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Baroness Hollis of Heigham: My Lords, I accept that there is a dilemma for someone who is required to buy an annuity at a certain point in time. However, as the House will know, people are not required to turn a lump sum, or a pension pot, into an annuity until the age of 75. Therefore, they have between the ages of 65 and 75--in many cases 60 and 75--to decide when to turn the sum into an annuity. Given certain assumptions of growth--investment growth of, say, 7.5 per cent.--they can achieve a draw-down of income which will at least match the annuity rate without eating into the capital.
Baroness Turner of Camden: My Lords, does my noble friend agree that, while we all welcome a reduction in interest rates, there is a downside? Many older people have looked upon income from savings as a way of boosting inadequate pensions. Therefore, to tell such people that low inflation will provide them with some protection will not help them very much if they experience an immediate drop in their income, as is now the case. What will the Government do to encourage people to save in such circumstances, since, quite rightly, it is government policy to encourage people to save as much as possible?
Baroness Hollis of Heigham: My Lords, the noble Baroness is right. However, I recall that about a decade ago, when inflation was at its highest level, people were least inclined to save and to opt for the older fashioned virtue of thrift because they saw the value of their savings being eaten away. Without trying to underestimate the significance of the issue, it is wise to put it into context. On average, occupational pensions represent about one-fifth of the average pensioner's income. Approximately 90 per cent. of people who have an occupational pension receive a final salary funded scheme and therefore benefit from low inflation rates.
Lord Higgins: My Lords, I declare an interest as chairman of a company pension scheme, although not of the kind described in the Question. Is not the simple answer to the Question that interest rates will be less and the level will be lower? In particular, is it also not clear that, if retiring today, people are receiving substantially less than they expected a year ago? Therefore, is not the Green Paper about the government forecasts of people's pensions completely unrealistic? Is it not likely that such forecasts will be grossly misleading?
Baroness Hollis of Heigham: My Lords, we have no reason to think so. I agree that one cannot always read into the future what happened 15 years ago. However, on average, pensioners' incomes have more than kept pace with earnings. It is clear that when interest rates are high, which is usually a consequence of high inflation, overall, pensioners have lost out because there is a transfer of money from savers to borrowers; younger people buy houses and the like. Traditionally, pensioners do better in a low inflation/low interest rate economy. For future pensioners, their best hope and expectation of having a decent private pension as they reach retirement is to have secure, well-paid jobs in a sound economy based on investment. That is what we are determined to secure.
Lord Goodhart: My Lords, I accept much of what the Minister says, but does the noble Baroness agree that the real threat to the level of pensions came from the Government's decision last year to abolish the tax credit on the dividend income of pension funds?
Baroness Hollis of Heigham: My Lords, first, we believe that the best investment for a pension is a sound economy. We do not believe that that should depend on tax distortions in the pension system. Secondly, it is worth emphasising that the value of ACT when it was renewed was one-tenth of the difference between the best and the worst performing funds in any sector of the pensions industry. In other words, what matters is choosing your manager.
Baroness Gardner of Parkes: My Lords, is the Minister aware that many people become anxious as they approach the age limit of 75? Will the Government consider raising that limit so that those who are terrified of being forced to take an annuity may wait longer?
Baroness Hollis of Heigham: My Lords, I recognise the problem faced by those approaching the age of 75. The Government are considering that issue, but I cannot reassure the noble Baroness that any changes are in prospect.
Baroness Hollis of Heigham: My Lords, I do not accept that the Government are actively encouraging money purchase funded schemes in the sense that the number of schemes which are money-purchase compared with final salary have not changed, slightly to my surprise, during the past two or three years. The number remains the same, although there has been a growth in hybrid schemes; a mixture of schemes.
As my noble friend will be aware, the stakeholder scheme is a money purchase funded scheme because it tries to meet the needs of those people for whom final salary occupational schemes do not make good sense. Such people are in and out of work; they may have had part-time employment or broken employment; they may be women who have had caring responsibilities; or be self-employed. Such people may stay in a job only two or three years and it would be absurd to expect them to take up a final salary funded scheme. However, the Government's stakeholder scheme, compared with the usual money purchase or personal pension scheme, will have low charges, assured basic standards of competence and a good return, making it possible for people for whom no suitable pension product has been available to enjoy a comfortable old age.
Viscount Falkland: My Lords, I thank the Minister for his reply. Is he aware of the recent report of the circus working group of the RSPCA, to which many relevant bodies contributed, which shows that there is great cause for concern? Taken together with the quite deplorable case of the Chipperfield chimpanzees, if I may so describe it, is there not now serious concern that we are past the stage when wild animals, many of which come from species under threat, should be
Lord Williams of Mostyn: My Lords, I have in fact read the report. The Associate Parliamentary Group for Animal Welfare intends to consider the report formally within a matter of weeks. The executive summary of the report states:
Lord Renton: My Lords, does the Minister agree that the present legislation does not prevent wild animals being confined in small cages, drugged and sometimes chastised in order to perform an unnatural kind of entertainment, all of which is surely cruel? Should we not now try to do something about that?
Lord Williams of Mostyn: My Lords, any intentional infliction of harm to animals is against the criminal law. Reference has been made to the recent high profile case but, in fact, that was a successful prosecution. The law is there to protect against the infliction of harm and damage to domestic and captive animals.
Viscount Mountgarret: My Lords, to carry the question of the noble Lord, Lord Renton, further, would it not be relatively simple to ban the use of wild animals for entertainment generally across the board?
Lord Williams of Mostyn: My Lords, that would be a possibility. It is certainly something I imagine the associate group will want to consider. The Chief Whip reminds me that, in his view, the duty of training wild animals for entertainment purposes ought really to be with him, not me!
Baroness Trumpington: My Lords, arising from the recent high profile case to which reference has been made, is it true that a loophole in the law allows a person who has been found guilty of mistreating an animal to have the animal returned to him after the case? I believe that that applies not only to wild animals but also to horses.
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