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Lord Monson: My Lords, I shall certainly support the noble Lord, Lord Higgins, in the Division Lobby tonight. Perhaps I may tentatively suggest to him that, assuming he wins and the other place rejects his amendment, it would be sensible to compromise tomorrow by splitting the difference and proposing an age of 80 for the compulsory taking out of annuities.

The noble Lord, Lord Oakeshott, believes that people are living a full six and a half years longer on average than was forecast when the annuity rules were first framed. The noble Baroness at one point seemed to suggest that it was three and a half years and at another point that it was six years, but one way or another it is certain that there is increased longevity compared to a couple of decades ago.

If you average out those forecasts they come to a little over five years. So I think that there really can be no excuse for not raising the age to at least 80.

Baroness Hollis of Heigham: My Lords, I will be very brief. I know that there is other, even more urgent business awaiting your Lordships. The noble Lord, Lord Higgins, raised two points, of which the substantive one was echoed by the noble Lord, Lord MacGregor. The first point was the point of privilege. The noble Lord has experience of the other place that I do not. I can only tell him what I understand to be the situation. As I understand it, privilege includes the extension of tax relief, which is the effect of the noble Lord's amendment and which is therefore interfering with financial arrangements. I am therefore assured that, on the grounds that I cited—this is not to argue against the noble Lord's amendment, but on the grounds for rejecting the original amendment—privilege therefore applies. However, like others, I am now reading my brief on that point.

On the substantive point, which the noble Lord, Lord MacGregor, also made, pension provision is voluntary. No one has to save in a pension pot through a money purchase scheme if he chooses not to do so. Indeed, many people today are going for buy-to-let and other arrangements. If they choose to save in a pensions pot, they understand that they will be required to annuitise but, in order to attract people to that pension pot knowing that they will be required to annuitise, they will enjoy the benefits of tax relief that effectively roll-up in value to something like 55p in the pound. Having chosen that pension pot—there was no compulsion—they then, having attracted the tax relief that has artificially inflated that pension pot courtesy of taxpayers, normally with far lower incomes than they and often without themselves having an occupational scheme, want to turn it into both a savings draw-down account and a potential legacy.

My argument is that basically, if people enter a pension pot arrangement, they know what the rules are and that, as a result, they attract extremely generous

17 Nov 2004 : Column 1548

tax relief that other sections of society do not attract. If, instead, they want not to turn it not into an annuity, but into a savings pot or a legacy, they have other vehicles with which to save, ranging from property to fine art and fine wine: take your choice. We do not have to seek to deform—I use the word advisedly—an annuity arrangement in order to ask it to do other things.

There may be a philosophical difference between us on this, but that is the Government's position. People entered that arrangement voluntarily. Having done so and attracted hugely generous tax relief, they now seek to change the original contract, so to speak, with the taxpayer under which they entered an annuity arrangement. I understand the argument about longevity, and so on. We can argue about that. In response to the noble Lord, Lord Oakeshott, I understand that the difference between 2001 and 2003 is 0.3 years but, as I said, we will tease that out in some of the technical papers.

Lord Oakeshott of Seagrove Bay: My Lords, is life expectancy on that basis, as both she and Mr Wicks yesterday at the other end of the Corridor appeared to say, 17 years or 16?

Baroness Hollis of Heigham: My Lords, as I said, it is 0.3 years extra. The figure for 2001, on which I drew originally, gave a life expectancy of 16 years for men at the age of 65. The figure for 2003, two years later, has become 16.3. I said just now that it was 0.3 years extra and have now spelt that out in detail. That is on the same basis of the period of life expectancy.

I return to the original point. We cannot accept the noble Lord's amendment, or even the so-called compromise being offered from other Benches. Our position rests that we believe that the arrangements for annuities now are very generous in tax privilege terms. Between the ages of 50 and 75, people must take their annuity pot. Of course people would like low inflation and high annuity rates. Would not we all? But we know that that is not the world in which we live. Of course annuities are pooled risk but, at the end of the day, a pension pot and the requirement to annuitise was a contract voluntarily entered in to and then greatly enhanced by taxpayers, some of whom will be much worse off than those benefiting from those arrangements. We have not yet heard any arguments that suggest that we should disturb that arrangement.

