Contribution limits

I beg to move amendment No. 28, in clause 53, page 25, line 34, at end insert

‘save that the employers’ contribution shall be fixed at 3 per cent. of the amount of jobholders’ qualifying earnings in any pay reference period.’.

This is a fairly simple amendment, harking back to earlier clauses—which is very much welcomed by employer organisations like the CBI—and clearly sets out a 3 per cent. employer contribution in the Bill. We had a fairly prolonged debate about this issue only the other day, in the context, I think, of a Liberal Democrat attempt to jack that up to 5 per cent. But we managed to defeat that—or at least persuade them of the error of their ways—on the basis that this was all part of the post-Turner settlement, as it were.

It is important that that be in the Bill and I cannot imagine that there can be any controversy about also writing it in to clause 53, which deals with contribution limits. There are other issues regarding what should be in the Bill and we will come to those in later amendments.

I want clarification about what the hon. Gentleman’s intention. It has always been argued that the 3 per cent. should be the minimum employer contribution. His amendment would make it the only possible contribution. Is that his intention?

The Minister makes a good point, in which case we will have to recast the amendment. If the Minister accepts the principle that we should write 3 per cent. into clause 53 we would be very happy with that.

It just seems to me that if there is a clause headed “Contribution Limits”, then it is worth spelling out what is envisaged on contributions. We know the position at the moment is that we start off with an 8 per cent. overall level of contributions: 5 per cent. from an employee, 3 per cent. from employers. Again, this point was quite hard fought the other day on the basis that, if some future Government or personal accounts board wanted to come back and argue for a higher statutory employer contribution, they would have to do that by way of primary legislation. I think that remains the Government’s position, and I am sure our position as well—and that is the kind of reassurance that employers are looking for.

If the principle is acceptable to the Minister—I was not going to press this amendment to a vote anyway—I am sure he can find a way of setting out even more issues about contribution levels, including the 8 per cent. overall figure, into clause 53, which just seems a logical place to put it, despite the fact it appears earlier in the Bill.

The points made by the hon. Member for Eastbourne are ones that we, the Liberal Democrats, would wish to associate ourselves with. There is clearly a question about employer contribution and how it can be maintained at the 3 per cent. level that has been promised, and that is the expectation. An amendment such as this—which makes it clear that there would have to be further primary legislation if that were to be changed—would give the appropriate reassurance for which employers would certainly be looking.

Clause 18 says

“the employer’s contribution must be at least 3% of the amount of the jobholder’s qualifying earnings in the pay reference period.”

It is in the Bill already. I am not sure there is any point in putting it into this clause. It might confuse the courts, who may think there is some other further point.

We cannot accept the amendment proposed by the Conservatives, on the basis that it makes 3 per cent. the contribution; we have always made it clear that we regard it as a minimum contribution. We expect many employers will want to make a contribution higher than 3 per cent. We think that is a matter for them. That is why we have worded clause 18 in the way we did, saying that the employer’s contribution must be at least 3 per cent. of the amount of the jobholder’s qualifying earnings. I cannot see any point in putting it here.

I thought the Conservatives had taken a view that the employer’s contribution should be held at 3 per cent. which somewhat surprised me. I see now that that was not the intention—so that is clearer—but I do not see any point in putting it in twice. I can see a point in not doing it, in that the courts might want to know why it was there twice and whether this meant something slightly different. I am not convinced of the argument and do not see why this is necessary. I regret I cannot accept the amendment.

I am happy to be cajoled by the Minister. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 77, in clause 53, page 25, line 34, at end insert—

‘(1A) The Secretary of State must in each tax year from 2005 determine whether the amount prescribed in subsection (1) has maintained its value.

(1B) If the average earnings index (including bonuses) for the whole economy for September of a year is higher than the index for the previous September, the Secretary of State shall as soon as practicable make an order in relation to the amount in section (1), increasing the amount, if the new index is higher, by the same percentage as the amount of the increase of the index.’.

With this it will be convenient to discuss the following:

No. 29, in clause 53, page 26, line 1, leave out subsection (3) and insert—

‘(3) There shall be an absolute prohibition on transfers between the pension scheme established under section 50 and other pension or savings schemes, and jobholder contributions shall be limited to £3,600 in any one year.’.

No. 103, in clause 53, page 26, line 1, leave out subsection (3) and insert—

‘(3) A member may make payments that are not contributions for the purposes of provision under subsection (1) up to a maximum of 2 per cent. of the standard lifetime allowance’.

