|Child Support, Pensions and Social Security Bill
Mr. Rooker: That will not happen. Stage 2 of the state second pension—the flat rate—will not occur until stakeholder pensions are established. Later amendments will provide for ways of measuring whether they are established. They will not have been established if great chunks of the work force miss out on them.
Mrs. Lait: I realise that we are coming to that group of amendments soon, and we shall probe the Government on that issue. Will one of the criteria for the Secretary of State not introducing the stakeholder pension be based on whether a high proportion of sole traders and those working for companies with fewer than five employees have not taken up stakeholder pensions? If so, what will that proportion be? My hon. Friend the Member for New Forest, West is right—sole traders and people in that category constitute a significant part of the work force, who would not benefit from SERPS.
Mr. Rooker: I could jump the gun by saying that, under amendment No. 170, we shall accept the spirit of that point, which I hope will answer the hon. Lady's question on this amendment. It is impossible to list how to measure success, and I shall say more about that matter when we debate the next amendment. If large chunks of the market are missed out, for various reasons, a flat rate will not apply. ``Established'' means established; it does not mean started up and available. We have an avowed target in terms of the numbers of people who take up second pensions, if only on a voluntary basis. Nevertheless, we want a fairly large part of the market to be involved. I cannot comment on the issue of sole traders; our policies are not predicated just on the basis of sole traders, to which the hon. Lady continues to refer. There will not be a flat rate unless the scheme is established. We will have a set of criteria, which will be debated in Parliament, to assess whether it is established. As I have said, the spirit of amendment No. 170 can be accepted even before we debate it.
Mrs. Lait: On the basis that we will consider the issue in more detail under amendment No. 170, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mrs. Lait: I beg to move amendment No. 170, in page 27, line 16, at end insert—
We move swiftly to what will be a long discussion on the meaning of ``established'', how it affects the withdrawal of SERPS and whether it is worth while for people to continue to stage 2 under the state second pension. We are concerned about paragraph 8 of page 40 of the Green Paper, which states:
When we discussed the previous amendment, we focused on a group of people who might risk losing out on their entitlement. We have to bear in mind the fact that one of the complications is that the target audience for stakeholder pensions is those who earn between £9,500 and £21,000, and there is a real and meaningful debate about whether it is worth while taking out a stockholder pension or state second pension, or whether it is better to rely on the minimum income guarantee, housing benefit and council tax benefit. There is no guarantee, other than promises, that stakeholders will evolve as the Government hope, for precisely the reasons that I mentioned. I do not want to bore the Committee by saying how much someone would have to save, in a stakeholder or state second pension, to have a better benefit than the minimum income guarantee.
Mr. Swayne: It is a question of not so much being bored as being enlightened. Many constituents need to have those facts drawn to their attention.
Mrs. Lait: Indeed.
Mr. Edward Leigh (Gainsborough): Does my hon. Friend agree that one can be enlightened and bored at the same time?
Mrs. Lait: I hope that people will be enlightened, and not in a boring way. If it is to be effective, advertising information must not bore people. One problem is that too many people are bored by the subject of pensions, because of its complexity. Frankly the Bill only adds to their difficulties instead of making it simpler.
The Government want to ensure that as many people as possible opt for stakeholder pensions. As I say, there are rival attractions. The minimum income guarantee has yet to prove that it is a worse deal for people than the amount that they could save either through stakeholder pensions or through the state second pension. We want to tease out from the Government what criteria they would use for establishing stakeholders pensions.
I am always aware, particularly in regard to pensions, that there is an iron law of unforeseen consequences, as people act in an economically rational manner. By definition, we cannot foresee what that rational manner will be, but we are well aware that, for people on a tight budget to commit to putting away a certain amount every month, can be a strain. However well intentioned they are and however much we want them to save for the future and provide for themselves, they may be better off investing in something like an ISA.
We hope that the Minister will say something more positive than he did on amendment No. 169 in relation to ``established''. Can he define ``established''?
Mr. Rooker: We touched in earlier debates on the interaction between couples and single people, and we must bear that in mind, because comparisons can be misleading, but what the hon. Lady said about ISAs is crucial. We must not give people the impression that there is equal treatment. The ISA is a savings scheme. If a person falls on hard times and goes on MIG, those savings are taking into account. If a person takes a stakeholder pension, his assets are treated slightly differently for means-tested benefits. People will lose their savings for what they might have thought was a pension because they were in an ISA rather than a pension scheme.
Mrs. Lait: I have no difficulty with the Minister's point if somebody has the spare cash to save from a continual stream of income. The difficulty arises when one looks over the whole term of life and saving, because the pressures on a family or a person to save at different times of their life are different. It is possibly easier to save when one is young and unmarried for, say, a starter pension, and then get married. If both the couple work, as is normal these days, they will be relatively well off and they can then both invest in stakeholder pensions or in the state second pension. Then children come along.
All members of the Committee who have children, and even those who do not such as myself, are well aware of the costs that children impose on a family, however well off they are. We know, because we have talked about child support issues, how a woman's income can fluctuate. The state second pension, in which the credits are up to £5,500, recognises that, when women are looking after children, their income can go down and, suddenly, a relatively affluent lifestyle is under enormous pressure. That is when saving long term becomes less of a worry and an ISA becomes a better way of putting money away tax-free for 10, 15 or 20 years until the children leave home.
I read today that the average age at which children leave home is 22, which I cannot believe. Clearly mothers make their sons far too comfortable, and the daughters are probably looking after the sons, but we shall not go into the details of that. Until the children leave higher education, and these days more and more children are going into higher education, the pressure on the family budget is enormous.
People on the incomes that we are talking about could find their budgets under huge pressure for at least 20 years if they make a monthly payment to a pension. That is when people decide, in a cold and calculated way, not to invest in a long-term pension, but, if they have some spare cash, to invest in an ISA. I admire such people because that is a jolly tough decision. Ministers must accept the need for flexible savings. However flexible a stakeholder pension is, it is not as flexible as an ISA. As families struggle to bring up their children, they will have a huge savings gap in the middle.
What criteria are we talking about for success? We have said that those who work for small firms may pick up an ISA. In Standing Committee debates, a figure is often produced as being typical of the problem under discussion. On this occasion, the dentist's wife turns out to be the figure to whom people refer when they talk about stakeholders. I feel sorry for dentists' wives everywhere for being stuck with this image. We are talking about the fairly well-off, middle-class wife who stays at home, perhaps acting as a receptionist or keeping the books for the dental practice. It seems sensible that the dentist should be able to invest in a stakeholder pension on behalf of his wife, but is that one of the criteria? What is the take-up? Will it be broken down by, say, social and demographic classes to show whether the stakeholder pension is successful? Will such people come into the target group to which the Minister referred—those with an income of between £9,500 and £20,000—because of what they do to sustain the dental practice? It does not take a great deal of imagination to read across into similar situations. If middle-class people take up the stakeholder pension on behalf of a lower earner in the family, will that be regarded as success for the stakeholder pension?
We need to know what percentage is needed to show whether the stakeholder pension is established to ensure that the Government's policy for the interaction of stakeholder pensions and state second pension stage 2 can go forward. Those who have to go on to the second stage of the state second pension after five years will find themselves badly affected, as the Minister has said on many occasions, because they have moved on to the flat rate. The Minister is trying to shoehorn them all into stakeholder pensions to make everybody save in the private sector.
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