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Personal Pensions

Volume 268: debated on Tuesday 12 December 1995

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To ask the Secretary of State for Social Security what proposals he has to improve the flexibility of personal pensions in retirement. [3575]

To ask the Secretary of State for Social Security what proposals he has to improve the flexibility of personal pensions in retirement. [3581]

We will introduce age-related rebates for personal pension holders who have contracted out of the state earnings-related pension scheme, which will make such pensions attractive across a broader age range.

Personal pension holders will also be allowed to draw an income from their fund each year and defer buying an annuity until a time of their choosing up to age 75. In addition, unmarried personal pension holders will no longer have to buy annuities that make allowance for a widow's pension.

I thank my hon. Friend for that answer. Does he agree that one of the greatest threats posed to the viability of personal pensions would be the guaranteed minimum pension, as proposed by the Labour party?

My hon. Friend is absolutely right. The Opposition's proposals would not only undermine personal pensions but would impose a further tax. Sooner or later, the Labour party really must come to terms with the fact that all its policies involve increasing taxes, and that is what the honest men showed the other night.

Has my hon. Friend seen the June 1995 economic outlook of the Organisation for Economic Co-operation and Development? Is he aware that it concluded that the United Kingdom is the only country with a sustainable and affordable pensions policy? Does he agree that that is due to the fact that the Government have given encouragement to the pensions industry to provide such policies?

Yes, the OECD study confirms that the UK will be the only country with a sustainable state pension scheme in the next century. That is a tribute to the work of my right hon. Friend the Secretary of State in reforming pensions in the United Kingdom. The United Kingdom also has more assets in pension funds than the rest of the European Union put together, and we now have 8 million personal pension holders.

Will the Minister confirm that the total cost to the national insurance fund of low earners opting out of SERPS into personal pensions has been more than £4.3 billion? Is not it true that many of the people on low incomes with personal pensions will now receive an even lower pension than they would have done under SERPS once insurance companies have taken their cuts, fees and charges? How can the Minister justify the typical Tory incompetence that has wasted taxpayers' money and cut pensions all in one go?

We have had taxation; now we have nationalisation. The hon. Gentleman is suggesting that we should nationalise schemes that have provided security for 8 million personal pension holders and have put this country in a better position than any other country in Europe.

Does my hon. Friend agree that it is absurd for Opposition Members to talk of a national insurance fund? There has never been such a fund; the money is spent as soon as it comes in. Would we not do better to follow the example of countries such as Chile, which set up a fully funded pension system as long ago as 1981? Pensions in Chile are now 50 per cent. higher and other benefits nearly 100 per cent. higher than they would otherwise have been, and Chilean workers can choose between 18 different pension management funds, thus securing finance for their old age in a way that will not be possible in any western country apart from Britain.

My hon. Friend is right. Funded pensions have a part to play in providing for pensioners in Britain. In this country, however, we have private funded provision, of which I think my hon. Friend might approve. Only Opposition Members believe that every solution must involve nationalised state endeavour.