Ruth Kelly: I am afraid the hon. Gentleman has completely misunderstood the purpose of clause 224, which provides for an adjustment to be made to the pension input amount for defined benefit arrangements in cases where the member does not during the year actively accrue rights under the arrangement. The effect of that adjustment is to reduce the pension input amount by the greater of 5 per cent., the rate by which the retail prices index has increased over the year or the rate provided for in Inland Revenue regulations. The amendment seeks to extend the effect of this clause to cases where the member is actively accruing rights, but the hon. Gentleman fails to appreciate that clause 224 is there purely to ensure that members who do not accrue rights under an arrangement are not put to any trouble of calculating their pension input amounts for the purposes of the annual allowance.
I will give the Committee a couple of examples of how that might work in practice. Many deferred pensions are, under the rules of the scheme, increased by a flat rate of 5 per cent. a year. The clause ensures that deferred members of such schemes do not have to worry about the annual allowance charge. That will be the case even when the inflation rate is low, as it is and as we intend to keep it. Furthermore, many pension schemes are obliged to apply what is called statutory revaluation to the future pensions of deferred members. The regulations made under the clause—I have sent draft copies of them to the Committee—will ensure that where the statutory revaluation is greater than the RPI or 5 per cent., the amount of the statutory revaluation is again ignored for annual allowance purposes.
However, we want to capture the savings of active members of defined benefit schemes to calculate their pension input amount. There is no unfairness in that. The generous annual allowance, which we have just been debating, and the annual increase in that allowance will allow their pension savings to grow by a real amount without being subject to a tax charge.
The hon. Gentleman draws attention to the treatment of cash balance arrangements. They are dealt with under clause 220. However, clause 220 is there for an entirely different purpose. It allows members of cash balance arrangements to deduct whichever is higher, RPI indexation or 5 per cent., from their pension input amount. That provides broad parity of treatment with other money purchase arrangements, under which only the contributions and not the investment build-up are taken into account for annual allowance purposes.
Clause 224 is merely intended to help deferred members of schemes. We actively want to capture active members of such schemes. I therefore urge the hon. Gentleman to withdraw his amendment.
Mr. Osborne: The Financial Secretary accuses me of misunderstanding the clause. In that case, the people in the pensions industry who proposed the amendment have also misunderstood the clause, which seems to prove that the Government have not made their case very clearly. She says that it is all about saving trouble
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for deferred members, and actively capturing active members. However, surely the Government could have spared active members the trouble of going through the process if the increase had been within the 5 per cent. or RPI range. However, I will not press the matter to a vote. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 224 ordered to stand part of the Bill.
Clauses 225 to 227 ordered to stand part of the Bill.
Scheme sanction charge
Amendment made: No. 456, in
clause 228, page 189, line 3, leave out subsection (4).—[Ruth Kelly.]
Clause 228, as amended, ordered to stand part of the Bill.
Clauses 229 to 235 ordered to stand part of the Bill.
Taxation of non-pension benefits
Amendment made: No. 457, in
clause 236, page 194, line 11, leave out from 'to''' to end of line 12.—[Ruth Kelly.]
Clause 236, as amended, ordered to stand part of the Bill.
Registered pension scheme return
Amendment made: No. 458, in
clause 237, page 196, line 15, leave out 'payment' and insert 'provision'.—[Ruth Kelly.]
Clause 237, as amended, ordered to stand part of the Bill.
Information: general requirements
Amendments made: No. 459, in
No. 460, in
clause 238, page 197, line 19, leave out 'payment' and insert 'provision'.
No. 461, in
clause 238, page 197, line 39, leave out 'paid' and insert 'provided'.—[Ruth Kelly.]
Clause 238, as amended, ordered to stand part of the Bill.
Notices requiring documents or particulars
Amendments made: No. 462, in
clause 239, page 198, line 27, leave out 'payment' and insert 'provision'.
No. 463, in
clause 239, page 198, line 43, at end insert—[Ruth Kelly.]
