§ 3.47 p.m.
§ Sir Brandon Rhys Williams (Kensington, South)
I beg to move,That this House, noting the injustice and frustration suffered by people who are now liable to incur the loss of their pension rights if they change their employment, calls upon Her Majesty's Government to take urgent action to ensure that pension rights can under no circumstances be extinguished and in every practicable case should be made fully transferable on change of employment if required by the beneficiary.When I was elected for South Kensington I thought that I was probably one of the luckiest men in British politics. When, on my arrival in this House, I won the Ballot for Private Members' Motions in my first month I thought that I was also one of the luckiest Members in the House. I wish that I had the expertise in advocacy and the distinguished legal mind of my extremely popular predecessor, Mr. William Roots. He was loved in all parts of this House, and I am extremely glad to be able to report that he is continuing to make good progress in his health. His wife told me only today that he is definitely on the mend.
My predecessor would have been able to make much better use than I can of this opportunity and I therefore ask the House to be indulgent, as it is the first occasion that I have spoken here. This Motion is not a matter of party controversy, because during the last election both the radical parties, and the Conservative Party, also, included a recommendation in their manifestos that something should be done about it. Although the distant objective is quite clear to us all, the way to it is a stony one and it goes through a veritable minefield of technicalities. The way is littered with Private Members' Bills, official reports, Government surveys and the like—all have either been abandoned or neglected.
The basic facts are these. Probably between 12 and 14 million people are now covered by occupational pension schemes, and the number is reputed to be growing at the rate of about 500,000 people a year. About 4 million of those people are included in statutory schemes—that is, schemes covering the Civil Service, local government, nationalised industries and other statutory bodies. The remainder are covered by at least 60,000 803 separate schemes. All the best schemes aim to offer between half and two-thirds of final salary at the completion of the beneficiary's career, plus, in some cases, a lump sum. But conditions vary enormously and it is extremely difficult to generalise.
The total amount being subscribed to all these different types of scheme, taking employers and employees together, is said to be well in excess of £1,000 million a year. The law covering all these schemes is an almost incomprehensible tangle, and it has never dealt adequately with the circumstances which arise when people change their jobs and wish to move their pension from one scheme to another. The initiative to put the matter right rests not with the employers or with the trustees of the many various schemes, and certainly not with the Inland Revenue, but with Parliament. Until something is done, continuing loss will be suffered by the large number of people who change their jobs every year. The best estimate which one can obtain suggests that the extent of these losses is now about £1 million every week.
I believe that a very high proportion, certainly the majority, of all the people at work in Britain today are not making the fullest use of their experience, training and capacity. When we say that something is wrong with the British economy, we are simply speaking in an abstract way. What we should say is that there are millions of people working in places or organisations where, whether they know it or not, they are less usefully and less gainfully employed than they might be. This is a situation where Parliament could usefully intervene in the working of the economy, and it should do so without delay.
The country needs people who are prepared to move from one firm to another in order to broaden their experience and so make themselves fit later in their careers for the responsibilities of general management. This is especially necessary in an industrial world which is tending increasingly towards specialisation. We need people who are willing to change their jobs to help with industrial training or themselves to take extended courses of training. Above all, we need people with resources behind them which will make it possible for them to walk into their works 804 manager's or export director's office, or perhaps the office of the chairman of the firm for which they are working, and say, "I do not like the way in which you are running this organisation. I am leaving."
Unfortunately, this all too seldom happens. We need people who are able to take this initiative so that they can exercise the pressure for efficiency which could undoubtedly be raised if people in the junior and intermediate ranks of management had greater independence. What goes for the private sector of industry and business, I am sure, goes equally, if not more so, for the public sector.
Apart from the purely economic issues, we must consider the question of justice. I heard a few days ago of a Member of the House, a man highly respected on both sides of the House, who, when he came here, lost pension rights which had accrued on his behalf for over 28 years. If I may be excused a personal note, I spent about one-third of my working life with one of our largest industrial organisations. When I left a few years ago I was allowed to draw out of the pension fund a sum of money which was equal to, I suppose, only about a quarter of the genuine asset value of the accrued pension rights standing in my name. But I was fortunate, because had I been working in a firm with one of the so-called non-contributory schemes I should have received nothing at all.
In these days it is very difficult for a man, particularly a white collar worker, to amass any savings before middle life, because while he is waiting to reach his maximum rate of earnings he is probably running into the highest rate of outgoings that he will encounter in his career. He is probably paying for his house and bringing up his children at the same time. It is therefore important that he should be able to protect the savings which he has been able to make by joining an occupational pension scheme.
I turn to specific recommendations. I hope that in doing so I shall not weary the House, but this is a highly technical subject and one is bound to be specific if one is to make any useful contribution. Connoisseurs of this subject will recognise that at several points I differ from the findings of the Morgan Report, which was published about two years ago by the 805 Ministry of Labour. I pay tribute to that Report in many respects, but it was rather timid in some of its conclusions. What it says about the significance of the problem of the transferability of pension rights on the mobility of labour is so utterly at variance with my own observation and, I think, that of people who have more experience than I have of the case work involved when people are seriously considering changing their jobs, particularly for white collar workers and worker over 40 years of age, that its findings should be treated with considerable reserve.
First, I suggest that we should appoint a Registrar of Approved Pension Funds. At present, pension funds fall between several stools. They may come within the purview of the Registrar of Friendly Societies; they may come under the Registrar of Non-Participating Employments; or, perhaps, they are simply supervised by the Inland Revenue which, in this respect, is acting rather outside its proper capacity. The Registar should oversee the creation of new schemes and, what is particularly important, the amendment and amalgamation of existing schemes. He should adjudicate in disputes and settle problems arising from transfers, and he should publish regular reports. It is ridiculous that in order to find out what is happening in this immensely important sphere we should have to arrange for the Government Actuary to make spot checks on the situation every 10 years or so and publish a report which cannot be final or conclusive.
The cardinal principle should be established that in all pension schemes seeking the relief of taxation on accruing interest and capital gains, the fund should be seen to he the inalienable property of the beneficiary. Once the employer has made his contribution to it, no part of the fund should be deemed to be the property of the employer. It is quite wrong that for disciplinary reasons, or when employees leave the firm, the employer should have any option to recover what he has paid into the pension fund.
If employers wish to give long-service bonuses or awards of that kind as a right, there is no reason why they should not do so; but they should not expect to be able to claim the benefit of the valuable special concessions in taxation 806 which are allowed for the purpose of building up pension funds on behalf of their employees. Pension rights, in other words, should be identified firmly and finally as deferred pay and should not be seen to be a fund partly or wholly belonging to employers.
I think—and this is an important point although a rather technical one—that we should establish clearly the difference between a transferable pension and a preserved pension. For a person to take his pension with him when he moves from one firm to another is generally much more favourable than building up a series of frozen pensions left behind with former employers. This is not simply because of the effects of inflation, but because the best schemes—indeed, a very large number of schemes, and I believe that the number is increasing—calculate pension by length of service multiplied by final salary. It is obvious from the arithmetic that it is better that all the pensions should be calculated from the final employment than that one should draw a group of pensions which cannot, in the nature of things, give such a favourable result.
I think, also, that the concept of full transferability is implicit in the State graduated pension scheme, which was introduced by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter); and the public are now used to it. Therefore, we should make clear that transferability is our objective and that preservation is a very second-class object. It is only a residual object in cases where full transferability is not possible.
There will always be cases where transferability is not practicable or, for one reason or another, not really desirable for the beneficiary. I recommend that beneficiaries should then have the option to take a lump sum and invest it with an approved fund, in much the same way as a self-employed person can do. I have considered the option to take a lump sum in part exchange for pension rights and I think that it should be extended to cover all types of scheme. At present, it is preponderantly in the public sector that that option is available and it is considered an extremely valuable one by members of the Civil Service. If it was also available in private sector 807 schemes, it would remove the anomaly which prevents free movement between the public sector and the private sector, to the great benefit of both and particularly of the employee.
I have also considered the arguments for withdrawing the facility which allows employees to take a refund of their contributions when they change jobs. I consider that this should continue. In this, I realise that I am flatly at variance with the Morgan Report, but it is extremely hard to tell people who have put money, sometimes voluntarily, into pension schemes that it is no longer their own but belongs to the trustees of the scheme. Indeed, I would go further and extend the facility to take out a part of the accrued pension right on change of employment to those in the so-called non-contributory schemes, at least as to one-quarter or one-third of the value which has accrued for them.
We are not trying to maximise pensions. Our object is to protect the rights of the individual and to encourage mobility of labour. I think it reasonable, however, if the option of the employee to take back his own contributions is retained, that the rate of tax which is charged on such refunds should be reviewed, because an entirely artificial formula is used and it no longer seems to be realistic.
I have three further specific recommendations to make. First, I think that the restrictions should be withdrawn on the amount of pension which the final employer may give where there is a possibility of only 10 or under 20 years of service. This question of the uplifted sixtieths takes us into the most fantastic realm of bureaucracy. The sooner that the injustice which goes with the opera-of that concept is swept away, the better it will be.
I think that the upper limit of £3,000, which has been imposed on some type of pension whether a higher figure been earned or not, should also be withdrawn.
Lastly, I recommend that full tax benefits should be given for short-service schemes which envisage the possibility of early retirement or redundancy on the Army pattern. This 808 is not the occasion to explain in greater detail why I foresee that schemes of this kind will become increasingly necessary, but they should have a real and permanent place in some types of occupation. If we are contemplating a radical revision of the rules affecting occupational pension funds, we should take account of the fact that there will be an increasing need for pensions in industry and business to be calculated in the same way as they are for the Armed Forces.
The House has been extremely indulgent with me and I would like to conclude by saying only this. It has been suggested lately that nothing could be done to protect pension rights in occupational schemes until the Government have brought in their new graduated State scheme, but unless the Government intend to wipe out occupational schemes altogether, which seems to me to be inconceivable, the law which governs them will still need to be changed.
I can see no excuse for delay. Millions of people are affected by this matter. I hope that as a result of this debate something will be done, and done at once Where there is a will, there is a way.
§ 4.6 p.m.
§ Mr. F. J. Bellenger (Bassetlaw)
I congratulate the hon. Member for Kensington, South (Sir B. Rhys Williams) on the cogency of his speech and also for another reason. He happens to be the Member for the constituency in which I reside. I may say, to put at rest the minds of some who may look askance at the hon. Member's appearance here, that I had nothing to do with his arrival. Nevertheless, he is my Member of Parliament and he has today acquitted himself as well as, if not much better than, many maiden speakers whom I have heard in my long association with the House of Commons.
I hope that the House will agree with the hon. Member in the Motion which he has moved, and for this reason. I do not see how we can avoid doing so. It is written into the terms of the House of Commons Members' contributory fund, of which I am a trustee, that hon. Members coming into the House from other professions have the right, if they so wish, to transfer their pension rights to the House of Commons fund. There is, therefore, a very good reason why we 809 should agree with the hon. Member in the Motion which he has so ably moved.
I do not know what statutory action will need to be taken and whether the Government should initiate legislation to do what the hon. Member wants. He has rather suggested that they could do so as soon as they introduce other proposals linking in another way the pension rights of the mass of workers. When my hon. Friend the Joint Parliamentary Secretary to the Ministry of Labour replies to the debate, he should certainly tell us that the Government are willing, as the hon. Member for Kensington, South has urged, urgently to do something about this matter. We have done it in several cases of hon. Members who are now in the House and who have come from industry at large. Why should we not do it for the mass of workers, as the hon. Member suggests?
Quite often nowadays pension rights are part of the terms and conditions of employment on which executives and others are engaged. We should not, merely because they change their mode of employment, seek to deprive them of the rights which are theirs and which they took up when they sought to engage themselves with their employers. Quite often, of course, many of these pensions are based on private insurance schemes throughout the country. I do not think that there would be any great difficulty in getting the private insurance companies to agree to a provision of this nature.
I do not want to speak at length on the hon. Gentleman's Motion. I rose merely to congratulate him on his maiden speech, and also to support the proposition which he has put before us so well. Therefore, I shall now resume my seat, merely adding that it would be a shame if we denied to others the opportunity which we as Members of Parliament reserve to ourselves in our own pension scheme.
§ 4.11 p.m.
§ Mr. Michael English (Nottingham, West)
I should like to join my right hon. Friend the Member for Bassetlaw (Mr. Bellenger) in congratulating the hon. Member for Kensington, South (Sir B. Rhys Williams) not only upon his speech but upon his choice of topic.
