward that has the advantage that compensation, whatever was agreed, could be paid year by year and we could have the agreement of all the political parties to such a solution. In pensions, there is much to be said for bipartisan agreement, and I believe compensation is justified here.

The reason I advocate that course is that I think that natural justice demands that we should seek to help men and women who have saved for their retirement and done everything that successive governments have asked them to do. But I advocate that course for another reason: there is an urgent need to restore confidence. By any standards, the past few years have been extraordinarily difficult. Yet as people live longer, the need has never been greater than it is today that we should encourage provision for old age. That means that people should have the confidence to invest and to save. I want everyone to have a decent pension of their own—that, I think, should be the aim—but I fear that today, we are some way from that goal. I beg to move for Papers.

6.37 p.m.

Lord Brookman

My Lords, the subject of pensions is very high on the political agenda. We should all be grateful for this timely debate, initiated by the noble Lord, Lord Fowler, whose expertise and experience I must confess I am unable to match. I declare an interest, not only as a person who benefits from a final salary pension scheme but also as a former General Secretary of the Iron and Steel Trades Confederation, the community union. I was both an employee and an employer, so I had to administer a pension scheme.

I should like initially to refer to what I know best: the achievement—for it was an achievement of a final salary pension scheme for blue-collar workers in the steel industry. Thirty years ago in 1973—not very long ago—tens of thousands of workers were introduced into a pension scheme. When I started work in 1953 at the Ebbw Vale steel works in south Wales, I was amazed, not only by the adverse working conditions but the age profile of the employees. Many were over the age of 70. Why? I suggest that it was because there was no pension scheme and nothing there for them to retire on.

Only white-collar workers in the steel industry had pension schemes in my younger days. Staff workers had a pension scheme. My father was one, and one of my brothers, being a foreman, was another. But for me and my other brother—no pension schemes for us. So 1973 was a good year for the introduction of company pension schemes—at least, it was for me and for many thousands of others. As an aside, it was public ownership that introduced a pension scheme for blue-collar workers throughout the United Kingdom steel industry.

We are where we are, so I welcome the Government's introduction of the Pensions Bill. Following the terrible series of disasters with companies going into liquidation, and the subsequent effect on employees' pensions, the Bill will go some way to safeguard schemes for the future. However, I stress, that is for the future.

The noble Lord, Lord Fowler, rightly raised the issue of the plight of workers in serious difficulties as a result of companies such as Allied Steel and Wire and others going into liquidation. It has brought home to millions of our fellow citizens the weaknesses in protection for pension rights. I suspect that very few of your Lordships are unaware that 1,000 redundant workers in the steel plants in Cardiff and Sheerness, some with 30 years' service or more, face lives of penury as a result of the insolvency declared in 2002.

From my perspective, a pension is not just another financial commodity for which we pay now to use later. Millions of men and women employees, along with their employers, pay contributions to occupational pensions that build up entitlements. Such entitlements are part of their pay. They are not something special to them: but their pay. Their own money goes into the pension scheme. I suggest that it is part of the deal that resulted in their being employed in the first place. A company pension scheme is a good selling point for any company wishing to employ people.

Indeed, the law—many noble Lords are expert in this area—recognises that there is something special about wages. If a company becomes insolvent, employees' pay has the first claim on assets, and it is my understanding—I shall be corrected by the Minister if I am wrong—that the state steps in to make up shortfalls. Fortunately, as a general secretary, I never had to face such a situation, but I believe it to be the case.

A colleague of mine who follows these issues more assiduously than myself makes a valid point. He says that this is a case of basic morality. As a religious man, he quoted Leviticus and the epistle of St James as an injunction on employers to pay labourer's wages at the end of the day on pain of incurring heaven's wrath. It is a moral responsibility. It is a moral responsibility for banks and bankers. We read and hear about vast profits, mind-boggling salaries and, at the same time, the withdrawing of credit from companies such as Allied Steel and Wire, which eventually led to the current dilemma. Dilemma it is, because it now seems that the key unions at Allied Steel and Wire have started a legal claim against my Government stating that they are in breach of a European Union directive. The directive refers to governments having a formal obligation to establish and maintain arrangements to guarantee payments of pensions when companies go bust with debts to pension funds. That directive has been in effect since 1980. I need say no more.

The proposed pension protection fund is to be welcomed. However, it cannot be right that workers such as those in Cardiff and Sheerness will be hung out to dry. Some months ago, my noble friend the Minister indicated to me in reply to a question that there would be no retrospective legislation. Much has happened since then however. There has been much activity in another place. The Western Mail, a leading newspaper in south Wales, published an article on 16 March that referred to an "encouraging meeting" between the Prime Minister and Mr Kevin Brennan, MP for Cardiff West, which is welcome. I am also pleased to hear that, at Question Time today in another place, the Deputy Prime Minister gave a positive response to a similar question from the Floor.

This injustice should be addressed. Companies are winding up defined benefit schemes. Employees at Allied Steel and Wire in Cardiff are suffering. Some companies are using dreadful tactics whereby 12-month contracts are imposed, with employees incurring no benefits at all. The Pensions Bill is good news, but I want it to be stronger. I want it, as do many other noble Lords, I am sure, to safeguard workers' interests and help those who are currently suffering as a result of their companies going into liquidation.

6.45 p.m.

Baroness Barker

My Lords, I declare an interest as an employee of Age Concern England. I, too, thank the noble Lord, Lord Fowler, for the opportunity this evening to discuss again this important issue. The debate is timely, following as it does the report of the Penrose inquiry. It could be said of last week that it was a bad week to be an actuary.

I have been a Member of your Lordships' House since 1999, and I have noticed the frequency with which we politicians return to the subject of pensions policy. Perhaps that is because, unlike the Prime Minister, those of us who pursue our political careers in this House and who are not on the ministerial Front Bench receive no pension contributions for our efforts whatever. More likely, it is because, remarkably, pensions have shot up the political agenda in a way that few could have predicted in previous years. There are well known reasons for that, such as the economic reasons associated with the happy experience of the increase in longevity of most of the population, and changes in old-age dependency ratios coupled with changing employment patterns.

However, two important things have changed over the past five years. The first is the public perception that a growing older population coupled with a declining birth rate is an economic burden. That impression is frequently reinforced. However, as the Select Committee on Economic Affairs noted in its report in November 2003, many of the actuarial assumptions beneath that simplistic statement are open to challenge. However, one thing is clear: the structure of private and occupational pensions has appeared to change little to take into account those significant demographic changes.

The second thing that has markedly changed is the perceived attitude of employers towards occupational pension provision. In 1998, the report by the Pension Provision Group entitled We all need pensions stated: In addition to wanting to provide for their employees in old age, employers offer a pension scheme because they see it is in their own interest to do so. Most importantly, employers believe that the provision of a pension scheme will help attract, retain and motivate employees. They may also consider that providing pension schemes enhances their reputation in the community generally and avoids the bad publicity that can be associated with employees retiring into poverty". However, as the noble Lord, Lord Brookman, said, five years on, in the wake of the collapse of schemes such as ASW's, which have left thousands of people facing a retirement in penury, everything seems very different. Rightly or wrongly, there is a perception that generosity of occupational pension provision is risky or unwise for an employer. The proposals for the Pension Protection Fund in the Pensions Bill can be depicted as a way of penalising good employers and bailing out the bad, which is not helpful.

One thing that employers have failed to reflect is the necessary change coming upon us in attitudes to work and employment. By December 2006, employers must be ready to implement the EU employment directive of 2000, which prohibits discrimination on grounds of age. To date, there is little evidence of companies abandoning employment practices that are based on age and few have abandoned arbitrary retirement ages. December 2006 is not very far away and it is of concern that, on the one hand, people are talking about the need to raise the basic state pension age and, at the same time, there is little evidence of employers taking on board the implications of such a move for them.

The title of today's debate does not include the basic state pension, but it is impossible to discuss private and occupational pension provision without making reference to it. Indeed, the Government's own strategy explicitly recognises that with the proposals in Clause 194 of the Pensions Bill for combined pension forecasts. Time and again, research into the low level of investment in personal pensions reveals that people have wildly optimistic expectations of the level of retirement income that they can expect from personal pension provision. People either have insufficient access to information, or their level of financial literacy is so low that they cannot understand the nature of different pension products. That situation is not helped by the complexity and uncertainty of the ways in which private and occupational pension schemes interact with the basic state pension.

