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Mr. Webb: The Minister has ruled out scrapping the age limit of 75, but does he accept that, since it was introduced, male life expectancy has risen from 65 by more than five years, contrary to what Baroness Hollis said in another place. Is there therefore not a case for raising the limit to at least 80?
Malcolm Wicks: I can only repeat what I said earlier. The Government will wish to consider key issues, including annuitisation at the age of 75, with particular care and urgency, and decide whether they remain fit for the purpose. That is as far as I can go.
The Lords amendment is not appropriate, but we acknowledge the high level of interest in the issue. We are, as I have just shown, prepared to respond constructively and promptly, including on the specific issue of annuitisation, as a priority once the Pensions Commission has reported.
Mr. Edward Garnier (Harborough) (Con):
The Minister should not allow himself to think that interest in this matter was confined to the other place. He acknowledged that it had been discussed on previous occasions in the Commons, but he seems to have found it inconvenient to remind himself that, on 7 March 2003, the Retirement Income Reform Bill, which I had the honour to introduce in the House, completed its Second Reading with a majority of 101. It is therefore the settled will of the Commons that Lord Higgins's proposal in Lords amendment No. 359 should come into law. The
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Minister is a great supporter of the supremacy of the House of Commons, so perhaps he could be consistent and argue for it in this case as well.
Malcolm Wicks: I had better not comment on the hon. and learned Gentleman's judgment that that was the settled will of the House. That may have been the case on a rather quiet day, but there are more than 100 Members in the House, as we will demonstrate later. However, I have said that we will look at the specific issue of annuitisation as a priority once the Pensions Commission has reported. I acknowledge the interest shown by the House, both in this issue and in pension matters that affect the other 99 per cent. of the population.
Mr. David Willetts (Havant) (Con): The Minister has just made a tiny concession, although it required a trained eye to spot it. Indeed, that is why he had to repeat it for the Liberal Democrats. However, it will not quite do the job. It would be helpful if he explained what the Government will look at after Adair Turner reports. Can he give a firmer commitment, particularly on the age limit for buying an annuity? I am afraid that I do not regard what he has said as a significant concession, given the weight of opinion in both Houses. There was a substantial vote in the other place last night, because their lordships feel strongly about the issue. I do not have any expertise on matters of privilege, but there is a strong belief in the other place that privilege does not apply in the way that the Minister suggested.
This is not just a matter for the other place. As my hon. and learned Friend the Member for Harborough (Mr. Garnier) said, Members of the Commons feel strongly about it as well. I am grateful to him for reminding the House of the heroic moment when the Government suffered a defeat on Second Reading. We fondly remember that great moment, which was a reminder to the Government of how strongly people feel about annuities. The fact that the vote took place on a Friday shows how much the Opposition care about the subject, because we were all willing to turn up to support our hon. and learned Friend who, like my hon. Friends the Members for Taunton (Mr. Flook) and for Bournemouth, West (Sir John Butterfill), introduced a private Member's Bill on retirement income.
I shall not rehearse all the arguments in favour of the Lords amendment, because a tight programme motion is in operation. I shall therefore comment briefly on some of the things that the Minister said. First, a simple point of principle is at stake. Why should we pass regulations in the House telling adults what they should do with their savings provided that the taxpayer does not have a direct interest in the result? Once we have covered that angle—the Lords do so successfully in their amendment—it is not legitimate for us to tell people what to do. With the greatest respect to my hon. Friends, the proposal inserted in the Bill in the other place achieves that neatly and simply by specifying that there should be no requirement to buy an annuity by the age of 75
"provided that the pensioner can demonstrate that he has resources to ensure that he will not become dependent on means-tested benefits."
Beyond that simple proviso, what right do we have to tell people what to do with their money?
Sir John Butterfill: I have been listening carefully to my hon. Friend, and I thoroughly agree that, provided that we can demonstrate that there is no call on the state, people should be free to do as they wish? Can he imagine an independent financial adviser telling someone that they should put all the money for their retirement into an annuity? Does he think that the IFA would be performing his duty as a financial adviser if he did so?
4.30 pm
Mr. Willetts: That is a very good question. I sometimes fear that, as we get into these pension debates, I may occasionally find myself straying into giving financial advice without being regulated to do so. Given my hon. Friend's expertise on the subject, he makes a powerful point that I hope the Minister will take into account.
