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Amendments made: No. 78, page 389, line 36, leave out from ‘person’ to ‘on’ in line 37 and insert ‘becomes beneficially entitled’.

No. 79, page 392, line 10, leave out ‘or 89A’.

No. 80, page 396, line 14, at end insert—

‘(ab) a disabled person’s interest within section 89B(1)(c) or (d) below, or’.

No. 81, page 399, line 44, after ‘interest,’ insert ‘or a disabled person’s interest within section 89B(1)(c) or (d) below’.

No. 82, page 400, line 42, leave out from ‘applies’ to end of line 44 and insert ‘—

(a) as though for “an interest in possession” in each place where that appears in subsection (1) above there were substituted “a postponing interest”, and

(b) as though, for the purposes of that subsection, each of the following were a “postponing interest”—

(i) an immediate post-death interest;

(ii) a disabled person’s interest.”.’.

No. 83, page 401, line 20, at end insert—

‘(ia) a disabled person’s interest within section 89B(1)(c) or (d) below, or’.

No. 84, page 401, line 27, after first ‘interest’ insert ‘, disabled person’s interest’.

No. 85, page 401, line 29, after ‘or’ insert ‘disabled person’s interest or’.

No. 86, page 401, line 37, leave out ‘neither’ and insert ‘—

(i) not’.

No. 87, page 401, line 37, leave out ‘nor’ and insert ‘,

(ii) not a disabled person’s interest within section 89B(1)(c) or (d) below, and

(iii) not’.


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No. 88, page 403, line 7, leave out ‘property comprised in the testator’s estate’ and insert ‘the property’.

No. 89, page 403, line 18, at end insert—

‘(5) Subsection (4) above also applies where—

(a) a person dies before 22nd March 2006,

(b) property comprised in the person’s estate immediately before his death is settled by his will,

(c) an event occurs—

(i) on or after 22nd March 2006, and

(ii) within the period of two years after the testator’s death,

that involves causing the property to be held on trusts within subsection (6) below,

(d) no immediate post-death interest, and no disabled person’s interest, subsisted in the property at any time in the period beginning with the testator’s death and ending immediately before the event, and

(e) no other interest in possession subsisted in the property at any time in the period beginning with the testator’s death and ending immediately before 22nd March 2006.

(6) Trusts are within this subsection if they would, had they in fact been established by the testator’s will and had the testator died at the time of the event mentioned in subsection (5)(c) above, have resulted in—

(a) an immediate post-death interest subsisting in the property, or

(b) section 71A or 71D above applying to the property.”.’.

No. 90, page 403, line 42, after ‘if’ insert ‘—

(a)’.

No. 91, page 403, line 43, at end insert ‘, or

(b) the person dies under the age of 18 years and, immediately before the person’s death, section 71D of the Inheritance Tax Act 1984 (age 18-to-25 trusts) applies to the property in which the interest subsists.’.

No. 92, page 404, line 6, at end insert—

‘(iii) a disabled person’s interest within section 89B(1)(c) or (d) of that Act, or’.

No. 93, page 404, line 20, leave out ‘(1B)’ and insert ‘(1B)(a)’.

No. 94, page 404, line 27, after ‘if’ insert ‘—

(a)’.

No. 95, page 404, line 28, at end insert ‘, or

(b) the person dies under the age of 18 years and, immediately before the person’s death, section 71D of the Inheritance Tax Act 1984 (age 18-to-25 trusts) applies to the property in which the interest subsists.”.’.

No. 96, page 404, line 33, at end insert—

‘(db) by virtue of subsection (2) of section 71E of that Act (age 18-to-25 trusts) does not constitute an occasion on which inheritance tax is charged under that section,”.’.— [Dawn Primarolo.]

New Clause 3


Amendments to Finance Act 2004: Retirement Income Fund

‘(1) The Finance Act 2004 is amended as follows.

(2) In section 164 at end add “and

(g) payments into a Retirement Income Fund.”.