If the Adair Turner commission reports differently, the Government will obviously take that into account. As I made clear in my statement, we will consider any of its recommendations with care and urgency. Your Lordships would not expect me to go beyond that: I do not know what it will recommend and cannot predict what our response would be to any recommendations that it may make. To suggest that we are somehow denying choice to people when their original choice was made to enter a pension arrangement and therefore an annuity is unreasonable. I hope that, with that explanation of our philosophy—that we believe that what we are arguing is fair and reasonable and that we do not think it right to deform the original

17 Nov 2004 : Column 1549

intention of that pension contract, which was designed to ensure a secure income in retirement—your Lordships will reject the amendment.

Lord Higgins: My Lords, I shall make only two points. First, I do not believe that the amendment alters—that is the crucial word—tax relief. Secondly, it is right that we should press for a change to the age of 85. Given that all the legislation—and this Bill is at the end of the queue—is right up against the buffers, I very much hope that when the Bill goes to another place, it will accept that an amendment of this sort is appropriate. We have deployed nearly all the arguments; I do not intend to repeat them now. I seek to test the opinion of the House.

7.5 p.m.

On Question, Whether the said amendment (No. 359B) shall be agreed to?

Their Lordships divided: Contents, 207; Not-Contents, 136.

Division No. 2

CONTENTS

Addington, L.
Alderdice, L.
Allenby of Megiddo, V.
Alliance, L.
Ampthill, L.
Anelay of St Johns, B.
Arran, E.
Ashcroft, L.
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Baker of Dorking, L.
Barker, B.
Beaumont of Whitley, L.
Bell, L.
Blatch, B.
Bledisloe, V.
Bonham-Carter of Yarnbury, B.
Bowness, L.
Bradshaw, L.
Bridgeman, V.
Brittan of Spennithorne, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Buscombe, B.
Byford, B.
Carlile of Berriew, L.
Carnegy of Lour, B.
Chadlington, L.
Chorley, L.
Clement-Jones, L.
Cobbold, L.
Colville of Culross, V.
Colwyn, L.
Cope of Berkeley, L. [Teller]
Courtown, E.
Cox, B.
Craig of Radley, L.
Crathorne, L.
Crawford and Balcarres, E.
Cuckney, L.
Cumberlege, B.
Darcy de Knayth, B.
Dean of Harptree, L.
Denham, L.
Dixon-Smith, L.
D'Souza, B.
Dykes, L.
Eccles of Moulton, B.
Eden of Winton, L.
Elis-Thomas, L.
Elles, B.
Elliott of Morpeth, L.
Elton, L.
Erroll, E.
Falkland, V.
Falkner of Margravine, B.
Feldman, L.
Ferrers, E.
Fookes, B.
Forsyth of Drumlean, L.
Fraser of Carmyllie, L.
Freeman, L.
Garden, L.
Geddes, L.
Glenarthur, L.
Glentoran, L.
Goodhart, L.
Goschen, V.
Greaves, L.
Greengross, B.
Hamwee, B.
Hanham, B.
Harris of Peckham, L.
Harris of Richmond, B.
Hayhoe, L.
Henley, L.
Higgins, L.
Hodgson of Astley Abbotts, L.
Hogg, B.
Holme of Cheltenham, L.
Home, E.
Howard of Rising, L.
Howe, E.
Howe of Aberavon, L.
Howe of Idlicote, B.
Howell of Guildford, L.
Hunt of Wirral, L.
Inglewood, L.
Jacobs, L.
Jenkin of Roding, L.
Jopling, L.
Kalms, L.
Kimball, L.
King of Bridgwater, L.
Kingsland, L.
Lawson of Blaby, L.
Lester of Herne Hill, L.
Linklater of Butterstone, B.
Liverpool, E.
Livsey of Talgarth, L.
Lucas, L.
Lyell, L.
McAlpine of West Green, L.
MacGregor of Pulham Market, L.
Mackie of Benshie, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Mancroft, L.
Mar, C.
Mar and Kellie, E.
Masham of Ilton, B.
Mayhew of Twysden, L.
Methuen, L.
Michie of Gallanach, B.
Miller of Chilthorne Domer, B.
Miller of Hendon, B.
Monro of Langholm, L.
Monson, L.
Montrose, D.
Moore of Lower Marsh, L.
Morris of Bolton, B.
Mowbray and Stourton, L.
Murton of Lindisfarne, L.
Neill of Bladen, L.
Neuberger, B.
Newby, L.
Newton of Braintree, L.
Noakes, B.
Northbrook, L.
Northesk, E.
Northover, B.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L.
Onslow, E.
Palmer, L.
Palumbo, L.
Patten, L.
Pearson of Rannoch, L.
Peel, E.
Perry of Southwark, B.
Peyton of Yeovil, L.
Platt of Writtle, B.
Plumb, L.
Plummer of St. Marylebone, L.
Razzall, L.
Reay, L.
Redesdale, L.
Rees, L.
Rees-Mogg, L.
Rennard, L.
Renton, L.
Renton of Mount Harry, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Roper, L.
Rotherwick, L.
Russell-Johnston, L.
Ryder of Wensum, L.
Saatchi, L.
St John of Fawsley, L.
Saltoun of Abernethy, Ly.
Sandwich, E.
Scott of Needham Market, B.
Seccombe, B. [Teller]
Selborne, E.
Selsdon, L.
Sharman, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Shutt of Greetland, L.
Skelmersdale, L.
Slim, V.
Smith of Clifton, L.
Steel of Aikwood, L.
Stevens of Ludgate, L.
Stewartby, L.
Strathclyde, L.
Taverne, L.
Thatcher, B.
Thomas of Gresford, L.
Thomas of Swynnerton, L.
Thomas of Walliswood, B.
Thomson of Monifieth, L.
Tordoff, L.
Tugendhat, L.
Vallance of Tummel, L.
Vinson, L.
Waddington, L.
Wade of Chorlton, L.
Wakeham, L.
Waldegrave of North Hill, L.
Wallace of Saltaire, L.
Walmsley, B.
Walpole, L.
Warnock, B.
Watson of Richmond, L.
Wilcox, B.
Williams of Crosby, B.
Williamson of Horton, L.
Willoughby de Broke, L.
Windlesham, L.
Wolfson, L.