I therefore noted with interest the recommendation of the Select Committee on Economic Affairs that the possibility of a national financial advice network provided by the voluntary sector should be explored. That said, I have strong reservations that any voluntary organisation would find itself able to undertake any such risk whatever. But I do believe that there is a case for private sector companies to consider whether they could be involved in voluntary organisations. From that I would exclude my own, as I refer to those that have a track record in provision of money advice. They are the organisations that the public trust to give them independent advice.

The noble Lord, Lord Fowler, was absolutely right when he referred to the gender discrimination in annuities having a huge impact, particularly given the way in which the change to defined contribution schemes carries on completely unabated in a way that five years ago was simply not envisaged. There really ought to be further research on that.

Finally, on these Benches we have consistently argued that the greatest need is among older pensioners. We believe that the longer the time since a person was actively engaged in the labour market, the greater the probability that they will have an inadequate retirement income. Efforts to enable people to stay economically active for longer, including changes which enable people to work part time and call down part of their pension entitlement, are to be welcomed. However, until the state pension system recognises the plight of older pensioners, of whom there will be many more, and until private and occupational pensions schemes similarly address that issue, in a way that is comprehensible to those who need to make the financial planning that the noble Lord, Lord Fowler, rightly called for, I believe that many of the changes that we are considering at the moment may be interesting academic exercises, but will leave most of the general public still facing an uncertain future.

6.53 p.m.

Lord Lea of Crondall

My Lords, first, I add my voice to those welcoming the initiative of the noble Lord, Lord Fowler, in introducing this debate. I add my support to the sentiments expressed by my noble friend Lord Brookman on the problems of ASW and other companies in similar positions, and hope that the talks to which he referred could lead to some accommodation being reached on that matter.

I welcome the key features of the Pensions Bill, and shall pick out one or two points in it. I shall relate that to the collapse of confidence to which the noble Lord, Lord Fowler, referred, which is not principally a question of the government of either party but a collapse of confidence in the industry. "Independent financial advisers, are they all crooks?" is the type of sentiment that one hears expressed. There is a massive job to do, which I relate to the problem of advice about pensions. In that regard, the Government have been doing some very interesting things, from the Green Paper right through to what is happening directly in the Department for Work and Pensions.

Underneath all that, there are some fundamental questions to be asked about where we are going on the savings ratios in Britain. I know that people speaking for some other economies do not agree with what I am about to say, but I believe that our savings ratio in Britain—whether the household savings ratio or the national accounts savings ratio—is far too low. It is 5 per cent, broadly speaking, as compared with 15 per cent in France, Germany and Italy. Some people believe that because we have a high level of consumption, higher as a percentage of the gross national product than France, Germany or Italy, Britain is doing rather well and Germany, France and Italy are not doing so well.

It is a question of timescales and mortgaging the future. John Maynard Keynes said that in the long term we are all dead, but one certainly has to take a timescale of 20 or 30 years, when some people in this room may not be dead. Certainly, that is a timescale for which we must plan in the pensions industry. It is interesting and important that the terms of the debate are so similar to the remit of the Independent Pensions Commission, chaired by Adair Turner, which has been operating for about a year and has another year or so to go. He is working with two very distinguished colleagues, one of whom, Jeannie Drake, is a leading trade unionist.

I briefly remind the House of some of the matters that the commission is studying in great depth. Under the heading of demographics, it is investigating the potential demographics in 2050 of life expectancy, fertility, migration and other variables. The commission asks the question, which I rather like, whether there are any limits to the increase in life expectancy". It asks about the implications of different demographic assumptions for annuity rates at different ages.

The commission also asks when and why people retire. That might seem rather a facile way in which to pose the question, but there it is. The commission focuses on trends in labour force participation rates, considering age, gender, ethnic and other categories. It asks to what extent so-called early retirement is voluntary or involuntary.

I wish Adair Turner and his colleagues all the best. They are a very distinguished team of three. They are going quite wide in their trawl, but it is essential that they do so. Another example of the width of their trawl is mentioned in their interim comment on what they are working on. It says: A crucial issue will be the implications of house ownership for `adequacy' of savings. This will depend on whether housing assets truly represent a releasable source of wealth and thus income in retirement, or whether for many people they are only relevant because they secure rent-free retirement". Finally, the commission is considering not the state pension system itself but the likely consequences of the present and evolving state system for the levels of support that the state system will deliver in relation to the incentives for private savings.

I refer to two points in the Bill that are particularly welcome. The pensions protection fund is based on the fact that although in, the overwhelming majority of cases, promises made in defined benefit pension schemes are fulfilled … in some exceptional cases, a scheme will go bust with an underfunded pension and the workers lose out … This has shaken trust in pensions in general"— trust that the Bill is "taking action to restore". The statement goes on to say: The PPF will be a compensation scheme protecting pension scheme members, so that if their employer goes bust, they can be reassured that they will still receive the core of the benefits which they had expected—protecting the pension promise. This is a huge step forward for pension security … [and] has been welcomed by the CBI, the TUC and the public at large". It will give, 100% of the original promise to people who have reached pension age [and] 90% for people below that age (subject to a cap of £25,000 per year)". Then there is the pensions regulator: The new Pensions Regulator will focus on protecting the benefits of pension scheme members, concentrating its efforts on schemes where it assesses that there is a high risk of fraud, bad governance or maladministration … The Pensions Regulator will also have a specific function of providing information, education and assistance to certain categories of people involved in administering, advising and facilitating the operation of certain schemes". So far, so good. We need to have some extra provision in the legislation to give workers the absolute right to be consulted about changes in pensions and it is important that provision is being made for Citizens Advice Bureaux to be given some assistance. As a credible part of the voluntary sector, I welcome the fact that they are gingerly moving into the field of giving pensions advice.

7 p.m.

Lord MacGregor of Pulham Market

My Lords, I think that this is the third time in less than a year that I have spoken in a pensions debate in this House and I again declare an interest as a trustee of a pension fund and as a director of a life assurance and pension provider.

I agree with the noble Baroness, Lady Barker, that the reason that we are coming back to this again and again is because pensions have gone right up the political agenda. They will be a major issue for governments of all persuasions in the years ahead and they must be must be got right in the long term. In seven minutes it is very difficult to cover this field and I shall therefore just highlight a few issues, to each of which I would like to have been able to devote a full half-hour, in the hope that we can come back to them later.

I remember that after I left the Cabinet, as my noble friend Lord Fowler indicated, and felt freer to talk on these matters, I was speaking and writing about pensions in the mid-1990s. The general theme that I was developing then was the pension time-bomb. Of course, I was then referring to demographic factors, with which we are all familiar, and to the fact that surveys and reality showed that many young and not-so-young people knew that they had to save more for their old age, because the state pension would not provide, but were not doing so. That was the worry then.

In the period since then, we have had many issues that none of us predicated at that time. At that time the atmosphere was still that we were congratulating ourselves on having the best funded pension provision in the EU and many pensioners and prospective pensioners were basking in the expectation of retiring at the age of 60 or even earlier and having a very comfortable retirement life for many years.

All of that has changed. I want to begin by asking the "what if?". What if the Government had not taken £35 billion already, and I gather will probably take £6 billion a year, out of pension funds, which has undoubtedly had a major effect on the black hole that we are all discussing? What if there had not been such a focus on mis-selling? I fully understand the point about pension mis-selling and if I have time I will return to it. But what if we had not had seven years of an atmosphere in which the bad news was always put forward in the media and there was constant pressure about everything that was going wrong in the pension industry? It is no wonder that the public's confidence has collapsed and even providers now feel beleaguered and uncertain of their future.

What if the Hyman case in the House of Lords in relation to Equitable Life had gone the other way? Instead of being 3:2 as it was, what if, with only one judge taking a different view, it had been 3:2 the other way? There would be a different debate going on at the present time.

What if the equity markets had not downturned? Most interesting of all, what if we had not moved into a low inflation and low interest period? I applaud that for all sorts of other reasons—we have all been endeavouring to achieve this in our lifetime—but let us be quite clear. It has a significant impact on the current debate on pensions because many pensioners are complaining about the low annuity rates they are getting, which are a direct reflection of low inflation and low interest rates. I remember in the 1970s when inflation was at 26 per cent and therefore the interest rate return that pensioners were getting on their bank deposits was fairly high that when inflation came down they were complaining that the interest rates had come down too. It was very difficult to get that realistic argument over. We are suffering from this not only because of the annuity position but also because, I suspect, low interest rates have a bigger influence than the current state of the equity markets in the actuarial calculations for pension funds. It is curious that the black hole would be diminished quite a bit if interest rates went up substantially, because of the way in which the liabilities are calculated.