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Clause 239, as amended, ordered to stand part of the Bill.
Clauses 240 and 241 ordered to stand part of the Bill.
Assessments under this Part
Amendment made: No. 464, in
clause 242, page 200, line 42, leave out from 'provision' to end of line 43 and insert
'for and in connection with the making of assessments in respect of—
(a) the unauthorised payments charge,
(b) the unauthorised payments surcharge,
(c) liability to the lifetime allowance charge under section 206(2) (person to whom lump sum death benefit paid),
(d) the scheme sanction charge,
(e) liability under section 259 (trustees etc.liable as scheme administrator),
(f) liability under section 260 (member liable as scheme administrator), and
(g) liability under section 394 of ITEPA 2003 (benefit under employer-financed retirement benefits scheme: charge on responsible person).'.—[Ruth Kelly.]
Clause 242, as amended, ordered to stand part of the Bill.
Clauses 243 ordered to stand part of the Bill.
Registered pension scheme return
Amendment made: No. 465, in
clause 244, page 201, line 41, leave out '£300' and insert '£100'.—[Ruth Kelly.]
Clause 244, as amended, ordered to stand part of the Bill.
Clause 245 ordered to stand part of the Bill.
Documents and particulars required by notice
Amendment made: No. 466, in
clause 246, page 202, line 24, leave out 'of' and insert 'not exceeding'.—[Ruth Kelly.]
Clause 246, as amended, ordered to stand part of the Bill.
Clauses 247 to 253 ordered to stand part of the Bill.
Lifetime allowance charge
Mr. Osborne: I beg to move amendment No. 419, in
I supposed that you would kill me, Mr. McWilliam, if I moved the amendment formally.
The Chairman: Order. If the hon. Gentleman wants to move the amendment formally, he could always reply.
Mr. Osborne: Clause 254 allows a scheme administrator to apply to the Inland Revenue to be
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excused from a lifetime allowance charge on the ground that an administrator ''reasonably believed'' that there was no such liability. I shall speak narrowly to the amendment because I know that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) wants to catch your eye, Mr. McWilliam, to talk about the stand part debate.
The amendment would simply add another ground upon which a scheme administrator could apply to the Inland Revenue when
''the scheme administrator reasonably believed that the liability would be met by another person''.
If someone takes several pensions from several schemes at the same time and goes over the lifetime allowance and the scheme administrator is told by that person that another scheme is dealing with it, it cannot be right for the scheme administrator to be penalised. I am not sure whether that situation is covered by the clause because the scheme administrator could not claim that they thought that there was no liability. They would have been aware that there was a liability, but thought that someone else was dealing with it.
The point is narrow and one would hope that the Inland Revenue would, in practice, exercise discretion, but I am not sure whether the legislation would allow it to exercise that discretion. Therefore, it might be useful for the Inland Revenue to take that on board.
Ruth Kelly: I shall try to respond purely on that point, given that the hon. Member for Arundel and South Downs wants to talk about the purpose behind the clause. It is quite difficult to discuss the amendment without discussing the purpose behind the clause, however. The question is whether it is reasonable for the Revenue to discharge the scheme's liability where the scheme has written an agreement that the member or other scheme will pay. We have to both protect the Exchequer and enforce the lifetime allowance charge where it is legally due, giving schemes a let out only in the very narrow circumstances that I have described.
Schemes have to accept that they are liable for the lifetime allowance charge. It would be unwise of a scheme to enter into an agreement with a member, for example. Such an agreement would not relieve the scheme of its tax obligations. It would be even more unwise for it to enter into an agreement with another scheme because another scheme would have no liability for a lifetime allowance charge arising in respect of a different scheme.
I do not agree that it is appropriate to provide the tax to be discharged to the detriment of the Exchequer simply because the scheme has entered into some understanding with someone that they would satisfy the scheme's liability. On that basis, I ask the hon. Gentleman to withdraw his amendment.