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Baroness Hollis of Heigham: My Lords, I intended to present this information when we debate income support levels but for the noble Lord's information, somebody who contributes over a full working life--there are certain assumptions about earnings increasing 4 per cent a year and so on--will only have to pay in £3.50 a week or £13 a month, of which perhaps half could come from recycled rebates, to float them above the level for a stakeholder pension. If they were to put in something like £50 a month or £12.50 a week--half of which or more, according to the person's age, could be recycled rebates, so that is a gross figure and not a net figure because a net figure could be half that or less--they would acquire a pension over a working life of the order of £75 a week on top of their state pension. Even quite small sums--#10, for example--would produce a worthwhile figure if that were net of the recycled rebates. If one added that £10 into the recycled rebates, one could have (on certain assumptions about earnings and inflation over a lifetime) a pension of perhaps £50 a week. We should

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not underestimate the power of compounding over a lifetime and the addition of both the employee's net contribution and the recycled rebate.

Lord Higgins: My Lords, I am grateful to the noble Baroness for her intervention. With a number of amendments, the arguments have gone back and forth, and replies relevant to one can be used for another. I shall study carefully the illuminating figures that the Minister has just given.

As to the tax limit and so on, we have referred to a number of consultation documents. Consultation brief No. 6, which has a red cover in this case--

Baroness Hollis of Heigham: Claret, my Lords.

Lord Higgins: My Lords, burgundy perhaps. Someone has to be the straight man in this act.

A number of the proposals have been widely welcomed, with surprise in some cases. As I understand the tax proposals, if someone who has no income makes a contribution to their pension, they will get a handout from the Inland Revenue. I cannot recall that happening on any previous occasion. Perhaps it is regrettable that will appear in the Finance Bill in another place rather than be debated here. In the light of the Minister's helpful remarks, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 14 not moved.]

Baroness Hollis of Heigham moved Amendment No. 15:

Page 2, line 16, leave out (“or the Pension Schemes (Northern Ireland) Act 1993").

On Question, amendment agreed to.

Lord Higgins moved Amendment No. 16:

Page 2, line 18, at end insert (“or other insurance contracts, annuity contracts or pension arrangements which satisfy the prescribed arrangements").

The noble Lord said: My Lords, Amendment No. 16 concerns an important issue on the question of transferability of assets from one particular form of contract into the stakeholder pension scheme. It is linked with Amendment No. 17. I am not sure whether or not that amendment accepts my proposal. If that is so, we can make rapid progress. However, there are one or two points which should be made.

Incidentally, I believe that perhaps the noble Baroness was not accurate with regard to final salary schemes in saying that there are difficulties on transferring. One can always leave the final salary amount in the existing scheme, as indeed I did. The noble Lord, Lord McIntosh, shakes his head.

Lord McIntosh of Haringey: My Lords, you can always have a frozen pension, but if you change jobs three or four times in your 20s and 30s, you will land up with three or four “piddling" little frozen pensions which will not add up to a proper final salary scheme.

Lord Higgins: My Lords, speaking from personal experience, I served roughly the same length of time with a

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well-known multinational as I did as a Minister. The frozen pension did a great deal better than the ministerial one. Be that as it may, as we understand it the stakeholder scheme must accept transfers from other schemes but there are some risks as far as concerns the trustees. I refer, for example, to schemes which do not have fully equalised benefits for men and women. I am not sure whether that point has been taken into account.

The issue of transfer values is difficult and much involved in discussions with actuaries, and so on. We will need to ensure that trustees who transfer, for example, from a defined contribution scheme (like that of a company) to a stakeholder scheme do not suddenly find that there are problems. If the amendment tabled by the noble Baroness embraces my amendment--no doubt it is far better drafted--I look forward with interest to what she has to say. I beg to move.

Lord McIntosh of Haringey: My Lords, the noble Lord is quite right. He moved the same amendment in Committee and I said that we were prepared to consider it further; indeed I quite welcomed it.

