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Lord Higgins: As I said, my amendment is not well focused, as it knocks out earnings altogether. I can understand that, if we were to accept it, it would be extremely expensive. None the less, the points made by noble Lords who have spoken are important.

Can I make clear what the Minister is saying? As I understand it, she is saying that it is a complicated business—none of us would dispute that—and that there may be a particular situation for pensioners aged between 60 and 65. Above that level, can we be clear that it is the Government's intention that there should be a disregard? As I understand it, there is anyway an MIG disregard. I think that it is £15 a week for full-timers and part-timers working more than 16 hours or, in the case of a couple, 24 hours a week. I have had terrible trouble trying to find where it appears; I presume that it is in a statutory instrument, but I could not discover where.

At all events, what we are considering has two elements: the state pension consists of what used to be MIG, on the one hand, and the savings credit, on the other. Am I right to interpret the Minister as saying that there would certainly be a continuation of the MIG disregard for pensioners above 65, let us say, and that the Government are still considering whether to give a disregard as far as concerns the savings credit for people who are also in part-time work. I am not really clear at the moment what the Minister is saying.

Baroness Hollis of Heigham: I understand the noble Lord's point about earnings disregards. Let me clarify the current situation; the noble Lord may not have described it completely.

At the moment, the earnings disregard in general applies to all client groups in receipt of income-related benefits. The different levels of earnings disregard are as follows, and they apply across the board: £5 for a single person; £10 for a couple; and £20 for lone parents, disabled people entitled to the disability premium or aged over 60, carers entitled to the carers' premium and people in certain special occupations. The £25 earnings disregard comes into play with housing benefit and council tax benefit. If the noble Lord were to say to me that we should tidy it all up, I would not disagree. However, that is where we are. In addition, there is, of course, help with childcare costs coming through from the Tax Credits Bill. That is the current state of earnings disregards.

I do not want to make a commitment at this stage. I hope that the noble Lord, Lord Higgins, will bear with me; I can understand his irritation. We should not at this point separate the treatment of earnings from earnings disregards. We seek to have a clear position

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for those aged over 65. There is an order of difficulty relating to those between the ages of 60 and 65 and people under the age of 60. That is a complex matter that we must resolve.

Certainly, if there is an earnings disregard of any size, we must consider how it interlinks with disregarding earnings in total. If I were to say, for example, that we would keep a minimum of £5 or £10, it might be unnecessary if the subsequent earnings were to be disregarded in total for these purposes. I ask the noble Lord to allow me to return as soon as I can with a clear statement of our proposals, rather than chip away at bits of them. There are two or three different considerations at play. To be frank, I must say that I cannot answer the noble Lord's questions unless I have clearer policy parameters than I have at the moment. They are still being consulted on and worked up for reasons that he will understand.

Lord Higgins: I fear that I do understand them. The whole thing is incredibly complicated, which is a result of the Chancellor of the Exchequer's obsession with the whole idea of credits. At the point at which the Minister is not sure whether she has got it right, I really become terrified—for most of the last speech, in fact.

Baroness Hollis of Heigham: I believe that my description of earnings disregards was accurate. I said that I could not give the noble Lord the policy parameters on whether the disregards should be increased so that it was a full earnings disregard for those over 60 up to those who remain below the pension credit ceiling and, secondly, on the interlock between those under 60, those between 60 and 65 and those over 65.

The problem is the determination of policy parameters. Once we have done that, the rest will fall into place. The noble Lord will understand perfectly what can then be deduced. If I said, for example, that all earnings were to be disregarded or, alternatively, that all earnings were to be qualifying income, the noble Lord and I could agree on the policy implications for pension credit. I cannot do that at the moment.

Lord Higgins: That is unsatisfactory. Can the Minister clarify two points? First, in the course of this consideration, is she considering disregards in respect of both parts of the state pension credit? Secondly, should we not have, by Report, a clearer answer than she has been able to give this evening?

Baroness Hollis of Heigham: I very much hope that I will be able to give a clearer answer by Report. If I cannot, I shall apologise to the noble Lord.

Lord Higgins: We shall wait and see what happens. If necessary, we shall vote on it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Lord Higgins moved Amendment No. 75:

Page 9, line 10, leave out paragraph (d).

The noble Lord said: The amendment would remove paragraph (d), which—I think I am right in saying—is related to annuities. It is a question of whether income from annuity contracts other than retirement pension income should be included in income as far as concerns the operation of the state pension credit. It appears to be the Government's intention that income from an annuity should count as income. But what puzzles me is the parenthesis which states,

"(other than retirement pension income)".

It would appear therefore that income from a retirement pension income annuity, typical in the case of defined contribution pension schemes, is not to be counted as income. However, if someone has an annuity contract which has nothing to do with their retirement pension income, then it is to be treated as income. That is what the wording states, but it strikes me as rather extraordinary. Perhaps the noble Baroness can explain. I beg to move.

Baroness Hollis of Heigham: Amendment No 75 is another in the series dealing with income. Subsection (1)(d), which the amendment seeks to remove, provides the power to take income from annuity contracts, other than retirement pension income, into account when calculating pension credit entitlement.

Annuities are treated as income within MIG whether they are purchased from a pension fund or other capital. The Government intend to carry forward these provisions into those for pension credit. Therefore income from annuities will be taken into account as a weekly income stream in the calculation of the guarantee credit. The weekly amount will also be used to calculate the savings credit.

We have included this provision because, so far as possible we wish to maintain a level playing field between different retirement savings products, a point we have discussed on earlier amendments. We do not want to make some savings vehicles more financially attractive, nor do we want to encourage people to transfer capital holdings into an annuity contract in order to obtain a larger amount of pension credit or, indeed, to become newly entitled to it.

I hope that I have been able to persuade the noble Lord of the need to take income from annuities into account and I trust that he will feel able to withdraw his amendment.

Lord Higgins: I understand the Minister's response perfectly well, but then the parenthesis,

"income from annuity contracts (other than retirement pension income)"

should not be taken into account. As presently worded, it looks as though annuity retirement pension income is not to be taken into account. I am not clear why that should be the case.

Baroness Hollis of Heigham: All I can say is that income from annuity contracts other than retirement

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pension income covers a list of incomes other than retirement pension. I understand that this paragraph specifies the additional forms. Retirement pension is covered in Clause 15(1)(c), which is defined in Clause 16, and includes in paragraph (h) retirement annuity contracts. I think that this is simply in addition to the retirement pension income that we have been discussing.

Lord Higgins: I fear that I may have slightly misled the Committee on this point.

Baroness Hollis of Heigham: I certainly undertake to write to the noble Lord if he requires a more detailed explanation.

Lord Higgins: I may not have expressed my point as clearly as I might have done because, as has just been pointed out by my noble friend, paragraph (c) lists "retirement pension income". In that case, I am even more puzzled. If paragraph (c) covers retirement pension income, why do we then need the parenthesis under paragraph (d)?

Baroness Hollis of Heigham: I understand that it is possible to turn moneys into an annuity which may have no formal or technical connection with retirement pension, although it may then be enjoyed by someone of retirement age. That, I presume, is why it has been specified in this way.

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