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Mr. Tom Levitt (High Peak): It has always struck me as odd that those people who are for ever telling us that they are so valuable to the economy—the entrepreneurs, the innovators, the movers and shakers—tend to retire early on very generous pension packages, whereas those who have not been so fortunate have to work right up until state retirement age to get a modest income from their pensions. When reviewing his response to the Pickering report, will my right hon. Friend consider not only the interests of those on low pay and those entering or re-entering the labour market late in life but the pension rights of people who, after a lifetime of employment, seek to go to a step-down employment position for a few years before they retire which can, at present, jeopardise their pension rights?

Mr. Smith: Yes, I referred in my statement to the importance of the Green Paper looking at the wider opportunities around retirement, and this is precisely the sort of thing I meant. Instead of facing a cliff edge, many people would like to move into retirement more gradually. My hon. Friend is quite right that their options are artificially constrained. Indeed, there are perverse incentives on far too many people to pack in work sooner than they would like. I want the outcome of our further work and the Green Paper to bring forward some truly radical proposals that will open up new choices and opportunities for these most valuable members of the population.

Hugh Robertson (Faversham and Mid–Kent): May I draw the House's attention to my entry in the Register of Members' Interests?

I welcome the Secretary of State's commitment to take a radical look at this issue in the near future and, as part of that review, will he give an undertaking to look at the diversification of investment asset classes, particularly the cost of trading in and out of those alternative asset classes? For example, if people could have had greater exposure to the commercial property market in their pensions in recent years, the returns on them would have

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been significantly boosted. They are currently prevented from doing so by the level of stamp duty. Will the Secretary of State look at that?

Mr. Smith: I will look at these matters, but when investment in any form of asset is urged on me, in the House or elsewhere, it is wise to remember the adage about not putting all one's eggs in a single basket.

Mr. Barry Gardiner (Brent, North): I welcome the report and the commitment to a Green Paper in the autumn. Does my right hon. Friend accept that there is a tension contained in the report? Pickering argues that in the workplace, the pension is part of the remuneration package, yet one of the recommendations in the report is that section 67 of the Pensions Act 1995 should be repealed, which would allow employers facing funding constraints to change their funding contribution to the scheme. It refers to an overall replacement of benefits, so although the overall benefits package from those employers may remain the same, unilateral change in the individual remuneration of workers might be possible. Will my right hon. Friend look extremely carefully at that recommendation before allowing it to go ahead?

Mr. Smith: My hon. Friend makes a very good point. I agree that it makes sense to consider that recommendation extremely carefully, not least because of its implications for the rights of individuals. One possible approach would be to put limits on any detriment that might be involved. We should not underestimate the importance of getting to grips with these issues if we are really to have the far-reaching simplification that we need. That is true not only for the ease of schemes' administration but to allow us to have some actuarial equivalence for all the different pots under different schemes for different periods that people have built up. There are great prizes in the efficiency and overall benefit of pension provision if we can crack that, which is why it would be unwise to rule out any change in this area.

Mr. Mark Hoban (Fareham): What assessment has the Secretary of State made of the cost to the Treasury of ending compulsory indexation and compulsory survivor benefits? It strikes me that the proposals will end up transferring costs from pension schemes to the Exchequer, so it is right to be wary of them.

Mr. Smith: I am sure that my colleagues in the Treasury are keeping a close eye on that aspect of the proposals.

Mr. Jim Cousins (Newcastle upon Tyne, Central): National insurance payers are a substantial collective investor in occupational pension schemes, so I urge my right hon. Friend not to accept the recommendations relating to survivor benefits and the provision of cost of living increases in pensions. Down that path lies not consensus but a great deal of hidden misery for people in occupational pension schemes and their relatives, when old. Many survivor benefits will go not to women but to men, and that should be borne in mind. Inevitably, following that hidden misery, there will be more means-testing and more cost to the Exchequer.

Mr. Smith: Those points are forcefully and well made and I shall certainly bear them closely in mind.

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I appreciate the arguments about the impact on individuals and families in the future, as well as the logic of the position concerning how far it is justified, when the national insurance system provides particular benefits, for schemes that are funded in part by contracting out from those benefits not to provide them in turn.

Sandra Osborne (Ayr): I share the concerns of other hon. Members who have seen constituents paying into pension schemes all their lives only to find that they do not get the benefits when the time comes. I welcome the proposals for increasing scheme membership on the boards of trustees, but does my right hon. Friend agree that it is absolutely vital that such trustees have the proper training, so that they have the necessary skills and knowledge to make sound judgments about pension schemes?

Mr. Smith: Yes. That is a very important part of the Myners agenda. Given the importance of the role that such trustees are fulfilling, it is crucial that they understand it and are well equipped to fulfil it.

Mr. Andrew Love (Edmonton): Like my right hon. Friend, I used to work for the retail Co-operative movement, which had a very good final salary scheme. In 1988, it was not allowed to continue to include all employees in the scheme, so many lower-paid employees left. They did not take up any of the alternative pension provision that was available, so they are now retiring on inadequate pensions. I commend the recommendation that employers should be allowed to have all employees included in their scheme.

I also welcome the emphasis in the report on simplification, and especially on education and advice for consumers. Does my right hon. Friend agree that a system that people can fully understand will gain their trust and confidence, ensuring that we can fill the pensions gap?

Mr. Smith: I welcome my hon. Friend's comments. He is right about the importance of education, so that people can have a better understanding of the pensions situation. One of the tragedies is that it is an impenetrable maze for many people. Tragically, workers have lost out because they did not understand what was happening to them or the choices that were open to them.

I hear what my hon. Friend says, and we will think carefully about the question of compulsory membership of schemes, which may not be to some people's advantage. Instead, they should have a good, defined contribution alternative. That depends on the level of contributions, which is the acid test against which proposals should be judged. It is the end result that is important—the level of contributions and thereby the security and standard of living people will have in retirement. I shall bear all my hon. Friend's points closely in mind.


Control of Fireworks (No. 2)

Mrs. Cheryl Gillan, supported by Mr. Laurence Robertson, presented a Bill to make provision with respect to the sale and use of fireworks; and for connected

11 Jul 2002 : Column 1067

purposes: And the same was read the First time; and ordered to be read a Second time on Friday 19 July 2002, and to be printed [Bill 172].

Environmental Audit (No. 2)

Mr. Laurence Robertson presented a Bill to require the Comptroller and Auditor General to examine and report on the environmental impact of public expenditure, and the environmental performance of government departments and certain other public bodies against targets set by Ministers; to provide for the establishment of an Environmental Auditor General to carry out such functions and report thereon to the House of Commons; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 19 July 2002, and to be printed [Bill 173].

Home Energy Conservation (No. 2)

Mr. Jonathan Sayeed presented a Bill to make further provision about energy conservation in relation to residential accommodation; to make further provision about the eradication of fuel poverty; to amend the definition of house in multiple occupation in Part 11 of the Housing Act 1985; to amend the law relating to registration schemes for houses in multiple occupation; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 19 July 2002, and to be printed [Bill 174].

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