The reason for extending the provision is that occupational and personal pensions are not the only type of recognised pension arrangements. Other types include retirement annuity contracts and certain other types of annuity or insurance policies. Insurance and annuity contracts can, for example, be used to give effect to an ex-employee's rights in the former employer's occupational pension scheme. Once our proposals for pension sharing on divorce are introduced, a spouse who becomes entitled to a share of the former spouse's pension and is not at that time a member of a pension scheme will be able to buy a deferred annuity. It is possible that those people may, in future, want to transfer such rights into a stakeholder pension scheme.

There is nothing in our original proposal which would have prevented a stakeholder scheme from accepting transfer from such arrangements. However, since we last discussed the issue, I have had an opportunity to consider it further. I am pleased to say that on reflection we can see no reason why this provision should not be amended to ensure consistency of treatment between different types of arrangements. We have tabled Amendment No. 17 to include transfers of rights in the types of pension arrangements that we have been discussing. It meets what I believe to be the purpose of Amendment No. 16 but has simply been expressed somewhat differently, on legal advice, to achieve the intended effect.

Lord Higgins: My Lords, I am not a lawyer and therefore I fully accept that this is no doubt better drafted than my own amendment. I am glad that the Government have been prepared to accept the principle of what we argued in Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 17:

Page 2, line 18, at end insert--
(“( ) contracts and schemes approved under Chapter III of Part “IV of the Income and Corporation Taxes Act 1988 (retirement annuity contracts);
( ) annuities and insurance policies purchased or transferred for the purpose of giving effect to rights under pension schemes; and

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( ) annuities purchased or entered into for the purpose of discharging liability in respect of pension credits under section 26(1)(b) or under corresponding Northern Ireland legislation.").

On Question, amendment agreed to.

Lord Higgins moved Amendment No. 18:

Page 2, line 20, at end insert--
(“(10) The ninth condition is that the scheme shall provide full and accurate advice to any person who applies to join the scheme as to how a stakeholder pension would benefit the applicant compared to other types of pension and shall tell the applicant that they have up to twenty-five days to cancel the application without cost or penalty; and an applicant to a stakeholder pension scheme shall have up to twenty-five days from receiving the said advice to cancelling the said application without cost or penalty.").

The noble Lord said: My Lords, Amendment No. 18, which stands in my name, suggests that it should be a condition of the stakeholder scheme that it shall provide full and accurate advice to any person who applies to join the scheme as to how their pension would benefit the applicant compared with other types of pension, and tells the applicant that they have 25 days to cancel if they think it is wrong.

This clearly relates to the question of advice and concerns one of the problems which arose with regard to the so-called “1 per cent cap" on the charge which the stakeholder scheme can make for provision of the pension. As I understand it, the Government are changing their view somewhat as regards that matter. They are tending to say that there may be some additional charge for advice. That is an important shift. One of the reasons why charges are as they are in existing schemes is that the amount which is charged “up front" includes a charge for providing advice. However, as the noble Lord, Lord Goodhart, stated earlier, that commission may indeed be paid in a way which is not justified.

Essentially, we are suggesting that there should be a sensible system for advice. The noble Lord, Lord Williams, suggested earlier that I was not taking into account the increase in the number of products available--“products" is the right word. The more one looks at such products, the more difficult advice becomes. Despite the fact that the noble Baroness argued earlier that the state second pension is somehow totally separated from the stakeholder pension, there are considerations there which individuals may wish to take into account when deciding whether or not to join a stakeholder scheme. Indeed, that is so more generally.

In particular, there are other difficulties. Dare I mention the provision by the Treasury of the so-called LISA? We have heard nothing at all about LISA. It appears to have sunk without trace. Clearly people will need advice as to whether they should go in for a stakeholder scheme or what appears to be a competitive product offered by the Treasury. It looks like a complete alternative to the stakeholder pension scheme. Will the advice given by the stakeholder promoter take that into account? Referring back to the comments made by the noble Baroness, Lady Castle, an area to be considered is whether people have the whole picture so far as concerns the present situation. None the less, I do not wish to detain your Lordships longer. I hope that we can have some reassurance from the Government with regard to the question of adequate advice

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and, in particular, whether it is now considered appropriate for a charge to be made for it by the provider of the stakeholder pension. I beg to move.

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