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Malcolm Wicks: I had better not let the hon. Gentleman get away with that. He is obviously limbering up for the debate on hunting. What he says is
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misleading. I was not implying that £250,000 is what people need to avoid a means test. He knows that I did not suggest that. Perhaps he could pay more attention to the 80 per cent. of British people with pension pots worth less than £30,000. Whatever the merits of his argument, does he concede that he is speaking—as can happen on certain Benches—about a very small privileged group of well-off people?

Mr. Willetts: I am happy to accept another intervention from the Minister if he has further and better information. We know the size of the individual pot, but we do not know how many pots an individual has. The Minister does not know how much, on average, an individual has. All he is measuring is the size of specific pots. It is perfectly possible for someone to have two or three personal pensions in specific arrangements. Sadly, one of the problems of personal pensions is that they are fragmented. It would therefore be wrong to regard that figure as the total amount of money held, on average, by an individual.

Mr. Adrian Flook (Taunton) (Con): I may be able to help my hon. Friend. The Minister may not be speaking of the figure of £250,000, but the noble Baroness in another place said precisely that £250,000

so the Government have collective responsibility for the figure of £250,000.

Mr. Willetts: My hon. Friend is right. The Minister was trying, in his previous intervention, to escape from the figure of £250,000 but it is clear how the figure has been used in both Houses to justify the Government's position.

Mr. Garnier: Does my hon. Friend accept that the Government's arguments about large pots being required to bring people into a reasonable income have been put to us time after time? I am sure that we heard them in the context of the Bill introduced by my hon. Friend the Member for Bournemouth, West (Sir John Butterfill), and perhaps later in connection with the Bill introduced by my hon. Friend the Member for Taunton (Mr. Flook). One would have thought that, by now, the Government would have provided us with the information from the Treasury or the Department for Work and Pensions, having done the research to find out how many separate pots people had in order to accumulate a sufficiently large pot. Moreover, just because we cannot help everybody, is it the Government's case that we should not help anybody at all?

Mr. Willetts: My hon. and learned Friend is right. I would have wanted the flexibility that we offer in the amendment that the Government are trying to remove to extend to as many people as possible. That is why, as I was arguing, we believe in reforming the benefits system so that there is less means-testing. As we do that and reverse the spread of means-testing, and as the value of the basic pension increases, fewer and fewer people
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will be excluded from that flexibility by the requirement. Accepting the amendment introduced in the other place, and even accepting at face value the Minister's argument that people need £250,000 to avoid means-testing, confirms to me that we should be energetic in trying to reverse means-testing.

We shall divide the House if the Minister attempts to reverse the amendments made in another place. I do not regard the concession, if concession it be, that he made about the terms of Adair Turner's report as rising to the strength of feeling that has been shown in both Houses on this very important subject.

Mr. Frank Field : May I briefly add three points to the debate, Mr. Deputy Speaker? Although we are debating annuities, we are also debating the nature of government and our belief in it.

First, although my hon. Friend the Minister is right to say that in his view few people in Birkenhead would benefit from the proposal, both he and I might be surprised by the number of people in Birkenhead who would benefit. The Minister and I learn from our constituents, but that is not the only way in which we gain policy ideas. Sometimes we must make policy decisions that do not arise directly from our constituencies, and this is one such case.

Secondly, one of the Labour party's goals is to spread wealth as far as possible, and not to see wealth confiscated. The arguments about the privileges by which people built up their pension pots are difficult, but as the hon. Member for Bournemouth, West (Sir John Butterfill) quickly told us, people who build up other pots of savings are not required to cash them in at the end of the day. Although the proposals may affect only a few people, the Government have deployed the weak argument that the proposals will affect annuity rates, because there will be a rush out of the annuities market, but that there is no need to worry because almost nobody will be affected.