(3) In section 165 there is inserted in Pension rule 6 “or

(d) a withdrawal from a Retirement Income Fund.”.

(4) In section 165 after Pension rule 7 there is inserted—


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“Pension Rule 8

Before a member makes a withdrawal from a Retirement Income Fund, he must buy a relevant linked annuity which is linked to the retail prices index, which pays an income equivalent to the Minimum Income Requirement.”.

(5) In Schedule 28 after paragraph 16C there is inserted—

“Retirement Income Fund

16D (1) Subject to subsections (2) and (3) of this section, a Retirement Income Fund is a vehicle for the reinvestment of savings in retirement, which—

(a) has been established by a person designated by subsection (1) of section 154; and

(b) is a vehicle by whose investments are—

(i) investments of a kind described in the Insurance Companies Regulations 1994, Schedule X, Part 1; or

(ii) approved by HM Revenue and Customs.

(2) Funds held in the Retirement Income Fund as referred to in subsection (1) may be withdrawn from the Retirement Income Fund by the member as and when he elects.

(3) A member may not invest in a Retirement Income Fund unless the requirements of Rule 8 of section 165 have been met.

(4) A Retirement Income Fund, and any income derived from it, must not be capable of assignment or surrender by the member.

(5) Any withdrawal from the Fund by the member under subsection (2) shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and shall be treated as earned income of the member.

Minimum Retirement Income

16E (1) The amount of Minimum Retirement Income shall be set for each financial year following consultation by the Chancellor of the Exchequer by order.

(2) An order under this section shall, in respect of each financial year after that in which this section comes into force, be made on or before 31st January preceding the year in question.

(3) An order under this section shall be made by statutory instrument and shall be subject to annulment in pursuance of a resolution of either House of Parliament.”.’.— [Mr. Hoban.]

Brought up, and read the First time.

Mr. Mark Hoban (Fareham) (Con): I beg to move, That the clause be read a Second time.

Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to discuss the following:

New clause 7— Dependant’s Retirement Income Fund—

‘(1) The Finance Act 2004 is amended as follows:

(2) In Schedule 28 after paragraph 22 insert—

“22A Dependant’s retirement income fund

(1) Subject to subsections (2) and (3) of this section, a department’s retirement income fund is a vehicle for the reinvestment of savings in reitrement, which—

(a) has been established by a person designated by subsection (1) of section 154; and

(i) investments of a kind described in the Insurance Companies Regulations 1994, Schedule X, Part 1; or

(ii) approved by HM Revenue and Customs.

(2) Funds held in the retirement income fund as referred to in subsection (1) may be withdrawn from the retirement income fund by the members as and when he elects.

(3) A dependant may not invest in a dependant’s retirement income fund unless the requirements of Rule 8 of section 165 have been met.


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(4) A retirement income fund, and any income derived from it, must not be capable of assignment or surrender by the member.

(5) Any withdrawal from the fund by the member under subsection (2) shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and shall be treated as earned income of the member.”.’.

Amendment No. 62, in clause 159, page 135, line 7 , leave out ‘and (4)’ and insert ‘, (4) and (7)’.

Amendment No. 14, page 135, line 34, at end insert—

‘(7) The Treasury may make regulations about the application of subparagraph (2) of this section which will be deemed to take effect from 6th April 2006.’.

Amendment No. 107, schedule 22, in page 451, line 26, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 108, page 451, line 28, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 109, page 451, line 38, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 110, page 452, line 6, after ‘pension’, insert ‘and retirement income fund’.

Amendment No. 111, page 452, line 29, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 112, page 452, line 35, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 113, page 452, line 40, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 114, page 453, line 4, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 115, page 453, line 10, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 116, page 453, line 29, at end insert—

“dependent’s retirement income fund” has the meaning given by paragraph 22A of that Schedule’.

Amendment No. 117, page 453, line 40, at end insert—

“‘retirement income fund” has the same meaning as in paragraph 16D of that Schedule.’.