All of these things have happened. If none of them had happened we would still be facing the demographic timebomb and other issues that I was referring to in 1975. But now we are in a climate where the position is very much worse.

I want to spend the last four minutes of my speech on a few reflections, I hope in the spirit of my noble friend Lord Fowler, trying to make the point that this is an issue that all governments must assess and therefore we should not be criticising each other all the time—although I am about to do that. I have to say that in relation to the new pension cap of £1.5 million, although I would have done it in a different way, I have a lot of sympathy with what the Government are trying to do and I do not have a great deal of sympathy for some very highly paid executives who are screaming about it. I make that point to show that I am approaching the issue in a bipartisan way.

I want to make a few reflections that I hope will feature in all our debates in the future. The first is that the Government must recognise that their policies over the past seven years are not working. It is not just the removal of the tax credit on the pension schemes—although that has had a remarkable effect, certainly as great as the effect of the equity markets and the accountancy changes—it is also that the flight from final salary schemes, which we all know is taking place on a massive scale, puts greater emphasis on personal pensions. Frankly, the Government's stakeholder pension scheme is not working to anything like the extent that they expect. It is also the case that contracting out of the state scheme is not now providing sufficient incentive for employers to promote occupational schemes strongly. All of these issues must be faced up to and we must find new incentives and new ways to encourage employers to continue with occupational pension schemes and to encourage individuals to take out personal pensions.

Secondly, on the state pension I agree with my noble friend Lord Fowler. I think that the situation has changed and that we need to reassess the role of the state pension. I am greatly impressed by the work that David Willetts is doing. He has given some brilliant and compelling lectures which, because they do not contain soundbites, are unfortunately not getting much attention at the present time. But they are well worth considering in a non-partisan spirit. I agree that the real problem that we face with the state pension is that in due course 60 to 70 per cent of all pensioners will be on means-tested benefit, which is no incentive to save.

Thirdly—and this is a very difficult subject to embark on for 30 seconds—we need to have a different climate in which to look at all this. Of course I accept that pension mis-selling took place and that it had to be dealt with. But if we are in a climate where we believe that there is no risk in long-term savings, if we are in a climate in which there will be constant blame and constant demands for compensation, which is the culture we now live in, we shall not get a balanced argument in debate on these issues. I shall take one example. If someone had an Equitable Life pension that had matured in 1999 and all the proceeds had been invested in the stockmarket at that time, that individual would be in a worse situation now than if he had remained an Equitable Life policyholder. That is because investments in PEPs or ISAs do not have an expected guaranteed return and it is understood that if you invest in unit trusts or PEPs or ISAs you must face the risk of markets going down. We seem to have lost all of that in the pension field. I wish I could have said much more about that issue.

Finally, I agree that unless we face up to some of these issues young people simply will not save. They believe that their investment in their house will in some form provide their pension in due course. Frankly, it will not. They are taking a huge risk.

So I come to the final two points that I want to make. I think that we may have to face up to the fact of the need for compulsory occupational pension provision before too long. It is important that we do not waste too much time not facing up to it and saying that we hope that the situation will get better. We ought to be having that debate now.

I go back to my position in my original timebomb article. We must recognise that perhaps the biggest factor of all, and the one that is causing so much difficulty for the providers of private pensions, is longevity, the fact that year after year we are all living longer. That is a very good thing from every point of view, except for pensions. We must now address the likelihood, in my view, that the state pension age will have to go up from 65 and the sooner we face up to that, the better. We must also face the likelihood that one of the things that is reducing the returns on occupational pensions is longevity and we must take that into account.

7.10 p.m.

Baroness Dean of Thornton-le-Fylde

My Lords, I, too, welcome the opportunity of this debate. I console myself with the fact that we have the Pensions Bill coming probably just after Easter and that we will all probably have much more time to debate the issues then. So, like the noble Lord, Lord MacGregor, I shall try to skate very quickly over some of the key issues.

I think there is wide cross-party support for the aim of the Motion. We have to encourage more people into occupational and personal pension funds because of the demographic time-bomb, which has been mentioned, and a host of other reasons including the savings factor. I think that two words will help—trust and confidence. When I was a young union officer in Manchester, both words were a given in company pension funds. Workers had trust in the funds and they had confidence that they would get their pension at the end of the day. I think that those have been severely damaged. I have great sympathy for the 60,000 workers in the case mentioned by my noble friend Lord Brookman. I do not believe that we need to wait for the Pensions Bill to address that issue. The matter is so important that it should probably be dealt with in parallel with the legislation. I urge the Government to address it. I know that they are concerned about it.

The noble Lord, Lord MacGregor, took a little trip down memory lane, but it was a very limited memory lane. I should like to go a little further. I think that three Members present in the Chamber will remember our debates on the then Conservative government's Pensions Bill, when we sat on that side of the House and the noble Lord on this side. I think that the noble Lord, Lord Tordoff, was in the House then. My noble friend the Minister sat on the Front Bench and I was her humble number two in the debates on that legislation. I suggest that that Bill—nicknamed the Maxwell Bill because of the Maxwell scandal, which was why I was involved in the pensions discussions—was very badly flawed. It is also part of the jigsaw puzzle concerning the current lack of confidence in pension schemes.

Provisions in the previous government's pension arrangements allowed companies to take from their pension fund any surplus above 5 per cent. The trustees could do nothing about it. Removing money from the funds at a time of huge surpluses obviously had a direct impact on the funds. Moreover, the Act introduced in the mid-1990s encouraged people to pull out of occupational final salary schemes and go into money purchase schemes. That was the root of the mis-selling. It happened because the insurance industry had a clientele bonanza which it never in its wildest dreams expected. Another consequence of the legislation for occupational pension schemes was the drawing out of younger scheme members to whom money purchase schemes were more attractive. Those arrangements entirely distorted the profile of occupational pension schemes. That is sometimes forgotten. If we are going to have a debate, let us have a wide one.

There was another factor. At that time, my noble friend Lord Eatwell—who I am delighted to see in the Chamber—spent a lot of time arguing for what was called a central discontinuance fund. After Easter, when we get the Pensions Bill, we will be able to debate the pensions protection fund. If the Opposition Benches had listened then, perhaps we would not be in the current position as regards those 60,000 workers.

At that time, my noble friends Lord Eatwell and Lady Hollis also argued that the minimum funding requirement—which, it was said, had to be included in the Pensions Act—was too rigid and not sufficiently flexible and could severely damage pension funds. Both of those debates have come home to roost in the mature situation in the pensions field. We also argued—I say this as a side issue—that, on divorcing, women should have a fair share of the pension fund. It took a Labour Government to introduce that because the then Conservative government refused pointblank to do so.

I believe very strongly that this is a cross-party debate. However, let us not pick and choose which parts of the debate we want to talk about. I believe that the Pensions Bill will be helpful. It will be criticised, of course, but it goes a lot further than current arrangements to protect people and, we hope, to encourage them into pension funds.

One issue on which I strongly disagree with my own Government and strongly agree with the noble Lord, Lord Fowler, is that of annuities. The argument that annuities affect only a small group of the highly paid will just not run in the light of current demographic changes. The Association of British Insurers has published a survey showing that people are taking annuities before 65 as though they welcome it. I think that it is a slanted debate. People like to arrange their affairs. They like to know where they are and the point they have reached. We also read in the press that returns on annuities are decreasing. Therefore, many people believe that they should get in now before they lose yet more money.

I strongly urge the Government to readdress the annuities issue. I gather that the age limit of 75 was established when people could expect to live to 70, so only a few reached the limit. I believe that we have to protect the government of the day against a situation in which we must look after and fund those who have used the sum or given it to their families. We have to ring-fence a sum to protect their pension income.

I welcome this debate. The issue could be, and should be, a cross-party one.

7.16 p.m.

Lord Freeman

My Lords, I declare an interest as chairman of the pension fund trustees of an industrial company's defined benefit scheme.

I congratulate my noble friend Lord Fowler on introducing this debate. Indeed, I am getting used to following him and my noble friend Lord MacGregor. I agree with what both have said. I shall not repeat their arguments, save to remind my noble friend Lord Fowler of his remarkable achievement, 20 years ago, of introducing the personal pensions legislation. It has had its problems, but it was a great initiative. He will not remember that, 20 years ago, I introduced a 10-minute rule Bill on the same subject. Of course it failed, but afterwards he came up to me and said, "Well done, my boy; you'll go far". I have tried to follow in his footsteps ever since.