I have very briefly discussed with the hon. Member an interest which we have in common, namely, an endeavour, 810 shared, I think, by a number of hon. Members on both sides of the House, to try to introduce efficiency into the industrial scene, and I think that the hon. Member for Kensington, South has a great deal of knowledge and experience to contribute on this sort of topic. Consequently, I was extremely pleased to see it was raised today.
But I am not wholly pleased that it was not raised by the Government. I sincerely hope, as the two Members who have spoken so far have said, that the Government will not forget that, in the election programme which hon. Members on this side fought the election upon, there was a specific commitment upon this issue; because we have not forgotten it.
I sincerely hope, therefore, that we shall hear from the Government Front Bench today not necessarily precisely the proposals that the Government would wish to make, but when we are to know what proposals they have to make in this field. It is very useful that we should be able in this debate to say what we think the proposals might include.
I listened with great interest to the eight points, as I think there were, which the hon. Member for Kensington, South made. I will be quite frank and say that some of them I do not understand, but I think that some of them are also not fully known to some persons administering pension funds. I first and foremost agree with the hon. Member that there ought to be a registrar. That is of vital importance.
I have actually had complaints from employees of one large and very well-known public company on the particular form of alterations to the company's scheme, but really there is no obligation on any company to have any particular form of pension scheme other than one which complies with the Inland Revenue's taxation rules. If it does that then almost anything else goes. I think that that can be thus very roughly described as the situation.
This is very relevant to the second question of whether a fund is or should be regarded as the property of the beneficiaries or not. That was the second point raised by the hon. Member for Kensington, South. In this context, I am not quite sure whether I agree with him about employees taking out their 811 contributions; that the existing practice is something one would wish to continue if pension schemes were transferable.
I think that I would personally be inclined to agree with the Morgan recommendation on that, rather than with the hon. Member. Certainly, I would not like to see refunds continuing with certain pension schemes, because I am sure that the hon. Member and others will be aware that a refund of contributions paid in at a given date or series of dates and taken out, say, 20 years later when the cost of living has risen, as will the value of the pension scheme because of capital gains, means that this is where practically the beneficiary loses rather than gains. Often, also, the rate of interest on employees' contributions is far below market rates.
If the hon. Member for Kensington, South, means, as I hope he does not, refunds in all cases continuing on the present basis I emphatically disagree with him. I would probably go further and say that if we are to make schemes properly transferable the practice should cease.
The last point I wish to make is this. I think that everyone would agree with the hon. Member that there is no likelihood, whatever the Government do, of there not being still occupational schemes in existence. One could imagine a national scheme which provided for all persons in employment everywhere, but it would still be the case that there would be certain employments where the employers might wish to provide better pensions for particular classes of employees, or there would be cases where, just because an industry is more prosperous, it would wish to provide better pensions than less prosperous industries. One cannot, therefore, imagine a complete cessation of existing occupational schemes. But I do not think one need go quite as far as the hon. Member for Kensington, South and say that one does not necessarily envisage some cessation of occupational schemes.
What I have in mind is that administratively one of the simplest ways of dealing with the problems of transferability would surely be to start with the question of graduated pensions. I do not wholly agree with my own party on this subject. 812 I do not think that there should be a top limit of benefits which may be received or a top limit to the salary under which graduated pension contributions are paid. To my mind, for a man earning his living at £10,000 a year there should not be a distinction—except in amount of contribution and benefit—from a man who is earning his living at £1,000 a year.
Presumably, there is justification for what they are paid. Therefore, if one is to have a graduated pension scheme nationally they ought to get benefits based on contributions and based on the earned income they have been earning when in employment. I mean genuine employment, of course. I am not talking of the one-man business where someone pays himself a salary because it is then earned income rather than unearned income for tax purposes.
Having done that, this can only be, as it were, a basic minimum. It may be that one would wish to extinguish occupational schemes which are less good than that or occupational schemes to the extent that they are the same. In other words, one could say to each company that it will have to contribute on a massive scale to our national pension scheme but it might extinguish its contributions to its existing occupational scheme to a certain extent or possibly in total.
This would extinguish some of the less good occupational schemes, but I do not think there would be any loss, nor do I think that anyone would suffer. Neither the beneficiaries nor the firm would suffer, and administratively a great deal of time and clerical effort on running a lot of rather poor pension schemes would be saved. One might consider this because it reduces the problem of transferability amongst the ones that remain.
With regard to them, for heaven's sake let us trying something less complicated than actually exists amongst local authorities and nationalised industries. The existing basis of transferability, where it does exist, amongst certain professions, such as teaching, the local authorities, nationalised industries and the hospital services, should not, it seems to me, be copied. There we have the worst of both worlds. Every pension scheme is regarded as a separate entity, whereas I would have 813 thought, for example, it would be just as easy for the pension schemes of all local authorities to be regarded as one scheme. Each person who leaves and each person who arrives is treated as a separate case.
There are vast formulae, and masses of legislation explaining how to work out the formulae in order to determine the precise rights which can be taken from one authority or organisation to another. This results in a mass of clerical and administrative labour in order to deal with each detailed individual case. I would have thought that it could all be done a great deal more simply.
What I have in mind is that one could transfer the amount of the accrued contributions out of one scheme into the second scheme, where it would be used, in the second scheme, as if it represented the amount of contribution into that scheme by a person who had been employed there. This would seem to be a perfectly simple basis.
The principal type of organisation that would then suffer is one which is declining in numbers—I will not go into the question of age composition, but the same broad principle applies. The obvious case, not necessarily the only one, of an organisation which would suffer under such a scheme would be the organisation which was declining in numbers, because pension rights would continually be taken out and no new rights would be brought into the scheme.
I am not an actuary, I am not sure whether this makes a practical difference. If the scheme is extinguishing itself, it may make no difference at all. It does not seem to be beyond the wit of man to devise precautions against any effects of that kind which may flow from my suggested principle. Normally, the simpler method, although it might not be strictly accurate in terms of money, would probably justify itself in terms of administrative savings. An analogy, although it is not an exact one, is with the redundancy payments scheme, whereby the Government pay contributions which would otherwise be provided from other sources.
We should endeavour to make transferability of pensions work. I agree with all that the hon. Member for Kensington, South has said on the desirability of transferability of pensions, as do the overwhelming majority of hon. 814 Members on this side of the House. I hope that we shall first get some information from Her Majesty's Government on when they are to produce proposals, and that those proposals will be so designed as to have the maximum effect with the minimum clerical and administrative effort.
§ 4.24 p.m.
§ Mr. Tim Fortescue (Liverpool, Garston)
I am most grateful to you, Mr. Speaker, for giving me the pleasure and privilege of being the first Member on this side of the House to congratulate my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams). I do this with the greatest sincerity. We on this side all know my hon. Friend's great expertise in social and pension matters, and we were delighted that he should choose such a difficult subject and argue it with such cogency from his very great knowledge. We hope very much that we shall hear him many times.
Having said that, I should like to take up a point raised by the right hon. Gentleman the Member for Bassetlaw (Mr. Bellenger) who, in his speech, said that we in the House of Commons reserved to ourselves the right in our own pension scheme to transfer our pension rights from previous employment when we come into the House. This is written into our scheme, and when I came into the House about two years ago I was delighted to read that it was possible.
I promptly sat down and wrote a letter to my previous employers informing them that they had to transfer my pension rights in their scheme to the House of Commons scheme. I received an extremely dusty answer very quickly from the trustees of their pension scheme saying that, whatever the House of Commons scheme might say, they were not at all interested, and intended to retain their contribution to my pension in their fund and do nothing about it. In case the right hon. Member's words arouse hopes in the breasts of future Members of the House that it is obligatory upon their present employer to transfer their pension rights, I very much regret that I have to disillusion them; this is not so.
The hon. Member for Nottingham, West (Mr. English) advised us what might be done to attain simplicity, and I agree with much of what he said. Until recently I have been living in 815 Switzerland, where the Swiss, with their great enthusiasm for standardisation and simplicity, have tried to simplify this matter. In doing so they have made a far worse mess of it than anyone would have imagined possible. In certain cantons of Switzerland they have standardised all pension schemes, so that when one moves from one job to another one takes out of one's first pension scheme one's own contribution. This contribution is paid into the new pension scheme, and one's new employer must match those contributions from his own resources, whereas the former employer retains the contributions he has made twards the pension of the man who has left.
One would have thought that the result of this would have been obvious, but it apparently was not obvious to the Swiss. The result is that in Switzerland it is practically impossible to change one's employment after the age of about 40. One has to be very valuable indeed to persuade an employer, especially a Swiss employer, that one is worth to him not only the salary he will pay, but also the accrued pension rights which may have been earned in many years of employment with a previous employer. I hope that the Parliamentary Secretary who was listening to the very wise words of the hon. Member for Nottingham, West will not be lured down the path towards simplicity which has been followed so disastrously by our friends in Switzerland.
§ 4.28 p.m.
§ Mr. Sydney Bidwell (Southall)
May I join in the congratulations to the hon. Member for Kensington, South (Sir B. Rhys Williams) in what I understand is his maiden speech. I was not fortunate enough to hear the beginning of his speech, but I did hear most of it and, as my right hon. Friend the Member for Bassetlaw (Mr. Bellenger) has said, it was most cogently expressed. Of course, one's maiden speech is a most nerve-racking experience, but, as I can tell my hon. Friend from my shortish experience in the House, so is one's fourth, fifth and sixth speech in the Chamber.
One does not normally associate revolutionary propositions with Kensington, South. I expect that the hon. Member is very well aware that to get legislation to 816 achieve complete transferability rights of all pensions and superannuation schemes in the land would be a most forward step, and a most revolutionary one. It is one which is quite consistent with the spirit and the ideas of many hon. Members on this side of the House. It is quite consistent with the policy of the Trades Union Congress. However, I doubt very much if it is quite consistent with Confederation of British Industry policy. Nevertheless, that is no reason why the hon. Gentleman should not bring this proposition before the House.
My main reason for wishing to join in this debate is that I have put down several Questions along these lines seeking this forward step. Having regard to the principal reason for the hon. Gentleman's desire to support this proposal, in that it should lead to a greater mobility of labour, clearly it is a long overdue step.
For many years, we in the Labour Party have subscribed to the idea that we should have a national superannuation scheme applicable mainly to those who at present are shut out of what I would call any decent kind of occupational pension scheme. That applies to the vast majority of our workers. What I call decent superannuation schemes are applicable to a very small minority of employees at present.
I want the hon. Gentleman to understand, however, if he has not done so already, that his proposal would be a considerable challenge. Under present systems, the fact that one loses the employer's side of the pension contributions is a tremendous deterrent to changing employment, particularly when one reaches the forties and fifties. As the hon. Gentleman said, there are many such people who feel that they are glued to their present jobs and who would be much better off, not only from their own point of view but from that of the nation, if they changed their employment. Frequently, one hears of a man being deterred from taking on promotion in another kind of employment for which he is more suitable.
In the event of this idea coming about, I suggest that there would be a considerable movement of people out of the Civil Service. Many people were put there by their parents and rue the day when it happened. They would much prefer to be in other jobs and, therefore, it is only 817 fair and reasonable, accepting the idea of the freedom of the individual, that people should have these rights.
However, many employers would resist it, because their pet schemes are means to keep people in their employment. If they are particularly valuable or skilled employees, that is what they would wish to do. In a sense, although we are no longer living under the old crude conditions of capitalist masters and where working people have acquired enormous rights, as a result mainly of the efforts of hon. Members on this side during the course of the century, there is still a kind of master-slave relationship between employer and employee. I welcome this attempt to sever some of the chains which bind workers to their employers. As a result, I have nothing but the greatest amount of warmth towards the proposition of the hon. Member for Kensington, South.
Another reason for my wishing to take part in the debate is that I have had representations from constituents on this very matter. They are women workers, and they contend that there is discrimination against women in their employment. The men have certain transferability rights, but the women do not, and they have asked me when it will be possible for us to put through legislation in this House which will give them a fair crack of the whip. I am glad, therefore, that this proposal comes before us today.
As the hon. Gentleman has said, we have the graduated pension scheme, which many of us have dubbed the graduated pension swindle because of the poor benefits that it pays in relation to what is paid in. The hon. Gentleman's proposition means that, if one is changing one's employment and it is a contracted-in situation, the full rights are restored to both the employer and the employee elements of the contributions made. There is an enormous difficulty in the application of it, but I hope that the Government will not fight shy of it, because the prospects of getting our longer-term idea of a national superannuation scheme are much more distant than we thought might be the case when my right hon. Friend the Lord President of the Council put it before the Labour Party conference 10 years or so ago.