No. 30, in clause 53, page 26, line 1, leave out subsection (3).

No. 58, in clause 53, page 26, line 6, leave out subsection (5).

This group of amendments will take a bit more time. They are all around the issues of contribution caps and transfers into and out of personal accounts.

I will quickly go through what the amendments seek to do and then give a bit more background. It is logical to start with amendment No. 29 which incorporates an absolute prohibition on transfers between the pension scheme—the personal accounts—and other schemes and also says that the contributions of the jobholder should be limited to £3,600 in any one year. Amendment No. 77 deals with how to maintain the value year-on-year of that contribution and I will return to that in a moment. Amendment No. 30 seeks to take out subsection (3) which would allow an order to change contribution levels. Subsection (5) would be taken out under amendment No. 58 which gives the Secretary of State power to repeal this section.

There has been a long and fairly fierce debate about contribution limits. There are very powerful arguments on both sides. On the one hand are ranged the consumer organisations and others, such as Age Concern, who argue the case for more flexibility in either a lifetime limit or a higher annual contribution cap or transfers in, either a one-off in year one or subsequent years of capital amounts.

Some of the arguments focus on people who want to catch up contributions—perhaps some of the people I talked of earlier who do nothing between now and 2012, assuming that is the date—or people who want to put savings, an inheritance or divorce settlement into personal accounts. I apologise to people whose arguments I am paraphrasing. I will perhaps touch upon one or two in more detail and perhaps in their own words in a minute.

Ranged on one side are a group of people, especially those representing the industry, who argue very strongly and persuasively that we must take every step that we can in legislation to ensure that personal accounts, even if they are a success in their own right, do not erode existing pension provision and compete as a non-advice, low-cost alternative to other pension savings. We have debated at length the nightmare scenario, which was conjured up by the Pensions Policy Institute, of personal accounts being quite successful, but the overall pension savings in the country sharply declining because of levelling down and so on.

On the other side of the argument is the mantra of simplicity. Mr. Tim Jones seems to be getting a good run today. He raises this every time I have any kind of conversation with him, and I am sure the same goes for Ministers. As he and Paul Myners have said to me—and, I am sure, to everybody else who takes an interest in these things, including the Minister—every extra bell and whistle will add to the cost of personal accounts, and might add to the risk of them not being ready by 2012. As will become apparent when I deal with these amendments in more detail, I side with those who say, “Let’s not take risks about implementing personal accounts. There might be reasons for reviewing things later, but we need to be absolutely sure that this is ready to go in 2012,” and those who say, “We have a pretty good private pension set-up in this country as it is. It has taken a few knocks, but it is still a lot better than many other countries’, and we do not want to see that eroded or threatened by this new personal accounts system.”

Let me deal first with the annual contribution cap. The Pensions Commission originally proposed an annual limit of about £3,000, in support of which it said:

“This approach would mean that lower earners would effectively be free of any cap (since they would be unlikely to be able to use the freedom) while limiting the extent to which higher earners could use the NPSS as a low-cost alternative for pension saving that is already in many cases occurring.”

It is clear from that that the commission sussed out quite early on that there was a risk of levelling down and that that had to be dealt with clearly.

We then made a quantum leap to the December 2006 White Paper, when the Department for Work and Pensions suddenly popped up with the suggestion that the limit should go up to £5,000. It also proposed that the Personal Accounts Board should be able to review the limit, and suggested a higher limit of £10,000 in the first year. I know that the Minister has been turning that over in his mind, so he might have something to say about it. The Work and Pensions Committee also examined at the issue.

The £5,000 announcement caused, to put it mildly, a bit of a flurry in the industry, because it emerged that a £5,000 cap would, in theory, incorporate something like 94 per cent. of all existing pension provision, which was not at all what Lord Turner had in mind. We in the official Opposition were quite taken aback by the proposal. We did not know where it came from, what was behind it and who was in favour of it—it was certainly not the industry—and we did not think that it was sensible. We made it very clear, both in public and in private, that if the Government wanted to proceed with that figure, they would jeopardise the whole consensus process and that we would certainly not sign up to it. The Government got their mind right, to quote another famous film, and came up with a figure of £3,600 at 2005 prices, which we were content with, and a mini-consensus has grown up around that figure since, which is good news. We would still urge the Government to keep the £3,600 figure, and the Minister has made it abundantly clear that that £3,600 at 2005 prices is still the policy.