NOT-CONTENTS

Acton, L.
Ahmed, L.
Alli, L.
Amos, B. (Lord President of the Council)
Andrews, B.
Archer of Sandwell, L.
Ashton of Upholland, B.
Bach, L.
Bassam of Brighton, L.
Bernstein of Craigweil, L.
Bhattacharyya, L.
Billingham, B.
Borrie, L.
Bragg, L.
Brett, L.
Brooke of Alverthorpe, L.
Brookman, L.
Burlison, L.
Campbell-Savours, L.
Carter, L.
Carter of Coles, L.
Chandos, V.
Christopher, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Corbett of Castle Vale, L.
Crawley, B.
Dahrendorf, L.
David, B.
Davies of Coity, L.
Davies of Oldham, L. [Teller]
Dean of Thornton-le-Fylde, B.
Dixon, L.
Drayson, L.
Dubs, L.
Elder, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Falconer of Thoroton, L. (Lord Chancellor)
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Fitt, L.
Fyfe of Fairfield, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Gilbert, L.
Gilmour of Craigmillar, L.
Golding, B.
Goldsmith, L.
Gordon of Strathblane, L.
Goudie, B.
Gould of Brookwood, L.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grantchester, L.
Griffiths of Burry Port, L.
Grocott, L. [Teller]
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayman, B.
Henig, B.
Hilton of Eggardon, B.
Hogg of Cumbernauld, L.
Hollis of Heigham, B.
Howarth of Breckland, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Janner of Braunstone, L.
Jones, L.
King of West Bromwich, L.
Laird, L.
Layard, L.
Lea of Crondall, L.
Leitch, L.
Lipsey, L.
Lockwood, B.
Lofthouse of Pontefract, L.
McDonagh, B.
McIntosh of Haringey, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Mallalieu, B.
Massey of Darwen, B.
Maxton, L.
Merlyn-Rees, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
O'Neill of Bengarve, B.
Ouseley, L.
Parekh, L.
Pendry, L.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prosser, B.
Prys-Davies, L.
Radice, L.
Randall of St. Budeaux, L.
Rendell of Babergh, B.
Richard, L.
Robertson of Port Ellen, L.
Rooker, L.
Rosser, L.
Royall of Blaisdon, B.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Simon, V.
Snape, L.
Stoddart of Swindon, L.
Strabolgi, L.
Taylor of Blackburn, L.
Thornton, B.
Tomlinson, L.
Triesman, L.
Truscott, L.
Tunnicliffe, L.
Turner of Camden, B.
Uddin, B.
Wall of New Barnet, B.
Warner, L.
Whitty, L.
Wilkins, B.
Woolmer of Leeds, L.
Young of Norwood Green, L.
Young of Old Scone, B.

Resolved in the affirmative, and amendment agreed to accordingly.

17 Nov 2004 : Column 1551

Motion, as amended, agreed to.

7.18 p.m.


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