818 It would be wrong to think that because we want this major overhaul of the social services and this concept of a national superannuation scheme under the aegis of the State, we should hold back in this very necessary elementary reform of establishing a system of full transferability of rights as they apply to present pension and superannuation schemes, whether they be handsome ones applicable to salaried staffs or the lesser ones applicable to wages staffs.
§ 4.36 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I apologise to the hon. Member for Kensington, South (Sir B. Rhys Williams) for not having been present when he made his maiden speech, but I assure him that I will read it, because I am deeply interested in the subject.
The reason for my interest is that I am worried about the extent to which we can continue piling on to large groups of insurance companies, large industrial complexes and even small ones a burden which moves further away from their commercial responsibility towards a social one.
I used to work for a large industrial complex in a category where I was able to join a very good superannuation scheme. I happened to be in an industry which was a very progressive and remunerative one, producing high profits. It was an expanding industry, even between the wars. We had pensions schemes which, in the context of many other industries, were top hat ones even for those in the lower grades.
In industry generally, much depends on the ratio between capital and manpower employed; in other words, the manpower intensity and the capital intensity. Depending on those two factors, private schemes vary in the benefits that they can grant for given contributions to those subscribing to their superannuation schemes. In an economy such as ours, it is quite impracticable to make matters really watertight and give complete transferability of pension rights to everyone.
In his Motion, the hon. Gentleman says that such rights should be retained in every practicable case. However, there will not be many practicable cases when it comes to dealing with insurance companies and the pension schemes of 819 different industries. For example, I cannot see the mining industry or the shipbuilding industry being able to evolve with their insurance companies superannuation schemes which are equal to some of those in industries where capital intensity is high, manpower intensity is low and the product very profitable. I can see transferability of pensions as between groups of workers in different industries made possible only through the State, perhaps in conjunction with the insurance companies, with the matter being treated as a social matter and taken away from the responsibility of commercial enterprise.
My hon. Friend the Joint Parliamentary Secretary will probably argue that units of industry on the Continent bear a higher burden in various social security and pensions schemes, with higher percentages borne by and costed on to industries than is the case in this country. I believe that in a large trading nation like this, with a high density of population and a need for highly competitive industry, it is far better for the State and the general body of taxpayers to provide for a general level of superannuation based on the function one performs in industry.
I have changed my employment sources three times in my lifetime. In no case was I allowed to transfer my pension. When I came here it was out of the question. The insurance company that handled the group insurance for the company by which I was employed would not entertain it at all. Whether it thought the expectation of life in my previous job was better than in this I do not know. I know some enterprises—I will not mention them because it would not be fair—where the incidence of accident and even of health statistics are lower than in other industries and transferability becomes difficult.
I accept the proposititon of my hon. Friend the Member for Southall (Mr. Bidwell) about holding labour. This is a very difficult matter indeed. Let us take the case of a man, 45 years of age, married and with children going to the local grammar school, a good and highly skilled employee in industry and whose manager or foreman is a man with whom he has grown up, so to speak, over the years. Often people like him are inhibited from changing their occupation for very 820 human reasons. The people who run industry today are not the hard-faced men of the 19th century. Often they are compassionate and very generous. There is a good type of man running industry today. One has only to work for the Americans for six months to discover the difference in attitude between British and American managerial executives. Often a man is inhibited from changing his labour because, by so doing, he will lose pension rights that have perhaps been built up over 25 years. On this aspect, I welcome the Motion.
Switzerland has been mentioned, so there is no need for me to quote the absurd situation there. I hope that no one in this House suggests that we should undertake the Swiss concept of transferability of pension rights. I cannot see it happening here. It would lead to chaos. Therefore, I hope that any idea of building up a universal comprehensive insurance system will be done through the Ministry of Social Security rather than leaving it to industry. This is not because the top people in industry are vicious or are slave-drivers, or want to make massive profits out of their contributions, but because of the different aspects and profitability of industry.
Some of the things that are least socially desirable are often the most profitable. One can often make a fortune by making a small contribution to the general well-being of the society in which one lives. On the other hand, one can make a large contribution and die a pauper. This is the story of social contributions throughout the ages. No one complains, because often the man who makes a fortune has hated the work that he has been doing. It has probably been difficult and trying and he may get ulcers. But the other fellow who enjoys his work is venerated and lives to a ripe old age, which is his reward. That is a phenomenon of the social history of this and other countries.
I hope that this Motion highlights the problem and will urge the Government to get ahead with preparing some social security scheme which will give us a universal superannuation retirement pension on top of the basic State pension based on the contributions of the State, the employer and the employee in all our industries. By so doing we remove the 821 basic responsibility from individual industrial units and enable not only those at top and medium level, but workers at the lowest level to move between industries where perhaps their labour is more urgently desired.
§ 4.45 p.m.
§ Sir Douglas Glover (Ormskirk)
I apologise to my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) for missing his maiden speech. I know that he is an expert on transferability of pensions. I would have liked to have listened to his speech. Unfortunately, as he will find the longer he stays in the House, hon. Members sometimes have to attend other meetings and cannot be here when they wish. He will understand that there is nothing derogatory in making his maiden speech when a lot of his hon. Friends were not present to hear it.
The hon. Member for Dunbartonshire, East (Mr. Bence) made a valuable contribution to the debate. Like him, I will take great pleasure in reading my hon. Friend's speech, which I am sure was first-class. Knowing this House, I am sure that he feels a great load off his shoulders now that he has broken the ice and dived in at the deep end.
There is a great deal in what the hon. Member for Dunbartonshire, East has said about transferability of pensions. I support the views of my hon. Friend the Member for Kensington, South. It would be ideal and desirable to get transferability if it is feasible. I am governed by the fact that the insurance companies would have a greatly increased turnover if they had introduced transferability. There must be some pungent and powerful reason, therefore, why, in fact, they have not, despite the difficulties involved in so doing. It would he to their advantage if everyone in employment was insured for a pension over and above his State pension and, on changing his employment, could take his pension with him.
I should like to see a person changing his employment taking his pension with him. One difficulty is that the pension rights of an individual are, from a firm's point of view, not only created to provide an advantage to the employee, but are an insurance policy to keep the employee on the firm's payroll. The firm is not very interested if a chap can say, "I am leaving your employment", and 822 can take his pension rights with him. If he is allowed to do that it is more likely that he will leave. Therefore, we have to face the fact that, concerning private insurance policies, if a man leaves firm A to go to firm B he will lose his pension rights.
This is, I think legitimately, one of the sanctions against a man leaving, because a firm can say, "This man has worked for us for 20 years. It is not likely that he will leave, because, if he does, he will lose his pension rights." There is an inbuilt insurance, from the firm's point of view, that he will stay in his employment.
Another pertinent point is the difficulty that one organisation with a vast turnover on a very small amount of profit may find difficulty in providing the same pension rights as another organisation where capital intensity, compared with the number of people employed, is very small. It is, therefore, able to provide much better pension rights than the vast extractive industries. I apologise to my hon. Friend the Member for Kensington, South, because he may have been able to solve this argument, but there is a real difficulty in levelling out pensions, as it were, between the capital intensive industry and the industry where there is a vast amount of manpower. It is easy for I.C.I. to provide generous pensions in its capital intensive employment with comparatively few employed considering the profits involved. On the other hand, other industries which are not making such a profit would find it difficult to give I.C.I.-type pension rights if there were compulsory transferability.
First, we should try to get voluntary transferability on a much wider scale than obtains at present. I cannot see how the State can enter into interference in private arrangements between employee and employer, making this compulsory, because the State has no idea what sort of employment a person may be going to if he leaves the place where his present pension was negotiated. He may be going into some form of society where at present there is no pension right at all. He may foolishly go into a betting shop and earn twice as much money as before, but find that there is no machinery at the moment for a graduated pension scheme in his new occupation. It would be difficult for the State at this time to produce legislation 823 that would make for compulsory transferability.
We on this side of the House should encourage a voluntary transferability system and, if possible by taxation, provide incentive for insurance companies to extend transferability to cover the maximum number of people. I am suspicious of all the well-meaning ideas which involve the State doing something else. Invariably, I discover after about five years that the State has taken compulsory powers and the voluntary system has disappeared. Then the party opposite says that it would be a good idea to take the whole thing over for the State and we get more inefficiency, lack of choice, and loss of freedom of action. I therefore view all these things with a great deal of doubt and worry.
Perhaps my hon. Friend and I can discuss this matter outside the Chamber, for he may have solved these problems. I apologise again for not hearing his speech. I think that there is an enormous amount of difficulty in this field, but my hon. Friend has done a very valuable thing by using the procedure of a Private Member's Motion so that the House can discuss this subject.
§ 4.54 p.m.
§ Mr. Albert Booth (Barrow-in-Furness)
I am grateful for the opportunity for this debate which has been afforded by the hon. Member for Kensington, South (Sir B. Rhys Williams), because it gives us a long-needed chance to consider a serious and developing problem. We may have differences among ourselves as to the solution, or even as to whether there is a solution in the legislative sense, but I think that we are all at one in agreeing that there is a problem which is worth our considering.
The first aspect I turn to is the adverse effect of lack of transferability on trade unionists and trade organisations. It has been the experience of a number of staff trade unions in particular that the older member who has made many years' contributions to a staff employment fund is understandably reluctant to paricipate as actively and militantly in certain campaigns as the younger member with no investment, or very little, in the superannuation fund.
824 This is understandable in terms of the attitude of a man with many years of contributions to a superannuation fund. He considers, among other things, the prospect of losing his superannuation in the event of his being involved in certain forms of industrial conflict. It is understandable, also, in the light of the sense which is borne in upon him of the superannuation arrangement being a question of an individual contract between him and the firm conditional on his remaining with that firm, which is precisely what these funds are at the moment.
This leads us to consider the desirability of understanding the nature of the contract and whether we as a House of Commons want to ensure that it is a contract which embraces not only the individual and his employer, but the State in so far as the State has a concern for the maintenance of a man or his family during retirement. More particularly, has this been a problem in sectors of the engineering industry where employers—unwisely in my opinion—have insisted that certain employees should be entitled to participate in certain superannuation funds only if they are members of the Foremen and Staff Mutual Benefit Society.
By doing so many drawing offices and other staff employment establishments have been cleft between those who have stood by their union as they saw it and established the fundamental right to maintain trade unionism within staff employment, and those who have considered it more desirable to assist the right to participate in a superannuation scheme than to become members of the Foremen and Staff Mutual Benefit Sociey and have thus been deprived of their right to join a union.
I hold, along, I think, with every Labour Member in this House, that the right to be a member of a union is fundamental and cannot be made conditional on forfeiting a right to participate in a superannuation fund. Until such time as this requirement is driven out totally from industry, I shall always hold the view that we must ensure that transferability is a right and that pension fund membership cannot be made conditional in any way which will cause a man to forfeit his right to be a member union.
825 Another aspect which possibly may be nearer to hon. Members is the effect on civil servants. It seems that the rather special position of civil servants vis-à-vis superannuation is one which might be detrimental to the country. I estimate, and put it no higher, that many in the Civil Service today would not be there but for the fact that leaving the Service would cause them to lose a good pension right. At a time when the political problems we face are becoming more technical with increasing complexity and require more and more understanding by those who practice as officers for Government, what is going on inside industry and other aspects of civilian life makes desirable a greater degree of movement between the Civil Service and industry.
In so far as our present mode of superannuation and its conditions act as a barrier to this, they act as a barrier to a necessary improvement in the transfer of ideas and cross-fertilisation of the best factors of industry and the Civil Service. I do not hold the view that the Civil Service would be the only beneficiary of this movement. Just as some of the best ideas of industry could usefully be introduced into the Civil Service, so some of the best practices of the Civil Service could usefully be transferred into private industry.
It seems to me that the attitude of firms to the question whether they can transfer a pension depends very much on the desirability or otherwise of obtaining or releasing employees. Much speaking is done on the subject with tongue in cheek. I have heard it said that in no circumstances is it possible to transfer the pension of a man who wishes to leave. On the other hand, I have seen a man transferred into an engineering firm at an age over 60 because it was thought desirable to have him working in that firm.
The problem can be overcome. I claim no expertise in insurance or actuarial matters, but I am certain that a qualified actuary could easily work out the value of the contributions made to one pension fund as transferred to another. It is not an insoluble problem. What is lacking is the will to make such transfers possible.
