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7 Mar 2003 : Column 1066—continued
Ms Debra Shipley (Stourbridge): Does my hon. Friend agree that it is interesting that the hon. and learned Gentleman did not respond to my hon. Friend the Member for Scarborough and Whitby (Lawrie Quinn)? That was probably because he was talking to two of his colleagues and not listening.
Mr. Dismore: The hon. and learned Gentleman is in the Chamber to defend his Bill, but he does not seem interested in the arguments.
The hon. and learned Gentleman and my right hon. Friend the Member for Birkenhead mentioned the pensions crisis. The Select Committee's inquiry has been considering that and the overwhelming body of evidence leads one to say, "Crisis—what crisis?" The problem is that it is not a crisis in the true meaning of the word. A crisis is an immediate problem that requires action to be taken straight away to put it right, but we have a long-term problem that requires long-term solutions over the next five, 10, 15, 20 or so years. It is nonsense to think that without a knee-jerk reaction to the problem, everyone will end up in the workhouse when they retire.
Mr. Bryant: Surely the real pensions crisis was when the Tories so liberalised the financial services industry that thousands of people were sold pensions that they should never have been sold in the first place.
Mr. Dismore: My hon. Friend makes a telling point, which leads me to the matter of confidence. Although there may not be a pensions crisis per se, I accept the argument put to us by a number of people in the Select Committee hearings that there is a crisis of confidence in the private pensions sector. That is a different issue altogether. The evidence shows overwhelmingly that the fundamentals of pensions in Britain are sound. Compared to Europe and the rest of the western world, we have a well funded pensions industry that is sufficiently robust to cope with most of the trials and tribulations that bash it from time to time. We are in a much stronger position than anywhere else in Europe.
When the hon. and learned Gentleman goes on about the £5 billion pensions tax, he misses the point. My hon. Friend the Member for Rhondda (Mr. Bryant) mentioned mis-selling. That is one of the problems at the
root of the crisis of confidence. Equitable Life sold pension policies that were attractive at the time. Indeed, I bought its policies—
Mr. Dismore: I am sure that that company sold policies to other hon. Members as well, but they could not be sustained in the long term. The failure of private sector work-based schemes when companies go bankrupt is another problem that has helped to generate the crisis of confidence in the pensions market. Couple that with the problems on the stock exchange and the falling value of pension company holdings, such as at Standard Life, and people inevitably start to wonder whether it is worth while saving for the long term. That is completely different from saying that there is a crisis in pensions themselves.
There is nothing in the Bill to increase the savings pot for anyone—except women, who will benefit at men's expense, and I shall come to that in a moment—unless the hon. and learned Gentleman's claims of tax neutrality prove not to be correct. The Bill is not a panacea for problems with annuities. Moreover, it would provide very little benefit to the overwhelming majority of pensioners who, if they do buy an annuity, have relatively small funds.
As you mentioned earlier, Mr. Deputy Speaker, my reasoned amendment was not selected, but that does not mean that the arguments behind it are not valid. I turn to those now in explaining why the House should decline to give the Bill a Second Reading. Clause 1(4)(c) provides that section 45 of the Sex Discrimination Act 1975 shall not apply to the minimum retirement income annuity, which is one of the hon. and learned Gentleman's inventions in the Bill. I shall deal with that in more detail later.
The purpose of the clause is to remove the defence allowed by that section for sex discrimination in annuity rates. It would prevent annuity providers from setting the annuity rate by reference to the different average longevity of men and women. I suppose that I ought to declare an interest as a man—at least, I was a man the last time that I looked. Perhaps the hon. and learned Gentleman ought to declare the same interest. [Interruption.] The hon. and learned Gentleman says that he has no sex at all.
Mr. Garnier: The hon. Gentleman must try not to behave like the Friday afternoon lawyer that he is. I said that I had absolutely no interest in his sex.
Mr. Dismore: Perhaps I ought to remind Conservative Members that there are certain biological differences between the sexes, one of which is that women live longer than men.
Mr. Love: There was some confusion earlier about the current differences in life expectancy. According to a useful House of Commons research paper, even in 2001 the difference in life expectancy between men and
women was three years at age 65. Does my hon. Friend accept that that is a major difference, and it must be recognised?
Mr. Dismore: My hon. Friend is absolutely right, and I hope later in my contribution to look at those tables in a little more detail and to point out some of the anomalies that the Bill throws up.
