9.51 pm
Mike Penning: It is an adage that if you sit here long enough, you will get your time. I am about to get more time than the Front-Bench spokespeople, which is fantastic news. As I mentioned, I came in for Prayers this morning. I have sat here throughout not only because this is a very important debate, but because the financial assistance scheme was not covered on Report and so I could not talk about it much then—I now have ample opportunity to do so.
I have made many speeches in this House before this Secretary of State and Minister of State—the Minister for Pensions Reform—as well as before previous Ministers of State, calling for justice for the 125,000 pensioners whose pensions were stolen from them when their occupational schemes were wound up. I shall repeat again that more than 700 such people come from my constituency. I was ever so pleased when, after five years of campaigning by many hon. Members across this House, we thought we had reached the conclusion and we thought that those people would receive their compensation. We all fought for 90 per cent., and that is what they will get through the financial assistance scheme.
I told my pensioners at our public meeting in my constituency on the Saturday when many members of the team who have been working with the Government Front-Bench team on the issue were present—people such as Peter and Jacquie Humphrey, Dave Allen and Ros Altmann—that we must examine the small print. I am worried not by the Front-Bench team who are present, but by their paymasters in the Treasury, who have always worried me and who have frankly been holding this back for many years.
I am pleased that the Secretary of State has promised to write to me about the two points I raised in my intervention. Perhaps he would be kind enough to write to me about a couple of others, too. The first relates to pensioners who should have been getting their pension but who had to receive benefits because the FAS has not paid out. Will the Government guarantee—will the Secretary of State guarantee this to me in writing, if necessary—that benefits paid to pensioners in schemes while they have been waiting will not be claimed back? It seems obvious that they would not be, but successive Governments have often claimed back moneys paid in benefits when people have received compensation. That often happens in respect of injury compensation where people have been on income support. [Interruption.] I am sorry that Members on the Government Front Bench are not willing to listen to a debate in which some of us have participated for seven hours, but if they could bear with us for a few more minutes, they would then be able to go off to the bar and have a laugh. This is a serious matter. Many people are worried about whether they will have to pay back the benefits. There is a track record of that happening, and I seek assurances from the Government that that will not happen to these pensioners.
The other issue—I am grateful that the Secretary of State agreed to meet with me about it—is the situation of those who have lost their loved ones while waiting for the compensation to come through. My constituent Dave Cheshire died about two and half years ago and his widow, Marlene Cheshire, does not know what will happen. If the claimants had still been alive, they would receive the full compensation package, but their widows may be in a difficult situation. When the Secretary of State was the Minister of State, he met a delegation of widows from all over the country and he promised to look at the situation then, but it is still a big issue now and of grave concern.
The other, linked issue is that of claimants who have lost their income while they have been waiting for compensation because they have been unable to work due to sickness. I wrote to the Secretary of State about that recently, because some of my constituents are worried about how much money they will get from the scheme. They want to know whether they can enter the scheme early because they are disabled. It is a technical point, but it is important. If they are not available for work because they are disabled, can they enter the scheme early or do they have to wait for the full version?
I apologise for bringing those points up at such a late stage, but they are vitally important for the pensioners who are likely to get money from the FAS. They need to know the details so that they can plan their future.
All of the great work that has been done on the Bill and the consensus that the Government have reached with the Conservatives and the Liberal Democrats is important, but it will be a waste of time unless the public have trust in pensions. The Secretary of State mentioned 12 million people who could join the scheme, but they will not go anywhere near it if they do not have any trust in it. I have been canvassing in the London elections and it is an issue on the doorstep. People are concerned about their futures and whether they can trust anybody with their pension schemes, especially with the banks and the current credit squeeze.
Many people who lost trust in traditional pension schemes, especially when the occupational schemes started to be wound up, looked to investment in property. A crisis is happening there, alongside the crisis of confidence in the pension scheme. In the eloquent words of Ros Altmann, who was a Government adviser before she helped the occupational pension scheme groups, we have a pension crisis today that could well become a pensioner crisis tomorrow, unless we address the issue of confidence in the pension system.
It is up to the Government to be the driving force. They have been the driving force on this issue, but—as Conservative Front Benchers have said today—we have heard it all before from both Labour and Conservative Governments. They have claimed that whatever they are proposing is the panacea to the pension problem and will mean that more people will have a decent pension. However, even if this scheme works, we will not solve the problem unless we address the issue of means testing.
