Finance Bill

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Mr. Flight: The hon. Member for North Norfolk (Norman Lamb) asked a perfectly good question of the Financial Secretary. She gave half the answer, which was about the 10,000 people affected by the new lifetime limit, and we already knew about them. She did not give any answer about how many of those people were in pre-1989 schemes. If she has that information, I would be grateful for it—my assessment being that the number will be relatively small.

The Financial Secretary seems to forget that, as PricewaterhouseCoopers has pointed out, we have moved from eight to six schemes and that, as I pointed out, the transitional arrangements are extremely complex. Our amendment correctly involves the issues that she has raised, but, equally, the grandfathering of pre-1989 people could be done in a different way by making the transitional arrangements for them equivalent to being grandfathered.

The Financial Secretary boasts that the arrangements are generous. In some contexts they are, but, as she is well aware, for those people lucky enough to be in 1989 schemes they are not so generous. Those people are disadvantaged because if contributions to their pension schemes continue until they retire, they lose the protection against being capped that they were granted back in 1989.

It is pretty glib of the Financial Secretary to cast the matter off, saying, ''It's all better, really. It doesn't matter.'' She is deaf if she has not heard the dissatisfaction from those affected by the proposals. The general principle is one of endeavouring to simplify, although the simplification is not quite as great as she claims. She has quoted her laudatory congratulations, but they do not focus on the specific

Column Number: 677

issue and the Government could address a point of principle without over-cluttering the transitional arrangements. Therefore, we wish to put the matter to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 13

Division No. 9]

AYES
Atkinson, Mr. Peter Bacon, Mr. Richard Davies, Mr. Quentin
Flight, Mr. Howard Jack, Mr. Michael Osborne, Mr. George

NOES
Burgon, Colin Cohen, Harry Cruddas, Jon Ennis, Jeff Fitzpatrick, Jim Healey, John Kelly, Ruth
Lamb, Norman Marris, Rob Pound, Mr. Stephen Purnell, James Quinn, Lawrie Todd, Mr. Mark

Question accordingly negatived.

Amendments made: No. 521, in

    schedule 34, page 474, line 33, leave out '(except for' and insert

    'of this Act (except for section 207(6) and'.

Amendments made: No. 521, in

    schedule 34, page 474, line 33, leave out '(except for' and insert

    'of this Act (except for section 207(6) and'.

No. 522, in

    schedule 34, page 474, line 36, leave out 'and (5)'.

No. 523, in

    schedule 34, page 475, leave out lines 1 to 8 and insert—

    '(a) on 5th April 2006 the member had an actual or prospective right under the pension scheme to a pension from an age of less than 55,

    (b) the rules of the pension scheme on 10th December 2003 included provision conferring such a right on some or all of the persons who were then members of the pension scheme, and

    (c) such a right either was then conferred on the member or would have been had the member been a member of the scheme on that date.'.—[Ruth Kelly.]

Amendment proposed: No. 393, in

    schedule 34, page 475, line 7, after 'scheme', insert

    'or a contractual right under his contract of employment with a sponsoring employer'.—[Mr. Flight.]

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 13.

Division No. 10]

AYES
Atkinson, Mr. Peter Bacon, Mr. Richard Davies, Mr. Quentin
Flight, Mr. Howard Jack, Mr. Michael Osborne, Mr. George

NOES
Burgon, Colin Cohen, Harry Cruddas, Jon Ennis, Jeff Fitzpatrick, Jim Healey, John Kelly, Ruth
Lamb, Norman Marris, Rob Pound, Mr. Stephen Purnell, James Quinn, Lawrie Todd, Mr. Mark

Question accordingly negatived.

Amendment made: No. 524, in

Column Number: 678

    schedule 34, page 475, line 14, leave out sub-paragraphs (4) and (5) and insert—

    '(4) The member's protected pension age is the age from which the member had an actual or prospective right to a pension under the pension scheme.

    (5) But this paragraph does not have effect so as to give the member a protected pension age of more than 50 at any time before 6th April 2010.'.—[Ruth Kelly.]

Ruth Kelly: I beg to move amendment No. 525, in

    schedule 34, page 476, line 41, leave out from beginning to end of line 2 on page 477 and insert

    'have been entitled under the arrangement on 5th April 2006 on the assumption that the individual became entitled to the present payment of a lump sum under the arrangement on that date.