The fundamental reason for legislation in this respect is to be found in the basic reason for having a superannuation fund at all. It is that employees, either of State or of private firms, wish during 826 their working lives to make some financial provision for themselves and their dependants in retirement. If we continue as at present, hunderds of thousands of our fellow citizens, by the very nature of the contract into which they enter, will be able to make that provision only if they tie themselves to a firm or to an industry. That is totally unreasonable. It would be unreasonable at any time, but it is particularly so in the latter part of the 20th century, when we want people to move their occupations and when it is desirable for them to learn new skills and to take up new occupations, because they must be prepared to move into different parts of profession and industrial life.
I hope that the Minister will give an undertaking that the Government are prepared to introduce legislation to bring about the transferability of pensions.
§ 5.3 p.m.
§ Mr. Kenneth Lewis (Rutland and Stamford)
May I congratulate my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams), first, on his good fortune in drawing a place in the Ballot and, secondly, on selecting this subject for debate. I was eight years in the House before I was fortunate in the Ballot, and on that occasion I drew No. 2 I listened to his speech with a great deal of interest. It was a very practical contribution, and I hope that the Government will take note of it.
This subject has been considered over a number of years by Minister of Labour of both the Conservative and Labour Parties. About 1963 the Conservative Central Office produced a publication, in compiling which a number of my hon. Friends and I took evidence from both trade unions and employers, and this was one of the subjects which we discussed.
We came out in favour of the transferability of pensions. Despite all the practical difficulties, we were certain that this was an essential step towards securing mobility of labour and the transfer of expertise from one industry to another, and, in particular from declining industries to industries which were growing and developing.
We met a good deal of opposition from both sides of industry, although 827 it was probably strongest from the employers. They have a particular interest in holding on to people—and one means by which they do so is to offer their employees a pension. Governments are partly to blame. Taxation is so high on all employees, and particularly on those at the highest level, that the only way in which an employer can provide an incentive is to compete on pensions. Once he has done that, he tends to take the view that it is an opportunity to keep the employee working within his own organisation. That is a restrictive practice—and a restrictive practice which we ought to get rid of as soon as possible.
But the Government must give a lead, and up to now they have failed to do so. Recently I had a case in my constituency in which a man employed by the General Post Office wanted to transfer to a job for which he had applied in the normal way with the Ministry of Public Building and Works. He was offered the job but then found that it was impossible for him to maintain his pension rights if he moved. He therefore had to turn down the job.
I took up the matter with the Postmaster-General, who wrote to me and said that this was, in fact, the case. He said that he was very sorry about it but that the Post Office needed the skill of that man and could not afford to make arrangements to transfer his pension because that would mean that they would have to let him go. If that happens between one Government Department and another, and if it happens between nationalised industries, how can we hope to change the mood in private industry? The Government must give a lead. They must make arrangements so that there is transferability of pensions between Government-industry and private-industry and between the Civil Service and the nationalised industries.
Everyone accepts that it is very difficult to change quickly, but we have been looking at the problem for 10 years, this represents snail's progress. I hope that in his reply this afternoon the Minister will not put off a decision by saying that he is awaiting the report. My hon. Friend was correct in his analysis: there is nothing to prevent the Minister, in advance of the report on pension schemes 828 which are related to earnings, from taking an advance decision. He could at any rate give a lead within the Government service.
Pensions are a part of earnings—an extension of earnings into retirement, and as such they should be an incentive to the individual rather than a disincentive. They should be a means by which the best use is made of the individual's skill and by which he can move, if he wishes, to extend the use of his talents. At the same time they ought also to be a means by which industry can secure workers and not just a means by which they can hold on to them.
§ 5.8 p.m.
§ Mr. Stan Newens (Epping)
This is a very important subject and the House is grateful to the hon. Member for Kensington, South (Sir B. Rhys Williams), who initiated it.
We live in an economy in which change is taking place very rapidly. We live in the midst of an unprecedented spate of take-over bids, mergers and reorganisations of industry of all sorts. The capital value of the firms involved in 1967 was double that of 1966, and we are likely to see even larger firms involved this year. With take-overs and mergers, there is inevitably a drying up of jobs and a number of redundancies. New opportunities arise and opportunities which seemed to exist often disappear.
Few men in industry now can be sure that they will be doing in 10 years the same job as they are doing today. This applies not merely where there are takeovers or mergers; it applies, also, where people remain with the same employer. If a man discovers that his job is drying up, or is likely to do so, he may well wish to go over to another firm. In such circumstances, it is vital to have transferability of pension rights so that men are able to change to new jobs as opportunity presents or as necessity arises. It is wrong that men should be prevented from moving around, when everything else favours such action, purely because they would lose certain pension rights.
As the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) said, employers have used pension rights as a means of holding labour. We can no longer afford that state of affairs to continue. Recently, a scheme was introduced 829 so that teachers who entered the House of Commons could have their pension rights transferred to the Members' scheme. If that is good enough for teachers, like myself, who enter the House of Commons, it is good enough for all other workers.
A good many people are late developers; when they have reached a certain stage in life they find that they would like to train for other jobs. If they cannot take with them pension rights which they have accumulated, their aspirations will be damped down, and the general state of affairs will be far more stagnant than is desirable.
This is not an academic matter or one affecting only a few. At this time, with take-over bids and mergers very much in the air, I have received a good many letters from constituents raising this very problem with me. In Harlow, part of the Epping constituency which I represent in the House, a large establishment was affected recently by the take-over of A.E.I. by G.E.C., and we have, in addition, had several other factories affected by redundancies on a smaller scale. Each of these events brought letters to me, as the Member of Parliament, asking about transferability of pensions and what rights ordinary individuals, who have worked with a firm for years, may have if they go to other organisations.
Like the hon. Member for Rutland and Stamford, I have taken up several such cases, and I have been struck by the utter stupidity of the arrangements at present prevailing which prevent people from moving around although it would be to everyone's advantage that they should.
I am delighted by any improvement which takes place. I regard as an advance piecemeal schemes arranged for interchangeability between particular private schemes, but I am certain that a general State scheme is required. We must have legislation if the problem is to be tackled properly. We cannot afford to leave the question of transferability to the chance benevolence of a particular employer or to the luck of the game in certain occupations. There will be many anomalies left unless the Minister is able to undertake today, or fairly soon hereafter, to introduce legislation to make the whole system uniform.
830 I urge my hon. Friend, therefore, to regard this as a matter of priority. I recognise that to introduce transferability of pensions will be no simple business. It entails enormous complications and difficulties, but, none the less, the job cannot be put off. Many people will continue to lose their rights to pension so long as the present situation is allowed to continue, and those who have lost their pension rights cannot have them restored retrospectively. Moreover, many people will take decisions about their future employment different from those which they would take if they were assured of being able to transfer their pension rights.
I urge my hon. Friend, therefore, not to regard this as a trivial matter. It affects a great many people, and, now that mergers and takeovers are taking place so frequently, it will affect a great many more. Urgent action is called for. We must have legislation laying down a scheme which will apply universally throughout industry and throughout other sectors of the economy. I hope to hear from my hon. Friend an assurance that the Government regard the matter as urgent and a promise that, at the earliest possible moment, action will be taken to remedy the present state of affairs.
§ 5.17 p.m.
§ Mr. Peter Tapsell (Horncastle)
I am glad to have this opportunity from the Front Bench to join with other hon. Members who have spoken in congratulating my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) on a really excellent maiden speech. He spoke with closely reasoned logic and knowledge and deep seriousness on a subject which, I know, has long been dear to his heart and on which he is a considerable authority. The whole House listened to what he had to say with the greatest interest, and we look forward to hearing him contribute to our debates on many future occasions.
In considering pensions for the retired, we all share the same aim, to ensure that as many people as possible have a sufficient income in their old age to maintain a decent standard of living and one not too far removed from that to which they were accustomed during their working lives. Among those already retired, the main source of income of the great 831 majority of our fellow countrymen is still the State pension. But the great change in recent years has been the growth in the number of people earning an eventual entitlement to a pension through membership of an occupational pension scheme.
As my hon. Friend the Member for Kensington, South said, over 12 million people, about half the working population—in fact, it is two-thirds of the male working population, I think—are now gaining such private pension entitlements. This is an extremely valuable development. Not only does it help to solve the problem of poverty in old age, one of the most serious of our social problems, but it generates—hon. Members opposite sometimes overlook this—the private savings necessary to finance the future industrial expansion on which all our social services and the prosperity of the entire country depend.
In considering the subjects of the preservation or transferability of pension rights, desirable as these are, as everybody who has contributed to the debate has agreed, our starting point must surely be to do nothing in the process of securing those objects which will check either the growth of these private occupational pension schemes or the flow of private savings they produce. Every Chancellor of the Exchequer, whatever his party, will agree on that. Whether an employer sets up a pension fund is, to a very large extent, a matter of his own free choice. If we make it too unattractive for him to set up an occupational pension fund, he will not do so.
Some hon. Members have spoken as if every employer would automatically set up one of these funds. That is far from the case. We want to maintain the present climate in which every encouragement is given to good employers to set up new funds so that eventually virtually the entire working population will be entitled on retirement both to their State pension and their occupational pension.
Preservation and transferability are quite separate propositions. It is important to keep the distinction between them clear. Preservation means that when an employee leaves a job the contributions which have been paid into the pension fund by him and his employer remain to 832 his credit in the fund so that when he reaches retirement age he receives the rate of pension to which they give entitlement, even though he may have left that firm many years before.
Transferability, on the other hand, means that the contributions which have been paid into the fund, together, presumably, with any interest they have earned and the capital gains in which they may have shared, are switched to the pension fund of the firm to which the employee is moving. There is an actual physical transfer of assets in the latter case from one fund to another.
Both preservation and transferability raise considerable practical problems, but they are different problems. I could not agree with the hon. Member for Southall (Mr. Bidwell) that this was an elementary reform that we were calling for. The hon. Member for Dunbartonshire, East (Mr. Bence) was much closer to the truth when he said that, though it was a very desirable reform, it was an immensely complicated one. Everyone who does not have to deal with these practical problems is easily tempted to support making either preservation or transferability compulsory, either by statute or by withdrawing tax reliefs from funds which do not provide it, and to think that has automatically disposed of the matter. In fact, that is precisely the point at which the difficulties begin. The hon. Member for Dunbartonshire, East mentioned a number of them.
The Conservative Party, in its 1966 election manifesto pledged itself toEnsure that everyone can either transfer or preserve their pension when they change jobs.The Labour Party, in its manifesto, pledged itself toDeal with the problem of transferability of occupational pensions".That was a nice brisk throw-away line. The Morgan Report, reporting on this subject in the same year—1966—also recommended that preservation should be made compulsory but did not explain in any detail how the practical problems were to be overcome.
The reasons why everyone favours compulsory preservation in principle, and why many favour compulsory transferability, were very well set out by my hon. Friend the Member for Kensington, 833 South; and I need not repeat them at any length. The argument for mobility of labour and the argument on behalf of men who think they have got as far in their own organisation as they can hope to go but who might have a very considerable contribution to make in another organisation has only to be stated to gain general acceptance.
Although it is possible to argue about the extent to which the absence of compulsory preservation or transferability impedes mobility of labour, no one can deny that it does impede it, and impede it among particularly important, if relatively small, sections of the community. We should keep the size of the problem in proportion. Very young people when they are starting work usually do not worry too much about their pension rights. I changed jobs three times in the first three years that I went on to the labour market. In doing so, it never occurred to me either to think of the pension rights I was giving up or to inquire about the pension rights that I was about to get. If now, as a member of the management side of a firm, I had to interview a young man in his early twenties, and very early in the conversation he started questioning me about his future pension rights, I would not count that in his favour.
§ Mr. Bidwell
Does not the hon. Gentleman agree that the matter of pension rights, and even pension considerations, is one of age? Someone of middle age is much more thoughtful about what will happen in old age than is someone just starting work.
§ Mr. Tapsell
I absolutely agree. That is the point I am trying to make.
It does not apply very much with the young. It does not always impede mobility strongly with the top executives earning very big salaries, because special arrangements with top hat schemes can often be made to meet them. Those who are really affected by this tend to be middle-aged men of middle rank who feel that their promotion is blocked in some big organisation but who also feel, and often rightly feel, that they can make an important contribution in another, perhaps, smaller, organisation. It is because I agree with my hon. Friend the Member for Kensington, South that there are many men of that type who are 834 debarred from making the full contribution they could make to our economy that I recognise the great importance of this subject.