When we debated the previous Bill on this subject, my hon. Friend the Member for Brent, North (Mr. Gardiner) eloquently described the effect of that difference on the arithmetic of calculating annuities. I assume that the hon. and learned Member for Harborough failed properly to prepare for his speech, because if he had he would have read those arguments, which are very cogent, in the Hansard account of that debate.
I also remind the hon. and learned Gentleman of a point that I made on the Second Reading of the Bill presented by the right hon. Member for Skipton and Ripon (Mr. Curry), because I have not yet had an answer to it. I said:
- "What about the sex discrimination legislation and the double exemption? Is it the role of private sector provision to level up between Peter and Pauline . . . or is that the responsibility of the state? There is nothing wrong with the state's involvement in pooling risk between the sexes. I take the point that when each sex reaches the age of 65 the differences between life expectancy are somewhat lower. However, I question whether it is right for the private sector to adopt this position, bearing in mind how annuities are currently calculated for pooling risk."—[Official Report, 11 January 2002; Vol. 377, c. 848.]
It may seem paradoxical that Labour Members such as myself should advocate a position that on the face of it is contrary to our deeply held belief in equality for everyone. To achieve that, however, we must recognise that people are not equal in certain biological respects, such as ageing, and that can be done within the existing annuities system. I passionately believe in equality, and the state clearly has a role to play in achieving it, but should we regulate private sector rights in this way? At the risk of going down the highways and byways of equal opportunities, I should say that the Bill points up the distinction between the right role of the state in trying to regulate the balance between the sexes, and the wrong role.
If a woman is doing work of equal value to that of a man, she should get the same rate of pay. If a woman buys an annuity, she should have the product of that annuity, and the same is true of a man, but to achieve the same amount as the man, year on year, the woman would have to pay more. The hon. and learned Gentleman is not trying to achieve equality through equal work for equal value or, in this case, equal pension for equal contribution. He is taking money away from the man to meet the aspirations of the woman for her annuity.
Is there not a difference between the pooling of risk between the genders by the state, which carries that process across the whole economy, and the pooling of risk between individuals who happen to be men or women? It is clear that it is part of the state's
responsibility to consider the issue, but does not the hon. and learned Gentleman agree that as matters stand we run the risk of robbing Peter to pay Pauline?
Mr. Stephen Pound (Ealing, North): I apologise to my hon. Friend, to the hon. and learned Member for Harborough (Mr. Garnier) and to the House for my late arrival, which was entirely the fault of the Mayor of London, whose policies are so successful that the streets are now full of cars.
Is there any evidence that people over the age of 75 want to buy annuities? I understand that research by the Association of British Insurers implies that, at most, 5 per cent. want to do so. Are we not in danger of creating a system that will be of interest to the more wealthy members of society, and of doing nothing for the majority of people who have real needs?
Mr. Dismore: My hon. Friend presages my remarks. The Bill is a complex vehicle—the hon. and learned Member for Harborough claims simplicity for it, but it is far from simple—for solving a problem, which, if it exists, applies only to a few wealthy people, like the hon. and learned Gentleman himself perhaps.
The Bill does not recognise the differing life expectancies that insurers take into account in setting annuity rates. It would remove the right of insurers to underwrite personal pension annuities on the basis of sex or to allow sex to be taken into account as a risk factor. Instead, it would force providers to use composite annuity rates averaging male and female factors. Another effect would be that any provider, when setting a composite rate, would face the risk of the male and female take-up not matching the assumed mix, so it might build in a margin that would lower annuity rates in general for both men and women.
The Bill would also introduce inconsistency between different types of pension arrangement. If an annuity was bought to secure benefits from an occupational pension scheme or a retirement annuity contract, the Bill would not prevent the rates from taking account of the annuitant's sex. That is particularly important in view of the alleged flight from defined benefits to defined contributions as a basis for occupational pension schemes. The Bill would, I assume, apply to pension schemes based on defined contributions. We understand from the media that there is a groundswell of movement towards such schemes, but the evidence taken by the Select Committee shows that the movement is not as great as one might believe. The assumption seems to be that no more than a quarter of pension schemes would move in that direction, which would not necessarily be a bad thing—it would depend on the total contributions to the scheme. The Bill introduced by the hon. and learned Member for Harborough would have an unfair effect on an employee on a defined contributions scheme working alongside a colleague on a defined benefits scheme, as it would catch one but not the other.
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