    (7) In calculating an amount in accordance with sub-paragraph (6) the valuation assumptions apply but as if the reference to such age (if any) as must have been reached to avoid any reduction in benefits on account of age in paragraph (a) of section (Valuation assumptions) were to the relevant age; and for this purpose ''the relevant age'' is—

    (a) if on 10th December 2003 the terms of the arrangement made provision for a reduction in the amount of benefits payable in respect of rights under the arrangement on account of the holder of the rights being below a particular age, that age, and

    (b) otherwise, 60.

    24A(1) This paragraph applies if any of the individual's uncrystallised lump sum rights on 5th April 2006 are rights under one or more arrangements under a pension scheme or schemes within paragraph 1(1)(a) to (d).

    (2) The value of the individual's uncrystallised lump sum rights on 5th April 2006 under the arrangement, or the aggregate of the values of the individual's uncrystallised lump sum rights on 5th April 2006 under such of the arrangements as relate to a particular employment, is the lower of—

    (a) the value, or the aggregate of the values, calculated under paragraph 24, and

    (b) the maximum permitted lump sum.

    (3) ''The maximum permitted lump sum'' means the maximum lump sum that could be paid to the individual on 5th April 2006 under the arrangement or arrangements if it or they were made under a pension scheme within paragraph 1(1)(a) without giving the Board of Inland Revenue grounds for withdrawing approval of the pension scheme under section 591B of ICTA.

    (4) For the purposes of sub-paragraph (3) it is to be assumed—

    (a) if the individual was in the employment to which the arrangement or arrangements relates or relate on 5th April 2006, that the individual left the employment on that date, and

    (b) if the individual had not reached the lowest age at which a lump sum may be paid under a pension scheme within paragraph 1(1)(a) to a person in good health without giving the Board of Inland Revenue grounds for withdrawing the approval of the pension scheme, that that fact would not give the Board such grounds.

    (5) Whether an arrangement relating to an individual relates to an employment is to be determined in accordance with paragraph 9(6).'.

The Chairman: With this it will be convenient to discuss the following:

Government amendments Nos. 526 to 545

Amendment No. 394, in

    schedule 34, page 480, leave out line 31 and at end insert—

    (VULSR{**multi**}CSLA)+ALSA

    (VULSR xFSLA

    Amendment No. 395, in

    schedule 34, page 480, leave out line 35 and insert—

Column Number: 679

    VULSR{**multi**}CSLA

    VULSR xFSLA

    Government amendments Nos. 546 and 547.

Ruth Kelly: This group of Government amendments covers the ability to protect large lump sums under the new system.

The amendments seek to do two things. First, amendments Nos. 528, 529 and 531 allow people who have claimed primary protection for their pensions and who have large lump sums—by ''large'' I mean over the £375,000 that will be allowed under the new regime—to protect those lump sums in a simpler way than that proposed in the Bill. The member will have a protected amount, which he will be able to take from any of his schemes as he sees fit. This is a relaxation of the approach in the Bill, which contains an additional requirement that the lump sum must be taken as an equal percentage of the benefits from each arrangement. It is an administrative relaxation, and I recommend it to the Committee.

Amendments Nos. 525, 526, 527, 530, 531 and 533 to 547 are similar in purpose to those that we discussed on changing the valuation procedure of protected pension rights. The changes put the lump-sum valuation on to the same basis. The protected value will be the lower of the value of the accrued lump sum, without the imposition of any early retirement factors, and the maximum lump sum allowed under the Inland Revenue's discretionary approval regime on 5 April 2006, using various assumptions that are set out in detail in the explanatory note. That method of valuation was requested by the actuarial profession in response to the publication of the Bill. This group also contains a few amendments that make consequential changes arising from earlier amendments on valuation and lump-sum benefits. This is a sensible change arising from consultation and I therefore commend it to the Committee.

11 am

Opposition amendments Nos. 394 and 395 seek to correct a transpositional error in the Bill. I agree with the intention behind them. We have taken advice and we believe that the amendments are technically correct. I therefore recommend that the Committee accept these amendments, too.

Mr. Flight: We welcome the Government's amendments in relation to lump sums and see no reason why people should not be free to take whichever pot they choose. We are delighted that our vital amendment has been accepted.

Amendment agreed to.

Amendments made: No. 526, in

    schedule 34, page 477, line 8, leave out 'paragraph 24' and insert 'paragraphs 24 and 24A'.

No. 527, in

    schedule 34, page 477, line 20, leave out 'paragraph 24' and insert 'paragraphs 24 and 24A'.

No. 528, in

    schedule 34, page 477, line 22, leave out '(6) and' and insert '(5) to'.