We are trying to help out the Minister with amendment No. 77, which deals with uprating the figure. However, the figure does not appear in the Bill, or even, I believe, in the explanatory notes. We think that it should, and some of the witnesses agree with us. I will cite what some of them said in a moment.

I give credit to the Engineering Employers Federation and Mr. David Yeandle, who came up with the wording of amendment No. 77. It is designed to make it clear that the Government will not only carry through their commitment to an annual limit of £3,600, based on 2005 earnings levels, but that they are committed to that limit

“being uprated with earnings from that point to implementation from 2012.”

It cites that the precedent for such tight drafting as section 34 of the Employment Relations Act 1999, which is used to implement, among other things, the maximum weekly pay that is used for calculating statutory redundancy pay annually in line with the retail price index. This is not rocket science.

In our evidence session, I was underwhelmed by the Minister’s response when I quizzed him as to why £3,600 was not mentioned at all in the Bill. He said:

“£3,600 is a 2005 figure”,

which is correct,

“which will be annually uprated as we deal with issues in terms of the economy, inflation and other factors. Therefore we want to ensure we do not enshrine in statute something that we then plan to amend year on year. ”

That is fair enough, up to a point. He continued:

“For those reasons, enshrining that figure in legislation would not be wise but we would intend to say that very clearly the policy is that that is the figure; we do not intend to increase it other than by the increases in the level of inflation.”——[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 113, Q138.]

Why am I not convinced by that? All sorts of pieces of legislation are peppered with examples of figures that change. At the moment, £3,600 may not be the right figure. However, I have never claimed that any of my amendments or new clauses is the ultimate. We do not have all these clever people working for us, and if the principles are accepted, the parliamentary draftsmen can go away and sort it out.

However, given that this is such an important issue, why can it not be in the Bill? The argument that one should not put a figure in legislation because it will change is, with respect, completely bonkers. Figures have been put in all sorts of legislation, such as tax and minimum wage legislation, and those figures change. There is almost invariably a formula in the legislation setting out how they are to change. With respect to the Minister, I do not think that that is a valid argument against the amendments.

The EEF supports a £3,600 limit. Originally, it lobbied the other way and wanted the limit to be more open and flexible, but its attitude now seems to be, “We have now alighted on this figure and there seems to be general agreement—perhaps some of it grudging—that that should be the figure, so let us make sure that it is in the legislation.”

There is also a question of lump-sum contributions and transfers. Although I intellectually understand the arguments that are put forward in favour of them, I think that there are real arguments against. I have dealt with simplicity and the erosion of existing provision. If someone had a £10,000 inheritance and decided to put that into their personal account scheme, there would be two major problems.

A lump sum would not attract the employer contribution. I do not want to reopen the whole debate—important though it is, and we have had it more than once—about the groups that will benefit from personal accounts, not benefit, or not benefit as much as they expect. Those three groups—those that will benefit, those definitely at risk and those in the middle, as identified by the PPI—will be part of the ongoing process at which we will be looking on a cross-party basis. Part of the definition of whether people are going to be better off will be based purely on an employer contribution, because that will make all the difference to whether they are going to get something out of this or not. However, with a £10,000 lump sum, there will be no employer contribution.

We also keep coming back to the issue of advice. No one is going to give any of those people specific advice  on their particular situation. Otto Thoresen, as people keep reminding us, is wrestling with the oxymoron of generic advice. We will see what he comes up with in his final report—I think that the Minister said that other day that it might be published in March. Someone might well be advised not to put that £10,000 in personal accounts and to do something completely different, but there will be no one queuing up to give such specific advice.

Let me come back to what some of our witnesses said about the subject. When we saw Mr. Stephen Haddrill of the Association of British Insurers on 15 January, I asked him what he thought should be in the Bill to minimise the erosion of existing provision. He talked about his concerns on levelling down and the need to ensure that the personal account remained

“targeted at the people it is really designed for...Money speaks, and we fear then that personal accounts will get delivered for the people with more money”— rather than the target group. He went on to say:

“That is why we do not like the idea of high levels of contribution being allowed during the year—the Minister has given assurances on that, but we do not see that £3,600 figure on the cap actually on the face of the Bill. We— this is the view of the ABI—

“would much prefer that to be in the Bill.”