We are witnessing the slow demise of defined benefit schemes. Most of them are closing to new entrants. In 20 or 30 years' time, they will all effectively be closed-end funds with no new active members. Some 10, 20 or 30 years ago, our defined benefit schemes—our final salary schemes—were the envy of the world. For a variety of reasons, and I am not going to play party politics, we have seen their demise. I very much regret it. It is in sharp contrast to the public sector where the Government are the sponsor and guarantor of public sector final salary pension schemes.

I am looking very much indeed to the introduction of the Pensions Bill. Under the leadership of my noble friend Lord Higgins on the Front Bench, I look forward to burning the midnight oil with the Minister. However, I should like to put up three small red flags about the Pensions Bill. As the noble Baroness, Lady Dean, said, this debate is, in a sense, a trailer to that important Bill.

The first point is on the pensions protection fund. This is not a small point but a point of some seriousness. Of course the fund must be welcomed. I think that all noble Lords who have spoken in this debate have welcomed its introduction. However, it is effectively a payroll tax on employers. That is how it will work. We will debate what proportion will be flat rate and what proportion will be risk proportioned, but—at £300 million it is a payroll tax.

I have reread what the Minister said in a debate a year ago on this subject and her more recent comments on the Green Paper. I just do not believe that the savings that were mentioned by the Government to offset the £300 million cost are justified. I do not think that there is any credibility to the figure of £370 million claimed as an offset by limiting the price indexation cap to 2.5 per cent. We already have inflation at about that level and I do not see where those savings are going to come from. I also do not see where the £100 million of benefit is going to come from by dropping the MFR and therefore expecting funds to move from bonds to equities. In fact, just the opposite is the case.

First, if the Government are saying, "Here is a protection fund", if a company wishes to continue providing a defined benefit scheme—I hope that they will still continue for existing members—it must pay into a protection fund. With this additional net burden, some accruing benefits may well be lost. I believe that employers will inevitably look to offset some of that cost. I believe that the solution is for the burden to be shared more broadly. I argue that public sector pension funds should be included within the ambit of the protection fund, and hence the Government, Her Majesty's Treasury, will effectively make a contribution.

My second point concerns the excellent Paul Myners report. He made a number of recommendations to the Government about the role of trustees, all of which are very important. I welcome the recommendation in the Bill being debated in another place that there must be a continuation of member nominated trustees. That is democratic and right. However, we need more professionalism and perhaps more independent trustees to bring their outside experience to boards of trustees. I plead with the Minister not to introduce legislation concerning the role, the responsibilities and training of trustees. Let us have a jolly good code based on Myners and let us bring up the standards of most pension funds to the best.

I very much welcome the Government's initiative in taking powers to ensure that everyone in the country has adequate pension provision. I suggest that on people's 30th, 40th and 50th birthdays, they should be reminded of how much they have already set aside for their future pensions. I am amazed to find a growing consensus on both sides of the House in favour of some compulsion in this regard. Our savings rate is far too low. I would support a government initiative in co-operation with employers but funded by the Treasury to ensure that information was provided more generally on what people have saved.

I find myself in disagreement with some members of my party who have welcomed the Government's intention to remove employers' responsibility at least to offer additional voluntary contribution schemes. For heaven's sake, if we are trying to improve the rate of savings, to throw away the responsibility on employers—frankly, it is a relatively light responsibility—at least to offer employees the chance to save more seems to fly in the face of the logic of the arguments advanced by the noble Lords, Lord Brookman and Lord Lea of Crondall, the noble Baroness, Lady Dean, and those who have spoken on this side of the House. I am afraid that in coming years some degree of compulsion will be needed to raise the retirement provision of our population.

7.23 p.m.

Baroness Turner of Camden

My Lords, I welcome the opportunity to participate in this debate. I thank the noble Lord, Lord Fowler, for introducing it.

Those of us who were members of a final salary scheme who are now receiving pensions from such schemes are fortunate. Others may not be so lucky. Final salary, or rather defined benefit schemes are becoming a rarity, particularly in the private sector. Many firms are closing them to new entrants who are being offered—if they are offered anything at all—membership of money purchase or defined contribution schemes where the final result is often not known, where the employee takes the risk personally and where few people seem to know just how much has to be contributed to enable them to qualify for a reasonable pension on retirement.

The sense of crisis has arisen because in a number of firms that have become insolvent, scheme members have seen their eventual entitlement substantially diminished, even after 30 years' membership. Those cases have led to an enormous amount of public concern and a further lessening of trust in pension providers. What most concerns pension scheme members is the security of their investment. Until quite recently it was commonly felt that security was guaranteed by membership of a final salary scheme. That sense of security has been eroded. That is the latest event in a catalogue of concerns about pension provision affecting occupational as well as personal pensions.

I still strongly believe that the pension structure put in place under a previous Labour government by my late noble friend Lady Castle of Blackburn was probably the best we have ever had in this country. SERPS had flaws but they could have been put right. But instead that structure was destroyed by subsequent administrations. Moreover, in its attempt to "individualise" pension provision through the promotion of personal pensions, the government of the time contributed to a further lack of trust in the purveyors of pensions and compensation had to be paid to those who had been misled into leaving good occupational schemes in favour of poor personal provision. According to research undertaken by the ABI, 8 million working people are now not saving for retirement and a further two million are saving at too low a level to provide an adequate retirement income. Some 46 per cent of women are non-savers.

Clearly the Government are taking steps to deal with some of these problems and we await the new Pensions Bill to be debated in this House. One of the most discussed elements in the Bill—it has already been referred to several times in the debate—is the proposed pensions protection fund designed to provide compensation for members of schemes wound up in deficit after the insolvency of an employer. The PPF will be funded by a levy on DB schemes. The PPF is a very welcome new idea, but problems remain. The scheme will not come into operation until April 2005 and there is no retrospection. That means that employees who have lost out recently—some of them within sight of retirement—and have lost absolutely everything will be left in a truly dire situation.

The Government are saying that the PPF is an insurance scheme and there can therefore be no retrospection. Unions representing members in that situation refuse to accept that nothing can be done and are pressing for provision for retrospective cases. I was very interested in the scheme to which the noble Lord, Lord Fowler, referred in his opening address. There is also the fact that the compensation the PPF will provide is limited initially and potentially can be varied during its operation.

Furthermore, the statutory inflation proofing ceiling for pensions, called limited price indexation, will be reduced for all schemes from 5 per cent to 2.5 per cent. I am opposed to that. We have no idea that the present low level of inflation will persist; the signs are that it could increase. The measure, if carried through, could mean a worsening of standards, particularly for older pensioners.

I agree with the concept of a new pensions regulator to replace OPRA. The new regulator is, apparently, to have greater powers than previous bodies of a similar kind—certainly more powers than the Occupational Pensions Board, of which I was a member, and more powers than OPRA.

It is proposed that all schemes must make provision that at least one-third of the trustees must be member nominated. There will be a code of practice for that requirement, but, of course, it will not be legally binding. My union has suggested that one-half should be member nominated. Criticism in the past of member trustees has been in my view undeserved. Many are very fully committed people who often become extremely knowledgeable about their own scheme and pensions legislation generally. Of course, there should be training. That is already provided by many unions.

However, the difficulties experienced by some schemes in recent years have not been the fault of trustees. They were often opposed to contribution holidays taken by some employers in the good years, but had to go along with them after being told by actuaries that eventual pension entitlements were fully protected. Moreover, they were not responsible for the Chancellor's move on ACT which netted very substantial sums indeed for the Treasury and which led to a reduction in pension fund assets.

On the issue of stakeholder pensions, it does not seem that these have been as successful as the Government would have wished. I think that the reason is fairly obvious. The legislative requirement on employers is simply to provide access. There is no requirement for employer contributions. Practically everyone with an interest in pensions agrees that in cases where the employer does contribute, membership of stakeholder schemes increases dramatically. I hesitate to use the word "compulsion", but could not more be done to ensure that employers accept responsibility to make a contribution on behalf of employees?

Finally, I quote the ABI, which said: A successful private pension system can only work if it sits on the foundation of a strong and viable state pension system—yet our current state pension system is over-complex, sends out mixed messages about whether saving for retirement is the right thing to do and will result in over 60 per cent of the population being reliant on means-tested benefits by the middle of the century". I agree with that view. Low-paid workers, including large numbers of women, can look forward to only the state pension. As that is dependent on the contribution record, which may well have been interrupted by spells spent caring for others—children, partners, elderly relatives and so on—the level available for many women is one which inevitably results in poverty in old age, although I agree that the pension credit was intended to deal with that situation. However, it of course relies on means-testing.

