Pensions Bill [Lords]

Lindsay Hoyle Excerpts

Tuesday 18th October 2011 Commons Chamber

[Steve Webb]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

New clause 1—Obligation to inform scheme members about provider and product options—

‘Providers of Qualifying Schemes under section 16 of the Pensions Act 2008 (c.30) must, when informing members of their own range of annuity and similar products, explain clearly that alternative and more suitable options from other providers may be available.’.

New clause 9—Duty to establish a review into transfers into the National Employment Savings Trust (NEST)—

‘Within two years of the passing of this Act the Secretary of State shall establish a review into allowing transfers into the National Employment Savings Trust (NEST).’.

New clause 10—Duty to review any order on contribution limits in the National Employment Savings Trust—

‘In section 70 of the 2008 Act (Contribution Limits) at the end of subsection (1) insert—

‘(1A) Any order under this section shall be reviewed by the Secretary of State within two years of the Pension Scheme being opened to members.’.

Amendment 18, in clause 6, page 6, line 37, leave out ‘three’ and insert ‘one’.

Amendment 19, in clause 8, page 8, line 1, at beginning insert ‘Subject to subsection (2A),’.

Amendment 20, page 8, line 4, at end insert—

‘(2A) An order made under subsection (2) must not increase the amount in section 3(1)(c) by more than—

(a) the general level of earning; or

(b) in percentage terms by more than the percentage increase in the Lower Earnings Limit for national insurance purposes.’.

Government amendments 15 and 16.

[Steve Webb]

This is a broad group of proposals relating to private pensions. I shall speak in support of Government new clause 2 and Government amendments 15 and 16. As we have a relatively short time to discuss these issues I will also deal with the other amendments in the group, and do not anticipate making a further contribution to the debate.

Government new clause 2 deals with charges. Obviously, charges are important, as I am sure the whole House will agree, because money that goes on charges does not turn into pensions. The Government are therefore keen to ensure that charges are at a reasonable level and are transparent. For example, following on from the policies of the previous Government, we have gone ahead with the introduction of the National Employment Savings Trust, which will be a low-cost provider designed to ensure that charges across the market are brought down. There is evidence that new entrants to the market and existing providers are already looking at charges significantly lower than many people have experienced on their pensions in the past.

In Committee, concerns were raised about whether the Government should be capping charges. As the right hon. Member for East Ham (Stephen Timms), who is responding for the Opposition, is well aware, the Government do have powers to cap certain pension scheme charges. In considering this issue, we became aware of the anomaly that we do not have that power in relation to people who are no longer active members of pension schemes but who are deferred members, and in particular deferred members of qualifying schemes for auto-enrolment. If we want to cap charges—I will come back to that issue in a second—we do not currently have the power in primary legislation to cap them for deferred members of qualifying schemes for auto-enrolment. The purpose of Government new clause 2 is to give us that power, so that if we want to impose charge caps, we can do so systematically and without unintended omissions.

Our thinking on charge caps is that in general, we do not believe there will be a problem with charges. Particularly in the early years of auto-enrolment, it will be the very largest firms that come into the system. They will have the resources and time to shop around, they will be able to strike good deals, and they will have the National Employment Savings Trust available to them. We expect that for big and medium-sized firms, relatively low charges will be the norm.

--- Later in debate ---

[Steve Baker]

I am grateful for the hon. Lady’s point, because she seems to have pre-empted me—as I rewind on my iPad back to the chart showing taxation. [Interruption.] Between 1940 and 1950 the total level of taxation taken out of the economy rose from about 12% to 40% and it has stayed at about 40% since 1970. The context therefore is very different. The Government can only fund themselves through taxation, borrowing and currency debasement. If I wind forward and have a look at the charts on currency debasement, I can tell her that we have been furiously debasing the currency since 1971, which is the reason for the current mess we are in.

I also point out to the hon. Lady that the Bank for International Settlements has provided a number of charts setting out the debt projections for most of the western world, all of which look catastrophic. For example, in the United Kingdom—[Interruption.] Aren’t iPads useful! The BIS tells us that on the trajectory we inherited from Labour, our national debt would have reached 500% of gross domestic product by 2040. By then our debt interest payments would have been one quarter—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure that the hon. Gentleman is using his iPad very well, but I hope that he will come to Third Reading, which he should be mentioning.

[Steve Baker]

The financial context now is quite different from that in previous years. If the Government were not to address the pensions crisis within a realistic financial context, we would have a financial catastrophe. We would find ourselves, by 2040, attempting to spend one quarter of GDP on debt interest. It would be catastrophic—and much as my heart goes out to those ladies who I wish were not being affected by the Bill, because of the financial position in which we find ourselves I shall, of course, support the Government.