Earlier on, we heard of the millions of people whom the actuaries assumed would not take up the means-tested benefits. The Minister of State said that he had written numerous times to those who had been pinpointed as the sort of people who should be getting pension credit. After writing a third or fourth time, the Government should take the hint: those people will never apply for pension credit. They see it as a handout and as taboo, and they would be ashamed to claim it. There is no other reason why they should fail to claim it, if the Government have written to them— [ Interruption. ] Ministers are googling away on the Government Front Bench, but if they had listened to the debate they would have heard about the thousands of pensioners who do not take up the pension credit because they see it as a stigma to do so. It is not because of the complicated forms; that is a certain area. It is not because they have not been informed enough; that is a certain area. There are whole areas of this country where pensioners will not take up the credit because they feel that they are going cap in hand. We should have a link to earnings, which should come forward now. If that happened, a lot more people would not be on means-tested benefit, and the savings would be coming across. All through the debate, from both sides of the House, including the Secretary of State’s Back Benchers—
Mr. Speaker: Order.
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MIKE'S PREVIOUS INTERVENTIONS IN THE DEBATE
Mike Penning (Hemel Hempstead) (Con): May I take the Minister back a few moments, to when we were discussing the armed forces? I fully appreciate that most members of the armed forces would not wish to opt out, least of all those who serve 22 years-plus. However, there is a group of people who leave the armed forces early and wish to transfer their rights into another scheme. For instance, when I left the armed forces—the Grenadier Guards—I transferred my rights into the fire service. I appreciate that the Minister may not be able to answer me now, but this is a very important issue for those of our armed forces who are not going to serve for 22 years but have a pension provision to take with them. Will any parts of the Bill affect their right to transfer into other schemes?
Mr. O'Brien: To some extent, but it would not affect the sort of situation that the hon. Gentleman identifies with people transferring from the armed forces into the fire service. Because there are restrictions on the amount that can be transferred into personal accounts, the person concerned would not be able simply to transfer in a certain amount. One of the approaches that we have taken is to say that there is no transfer in and no transfer out of personal accounts, so amounts are not transferred in in that way. Many employers who currently have pension schemes will continue with those schemes. The personal accounts scheme is there as a default scheme for employers who do not have an adequate occupational pension scheme. Our intention is that employers who already have good-quality occupational pension schemes should continue with those schemes.
Mike Penning rose—
Mr. O'Brien: I will give way, although I am anxious to make some progress.
Mike Penning: The point that I was trying to make is that there are tiny amounts frozen within the armed forces schemes, which are useless in the long term as regards when people will get their pensions, but would be useful if they could be transferred into the personal accounts scheme.
Mr. O'Brien: I have a considerable degree of sympathy with that point. As part of the process of developing a consensus, we arrived at the “no transfers in and no transfers out” rule. However, I have repeatedly been told that some employees, including members of the armed forces, have quite small pension pots and that leaving them there is a hassle, so getting them into personal accounts or another scheme would be a better way.
However, some of the providers of pensions, and particularly insurance-based products, have concerns about the provisions that allow transfers in, even of small pension pots. We have said that at the start, transfers will not be allowed into personal accounts. However, we will review the situation in 2015, with a view to ensuring that we look at the matter again. My personal view, which is not reflected in the Bill because it is not part of the consensus, and we have reached an agreement, is that it should be possible to transfer in small pension pots, because it will just be a hassle if that cannot happen. There is no such provision in this Bill, but there will be a review in due course, and at that point, I hope that the practice will be allowed.
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Mike Penning: I should like to delay the House briefly to comment on what the Minister said. I understand that he has reached a consensus on people opting in or out of the provisions in the Bill and that he feels it difficult to move from that until 2015. However, the armed forces are an exceptional group of people, the vast majority of whom do not serve their full 22 years—or these days up to 30 years. When welcoming members of the armed forces from my constituency back from Afghanistan, I met someone who has just agreed to do another five years after serving for 22 years and who even hopes to do another five after that, making 32 years’ service in the armed forces. However, that is quite rare. The vast majority of men and women in our armed forces serve for between three and five years. The amount of money in the pension pots that they accrue is minuscule. The administrative costs on the state—in this case on the MOD—of running those schemes from within, rather than their being opted out of, into another Government scheme that could be administered separately, are huge as a proportion of the benefits of the scheme.