Incidentally, I am glad that the Opposition now support the idea that the basic state pension should be substantially increased and thereafter linked to the wages index.

We need to look seriously at all the problems not completely addressed in the Bill which will be before us shortly, but we must remember that genuine and lasting pensions reform demands that there should be as wide a consensus as possible among the major political parties.

7.31 p.m.

Lord Hunt of Wirral

My Lords, I congratulate my noble friend Lord Fowler on a most impressive and effective opening speech, and thank him for giving us the opportunity to have an important debate on pensions. I was also very pleased to follow the noble Baroness, Lady Turner of Camden, with whom several of us serve on the All-Party Group on Insurance and Financial Services. I should mention that I am a former chairman of AIFA, chairman of Beachcroft Wansbroughs Consulting and senior partner of Beachcroft Wansbroughs.

I would like to concentrate on personal pensions and the smaller group personal pension schemes. In the recent Budget, it was pleasing that we saw some signs that the Government had recognised at last the need to create better opportunities for people to save for their retirement. But sadly, they seem ready to come forward with proposals that benefit only the much better-off in society. Their priority should have been to bring forward credible proposals for the majority of people who are not that well off but are still able, reasonably, to save for their retirement.

Unfortunately, the debate has become confused by the seeming wish of the Government to put in place mechanisms allegedly to improve, as the first priority, the efficiency of the industry. Sadly, further down the agenda is the need to secure outreach to middle-income savers. So, since 1997, the only initiative in operation has been the so-called stakeholder pension. Notwithstanding the usual defence of its position by the Government, that has not been the wonderful success claimed. No objective observer would regard the initiative as anything other than a miserable failure.

One major life and pensions company invested more on TV advertising of its stakeholder pension than did the Department for Work and Pensions. It is now withdrawing from the market rapidly. Why? First, saving for retirement out of limited incomes is always going to take a significant amount of budget planning and personal sacrifice for individuals and families in a world where most advertising extols consumption now. Secondly, without any serious market research, the Government imposed a price cap of 1 per cent on an industry which globally has an expense ratio of nearer to 2 per cent.

Indeed, international comparisons would have revealed that the UK industry was no less efficient than any other. Distribution is expensive because pension saving runs against the consumer tide in developed economies. Therefore, it seems perfectly reasonable for any multinational life and pensions provider to remove its risk capital from the UK and use it in markets which, even on a risk-weighted basis, offer a much bigger return.

The question of efficiency simply does not go away. Some observers have noted that under conditions of low inflation, the industry cannot take 2 per cent from the yield if equities yield no more than 7 per cent. To do so would leave the investor with 5 per cent—little better than they could achieve with a very low risk investment such as gilts. The industry needs to develop an effective answer to that challenge, and I will not dispute now the Government's right to be interested in the efficiency of the industry.

The lines of argument that the Government have put forward seem rather thin. They would do well to consider the market failure that gives rise to the controversy and their difficulty over pensions savings. Consumers do not shop around for savings products. That transfers market power away from them and towards others in the market. The product providers have also exercised weak market power because of severe competition among large numbers of them. I must add that that dynamic is changing fast as the number of providers falls quite rapidly.

Market intermediaries have exercised strong market power, reflected in the levels of remuneration they receive. I am sure many will wonder at that remark, given my past affiliation. It is, however, nothing more than market forces working together to create some form of equilibrium—in this case, putting substantial resources at the disposal of those who must spend considerable time persuading and genuinely advising reluctant savers that they need to save, or need to save more. I do not deny that commission-driven selling is to be criticised where it damages the interests of the consumer, but the reality is that outreach has to be incentivised in some way. Salaries that do not reward results are inefficient and FSA research shows that many consumers are not ready to pay fees for advice.

It is easy to pour scorn on that outcome, but I remind the Government that there are two types of consumer detriment. The first arises from buying the wrong product, or the right product at the wrong time. The second arises from not buying the right product at the right time. In their endeavour to avoid the first type of detriment, they are simply creating the second. They do so through simply failing to analyse the structure of the market when the price cap is set. Simply, there cannot be an intermediated market for pensions at 1 per cent, and we must presume that that is the Government's misguided aim.

No doubt some will point out that part of the market works at 1 per cent. That is where employee-benefit consultants advise large employers. I am afraid, however, that that is rather like saying that everyone should enjoy the same bulk discount as a car-fleet operator enjoys when he buys 1,000 cars, although most of us can buy them only one at a time. Not everyone who needs to save works for a large employer.

Several noble Lords have mentioned the ABI. Its director general said in a speech at a conference this morning that equities and other traded assets continued to offer the best prospect for investment growth over the long term. The ABI produced a document last year entitled Better pensions for all, which sets out 10 steps to better pensions. I commend it as very simple, sound and clear advice.

Finally, I turn to the Sandler group or suite of products. Mr Sandier saw three ways to simplify the product; I will not go into details, because we know them already. I remind the House that the market failure that we are addressing is on the demand side; consumers just do not shop around for pensions. The FSA's conduct of business regulatory regime does not address that as such. Rather, it creates a countervailing force by controlling supply-side consequences. Price caps clearly reveal the Government's lack of confidence in that countervailing force, as they introduced another. Mr Sandler skilfully points out that the first countervailing force must be reduced if the second is to operate satisfactorily. But I gather that Mr Sandler is already concerned that the FSA might not create a sufficiently reduced light-touch regime.

I conclude by saying that there is a need to work together to create a real and effective solution.

7.38 p.m.

Lord Lucas

My Lords, I found that a most impressive speech. My noble friend draws attention to a very major problem at the heart of personal savings for pensions, which is that the necessary costs, if one is going for individualised private pensions sold in the market, are such as to eliminate all the additional return that one might expect from equity and similar investments. That simply makes the product not worth while for the people who are supposed to be investing in them.

I have long had a hankering to look at things a different way—as my noble friend said, to move to the pooled-fund concept. Those of us lucky enough to have pensions from employers use that. We do not go out and get our own pensions; they are provided as part of a big pool. One thereby gets much cheaper costs of management and much lower costs of marketing.

I do not see any reason why we should not have a national invested pension fund—run not by the Government but independently—managed competitively by fund managers so that one would introduce the market at that stage, in the same way as big companies. There would be proper professional management, offering different funds that people could swap around as they wished, but with different ways of limiting that to ensure that one never ran into illiquidity or the "Equitable Life" problem of people receiving more out of the fund than was deserved. It would address the cost problems and we should look at that, if we were to go down the route of compulsory saving. Otherwise, all that we are doing is defrauding people.

We have really been defrauding people over many years with defined benefit schemes. The noble Lord, Lord Oakeshott of Seagrove Bay, and I had desks next to each other for a while in this business. I remember—and it is a long time ago—how conscious one was of the iniquities of defined benefit schemes. They were extremely unfair and severely penalised people who changed jobs. At the end of the day, as has been noted by several noble Lords on the Benches opposite, the real iniquity is that the pensioners do not own anything. They do not own any of the assets, merely a promise—and in many cases that promise is broken. Defined contribution schemes are closer to pensioners owning real assets. That would also be taking an honest view of the risks of investment. There is no such thing as a safe, high-return investment.

The pattern of performance of stock markets down the years is such that, looking at their history, in any 30 or 40-year period—which is what one is contemplating with regard to a pension fund—a third of the time markets will underperform their trend rate by more than a third. In other words, there are bound to be long periods of substantial underperformance from markets relative to peoples' expectations. There is no way that employers can make up for that. The resources do not exist and one will merely penalise the current workforce for the sake of leaving one's pensioners in comfort. That is not fair. We have to recognise the inherent risks in investment and share them fully.

Tracker funds are also not to be encouraged. All they do is destroy the market. They mean that people are not taking market decisions based on the worthiness or otherwise of the companies concerned, but merely on whether they are in the index. If there is too much of that, one will shift the benefit of market movements to the likes of hedge funds, so that all of the profits will start accruing to people other than the pensioners—those who are using the newer financial instruments—and the price signals, which the market is supposed to offer to the companies within it, are destroyed. That is an entirely destructive approach. We must all recognise that investment is a risk and people must take that into account in their decisions.