In addition to the argument of industrial efficiency, there is also the argument of social justice. Pension rights can fairly be described, as they have been by a number of hon. Members today, as deferred earnings. For most people they represent the largest element of remuneration after the salary itself, and in many cases they represent the largest part of a man's life savings. The accumulated value of pension rights in a good private scheme may be worth the equivalent of 10 year's salary by retiring age. Their existence has probably always been part of the contract of service between employer and employee and, if the scheme is an attractive and generous one, may have been the deciding reason which tipped the scales in persuading the employee to choose that particular firm rather than one of its rivals. I would argue that any society which believes in private property and the encouragement of personal savings should do its best to protect such rights.
One might ask: where there is such general agreement how is it, as my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) pointed out, that so little action has been taken over the years? The truth is that the practical problems are, as anyone who has studied the question knows, real and not merely an excuse for inaction. I do not think that I could agree with the hon. Member for Barrow-in-Furness (Mr. Booth) that the problems were merely used as an excuse for inaction and that any competent actuary could quickly overcome them. Having talked to a number of competent actuaries about this subject, I get the impression that this is genuinely a very complex and technical problem.
§ Mr. Booth
So that there will be complete understanding between us, I want to put it on record that I did not argue that there was not a difficulty about legislating or overcoming the problem of transferability. What I said was not difficult for an actuary to determine was the value of contributions in one pension fund transferred to another. I would like it to be clear that the hon. Gentleman is not arguing against that contention as opposed to the general problem of transferability.
§ Mr. Tapsell
I see. I am glad to have got that reply from the hon. Gentleman. I do not now wish to become too heavily involved in the technicalities; I am not qualified to do so.
But even on the narrower point that the hon. Gentleman has made, when one bears in mind that some pension funds are not fully funded and the very great variety of investment policies which they may be pursuing—some buying high coupon-fixed interest stocks in order to obtain high income, some buying low yielding equities in order to get growth and some perhaps investing in not easily realisable property as a hedge against inflation—it does not necessarily follow that it is easy to estimate the actuarial value of one man's contributions in the fund and then transfer to another. If one does that and transfers them, one will put funds which are fully funded at a disadvantage compared with funds which are not fully funded. But I do not want to pursue that. It is just one of the many difficult problems that need consideration.
One might be expected, as my hon. Friend the Member for Rutland and Stamford has pointed out, that the Government would set a lead in all this in respect of their own employees before they began to contemplate legislative or tax action to try to improve performance in the private sector. If one counts only the 900,000 civil servants, including the Post Office, the Government are by far the biggest employer of labour in the country. When one includes the whole public sector, about 4 million people are employed, and among that number are some of the most difficult cases, as in the extractive industries mentioned by the hon. Member for Dunbartonshire, East.
The Government never tire of preaching to the private sector about the standards of private enterprise and how they should be improved. The present Government are committed to the principle of transferability in their election manifesto. Yet, in practice, they are still one of the worst of all employers where both preservation and transferability of pension rights are concerned. More than one-third of employees in private sector pension schemes can already take their pension rights with them if they change jobs, but the Government give the same 836 right to only one-tenth of their 4 million public sector employees.
As the Institute of Civil Servants has pointed out, the Civil Service superannuation scheme is basically the same today in all important respects as it was when it was introduced under the Superannuation Act, 1859. It is designed for the young entrant who will make the Civil Service his life career. The attitude to the civil servant of successive Governments ever since 1859 has been exactly the same as that castigated by the hon. Member for Epping (Mr. Newens) in the case of private enterprise. The fact is that no good employer, whether private or public, who has a first-class young man whom he is training up to take responsibility will want to lose him. There is nothing in any sense immoral, even if in practice it may be anti-social, in trying to design attractive conditions of work, including pension funds. After all, people are not only held by pension funds. Many large employers provide playing fields and longer holidays for those with a greater length of service and many other fringe benefits to try to hold their employees.
As members of a party which has for many years, rightly, championed the cause of workers, it is hardly open to hon. Members opposite to criticise employers who try to make conditions so attractive that their employees will not leave them. The Government, however, have almost wholly failed to adapt their own occupational pension schemes to meet the requirements of professional staff, nor have they been adapted to meet the needs of a modern society in which mobility of highly trained professionals should be encouraged. If the Parliamentary Secretary can promise nothing else today, I hope that he can at least give an assurance that the Government are giving urgent consideration to methods of bringing their own pension schemes into line with the better private schemes on the questions of both preservation and transferability.
The reason that the Government have given for their failure to fulfil this election pledge, as my hon. Friend the Member for Kensington, South pointed out, as far as the private sector is concerned is that it would be inopportune, as the Parliamentary Secretary said in correspondence, to deal with either preservation or transferability in private pension 837 schemes until the new State graduated scheme has been introduced. I find that phrase potentially rather sinister. I hope that I am wrong.
For the reasons I gave in opening, I hope that the Government will operate the contracting out clauses in their new State graduated scheme in such a way that the growth of occupational pension schemes will not be checked. On this point I would completely agree with my successor as the representative of his constituency, the hon. Member for Nottingham, West (Mr. English), who, incidentally, retired me at the tender age of 34. It is not just a question of bringing pension rights into the House of Commons fund; it is a question of whether one can take them out. However, I disagree with him when he says that he wants no top limit to the State graduated scheme. If there were no top limit on the scheme it would be a death blow to private occupational pension schemes.
It is very much in the interests of this country that public and private provision for old age should complement one another. It would be a social and economic tragedy if the State graduated scheme took the form in practice of an assault on the occupational pension schemes and the insurance industry, with which many of them are linked. If it does it will inevitably reduce this country's eventual capacity to provide our old people with the comfortable retirement that we all wish them to enjoy. It will also increase the burden on the decreasing proportion of our population still at work.
The great disadvantage of a Government "pay-as-you-go" scheme is that retirement benefits have to be paid each year out of the workers' current earnings. National Insurance has become in practice a tax on the young to support the old. With inflation, with rising expectations of living among the elderly and an ever-growing number of people living in retirement, the burden on the active sections of the community is bound to grow.
If the greater proportion of the retired people still in the future, as at present, have to look to the State rather than to an occupational pension scheme for their main source of income, there is likely to be a general lowering in the standard of provision for the old below that which 838 would otherwise be possible. The overwhelming advantage that occupational pension schemes have over a "pay-as-you-go" State scheme is that they are at least partially funded. They are real savings made today for use in the future. These savings in pension funds already amount to more than £8,000 million.
My hon. Friend the Member for Kensington, South gave us a striking figure; I think he said that they were increasing at the rate of £1,000 million per year. They provide the capital for the new investment in industry which alone can produce the higher production and increased exports which will finance all the social services and support the nonproductive sections of the community with the rising living standards that we want them to have.
I hope, therefore, that in their approach to the real problems of preservation or transferability of pension rights, whether in the context of the new State graduated scheme or under any statutory power which may be taken or in any changes in the law governing tax relief for pension funds, even the present Government may realise that the pension funds are just about the best friends that any Minister of Social Security could ever hope to find.
I hope that we may have an assurance from the Parliamentary Secretary that there will be the closest consultation at all stages with the pension fund managers and the insurance industry as well as with the T.U.C. and the C.B.I. before any decisions are taken. I hope that preservation will become virtually universal, subject to reasonable minimum periods of service, but I think that one must include the word "virtually". For what does one do about the man who, rather than having his pension rights preserved or frozen when he changes job, would prefer to receive a lump sum, perhaps to set up a business of his own, perhaps for a down payment on a house, or perhaps because he plans to emigrate?
This was one point on which I slightly differed from my hon. Friend the Member for Kensington, South. His knowledge of the whole subject is vastly greater than my own, but I felt that he skated rather easily over this problem, because from my study of the subject it seems to me that preservation and widespread payments from the 839 pension funds of past contributions as capital sums are in a sense incompatible with one another. This is, I believe, implicitly recognised by Section 379 of the Income Tax Act, 1952, which applies to many of these funds. The "mixed benefit" which would be involved in the suggestion put forward by my hon. Friend is regarded by the Inland Revenue as quite unacceptable.
I see the force of the Treasury opposition to the concept of "mixed benefit", for if a pension accruing in a tax free fund is to be regarded as deferred earnings—and every hon. Member who referred to the subject has so regarded it—and if it is to be treated, as it is, as earned income for tax purposes in the hands of the recipient, how is the lump sum to be regarded if it includes the contributions of the employer as well as the employee? I can see splendid opportunities for tax avoidance there unless there are the most stringent controls.
Nor does the lump sum really meet the real object of the exercise and the reason for the tax relief, which is that successive Governments have thought it right to give specially preferential tax treatment to arrangements which provide a pension for people in their old age. If a vigorous man of 35 takes the pension entitlement he has gained in the previous 15 years as a lump sum, for whatever worthy cause, in all probability it will not provide him with a pension in his old age. Yet, as the experience of most large pension funds has shown, the great majority of middle-aged men on changing jobs opt at present, when they have a choice, not for preservation of their pension rights, but for the return of their contributions.
I hope, therefore, that the Parliamentary Secretary will tell us how he plans to deal with that problem, if he is thinking, as I hope he is, of implementing the recommendations of the Morgan Report on preservation of pension rights. It would prove very unpopular if the right of return of contributions were suddenly and wholly withdrawn.
Transferability as an ideal is even more attractive than preservation. Ideally, all people on changing jobs, however often they change, would take their accumulated pension rights with them and draw their eventual pension from 840 the firm for whom they were working when they finally retired. The trouble is that the half of the working population who already have occupational pension rights have them in over 60,000 separate occupational pension schemes. Some of these schemes are fully funded, some partially funded, some unfunded. Some are contributory, some non-contributory. Some provide for retirement at the age of 60, some at 65—and, since the House of Commons Fund has been referred to several times, one must point out that our retiring age is somewhat uncertain. Some contain provision for widows and children, some do not. Some pay a pension related to the final year's salary, some to the total salary earned over a working lifetime. Some are far more generous than others.
It would be an exaggeration to say that no two private occupational pension schemes are identical, but when the Government Actuary published his new survey on occupational pension schemes in 1966 he reported that having looked at 40 small occupational pension schemes he found among them no fewer than 21 different combinations of contributions and pensions—21 different varieties out of 40. With 60,000 to choose from, the minister who makes transferability compulsory will need the help of an actuarial Heinz. Clearly he has one, because Labour's election manifesto contains the unequivocal pledge to "deal with the problem of transferability of occupational pensions".
Assuming that dealing with the problem is not just a euphemism for nationalising the lot, either directly or because of the nature of the graduated State scheme, I shall very much welcome the implementation of that pledge, if a sensible and practicable means can be found which will command the support of pensioners, employers and insurance companies alike. Such a solution, if it exists, would be of very great value to our nation. Failing that, perhaps the Government will return to the more realistic and practical pledge in the Conservative manifesto to "ensure that everyone can either transfer or preserve their pension when they change jobs".
§ 5.46 p.m.
§ Mr. Peter Archer (Rowley Regis and Tipton)
I greatly regret that I did not 841 have the opportunity of hearing the speech of the hon. Member for Kensington, South (Sir B. Rhys Williams) in introducing the subject. I look forward to reading it in HANSARD tomorrow. The House should be grateful to him for giving us an opportunity of discussing a vitally important question.
I find myself in agreement with what I might call the opening bars of the hon. Member for Horncastle (Mr. Tapsell), particularly when he said that the basic problem with which clearly we are all seeking, to grapple is that of inducing everyone to make provision for old age in some form, and at the same time to make the savings available to the economy as capital. But I am not sure that I followed him quite so happily into some of the other economic theory he advanced. Certainly, did not necessarily share his enthusiasm for the unmixed blessings of private occupational pension schemes. I agree that it is important that people should be induced to provide for their old age. But it would be a tragedy if their youth and middle age were ruined in the process.
I want to begin by directing attention not so much to an economic problem, but to a very real social problem which sometimes arises out of private occupational pension schemes to which are not attached rights transferability. A growing number of private companies offer remuneration to their employees not only in the form of a straight money payment but by providing them with a house, educating their children and, particularly, making provision—sometimes very substantial—for their old age, in a form which, as the hon. Gentleman said, may represent the equivalent of 10 years' earnings.
But the effect is that their whole future, their whole prospects of comfort and a moderately happy retirement, are identified with the company. Not only can the employee not confer on the community the benefits of such contribution as he may be able to make in another situation, but he has been reduced to a situation of near-slavery. That term may appear over-dramatic, but I have come across a number of very tragic instances of a man who has found that his whole future is now identified with keeping in with the establishment where he has happened to find himself. It means that particularly the best companies often find that their 842 employees are completely smothered by the benefits being provided for them.
