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Mrs. Angela Browning (Tiverton and Honiton): I support my right hon. Friend's Bill, but I have one concern, which may simply be a matter of clarification. The principle of equality between men and women in annuity rates is worthy, but in actuarial terms men end up subsidising women because of the differential in life expectancy.

Mr. Curry: That is a perfectly valid point, but we made a deliberate decision to have a system that, to use an abbreviated term, may be described as unisex, because women suffer much more severely than men. [Interruption.] They may live longer, but that is not a sin, I hope, although it does mean that they receive much worse benefit from the schemes. We have anticipated the trend of international law, which is constantly against such differentiation between men and women. We deliberately built that aspect in, so, although I plead guilty, I am unapologetic over my hon. Friend's charge.

Mr. John Greenway (Ryedale): My right hon. Friend pleads guilty unnecessarily. Although current actuarial tables show that life expectancy for those in their 20s is greater for women than for men, once people reach 65, which is the age we are discussing, there is little difference between the life expectancy of both sexes.

Mr. Curry: I am extremely grateful for that mitigating evidence from a former policeman.

Bob Spink (Castle Point): My right hon. Friend has indeed pleaded guilty before being found guilty. The point made by my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) is a good one, but it is mitigated by the Bill's excellent inheritance clauses.

Mr. Curry: I am grateful for that anticipatory applause, which I shall be happy to receive again when I reach the appropriate point in my speech. Furthermore, when my hon. Friend the Member for Tiverton and Honiton intervened, I was about to say that those factors add to the sharp fall in gilts, which particularly hits women as they pay a premium owing to longer life expectancy.

The substantive point is that the rules are no longer delivering the security to the pensioner or the guarantee to the state for which they were designed, so while the

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pensioner is trapped, the state is equally trapped owing to the looming requirement to provide welfare for people who may no longer be able to meet their own welfare needs. The Government admit that. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) asked about

The Government replied that the sum required in a single flat-rate scheme, which is the most common, is £36,000 for a man and £39,000 for a woman. The figures for an index-linked single life fund rise to £48,000 and £52,000. That again shows the differential between what men and women must pay to secure equivalent benefit.

The Government have also given figures to show that a 40-year-old woman would need £100,000 to buy an annuity at 65 and stay off income support, even with the state pension. The pension credit will of course alter benefit entitlement, but it will not reduce the volume of savings required to keep off benefit. Equally, a single man with £100,000 in savings in annuities will be eligible for income support by 2017, sooner for women.

There is no real difference in the analysis of the problem. Change is needed, and the Government recognise that. The Inland Revenue has approved a scheme to overcome some difficulties—the so-called London and Colonial scheme, which provides for a fund that may be inherited. The problem is that the fund is offshore, high cost in its fees and requires a minimum of £250,000, so if any Labour Members are thinking of saying that I am engineering a scheme designed purely for the better-off, I hope that they will pause for thought before levelling that accusation.

Mr. Nigel Waterson (Eastbourne): On that point, does my right hon. Friend agree with my constituent Mr. B. L. Harris of Willingdon Road that many of the people who are suffering are those on lower and middle incomes? He asks why people like him should start making provision in their 20s and 30s and take the risk that, some 50 years on, they will be caught by a very low rate of annuity.

Mr. Curry: That is precisely the point. When my hon. Friend's constituent began his scheme it would have been indexed in the expectation that it would keep him in a relatively comfortable, but not exaggerated, lifestyle in his old age, but he may well find himself slipping towards income support, and that is the nub of the problem that we are trying to address today.

My scheme is aimed at the middling saver and at achieving a pot of between £80,000 and £150,000, but I include specific suggestions to allay the Government's concerns and to prevent abuse of the scheme, such as its use to promote tax evasion. My scheme would provide an option. If people wished to remain with the scheme provided by existing legislation, they would be able to do so, with one exception. I am not requiring a change; I am making a change available to those who want it.

My scheme would retain the 25 per cent. tax-free lump sum. There are intellectual arguments about whether the lump sum is sensible, but many people depend on it to pay off an endowment mortgage, and I doubt that any

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politician in the House has the courage at the moment to suggest that the option should be removed. I put down an intellectual marker that, at some stage, logic may require scrutiny of that.

By the age of 65—I repeat, 65—people would have to buy an annuity to keep off welfare, taking the state pension into account. The Government have to fix that level annually, so I am not pretending to do that. Today, making a reasonably generous calculation, we estimate that the amount would be about £140 a week, again including the state pension. The fund needed to generate that would be about £55,000, and the Bill describes that as the minimum retirement income. The annuity would be indexed, and it would be unisex. The key point is that what was left—not everybody would have anything left—could be invested in a retirement income fund. In other words, people could break out of the obligation to invest the whole sum in low-yielding bonds delivered in what is, in practice, a monopoly marketplace.