He continued to say:

“We do not see anything about transfers in from other schemes on the face of the Bill in terms of them being stopped, which is what we would like to see. I think that we should also be very cautious indeed about random lump-sum contributions—in fact, not allow them—into these schemes, because they will not be matched by an employer contribution”—

I have made that point already—

“and they will not necessarily be the right thing to do. This is an advice-free zone”— here is the chilling bit for Ministers—

“so people will be making mistakes, and, in 20 years’ time, liabilities will be laid at the door of the Government as a result.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 24-25, Q31.]

I do not know who the Government will be in 20 years’ time. All that I can say with some confidence is that neither the Minister nor I will be in our posts.

I do not know whether that is significant, coming from the ABI, but I should touch on something else that Stephen Haddrill said. When he talked about additional contributions, he said:

“The real reason why we do not like additional contributions is because we think it complicates matters. We think it will be taking money out of financial pots where people have had advice and where they have got good investments and are putting them in something on which they will have no advice.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 37, Q52.]

That was all he has to say on that particular issue. Additionally, the written evidence of the Engineering Employers Federation stated:

“We are therefore very surprised and disappointed to see that, whilst Clause 53 of the Pensions Bill refers to the introduction of an annual contribution limit, there is no reference to the level of this limit in either the Pensions Bill itself or the Bill’s Explanatory Notes. We consider that both the £3,600 annual contribution limit and its uprating in line with earnings between 2005 and 2012 need to be set out clearly in the Pensions Bill as we feel that the absence of this detail will inevitably reopen the debate on this important issue which we felt had been resolved.”

I will take the Minister at his word when he says that he does not want to reopen the debate, and, certainly, we do not. However, the sure way of ensuring that that does not happen is to put it in the Bill. I have already said that I cannot see the remotest technical problem with a clause that takes account of £3,600 at 2005 prices.

The Investment Management Association, which has similar views, hardly surprisingly, to those of the ABI, says:

“Key to keeping the costs of the system low is ensuring that individuals can be confident that they can participate without seeking regulated financial advice.”

It goes on to talk about complications because of other contributions. It says:

“IMA therefore supports a strict annual contribution cap, with £3,600 a reasonable level, (uprated annually as appropriate) and that this should be specified in the Bill.”

Interestingly it goes on to say that it would accept a higher limit

“for the first year in which Personal Accounts come into operation...We also oppose Amendment 103”

—which we will be hearing about—

“since this would allow annual contributions of up to £30,000, taking the system well beyond its core purpose.”

I agree with that. I am delighted to see that the IMA supports my amendment to remove subsection 5, which it describes as

“an unnecessary power to repeal by Order the section dealing with contribution limits.”

It says that:

“This would be required only if Parliament were not committed to keeping Personal Accounts focused on their target market of those without current access to long term saving. While there may be a need for flexibility in the event of a future review that leads to a different consensus about contribution limits, there are sufficient powers in Clause 53 to allow the Secretary of State to change the limit in any direction. We cannot see however why it might ever be necessary to consider abolishing the limit altogether.”

There are powerful arguments on both sides of the debate. We have come down on the side that I have described. This is the purpose behind our part of the group of amendments and I hope that those arguments will commend themselves to the Committee.

The amendments cover at least three important, but distinct, areas: first, the uprating of the limit, secondly, the ability to transfer in or out of personal accounts and, thirdly, whether, in addition, there should be a lifetime limit. I disagree with much of what the hon. Member for Eastbourne has said about the second and third of those. However, on the first of those, the uprating of the annual limits, he makes a great deal of sense. Amendment No. 77 seeks an annual limit of £3,600 at 2005 prices that should then be uprated in line with the relevant index in the future. To have that in the Bill, just to be clear of the Minister’s intention, makes a great deal of sense. I will now turn to other issues where there are some grounds for disagreement.

The hon. Member for Eastbourne seeks to put in the Bill an absolute ban on transfers in and out of personal accounts. It is clear from what the Minister said  elsewhere that that is a question that he seeks to review in 2017. That approach is probably a sensible one, but there are cases where, having had a period of stability in the initial phase of personal accounts—which I suspect is what the 2017 review is designed to achieve—there are circumstances in which to allow small transfers in and out would be appropriate.

