Pension Annuities (Amendment) Bill

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Mr. Curry: I fear that if I were to enter into too great a discursive debate on the Bill, you would call me to order, Mr. Stevenson, as that was the purpose of Second Reading. As I understand it, the Committee stage is focused on amendments tabled.

We are discussing definitions. As I said, the Government's amendments would destroy the Bill. There is no point pretending otherwise. This is the definitional phase. I merely want to know whether this is the hors d'oeuvres to the feast that the Minister will have later or, as she said, an exclusively technical amendment to enable my Bill—whether she likes it or later destroys it—to work more effectively. If that is the case, I will take her word for it because I believe that that is the correct way to behave in Committee. If it is not, I depend on her to tell me if my interpretation is right. I should like her reassurance that amendment No. 16 would not remove the supervisory framework from the Bill, as my colleagues and I believe would happen.

I need clarification of where amendment No. 15 applies because I have not yet managed to clag it into the Bill—to use an expression that you might understand, Mr. Stevenson. Amendment No. 16 would remove the concept of retirement income fund and simply transfer that appellation to an existing mechanism. Those are my concerns.

Ruth Kelly: I appreciate the spirit in which the right hon. Gentleman asked his questions about the technical nature of the amendments. I understand that they are technical and that their purpose is not to undermine the Bill in any way. It is worthwhile to take

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the right hon. Gentleman through some of the detail of the amendments so that he knows exactly their intentions and how they apply.

Clause 1(2)(a) as drafted suggests that the pension scheme will make provision for sums to be invested in the retirement income fund in the same way as for lump sums and annuities. Amendment No. 6 makes it clear that the retirement income fund is a designated part of the pension scheme and that the benefits will include withdrawals from that fund. In that sense, therefore, the amendment is purely technical and clears up a drafting error.

The right hon. Gentleman seems more concerned with amendments Nos. 15 and 16. Amendment No. 15 inserts the words

    ''Where a member elects to defer the purchase of an annuity such as is mentioned in section 634 he may, for such period as defers the purchase, designate part of the personal pension fund as a Retirement Income Fund under this section.''

I realise that this is getting very technical, but clearly, this is the right hon. Gentleman's Bill and he is interested in the amendments. The purpose of the amendment is to make it clear that the retirement income fund is part of the personal pension fund and that that fund will last only for the period permitted by the income withdrawal rule. The obvious consideration is whether we should have that rule under the Bill. Later on, I shall argue that it should still apply. I imagine that we will differ on the question of its re-insertion when we debate that part of the Bill.

Clause 1(7) inserts a new provision, section 637B, into the Income and Corporation Taxes Act 1988. The definition of the retirement income fund is inadequate as drafted because it implies that the fund is somehow separate from the personal pension fund. However, there is no proposal to amend section 633, which concerns the scope of benefits for a personal pension scheme, to include payments into a retirement income fund and amendment No. 15 removes any ambiguity by making it clear that the retirement income fund remains a designated part of the pension fund.

That leads on to amendment No. 16 and the right hon. Gentleman's concerns about the framework for protection of his proposed retirement income fund. Amendment No. 16 is consequential on amendment No. 15, which inserts a new provision into section 637B of the 1998 Act. Amendment No. 15 defines the retirement income fund and specifies that it must be established by a person designated under section 632(1) of the Act. With regard to a designated person, because the retirement income fund is now considered to be a designated part of the personal pension fund, it must be established in accordance with the general framework of the personal pension fund. Therefore, the amendment would not have an effect on investor protection.

Mr. Frank Field (Birkenhead): I advise my right hon. Friend—for today's purposes, I shall refer to him as such—the Member for Skipton and Ripon to accept the amendment and the compliment that the Minister is paying him. It is generally agreed that she is the

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cleverest Treasury Minister. He assumes that almost all of the Government amendments are wrecking amendments. If that is the case, the Minister's comments offer hope, because she is trying to back both horses: for fear that the Bill will be enacted, she wants to make it more workable.

Given the spirit in which the Minister has proposed the amendment, we should accept it. However, we must be aware that she has other designs on the Bill, and those might be resisted.

9.15 am

Mr. Curry: I am sure that the right hon. Gentleman meant to say that the Minister was the cleverest person in the Treasury team, other than the Chancellor.

Mr. Field: With regard to my statement, the full stop can rest where I put it—[Interruption.]

