Pensions Bill

Debate between Lord Bishop of Chester and Lord Hutton of Furness

Wednesday 8th January 2014 Grand Committee

[The Lord Bishop of Chester]

My Lords, I support this amendment. The background seems to be one of a general lack of provision for pensions for older people in the future. There is a major shortage of pension savings, and my impression is that that is getting worse rather than better, for all sorts of reasons. My experience of young people—I use the word “young” to include people in their 30s—is that they do not think about pensions as much as they should. Anything we can do to encourage people to take a long-term view and think for the future must be a good thing. The principle, therefore, of deferring taking the state pension until you really need it seems a healthy principle to encourage in our circumstances. My anxiety is that, in the future, a lot of people are going to be very short of money when they are older. It seems fundamentally right to do anything we can to encourage that culture of not taking the pension until you need to.

If you are going to encourage people to do that, maintaining the flexibility so that they can either take additional income when they do take their pension, or a lump sum in lieu of the money they save, seems to be a sensible inducement. If you just look on it as an issue of encouraging savings, one of the lessons of the last decade or so is that we need to encourage the thought of saving in our culture. It may be just as easy to take the pension and put it into a building society account or whatever but why not offer the option of the Government allowing the lump sum to be taken? Another reason for supporting the amendment is the principle that if it ain’t broke, why do you need to change it? What is wrong with the current arrangements that means that we want to change them?

My third reason for supporting this is that, in principle, I think there should be parity with how we relate the state provision of pensions to private provision, which normally allows the option of taking part of the pension as a lump sum. That is an important principle of flexibility and, indeed, defined benefit schemes now typically make that option more available than they used to. There seems to be a simplicity—to use the Minister’s point—in treating state pension and private pension arrangements in broadly similar ways.

[Lord Hutton of Furness (Lab)]

My Lords, I do not want to detain the Committee for any length of time here but my noble friend has raised a very important issue of principle that the Committee should consider very carefully. I hope that at some later point the whole House might as well.

In relation to the Amendment 31A moved by my noble friend Lord Browne, the Minister, quite sensibly, prayed in aid the existing rules and said that the provisions simply reflected that. In essence, that was his argument for continuity. Here, he is proposing something quite different—he is proposing to take away a freedom and a choice that have existed for some considerable time from people who want to defer claiming their state pension. We should not do that unless there is a compelling reason for so doing. The principle of choice for people retiring should be preserved. They might want to, for whatever reason—and maybe the Minister would not agree with the reason—take their deferred pension as a lump sum. I cannot think of any good reason why we should not allow them to continue to do that. It cannot have any overall implications for public spending so there cannot be any cost to the Treasury.