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Ruth Kelly: I do not intend today to have a full debate on the underlying rationale behind the Christian Brethren's objection to the use of annuity products. I understand that their objection has been made in a genuine way to the Treasury and the Inland Revenue.
The amendments proposed by MembersI recognise the contribution by my right hon. Friend the Member for Birkenhead (Mr. Field)have been made in good faith and I accept the motivation behind them. This debate is totally without self-interest because the Christian Brethren do not vote, but it is only right that the House should take an interest in the protection of minorities. They should be able to exercise their conscience in as full a way as the Government and society can provide for.
However, I do not accept that the route provided by this private Member's Bill can enable the Government to meet our objectives in providing secure, long-term savings in retirement and to deal with the difficulties faced by the Christian Brethren in relation to those issues. I set out clearly in my opening remarks some of the technical difficulties and explained why I do not believe that the matter can be dealt with by regulationfor example, there is no provision to amend section 633 of the Income and Corporation Taxes Act 1988 in that regard.
I also have more serious concerns. As the hon. Member for Gainsborough (Mr. Leigh) said, the Bill would not just create a loophole for the few but would undermine the whole purpose of the Bill. That point was reinforced by my hon. Friends. I do not see how the provisions can be
Mr. Flight: I thank the Minister for giving way. As she must be clear, the key purpose of the amendments is to secure from the Government a commitment that they will address the needs of the Plymouth Brethren, not that they will consider doing it or continue talking for ages.
Ruth Kelly: I thank the hon. Gentleman for his comments. I hope that hon. Members realise that I also enter these negotiations in good faith and, as far as possible, I am committed to finding a solution to the issues faced by the Christian Brethren. However, it is important to set the provisions in context.
The hon. Member for Twickenham (Dr. Cable), who is no longer in his place, drew a parallel between the Christian Brethren and the conscientious objectors who did not want to fight during the war. Such parallels are not illuminating in this context. We have to try to find a way to enable Christian Brethren to save for a secure income in retirement in a way that does not conflict with their religious beliefs. That is what I intend to try to facilitate.
Officials at the Inland Revenue are already involved in detailed and constructive dialogue with the Christian Brethren. I have published a consultation document and the Christian Brethren have provided a response. [Interruption.] I note the return of the hon. Member for Twickenham. Inland Revenue officials are now exploring with sincere and genuine people a way in which they could provide a secure income in retirement outside the current pensions framework. We have been exploring particularly how they might use the ISA framework.
At the moment, the Christian Brethren can contribute to cash ISAs for themselves or their employees. The problem is that employees might be tempted to withdraw some of the money from the ISA before they reach retirement age and to use it for other purposes. The difficulty is that that is down to individual choice. I understand that the Brethren, as employers, would prefer there to be some lock-in and the dialogue is continuing. However, it is difficult to provide a commitment to a lock-in for one group of individuals that would not apply to the majority of the population. It is not clear that we could provide a specific lock-in, and clearly a general lock-in would frustrate the general thrust of the Government's savings policy. ISAs are designed to be a flexible savings vehicle which allows immediate withdrawal and transfer between providers. However, negotiations are continuing.
I believe that the Christian Brethren understand that the Inland Revenue is looking at this in a constructive manner. Progress is being made in meeting some of their concerns and we may be able to find a way forward that addresses their needs and the Government's concerns. Of course I am committed to continuing the dialogue until both parties are satisfied with the outcome. I congratulate the hon. Members who tabled the amendments as it is right and proper that we discuss these issues in the House.
Curry, Rt Hon David
Johnson, Miss Melanie
Tellers for the Ayes:
Mr. Andrew Dismore and
Mr. Andrew Miller.
Arbuthnot, Rt Hon James
Beresford, Sir Paul
Bottomley, Peter (Worthing W)
Browning, Mrs Angela
Cable, Dr Vincent
Chapman, Sir Sydney
Duncan, Alan (Rutland & Melton)
Field, Mark (Cities of London)
Forth, Rt Hon Eric
HeathcoatAmory, Rt Hon David
Johnson, Boris (Henley)
Laing, Mrs Eleanor
Lait, Mrs Jacqui
Lewis, Dr Julian (New Forest E)
Maclean, Rt Hon David
Osborne, George (Tatton)
Portillo, Rt Hon Michael
Redwood, Rt Hon John
Roe, Mrs Marion
Young, Rt Hon Sir George
Tellers for the Noes:
Mrs. Cheryl Gillan and
Mr. Charles Hendry.
Question accordingly negatived.
'Subject to subsection (7) below'.
Ruth Kelly: The change made by the Bill does not recognise the differing life expectancies of different groups that insurers take into account in setting annuity rates. The measure would remove the right of insurers to underwrite personal pension annuities on the basis of sex, or to allow that to be taken into account as a risk factor. It would force personal pension annuity providers to use composite annuity rates averaging male and female factors.
It is argued that women get a raw deal because the annuity rates that they receive are lower than men's, but that is because of women's longer average life span. At the top rates that are currently available, a 65-year-old man who purchases an annuity for £100,000 might receive £706 a month. The comparable figure for a female
Clearly, interest and inflation rates play a large part in assessing the value of the respective amounts, but those simple figures illustrate that the value of a woman's annuity is at least no less than that of a man. Other aspects being equal, an annuity payable to a woman may be smaller than that payable to a man, but it will on average be paid over a longer period.
It is not difficult to understand that unisex annuities would generally favour women and disadvantage men. On average, a man will not live as long as a woman. His annuity will therefore be paid for a shorter period than a woman's, and for the same outlay. That is simply illustrated. If a unisex annuity paid £675 a month for an outlay of £100,000, the male would receive £137,700 for the years after his expected life span whereas the female would receive £162,000. The Bill would prevent a man from entering into a personal pension annuity contract and buying with his money a pension that reflected his life expectancy.
Another effect is that, when setting a composite rate, any provider would be at risk of the male/female take-up not matching the assumed mix, and could therefore build in a margin that would lower annuity rates generally. The proposed change would also introduce inconsistency between types of pension arrangement. If the annuity was bought to secure benefits from an occupational pension scheme or a retirement annuity contract, rates could still take account of the annuitant's sex.