I am not for a moment criticising their intentions. I am certain that frequently their intentions are the best, but it means that an employee recognises that his only hope of success is in remaining within the organisation and making himself as amenable as possible to the organisation and to his superiors, so that he becomes a complete organisation man. His industrial, commercial and social life are wholly dominated by the organisation. If he offends his superior, if he finds that he is not successful at a sport which is fashionable in those circles, if his wife does not get on with the wife of the general manager, he is confronted with a choice of clinging to an organisation where his face just does not fit, or leaving and losing the whole of his pension rights and virtually condemning himself to an old age of poverty. All too often it means that he clings pathetically to the desk or the bench which he occupies as the meal ticket for his future.
It means that any political views which he may have he would be wiser to keep to himself. It means that if he wants to take part in the affairs of the trade union concerned, it would be much wiser for him to restrain his inclinations. It means that his mental processes become wholly caught up in the corporate mental processes of the company. He becomes the victim of a more complete tyranny than any tyranny deliberately imposed by the State, or by a recalcitrant landlord, or an employer who sets out deliberately to kill the spirit of his employees, and this is so often done completely unconsciously, because the company just does not appreciate what is happening, and might even be gravely offended if it were suggested that it was happening.
Having pointed out this possibility of being strangled by the smoothest silken bands, I have made the contribution which I rose to make, but I should like to take the opportunity to point out another problem which has become apparent to me in the last two or three weeks because it has arisen in my constituency. This is a situation which arises in connection with a takeover and which was mentioned by my hon. Friend the Member for Epping (Mr. Newens).
Having found that their company was being taken over, a number of employees 843 were immediately assured—and I am sure that they were assured in all good faith—that they would not lose any of their pension rights. This was to be a matter of transferability. They were given the opportunity of subscribing to the pension scheme of the company which had taken them over. They were not given very long to make up their minds—only seven days in which to take advice, discuss it among their friends and finally take a decision which would affect their whole future. However, one appreciates that all too often commerce has to operate in this way and that is not my point.
The point is that, having opted into the new pension scheme, they discovered that it provided increased benefits at the expense of increased contributions. While they will probably benefit in the long run and have little reason to complain, they can be forgiven if at the moment they strongly take the view that this is not the time to increase deductions from their wage packets, particularly when they feel that they were not given a substantial alternative. The alternative would have been to lose the pension rights which had already accrued to them, and many of them, already advanced in age, might have found that even preservation would not have helped them, because they were too old to enter another scheme. They have been steamrollered into a scheme, which in other circumstances they might have looked at twice, on the assurance that they would not lose anything. They are losing immediate benefits at just the time they need them.
I was not surprised when the hon. Member for Ormskirk (Sir D. Glover) expressed the view that we should be very reluctant by legislation to introduce an element of compulsion into the way in which private commerce conducts its affairs. I know the views of the hon. Gentleman, to which he is fully entitled, and this is not the opportunity to question them. However, to say the least, I was a little relieved when some of my hon. Friends did not express similar opinions, because I rather expected to hear from them views which I have heard expressed by some of my friends active in the trade union movement—that this is a matter which should be left to negotiation between the two sides, and which might be expected to produce a 844 better result than the introduction of an element of compulsion by legislation.
This is a line of reasoning which I have never understood. On this side of the House we all subscribe to the theory that the economic affairs of the community are best ordered by decisions taken rationally as a community, and not by introducing a jungle where everyone gets what he happens to be in the best negotiating position to snatch. I hope that this is a matter in which, possibly with the consent of both sides, we can work out a method of dealing with the problem not merely to the satisfaction of those in the best bargaining position, but satisfactory and just to everyone concerned.
I do not believe in a situation in which an industry which happens to be making a profit can improve either the pension rights or the straight remuneration of its employees, must less the profits of its shareholders, at the expense of an industry which is in a less strong bargaining position. I do not believe in a situation which will permit producers to feather their own nests if they happen to be in a better bargaining position than the equivalent consumers. I do not believe in a situation which permits some employees of a company, who happen to be in a fairly strong position, to improve their position at the expense of other employees whose share of the profits of the company may be correspondingly curtailed.
Some of the problems have been discussed by the hon. Member for Horncastle. They inevitably arise when we try to fit together the jigsaw of a number of separate schemes of different kinds, some funded and some not, some designed for retirement at 60 and others for retirement at 65, some related to earnings and others intended to produce flat rate benefits. One can see the actuarial problems springing up from the very suggestion of trying to mould them together. Yet we all agree with the hon. Member for Kensington, South that this is a subject with which we should grapple quickly, and I should have thought that the simplest solution was for the Government to introduce at the earliest possible date the scheme on which they fought the last election and to which we all look forward with such eagerness.
845 It may be not enough merely to have a national policy for retirement benefit. We may have to go further and introduce a national policy for fringe benefits generally, and after that we may find ourselves compelled to produce a national policy for all remuneration, a national policy which, I hope, will commend itself to all sections of the economy and in which we shall secure from all sections a measure of co-operation, not because it has been introduced because of the necessities of the moment, but because it has been introduced as a deliberate act of policy, as the only way in which to secure fair remuneration, fringe benefits or otherwise.
But pensions may be a very good point at which to begin. I hope that my hon. Friend the Parliamentary Secretary will be able to assure the House not only that the Government recognise the problem—I am sure that we shall get that assurance—but that shortly we shall hear that the Government are preparing to deal with it.
§ 6.0 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Roy Hattersley)
May I, first, add my personal congratulations from this Front Bench to the hon. Member for Kensington, South (Sir B. Rhys Williams) on what has been agreed, by all sides of the House, to be an admirable maiden speech. It was obviously a speech stemming from a great deal of knowledge and experience, a speech expressing the view flowing from that knowledge remarkably cogently.
The hon. Member was right to say that he was fortunate in drawing, so early in his Parliamentary career, a place at the top of the Ballot, but political success is concerned with having the ability to take advantage of one's good fortune, and clearly, by the speech he made this afternoon, he has demonstrated that he fulfilled the second part of that political necessity.
I turn now to the substance of his Motion, which urges upon the Government the taking of urgent steps for the protection of pension rights. I reiterate what has already been said by the hon. Member for Horncastle (Mr. Tapsell), that protection of pension rights can mean two things. It will be for greater clarity if I give my own definition of 846 what those two things are. The first is simple transferability, and that is the last occasion on which the word "simple" will be juxtaposed with "transferability" during my speech. I define that as buying, in a new pension scheme, rights equivalent to the value, however calculated, of those bought in the old. That is a first alternative.
The second is preservation of similar rights by deferment of benefit. I define that as obtaining a guarantee of a pension, based on the total contributions paid into the old scheme at the time of withdrawal but obtaining the benefits only upon retirement. It is essential that in setting out the Government's position I examine both potential elements of the protection of pension rights, preserved pension and transferred pension.
At the outset I have to say that the problems of transferability, the obstacles to it, are so great as to seem as to appear insuperable to some people—not to my hon. Friend the Member for Barrow-in-Furness (Mr. Booth), but to some. Certainly, they are not simply the result of reluctant management, unwilling or unable to take part in schemes which are to the benefit of their employees, their potential employees and to others. They are technical problems about how the transfer is to be effected, about the value of the rights transferred and the benefits received as a result of the transfer values.
Occasionally, transfer values and the rights in the new scheme are established by an agreed formula. This is particularly so in the public sector, to which I will turn later. Whatever else may be said, it is true that a formula by which transfer values of rights in new schemes can be reconciled, is more often found in the public sector than elsewhere. Most usually, certainly in the private sector, the decision of the first scheme as to what to give and the decision of the second as to what rights can be obtained by that movement, are independent decisions, and very largely unrelated to each other. They pose technical problems often regarded as insuperable.
The transfer value may be calculated in a series of ways. It may be simply calculated on the total sum of the contributions already paid in. In itself this may pose problems, as the employer's contribution may not be a fixed percentage, or a fixed figure in any one year, 847 but calculated in some totally different way. On the other hand, the capital value of a deferred pension that an employee might receive, had he chosen deferment rather than transferring the pension, might be regarded as the rights which he takes out of the fund.
Just as these alternatives are available as definitions of what rights an employee takes with him, so there are similar alternatives for deciding the entitlement of an employee in a new scheme. These problems exist in all sectors, even when the two schemes, the scheme from which the employee moves and that into which he moves are identical.
Clearly, when the movement is between two dissimilar schemes the problems are intensified. The hon. Member for Horncastle reminded the House, as did others, of the dissimilarities between schemes, between the age of entry in one scheme and another, between the age of retirement and the benefits, the different sizes of contributions, and the difference in some cases, between the existence and non-existence of contributions.
He reminded the House of the different ways in which an employer might calculate his contribution—one sixtieth or one eightieth being alternative ways of calculating the eventual benefit. If there are difficult technical factors involved in reconciling the movement when two schemes are identical, there are clearly enormous difficulties in reconciling the transfer when two schemes are totally dissimilar.
There is another additional built-in difficulty, and that is that the calculations going into the creation of most schemes are based on the assumption that the salary progress of the insured person, the eventual beneficiary, will, if not gradual, be predictable—that he will go on at something like an equable curve. By definition, when a man changes his job and therefore his pension scheme, he is often doing it to break down that curve of gradual salary. By moving from job A to job B he may obtain, on the point of retirement, a salary on which his pension is calculated and which is far in excess of anything anticipated by his original firm when it made the initial contributions to the pension fund during the first five, ten, or fifteen years of his working life.
848 These are only some of the problems involved in transferability, and it is not surprising that the extent to which genuine transferability is open to employees at present is very limited.
§ Mr. Tapsell
Having said what he has, how does the hon. Gentleman account for the fact that his party, in its 1966 election manifesto, pledged itself to deal with the problem of transferability of occupational pensions?
§ Mr. Hattersley
I am very much aware that the hon. Gentleman regards my party as being responsible for inadequacies which he dated back to 1859. I will try to explain to him that the Government are offering a series of alternatives. All that I am trying to do at the moment is to set out some of the difficulties.
I am sure that the hon. Gentleman, like the rest of the House, expects a serious consideration of the difficulties. If he thinks that the difficulties do not exist he must tell us. I now intend to go on to deal with the difficulties of the alternative scheme, preservation, and then I will try to explain what is the Government's attitude to these alternatives, which I hope will satisfy the hon. Gentleman. I will even deal with the election manifesto.
I was saying that with all those objections it is not surprising that the existence of genuine schemes offering the reality of transferability and not simply the prospect of transferability is very limited. Both the public and private sector contain notable exceptions to that rule. I call to mind, in the absence of the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis), who had hard things to say about the inadequacy of schemes for the public sector, the negotiations recently held between British Railways and the Civil Service to bridge the gap and solve the problem. It is right to say that because of these difficulties, these technical obstacles, transferability is not a frequent feature of pension schemes today.
Let me turn to the alternative, deferred pension rights. I do not regard this as an easy alternative. It is not without problems. Deferred pension rights produce a fragmentation of pension schemes, with all the complication and inconvenience, and administrative difficulty that that implies. They are particularly 849 vulnerable to inflation since they are calculated at a date many years before the participant actually enjoys his pension.
Clearly, the element of the eventual pension may be calculated on a small part of the salary, which has little or no relationship to the eventual salary received. At least there is one thing which can be said about deferred pension rights, and that is that in the immediate future they are more feasible, more practical, more easily put into operation than is transferability.
As we have been reminded, my right hon. Friend the then Minister of Labour decided to examine all the implications of these two alternative schemes as far back as 1966. He set up a working party which has been referred to this afternoon as the Morgan Committee. It was a subcommittee of my right hon. Friend's National Joint Advisory Council. It reported in April, 1966, and its report was considered by the National Joint Advisory Council, after consultations by the parties on that Council with their constituent organisations, in October of that year. It was its conclusion, as it is mine today, that deferred rights are at least more feasible, more practical and more likely to be put into operation than is complete transferability. It made four recommendations to my right hon. Friend the then Minister of Labour.
The first recommendation was that universal and effective arrangements for preservation are desirable. The second was that deferred pension rights should be a minimum aim, whatever the reason for withdrawal. The third was that inevitably this involved a restriction on the individual's right to withdraw his own contributions. The fourth was that a direct statutory requirement should be imposed on occupational pension schemes as the only conceivable way of bringing about these admirable aims.
