Pensions Bill

Debate between Nigel Mills and Liam Byrne

Monday 17th June 2013 Commons Chamber

[Nigel Mills]

I note the points the right hon. Gentleman is making, and I can see that they have some sense. Does he recognise that a low-earning, self-employed person on £10,000 a year would be paying more national insurance than an employed person who is being paid £10,000? The position is not quite as simple as he is making out.

[Mr Byrne]

The hon. Gentleman makes an excellent point. My chief concern in this debate on principles is for the long-term bargain to be put on a secure footing. It would be wrong to lead the self-employed up the proverbial garden path by offering a great deal, clapping everyone on the back and voting it through only to see it collapse because it is literally too good to be true.

The final point on which we will press the Secretary of State during the passage of the Bill is probably the most important issue that our constituents will put to us: will the new flat rate pension offer them a comfortable retirement after they have worked so hard for so long? We are concerned that parts of the Bill fail that basic comfort test. Let us be clear that the hard wind-up of the state second pension will create a notional loss for many people under the age of 59. For example, 190,000 people in their 50s could lose between £30 and £35 a week, compared with what they would have got if S2P stayed in place. Someone who has been contracted-in for all of their working life and is aged 55 when the pension is introduced, would in theory have been able to accrue additional state pension for the remaining 11 years of their working life, amounting to £24 a week in additional state pension. That will no longer be possible under the single tier. They will continue to contribute 12% NICs for the rest of their working life, but there will not be an additional S2P entitlement.

The situation is even more grave for those who are just starting work: those in their 20s who will not retire until after 2060. By the Department for Work and Pensions’ own calculations, the majority of them will have lower pensions under the single-tier system, as the income replacement rate will fall from 38% to just 30%—a big drop that points us to the gaping hole where reform of the private pension system should be.

The Government have been clear, as they rehearsed the arguments in the past year, that they want personal accounts to pick up some of the slack for the fall in income replacement rate. There was a degree of consensus on the auto-enrolment system that the Government are now taking forward. We are concerned that the measures to link membership of auto-enrolment to the personal allowance mean that too few people will be involved in the new personal accounts, and that not enough people will be saving for the future.

We are also concerned that the effective shut down of S2P means that workers now lack a state-backed, low-risk option in which to save, which is why we think that now is the time to remove many of the fetters and constraints that were initially constructed for the National Employment Savings Trust, the national pensions mutual created under the Pensions Act 2007. We need to allow transfers in from other schemes, end the upper ceilings on contributions—this is what employers are telling us—and legislate harder for transparency on costs and charges, which is why we have called for an investigation by the Office of Fair Trading into workplace pensions. We want to see a simple and comprehensive declaration of the costs of saving in a pension, so that savers can see precisely what is being taken away from them and the long-term impact on the size of their pension pot.

We are concerned that there is a structural problem that needs to be grasped: the fractured and small-scale nature of the offer for many pension savers. Too few funds have the scale to offer savers the best investment decisions or the lowest charges. The Government must look much harder at how to foster an industry of bigger, simpler and cheaper funds.

We can learn many lessons from countries such as Australia, particularly on the establishment of a low-cost default pension fund; trustee directors for every pension scheme with statutory duties to work in the interests of savers; and requirements to publish a detailed charging structure and past performance to ensure transparency. To deliver this kind of industry for the future, we should be considering a legal requirement that all pension schemes prioritise the interests of savers over those of shareholders. We should also be considering obligations on trustees to assess whether schemes have sufficient scale to deliver low costs, and if the assessment is that a scheme is too small to deliver this, trustees should be empowered to investigate merging with other schemes. Finally, we should consider whether regulators should be empowered to mandate small schemes to merge, as is done in Australia.

In conclusion, the Opposition have always believed that matters as serious as those in the Bill should be approached in a spirit of national consensus, and I say again that I am grateful to the Secretary of State for how he has approached the debate, but the House must ask whether the new pensions provision is sustainable, comfortable and genuinely universal. I am afraid that we believe the answers are no, no and no again. We agree on some of the principles, but now is not the time for a failure of nerve; this is half a Bill, half a reform, and as the Bill goes through the House, I urge him to be more radical, to build on his inheritance and to give us a long-term scheme that will deliver a better standard of living for pensioners who have worked so hard for so long.

Jobs and Social Security

Debate between Nigel Mills and Liam Byrne

Wednesday 28th November 2012 Commons Chamber

[Nigel Mills]

I am not sure that I am the best person to answer that question. However, when we have a programme that is running for seven years, with people being put on to it for two years, we cannot draw many conclusions from the data in the first few months of its operation. A decent period will have to elapse before we get some reliable data that will have some meaning and can be used to look at trends. I see why we have official data to the end of July this year, but data since then would have more relevance if we also had data from the first three months of the programme.

No Member of this House seriously disputes the need to provide those with most barriers in their way with the additional support that they need to get back to work. Many such people have been out of work for a long time and will need help with serious issues in order to build up confidence and have any chance of getting back to work. To be fair, the scheme of the previous Government towards the end of their time in office was not radically different from that introduced by the current Government. This Government have accelerated the change, introduced a more consistent programme over the whole country and brought the strands of different schemes into one programme, but the direction of travel is not entirely different. In fact, many providers involved with the previous scheme are also involved in the current one. It is not sensible to say that the Work programme is doing the wrong thing and is a terrible idea, and that its support is completely wrong. Where does that leave us? Surely it is not the Opposition’s policy to have no support at all for the long-term unemployed.

[Mr Byrne]

The hon. Gentleman is generous in giving way. Our point is that there is not enough fuel in the tank. I am sure he is as worried as I am that on current performance, the Work programme may not hit its second-year target to get 27.5% of those on the programme into a long-term job. The Opposition motion says that we should start putting more fuel in the tank by providing extra resources for young people.

[Nigel Mills]

One problem of the Work programme is that the year we are looking at contained the second part of the double-dip recession. We all accept that it is hard for anyone to find work in a recession, let alone those who have been out of work for a long time and have the most barriers to overcome. We hope that as the economy gathers strength in the coming year, that will give the Work programme even more chance of success in meeting its second-year targets.