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Lord Mackay of Clashfern: My Lords, I join those who have congratulated the noble Baroness, Lady Hollis, on securing this. So far as I can see, it is really about as far as we could reasonably be expected to go

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with the amendment. I believe that, in due course, the Government will be able to overcome the obstacles that appear at present. I am sure that those obstacles are just to test their ingenuity.

Lord Barnett: My Lords, I add my congratulations to my noble friend. Has the Minister’s commitment been agreed with the Treasury? I say that with a little experience, a long time ago. It is important that the Treasury be committed to what he said, so I hope that he can give me that assurance.

Baroness Hollis of Heigham: My Lords, in the words of the noble Baroness, Lady O’Cathain, the statement repeated by my noble friend today—it was first offered by the Minister in the other place—to me represents a moral commitment or, to coin a phrase, a promise with menaces. We expect it to be delivered and I am confident that my noble friend will use his best endeavours so to do. I am very grateful for today’s comments suggesting that there need be no immediate legal obstacles in the road that would stop the show. There are problems to be addressed and overcome, but nothing that should stop the ultimate success of the amendment, which will bring women in this country, who have often spent their lives in caring, into the contributory system in their own right, as we should all wish to see.

Therefore I should give some thanks. Thank you, first, to my noble friend, to Mr Mike O’Brien in the other place and to the civil servants supporting them, who have always been available to see one and were almost always open-minded when they did. That was greatly appreciated. To my certain knowledge, they have worked very hard indeed in negotiations with the Treasury, and this statement now represents the Government’s position and not just that of the department. I very much appreciate that.

The second thank you is to the outside organisations, particularly Carers UK, Help the Aged, Age Concern and, above all, the Equal Opportunities Commission, which helped to form and organise the Women’s Pensions Network. I suspect that many noble Lords will have been at the receiving ends of its missives, e-mails and, indeed, its appreciation and gratitude. It very much values all that has been done in this House.

Thirdly, if it is not impertinent, I thank your Lordships. It was amazing to sit here and watch how the debate took fire. It went right around the House, with contributions, support and votes almost equally judged around the Back Benches, including distinguished Back-Benchers, in a way that many of us could not have dreamed of when we started this battle a year or two ago. I am very grateful to the 179 noble Lords who supported the amendment in their speeches and votes. To the 86 noble Lords who felt that they could not support the amendment, I would at least like to place on record my appreciation of their generosity and tolerance to someone from their own side who, none the less, sought to challenge government policy. Among those 86 is a Peer whose wife has chastised him roundly for his vote. Another Peer’s two daughters have angrily criticised the

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position he adopted on the day. I do not doubt that, as the noble Baroness, Lady O’Cathain, said, if we revisited this issue, we could count on even greater support on the government Benches from those who realise that this is not just a House of Lords issue, but a family issue, a women’s issue and a citizens’ issue.

Therefore, if it is not impertinent, I thank noble Lords most sincerely on behalf of all the women whose interests we have in mind on this. We have gone a very long way. I am comfortable with my noble friend’s statement. I am confident that the Government will deliver. It would be right to say that we all expect no less. Therefore, I suggest that we accept my noble friend’s recommendations.

Lord McKenzie of Luton: My Lords, I thank my noble friend Lady Hollis for the way she has worked with us to reach what I think is a sensible solution that provides the basis of a move forward, and I thank all other noble Lords who have spoken in this short debate. It is clear that the sentiment of the House has not shifted from that which it expressed on Report and I, for one, hope that we can get a solution, because I would rather not go through that debate again. In response to my noble friend Lord Barnett: yes, this has been agreed with the Treasury. Clearly, policy relating to national insurance contributions is a matter for the Treasury and it has vetted the statement I gave earlier.

The Government have been clear about their commitment to provide fairer outcomes for women. As I said previously, many measures in the Bill show that. I hope noble Lords will agree that we have shown sympathy for the objective of my noble friend’s amendment during debates in both Houses. The objective of fairer outcomes was never a sticking point here, rather the means by which to reach that objective. This is a complex issue and I am sure noble Lords will agree that it is sensible to explore all the possible implications of the options open to us before drawing conclusions. I particularly thank the noble Lord, Lord Lester, for his contribution and will specifically draw his comments to the attention of officials.

The Government are committed to looking at all the options, getting the views of stakeholders—for example, the EOC—and coming up with a solution. This has to be fair, practical, affordable and easily understood, while meeting the principles inherent in my noble friend’s original amendment, which is to help women living here to achieve a full basic state pension. I cannot pre-empt what the outcome will be but I hope that the update provided in the Pre-Budget Report will provide an outcome with which we can all be satisfied.

On Question, Motion agreed to.

Lord McKenzie of Luton moved Motion B:

“Minimum retirement income

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The noble Lord said: My Lords, I beg to move that the House do not insist on its Amendments Nos. 12, 13, 14 and 73, to which the Commons have disagreed for their reasons numbered 12A, 13A, 14A and 73A.

I begin by respectfully reminding noble Lords that, as Amendments Nos. 12 to 14 and 73 would alter provisions relating to taxation, they fall outside the scope of this House. Specifically, the amendments would reduce tax revenues. The retirement income fund, set out in Clauses 12 to 14, would enable individuals to shelter large tax-privileged pension funds until death and then pass them on to heirs. It could also allow large discretionary lump-sum withdrawals where the tax relief given would be likely to exceed the tax recouped when the lump sum was taken out. Additional funds—largely from existing savings vehicles—would be likely to be recycled into pension savings to take advantage of the scheme. By allowing value protection on an annuity at any age, Lords Amendment No. 73 would provide the potential for tax relief on pension savings to be used to provide tax-advantaged capital on death during any stage of retirement and not a retirement income.

