Pensions Bill

Debate between Liam Byrne and David Mowat

Monday 17th June 2013 Commons Chamber

[David Mowat]

The Minister is nodding, so I will not push the point. However, we are in the new world of portfolio careers, where people change jobs eight, nine or 10 times, with entrance and exit charges every time. I find the point hard to see, but okay.

I have four suggestions for the Bill Committee; if any Whips are listening, I should say that I will not be a part of it. I think there is a case for a cap. The industry sometimes says that a cap would drive down innovation, but we do not need more innovation—we need solid, passive investments that we leave and let go for a long time.

I would like there to be more enforced simplicity. We should look at what the Department of Energy and Climate Change has done with electricity and gas charges. It has insisted that bands should be brought in so that there is comparability and consumers can say, “I’ll go with them” rather than being swamped in a myriad of complexity. Pensions are massively more material to the well-being of most people than utility bills, yet they are massively more complex. Perhaps we could consider standard charges and standard comparisons of the annuity market, so that when people choose an annuity they are much more able to make a reasoned decision. The Cooper reforms in Australia are an example of that, and I would like us to move down that route.

I have given annuity transfers a great deal of thought. I know that the market is saying that people will be sent letters to ensure that they have checked out the market before they go with their base supplier. Personally, I think there is a case for saying that the base supplier should not be allowed to provide an annuity. If we really want to force the market to work, we should do something such as that. If we are going to leave the matter with the base supplier or the organisation that the person has saved with, we could ensure that they register so that we know that people have properly considered the option of going elsewhere.

Finally, I turn to tax relief. I said at the start that our pension system has a structure different from that of a lot of countries in Europe. We have smaller basic provision; we then give a lot of tax relief and hope that the private market will take care of the situation. We spend about £30 billion a year on tax relief.

[Mr Byrne]

It is £44 billion.

[David Mowat]

I am told that the figure is £44 billion: a lot of money. It behoves us—it behoved the last Government, as well—to ensure that that money is spent effectively in a targeted way. My concern is that that money is part of the reason why the charge rates in our market are higher than in other countries and that effectively, our tax relief, whether £30 billion or £44 billion, is going into property prices in Kensington and Chelsea and not into people’s annuities and pension value.

Before I sit down, I want to reiterate that auto-enrolment, which I have been going on about for the past couple of years, has made it even more important for us to fix the situation. The industry cannot be left to play it long and hope that we take a long time to do something about the abuses.