Returning to the main issue—how we encourage occupational or personal pension provision—we cannot do that by threatening people with the thought of penury in old age. No one believes that anymore, although it may be true. People are not reacting to that as a stimulus. We need to offer them the confidence that if they put money aside now, they will be able to enjoy a significantly better standard of living when they retire. It is important that all governments stick to that. My real difficulty with the Chancellor's £5 billion raid on pension funds is that he broke that implied promise. If we are to have a system where a significant proportion of pensioners will be in the benefits system, we must ensure that those people who have saved see themselves as substantially better off than those who have not. The taper on the benefits system has to be generous. Otherwise, why should a person on a low income scrimp and save and put together in the course of their life a fund of, say, £100,000? Think about all that they have foregone to put that money together, yet in the end it is worth nothing because they have had to buy an annuity which then deprives them of state benefits, leaving them no better off. We cannot make people face that prospect and expect them to save.

We must deal with the annuity problem, as some of my noble friends have said. It should not be imposed on people as long as they have enough income to be out of the state net. In contrast to my noble friend Lord MacGregor, I believe that we have to allow for the fact that people will regard their houses as the substantial part of a pension. The pattern of living in houses fits extremely well with a pension—one downsizes to a smaller property when one starts becoming feeble and eventually one uses equity release. We ought to regard that as part of pension provision.

My time is up. We will continue the debate when we consider the Pensions Bill.

7.46 p.m.

Lord Oakeshott of Seagrove Bay

My Lords, I thank the noble Lord, Lord Lucas, or Ralph Palmer, as I knew him, for making my declaration of interest for me already as a pension fund investment manager for the past 28 years. I do not remember thinking that we were defrauding pensioners, if that is what Ralph thought at the time. Indeed, we were working on making small company investments for the National Coal Board pension fund, which is a good example of how the separate, ring-fenced British pension fund has worked well. There is now no coal mining industry left, but the pension fund is in good health.

I am also delighted to respond to my noble neighbour—if I can call him that—the noble Lord, Lord Fowler, who sets a great example to us all of active retirement, both in this House and as he strides along Seagrove Bay on the Isle of Wight.

To a remarkable extent we have spoken with one voice in this debate. The most eloquent on the Benches opposite were the noble Baronesses, Lady Dean and Lady Turner, and the noble Lord, Lord Lea of Crondall, who in particular described the collapse of confidence in private pensions and the scale of the problem that we face to rebuild it. One voice also from my noble friend Lady Barker and the noble Lord, Lord Fowler, who attacked the disincentive that the Government's heavy and growing reliance on means testing provides for private saving for old age.

Today's debate is typical of the wider debate on the future of pensions. Almost all serious commentators who are pensions professionals agree that present pensions policies are not sustainable. The all-party report, Aspects of the Economics of an Ageing Population, published in this House by the Select Committee on Economic Affairs, makes that clear in its devastating and comprehensive analysis of present policy. But, like little Johnny in the column of soldiers marching over the bridge, the Government still insist that they are the only people in step. The committee concluded that, the proposed reform to the regulatory and tax environment of occupational pensions will come too late to reverse, or even stem, the tide of closure of defined benefit pension schemes". Pension scheme closures are not all the fault of this Government or previous governments. The Treasury was too keen to stop surpluses accruing in pension funds in the fat years; and it seems to see tax avoidance around every corner, when that was not the case at all. Since 1997—as the noble Lords, Lord Fowler and Lord MacGregor, and the noble Baroness, Lady Turner, have pointed out—the Government have year by year eaten away at pension fund solvency with their dividend tax.

Last week's Budget changes on pensions taxation were a useful improvement on the Chancellor's first shot over a year ago. He backed down in four separate ways on his original proposal of a £1.4 million lifetime savings limit, under heavy fire from these Benches, the CBI, the entire pensions industry and, ultimately, no doubt, the Prime Minister. Mr Brown has cut the marginal tax rate on pension savings over the cap from 60 per cent to 55 per cent; he has put that off for a year; he has lifted the limit to £1.5 million, rising to £1.8 million over four years; and in practice, because of the way he has fixed the multiplier, he has lifted the cap for people retiring from defined benefit schemes to about £2 million. The National Audit Office concluded that twice as many people would be caught by the cap as the Treasury claimed and described the Treasury estimate for future numbers being affected as having "a thin evidential base". I rather like that. Next time, the Chancellor should bluster less and consult more.

Simplified rules for pension taxation help only people who already want to save. The real problem is the millions who have lost confidence in the private pensions system altogether, or who never joined it in the first place, as is the case in particular with so many of the young today. I still remember the blank look from my daughter when I tried to talk to her about pensions when she started her first, quite well-paid job last year. "A pension, Dad?", she said. "Get real, I'm 21!". Our parents' generation had savings books; our children's have credit cards.

So the pension protection fund is the centrepiece of the government's efforts to encourage occupational pension provision, together with their Pensions Bill, which we look forward to scrutinising and revising with vigour when it reaches your Lordships' House.

Let me make it crystal clear from the start that we on these Benches support the fund. Why, incidentally, does it have to be based in southern England, as the advertisement in the Sunday Times for the new chief executive and chairman stated? I can tell your Lordships that there is no shortage of top-class actuaries and lawyers in Leeds, Glasgow or Edinburgh. But we support it and we have been moved by stones such as that told by the noble Lord, Lord Brookman, about the ASW members who paid into their fund for many years only to lose most of their benefits just before they retired. That was partly because of the unfair order of priority on wind-up, which we are waiting to have sorted out.

I saw a particularly shocking example this week, not of a struggling steel company but of a highly profitable multinational company, Felix Schoeller, which makes photographic papers on seven production sites in Germany, Canada and the United States. It did a really brutal asset strip on the Glory Paper Mill in Wickham. It bought the mill in 1995; closed it in 1999; moved the machines to East Germany; wound up the pension scheme in 2002; left 350 members with a £12 million deficit; and then flogged off the site for housing and a luxury health club. That was a particularly vicious and wicked example and I am not surprised that the chief executive of OPAS called it scandalous.

I do not have time to go into the details of that, but the clear message is that the law must be changed to stop firms, British or foreign, walking away from under-funded subsidiary pension schemes for at least five years after they have sold them. The "moral hazard" will be dealt with when the PPF comes in, but this sort of exercise is widespread and almost a part of the way of life of American sharp financiers who leave the environmental liabilities with the state and the pension liabilities with the pension benefit guarantee corporation. We need to be careful to avoid that.

We need the PPF, but we equally need to get it right at the start when we set it up. The Government plan to set it up with all funds, strong and weak, prudent and profligate, safe and risky, paying the same flat rate per member—a poll tax on pension funds in fact. They plan to duck the hard job of getting the balance right between what different funds pay to the board of the PPF a year or more after it had got going. I am afraid that that is not good enough. That really is asking Parliament to approve a menu without prices. It is not a minor job to be left to the technicians later. We must get a real feel for how the risk-based levy will work, what the weaker firms will have to pay and fund, to judge whether the whole scheme is viable on the basis the Government propose. There is, remember, no government guarantee of any kind.

The Government stand behind the Pool Re reinsurance scheme, which provides insurance cover against terrorist incidents. Why is it unthinkable for them to do that in the case of the PPF? Public confidence in savings really would collapse once and for all if the Government ever allowed the PPF to default on its obligations. Why not build in a contingency plan now to avoid that disaster rather than have an inevitable panic reaction, back-of-the-envelope rescue by government, which we all know would happen?

Let me conclude with a brief welcome and a warning about new vehicles for pension savings in property. As regards commercial property, with well-spread portfolios of different commercial property, that is welcome. But the proposal to select investors for individual buy-to-let houses or flats, or even their own second homes, into their tax-sheltered pension funds could be playing with fire in an over-heated housing market and wide open to abuse. The concentration of risk involved, when you have already got most of your assets in one house and then having one more house, does not bear thinking about. No one who advised people to put all their pension funds into two single shares would be other than guilty of the most gross mis-selling. I strongly advise against that.

Given that in the debate we have heard of the depth of concern about the future, although we all want to work together to solve it, let me make clear that in my view we will never be able to build a solid private pension structure on top of the morass of means-testing in public pension provision. As the Select Committee put it, the Government's heavy and growing reliance on means-testing the pensioner population is regrettable because it sends a clear signal to many current workers that it is not in their interests to save for their own old age.

7.55 p.m.

