Mr. David Crausby (Bolton, North-East)

5.46 pm

We should be doing everything that we can to persuade young people that it is important to make financial provision for their old age. As my hon. Friend the Member for Aberdeen, South (Miss Begg) and the hon. Member for Chesterfield (Paul Holmes) said, there can be nothing more damaging to that case than young people who know a relative or friend who has suffered the fate of losing their pension.

It must be unacceptable in a fair-minded, 21st-century system for employees, through no fault of their own, to find themselves without a pension after a

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lifetime of hard work simply because their employer mismanaged or misunderstood their pension or went missing with the money. With that in mind, the new pension protection fund is extremely welcome, but it is long overdue. It will undoubtedly help to restore confidence and protect future generations from a miserable old age. As many hon. Members have said this afternoon, there are tens of thousands of despairing victims who should have been protected before now.

It was as clear as the nose on one's face that, as the stock market boomed and employer after employer took long, luxurious contributions holidays, there would be a day of reckoning. The day of reckoning has come for many, and the Government should have predicted it, because it is not those who encouraged the contributions holidays who will pay the price but long-suffering employees who continued to pay their contributions throughout those years.

Mr. McWalter: Does my hon. Friend accept that many honourable companies took those holidays because they had reached the threshold of 105 per cent. of liabilities and were forced to take a pensions holiday? That is an important component of this debate.

Mr. Crausby: I accept that that is an important point, but such companies had the opportunity to increase benefits.

We should remember that, until the early 1980s, many workers were forced to join pension schemes as a condition of their employment. With that in mind, the Government have a responsibility to backdate the protection that should have been afforded to those who have already suffered so traumatically. The 1980 European insolvency directive placed a clear responsibility on Government to protect workers, and we have both a moral and a legal responsibility to put things right for that relatively small group of people.

I urge Ministers to look to the future and to talk constructively to those groups of pensioners and their trade union representatives to establish the size of the problem, with a view to funding retrospective compensation.

Before I was elected, I was a pension trustee, appointed by my fellow employees in a medium-sized engineering company. I tried to persuade the management of the day that it should not take contributions holidays, but instead improve benefits to bring the funding below 105 per cent. Management defended the non-payment of contributions—

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reasonably, at the time—saying that, when more difficult days arrived for the equity markets, the company would be forced to carry the liability and top up the fund with higher contributions. The company is now insolvent, and the pension fund has no one to cover excess liabilities. Those who enjoyed the contributions holidays have long gone. Management had no need to take any notice of me, and they did not, because they always had a majority of tame trustees, appointed by the directors, who had little choice but to do as their American owners insisted. Those trustees understood that, if they did not toe the line, their masters would find someone who would. Change will need more than just education and support for trustees. Sometimes it takes courage and independence, and it is easier to say than do when people feel that their jobs depend on how they act.

The 1978 legislation on pensions was a tremendous piece of work. It was a great step forward, but perhaps it was a little naive, with too much concentration on management-appointed trustees. The Pensions Act 1995 took an important step in the right direction by providing a general requirement for members to have the right to nominate their own trustees. I understood—although I did not agree with it—why the previous Government introduced a constraint that only a third of trustees should be member-nominated. It would probably have been a little early—and possibly too risky—to rush into too much change in a hurry. However, almost a decade has passed now and I would have thought that it was time for members to take control of their own money with at least a half the trustees being appointed by pension scheme members themselves. I am disappointed that the Bill does not provide for that.

The people best qualified to protect pension schemes are those who have the most interest in the prudent management of a fund. That group must be the pensioners and prospective pensioners themselves, not people who have no long-term personal interest. Far too many schemes that are now in trouble would have been much better protected out of the hands of unscrupulous employers and under the eye of pensioner-appointed trustees with control.

I welcome the legislation, which offers greater protection to existing scheme members, but I am deeply concerned about the lack of motivation for employers to continue to provide pension benefits. I worry that more Government legislation that introduces protection will mean that employers are less inclined to continue their provision, especially of final earnings schemes. We are forced to leave scheme members unprotected or to watch as the number of occupational pension schemes declines. The third option, which I very much favour, is to introduce a measure of compulsion on employers and employees to provide and join pension schemes. It would be much nicer if we could achieve that by persuasion and education, but it will always be difficult to persuade poorly paid young people that they should contribute to a pension from an early age. In a competitive market, employers will also come under pressure.

The Bill is a good one, but it fails to tackle some important questions, especially on compulsion. I am convinced that we shall have to return to those

questions, and it will be a great shame if we leave it too late and act in panic when there are even fewer schemes and even fewer workers opting to save for their old age.