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Personal Accounts

Volume 461: debated on Monday 4 June 2007

We will publish our response to the consultation on the personal accounts White Paper shortly, together with our response to the recent Select Committee on Work and Pensions inquiry. Our intention remains to introduce a Bill in the next Session of Parliament.

Personal accounts give many thousands of working families in my constituency who do not have an occupational pension an investment option, but only if they have confidence in that option to invest in those accounts. Can the Secretary of State indicate what he will do to ensure that those people have confidence and invest in those accounts?

The first and perhaps most important thing that we can all do is to make sure that there is a strong and enduring consensus around the policy itself. I believe that that is the case after the excellent work that Lord Turner did. The key responsibility, of course, will be in this House. We have legislation to enact in the next Session, as I said. It will be important that the personal accounts delivery authority, the new independent board that will be set up to oversee the introduction of the new policy, has the right remit and produces the right guidance, information and help for millions of workers who are not familiar with occupational pension schemes, but who, like many people in my hon. Friend’s constituency, are keen to start saving. It is the responsibility of Ministers, the delivery authority and all of us in the House to continue to make the case for additional workplace savings. We must do all we can here to solidify that consensus and to ensure that the reform can serve her constituents in the way in which she and I would both like.

Does the Secretary of State agree that, alongside encouraging personal accounts, the Government must do all they can to keep good-quality defined benefit schemes in operation? If so, why have the Government chosen explicitly to ignore the recommendation of the Government Actuary in relation to the level of the contracted-out rebate that applies from April this year? Is not that decision essentially another back-door tax on pensions? Will the Secretary of State review that decision in April 2008, which the right hon. Member for East Ham (Mr. Timms) indicated would happen when he was Minister for Pensions?

We always keep such decisions under careful review. The hon. Gentleman is a one-track record when he refers to all these reforms; he has nothing positive or constructive to offer. We both agree that consensus is an important part—[Interruption.] The hon. Gentleman is having a second bite at asking his question, but he should have got his first attempt right. If he had done so, I might have answered in the way that he would like, but I prefer to answer in the way that I wish given the question that he actually asked. I hope that the Liberal Democrats will at some point come to support—however grudgingly—the policy on personal accounts.

Does my right hon. Friend agree that it is particularly women in work who have missed out on occupational pensions who miss out on pensions? How will he ensure that the new personal accounts are targeted on such people so that they get the necessary advice to ensure that they can fill that important gap in their pension provision?

If we are to succeed in doing that—as my hon. Friend and I both wish us to do—we must continue the discussions that we are having with the pensions industry, employers and trade unions. It is important that personal accounts are targeted specifically on the group of people that Lord Turner and the Government have in mind: low and moderate income earners who work for companies that do not have an occupational pension scheme. We can continue to ensure that the policy works in the way that my hon. Friend and I want by making sure that there is a cap on contributions, that there are restrictions on transfers in and that there is a simple scheme exemption process. Personal accounts must be complementary—they must not compete with good-quality existing pensions. I am sure that we can design the system in that way.

Is not the Secretary of State ashamed of the low savings rate that there has been in this country under this Government, and is not the main reason for that the removal of tax reliefs, particularly on pension funds, along with the downgrading of tax relief on other saving schemes? Does he accept that we need better tax breaks to get people to save more, which they clearly need to do to have a prosperous retirement?

Fiscal incentives will be attached to the introduction of personal accounts; I am sure that the right hon. Gentleman is aware of that. If he and his party colleagues truly believe what he has just said they would be proposing to reverse the dividend tax credit changes that we made. I understand that they are not planning to do so, although he personally might favour that.

The Secretary of State has already agreed with the hon. Member for West Lancashire (Rosie Cooper) that public confidence in the pension system must be restored if personal accounts are to be successfully introduced. Does he understand that a vital part of that process is the delivery, without further delay or prevarication, of a fair and equitable solution to the situation of the 125,000 victims of pension scheme failure whom the ombudsman’s report identified?

Yes, I do accept that, which is why we have brought forward further proposals to make the financial assistance scheme more comprehensive in its scope and more generous in its application. It is also why we have set up a review to discover whether there are other unclaimed assets that we can use to improve the minimum 80 per cent. guaranteed level of compensation that will be available under the FAS. As well as accepting that that is important, I am confident that the Government have introduced a full and comprehensive set of measures to deal with the problem. Looking forward, in respect of the Pension Protection Fund, we have the right guarantees in place.

I am glad that the Secretary of State accepts the need to restore confidence, but how does the emotive and aggressive language of his High Court submission against the ombudsman help to restore that confidence? Will calling the ombudsman’s decision “flawed, irrational and peripheral” rebuild that confidence? Or perhaps he thinks that that objective will be best achieved by asserting that the parliamentary ombudsman—an Officer of this House—is

“no better placed to form a view than the Secretary of State”?

I will tell the Secretary of State what he needs to do if he wants to rebuild confidence—

Order. The hon. Gentleman has rightly asked a question, but he should not give advice—not at this stage.

The Secretary of State always acts on the basis of the legal advice that he receives. The Government’s lawyers produced those arguments and I am happy to stand by them.