We have talked previously about particular groups of people such as those with small pension pots or broken work records. Let us take as an example someone who has worked for two or three years in a relatively low income job, with a company pension scheme, who has perhaps built up a small pot which would be significantly lower than the trivial commutation limit. After a period out of work, they might come back into work and have a personal account again but have only the income and the time to build up a relatively small pot. It would clearly make sense, in due course, to allow those small pots to be combined, within appropriate limits, to allow the transfers in.

I accept what the hon. Member for Eastbourne says, and he is right that this point has been made strongly by PADA. He is right that Parliament should be conservative about adding unnecessary bells and whistles to the scheme, because the more bells and whistles that are added, the more complex it becomes and the harder it becomes to keep the charges at a low level. That would then have an impact on the benefits that members will receive. However, the critical word has to be “unnecessary”. There are some additional ways of contributing to personal accounts which I would not characterise as unnecessary bells and whistles, but which are potentially necessary to allow personal accounts to achieve their full objective. There is at least a genuine question to be asked about allowing the transfer in of other small pots so that there can be a combination which allows a decent degree of income to be realised in retirement. I hope that the Minister can say that the 2017 review will be a real review that will look at those issues in detail with a view to ensuring that the interests of members, particularly those I have described who might have a number of small pots, are met. That is why I strongly oppose amendment No. 29.

I turn now to the idea of having some additional lifetime contributions limit, which is embodied in amendment No. 103. It suggests that

“A member may make payments that are not contributions for the purposes of provision under subsection (1) up to a maximum of 2 per cent. of the standard lifetime allowance.”

Standard lifetime allowance, as the Committee will know, is currently £1.6 million. Two per cent. of this would be £32,000, approximately twice the current trivial commutation limit. We had an interesting debate about trivial commutation in which I proposed an amendment that the trivial commutation limit be increased. Amendment No. 103 would add a degree of flexibility to the system while not allowing excessive contributions to be brought in from outside. That would allow people in the target group—and this has to be of interest to the Committee—who are on low incomes and may only be able to make a relatively small contribution to their personal account, to make use of any windfall, legacy or inheritance they may  have to build up what will be, in many cases, the only pension they have to ensure an adequate income in retirement.

While the hon. Member for Eastbourne is absolutely right that there would not be an employer contribution attached to any such transfer in, the obvious reason for such a transfer would be to allow growth to take place in that money so as to contribute to the overall retirement fund. That would allow them to reach a level at which they are able to benefit from an annuity or a regular income stream as opposed to a lump sum, which is all that they would be entitled to in a very small pot. I must confess that I was not in the Committee when the questions about advice were debated, though I have read with interest the record of those discussions. However, to say that the fact that such people will not be in a position to have advice is an argument against allowing a lifetime contribution limit, is not quite right. If we are to get the advice regime right—it is my understanding that that is what Otto Thoresen has been asked to look into, and it is certainly the basis on which my party’s proposals for the advice regime have been made—we must consider that there are a number of different aspects of life where better access to financial advice is needed by a range of people who will potentially be in the target audience for personal accounts. This is not just advice about personal accounts. Advice is needed about personal debt, for example.

Our suggestion—a national network of financial advice centres, perhaps operating through citizens advice bureaux—would clearly provide a vehicle where, if someone wished to ask a question about this sort of decision, they would be able to do so. People would be able to receive generic financial advice, not restricted to personal accounts, but dealing with a range of other circumstances. Such an approach would allow relevant questions on this sort of decision to be asked. So that is not a genuine objection to amendment No. 103.

I am very pleased to see that a number of stakeholders, who follow very closely the Committee’s deliberations, also support amendment No. 103. I note, for example, the EEF’s belief that individuals should be able to make the occasional lump-sum payment, in addition to the annual contribution, into a qualifying workplace limit such as personal accounts, provided this does not add disproportionately to the cost of administration, which must be kept as low as possible.

I am also pleased to note the support of Which?. It says that the Government should introduce a lump-sum contribution limit now to allow consumers to pay in lump sums such as inheritance, redundancy payments or bonuses, separate from an annual limit. That would help people to save for a comfortable retirement in line with their aspirations, and allow millions of people to achieve their aspirations, which are not currently being fulfilled. That is the Bill’s principal political objective. Likewise, the TUC has noted its support for amendment No. 103. I could go on, but I suspect I would try your patience, Mrs. Anderson, if I continued to list organisations in support of this point.

