Pensions minister Ian McCartney has admitted that a significant proportion of employers have set up a stakeholder pension scheme simply to comply with the law but are not making contributions.
Testifying at the final oral evidence session of the Parliamentary Work & Pensions select committee's inquiry into the pension regime, this was the first time that the Government has conceded that stakeholder has failed to increase pension savings significantly.
In response to a question from committee member Conservative MP Andrew Mitchell, McCartney said: “You are absolutely right. A significant proportion of employers have done absolutely nothing other than to register a scheme to comply with the law.”
He said that 97 per cent of the 1.15 million policies sold have been bought by people of working age and that 40 per cent have been bought by women. But the Department for Work & Pensions could not say how many women of working age are working.
McCartney was asked by committee chairman Liberal Democrat MP Sir Archy Kirkwood whether he agreed with industry sentiment that while the pension credit is a plausible short-term solution for assisting today's poor pensioners, it is not workable in the medium to long term.
McCartney disagreed, saying the Government is committed to the scheme as it believes means testing is the best way forward for targeting benefits at pensioners.
When asked by Mitchell if he was confident the Government could not be accused of misselling stakeholder by promoting it to lower earners whose savings may negate them getting means-tested benefits, McCartney said nothing the Government was doing in terms of stakeholder could be seen as being in danger of misselling.
Mitchell said that was a fine legal answer and asked if the minister had any moral problems with that the situation. McCartney again said no.
Scottish Life head of communications Alasdair Buchanan says: “It is a surprise that he was being quite so frank but his comments do reflect the reality of the situation.”