Pensions Bill [HL]

Debate between Lord Flight and Lord Boswell of Aynho

Wednesday 30th March 2011 Lords Chamber

[Lord Boswell of Aynho]

My Lords, the noble Baroness, Lady Hollis, has performed a signal service to the House in bringing this issue to our attention. She was kind enough to refer to work done by David Willetts and Sir Malcolm Rifkind. I was privileged to be part of their Front Bench team at that time, although I cannot claim any real credit for the genesis of the thinking. As the noble Baroness said in referring to the consultation paper, it is now beginning to sink into the mainstream. I am a strong supporter of greater flexibility in this area so I am glad that she has raised it.

I have some slight reservation as to whether the issue is as gender specific as the noble Baroness feels that it is. I think that she is conceding that point and, indeed, she did not say that it was exclusively so. I can imagine situations where men, for example, perhaps have overlapping earnings and have acquired a certain pension capacity or pot. In Committee, we debated some of the difficulties that can arise as regards smaller sums. It might be quite sensible, as well as convenient, for an individual of whatever gender who perhaps is starting a business or otherwise to access that money in order to provide starting capital. It is a wider and general interest. I very much look forward to the Minister’s response to how it is going.

In technical terms—I stress in technical terms, although not in any sense to derogate from it—I have some slight reservations. First, in terms of using this Bill as the vehicle for doing it, it is premature but that is not a reason for not ventilating issues. Secondly, I am not absolutely sure—because it appears annexed to a passage of the Bill which is about auto-enrolment, although I think that the noble Baroness indicated a wider remit—whether it is simply about NEST or more general. I think that it is probably more general and it would be clearly invidious if it was NEST specific.

There is also a technical problem in the wording of the amendment. I understand the point, which was developed during her speech, that there could be some rules which would avoid moral hazard and would get one to the same minimum assured level of pension or pension pot at the end. Nevertheless, the way in which the amendment is worded it seems to me to be at least conceivable that as long as the £10,000 limit were maintained, an individual pensioner could make serial applications to the fund and draw it down to the qualifying level. I know that that is not the noble Baroness’s intention. However, it is right that we should be starting to think about this and I hope that it will be even better when we have brought it to effect.

[Lord Flight]

Perhaps I may add that I think that it is a great advantage that the noble Baroness has raised this issue. I believe that if it were to be taken up it should go across all pensions. In the US, under the 401(k) plan, you can withdraw money only by borrowing it at a fancy rate of interest and you have to repay. Even with that rather unattractive mechanism, as has been pointed out, it still bears fruit. The ISA story illustrates it even more so. Let us remember also that if you take money out of an ISA you cannot put it back and continue with those benefits.

More widely, if we are going to keep the pension structure as a big area for retirement saving, it is a bad brand name which has been damaged by all sorts of things in the past 15 years. Elements need to be added to pensions saving to make it attractive to people, of which this is one of the important ones.