These considerations were advanced, and this point of view was advocated, largely for reasons of social justice rather than economic necessity, for the Morgan Committee concluded that the effects on mobility are limited and selective and do not provide a compelling argument for the general requirements of preservation. I do not think that that statement, which the hon. Member for Kensington, South 850 regarded as slightly complacent, is totally at variance with his experience and beliefs. I believe that the areas to which it refers as being limited and selective are probably the areas about which he knows most. They are certainly the areas of the higher income groups—middle and top management.
The Morgan Committee, while making that qualification, accepted that the problem exists. Certainly, I accept that that problem exists and the four conclusions of that Committee as endorsed by the National Joint Advisory Council of the Ministry of Labour—that if one is to bring about these pension schemes in the numbers that the nation and the economy require, it must be done by direct intervention of the House of Commons. I do not believe that exhortation and example will do. I do not believe that tax incentives and penalties would be adequate. In many ways, they would not be fair and certainly would not move sufficiently quickly. If we are to bring about the schemes in sufficiently large numbers, it must be done by the House of Commons expressing by Statute its belief that an obligation must be placed on management.
However, having said that, I must issue a warning which endorses the caution of the hon. Member for Ormskirk (Sir D. Glover). He reminded us, rightly, that in a situation in which it is not compulsory to set up a contributory pension scheme any statute which makes compulsory pension schemes more expensive, more exacting to operate and more difficult to administer may prevent some firms, and clearly firms at the margin of decision, from setting up a scheme. I accept that difficulty, but I reiterate that if we are to do it we must do it by statute.
The second disadvantage which I must bring to the attention of the House is the cost of making such schemes universal. It is estimated that they would amount to£50 million gross cost—about 5 per cent. of the total annual cost of pension schemes, or about 0.5 per cent. of the total national wage bill. It was those costs which made the C.B.I., represented on the National Joint Advisory council, concludethat any move to provide for compulsory preservation must be deferred until the economic situation justified the additional costs which would fall on employers".851 When I ask the House, as I shall in a moment, to be a little more patient with the Government, and with successive Governments which have failed to meet the problem, I do not do so for that reason.
§ Mr. Hattersley
The hon. Gentleman is very eager about this point. He has at least three years in which to see that pledge fulfilled. If he waits for another three minutes, he may see what the prospects are.
I am not asking the House, the nation and the economy to be a little more patient because of those economic considerations, important though they are. Many of my hon. Friends will argue, and I hope that many hon. Members opposite would argue, that the economic considerations must be overriding in all our decisions at this moment. However, there are other reasons why I must ask the House to wait a little longer, paramount though the economic considerations must be.
The reason is that which I suspect the hon. Member for Horncastle is anticipating, namely, that a major review of policy in this field is under way and that major review is clearly intimately linked with decisions on the transferability of pensions. The major review includes the possible extension of graduated schemes, and I could not possibly say or do anything today and nor could my right hon. Friend the First Secretary propose to the House anything which might pre-empt those schemes, which might confuse those schemes or conflict with them or which might imply what those schemes contain. The House does not have long to wait to know what they contain.
My right hon. Friend the Minister of Social Security announced to the House on 4th March—it appears in column 23 of the OFFICIAL REPORT for that date—that she hoped to produce a White Paper on her scheme and her entire review by the end of this year, and the final view of the Government about how such a scheme of transferability can be operated must await the production and printing of that White Paper.
852 However, it remains the Government's view that they must tackle the problem of transferability. If the House wants us to vouchsafe our good intentions, I do so by saying that I do not ask the House to vote against the Motion. It is not a Motion which I should have tabled myself, because perhaps the hon. Member for Kensington, South and I would argue about the meaning of "to take urgent action" and "in every practicable case".
But, putting those semantic difficulties aside, and hoping that the hon. Gentleman will believe that the end of 1968 amounts to "urgent action" and that "in every practicable case" means exactly what it says, while I do not urge the House to support the Motion, I certainly do not ask it to reject it—not simply because of the admirable way in which it was moved and the spirit of bipartisanship which has characterised every speech, except one from the benches opposite, but because the Government are committed to the principle and understands very well the necessity of bringing this about, and intend to bring one or other of the solutions about at the earliest opportunity.
§ 6.17 p.m.
§ Mr. Charles Mapp (Oldham, East)
I was intrigued by the concluding words of my hon. Friend the Joint Parliamentary Secretary. I am very anxious that the review to which he referred should be completed quickly. Not only this side of the House but the country would be very disappointed if that review was not made public and if legislation did not follow it by the end of the year.
I wish to return to the immediate issue before the House. Perhaps I should declare an interest. I am a member of a small panel of the Society of Pension Consultants, which has distributed an interesting document to us. However, I am in no way committed to its general principles and I have told the Society that, while I have some knowledge about these matters, I have great reservations about certain of its points of view. This debate appears to have emanated from that kind of background. I regret that that kind of background has, in effect, created this discussion.
The Motioncalls upon Her Majesty's Government to take urgent action to ensure that pension rights 853 can under no circumstances be extinguished and in every practicable case should be made fully transferable…if required…".My hon. Friend the Joint Parliamentary Secretary did not mention this, but I want to say emphatically that if the Government take away from either salaried or wages people in industry the right to leave a firm and take with them the credit which has accrued to them in whatever pension funds there may have been, and if they seek in substitution to offer to the worker or the salaried person some deferred pension scheme, they will be misunderstanding public opinion.
I am one of those who has been covered by superannuation away back since 1917 or 1918. I belonged to a railway fund in which the members had a committee of management with the employer. Many private schemes are imposed upon workpeople as a condition of service. I take the view that contributions to properly organised schemes are desirable in addition to what the State might provide.
What is happening in industry, however, is that work-people and staff are contributing very heavily to funds but have no expression whatever in the way those funds are used. Nor can they exercise any influence in the investment policy which is applied to those funds.
It seems to me that if I were a reasonably modern employer and I wanted to take into consideration industrial relationships as we know them, part of my attitude to my staff would be that I would want them to make provision with me as a firm for later eventualities in life. In return for the contribution which I might make, I should offer to them some form of democracy as to how those pensions were used.
In the speech of my hon. Friend who preceded me, I picked up the question of consultation with the trade unions. As I have said, I belonged to a railway fund in which there was consultation throughout. Tie Minister should realise that there is a vast amount of money in these private schemes that people have contributed in the hope that, at some time, they will return to them as pensions. A terrific financial empire is built up on these funds from year to year. The investment policy behind them is 854 never questioned anywhere. In my opinion, that is a point which should be in the Government's mind when, later this year, they issue their White Paper.
How many of these schemes are conditions of service? In my case, and with many firms across the country, participation in a scheme is made a condition of service. That accounts for the fact that among the unemployed we find, perhaps, more than a proper average of people who are past the age of 45 or 50.
We must realise the difficulties and dangers of firms saying, "Everything else is equal, but we are not recruiting you because you have gone beyond the proper age for our superannuation fund". They may or may not have heard of late age entrants and the higher amounts which should be paid. That is probably due to the fact that many of these firms, having committed themselves in principle to pension funds, hand out the policy and details of the funds to consultants and they are unapproachable by the staff.
I take the view that that is undesirable. If I were collectively involved in industry on the trade union side—and I was on the railway—I would not tolerate my colleagues in that way, although it may be to their advantage later, contributing to funds, involving considerable finance, but having no say whatever in how those funds are used or, indeed, to what extent the interpretation of the rules is generous or restrictive. I hope that the Minister will bear these thoughts in mind.
In all this discussion, I notice a complete absence of any reference to the possibility of what happens to the interests of employees who have been paying over a long period. The present practice is that, in the main, a person can take his money out. The fact is that, as a rule, there has been an equal contribution or otherwise between the firm and the employee. If he leaves halfway through his life, he gets the return of his contributions.
Those of us who are familiar with the running of superannuation funds know full well, however, the extent of accretion each year to the funds contributed by employers and employees. The interest which arises in the management of the fund helps it to maintain viability. To take out simply the employee's 855 contribution and to retain the interest which has accrued on his contribution is manifestly unfair. In my opinion, this robs him of a share of his investment. That is what it amounts to.
My hon. Friend the Joint Parliamentary Secretary said that a scheme had been agreed between the railways and Government Departments, of which I have some information, but it took a long time to bring it about. We have, I think, reached the position that when a salaried person moves from the railways, which had a committee of management representative of both sides, into the Government scene, he moves into a sector in which there is little or no consultation about how the funds are dealt with.
I would like to say this last word. If we are to talk about the transferability of pension rights, in my opinion this will not appeal at all in a world in which, over the period of a generation, inflation destroys the value of whatever deferred pensions we might have in mind. I am not over-anxious that the world of cover for the industrial worker should be taken over too much by professional people—although they have their place—or should be taken over too much by institutions involved in finance. I want to see the State take a greater share in this.
I would also like to see the private side of industry put its house in order in many ways by agreeing to a far smaller number of much more democratically managed schemes which would be commendable to a large number of firms. In that way, it would be possible to get something approaching uniformity and to make easier in due course the kinds of things which are mentioned in the Motion.
If the wordsunder no circumstances be extinguishedpreclude an individual from leaving his firm to go into some other form of business or another form of work, and if he is unable to get back at least the amount which he has paid in together with the appropriate interest which has accrued on it, I would differ completely with the proposal which is before the House.
856 If the Motion accepts that principle, I would have a different view about it. I hope that the Government will bear this in mind in building up their thinking, the results of which we shall learn in due course in their White Paper.
§ 6.29 p.m.
§ Mr. George Wallace (Norwich, North)
It so happens that I have had a great deal of experience of these matters in a personal sense. I have been in two superannuation schemes, one of which was contributory and from which I had my cash refunded. Subsequently, before entering the House of Commons, the opportunity was given to me to carry on my pension scheme on a transferable basis.
I am generally sympathetic to the Motion. There is no doubt about it that the problem we are discussing is the problem of the older man. The younger man can take a gamble, but not the older man, the man of 45 or 50.
I think that there is a short-term solution. I happen to have been in a superannuation fund before I came back to the House. It was on an endowment policy basis. I had an endowment policy, my employer had an endowment policy. When I left I was able to take my policy over and carry on the contributions. If all schemes were on that basis I am sure the problem would not be so serious as it is at present. As I said, the problem is more difficult for the older man, but if the older man had to face up to the situation and had an endowment policy he could carry on his contributions on change of employment. So I would suggest that if we could manage to persuade large firms to go over to the endowment policy basis much of this problem would cease to exist.
I agree with my hon. Friend who mentioned equation of pensions with conditions of service. One firm I was employed by some years ago definitely made entrance into the superannuation fund compulsory, and a condition of service.
We are discussing transferability of pension rights when a person has made contributions, but there are also noncontributory pensions, and the whole problem is, if we are to give transferability of pension rights to the noncontributory pensioners, the people in a non-contributory scheme, then, in a 857 sense, we are giving an unfair balance to them compared with the person who has made contributions.
There is no cut and dried, short-term solution. It is a most difficult, complicated problem, and I would end, as I began, by suggesting that many firms would be well advised to turn over to the superannuation schemes on an endowment basis. I am not going to sell insurance here, but it is obvious common sense, for if there is an endowment scheme one can decide to carry on and the older man would be able to benefit. The younger man has a temptation to spend his refund of contributions, contributions which he has cursed every pay day when he has had them deducted from his pay. The younger man can take a gamble. The older man cannot. I did not take a gamble. I made sure I was covered.
§ 6.35 p.m.
§ Mr. Alexander W. Lyon (York) rose—
§ Mr. Tom Boardman (Leicester, South-West)
On a point of order. Is it in order for this debate to be continued by hon. Members who have not been in the House for very much of the debate and are coming in one after another, and when there is on the Paper another Motion in my name, a Motion which is of considerable interest to hon. Members? Cannot the House move on to that next Motion?
§ Mr. Alexander W. Lyon
Both my hon. Friends who have spoken—[Interruption.] I am sorry that the noble Lord the Member for Hertford (Lord Balniel) finds it deplorable to express one's opinion in a debate in the House. I always understood that the House was the home of free speech and that one could exercise that right in any debate and that the procedure of the House was so ordained that, if one wished, one could make a contribution. I intend to make that contribution despite the seated objection of the noble Lord.
Both my hon. Friends who spoke earlier had to declare an interest, partly by reason of professional interest in occupational pension schemes, partly by 858 reason of the form of occupational pensions which they had. I can speak from a disinterested point of view since I have never been in an occupation where there was an occupational pension scheme, and my interest in the scheme which is related to the occupation I now hold is one which will not mature for some little time, though I am optimistic that I shall live to draw it.
