Pensions Bill

Government Department: Department of Work and Pensions

Liberal Democrat Spokesperson in the Commons: Danny Alexander
Liberal Democrat Spokesperson in the Lords: Lord Oakashott of Seagrove Bay


Government proposals

This Bill will enact the remaining provisions of the pension reform package set out in the White Paper, Security in retirement: towards a new pension system. This involves:
· Introduction of a new scheme of personal accounts, which are intended to provide low and middle earners with a private pension in addition to their basic state pension.
· Individuals will be automatically enrolled into a pension but will have the right to opt out.
· Minimum employer contribution to improve incentives to save.
· An independent Delivery Authority, utilising the skills and experience of the private sector, would determine how the new scheme is built and run.

Liberal Democrat Response

While the introduction of personal accounts is a step in the right direction, the Government’s attempts to increase incentives to save for retirement are totally undermined by their obsession with means-testing.

Many people on low to middle incomes will think twice about setting aside money for old age when Labour’s massive increases in means-testing mean that they would simply be saving money for the Government rather than themselves. (Under the Government's proposals up to 45% of pensioners will still be being means tested in 2050.)

While the Conservatives are right to agree with us on this point, it’s a shame that they haven’t bothered to propose a workable solution. Hot air alone will not solve this problem.

The introduction of a decent state pension is essential if we are to provide a stable platform for private saving. The Liberal Democrats would immediately restore the link between pensions and earnings and introduce a citizen’s pension within 10 years that would slash means-testing from over 50% of pensioners to less than 10%, dramatically boosting incentives to save.

Additionally, we are worried that the Government will not provide sufficient specific financial advice to assist savers when personal accounts are rolled out. While payments into personal accounts, given the employer and government contribution, will be in the best financial interests of many low to middle income earners, for a significant number they will not. Not only will those who face high marginal deduction rates due to receipt of means tested benefits lose out but individuals will high interest loans could find themselves plunged further into the red unless it is made clear that paying into personal accounts will not leave everyone better off. If personal accounts are to be trusted, it is essential that the government provides adequate funding for information to jobholders who will be affected by personal accounts.

The Liberal Democrats in the House of Lords have been supportive of what the Bill is hoping to achieve, yet have tabled a number of key amendments that have been considered in committee stage.  The main amendments that Lib Dems have moved concern the necessity to provide generic face-to-face advice, particularly for those that are over 50 years of age, before jobholders are automatically enrolled into the Personal Accounts system, seeking to ensure that the earnings link with pensions is reinstated no later than 1st April 2012 and generally ensuring that all purchasers of annuities sign a form of consent that is set and reviewed by the Financial Services Authority stating that they have purchased an annuity whilst being made aware of other potential better value annuities.

Applicability (e.g. Scotland)
The Bill applies to Great Britain. Its provisions relate to matters that are reserved to the UK Government for Scotland and Wales, but devolved in Northern Ireland.

Further Information
Commons Second Reading
Committee - 15/01/08 (Morning) 15/01/08 (Afternoon) 17/01/08 (Morning) 17/01/08 (Afternoon) 22/01/08 (Morning) 22/01/08 (Afternoon)
Progress of the Bill

Click here to read the Government's note on the Bill

(NB. Information on the stages a bill goes through to become an act of Parliament is available by following this link.)

Last updated 05/08/08