Our proposal is not a bell or a whistle; it is an essential feature to allow people on low incomes who are in the target group and may not be in a position to create, through their own endeavours and employer  contributions, the size of pension pot that they wish, to make relatively modest additional payments into their personal account from time to time, with a clear lifetime limit set at a relatively low level. It would ensure that the personal accounts scheme can have the wider benefits desired by everyone on the Committee. That would be a sensible addition to the Bill, and, although I have not yet heard the Minister’s response, I would like to be permitted, if necessary, to press the matter to a Division at the end of the debate.

I have considerable sympathy for some of the points raised by the hon. Member for Inverness, Nairn, Badenoch and Strathspey. He identifies the three key issues we are discussing: the £3,600 annual cap, the transfers in and out and the lifetime investment that people might make.

Our view is that transfers in and out should not be allowed at this time, but he will be aware from my evidence to the Committee that I have some sympathy for this idea in terms of small pots. Let us look at it after 2017, at a more appropriate time when we have reassured the industry—particularly the insurance-based, but also the trust-based pensions industry—that people will not transfer significant sums from one pension fund to another. At that time, the Minister and hon. Members can take a view on whether it is appropriate to allow small pots to be transferred in and out of personal accounts. Tim Jones indicated that there were some benefits in doing that but there is a need at this point to keep a level of reassurance for the industry and that would help with our aim of preventing levelling down, which is an important concern for all Committee members.

There has been lively debate for some time around the lifetime limit. There are strong views on both sides. I do not propose to close that debate down now. I hope that, in due course, a wider consensus will emerge. We certainly do not have that now. Closing down the debate on the £10,000 limit at this time would not be the right way forward.

I am pleased that the Minister does not wish to close down that debate. He is right that there is a divergence of view within the stakeholding community. What steps would he take to bring consensus on that important issue? Clearly, if there is to be a consensus, it would require the Bill to be amended. If such a consensus emerges, is he willing to bring forward an amendment at a later stage in the Bill to allow that to happen?

First, we would not have to amend the Bill in order to enable that change to take place. Subsection (1) would allow that. Therefore, there is scope to allow that. It does not need to be in the Bill.

We do need to have a clear view by 2012 because there may well be people who wish to transfer into personal accounts a sum that is perhaps held in a non-pension saving pot. I am sympathetic that there is an argument but I want to look at the detail so, therefore, I am not disposed at this point to put it into the Bill.

The Minister has been very generous in giving way. To be clear on the first point he made, is it his view that, should a view come forward that a lifetime limit is desirable, that it can be done by regulation and not by primary legislation?

Yes. Subsection (1) we believe enables us to do that. Therefore, we would not need primary legislation. We are clear that our aim is that personal accounts should complement rather than replace good-quality pension provision, in order—[Interruption.] I am sorry. I believe that subsection (3) rather than subsection (1) would enable us to do that.

As far as our overall aim is concerned, we are not seeking to replace any good-quality pension provision. That has never been our intention. Indeed, the whole process is to complement not compete or replace current provision.

In order to achieve this we have taken some specific measures to focus personal accounts on the target group. An annual contribution limit of £3,600 and a prohibition on transfers in and out of personal accounts, at least in the initial stage, are part of that process. We have consulted widely on the level of annual contribution limit which involves a trade-off between focusing personal accounts on the target group and providing individuals with flexibility to save. We have been quite clear that we intend to set the contribution limit at £3,600 in 2005 figures. We have reached a broad consensus with stakeholders that this is appropriate.

We have not put the actual amount in the Bill for a number of reasons. First, the level of the limit will not be £3,600 in 2012 because we have undertaken to uprate this figure in line with earnings from 2005.

Of course, I hear what the hon. Member for Eastbourne says about how we could have a figure in the Bill and a mechanism for adjusting it. That is possible and is certainly done in Finance Bills, but it is much easier in Finance Bills as they come around annually. We are looking at a Pensions Bill that we hope will still be looked at in 2020. Having such a figure in the Bill becomes much odder.

It is better to say that the figure will be annually uprated in line with earnings, so we are clear about where we are. We do not have any proposals to change that, and I know that the Opposition Members, should dire things happen at election time, would have no wish to alter it either. I think that the industry has the level of reassurance that it needs about the political consensus.