I would like the Minister to look into the issue again and to reconsider that exceptional group of people earlier than 2015, to see whether he could reach a consensus among the members of the other groups with which he has been dealing. I am sure that they would understand that our armed forces are particularly affected. There could be groups of people who have served for short periods in the armed forces—perhaps they served only in training, but were injured through no fault of their own and had to leave the armed forces. It seems ludicrous that there should be a tiny pot that will sit until they are 60 years old, but which could be brought into such schemes quite easily.
Mr. Mike O'Brien: First, to respond to the point that the hon. Member for Eastbourne (Mr. Waterson) made, the level of contribution will vary according to the rank and, I would imagine, the length of service of the various individuals.
Mike Penning indicated assent.
Mr. O'Brien: I am getting nods from those who have served in the armed forces and are better informed. However, I will write to the hon. Member for Eastbourne on levels of contribution.
The hon. Member for Hemel Hempstead (Mike Penning) made his point well and I have sympathy for him. That point came up during our evidence sessions in Committee and we heard various views on it. The concern among some stakeholders is that there will be a transfer into personal accounts of a significant number of pension schemes, which some of those running such schemes are concerned might lead to what is called a levelling down of the quality of provision. To avoid that, we have said that that should not happen at the start. That provision will run on, and we will look into it when we hold the review.
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Mike Penning: The hon. Gentleman’s comments highlight a crucial point about all future pensions. It is to do with confidence. The people in the schemes, many of whom will be at the lower end of the income bracket, must have the confidence to look forward. This is a Government-sponsored scheme, and if they do not get this advice we may well find 20 years from now that the ombudsman is looking at Government advice yet again; we have already had the debacle with the occupational pension schemes. It is crucial that people have the information, in order for them to build confidence so that they are willing to invest in their pensions.
Paul Rowen: I agree with the hon. Gentleman; I am a member of the Public Administration Committee, which has championed the cause of those who lost out on their pensions through occupational pension schemes. We do not want people to lose out in this case. Therefore, I welcome what the Minister has done in response to the discussions we had in Committee, by setting up the working group to carry out the detailed analysis and by making that information available to all parties as the Bill progresses through Parliament. That is important.
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Mike Penning: I promise not to delay the House for too long. I support new clause 2. I was fascinated to hear the common-sense approach that, yet again, the Minister took to the issue. The nature of means-testing means that we are dealing with the most vulnerable people in our society: those whom the state feels are below the threshold that we would all like people to be at, without needing a means-tested benefit. As a result, such people are the most ill-informed and cannot purchase the information that Members of this House and other members of the public could; such people will not receive independent financial advice.
My hon. Friend the Member for Bournemouth, West (Sir John Butterfill) just alluded to the fact that such people will rely extensively on the information that the Government and the schemes’ actuaries put out to the public. Above all—this is where I agree with my hon. Friend—they will rely on the tabloid press. If the tabloid press start saying that opting out is probably people’s best option because it will be safer, and that people should not worry because they can always fall back on means-tested benefits because they might not be better off, that would make this part of the Bill, at least, fall apart. The Minister would probably agree about that.
It is therefore imperative to put as much basic information as possible into the public domain as early as possible, to enable people to make a conscious decision to stay in the scheme, because there could be an exodus. I remember that back in the 1980s, it was “opt in, opt out”; lots of different schemes were in operation and things were very complicated. Financial representatives phoned people up to say, “I think you should opt out of SERPS,” or, “You should opt in to SERPS.” We made decisions about that specific matter, many of them wrong. I made wrong decisions, but I was persuaded to do so by a financial representative.
What worries me enormously is that because we are dealing with the most vulnerable people, who we are trying to get off benefits and into a pension scheme that prevents them from needing means-tested benefits as they reach their more mature years, all the hard work, everything that has been going on with all the different consortiums and all the consensus that has been built up could fall apart so easily, and even more people might end up on means-tested benefits. None of us would look forward to that situation.
