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Lord Higgins: I confess that I do not find the Minister's response reassuring, in the sense that people may find that some of the stakeholder pension schemes do not provide a level of income above the minimum income guarantee.

I find the reply of the noble Baroness the Minister somewhat surprising because one of the earlier provisions put forward by the Government will tell people on an annual basis what pension they are likely to receive eventually. I have previously expressed surprise at that, for the very reasons that the noble Baroness has just put forward; namely, that considerable assumptions about annuity rates, investment rates and so on are required. But if indeed the noble Baroness and the Government persist in taking the view that they will forecast what pension people are likely to receive as a result of their contributions, I should have thought there would be no problem in the Government equally accepting what the amendment says.

I remain puzzled, not least for the reasons mentioned earlier, because even over a timescale of 18 months one may well be significantly out in one's pension forecast. Therefore, if the Government continue to take the view that they will provide people with an annual statement of the pension they are likely to receive as a result of

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their contributions, I should have thought that it would not be difficult to balance that--for the individual if necessary to balance it--against the level of the minimum income guarantee.

Baroness Hollis of Heigham: As the noble Lord will recognise from his earlier discussion about employers' liability, there is a big difference between a forecast and a guarantee. We shall be doing the usual print-out saying "Given the current level of contributions, this is what you can expect". That is very different from guaranteeing. We know about some of the situations in which Equitable Life currently finds itself over guaranteeing a return at a certain level 30 or 40 years on. We do not know what the minimum income guarantee may be.

Lord Higgins: I shall not be tempted to go down the Equitable Life road, on which I have strong views.

If the Minister is indeed going to take the position that she has just described, such an indication is likely to be highly misleading and of no real value. I was surprised the Government put forward that idea. The noble Baroness said that it was a forecast rather than a guarantee. It is rather like the statement on proposals for taking out pension arrangements, which says that on the assumption of a growth rate of say, 3 per cent, the pension will be so much and on the assumption of a 7 per cent growth rate it will be a different figure. No doubt this was an idea thought up by the previous Government.

Baroness Hollis of Heigham: I do not know about the noble Lord, but certainly any private pension scheme of which I have been aware will normally give an annual statement saying what one's current level of contributions will buy, and projecting that forward. This allows people a sense of ownership of their pot of money, because it is their money. In addition, if they feel that the anticipated level of pension is inadequate, this could encourage them to put extra money into the scheme. So this is about information; it tells people what they can expect and therefore encourages them, if appropriate, to invest more. It is a useful tool. If we were not to produce such information, which private schemes regularly produce for their clients, the noble Lord would be equally critical.

Lord Higgins: Of course, the private schemes do so on very arbitrary assumptions, and mostly assumptions which do not mean very much. As I have said, the noble Baroness may well blame the previous government for producing this scheme, but my personal view is that it is not very helpful. Perhaps we may return to this point.

I find it almost bizarre that the Government propose to tell people what they may expect, when, as we discussed earlier, that cannot be done with a reasonable expectation of accuracy, even over a timescale of a couple of years. But, subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Clause 2 agreed to.

Clause 3 [Duty of employers to facilitate access to stakeholder pension schemes.]

Lord Higgins moved Amendment No. 23:

Page 3, line 24, after second ("of") insert ("10 or more")

The noble Lord said: This is becoming something of a duologue, or perhaps a trio.

The amendment is about the position of small businesses. In particular, we are concerned about the burden that is likely to be placed on small businesses in putting forward for their employees a specific stakeholder pension. The CBI in particular has expressed strong opposition to the proposals in the Bill which will require firms without occupational schemes to nominate a particular stakeholder pension.

We suggest that those with fewer than 10 employees are unlikely to have the resources which are necessary to decide on behalf of their employees whether a specific scheme is good or whether it is an appropriate form of provision for retirement. Employees may feel disgruntled if it turns out to be the case that the choice the employer made has been wrong, even if the employer is not legally at fault.

I suspect that the vast majority of smaller firms do not feel competent to judge between one scheme and another so far as concerns stakeholder pensions. The CBI has also expressed the view that it is not in the Government's interest to compel companies to put this forward and that the alternative might be that there should be a requirement simply to act as a clearing house: that the smaller employers might agree to collect the contributions but that those should then go into some more general system rather than that they have to nominate a scheme which they are ill equipped to judge. I beg to move.

