Pension Schemes Bill

David Mowat Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

It was striking to hear the Minister refer to a “revolution” and a “war”—not terms one usually associates with Liberal politicians. Clearly, the excitement of pensions has overwhelmed his Liberal temper.

This is the third pensions Bill of this Parliament, and I note that the Minister spent the first 15 minutes of his half-hour speech talking about the first and second pensions Bills, and the fourth one still to come. There is no doubt that much has changed in the pensions landscape, but let me first pick up the Minister on some of the things that he suggested. He painted a picture of a pension policy—a revolution, indeed—that is coherent in every respect and said that the first pensions Bill begat the second, the second begat the third, and of course the fourth is still to come. There is, however, another way to look at aspects of the Government’s pension policy, and I ask the Minister to reflect on these points.

The Minister referred to auto-enrolment. As is characteristic of him, he took all the credit, leaving aside the fact that—as was pointed out by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), the Chair of the Work and Pensions Committee—auto-enrolment emerged out of the Turner commission and the consensus built by the last Labour Government, and was rightly taken on by the Pensions Minister. Leaving aside that lack of generosity in the Minister’s reflections on auto-enrolment, there is a more fundamental point. The Turner consensus, which the Labour Government built and the Minister has continued, operated on the assumption of pensions being complex, long-term and difficult to navigate for anyone other than a financial professional. That necessitated a default-based approach whereby individuals employed without a pension were defaulted into a pension scheme. They did not exercise a choice to go into a pension scheme; they were defaulted into a good pension.

That was the Turner commission’s judgment and the consensus taken on by the last Labour Government, and indeed the Minister. However, the Government’s policy on budget reforms is predicated on a different approach and the assumption that at the point of retirement, when individuals come to turn their pension pot into an income—the whole point of a pension is to get as great a pension income as possible—they will be able to navigate that jungle of financial products successfully and maximise their retirement income. There is surely a tension between those two aspects of pension policy, and the Government’s approach to building up a pension pot and to turning a pension pot into retirement income.

That tension must be reflected on by the House, not because the Government’s policy for retirement income stage is necessarily wrong, but because there is a tension between the two poles of policy. If auto-enrolment policy was correct to assume that individuals need to be guided, helped and encouraged into better pension decisions, why do we no longer think that is the case at retirement? That is absent from the Government’s pension policy. The Minister would have us believe that everything fits together neatly, but it does not in that regard.

[David Mowat (Warrington South) (Con)]

The shadow Minister’s point would be stronger if in the past when people purchased annuities that had been done with the correct annuities and financial advice being given. We know, however, that 80% of people were buying the wrong annuities. At least in the model now coming in, there will be some compulsory advice, which is a step forward from what existed previously.

[Gregg McClymont]

The hon. Gentleman is a doughty fighter for better pensions and I respect that, but I ask him to reflect on what he has just said. The annuities market was broken because people did not shop around. They found annuities confusing and complex, and they defaulted into the option offered by their insurance company. Why do we think that that behaviour will suddenly change in a system that continues to be predicated on individuals making a choice?