Column Number: 680

No. 529, in

    schedule 34, page 477, line 23, at end insert—

    ' ''(5) If sub-paragraph (2) does not apply, the permitted maximum is the available portion of the member's lump sum allowance.'.

No. 530, in

    schedule 34, page 477, line 29, leave out 'paragraph 24' and insert 'paragraphs 24 and 24A'.

No. 531, in

    schedule 34, page 478, line 8, leave out 'Whether or not' and insert

    'If (and for so long as)'.

No. 532, in

    schedule 34, page 478, line 12, leave out 'sub-paragraph (1)' and insert 'sub-paragraphs (1) to (3)'.

No. 533, in

    schedule 34, page 478, line 19, leave out 'paragraph 24' and insert 'paragraphs 24 and 24A'.

No. 534, in

    schedule 34, page 478, line 21, leave out

    'rights on 5th April 2006'

    and insert

    'pension rights on 5th April 2006, calculated in accordance with paragraphs 8 and 9'.

No. 535, in

    schedule 34, page 478, leave out lines 27 to 40.

No. 536, in

    schedule 34, page 478, leave out line 41 and insert—

    '(2) For the purposes of sub-paragraph (1) there is to be deducted from the aggregate of the lump sum and the amount of the sums and the market value of the assets designated as available for the payment of unsecured pension so much (if any) of that amount as represents rights which are attributable to a disqualifying pension credit.'.

No. 537, in

    schedule 34, page 479, line 4, leave out '(6) and' and insert '(5) to'.

No. 538, in

    schedule 34, page 479, line 5, at end insert—

    '''(5) There is to be deducted from the aggregate of the amount of the lump sum and the annuity purchase price—

    (a) if the annuity is purchased (in whole or in part) by the application of sums or assets representing the whole or part of the member's unsecured pension fund, the aggregate of the amount of those sums and the market value of those assets, and

    (b) in any case, so much (if any) of the aggregate of the lump sum and the annuity purchase price as represents rights which are attributable to a disqualifying pension credit.'.

No. 539, in

    schedule 34, page 479, line 24, leave out 'paragraphs 26 and 27' and insert—

    '(a) paragraphs 25 and 27 (in the case of an individual in relation to whom paragraph 12 applies), or

    (b) paragraph 26 (in the case of an individual in relation to whom paragraph 12 does not apply),'.

No. 540, in

    schedule 34, page 479, line 38, after '2006,' insert

    'calculated in accordance with paragraph 29A,'.

No. 541, in

    schedule 34, page 479, line 40, after '2006,' insert

    'calculated in accordance with paragraph 29B,'.

Column Number: 681

No. 542, in

    schedule 34, page 479, line 41, leave out from beginning to end of line 11 on page 480 and insert—

    '29A (1) Subject to sub-paragraph (2), the value of the individual's uncrystallised lump sum rights under the pension scheme on 5th April 2006 is the aggregate of the value of the individual's uncrystallised lump sum rights under each arrangement in respect of the individual under the pension scheme, calculated in accordance with paragraph 24(5), on that date.

    (2) If the pension scheme is a relevant pension scheme, the value of the individual's uncrystallised lump sum rights on 5th April 2006 under an arrangement—

    (a) which relates to a particular employment, and

    (b) in relation to which the excess lump sum condition is met (see sub-paragraph (5) or (6)),

    is the amount arrived at in accordance with sub-paragraph (7) or (8).

    (3) A pension scheme is a relevant pension scheme if it falls within paragraph 1(1)(a) to (d).

    (4) Whether an arrangement relating to the individual relates to a particular employment is to be determined in accordance with paragraph 9(6).

    (5) If no other arrangement relating to the individual under a relevant pension scheme relates to the employment to which the arrangement relates, the excess lump sum condition is met in relation to the arrangement if—

    (a) the value of the individual's uncrystallised lump sum rights under the arrangement calculated in accordance with paragraph 24(5), exceeds

    (b) the amount arrived at in relation to the arrangement in accordance with paragraph 24A.

    (6) If one or more other arrangements relating to the individual under a relevant pension scheme or relevant pension schemes relates or relate to the employment to which the arrangement relates, the excess lump sum condition is met in relation to the arrangement if—

    (a) the aggregate of the values of the individual's uncrystallised lump sum rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 24(5), exceeds

    (b) the amount arrived at in relation to those arrangements in accordance with paragraph 24A;

    and the amount by which the aggregate of those values exceeds that amount is the ''lump sum excess''.