Mr. Curry: It would not be appropriate for me to intervene in this debate about the intelligence of Treasury Ministers. All hon. Members who serve in other Government Departments hold clear views about Treasury Ministers.

I asked the Minister if her purpose with regard to this group of amendments was to clarify matters so that the legislation would be more workable—although what might happen to it later is a different matter. She told me that that was her purpose and she assured me that I should not harbour suspicions that her amendments might be the aperitif before the feast. Therefore, I am willing to commend them.

Amendment agreed to.

Mrs. Angela Browning (Tiverton and Honiton): I beg to move amendment No. 1, in page 1, line 6, after 'Fund', insert

    'or sums for investment in a Retirement Failsafe Fund.'.

The Chairman: With this it will be convenient to consider the following amendments: No. 2, in page 1, line 9, after 'Fund', insert

    'or withdrawal of funds from a Retirement Failsafe Fund'.

No. 3 , in page 1, line 17, at end insert—

    '(g) the payment to a member of income from a Retirement Failsafe Fund satisfying the conditions of section 637C.'.

No. 4, in page 2, line 22, leave out 'section is' and insert 'sections are'.

No. 5, in page 2, line 41, at end insert—

    '637 Retirement Failsafe Fund

    (1) Where a member elects not to purchase an annuity he may transfer funds into a Retirement Failsafe Fund as follows—

    (2) The sum to be placed into the Retirement Failsafe Fund shall be the lesser of

    (a) 150 per cent. of the fund size needed to ensure the member has an income the equivalent of the Minimum Retirement Income, or

    (b) the whole person pension scheme fund

    (3) Withdrawals from the Retirement Failsafe Fund must be taken such as will ensure the member has an annual income equal to the Minimum Retirement Income set under section 2 of the Pensions Annuities (Amendment) 2002.

    (4) Any balance remaining in the personal pension scheme after the Retirement Failsafe Fund is established may be withdrawn as income as and when the member elects until he attains the age of 80.

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    (5) At the age of 80 the balance in the Retirement Failsafe Fund shall be transferred back into the personal pension scheme and withdrawals made from the whole scheme as follows—

    In each successive year starting at the age of 80 a sum shall be withdrawn equal to the balance of the fund at the commencement of that respective year divided by the number of years then remaining to the age of 100.

    (6) All withdrawals under subsections (3), (4) and (5) shall be regarded as ''income'' within section 1 of this Act.

    (7) The right to all withdrawals under subsections (3), (4) and (5) must not be capable of assignment or surrender.'.

Mrs. Browning: First, I wish to mention that I have not received any red roses or cards this morning and that is sad on St. Valentine's day.

These amendments have cross-party support. They have been tabled as a result of representations that many hon. Members have received from members of the Christian Brethren. They have felt for a long while that the existing pension annuity arrangements exclude them from making adequate provision for their and their employees' retirement. Therefore, the amendments are intended to add to the Bill, rather than detract from it.

It might be helpful if I explain the background to the amendments. Christians known as Brethren want equitable pension provision that meets their consciences. As the Minister knows, they have been working constructively for several years with the Treasury and the Inland Revenue to overcome that problem. It is clear that they are at a disadvantage and the amendments would rectify that.

I draw the attention of the Committee to amendment No. 5, which would insert a provision in the Bill for a retirement failsafe fund. Hon. Members will note that the amendment provides that

    ''In each successive year starting at the age of 80 a sum shall be withdrawn equal to the balance of the fund at the commencement of that respective year divided by the number of years then remaining to the age of 100.''

We are all aware—not least because of our attention to the Queen Mother—that people commonly live beyond the age of 100. However, that is a realistic age to use.

Members of the Christian Brethren have held discussions with many hon. Members and have told the Treasury that cash individual savings accounts should be recognised as an official pension route. They do not think that existing funds are acceptable because they regard any form of life annuity as a life insurance policy that must be refused on the grounds of a strongly held conscience. We must respect that belief and try to find an alternative route because the Christian Brethren's members, as individuals and employers, have a sense of responsibility. I read the White Paper that the Minister produced and I know that she wants equity and to encourage people to make provision for their retirement. Sadly, the current arrangements disadvantage that group of people.

Good examples of practice that have overcome the problem can be seen in other countries, such as the United States and Australia. I hope that the Minister will consider the amendments carefully. They would

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not only improve the Bill, but fill a gap in current pension legislation that disadvantages this group of people. We need urgently to deal with the issue.

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