§ Mr. DenhamTo ask the Secretary of State for Social Security what action he is taking to ensure that those choosing to opt out of the state earnings-related pension are informed of the risks to their pension due to the loss of the guaranteed returns offered by SERPS.
§ Mr. HagueSome 15 million people are contracted out of the state earnings-related pension schemes— SERPS. Around 10 million of these are members of their employer's pension scheme and 5 million have a personal pension. Members of salary-related occupational schemes will receive a guaranteed minimum pension—GMP—at state pension age from their employers, provided as a condition of contracting-out of SERPS. There is no risk that an individual's pension entitlement will be lower than that offered within SERPS.
117WIndividuals with a personal pension build up their own fund based on contributions made by themselves, their employer and the Government. The Government's contribution reflects the level of investment required to provide a pension equivalent to a GMP. These contributions and the return on their investment form "protected rights" guaranteeing a minimum value for the fund. An occupational money purchase scheme works in a similar way with the Government's contribution being provided through a rebate in the amount of national insurance contributions payable.
§ Mr. DenhamTo ask the Secretary of State for Social Security what action he is taking to monitor the performance of the investment funds associated with the personal pension plans of those who have opted out of SERPS; and if he will make a statement.
§ Mr. HagueIt is for individual scheme members, in conjunction with their financial advisers, to monitor the performance of their chosen pension scheme. In order to help them to do so, the trustees of personal pension schemes are required to provide to members, at least once in every period of 12 months, written details of the value of the member's protected rights under the scheme and the value of the member's accrued rights, other than protected rights.
§ Mr. DenhamTo ask the Secretary of State for Social Security (1) what is his estimate of the number of those taking out personal pensions and who(a) have and (b) have not opted out of SERPS who have allowed their policy to lapse after (i) one year, (ii) two years, (iii) three years, (iv) four years and (v) five years;
(2) what is his estimate of the total sum lost by policy holders who have allowed personal pension plans to lapse (a) after one year, (b) after two years, (c) after three years, (d) after four years, (e) after five years. and (f) in total.
§ Mr. HaguePersonal pensions used for opting out of SERPS do not lapse. Membership continues until cancelled either by the individual concerned or by the trustees or managers of the scheme. Personal pensions not used for opting out of SERPS become paid up when the member ceases to make payments into the scheme. In both cases, those contributions which have already been paid into the schemes continue to be invested to produce benefits for the contributor.
§ Mr. DenhamTo ask the Secretary of State for Social Security (1) what is his estimate of the total sum charged in commission on the personal pension plans of those who have opted out of SERPS and who make additional contributions to their plans for the last year for which figures are available;
(2) what is his estimate of the total sum charged in commission on the personal pension plans of those who have not opted out of SERPS for the last year for which figures are available;
(3) what is his estimate of the total sum of charges other than commission made on the personal pension plans of those who have opted out of SERPS and who make additional contributions to their plans for the last year for which figures are available;
(4) what is his estimate of the total sum of charges other than commission made on the personal pension plans of those who have not opted out of SERPS for the last year for which figures are available.
118W
§ Mr. HagueThe data requested are not collected. Consideration of the level of charges and commissions associated with personal pensions is a matter for individual investors in their choice of scheme. The Financial Services Act 1986 governs the disclosure to investors of charges and commissions associated with life insurance based products. My right hon. and learned Friend the Chancellor of the Exchequer has recently directed the Securities and Investments Board to come forward with new rules and proposals to make the costs associated with life insurance based investment products, including most personal pensions, more transparent.
§ Mr. DenhamTo ask the Secretary of State for Social Security (1) what is his estimate of the total sum charged in commission on appropriate pension plans for the last year for which figures are available;
(2) what is his estimate of the total sum of charges other than commission made on appropriate pension plans for the last year for which figures are available.
§ Mr. DenhamTo ask the Secretary of State for Social Security what action he is taking to ensure that the state earnings-related pension can operate in such a way as to provide an alternative to private provision for those who wish to make full provision for their retirement.
§ Mr. HagueThe state earnings-related pension is already one of several alternatives available to individuals choosing how best to make provision for their retirement.