Clause 1 - Meaning of “Savings and Retirement Account (SaRA) schemes”

Part of Rights of Savers Bill – in a Public Bill Committee am 2:45 pm ar 14 Rhagfyr 2005.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Stephen Timms Stephen Timms The Minister of State, Department for Work and Pensions 2:45, 14 Rhagfyr 2005

Let me welcome the fact that you are in charge of our proceedings this afternoon, Mr. Benton. I look forward to our debate under your chairmanship.

In response to the points made by Opposition Members, the position that I am taking this afternoon and the amendments tabled in my name are entirely consistent with what I said on Second Reading. I said that I was sympathetic to the objectives of the right hon. and learned Member for Kensington and Chelsea and share some of the aims that he set out on that occasion, but that we should not support the approach that the Bill takes and should continue to oppose it in Committee. Not only am I following in the tradition of my predecessors who responded to Sir Frederick Banbury and Mr. Bevins, I am being consistent with what I said on Second Reading.

I welcome the debate and the opportunity to consider in more detail the proposals that we analysed on Second Reading. I want us to have a constructive   debate; it will be useful in the context of the work taking place on pension reform. However, it would not be right for the Bill to proceed to the statute book.

It is only two weeks since we received the report of the Pensions Commission. It is a substantial document, and I agree with Opposition Members about the quality of the commission’s work. It is an impressive document, not least because it is a unanimous report from a former director general of the CBI, a former president of the TUC and a distinguished academic. We have made it clear—Opposition Members also made this point this afternoon—that we will examine carefully its recommendations in the period ahead, thus continuing the national pensions debate that we started earlier this year. At this stage, we have ruled nothing in and nothing out, and will continue to welcome proposals from everybody with an interest in the future of our pensions system. That is at the heart of the difficulty facing the Committee this afternoon.

Among its other major proposals, the report proposes a new pensions vehicle—the national pensions savings scheme—that would have much lower charging than most personal and stakeholder pensions have. It would certainly look very different to stakeholder pensions and the vehicles, or accounts, proposed in the clause. In the past few weeks, some interesting alternatives to the NPSS have been proposed. At the savers summit of the Association of British Insurers last week, I challenged the association to come forward with details of its alternative by the beginning of February. I suspect that that will look rather more like the accounts described in the Bill than the NPSS model. Other proposals might well be made. At this stage, the Committee simply does not have the information that it needs to decide whether we need the vehicle proposed in the Bill, the NPSS or something else. It will be another few months before the information needed to make that judgment is available.

A particular issue on which I should like to hear the reflections of the right hon. and learned Member for Kensington and Chelsea is that of the charge cap, because an important concern of the Turner report is that the cost of saving for a pension should be less than it currently is with stakeholder and other personal pension models. A power similar to one proposed in the Bill is used in stakeholder pension provisions to cap the proportion of a member’s funds that may be used to pay for the administration and management of the fund. The cap was originally set at 1 per cent. of the individual’s fund per annum; it was recently amended—for new members from April this year—to 1.5 per cent. a year for the first 10 years of membership, thereafter reverting to 1 per cent. Does the right hon. and learned Gentleman envisage such a charge cap for these accounts? If so, what are his thoughts on what it might be?