Baroness Crawley: I hope that the Minister will not take much heed of the amendment. Stakeholder pensions are designed to benefit people who work for small firms and are unlikely to have occupational pensions. Under the amendment, 84 per cent of employers would be excluded from having to give access to stakeholder pensions. Surely the more people able to become members of stakeholder pension schemes, the greater economies of scale and the better value those schemes will be. I understand that the DTI has a small business service which small business can access easily. Under that service from April 2000 there will be assistance with payroll matters, under which heading I assume that this category of pension would come.

Lord Goodhart: I am unable to go as far as the noble Lord, Lord Higgins, on the amendment. We are concerned about the position of small businesses. Under the Tax Credits Bill, these Benches joined with the Conservative Benches to exclude from liability to pay through the wage packet the working families' tax credit. We took that view because we felt that the employees were in no way disadvantaged by it.

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In this case the position is not the same. The employees will suffer if as a result they are denied access to stakeholder schemes. Those who will benefit from going to stakeholder schemes are those earning more than £9,000. That is a substantial sum. It is not a large wage but it is certainly more than, let us say, a part-time cleaning lady would receive.

We cannot go the whole way and say that there should be a blanket exemption for any employer who employs fewer than 10 employees. Nevertheless, I think that there is a case for saying that those with smaller numbers may be exempted from some of the provisions in Clause 3. For instance, I see no reason why someone with two or three employers should be required to allow a representative reasonable access to the employee. It would be possible for the representative to approach the employees directly, and therefore there is a case for re-examining the clause and giving a power to modify the provisions in respect of small employers.

There is a power to define "relative employees" which could be used to exclude employees by reference to the number employed by their employer. But that would be inappropriate and would not achieve the purpose. There is a case for saying that regulations could be allowed to modify the provisions of Clause 3 in the case of employers with fewer than 10 employees.

10 p.m.

Lord McIntosh of Haringey: My noble friend Lady Crawley urged me not to take heed of this amendment. I must disappoint her because I take heed of all amendments. That is what I am paid for. However, there are some difficulties with it. They are based on a misunderstanding on the meaning of "employer access" and there has been some exaggeration, not by your Lordships but in the public prints, of the burden which will be involved. Many employees are fortunate enough to work for an employer who runs an occupational pension scheme, so they have been able to join a good value pension scheme through their workplace. Employers see occupational pension schemes as a powerful tool for recruiting and retaining staff.

For those who cannot join an occupational pension scheme, the only option has been a personal pension. But as we know, those can be costly and inflexible and shareholder pension schemes will offer a better value option. We want everyone in work to have access to a good value pension scheme through their workplace. That point was made by the noble Lord, Lord Goodhart, when he said that employees would suffer if they were excluded.

Therefore, we have two reasons for framing the requirement on employer access; first, to help stakeholder pension schemes achieve the aim of better value provision; and, secondly, to encourage people to join the schemes. We think it is reasonable that employers should play a part in helping to make this a reality for those employees who cannot join an occupational scheme.

We are not asking very much. Employers should provide information about a stakeholder pension scheme for employees covered by the requirement and allow

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scheme representatives access to those employees. The noble Lord suggested that that requirement might be waived for small firms. I suspect that it might not happen in any event because a number of scheme providers might consider it expensive for two or three people.

Secondly, they should provide a facility for deductions to be paid to the scheme through the payroll arrangements. My noble friend Lady Crawley rightly reminded us that the DTI small business scheme exists and will provide payroll facilities for deductions.

Employers who offer an occupational scheme to all their employees will not be affected. Other employers will be exempted from those requirements in relation to employees who can join an occupational scheme or those whose employees fall below the national insurance lower earnings limit. We are committed to minimising the impact on businesses and therefore in the Green Paper we invited views on whether the access requirement should be voluntary. We considered the responses we received. We shall be issuing a further consultation on our specific proposals. The Bill as it stands without the amendment would allow us to prescribe exceptions to the access requirement if it became clear that this was justified in the light of consultation or experience. I hope that that will reassure the noble Lord, Lord Goodhart.

However, the amendment is too inflexible and too wide-ranging. It would mean that the requirement would not apply to 84 per cent of employers. Of a total of 1.2 million employers, only about 200,000 have 10 or more employees. Whereas a high proportion of those employers provide pensions, smaller employers are much less likely to offer an occupational pension. An exclusion for employers of fewer than 10 staff would leave out a disproportionate number of the very employees we are trying to reach.

I hope the Committee will agree that we have struck a reasonable balance between the small additional burden on employers and the need to ensure wider access. I hope the noble Lord will not press the amendment.

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