I was educated by much of the discourse of my hon. Friend the Joint Parliamentary Secretary in relation to this question. One is always in debt to him for the way he so persuasively marshals the arguments both for and against before intimating the opinion of the Government, but I thought that there was, perhaps, a flaw in his argument about the method by which one can overcome the difficulties of applying the principle of transferability to private occupational pension schemes in industry. The point was made partly by my hon. Friend the Member for Norwich, North (Mr. Wallace).
If it is now possible, at the termination of employment, before pension rights can become due, for contributions to be repaid in a lump sum, as is so often the position in occupational pension schemes, without any right either to the interest or to any part of the employer's contributions, would it not be possible by legislation to enact that the employer would be able to use the premiums which have accumulated over the years to buy a lump sum annuity which could be set aside for the use of the employee upon his retirement or upon some future date? It would be, of course, a short-term, transitional provision, because one hopes one will be able in due course to move to a more permanent solution to the problems which face us in this difficult situation, but in that short term would it not be possible to enable the employer to use those accumulated premiums for this purpose?
One of the tragedies, I feel, of the present situation is that when an employee has accumulated premiums for quite a considerable time, there is a temptation, particularly in moments of financial stress, for him to take the benefits which have accumulated in a lump sum to deal with the passing, temporary financial crisis. Sometimes it is a question of paying off hire-purchase instalments, 859 sometimes it is a question of moving home. At that moment there is a very real temptation, through the opportunity provided by a private occupational scheme which pays out premiums in this way, to take the lump sum.
Although one wishes to encourage mobility of labour, one does not wish to do so at the expense of the provision which is made by the pension schemes, and rightly made, for retirement in old age, and, therefore, it may be desirable to adopt a scheme of this nature, which would put an end to the right of the employee to take his money in a lump sum there and then, and take it only in the form of an annuity paid for out of the premiums he has contributed. After consideration with industry, it may be possible to implement some scheme whereby part of the employer's contribution could also be put into a fund for the annuity.
Somehow, this problem has to be overcome. All of us would agree about that, because mobility of labour in a modern, expanding economy such as this is absolutely essential if we are to grow at the rate which the Government intend. One of the tragedies of the growth of private occupational schemes is that they have led to a reduction of mobility of labour and to very real fear of men approaching the age of 50 that they will not be able to be employed by a new employer after that age. This has meant a rigidity in movement rather than a mobility. If the Government are to implement their economic programme, they must find a way of ensuring full transferability of pension rights.
The hon. Gentleman the Member for Horncastle (Mr. Tapsell) interrupted my hon. Friend to chastise him about the failure to implement the promise in Labour's election programme. He failed to point out, however, that the assurance about transferability of pension rights in occupational schemes was linked with the promise to implement a national superannuation scheme through the State, and that the two must intimately go together. It is impossible to deal with them apart.
The cost of ensuring full transferability of pension rights under private occupational schemes at this stage, before a full national superannuation scheme had been 860 worked out would be infinitely higher than if a national superannuation scheme were implemented which gave rights as good as or better than those provided in occupational schemes, and, therefore, reduced the size and number of such schemes.
The original scheme was worked out by the Lord President of the Council, the right hon. Gentleman the Member for Coventry, East (Mr. Crossman), who is now responsible for this part of the Government's programme. It was implicit in his thinking and reasoning on the document on national superannuation that private superannuation schemes would tend to be at any rate reduced as a result of the implementation of a Government programme. If the benefits afforded by a Government scheme are of the order of or greater than half pay on retirement, the employee will be unlikely to favour any private scheme which gives less protection in old age or which, if it is applicable in addition to the national scheme, will cost him more in contributions.
The employee will, therefore inevitably look much more favourably on the national scheme and for that reason it was expected that the private sector of occupational schemes would tend to be reduced. It is one reason why I have always supported the scheme that was put forward by the Labour Party in 1958 which is still awaiting implementation. It is highly desirable that all workpeople, whether they are employed or self-employed, should have afforded to them the same kind of benefits in later life.
One hazard of being a member of the profession in which I earned my living before I came into the House is that there is no occupational pension scheme. It was for that reason that some justification was put forward for the barrister's year, that at the end of a period—
§ Mr. Speaker
Order. We are talking about the transferability of pensions. If there is no pension, one cannot transfer it.
§ Mr. Lyon
I was illustrating, perhaps at some length, why I support the concept of a national superannuation scheme which would ensure to everyone full transferability of their pension rights, 861 irrespective of the employment in which they were engaged. One way in which this would be afforded would be to self-employed people such as members of the Bar, who have now lost the right of the barrister's year.
I pass on to the rest of my arguments, as I see that the Chair is restless. I believe that this problem cannot be dealt with until the implementation of the State superannuation scheme. Since the White Paper has been promised before the Summer Recess, the House ought to respond to the appeal of my hon. Friend that we should wait for the White Paper so that we can decide what remnant of private occupational schemes will require legislation or administrative action to ensure full transferability.
In the present economic situation it is clear that it will not be possible to implement the White Paper on a State superannuation scheme for some time, and it may be that there will be need for legislation or administrative action to cover that interim period. That is why I made the suggestion at the beginning of my speech that the Government might consider the idea of ensuring that the accumulated premiums were used to buy a lump sum annuity at a later date. If, as in the scheme which my hon. Friend referred to, the occupational scheme has built into it the accumulation of an endowment assurance, it will be possible to utilise that, but most private occupational schemes, as I understand, do not have that provision. It is perhaps a pity that that is not so, but it would be possible to build in this defence for a tiding-over period.
I hope that my hon. Friend will consider that solution to the problem.
§ 6.46 p.m.
§ Mr. Stanley Henig (Lancaster)
In following my hon. Friend the hon. Member for Bradford, East (Mr. Edward Lyons) I want to draw a point of contrast. He apparently came to the House from that noble but evidently under-paid and under-privileged profession, the Bar. I came from a profession where the superannuation rights were very good indeed and that is why, Mr. Speaker, I sought to catch your eye at this late hour of the debate in order to make a short contribution.
862 I have felt the effect of the present situation in which, after having contributed to a pension scheme for some time, one is suddenly in the position where various choices are offered to one other than continuation of that scheme. As I had been working only a short time as a university lecturer, I had contributed only for some 18 months to the F.S.S.U. scheme. All that was at stake was the beginning of my savings towards the distant date when I retired. At the time the choices were posed to me, I had to think of the position of somebody older than myself making a similar move. I doubt if one would want it to be laid down that the only university lecturers who can stand for Parliament and risk being elected and losing their superannuation rights are those below a certain age.
Several choices were given to me. First of all, on a short-term basis, I could have a year's leave of absence if I paid both my own and my employer's superannuation contribution. This, added to the Parliamentary scheme, would have meant a large burden on my somewhat stringent financial resources, so that was out.
The second choice was to withdraw the money already put in. Everybody would agree with this principle, but in the case of the F.S.S.U. all contributions on both sides are made at the beginning of the academic year. I could have drawn out 18 months' contributions, but against that I would have had to pay the employer's contribution for some months forward, and the net figure drawn out would thus have been negligible.
The other point put to me by the F.S.S.U. was that I could ask whether Parliament was prepared to accept transferability, in which case I could transfer back. I did not find that course tremendously appealing. The remaining alternative was to transfer the bit of superannuation rights that I had to a paid-up policy accruing to me when I was 66. That is something to look forward to, at least, although it does not amount to much.
In this day and age, we should welcome a certain amount of mobility of labour, but people who change professions are likely to find themselves with no concrete, satisfactory and large superannuation.
863 Linking that story to service in this House, against it we have the rule that hon. Members with 10 years' service receive a fixed pension on retirement. An hon. Member with less than 10 years' service does not get it. In the case of an hon. Member serving in this House for seven or eight years, there is nothing to transfer to him.
We are discussing the possibility of making some kind of liaison between the various private pension schemes. However, not only are they different from the point of view of transferability; they are different in regard to all kinds of other matters as well. Some of them look forward to half pay on retirement, some to two-thirds pay on retirement, others to two-thirds of average pay, and so on. In trying to make transferability possible, it is obvious that one will run up against all kinds of other problems. People will be moving from one profession to another where the ethics involved in terms of pension schemes may be very different.
Although the Motion is eminently laudable and worth while, and while I am certain that we on this side of the House will certainly not wish to vote against it, it becomes just that bit irrelevant. As they move from one job to another, if certain people are guaranteed half pay on retirement, why should not the same privilege be extended to other people who never were in a job giving that right? Surely the whole rigmarole of different private pension schemes with different rights be overtaken by something much more far-reaching. Obviously, it would be out of order now to go into details of the kinds of State superannuation schemes which have been produced from time to time.
But there is no point in trying to paper over an edifice where the cracks grow bigger as one papers over those which already exist, and that would be the case if one brought about transferability without dealing with the aspects which are most wrong in the present set up of private pension schemes. I refer to the facts that some are better than others, and some are a condition of service while others are not, quite apart from the fact that some employers have no private pension scheme at all.
864 One needs, therefore, to try to widen the application of the Motion and say that, instead of transferability, what is required is some kind of equality between private pension schemes and, ultimately, a State pension scheme which can supersede the lot. If that comes about, a person changing his job will not have the problem which I had to face of having to decide whether to take back my contributions, pay more, or carry on both sets of contributions. He will be able to move from one job to another knowing that every one has the same kind of superannuation, with so much for the employee and so much for the employer, and knowing that everyone gets the same at the age of 65.
That is why I welcome the Motion. I regret that it has not gone as far as it might have done, and I hope that the next time that the House discusses this very real problem it will have something much more concrete to consider, with the possibility of moving towards not just equal treatment for those who are already privileged, but something providing the same treatment for the privileged and the not so privileged.
§ 6.55 p.m.
§ Mr. John Lee (Reading)
I understand from my hon. Friends that the hon. Member for Kensington, South (Sir B. Rhys Williams) made what was his maiden speech earlier this afternoon, although his opening remarks were not the customary ones. But I have verified from my hon. Friends that that is so, and we congratulate the hon. Gentleman for having raised this important subject.
A number of my hon. Friends have illustrated from their past experience the ways in which the disadvantages of non-transferability apply. My hon. Friend the Member for York (Mr. Alexander W. Lyon), for example, belongs to a non-pensionable profession, as I do. My hon. Friend the Member for Lancaster (Mr. Henig) has had to sacrifice a pensionable occupation to enter the hazards of political life. I am in a mid-way position inasmuch as I practice at the Bar but draw a small occupational pension of £168 a year pro rata with my service overseas in a pensionable occupation.
I mention that because it has a direct relevance to the problems that the hon. Member for Kensington, South has raised. Long before transferability came to be 865 discussed seriously in this country, in the Overseas Civil Service it was possible to transfer one's pension rights. If one joined the Service in one colonial territory, one entered its own scheme. On transferring to another colonial territory, one's pension rights were also transferred. It did not matter if the salary scales, the terms of service and the length of service required to qualify one for persion were different. It did not matter if the territories in which one served were in totally different parts of the world. One's pension rights went with one.
I know a man, for example, who served in no less than five territories in different parts of the world and collected pension rights from each of them. When he retired, his pension was paid by five different Commonwealth and Colonial Governments. In the case of one of them, he had to wait five years after the normal retiring age to draw the pensional ingredient—
§ Mr. Tom Boardman
The hon. Gentleman clearly is concerned with the problems of the retired and the elderly. How can his concern be consistent with the deliberate policy which we are witnessing from the benches opposite, with hon. Member after hon. Member taking part 866 in a filibuster designed to enable the Government to avoid having to reply to the debate?
§ Mr. Lee
That is all very interesting, but it has nothing to do with the Motion. I am concerned with the transferability of pension rights. I was making the point, which I thought that the hon. Gentleman was capable of understanding, that what was done overseas years ago ought surely to be done here. I am sure that the hon. Member for Kensington, South will understand my point.
I was putting forward an extra argument in favour of the general principles which the hon. Gentleman has advanced. I was about to show that in one case, at any rate, whereas the normal retiring age for the Colonial Service is 55, the person to whom I have referred had served in the Bahamas and Bermuda, where the retiring age is not until 60, and that he had to wait another five years to draw his pension rights which had accrued in those territories. However, those rights were preserved—
§ It being Seven o'clock, the Proceedings lapsed, pursuant to Standing Order No. 5 (Precedence of Government business).