    (7) Where the excess lump sum condition is met by virtue of sub-paragraph (5), the value of the individual's uncrystallised lump sum rights under the arrangement is the amount arrived at in accordance with paragraph 24A.

    (8) Where the excess lump sum condition is met by virtue of sub-paragraph (6), the value of the individual's uncrystallised lump sum rights under the arrangement is the value of those rights calculated in accordance with paragraph 24(5), less the appropriate proportion of the lump sum excess.

    (9) The appropriate proportion of the lump sum excess is—

    V

    AV

    where—

    V is the value of the individual's uncrystallised lump sum rights under the arrangement, calculated in accordance with paragraph 24(5), and

    AV is the aggregate of the values of the individual's uncrystallised lump sum rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 24(5).

    29B (1) Subject to sub-paragraph (2), the value of the individual's uncrystallised rights under the pension scheme on 5th April 2006 is the aggregate of the value of the individual's uncrystallised rights under each arrangement in respect of the individual under the pension scheme, calculated in accordance with paragraph 8(5).

    (2) If the pension scheme is a relevant pension scheme, the value of the individual's uncrystallised rights on 5th April 2006 under an

Column Number: 682

    arrangement—

    (a) which relates to a particular employment, and

    (b) in relation to which the excess rights condition is met (see sub-paragraph (5) or (6)),

    is the amount arrived at in accordance with sub-paragraph (7) or (8).

    (3) A pension scheme is a relevant pension scheme if it falls within paragraph 1(1)(a) to (d).

    (4) Whether an arrangement relating to the individual relates to a particular employment is to be determined in accordance with paragraph 9(6).

    (5) If no other arrangement relating to the individual under a relevant pension scheme relates to the employment to which the arrangement relates, the excess rights condition is met in relation to the arrangement if—

    (a) the value of the individual's uncrystallised rights under the arrangement calculated in accordance with paragraph 8(5), exceeds

    (b) the amount arrived at in relation to the arrangement in accordance with paragraph 9(3).

    (6) If one or more other arrangements relating to the individual under a relevant pension scheme or relevant pension schemes relates or relate to the employment to which the arrangement relates, the excess rights condition is met in relation to the arrangement if—

    (a) the aggregate of the values of the individual's uncrystallised rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 8(5), exceeds

    (b) the amount arrived at in relation to those arrangements in accordance with paragraph 9(3);

    and the amount by which the aggregate of those values exceeds that amount is the ''rights excess''.

    (7) Where the excess rights condition is met by virtue of sub-paragraph (5), the value of the individual's uncrystallised rights under the arrangement is the amount arrived at in accordance with paragraph 9(3).

    (8) Where the excess rights condition is met by virtue of sub-paragraph (6), the value of the individual's uncrystallised rights under the arrangement is the value of those rights calculated in accordance with paragraph 8(5), less the appropriate proportion of the rights excess.

    (9) The appropriate proportion of the rights excess is—

    V

    AV

    where—

    V is the value of the individual's uncrystallised rights under the arrangement, calculated in accordance with paragraph 8(5), and

    AV is the aggregate of the values of the individual's uncrystallised rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 8(5).'.

No. 543, in

    schedule 34, page 480, line 16, leave out 'that occasion' and insert

    'the individual and the pension scheme'.

No. 544, in

    schedule 34, page 480, line 18, leave out from beginning to end of line 24 and insert

    'the individual becomes entitled to all the pensions payable to the individual under arrangements under the scheme (and to which the individual did not have an actual entitlement on or before 5th April 2006) on the same date.'.

No. 545, in

    schedule 34, page 480, line 26, leave out

    'for sub-paragraphs (5) to (7)'

    and insert

Column Number: 683

    'the reference in sub-paragraph (2) to the arrangement under which the member becomes entitled to the relevant pension were to the pension scheme and for sub-paragraphs (5) to (8)'.—[Ruth Kelly.]

No. 394, in

    schedule 34, page 480, leave out line 31 and at end insert—

    (VULSR{**multi**}CSLA)+ALSA

    (VULSR xFSLA

No. 395, in

    schedule 34, page 480, leave out line 35 and insert—

    VULSR{**multi**}CSLA

    VULSR xFSLA —[Mr. Flight.]

No. 546, in

    schedule 34, page 480, line 39, leave out '29' and insert '29A'.

No. 547, in

    schedule 34, page 481, line 12, leave out '29' and insert '29B'.—[Ruth Kelly.]

 
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