Lord Higgins

My Lords, I, too, congratulate my noble friend Lord Fowler both on providing a debate for us on the subject and on the way in which he introduced the proposals. As has been pointed out, there have been a considerable number of debates on the subject over time. Nearly all the usual suspects have managed to arrive on schedule, but we are also joined today by the noble Baroness, Lady Dean. We listened with great interest to what she had to say. Also my noble friend Lord Hunt, who does not always participate on these occasions, made some interesting points.

In winding up a debate on pensions, one is seriously up against time. I was inclined not to spend much time on the Pensions Bill provisions because I assumed that we would have reasonable time in this House to deal with them in due course. However, I express the hope that the other place also has adequate time and is not programmed out of existence as has been the case with previous pension Bills. They must be able to scrutinise it properly before it arrives in your Lordships' House.

Almost half of those who have spoken today have spoken about the Pensions Bill, including the noble Baronesses, Lady Barker and Lady Dean, and my noble friend Lord Freeman. I do not want to anticipate the debates on that Bill, but I want to make one or two particular points. A serious moral hazard argument is involved. Less sensible companies may well tend to take risks they ought not to take if they believe that at the end of the day the protection fund will pick up the pieces for them. A number of people, including the noble Baroness, Lady Barker, stressed that it may well be unfair on prudent companies because they will be paying into a fund and not claiming on it when less prudent companies reap the benefit of the protection.

I have a great deal of concern that this ought to be risk-based; there ought to be a risk component in the contributions. It is unfortunate that the Government have said that that will not be the case for the first year. I would almost rather see the provision delayed and then start on a risk-based system because I have a nasty feeling that it will continue as it began and never be risk-based.

In addition, the proposals in the Bill may result in some companies which have defined benefit schemes deciding that they would rather not join in this operation and therefore change to a defined contribution scheme. It is therefore likely to be a deterrent to good pension schemes, rather than the other way about.

A number of other points have been made, particularly on the savings ratio which has been halved. A point which no one has mentioned is that in recent years many people have invested in PEPs or ISAs rather than pension schemes because of the considerable advantages in terms of liquidity and so forth. It seems to me extraordinary that, when under this Government the pensions ratio has halved, the Chancellor of the Exchequer chooses this particular moment to reduce the tax benefits on ISAs and to reduce the amount which can be invested in t hem. That seems an extraordinarily paradoxical way to go about things.

Other noble Lords have commented on the decline in the number of final salary schemes. My noble friend Lord Freeman referred to it as a slow decline. Alas, I fear that it is anything but; it is a massive and rapid decline which gives considerable cause for concern. In addition, a number of Members commented on final salary schemes in the public sector. I noted with interest a few days ago that for the first time since the 1970s the number of people participating in public sector defined benefit schemes exceeded the number of people in the private sector participating in private sector schemes. There is growing concern at the disparity which is becoming apparent between those schemes, which gives rise to considerable disquiet.

I was fascinated by the remarks of the noble Lord, Lord Brookman. As changes have taken place, there has been an increasingly active interest on the part of trade unions. They have always had an interest but the pensions issue has not been in the forefront of their minds in the way that it is now. I welcome that; it is of tremendous importance. However, it has to be done sensibly.

In my previous role as chairman of a pension fund I was rather disturbed when this issue arose. I managed to persuade the company concerned to retain a defined benefits scheme. However, on grounds of costs it decided either to increase the contributions paid by the employees and by the company or to say that they would contribute the same amount and keep the same benefit. As chairman, I thought that the important point was that they should be given the choice. I am glad that the leaflet issued by the National Association of Pension Funds refers to that particular case. I was rather disturbed that the British Airways union has been proposing to take industrial action even in the face of being given that choice. That company has very large pension liabilities at present.

Many noble Lords referred to stakeholder pensions. Given the amount of time we have spent on this, the fact that 90 per cent of those have no members, assets or contributions but are mere shells is as big a disappointment to me as it must be to the noble Baroness who is to reply to the debate. My noble friend Lord Hunt pointed out that one of the reasons for that was the very stringent restriction on the 1 per cent rule which the Government imposed. However, the fact that these are just so many empty boxes is obviously very worrying.

I am concerned at the way in which the Government are pushing stakeholder pensions. To some extent, that is a mis-selling operation. On previous occasions the noble Baroness and I have discussed how much of a savings fund one needs to ensure that one eventually receives some benefit and that it is not all means tested away. Over time we have had some dispute as to what is the exact figure. However, is it not true to say that if someone has accumulated a stakeholder pension but no other pension provision, of say £30,000, all of that is likely to be means tested away—perhaps not means tested away but they will not receive any benefit as a result of it? The way that the means testing system works remains a serious deterrent.

I was going to make a speech on Equitable Life and the Penrose report. I was going to be very rude about a number of people including, I confess, Lord Penrose, who in his postscript seemed to me to have missed the object of the exercise, and also to attack the Parliamentary Ombudsman, who was being very wishy-washy on this issue. We have reached the stage where that matter should go to the Parliamentary Ombudsman. Despite her reluctance and the way in which she and her predecessor have behaved, it really should be the case that that should be resolved in that way.

In conclusion, I merely take up the point made by the noble Lord, Lord Lea of Crondall. He quoted Keynes saying that in the long term we are all dead. That is so, but, if we are lucky, before then we may draw pensions. That at least explains the great concern which exists on this issue.

8.6 p.m.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)

My Lords, I deeply regret that with such an interesting debate we are confined to two hours and do not have an extra half hour. That means, for example, that I have only 15 minutes and I am not sure that the noble Lord, Lord Fowler, will receive even one minute. I must therefore endorse even more than usual my apologies for any discourtesy in not seeking to address issues and questions. Like the noble Lord, Lord Higgins, I too was expecting to say rather more about the Pensions Bill. I have dumped all of that. I have taken about three-quarters out of my speech and perhaps I can do more if I go faster.

This is a welcome debate, and I am glad that we have had it. I am amazed at how much of the speeches from the Opposition Benches I find myself agreeing with, particularly the description by the noble Lord, Lord MacGregor, of the landscape, to which I shall return. That was particularly enriched by the role reversal which was going on in which nearly everyone from the Opposition Benches called for compulsory pensions which apparently did not cross the Government's agenda or papers in their long years in power and responsibility. However, I suppose that the privileges of opposition allow a loosening of such mental structures.

I shall start with the points made by the noble Lord, Lord MacGregor. I agree that the landscape we face, which he described very accurately, is one of stock market pressures, although recently they have somewhat abated. That is affected by the demographics of rising longevity: 18 months to two years for every decade that we progress, and by labour market mobility, which is increasing among those in their twenties, though not so much by older people.

I was curious that none of the noble Lords opposite remembered that the situation has also been made worse by the severe and growing inequality that occurred among pensioner incomes between 1979 and 1997. We know that during that period real wages rose by 36 per cent and pensions rose by some 64 per cent—I pay tribute to the previous government. But that concealed widening inequality among pensioners, of whom the bottom one-fifth saw their incomes rise by only 30 per cent, while the incomes of the top one-fifth rose by 80 per cent. This Government face pensioner poverty, market problems as regards confidence in second pensions and issues of longevity.

Central to seeking to meet those very real demographic, economic and social justice challenges, we must give people the information and confidence that they need to plan for their retirement and the flexibility to do so in a changing environment. Our informed choice agenda will ensure that all people of working age have access to personalised information tools, web-based retirement planners and pension forecasts to help them to understand what they need. I agree with everything that noble Lords have said: only when people realise just how little income their savings may buy them will they be tempted to put more aside.

Our Pensions Bill will improve confidence by strengthening the protection offered to members of pension schemes. The PPF will mean that for the first time ever individuals in DB schemes based in the UK will know that they will receive a meaningful pension, even if their company becomes insolvent and leaves the pension scheme underfunded. Like my noble friend Lady Dean, I am delighted that the current Government are at last responding to the calls which some of us were making in 1994 for provision such as central discontinuance funds, on which the noble and learned Lord, Lord Mackay, outvoted the Opposition Benches—although I should like to think that he did not out-argue us.

However, a number of noble Lords, particularly the noble Lords, Lord Oakeshott and Lord Higgins, and the noble Baroness, Lady Barker, were concerned that PPF increased the risk of moral hazard. I wish to make two points. First, the risk-based levy is designed to address that. I share with the noble Lord a wish that we could have gone immediately into a risk-based levy assessment. But we are dealing with 10,000 DB schemes; it takes time; and the alternative would have been to leave other schemes without the sort of protection that my noble friend Lord Brookman called for so movingly for people whose pensions are at risk.

