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John Mann (Bassetlaw): In the interests of brevity, I have cut out a significant proportion of my speech. I keep coming to Opposition day debates, unlike many Opposition Members. At least there are sufficient Conservative Members to oblige them, if they were a small companyunlike the Liberal Democratsto have a stakeholder pension.
I have been waiting for the cut and thrust of debatethat explosion of ideas that is supposed to characterise Parliament, with the Government being robustly and precisely examined by a defiant Opposition. Each day in debates I wait with excited anticipation for an onslaught from the official Opposition, but all we get is the occasional Back-Bench cameo.
I could compare the situation to a game of Bagatelle that I once received. Hon. Members may recall those traditional Bagatelle games. When one fires the spring, the ball bearing spins around with a "ping". The one I got was one of those badly made Bagatelle games; as one drew the spring back, the sound was less of a "ping" and more of a "boing", as the ball bearing trickled slowly up the game and lamentably cascaded downwards. When I listen to those on the Opposition Front Bench, I hear no "ping" today.
For 18 years, during which I first started paying in, I had to deal with the raiding of pension funds by employers when I advised pension fund trustees. During those 18 years, I had to watch as members of my family without occupational pension funds retired into poverty pensions. With all the brains available to the Government, after 18 years there was still no sustainable, effective pensions policy. Instead, there was the legacy of the pensions time bomb facing us now.
I want to ask my right hon. Friend the Minister about the role of the trade unions in stakeholder pension funds. The occupational pensions that we have are the legacy of effective collective bargaining by working people through their trade unionsbargaining to get the employer to make a serious contribution to an occupational pension. In persuading employers to take up and develop stakeholder pension funds, and in bargaining beyond stakeholder pensions into occupational pension funds, an opportunity is being missed by the trade unions which should be a rightful part of their historic role and, more importantly,
I would liken the stakeholder pension to a game of cricket. The stakeholder pension is, so to speak, the first pair at the wicket still batting, but what is required is a solid team performance to take the team through to a long-term win. It is far too soon to draw conclusions from the early returns that we have, especially as so little information has been provided. A natural caution on the part of the public when faced with the question of where to invest money for their future is understandable, particularly when one considers the target group at which stakeholder pensions are aimed. I would go further and say of my constituents, who are most prudent and financially cautious people, that it is laudable that they have waited to see how the legislation pans out before committing themselves to anything.
In the stakeholder pension, the Government have succeeded in beginning to create access to a low-charge pension scheme for those who previously had no means of securing their future. In the long term, it is the beginning of the process of providing security for those people's future. I congratulate the Government on the measure. It is a "ping" in the right direction.
Mr. Peter Viggers (Gosport): The Government came to office promising great things of the stakeholder pension: high standards of value for money, flexibility and security. Things started to go wrong when they used the expression "low-cost pension" to describe it. As has rightly been said, the intent is to drive down the cost of a pension, but there is no such thing as a low-cost pension. Pensions are extremely expensive and large amounts have to be found to build up a fund if there are to be good pensions. I see that as a result of my declared interest as a trustee of a pension fund.
Do stakeholder pensions work and are they worth while? One problem that has not been mentioned is that they were introduced through employers and made compulsory for those with more than five qualifying employees. That was an acrimonious point. It means that about 15 per cent. of the target population who work for smaller employers are excluded to start with.
A second point is that the scheme is voluntary, not compulsory. I do not believe that it will be possible to have a viable scheme unless it is made compulsory, which will drive down costs. Only 416,000 people have taken out stakeholder pensions.
I was baffled by the Secretary of State's insistence that stakeholder pensions are for moderate and higher earners. If they are, why did he tell the House on 23 February 1999, at column 229, that the target was "middle and lower ranges" of income? Why did Lord Rooker, the then Minister of State, say that stakeholder pensions were intended for
Could there be a better use of the money by people taking out stakeholder pensions? In many cases there could. The state second pension scheme, which takes over from SERPS in April 2002, may be a better investment for many because of the low level of contracting-out rebates. It has not been noted during the debate that many of those in the stakeholder pension target area have personal debt of some kind on which they are often paying a large amount of interest. The best investment that they could possibly make would be to pay off their private borrowings, on some of which they are paying well over 20 per cent.
The real reason why I oppose the system put forward by the Government is the level of means-testing, which does not just concern me but makes me angry. The Chancellor of the Exchequer, addressing the Labour party conference in 1993, said that the next Labour Government would
Someone on the minimum income guarantee will have housing benefit and council tax relief. That means that a person who has made prudent, but modest, provision for retirement can be worse off than someone who has never done anything in that regard. This is a widening gap and there is increasing and justified resentment about it.
When I make that point to the Secretary of State I have done so several timeshe simply asks whether I would not allow some extra relief for those on the lowest incomes. I understand the point, but does he understand that there is a deepening sense of resentment among those who have made prudent provision for their retirement about the fact that some people who have made no provision are better off than them? Of course, the pension credit that is to be introduced would increase the amount of means-testing to about 65 per cent. Does the Minister think it is acceptable for 65 per cent. of pensioners to be on means-tested benefits? I submit that it is not.
I cannot let this debate go without making two more points. First, I thank the Secretary of State for being present throughout the debate, which is unusual among Cabinet Ministers these days. His presence is a great compliment to the House, for which I thank him.
On the second point, I shall make my last comments in very rapid succession. This Government have introduced the greatest of all stealth taxes in damaging pensions by abolishing advance corporation tax relief for pension funds. That is a devastating blow of some £5 billion a year that is only now being felt. It is estimated that a 30-year-old will now need to pay an extra £200 a year to maintain his pension at the previous level. Tesco has increased contributions to its pension fund by 15 per cent. to pay for the change. Some 17 per cent. of those on final pension schemes are now in schemes that are being closed to new members. That is a devastating indication of the damage done to the pensions industry by the abolition of the tax relief. The result is that 9,000 new pension schemes were formed in 1997, 5,000 were formed in 1998 and only 3,000 were formed in 1999. What would I do? I would not mislead people by talking about low-cost pensions, but increase the basic retirement pension, introduce compulsory contributions to an adequate scheme and so reduce means-testing and increase self-respect for our pensioners.