Amendment No. 118, page 453, line 44, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 119, page 454, line 6, after ‘fund’, insert ‘and retirement income fund’.

Amendment No. 120, page 454, line 20, at end insert—

“‘dependant’s retirement income fund” has the meaning given by paragraph 22A of that Schedule’.

Government amendments Nos. 31 and 97.

Mr. Hoban: I should like to break down my remarks into two sections. The first deals with new clauses 3 and 7 and amendments Nos. 107 to 120 and the second covers amendments Nos. 62 and 14.

Hon. Members will remember debates about scrapping the rules that require the compulsory purchase of annuities at 75. We are holding our first debate on the topic since the Government modified the requirement in the Finance Act 2004. The argument
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that underpins new clauses 3 and 7 and amendments Nos. 107 to 120 is that the Government have created a framework through the 2004 Act and the Bill that could give people much wider choice for retirement income planning through the introduction of the alternatively secured pension and the creation of an inheritance tax regime for left-over funds. Having accepted that, I contend that the Government should create more choice for people in retirement and more certainty for the state by introducing a further alternative to annuitisation and the alternatively secured pension—the retirement income fund, which is the subject of the new clause.

The issue of compulsory purchase of annuities has been rumbling on for some time and was a topic of debate through private Members’ Bills. My hon. and learned Friend the Member for Harborough (Mr. Garnier), my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) and the former Member for Taunton all sought to address the matter through private Members’ Bills. My hon. Friend the Member for Eastbourne (Mr. Waterson) also raised it in discussions on the Pensions Bill and my hon. Friend the Member for Tatton (Mr. Osborne) did so in the Committee and Report stages of the Finance Act 2004.

It is remarkable that, having doggedly defended compulsory annuitisation throughout the debates on the private Members’ Bills and the passage of the Finance Act 2004, the Government in a sense modified the principle of compulsory annuitisation in that Act. The Act and the Bill that we are considering create an architecture for an alternative to compulsory annuitisation.

The 2004 Act introduced the concept of the alternatively secured pension, a mechanism that enabled the Plymouth Brethren to draw pensions that were not linked to annuities. They have well-known objections to annuities and required an alternative mechanism to establish a means of funding their retirement after the age of 75—the age at which an annuity has to be purchased. The Act enabled them to draw down a proportion of their pension fund after the age of 75, in line with specific rules, which I shall not go through in detail.

Rob Marris: Go on.

Mr. Hoban: I shall not do that, despite the hon. Gentleman’s tempting me to do so. However, the rules have an important bearing on some points that I want to make.

It is fundamental to appreciate that, in the 2004 Act, the Government accepted that there is no requirement for the annuitisation of the pension fund of a group of people at 75. Anyone who wants to go down that route can do so. The Government have, therefore, through the 2004 Act, removed an argument for compulsory annuitisation.

The new clause creates an alternative to the alternatively secured pension, which sets a maximum draw-down that ensures that people do not run out of funds during their retirement. It would minimise the chances of those with alternatively secured pensions becoming reliant on the state. It would not entirely prevent that, but it would minimise the chances by
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ensuring that there was always something left in the alternatively secured pension on which people could draw later in life.

The new clause would also minimise the chances of people becoming reliant on the state by requiring them to buy an annuity that delivered a minimum income. The Chancellor of the Exchequer would set the amount and, once it was purchased, it would enable people to draw down the rest of the funds as they saw fit, as they can do now before the age of 75. The new clause therefore sets out the minimum income requirement, the amount of which would be set by the Chancellor annually, to ensure that people do not become reliant on the state in their retirement, but that they have the flexibility to determine how the remainder of their pension fund should be used.

Steve Webb (Northavon) (LD): The hon. Gentleman has given a clear exposition. He suggests that the Chancellor of the Exchequer would set the same minimum income figure for everybody. However, if I have a pension pot and some other source of income, which already gets me clear of means-tested benefits, there is no reason why the minimum income for me should not be zero, because I will not need means-tested benefits even if I blow the entire pot. Should not the figure be specific to individuals?


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