The Minister argued that the people who convert into an annuity do so significantly before they reach the age of 75, so the requirement to convert at the age of 75 cannot be a serious obstacle. That is my summary of his argument, but the evidence from a survey by Watson Wyatt rather undermines that argument. The evidence was that there was a group of people who wished to convert into an annuity and they did, it is true, by and large do so before reaching the age of 75. However, there was a large group of people who had no desire to convert into an annuity—59 per cent. of pensioners had no desire to move into an annuity at all, and 12 per cent. said they would do so later. It is not that people are up against a deadline. There is a significant group of people who do not want to convert into an annuity. Another group may wish to do so earlier. It is not for us to tell them.
We have already had one concession from the Government, aimed particularly, as we understand it, at Plymouth Brethren to tackle their ethical objections to annuities as they are currently constructed. If the Government can be flexible for that group, why can they not be flexible for the rest of the population? The Minister needs to address that argument.
Mr. Frank Field: Should the Government not be doubly flexible on the matter? Plymouth Brethren lobbied me, as they no doubt lobbied other Members of Parliament. In representing their views, we knew that they would not be voting for any of us. There are large numbers of other people who are affected and who would vote.
Mr. Willetts:
It is perhaps a reflection on the Chancellor of the Exchequer's view of the world that one does not have to be a Plymouth Brother to take advantage of the concession that we are told is for Plymouth Brethren. The concession is potentially rather wider than we were told it was intended to be. Even when the Chancellor makes a concession, he does not want to admit how big it could be. The right hon. Member for Birkenhead (Mr. Field) is right. It could extend way beyond the Plymouth Brethren. As far as I know, the Government have not imposed a religious test before people take advantage of it—yet. Who knows? There are still another 24 hours and the Government may well amend the Bill further. They are only up to 950 amendments so far.
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I shall touch briefly on the argument that the amendment would affect only a small number of rich people. The point was made in the other place by the Minister there, as the Minister for Pensions has just reported to the House. The Minister in the other place said:
"We estimate that about 1 per cent. of all annuitants . . . would have an annuity worth more than about £250,000 that would therefore float them into being able to take advantage of this amendment".—[Official Report, House of Lords, 15 November 2004; Vol. 666, c. 1233.]
I wonder whether the Minister remembers our exchanges in oral questions just over a year ago. I invited Deborah Cooper of Mercer's to do a calculation on how much money someone needed to build up a sum of capital to pay them an income that would be sufficient to keep them off means-tested benefits throughout their retirement. The figure that she calculated was £180,000. I put that to the Minister, who said:
"The example presented by the shadow Secretary of State was specific, very long-term and assumed that the couple were not owner-occupiers, which would not be typical of elderly households, so I dispute its usefulness."
"What the figure might be depends on a wide range of assumptions, but bringing forward a figure that is in denial of owner-occupation, which is the common experience of pensioners, is not at all helpful."—[Official Report, 20 October 2003; Vol. 411, c. 358–9.]
We had an estimate of £180,000, which I thought was pretty high and a reminder of how shockingly extensive means-tested benefits have become. The Minister did not accept the figure of £180,000. The Government are now using an even higher figure of £250,000 to stop any movement on annuities by saying that anybody with a saving of less than £250,000 would not benefit from the amendment.
The Minister cannot have it both ways. He cannot reject £180,000, a figure suggested to him in the Chamber only a year ago, and suddenly say for the purposes of annuity reform that the figure is even higher. I paid great attention to what he just said. He seemed to be willing to endorse a figure of £250,000, which I think is a very high figure. Let us assume for a moment that it is right. After the exchanges on annuities over the past few days in another place, I am tempted to say that, from now on, we know from Ministers that means-testing is so extensive that people need not £180,000, but £250,000 as a sum of capital to keep them off means-testing in their retirement.
Let us assume that the £250,000 that the Minister has just endorsed is the correct figure. He thinks that that tells us we should not reform annuities. I think that it tells us that we need to reform the benefits system. It is not an argument against annuity reform. It is an argument in favour of tackling mass means-testing of pensioners. That is why the policies to which we are committed, and which, in a different form, the Liberal Democrats also believe in, are aimed at reversing the number of pensioners who are on means-tested benefits and ensuring that that very large figure starts to fall. That is the best way of tackling the problem.
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