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Pensions Bill
This Bill – which takes forward the work of Adair Turner’s pensions commission – introduces a low-cost personal account. The Bill aims to automatically enrol eligible workers into pension schemes, introduce a minimum employer contribution, and, confer on the Pensions Delivery Authority executive – as opposed to advisory – powers.
The Bill implements the recommendations of the Turner Pensions Commission not already legislated for by the Pensions Act 2007.
The work and pensions secretary, Peter Hain, introduced the Bill at second reading and set out the government's aims for the legislation.
"A guaranteed basic standard of living for pensioners forms the platform of our side of the renewed contract between the state and the individual, but we need to go further. We will restore the link to earnings, abandoned by a previous Conservative Government, by 2012. By 2050, the basic state pension will be worth more than twice as much as it would otherwise. That, in addition to the reforms to the state second pension, will ensure that people retiring in 2050 who have worked or cared for about 40 years will receive about £145 per week of state pension in today’s earnings terms."
Turning from state to occupation pensions, Hain explained that the government wants "to strengthen provision to support existing occupational schemes by simplifying the rules governing them through a rolling deregulatory review. The decline in private sector occupational pension provision since the late 1960s is serious, and in the face of increasing costs employers have been abandoning their defined-benefit—that is, final salary—schemes, whose active membership numbers have fallen from 8 million in 1967, to 5 million in the 1980s and 1990s, to fewer than 3.5 million today."
On employer contribution, Hain explained that "The Bill will introduce a mandatory duty on employers automatically to enrol their workers into a qualifying pension scheme. Many employers are already making substantial contributions to pension schemes and supporting their employees in saving for retirement. To make the package of reforms successful, however, the Government need all employers to play their part. That is why all employers will be required to contribute to their workers’ pensions a minimum of 3 per cent. on a band of earnings for defined-contribution schemes, as recommended by the Pensions Commission."
Concluding, Hain labelled the Bill "a blueprint for a new understanding between individuals, employers and the state, which will give all workers the chance to take control of their own retirement, providing for themselves and their dependants."
For the Conservatives, their shadow pensions secretary Chris Grayling expressed overall support for the intentions in the Bill but took issue with the Bill's specifics. Particularly, Grayling took issue with the current prime minister's treatment of pensions over the last 10 years whilst he was chancellor.
Grayling called on the government to adopt a more consensual approach to the Bill. "There is broad consensus about the direction of these reforms, but Ministers have used that consensus as a shield from serious debate, which is unacceptable and undermines the very concept of consensus."
Concluding his comments, Grayling called the government's record on pensions in the last 10 years "lamentable".
"They have presided over the rapid decline of our pension system and let down many of our most vulnerable elderly people. Their past efforts at reform have failed abysmally. The one man on the Labour Benches who appeared to have any idea how to tackle our pensions challenge had his ministerial career summarily terminated by the then Prime Minister—probably because he is smarter than him. I want these reforms to work and this Bill to make a difference not just because they are right for the pensions of tomorrow and for all our futures, but because we fully intend that a Conservative Government will implement these reforms in four years’ time."
For the Liberal Democrats, pensions spokesman Danny Alexander gave "a general welcome to some of the proposals in the Bill on the personal account scheme". Like Grayling before him, Alexander also expressed concern over the use of the means-test.
Alexander explained: "In addition to the potential problems for personal accounts, the means-testing strategy has wider problems. Many people do not claim means-tested benefits because of their complexity. For example, more than 1.5 million pensioners eligible for pension credit do not claim it. In recent years, council tax bills have gone up substantially, but only 53 per cent. of pensioners claim the council tax benefit to which they are entitled. Means-testing also erodes the returns from saving and reduces incentives to save."
Alexander concluded: "There has been a lot of talk about consensus in the debate, but in future, and particularly in Committee, that consensus has to be based on proper debate and a proper resolution of the genuine concerns and worries about the Bill and the personal accounts scheme. However welcome, well-thought-through and well-constructed they are, they have to benefit as large a section as possible of the target audience, which is people who do not currently save. That is why the arguments on means-testing and advice are so important. The Minister will have to do better in his reply than the Secretary of State did, and will have to do better throughout Committee to ensure that the issue is resolved, so that we can ensure a scheme that can genuinely be recommended to everyone in the target audience."
Progress
House of Commons
First reading: December 5 2007 [HC Bill 25]
Second reading: January 7 2008
Pensions Bill Committee:
Remaining stages: April 22 2008
Third reading: April 22 2008
House of Lords
First reading: April 23 2008 [HL Bill 50]
Second reading: no date
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