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Mrs. Browning: My free-market thinking does not suggest that women get less simply because they live longer. The hon. Gentleman knows about all the computations involved in actuarial calculations. He rightly says that women get less, but they usually reckon that they will be paid for longer. The guarantee is that, if they live longer, the payments will still be made, so there is a certain equalisation. I am concerned that we may allow sex equality, of which I am usually totally in favour, to get in the way of a more objective way to analyse risk.
Mr. Webb: I appreciate the point that the hon. Lady makes, but the pot from which the annuities are bought will be substantially smaller, on average, for women to begin with, for all sorts of historical reasons, such as the amount that they have paid and the sort of pension schemes of which they are members. I am happy to do a bit of meddling at the end to redistribute some of the injustice or unfairness that has not been picked up when women are of working age. All I am saying is that I am sympathetic to the provisions on sex discrimination for an entirely different reason from that of the right hon. Member for Skipton and Ripon.
Mr. Flight: Aside from a measure which, for whatever reason, is marginally favourable to women for so long as the age gap differs, the other concept is to have a simple standardised product in the minimum income annuity and, therefore, something that is as cheap as possible, with overhead costs as low as possible, and so forth.
Mr. Webb: I suspect that the complexity introduced by different rates for different genders is minimal compared with some of the complexity that the industry itself delights in introducing, but I understand the point.
Choice is critical, and I am concerned that, for some people, the Bill would restrict it. In an intervention, I mentioned people with small pension pots, who may not want to buy an indexed annuity, but would be forced to do so under such rules. A better example may be the impaired life category. If people hit 65 and all the signs are that they will not live until 70, they do not want to have indexed annuities. They do not want to protect themselves against 20 years of inflation, because they will only live for five years, but the Bill would force them to have a lower income for the rest of their lives than would otherwise be the case.
Mr. Webb: If I understand the right hon. Gentleman correctly, he is saying that people could reach 65 and go on with the money in the pot as at present until 75, at which point they would have to act, and that there would be an option at 65.
Mr. Curry: People would have to annuitise at 65. That would be the change from the existing regime, so they would not have that choice, but they could annuitise at 65 under what would otherwise be the existing rules.
Mr. Webb: I think that that undermines the right hon. Gentleman's point. I am sympathetic to the Bill, but if people had to annuitise at 65 and they were lifelong chain-smokers with cancer, they would not want to have indexed annuities. Lifelong chain-smokers who are 65 and thinking about buying annuities would want to buy impaired life or non-indexed annuities, but they would be forced to buy indexed annuities, so their incomes would be reduced for the rest of their lives. I think that I am right in saying that.
Mr. Gardiner: This is an interesting part of this debate because the very compulsion to annuitise at 65 would increase the competition on gilts, which, in turn, would drive down the annuity rates. Therefore, insistence that people annuitise at 65, instead of 75, far greater pressure would be put on annuities to sustain even the very modest rates available at the moment. I hope that the right hon. Member for Skipton and Ripon (Mr. Curry) will respond to that central point, perhaps later in the debate, because it is one of his Bill's defects.
Mr. Webb: There is a lot in what the hon. Gentleman says, and one of my concerns is that, to the extent that the Bill deals with a new form of compulsion, funnily enough, it may restrict choice and have knock-on effects, such as that on the gilt market, all of which need to be explored, although I remain of the opinion that reform is sufficiently necessary that we should take the Bill further.
We have not discussed at any length the requirement to buy indexed annuities. I sympathise with the point that the right hon. Member for Skipton and Ripon made that many more people should buy those products than at the moment, although in these days of low and stable inflation that may not be as much of an issue as it once was, but that is slightly difficult politically. If the Bill were ever to come into force, he would require everyone to have smaller incomes at 65because they would be indexedthan they could have chosen if they had been given a free choice to have level annuities. Indeed, they would have lower incomes at 66, 67 and 68, until the cross-over point, which may occur in their early to mid 70s. Pensioners may not respond well to that suggestion being forced on them. The question on my mind is how far such things should be compulsory and how far there should be choice.
