Oral Answers to Questions

Steve Webb Excerpts

Monday 10th September 2012 Commons Chamber

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

3. What discussions he has had with officials in his Department on the long-term financial benefits to the Government of up-rating frozen expatriate pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We estimate that the cost of uprating frozen pensions would be about £655 million a year. We believe that this is substantially in excess of any hypothetical savings arising from changed migration behaviour that might follow a change in policy on frozen pensions.

[Stephen Phillips]

I am grateful to my hon. Friend for that answer. He will be aware of the Oxford Economics report published last year that suggested that the Government could make a net saving overall in relation to pensioners who wish to retire overseas but are incentivised not to do so by the frozen pension situation. He will also be aware of the grave injustice against British pensioners who have already retired overseas whose pensions have been frozen. Now that there appears to be an economic case for righting that historic wrong, will he undertake to reconsider the question so that those who retire overseas can enjoy the fruits of their work in this country?

[Steve Webb]

I have indeed read that report, which I think is flawed on a number of grounds. To give an example, it assumes that if we uprate pensions, far more people will emigrate, and it counts savings from health and social care that might not materialise for 15 to 20 years while counting the costs up front. Our colleagues in the Treasury are not so far seeking policies with large costs for the current comprehensive spending review period that will give savings in 2030.

[David Mowat (Warrington South) (Con)]

4. If he will make it his policy that the National Employment Savings Trust should have greater freedom to compete in the market for occupational pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

NEST has been designed to complement, rather than replace, existing good-quality pension provision by offering low charges and simple choices to a target group of earners and employers. The Work and Pensions Committee has suggested that the NEST constraints might not be working in the way that was intended, potentially resulting in consumer detriment. We think that the evidence is not unequivocal and so are gathering further evidence to determine how to proceed.

[David Mowat]

I thank the Minister for that answer. He will be aware that for the past two decades we have had the highest pension charges in the OECD. Part of the solution for the next two decades is NEST, yet there are a number of restrictions on its operating model that are really quite onerous, owing to an onerous interpretation of state aid rules. Will he undertake to look at that again before auto-enrolment comes in, which could save many hundreds of thousands of people a lot of money?

[Steve Webb]

It is important to stress that NEST is not an end in itself, but a means to an end, and the end is making sure that all employees under auto-enrolment have access to good-quality, low-cost pension provision, not necessarily through NEST, but because of the effect of NEST in the market. As things stand, in the early days of auto-enrolment, which starts in about 10 days’ time—I will therefore not change the rules right now—the early adopters of auto-enrolment are getting good-quality, low-cost pensions because there is huge competition, but we need to ensure that that remains the case.

[Nic Dakin (Scunthorpe) (Lab)]

Why does the Minister not stand up for lower-income savers, stand up to Brussels and make the case for setting NEST free now?

[Steve Webb]

We are, at the moment, continuing with Labour’s constraints on NEST, and the reason is that those constraints were designed to encourage NEST to focus on low-income savers. It has therefore innovated on, for example, products and on language and has been a good thing. If we think that NEST is unable to achieve the job it is there for, we will change the rules, but the early evidence does not support that.

[Angie Bray (Ealing Central and Acton) (Con)]

5. What recent steps he has taken to prevent benefit tourism.

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[Mark Garnier (Wyre Forest) (Con)]

14. What recent estimate he has made of the number of people in work not saving for a pension.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Around half of all employees—around 13.5 million people—are currently not saving in a workplace pension. That is why we are pressing ahead with the introduction of automatic enrolment, to transform our long-term savings culture and support people in taking responsibility for their retirement.

[Graham Evans]

Can my hon. Friend confirm that our policy of auto-enrolment, which is due to start in October, will mean that between 6 million and 9 million more people will benefit in retirement?

[Steve Webb]

My hon. Friend is exactly right, and that indicates the scale of the policy. I often say that everyone will know someone who has been auto-enrolled. We are talking about a huge transformation, which is supported, I believe, in all parts of the House. It will be a revolution in pensions saving, and I look forward to the formal commencement just next month.

[Mark Garnier]

The Minister will no doubt agree that a good grounding in financial literacy encourages individuals to make proper decisions about providing for their futures, including with pensions. What discussions has he had with colleagues in the Department for Education about putting financial education in the curriculum?

[Steve Webb]

I agree with my hon. Friend that financial literacy and financial education are important. He will know that our colleagues in the Department for Education tend to take a light-touch approach to the curriculum, rather than wanting to be over-specific. However, there is a great deal that can be done in the existing curriculum. For example, compound interest is a pretty fundamental pensions topic and, in my view, ought to be in every maths lesson.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

A substantial number of those who are in pension schemes are saving well below the level needed to enjoy a comfortable existence in retirement. What are the Government doing to campaign for the better uptake of better schemes and encourage people to save earlier in their lives?

[Steve Webb]

The hon. Gentleman is quite right: around one in five of those who will be automatically enrolled are in their 20s, and if we can just get people starting earlier in pensions saving, that would be a good thing. Next week we are launching television advertising about automatic enrolment. The key is good quality workplace provision, automatic enrolment—which most people will stay in—and incentives from the Government. To give just one example, people on the universal credit will get additional help with their pension, because their pension contributions are allowed against their income for universal credit, so low-income households will get an extra boost if they save for a pension.

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

In all parts of the House there will be agreement about the importance of auto-enrolment. However, the hon. Member for Warrington South (David Mowat) has already raised the issue of high costs and charges. Does the Minister agree that in order to meet his coalition pledge to reinvigorate occupational pensions, there must be full disclosure of all pensions costs and charges to the saver, and that this is a prerequisite to ending rip-offs and reinvigorating occupational pensions in the United Kingdom?

[Steve Webb]

I think we have common cause across the House in wanting to see good value for money and transparency in charges. That is why I welcome recent initiatives—not just by the National Association of Pension Funds, but by the Association of British Insurers—to try to find ways of presenting such information simply and consistently. So far, under automatic enrolment competition is driving charges down, but we have the powers to cap charges and we will use them if we need to.

[Joan Walley (Stoke-on-Trent North) (Lab)]

10. What proactive investigation work he has commissioned the Health and Safety Executive to undertake in relation to legionella.

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[Damian Hinds (East Hampshire) (Con)]

Jam jar accounts can help families’ budgets, protect housing associations and promote a savings culture. As credit unions can offer these at a much lower cost than existing commercial offers, will my hon. Friend do all he can to encourage them?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate my hon. Friend on his tireless work in support of credit unions. As he knows, as part of the universal credit roll-out, we are piloting different sorts of budgeting accounts, including jam jar accounts, and we would be delighted if credit unions were to play a full part in that process.

[Julie Hilling (Bolton West) (Lab)]

T7. As we all know, the Atos work capability assessment is deeply flawed. How many people have died from their illness or disability since losing their disability benefits, and how many of them committed suicide?