I shall make one further point on moral hazard. There are sometimes calls for the Government to stand behind such a pension protection fund. That would invite every marginal employer to know that the Government would pick up the pieces. Put another way, if the Government were to pick up the bill for asbestosis claims, you could be damn sure that no employer would seek to improve protection for employees against asbestosis. We all understand the moral hazard issue. That is why the Government believe it right that the industry should be helped to police itself within the framework laid out by the pension regulator.

The Pensions Bill will also enable greater flexibility by replacing the inflexible minimum funding requirement with scheme-specific funding requirements, as my noble friend Lady Dean said. That will allow schemes the freedom to adopt the most appropriate funding strategy within a rigorous—that is part of the EL debate that we are not having tonight—regulatory framework of risk analysis, rather than chasing nugatory offences as at present. I was told by the chairman of OPRA that around 50 per cent of offences involved chasing employers who were three or four days late in paying their contribution. If we could get rid of some of that graffiti, if you like, and get into the real issue of addressing companies at risk, we could more honourably serve the needs of people in DB schemes.

We need to ensure that people will be confident in our pension protection fund schemes. My noble friend Lord Lea was absolutely right on that. I am glad that, for the most part, the schemes have been welcomed tonight. I wish to address the four main comments and criticisms that I think noble Lords have made. First, there has been a bundle of comments on the wider points about the savings regime, including the savings ratio, ACT and capping. Secondly, there have been comments about the structures of our current systems, with regrets expressed about moving from DB schemes to DC schemes, issues about annuities at age 75 and stakeholder pensions. Issues have been raised about regulation, particularly ASW and Equitable Life—I shall not speak to that, as noble Lords did not particularly address EL tonight. Finally, there were calls for an increased, strengthened basis in state provision. I think that it would be fair to say that nearly all the comments raised by noble Lords have fallen under those four broad headings. I wish to have a go at responding to them.

I turn first to the savings ratio. My noble friend Lord Lea of Crondall, and the noble Lords, Lord Freeman and Lord Higgins, said that the savings ratio in this country has halved over recent years. It is worth taking a moment to deconstruct that argument. What do we mean by the savings ratio? It is not what most of your Lordships assume that it means. I hope that people will not continue to use this as an indictment of Government policies.

Precautionary savings, bank account savings, building society savings, stocks and shares are included in the savings ratio. However, pensions, by far the most important form of saving for retirement, are only included in the savings ratio as a net concept, once pensions in payment have been deducted. Pensions savings—people's deferred income for their old age have only a modest effect on the savings ratio. Most private pension provision, which is what really matters, is not central to the savings ratio at all. It is determined in the work place, it is employer-driven, and its contributions tend to be stable. Occupational pensions coverage has remained stable, and I would be surprised—although we still need to do further work on this—if the proportion of GDP reflected by occupational pension contributions has changed much over the past 20 years or so.

That is one of the key assets that we take into old age. The second key asset is the value represented by housing. In this country, 71 per cent are owner-occupiers, compared to 45 per cent in France. That too is a significant asset not included in the savings ratio. The savings ratio only reflects the difference between the denominator and numerator, the income and expenditure on pensions, together with precautionary savings. Those precautionary savings fall if people think that they do not need to take precautions because they are confident about the economic situation, as indeed they are.

When we come to talk about the savings ratio in the Bill, I hope that your Lordships will concentrate instead on what seems to matter to me, which is what assets people take into their old age in order to ensure that they have a comfortable life accustomed to their expectations. The savings ratio is possibly the least useful indicator of that when people enter their old age. I have spent a little time on this, but it seems to be a source of much misunderstanding. No doubt we will explore it when we come to the Bill. I hope that we will concentrate on what really matters, which is the pension asset and possibly even the housing asset. Precautionary savings is a relatively modest player in terms of the comfort with which people go through to old age.

We have heard some fairly predictable points about ACT. We disagree on that, and I will not repeat the arguments. Myners said at the time that the quality of management was probably 10 times more important than any tax defamations, which is what we think ACT did, by encouraging companies to go for dividends rather than reinvesting in their company. The Government's view on that has not changed.

The current cap for the year 2004–05 is £99,000. The DB scheme is two thirds of that, which is what the normal DB scheme might represent, £66,000. Multiply that by 20 to get to the £1.5 million that the Chancellor adopted before the Budget. Therefore, the lifetime's earning is effectively meant to be a straightforward read-across from that grossed up sum. The noble Lord, Lord MacGregor of Pulham Market, made a general point, and I agreed with him. There is no reason on God's earth why people should not save in vehicles other than pensions. I do not see for the life of me why someone with a pension fund worth £1.5 million, or in time £1.75 million, should also expect a further 40 per cent on additional savings courtesy of taxes paid by the rest of us. They can continue to save—what they want is tax provision of 40 per cent on top. I do not see why we should be particularly sympathetic to that plea from the best-off to have additional payments from those who possibly do not even enjoy pensions in their own right.

The old chestnut of annuities at 75 was pressed by the noble Lord, Lord Higgins, and others. If one were to take out, as I think everyone would accept, the value required to float off IRBs, whether that is £100,000 or a higher or lower figure depends on assumptions that one makes about housing costs and so on, and whether one is in a couple, if one then stripped out the tax privileges, which one would have to do, worth on average 30 per cent, and if it was then further subject to an inheritance tax at 40 per cent, I wonder whether the siren calls for removing the 75 rule would be so seductive.

I will move on to some other issues. DB to DC scheme closures are a source of much regret by the noble Lord, Lord Freeman, and my noble friend Lady Turner of Camden. Yet, providing, given a mobile workforce, the level of contributions is broadly similar over time and is adequate—those are important provisos—DC schemes can be at least as good, and for many people, preferable to DB schemes. They help those who are mobile and those who are unlikely to gain from late career progression, which tends to be middle aged, middle class, middle salary men.

We should think of the money lost, as my noble friend reported, when there were contribution holidays on DB schemes. With DC schemes, there would have been no such contribution holidays, and the funds might have grown accordingly. I take the point about risk, but the level of contributions is at the core of the matter. DC schemes are not helped when—if GMB's figures are correct—a major food supermarket produces a DC scheme that is 2 per cent plus 2 per cent or one of our leading chain chemists companies has a DC scheme of 3 per cent plus 3 per cent. Such sums will lift nobody out of poverty in old age.

It is true that stakeholder pensions have not had the success that we would have hoped for. Some 1.8 million schemes had been bought by December 2003. There is the issue of charges, and there is, above all, the issue of employers' contributions. If employers contribute, stakeholder pensions are a success; where they do not, they are not.

I shall not go into Equitable Life, except to say that I am persuaded that the regulatory regime did what Parliament intended and ensured the solvency of the company in meeting its guarantees. At the time, Parliament did not intend that the regulatory regime could appropriately go beyond that. Only if there was a fault in the process of the regulatory regime could any charge of maladministration leading to compensation arise.

I shall take a minute to talk about the Tory Party's policies on the basic state pension. We all accept the need for a basic state pension that is a firm building block. I disagree, however, with the current Tory proposals to link the basic state pension to earnings, while tying the pension credit to RPI, in effect freezing it. That is deeply regressive. It would mean, for example, that women—only 14 per cent of whom go into retirement with a full basic state pension—would not gain from any earnings link and would lose the pension credit because it would have been frozen. It would mean that I and others in your Lordships' House would get a better basic state pension, while women forced to depend on pension credit would see those sums frozen. The sums would not be caught up by the basic state pension for something like 14 years. I hope that, on reflection, your Lordships will not find that to be the way to go.

There is a tension between helping the poorest pensioners, which needs to be done through income-related benefits, and encouraging people to save. That is why I think that the pension credit squares that circle elegantly, with its guarantee on one side and its savings element on the other, which will benefit people who have modest pots of £30,000 in their DC schemes. Only if a government can get it right and deal with the poverty of pensioners while rewarding saving can we have a future in which comfort lies in reliable, robust and adequate private pensions.

8.22 p.m.

Lord Fowler

My Lords, I thank the Minister for her reply, and I thank everybody who took part in the debate. It has been extremely useful and extremely good. There has been no substantial disagreement about the fact that we face a pensions crisis and that we must restore confidence.

The Minister has offered no hope of compensation, either in the case of companies or in the Equitable Life situation. However, I agree with all those who said that we should aim for as much cross-party agreement as possible. There will be differences, and I have just set out two of them. We all agree on the fundamental importance of good pension provision. With that, I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.