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Mr. Flight: I thank my hon. Friend the Member for Windsor (Mr. Trend) and the hon. Member for Northavon (Mr. Webb) for their kind comments.
Now that we have a Minister responsible for pensions who is full of such common sense, I urge him to spend more time with Dr. Oonagh McDonald and to hasten the Government's addressing of the issue. I shall cover three key points.
First, the annuity is mostly taken out as a guaranteed annuity, which must invest in gilts. People are now retired for a long time. Even if a pension were drawn at age 75, it is quite likely that one partner would live for another 15 to 20 years. Any investment adviser who recommended putting all one's money in gilts for a 20-year investment would be done by the Financial Services Authority for bad advice. That is exactly what the guaranteed annuity does. It is simply not the right investment medium for a pot of capital--albeit one that is being run down--that is needed to provide an income over 15 to 20 years.
The second crucial point is that stakeholder pensions--assuming that they get off the ground--will greatly increase the volume of money purchase pensions that are building up. The guaranteed annuity depends on adequate gilts to operate at all. If we are to have continuing fiscal virtue and Government surpluses--or at least no Government deficits--where on earth will those new long gilts come from?
The Minister may have seen advice to the Government to fund themselves less at the long end in order to save money. If there is rising demand and nil new supply, or even a reduction in supply, it is not surprising that real interest rates at the long end fall, not just nominal ones. A great increase in money purchase pensions and a balanced budget just do not make sense from an investment point of view.
My third point is one that Dr. Oonagh McDonald has made very strongly. It may be a no-brainer for those with generous money purchase provision to limit what has to be an annuity to an amount such that they would never need to prevail on the state. The many people who need to be freed, particularly hundreds of thousands of women, are those who may have £30,000 or £40,000 in a pension scheme and may build up no more than that in today's money in a stakeholder scheme. I find it patronising to suggest that they will do better with a paltry annuity that they are forced to buy than they would by looking after the capital themselves. They will look after it much better. It will be the great nest egg for them against old age and nursing homes.
Mr. Rooker:
Hon. Members commented on the requirement to purchase annuities by the age of 75.I always have an open approach--I even had one before 7 pm, so I have not changed my attitude. The age of 75 struck a balance at the time when it was chosen. I have already said that the Inland Revenue has the matter under review, in the time-honoured phrase.
My hon. Friend the Member for Kirkcaldy (Dr. Moonie) made an important point. Although private pension arrangements are voluntary and one does not have to enter into them, some private pension arrangements are perceived to be a gamble on one's life, so that people of a certain religious disposition are prevented from entering into them.
I am not fully assured that there are pension arrangements suitable for such people, whereby they would still obtain the benefit of the tax advantages. It is no good suggesting that they put their money in a building society. It is possible that new financial savings vehicles that are available, such as ISAs, would be suitable. I could have suggested PEPs, but those are no longer. If one is saving for a pension, one must know that the system will continue to exist for many decades, while one builds up a pot.
The matter had not been drawn to my attention until my hon. Friend recently raised it with me privately. I shall be happy to look into it. I am taking on extra burdens every half an hour as I speak, but these are important issues and it is the Government's job to find a solution. That is what government is about. We shall try to do that.
If my hon. Friend wants to come and see me or writes to me with the details, I shall get the Department of Social Security and the Treasury to look into the matter with regard to people of a certain religious disposition who cannot take up existing schemes, although I need to be reassured that suitable schemes are available.
The hon. Member for Windsor (Mr. Trend) mentioned the bad publicity, which could cause problems. We must get the legislation on the statute book for stakeholder pensions and ensure that the Government do their job of advertising, selling and educating, while the industry promotes particular schemes to a population whom, by and large, the pensions industry has passed by on the other side of the road. People with moderate earnings of
£9,000 to £20,000--the target group--may only remember headlines about mis-selling and misinformation, so it is important that such schemes are not affected by a bad press.
That point was made also by the hon. Member for Arundel and South Downs (Mr. Flight). I pay tribute to the efforts that he and others have made. As a late incomer, I claim no credit for the debate. That is a result of our system of government. I have picked up the fact that an important issue is involved, arising from the Government's legislation for stakeholder pensions. There is a target group of 5 million people who, by and large, in view of their salaries, are not big savers. We have to create a system to sell them the concept of a money purchase pension scheme, which is something those people would never have contemplated previously, so the Government are obliged to get it right. We have to change the target group's perception, because we want to get as many of them as possible into stakeholder schemes as soon as possible. At the same time, we have to be careful of knock-on effects on the rest of the industry--we do not want bad publicity blowing up around specific problems with money purchase schemes to undermine stakeholder pensions.
As my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said, it is important to be flexible. To the extent that I am allowed an open mind as a Minister, I have one. I have already said that I am making my own inquiries and asking my own questions. The issue did not come from the Box, but arose from debates in the House of Lords and from Dr. McDonald's contacting my predecessor. I shall be happy to take the matter further. That being so, and knowing that the issue will not go away, I trust that the House will agree, in this interim period, to reject Lords amendment No. 3.
Lords amendment agreed to.
Lords amendment No. 3 disagreed to.
Lords amendment Nos. 4 to 16 agreed to.
The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley):
I beg to move, That this House agrees with the Lords in the said amendment.
Mr. Deputy Speaker (Mr. Michael J. Martin):
With this, it will be convenient to discuss Lords amendments Nos. 18, 19, 82, 102 and 163 to 175.
Mr. Bayley:
In view of the time constraints, I shall be brief. To set out the background, the Bill provides that, in the event of bankruptcy, pension rights in a tax-approved pension scheme will be protected from seizure by the trustee in bankruptcy. However, to prevent people from using pensions deliberately to put money beyond the reach of creditors, a mechanism is needed to allow the courts to order recovery of excessive contributions. In deciding whether contributions were excessive, courts
The Lords amendments deal with the interaction of two provisions in the Bill: the pension entitlement on bankruptcy and pension splitting on divorce. The amendments do three things. First, they insert provisions for dealing with the recovery of excessive contributions in Scottish cases where the bankrupt's pension rights have been shared on divorce. Schedule 12 already contained provisions for England and Wales. Secondly, the amendments provide more detail about the way in which the provisions will work in cases where pension sharing has occurred. Thirdly, they make technical changes to clarify the drafting.
In summary, the amendments do not affect policy, but improve the way in which the measure is drafted. They are necessary to make the provisions work properly.
Lords amendment agreed to.
Lords amendment: No. 17, in page 21, line 10, leave out ("debtor's")
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