We have said that we would consider a higher limit of £10,000 in the first year and subsections (1) and (3) provide scope for that limit. As we have said in earlier debates, we are making pension policy for the long term. Without the benefit of 20:20 foresight, we believe it is important to retain an element of flexibility in setting the level of the contribution limit. We believe this approach makes clear our intention but does retain flexibility at the same time, and it is the right approach. So the industry knows our intention—it is all very clear—but I do not think that we need to put it in the Bill.

We have also been clear that it is our intention to uprate the annual contribution limit in line with earnings. This will prevent the value of the limit from being eroded over time as a proportion of an individual's  earnings. But again, flexibility is important. Amendment No.77 would remove the flexibility for the Secretary of State to adopt another index should it become apparent that uprating by earnings is not appropriate. This amendment would also prevent the introduction of a higher contribution limit in year one.

We are considering—as I have indicated—the £10,000 limit, but we are not in the position yet to close down that debate. We have asked the delivery authority to advise us on the cost and implementation issues around a higher contribution limit in the first year of the scheme.

Amendment No.29 would pre-empt this work, categorically ruling out a higher limit in year one. We also recognise that there will be some individuals with irregular contribution patterns who may want to make one-off payments to their personal account to boost their pension savings. Consumer groups in particular have been keen for members to have this facility. I have already indicated what our view is and I do not propose to close that down now.

As far as amendments No.30 and No.103 are concerned, both affect the development of a limit—such as a lifetime lump sum—but in diametrically opposite ways. Amendment 30 would prevent the ability, whereas amendment No.103 would prescribe a limit of £30,000—significantly undermining the purpose of the limits.

As an additional measure to protect existing good quality schemes when personal accounts are introduced, Amendment No.29 seeks to put a blanket ban on transfers in the Bill. We have made clear our commitment to banning most pension transfers into and out of personal accounts. However—as always—we must allow the flexibility for exceptions. There are some very limited circumstances—such as pension sharing on divorce and, as I have indicated previously, the small stranded pension pots—where we would want to have the ability to look at these issues. Paving powers for this ban are at clause 100 of this Bill, and we plan to set out the detail in the scheme order. We will therefore have the opportunity for some further discussion at a later date.

I would like to make clear that we are committed to carrying out a review of the contribution limit and the ban on transfers in 2017. In answer to the hon. Member for Inverness’s question—we intend it to be a real review. Quite what happens in 2017 will depend on the Government at the time. But our intention is certainly that that would be a real review.

These measures are important to protect good quality provision when the personal account scheme is introduced. But they do have cost implications for the scheme, and therefore it is right that we should review them once the reforms have bedded down to see whether they remain appropriate. It is right that, following a review and a debate in the House, the Secretary of State has the power to remove the requirement for a contribution limit. Amendment No. 58 would remove that flexibility and require primary legislation should the review conclude that no contribution limit is necessary. I believe that we have the balance right in the approach we have taken to this legislation.

There are some stakeholders who have different views and seek reassurances on particular points—the £3,600 figure is one. But the way we have sought to  present this, and the level of consensus around it, provides them with the level of security that they need and also enables us to keep some issues open. One of these is the £10,000 issue, where there is still a way for that debate to go and where getting a consensus is likely to be possible. It is not there yet, however, and it may well take some time—perhaps a year or so before we are in a position where the industry and the various groups are able to come together and take a view on this. I am anxious to enable that process to continue, so I hope that will not be circumscribed by these amendments. Having said that, I hope the hon. Gentleman will consider withdrawing the amendment.

I am not wholly convinced. In one breath, the Minister talks about giving people certainty and swearing undying loyalty to the figure of £3,600 at 2005 levels. He then talks about the need for flexibility. He cannot have it both ways because there are bodies out there like the ABI which represents great swathes of the industry and is nervous about the lack of reference in the Bill and in the explanatory notes to £3,600.

I will not press the amendment to a division on this occasion, but the Minister needs to go away and think about this a bit harder because it is clear from the evidence that there are real concerns that this is a figure into which there might be some flexibility—to use the Minister’s word—built.

I also take up the point made by the hon. Member for Inverness, Nairn, Badenoch and Strathspey, when he says that some of the things he is proposing are not bells and whistles. I suppose that one man’s bells and whistles are another man’s something else. We have to be guided, apart from any other arguments, by the pleas of those—like Mr. Jones—who are going to have to try to make all this work; we need to keep it simple. We can always add complexity later on, once it is working properly. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 ordered to stand part of the Bill.

Clause 54 ordered to stand part of the Bill.