I want to mention a couple of other quick thoughts. I worry about how the Bill fits in with the financing of long-term care. We increasingly need to think about people's old age holisticallyfor want of a better phraseand a percentage of those folk, perhaps a quarter, will eventually need to pay for long-term care. That is essentially an insurance product. I am concerned that we should be thinking about income in old age, lump sums and what happens to them in the round, rather than in a fragmented manner. We have suffered too much from fragmenting the way in which we consider such issues, and we should consider how they interact with one another.
I want to make a final observation on whether this is a Bill for the rich. The hon. Member for Preston (Mr. Hendrick) cited the typical £30,000 spent on annuities, but, first, that does not take account of the fact that people may buy several such products, so it is the combined value of their funds that matters, not the fact that the typical sum is only £30,000. Secondly, it does not take account of the fact that those figures will increase as time goes by. Those concerns will increasingly not just be the preserve of the very well-off; they will spread down the income scale, so it is good that the right hon. Member for Skipton and Ripon has introduced the Bill.
The issue of annuities is technical. Although the Inland Revenue has given a nod and a wink to certain products, the Government's response is to say, "Let the market produce the right products." My worry is that the Government are obsessed with complexity. They talk the language of simplification, but their deeds reveal the contrary. This Government introduced the individual pension accountyet another complexity that seems to have achieved nothing so far as I am aware.
If such things are left to the market, we shall end up with a proliferation of productsthe hon. Member for Birmingham, Edgbaston (Ms Stuart) produced a long list, and she could have continued for longerand people will become even more bewildered and at risk of making the wrong pension choice. That is why intervention of this sort is necessary; we cannot just leave things to the market, so I ask my colleagues to encourage the House to agree to the Bill's Second Reading.
Mr. John Greenway (Ryedale): In introducing the Bill, my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) began by outlining his early days and his good intentions when he and I were first elected to the House in 1987. One of my early resolutions, which remains intact, is never to be afraid of one's past, so I have always been proud of my working-class background and the fact that I was a grammar school boy and a London policeman. However, I am not quite sure, today of all days, what I should say about the fact that, for two years, in 197071 I worked for Equitable Life at its Epsom office. I have made that confession on previous occasions, particularly in debates on Equitable Life in Westminster Hall. I am sad about what has happened, but I make that point to show that I have an interest to declare as well as more than 30 years' experience of advising people on personal pensions.
I shall refer to my experience to address the issue of what motivates people to invest in pensions at all. That point is relevant to the Bill. Like my hon. Friend the Member for Arundel and South Downs (Mr. Flight), I declare an interest as a policyholder.
I congratulate my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) not just on his success in the ballot, but on his choice of subject to promote. Colleagues can choose what subject they wish, but they often choose narrow issues that do not always seem too relevant to our constituents. This is one of the most relevant issues to society today. That fact is reflected in the attendance in the Chamber and especially in the number of Conservative Members present.
The all-party group on insurance and financial services, which I have been fortunate to chair for 10 years, has examined the issue on numerous occasions and, most recently, in December. I gladly offer to any colleague present or who reads the Hansard report a copy of the brief that we were given. It complements the Library brief, which is also excellent.
One or two members of the all-party group are present, so I am sad that the Economic Secretary has left the Chamber because I wish to refer to its considered view. For some time, we have recognised that the Treasury is right to insist on proper safeguards to ensure that pensioner policyholders do not retain investments at the expense of state benefits. The hon. Member for Northavon (Mr. Webb) spent some time explaining that this is a difficult problem that the Bill, if it reaches Committee, will need to address. The Treasury is also right to say that the state must have an opportunity to recoup the tax reliefs that have been granted not just on the contributions but on the tax-free fund throughout the life of the policy. However, it would be wrong to conclude that that can be done only by the retention of an annuity requirement at whatever age it is decided that a compulsory purchase must be executed.
It would also be wrong for the Treasury or anyone involved in the debate to conclude that the Bill would benefit only the rich orthis argument has been made beforethat very few policyholders would benefit. Reference has often been made to the argument that the average size of pension policies is not sufficient to justify the measure, but I want to stress a point that has not been made in the debate. That argument ignores the fact that many people have several policies.
I have several policies with several life offices but, thankfully, Equitable Life is not among them. Someone asked me the other day why I, with my experience as an insurance broker, was not an Equitable Life policyholder. I said, "You'd expect an insurance broker from Yorkshire to say that I was too mean to give up the commission."