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Lord Higgins: It was said:

First, I must declare an interest as chairman of an occupational pension scheme. Perhaps on this occasion I should be a little more specific and say that it is one of the final salary kind. During Second Reading I suggested that the Bill comprised four or five Bills all rolled into one. It presented us with some problems because it was impossible to deal with some of the Second Reading points in detail, which we would have done had the pensions section or the section on the disabled been presented to the House separately. However, the noble Baroness's amendment, which she has moved so eloquently, perhaps gives us an opportunity of looking at the legislation in a broad framework.

Perhaps I may make two procedural points. If we are to discuss the remainder of the Bill coherently, there is some danger if we use the expression "a second pension" loosely and generically. If we are talking about

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stakeholder pensions there is a case for describing them so, and if we are referring to the state second pension we should also use that expression; otherwise the discussion will tend to become confused.

Secondly, as regards the groupings, we on this side of the Committee have sought to focus attention on particular issues relating to stakeholder and other pensions so that we can debate the particular issues rather than joining them together and discussing them in a general context.

The noble Baroness's amendment is concerned with two issues. The first is timing and the second is the context in which the Government's proposals have to be considered. The issue of timing is most important, as we shall see in relation to subsequent amendments. Of course, the reality is that it is not proposed to introduce the stakeholder pension for some considerable time.

As the noble Baroness rightly said, there has been a great deal of consultation. However, we waited a long time before the Green Paper appeared. The noble Baroness always suggested that there was a secret agenda. If that is still the case, I suspect that today's secret agenda is different from that in the first year of government when Mr Frank Field was a Minister in the department. There has been a significant change since his departure.

The fact is that while there have been delays, there have been fits and starts. We discovered that the consultation process was not completed before the Bill reached Committee in another place. As the noble Baroness rightly points out, there are still many provisions about which we are unclear. I believe that today the Committee will wish to clarify the Government's position on a considerable number of specific issues.

Furthermore, we must put the matter into context, in particular with regard to the other pension products which the Government are putting forward; for example, the state second pension. So far as we can see, that will be deferred for a very long time. However, we understand that it is to be a replacement for SERPS. The noble Baroness rightly pointed out that the manifesto referred to retaining SERPS. Apparently, it is not proposed to retain it for this Parliament but not for the next. It is difficult to see the justification for saying, "We have a manifesto commitment", when it is apparent that the Government have no intention of maintaining that commitment into the following Parliament, should they be fortunate enough to be re-elected. But the reality is that SERPS will go and a state second pension will be introduced.

It was also suggested that the Treasury has taken over these matters. I have addressed that theme from this Bench on a number of occasions in recent months. I believe that that is clearly the case. But curiously in this instance, while the Government and the Department of Social Security are putting forward stakeholder proposals, the Treasury has turned up with a different proposal; namely, a lifetime individual savings account. We do not know what the relationship is between the stakeholder pension and the lifetime individual savings account.

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As was rightly argued, we need to look at the matter in context.

I say "we" and, of course, a number of different interests are involved. There are potential or actual pensioners and there are the providers of the pensions. All have an interest in seeing matters in context. As was rightly pointed out, a whole range of aspects and alternative products are involved, which we cannot consider specifically when we look at the proposal for a stakeholder pension. I believe it is arguable that the stakeholder pension provides one more option to consider alongside all the other pensions, some of which can be held instead of a stakeholder pension, some in addition to it, and so on.

I take up the point, defended by the noble Baroness for many years, of the position of the basic state pension and the issue of up-rating it in line with earnings, which has always been a difficult issue for those on this side of the House. I say that honestly. None the less, the basic state pension has formed the bedrock of state provision in this country. However, there are serious fears that that bedrock is being undermined. We are told that there will be a guaranteed minimum income, which Age Concern rightly describes as income support, and the undermining of the contributory principle.

The other day the noble Baroness, Lady Hollis, slightly misunderstood what I was saying in relation to that. I was referring to the clauses later in the Bill--Clauses 68, 69, 72 and 73. In those clauses we find that people will receive what previously had been called "contributory benefits" without contributing. They will be deemed to have contributed. The combination of the minimum income guarantee and the undermining of the contributory principle gives one cause for concern about the safety of the universal non-means-tested state pension. I believe that we are right to consider that in the contest of the remarks of the noble Baroness.