There are of course alternative mechanisms. One could prescribe the size of the fund to deliver the minimum income. We chose income rather than capital so that it would be easier for regulations to bring together the pensions pot, benefit under SERPS and defined benefit pensions. We thought that it would be easier, administratively, if we had the same genus, as it were, of provisions.

Under these proposals, drawdown schemes, in which people take income and capital from a fund up to the age of 75, when the fund is annuitised, would no longer be possible, although existing arrangements would run their course. If people were given the freedom over their funds, they would have first to satisfy the obligation to provide for support to remain free of benefit. That is one of the underlying principles of existing provision, and I would retain it. I am sure that there is common accord that that is necessary.

Mr. Steve Webb (Northavon): We shall support the Bill, but I am concerned that those who have a small pot and who now simply buy an annuity of their choice would be forced to buy an indexed annuity. Does the right hon. Gentleman accept that that would restrict choice, as compared with arrangements at present?

Mr. Curry: I accept that it is a restriction, but I would argue that it is a wise move to make in any event. I am trying to move the debate on a little. I accept that there will be elements of the Bill that people will dispute, and that is another reason for the Committee stage. In Committee, we can discuss precisely those modalities, to use, rather riskily, a word imported from the European Union.

Mr. Waterson: Just when you thought you were doing so well. [Laughter.]

Mr. Curry: Few of us thought that pension annuities were a subject so redolent of humour. I hope that it continues.

It should already be clear that I am not inventing a permissive wheeze to let rich people get away with tax murder. The constraints that I have built in are obvious, but the Government should also build in stringent tax provisions—provisions for which I have been attacked on the grounds of, for example, bending over too far

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backwards to meet the Government's needs. Once again, I am unapologetic. I think that people must provide for their old age, and I do not intend to resile from that and give people a further benefit when they would already have received a benefit in the form of tax concessions. They should not be able to pocket that benefit without making reciprocal arrangements to protect their position in old age.

I suggest the following tax regime. First, there would be an exit tax on the fund of 35 per cent. at death, unless it was passed on to the spouse, partner or dependent children. The residual fund would be counted towards the estate for the purposes of estate duty, which of course the spouse does not pay. That would be double taxation, and people may want to criticise that, but I am trying to acknowledge the Government's need to make sure that people make adequate provision and to address, in anticipation, the fear that a lot of new money would be going into schemes that would qualify for tax benefit and from which the Government would have no clawback.

I am suggesting measures to prevent the fund being wrapped up into a trust. The Bill seeks to make the trust incapable of assignment, which should effectively close off that option. I suggest that the Government may want to change the rules on gift or inter vivos donations, again to prevent the possibility of exploitation of the scheme to benefit dependants outside the former rules that I explained.

Who would benefit? Aberdeen Asset Management argues that 1.2 million people, or 7.5 per cent. of people between 35 and retirement age, would be assisted. It is estimated that someone starting a scheme today would need to save 11.4 per cent. of net average earnings to reach the minimum income through the annuity—less than the existing arrangements demand.

What would the Government get out of this? I keep emphasising what the Government would get out of my proposals, and I am becoming almost ashamed of how much I am trying to help them. [Interruption.] I am delighted to hear that murmur of dissent. First, the Government would get continued annuitisation to get the minimum income, with a kick-off point at age 65 not 75, and therefore the possibility of more taxable income from the payment of the retirement income fund. Secondly, the drawdown scheme, which can diminish the capital available for annuitisation, would end. Thirdly, the Government would get a tax resource to recover their investment, although there may be a time lag. The Treasury should applaud the Bill, and even the dour Scottish spirits at the Department for Work and Pensions should toast me in a wee congratulatory dram.

What are the criticisms of the scheme? The first is that only the rich would do well; the poor would still have to invest in an annuity that mopped up all their savings. But that is what happens now. It is an inevitable consequence of the Government's demand that a fund accumulated for tax benefit should deliver the income for which it is intended. I agree with that. Almost everyone with modest funds buys an annuity at age 65 in any case, and the existing provisions would remain for those who wanted to invest using that vehicle.

The second charge is that the Bill is just tinkering. It is not. It is a radical option. Tinkering would be simply to move the age 75 cut-off point to 80 or 85, but then people

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would be encouraged to consume even more capital and head with greater certainty towards benefit dependency. The third criticism is that the scheme is a recipe for tax avoidance. I have spent some time explaining the measures that I propose to ensure that that is not the case.

The fourth accusation is that if pensions are made more attractive or, to use the Government's word, the "disincentive" of the present scheme is mitigated, there would be a flood of new money waiting to pour into pension schemes, claiming tax relief and escalating the cost to the public funds. That is the Inland Revenue's nightmare. That claim is exaggerated for three reasons. First, it is not clear that the amount of disposable income is as great as the Revenue fears, especially if the definition of disposable income includes housing cost. There is an argument about what disposable income is. The Treasury and the Department for Work and Pensions do not employ the same definition.

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