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Mike Penning: The point that I was trying to make earlier is that we must give our best shot at predicting what will be in the pot in the years ahead. That is obviously very difficult, but if I went to a private insurance company and said that I wished to invest £30,000 in a scheme, the actuaries would make some sort of prediction about the outcome, and the state pension would be included in that. It is therefore incumbent on the Government to give their best shot at prediction. I accept that it will be difficult. We cannot predict the future, but it has always been the job of actuaries to try to predict the size of the pot. That is why it is important not to guarantee more—it would skew the whole market if people were guaranteed a greater amount than they would get from a separate pension scheme—but to provide a knowledge base and give people some idea of how much they will get. People must have that information.
Mr. O'Brien: The hon. Gentleman makes some interesting points, and I will address them in a moment or two.
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Mike Penning: May I say what a brilliant speech my hon. Friend the Member for Eastbourne (Mr. Waterson) made? That is not to say that he has not made brilliant speeches before. He managed to pull together a great many amendments in one speech. He said at the start of his remarks that he felt as though he were going to a scrap yard, getting several pieces of a car and putting them back together. In north London, that is called a cut-and-shut. I will deal with the cut, if that is okay.
My hon. Friend and the hon. Member for Rochdale (Paul Rowen), the Liberal spokesman, talked about levelling down. It is imperative that that does not take place. If the Bill is to introduce new people to pensions that will get them off means-tested benefits, it is crucial that we have a level playing field. Now that we are talking about levels, it sounds as though we have moved from the car breaker’s yard to a building site. As I say, a level playing field is crucial. We must give no one an opportunity to cut their responsibilities and make people who are already in pension schemes slip backwards, or to encourage those people to move into the personal account schemes that we are talking about. That is imperative; if we do not ensure that, it will defeat the whole object of the Bill and we will go backwards, not forwards.
Mr. Mike O'Brien indicated assent.
Mike Penning: I notice that the Minister is nodding, so perhaps I have said something that we agree on. That is unusual for me.
There are shady business men dealing with pensions all over the show. There must not be a back door; there must be no opportunity for them to slide backwards. If there is no independent way to make sure that that does not happen, it is important that the people in charge of schemes make sure that it does not happen. The Conservative and Liberal Democrat Front Benchers have spoken of the evidence that outside organisations with concerns have provided. We must put a stop to the problem, and that is why I support new clause 6. The Minister may well give us very good reasons why we should not add the new clause to the Bill, but if we do not, will he give the House, the country and, more importantly, future pensioners assurances that there will be protection for those already in a scheme?
I am told that I pick on Tesco too often, so I shall refer not to the Tesco pension scheme, which the Minister mentioned, but to another one, on to which people are automatically enrolled; they are on very low earnings, and may be working part-time. One can easily see how that sort of scheme, which has very low premiums going into it, could easily be drawn backwards and be subject to the levelling down to which my hon. Friend the Member for Eastbourne referred, making it simpler for employers to let someone else take the responsibility. That would be disastrous for the Bill, and for the many people whom we are trying to encourage to have faith in pensions. We have to be honest with ourselves; we know from our constituencies that there is not huge faith in pensions. We know all too well how many people who come to our surgeries are concerned about the issue. That is true not just in my constituency, which has been affected by the Dexion situation and occupational pension scheme issues. Pension schemes in general are not the flavour of the month.
The purpose of the provisions is to encourage more people to come into the pensions arena and to have confidence in pensions. If we are to do that, we need new clause 6, or something very similar that will allow people to believe that those who are already in low-income and low-premium schemes will be protected. At the same time, the personal accounts scheme that we are talking about should have the benefit of keeping people out of means-tested benefits. I accept that the Minister is in a very difficult position, as he is trying to bring that about with the consensus that he has managed to get. That would all be lost if we ignored the concerns that have been raised. I will not read out the comments of all those who have lobbied us on the issue; some of them have already been read out. There is a genuine argument to be made, and there is genuine concern that it is all too easy to slip backwards, instead of going forwards, which is what we all want to happen as a result of the Bill.
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Mike Penning: My hon. Friend touched on an enormously important point when he used a simple analogy to explain the dangers of the scheme. Continuing the budget airline scenario, if he had said to British Airways 10 years ago, “Don’t worry, your market is safe because there is no competition, and by the way, there is a budget airline that is going to do Paris for £15 and Barcelona for £14”, BA would have laughed at him. What happened, as we know, is that budget airlines have been a huge success and millions of people who were flying with the big airlines and paying a fortune have gone over to those airlines. That is my fear in the pensions context.