Having said so much in favour of the argument of the noble Baroness, I am puzzled as to why she should attach this amendment to the document Principles into Practice, Cm. 4101. I had some difficulty in finding anything about pensions in that document. There are other documents to which she could have referred. However, I was struck by the extraordinary way in which the document is produced. I take, for example, some of the principles: Principle Eight says:

    "The system of delivering modern welfare should be flexible, efficient and easy for people to use". Anyone would suppose that the Government were to bring forward a system that was not flexible, was inefficient and difficult to use. Apparently, that is a principle that the noble Baroness set out in the document. I also refer to Principle Three:

    "The new welfare state"-- not government--

    "should provide public services of high quality to the whole community, as well as cash benefits". That appears to be unexceptionable. I am puzzled to understand why anyone would pay £5 for this document and I am a little puzzled as to why the noble Baroness should have attached her amendment to this document.

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In reality, when looking at the possible range of products--I believe "products" is the right word--which are before us, we should consider the danger of the mis-selling of private pensions, about which, I fully accept, we have all been rightly concerned. In many ways, that has been a disaster which is very difficult to put right. Having said that, I believe that there is a great danger--implicit in what was argued in proposing the amendment--of considerable mis-selling of the new products because we do not know what the inter-relationship of them will be. Also, in legislation, we have to consider something that is being taken on its own without regard to the alternatives.

On the timing issue, it is not clear what those who may consider taking out a stakeholder pension in due course ought to do in the meantime. As it will be a while before the stakeholder pension is introduced, perhaps the noble Baroness, Lady Hollis, will give us an indication of what people should do in the meantime. It may be two years before the stakeholder pension is introduced, and two years in the course of pension contributions which are paid at earlier stages of the contributory period rather than towards the end can have a significant effect.

There is widespread concern outside the House about such issues. Perhaps I may end by quoting from an Age Concern document:

    "The Government has concentrated on providing additional help for current pensioners through income support"-- which Age Concern refers to as a "minimum income guarantee"--

    "While increases to income support are welcome they are no substitute for a basic state pension paid at a reasonable level. The Government should be looking to minimise dependency on means-tested support yet by 2050 they still expect one in four pensioner households to be getting income support...Many older people with modest levels of savings and private/occupational pensions are already excluded from the minimum income guarantee and wonder why they bothered saving. There is a great danger that focussing on means-tested support will act as an even greater savings disincentive to future generations of older people".

To be frank, there are some aspects of the views of the noble Baroness, Lady Castle, with which I do not agree, but with regard to the points that she made on timing and the question of discussing the issues in a sensible context, I find myself in agreement with her.

4.30 p.m.

Lord Goodhart: I have listened with great attention and respect to what the noble Baroness, Lady Castle, has said. As we all know, the noble Baroness was the author of the pensions legislation of 1975 which, to a considerable extent, is still the basis on which our pensions are built. No one in this House or outside it could possibly speak with greater authority than she does on the subject.

I have a good deal of sympathy for what the noble Baroness has said in support of her amendment. My party supports, broadly and in many respects warmly, the Government's proposals for the reform of the pensions system. We believe that the idea of the basic state pension, the state second pension and the stakeholder pension as an alternative to the state second

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pension is an ingenious system that will move matters a long way in the right direction. In our view, the right direction is undoubtedly shifting pension provision as much as possible, so far as is consistent with the welfare of pensioners, from unfunded to funded. Of course, the state second pension is intended to provide for that.

However, we have difficulty with the fact that we now have provisions for the stakeholder pension only and, as yet, we have no details on the state second pension. It is important, indeed vital, to understand the interaction between the stakeholder pension and the state second pension.

We have seen from the Government's White Paper--not the earlier one to which the amendment refers--that the stakeholder pension is intended to be a funded alternative to the state second pension for those who are on incomes above £9,000. This is absolutely crucial. We need to know what the arrangements will be for opting out of the state second pension and into the stakeholder pension. But how can we know about that until we have an opportunity to see the legislation on the state second pension? Indeed, what has been brought out of the oven so far is no more than what might be described as a half-baked version of the stakeholder pension, because we know nothing about this crucial interaction. Until the state second pension is introduced, the stakeholder pension will be little more than a cheap and cheerful version of the long-standing and familiar personal pension.

I am sorry that the Government found it necessary to delay introducing legislation in regard to the state second pension. Until that happens--I hope it will happen soon and I should like to know what the Government's proposals are on this--we are able to see only half the picture, and that is a pity. Therefore I have great sympathy with the views expressed by the noble Baroness.

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