Rights of Savers Bill

Nick Hurd makes a major speech on the Rights of Saver Bill and addresses the "collapse of the culture of savings".

Mr. Nick Hurd (Ruislip-Northwood) (Con): Several Labour Members have spoken with great passion on behalf of those members of society who do not have the resources to save, and that is entirely respectable. However, in their passion, they have been deaf to the purpose of the Bill, which is to address the important issue of how to arrest the collapse of the culture of savings.

I congratulate my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind) on introducing a set of proposals that will address some of the structural barriers to saving, including the complexity and rigidity of pension products, and the inflexibility and poor value of annuities. I also congratulate him on recognising that the savings industry and the Government have to move with the times, and to respond to a new generation of workers who have much greater job mobility and who ask different things of their savings across their life cycle. I represent a London constituency in which the first rung of the housing ladder is looking increasingly out of reach for first-time buyers. To my eyes, the proposals benefit from drawing on the experience of what appears to work in other countries, notably Canada. They are underpinned by a set of principles that I understand, namely choice, flexibility, a desire for simplicity, and a desire to give people more control over their lives rather than increasing their dependency on the state. In doing that, the proposals go with the grain of human nature and aspiration.

The proposals are a persuasive response to a problem, the scale of which is astonishing. The Pensions Commission has warned us that 12 million people are drifting towards inadequate retirement income. In its own words:
"Britain's funded private pensions system is in serious decline".

The Government's own statistics tell us that only 44 per cent. of 16 to 65-year-olds have a private pension. That is 300,000 fewer people than only four years ago. The hon. Member for Denton and Reddish (Andrew Gwynne) echoed the astonishing remarks of the Chief Secretary to the Treasury at Treasury questions last year, when he seemed to suggest that a collapse in the savings ratio was a symptom of economic success. There is no room for complacency when the Association of British Insurers' report on the state of the nation's savings tells us, as I said earlier, that half the population feel that they do not understand pensions, and that only 12 per cent. think that the Government are doing enough to encourage them to start saving or to save more in a pension.

All this is hugely important for public finances, because if this trend continues, the taxpayer will have to spend more on means-tested benefits or on raising the state pension. It is also important for our sense of social justice, because we are heading in the direction of much greater inequalities in retirement provision. It is also hugely important for the competitiveness of our economy and for our quality of life. When we consider what the country is going to have to spend on upgrading its transport and energy infrastructures, and when we consider the implications of longer life expectancy and medical advances on our expenditure on health provision, it is increasingly obvious that this country will need to look to private capital and private savings to bridge the investment gap. However, the trend is going in completely the wrong direction.

These proposals chime with my own sense of priority, my own personal experiences, and the voices that I hear in my constituency. I particularly welcome the proposals to allow employers' pension contributions to be paid directly into a pension scheme of the employee's choice.

Like my hon. Friend the Member for Weston-super-Mare (John Penrose), I can confess that I, too, am guilty of high proliferation and low persistence. At the tender age of 43, I have four of those very modest pots, so I welcome the prospect of people being able to keep all their accumulated pension funds in one simple, accessible vehicle, particularly with the introduction of a flexible pension-regulated product such as SaRA, whose very name should at least endear itself to the Chancellor.

I also welcome what appears to be fresh thinking on the old chestnut of annuities. I, too, hear persistent messages from my constituency. The first is, what is the point of saving when the person who does not save receives the same amount from the taxpayer via means-tested credits? The second is resentment at having to buy a life annuity by the age of 75.

That resentment involves not having freedom of choice and it is fuelled by the fact that people consider annuities a bad deal-illiquid and inflexible, they provide a low return and are undermined by the inability to pass on a pension pot if the person dies after what looks like an arbitrary cut-off age of 75. I therefore recognise the retirement income fund-RIF-as a product that moves the debate on in the face of a long-term problem. I sincerely believe that only a bipartisan approach will solve it.

I hope that the Government are big enough to recognise that these proposals add enormous value to the debate.

12.16 pm