John Penrose: My hon. Friend anticipates the point that I was coming to. There is an argument that because personal accounts are an ultra-cheap, ultra-simple alternative, they will not compete with existing occupational schemes because they are designed in a different way and they do not provide the additional flexibility and levels of outcome that occupational schemes provide. However, that assumption has not, to my knowledge, been tested anywhere. As my hon. Friend points out by using the airline analogy, it is possible that there will be a knock-on effect, as budget airlines had on full service airlines.
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Mike Penning: I want to talk briefly about what the hon. Member for Hayes and Harlington (John McDonnell) mentioned a moment ago: the question of pride. Sadly, I lost my grandfather last year. He was 93 years of age.
He had never in his life had what he described as a handout until he became a pensioner. Then, he was expected to go cap in hand and ask for a benefit. Why should that be? This is not just about pride or about opening up one’s documents; it is not just about complicated forms. It is about the simple principle of what that generation paid in and what they are entitled to. I was not a Member of Parliament when we broke the link—I think that I was still serving in the armed forces at the time—but I am proud that my party has accepted where we need to be today.
The delay worries me enormously, however. The actuaries in the Department know full well what is coming. They know full well that, as incomes drop as we get into a difficult economic situation, the gap will close. So, if and when this measure eventually comes through during this Parliament, the cost implications will be even greater. We might even find ourselves in a situation in which more people— [ Interruption. ] The Government Whip makes a comment from a sedentary position. He did not have the guts to have a moan at the Labour Members who had the courage to stand up for their constituents, but he thinks it is quite funny and jovial to have a chirp at a Conservative MP for standing up for the pensioners in his constituency. I am proud of my constituents. I am very proud of my grandfather, who would not go cap in hand to get a mean-tested benefit. He survived in his own way and worked until he was in his early 90s.
Jim Cousins: May I urge the hon. Gentleman not to provoke the Whips Office? There is absolutely no need to do so. The Whips have been entirely reasonable today, and if he provokes them, goodness only knows what will appear in next Sunday’s newspapers. [ Laughter. ]
Mike Penning: As a humble Back Bencher with not much experience in this House, I will bow to the hon. Gentleman’s experience. I will not provoke the Whip in the House again, but privately, behind the Speaker’s Chair, I shall tell him what I think of him.
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Mike Penning: One group of people who were not living in a fool’s paradise consisted of the 125,000 pensioners who had their pensions stolen from their occupational pension schemes. Seven hundred of them are from my own constituency. I am pleased that after five years, the Government eventually came forward and gave them 90 per cent. of the pension to which they were entitled, but I have two questions for the Minister about part 4 of the Bill. First, can he confirm that the pensioners who were without their pension for nearly five years will not be taxed on the lump sum? Some of my constituents, such as Mr. Peter Humphries, will be charged 40 per cent. of their lump sum, although he had to go to work to pay for his family’s upkeep when his pension failed to come through for five years. Secondly, have the Government seen sense enough to wrap the financial assistance scheme up with the Pension Protection Fund? It seems ludicrous to have the two; what plans does the Secretary of State have for the FAS?
James Purnell: I am happy to give the hon. Gentleman both the assurances that he seeks. The first was given at oral questions recently. On the second, he will be glad to know that we are consulting on allowing the PPF to be more closely involved in developing the new FAS operations. Subject to the outcomes of that consultation, we are hopeful that the PPF will be able to take a formal operational role in the extended FAS scheme. I hope that that addresses the hon. Gentleman’s concern.
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Mike Penning: I have been in my place since prayers to ask this question, so I hope that the Secretary of State will bear with me if I press him again. I asked whether my constituents and other FAS members would be taxed on the lump sum. The Secretary of State alluded to the fact that the matter had been addressed at oral questions. Since then, however, we have discovered that some are going to be taxed on the lump sum because it is coming through in the form of a lump sum, and because they had to work to keep going during the five-year wait for compensation. Will the Secretary of State confirm that my constituents will not be taxed on the lump sum for which they have waited for five years, and which is the pension that they were entitled to in the first place?
James Purnell: I believe that we have addressed that issue: those people will be taxed in exactly the same way as if the situation had not occurred and they had been paid regularly—but we shall be happy to write to the hon. Gentleman to set that out.
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