It is a matter of principle: as far as I am concerned, the principle is that we should, at all times, allow people to keep their wealth rather than deciding what is best for that wealth. Way back at the beginning of my political career, I believed that we should have been the party that introduced the sale of council houses, and that was in favour of spreading wealth. Because we did not drive the policy, the funds were not used to replenish the housing stock—we all know what happened because we did not lead that reform. We must learn that lesson and apply it to this particular reform, which is about giving people freedom over their savings.

Thirdly, the Government and the Opposition parties are feeling their way to a new consensus on pensions. Even 10 years ago—certainly 20 years ago—we had extraordinarily high hopes for what the Government could achieve for everybody on pensions, but now our objectives are much more limited. All the Government's energy should be spent on ensuring that everybody is brought up to a minimum pension provision. What people do above that is not our concern, and we should not try to put our sticky fingers into people's private affairs.

In conclusion, first, although some people in Birkenhead would benefit, that is not the only reason why one should vote on the proposals; secondly, the
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Labour party should be about spreading wealth, not confiscating it; and thirdly, we must think about what the Government can do well and concentrate on that, rather than meddling in affairs that we continually get wrong.

Mr. Webb: I normally pride myself on speaking for the poor, marginalised and dispossessed, but occasionally I keep in with the well-off, and this is one such occasion.

I accept that we are discussing relatively small numbers of people and relatively large pension pots, but as the hon. and learned Member for Harborough (Mr. Garnier) said a moment ago, that is no reason why the regime should not be rational and sensible.

The Minister's arguments are woefully thin. The freedom not to annuitise has always been subject to two caveats: first, that one does not then make a claim on means-tested benefits, which is dealt with explicitly in the amendment; and secondly, that the tax take is eventually obtained. The Minister is worried that people will pick up tax relief when they pay in, tax relief on the fund and a tax-free lump sum. However, one does not get a tax-free lump sum until the money is taken out. It is not the case that when someone picks up a tax-free lump sum the taxpayer does not get their share, because people do not get a tax-free lump sum if they do not annuitise. I cannot see the relevance of the tax-free lump sum. On death, a 35 per cent. tax rate applies to uncashed pension pots, so the taxpayer potentially takes a beneficial stake compared with a tax-free lump sum being taken and the rest of the pot being taxed as income. The taxpayer may make a gain, and it is hard to see the potential loss.

4.45 pm

If the Minister will not abandon that principle, in the spirit of new Labour, he surely wants to modernise it. In 1976, the age limit at which that provision bites was raised to 75 for particular sorts of pensions. Yesterday, some discussion occurred in the other place about the relationship between that threshold and life expectancies. Undoubtedly unintentionally, Baroness Hollis gave the other place the misleading impression that the life expectancy in years for a man of 65

However, the Turner report states that the figure is 19 years, which is the most up-to-date estimate. That point is significant because, since the age threshold was raised to 75, male life expectancy has risen not by three and a half years, which is the impression that Baroness Hollis gave to the other place last night, but by six and a half years, which makes the case for raising the age threshold from 75 to 80 compelling.

Today, my noble Friend Lord Oakeshott has written to Baroness Hollis asking her to correct the record, and I hope that she will do so. The substantive point is that freezing the threshold at 75, which the Government want to do, will make the provision bite more and more. When the threshold was first introduced, a good number of men would not have made it to 75. With substantially enhanced life expectancies, more and more people are being covered by the annuity rule.
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A moment ago, the Government hinted that next summer, after the election, they might think about the threshold. Surely the electorate deserve better than that—they deserve to know the Government's plans. The amendment does not change any of the arguments of principle. I agree that the restriction is not necessary in principle, and if the framers of the legislation and its amenders in 1976 intended the provision to apply to a particular proportion of the retired population, keeping that threshold up to date with changes in life expectancy would not even undermine the Government's principle.

I know that several other hon. Members have, like me, pursued the issue over a number of years, and I am sure that the House would like to hear from them. However, I share the view taken by my noble Friends that the annuity rule is altogether unnecessary. At the very least, I ask the Government to reflect on whether raising the threshold might go a good way to addressing some of the concerns that have been expressed.

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