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Baroness Hollis of Heigham: My Lords, I ask the noble Baroness, Lady Barker, to look at Chapter 7 in relation to women. I admit that there is nothing on this in the Statement as such. But in Chapter 7, for the first time, we have a section on women's situations. For example, if I can draw her attention to section 7.1, paragraph 6, it says that most women work fewer hours for lower pay and for fewer years than most men. So they acquire less national insurance rights and have less occupational pension coverage. But that reduced pension income, given women's earlier retirement age and greater longevity, has to last them for longer. Therefore at each step of the way we have to intervene to ensure women's greater financial prosperity in old age.

My point is that women's financial penury in old age is a consequence of their situation in the labour market through their working lives. To put it another way, a man may start single, marry, have children, divorce, become single again, re-partner, but throughout that

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time he almost certainly works full time and contributes to his pension. Almost every one of those steps will affect a woman's contributions to her earnings and therefore to her pension. She is therefore locked in that situation.

I hope that when the noble Baroness has the time she will read this report—it is very long. It will be seen that at each step we are trying to take measures to improve the situation of part-time workers; to improve childcare access for women; to improve their situation vis-à-vis national insurance schemes; to try to bring them into occupational pensions and to try to improve their situation through targeted support like S2P in retirement. But it must be analysed step by step, which is all I can suggest to the noble Baroness. It is locked into the inter-linking between their earnings and caring capacity in their working lives which generates such poor state and occupational coverage as reflected in their national insurance rates.

The noble Baroness asked about employers. The point on compulsion is that up until 1988 employers could make membership of a scheme compulsory as a condition of employment. That was then scrapped. We are putting forward for consultation—this is a Green Paper—whether or not we should go back to that situation and allow employers to make it a compulsory condition of employment. That is not the same as saying that employers themselves will necessarily contribute. But our experience is that where they have such a scheme, they tend to. The second issue of compulsion is one that we shall keep under review. At the end of the day, if employers do not contribute then, as we know from experience, many employees fail to contribute also and as a result they fall back.

Lord Forsyth of Drumlean: My Lords, the Minister spoke eloquently this afternoon about how people will need to contribute more to their pension schemes, save more, retire at a later date or enjoy lower living standards when they do retire. Will she be honest with the House and acknowledge that millions of people in Britain will be in exactly that position of having to retire later or save more as a direct consequence of her Government's decision to take 5 billion every year from their pension schemes?

In response to the question asked by my noble friend in relation to the need to encourage companies to invest more in their businesses, was the Minister saying that the Government felt that that was more important than the long-term prospects of pensioners in this country? Can we have a straight answer? If the noble Baroness wishes to persuade people—a proper goal—to contribute more to pensions, is it not high time that the Government reversed the damaging decision they took to take away 5 billion from people's pension funds when they had every expectation that that money would be there to look after them in their old age?

Baroness Hollis of Heigham: My Lords, I have given my answer on ACT and I shall not expand further on it at this stage. However, I am happy to come back to the new point raised by the noble Lord, Lord Forsyth, about people seriously under-saving.

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The best evidence we have is that if we assume that people wish to enjoy, for example, 50 per cent gross income in retirement—it is worth emphasising that that means 62 per cent net income because they are not paying national insurance contributions and the like—then around 12 per cent of people are seriously under-saving. If however we are talking of having a gross income in retirement of 40 per cent or a net income of around 50 per cent, we are coming down to a ballpark figure of around 1 million.

So a serious problem arises for people with modest earnings. It does not arise for those with the poorest earnings. It will be seen on Table 2.7 in the Statement that up to 300 a week the state pension will give replacement values of 50 or 60 per cent or more; indeed, for the poorest it will actually give replacement values of nearly 140 per cent. But for those earning between 15,000 and 25,000 a year—the group seeing their pension promise reducing given longevity and the stock market turmoil—if they wish to enjoy higher pensions than they are currently in line to receive, they indeed have to save more, work longer or alternatively reduce their expectations. There is no way out of that, given increasing longevity.

Earl Russell: My Lords, when I was a rather feckless young man of 23, newly arrived in London and able to think of a thousand things on which to spend my money, I was furious to discover that I had to make a compulsory contribution to a pension scheme. Now, having retired six weeks ago, I am extremely grateful that I did. Does the Minister think that that helps to make out the case that my noble friend Lord Oakeshott of Seagrove Bay made in favour of compulsion, although not necessarily to contribute to one's employer's scheme?

Does the Minister remember—she probably does not—an occasion in the debate on the Address two years ago when I advised her not to claim for the Government all the credit for the success of the global economy and to remember that before she had to start saying that the Government were not to take the blame for all the failures of the global economy? Does she have the tiniest bit of regret that she did not take that advice?

Baroness Hollis of Heigham: My Lords, all that one need do is consider the state of the British economy, compared to other economies, to see how robust it is. We have higher employment than we have ever had and less long-term adult and youth unemployment than we have had since the late 1960s. Noble Lords should also consider the low level of inflation that we enjoy.

It is worth emphasising to the noble Earl that low inflation is of particular value to women. In the kind of high-inflation economy that we inherited, a rate of 10 per cent would mean that the value of a pension would halve in eight years; at 5 per cent, it would halve in 14 years. With the current level of inflation, it would halve only after about 29 years. That is a real return for the Government's investment in our economy.

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The second point that the noble Earl made was about compulsory contributions. It is worth reminding the noble Earl that annex 4 to the Statement gives the composition of the group without pensions. We know that half are low-earners—with less than 10,000 a year—who have a real problem with debt. It might be better for them to rely on state provision. Two thirds are women, for the reasons that I suggested. A third work part-time. A third are young—under 30—and may be in the situation that the noble Earl, Lord Russell, was in. Half of those with slightly higher earnings had broken work records, but nearly all of them had partners who saved more than they did. We take isolated figures and do not consider household savings.

Given all that, the noble Earl can see why significant tranches of the population do not feel that a funded pension is for them. That is not to say that we should not try to persuade them to save for it, but, for many people, it is not sensible to go into a funded scheme. They would do better staying with S2P.

Lord Blackwell: My Lords, like other noble Lords, I recognise several useful measures in the Statement. However, the debate we should have is about whether those measures are adequate for the scale of the problem we face. As I have not seen the Green Paper, I wonder whether the Minister can tell us whether, to inform that debate, the Government have set out their view of a reasonable objective for future levels of pension income relative to wages. If not, can it be set out before we debate the matter?

Baroness Hollis of Heigham: My Lords, we say that it is a matter of choice. We give figures to show people what they would have to save, given certain assumptions, for a number of years, if they wanted a gross income of 66 per cent—80 per cent net—or a gross income of 50 per cent—62 per cent net. We set it out in that form, but, ultimately, it is someone's choice what level of income they wish to experience and what arrangements they will make to arrive at that level. It may be determined by their mortgage situation, whether they are putting children through university and other commitments.

Baroness Noakes: My Lords, the Minister said to my noble friend Lord Higgins, I think, that shifting to 60 per cent private provision was no longer a target, just a direction of travel. What is the current proportion of private provision to public? What does the Minister expect those ratios to be in 10 years' time as a result of the Green Paper?

Can the Minister also give the Government's position on defined benefit and defined contribution schemes? Are the Government now indifferent as between those schemes? I took from what she said that they were complacent about the continuance of defined benefit schemes, although my reading of the statistics is that the rate of closure is worrying, if one believes that such schemes should be maintained.

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How transparent will the work of the new insurance commissioner be? How independent will the commissioner be—

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