My Lords, in the unavoidable absence of my noble friend Lady Castle of Blackburn owing to illness, at her request and with the permission of your Lordships, I ask the Question standing in her name on the Order Paper.The Question was as follows: To ask Her Majesty's Government what percentage of the contributions paid for national insurance, pensions, occupational pension schemes and personal pensions goes on administrative costs.
My Lords, the administration costs charged to the National Insurance Fund for awarding and paying state retirement pension and collecting and maintaining records of national insurance contributions were some £622 million in the financial year 1996–97. This represents about 1.5 per cent. of the fund's income in that year.Little information is currently available about the costs of running occupational pension schemes. The Government Actuary's Department has carried out a study and will shortly publish a report of findings in this area. The Government do not collect information on the cost of administering personal pensions.
My Lords, I thank my noble friend for that Answer. As I understand the matter, there may be a policy move towards encouraging personal pension schemes in the private sector. Will the Government at least pay some attention to the costs of such schemes in comparing them with the possible alternative of extending public sector schemes?
My Lords, personal pensions are a private contract between the pension provider and individuals. As we know, some charges attached to personal pensions are too high and inflexible. Individuals must therefore consider very carefully the charges that attach to personal pensions before entering into such contracts. The purpose of the stakeholder pension is to attempt to reduce some of those costs for people who cannot afford them.
My Lords, does the Minister agree that it is absolutely scandalous that the previous administration, in promoting personal pension schemes, did not set up a mechanism to monitor the administrative costs associated with their provision, which would have been available to the Government now?
My Lords, I entirely agree with my noble friend.
My Lords, have the Government yet received any reliable estimates from the pensions industry or elsewhere as to the additional administrative costs which may be incurred when pensions come to be split on divorce?
My Lords, that will form part of a study that was announced last week by my right honourable friend into the whole matter of pensions splitting. Other matters enter into it. There may be single-sum payments, which would reduce administrative charges. The whole question of whether one or other spouse can afford their share of the split pension also has to be examined. It is quite an involved matter.
My Lords, the noble Baroness, Lady Castle of Blackburn, has put a remarkable series of questions over the past few days. Perhaps I may express a personal hope in that I trust she is well.So far as concerns comparative administrative costs, presumably the ratio would be better, as regards the Government's proposals for a stakeholder pension or a second pension, if that is made compulsory rather than if it is not. Despite the delay in publishing the Government's Green Paper on pensions, presumably estimates have already been made as to the comparative figures. Will the noble Lord give them to the House?
My Lords, no estimates have been made. The study is still continuing. The whole purpose of the stakeholder pension is to reduce the costs below those of personal pensions, which are considered to be rather high and unaffordable by the low-paid, those in intermittent employment and some of the self-employed.