However, even if the other place had been willing to waive its privileges relating to taxation, the Government would still fundamentally oppose Amendments Nos. 12 to 14 and 73 because they cut across several of the fundamental principles of government pensions policy. Tax relief on pensions saving, which amounted to more than £16 billion in 2006-07, is given to encourage people to save for retirement. As part of the “deal”, tax-privileged pension savings must be turned into a retirement income by the age of 75. Reflecting retirement patterns, there is little pressure on the age limit of 75: only 5 per cent annuitise after the age of 70 and most people do it before that. As working longer is key to meeting the pensions challenge, the Government continue to keep this under review.

Your Lordships will recall that, under an RIF, a pension fund could remain invested for life. Annual withdrawals between minimum and maximum limits would be permitted, depending on a member’s other income, life expectancy and a defined minimum retirement income. We have consistently stated that the RIF violates this deal behind pensions tax relief. Depending on other income sources, an RIF could allow someone either to extract large lump sums of tax-advantaged pensions savings for any purpose or to choose not to draw any income so that he or she could pass the fund on at death. Both violate the policy reason for giving tax relief.

We have consistently been clear that, for the vast majority, an annuity is the best way to secure a

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retirement income. The RIF is silent on tax treatment on death, and I fear that it is designed solely to allow pension funds to be passed on to heirs. No one should contribute to a pension with the aim of being able to pass on funds where more than half may consist of tax relief.

Amendment No. 73 would abolish the current age limit of 75 for value-protected annuities. This would allow an open-ended return of capital throughout all stages of retirement, which would tend to benefit those more interested in using their pension fund for inheritance planning rather than a retirement income. I therefore urge that this House does not insist on its amendments.

Moved, That the House do not insist on its Amendments Nos. 12, 13, 14 and 73 to which the Commons have disagreed for their reasons numbered 12A, 13A, 14A and 73A.—(Lord McKenzie of Luton.)

3.30 pm

Lord Hunt of Wirral: My Lords, I am surprised at what the Minister has just said. There is a paradox. He said that the amendments are faulty in that they are silent on the tax treatment of the fund, yet the Government have decided that the amendments are in breach of privilege because they deal with taxation. The amendments are either silent or they are not. Even more important, the amendments have been the subject of legitimate discussion on several previous occasions. For instance, on 15 November 2004, your Lordships’ House defeated the Government on the question of the maximum age for annuities. Then, on 17 November 2004, there was a further government defeat on the amendment tabled by my noble friend Lord Higgins to raise the age to 85.

It is curious that suddenly privilege is invoked. The Minister owes us some further explanation. It may be that someone somewhere decided to protest about other amendments on the basis of privilege and to extend the protest to this group, failing to realise that the House has debated these subjects on many previous occasions. I think that the noble Baroness, Lady Hollis, responded in 2004. We are owed a further explanation.

When I looked at the Official Report of the other place to see whether I could be persuaded by the arguments that had been used against these amendments, I discovered that no one had even discussed them because of the operation of a timetable Motion. I have not changed my mind, because no one in the other place tried to change it

The Minister has once again put forward the case as he sees it. He is always very articulate, particularly about this terrible phenomenon of tax avoidance—being able to build up funds and avoid tax. I do not think that the Government have any right to tell pensioners what to do with their pension pot beyond what effect it can have on their eligibility for various benefits. The tax incentives that the Government give to encourage responsible savings in no way transfer the ownership of this money to the Government.

In opposing the amendments on the previous occasion, the Minister claimed that the point of

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pension tax incentives is to provide an income in retirement “and nothing else”. If this is so, why does he feel that it is his Government’s responsibility to involve themselves in how that income is spent? He described the minimal flexibility that is allowed—the possibility of taking up to 25 per cent of the pension as a lump sum—as a generous concession on the part of the Government. That is ridiculous. What possible business of the Government can it be if a pensioner decides to blow 30 per cent, 50 per cent or any amount of their pension pot, as long as they do not throw themselves on to benefits by so doing?

This patronising and paternalistic attitude taken by the Government can be further seen by the noble Lord’s words when talking about the alternative secure pension regime that the Government allowed for those with a religious objection to annuities. He described people as “piling in” and trying to abuse the arrangements. Why do the Government consider it abuse when a person attempts to use a legal and profitable mechanism for investing his or her money? After all, the Government created this opportunity for people. What is wrong with them taking that opportunity?

The Minister said in response to these amendments the first time round, and has repeated it a few moments ago, that to spend a pension pot on things other than an annuity was an improper use of tax-privileged savings. Can he explain the difference between spending your savings and spending the proceeds of an annuity? The only principled difference between my amendments and the current arrangements is the mechanism by which care is taken to stop pensioners falling on to benefits. That must surely be the only legitimate reason for the Government to intervene.

This issue will not go away. I can only hope that when we table these amendments again, the Government will be in a more receptive mood.

Lord Skelmersdale: My Lords, my noble friend may be surprised that another place’s reaction to his amendment is to plead privilege. For my part, I am far from pleased that the guillotine Motion meant that that House did not discuss the arguments at all. What price the Prime Minister’s pledge to give Parliament more say and control over the Executive? Instead, we got a knee-jerk reaction of privilege.

My noble friend made a principled point that the Government should not be telling people what to do with their money above and beyond how that impacts on the taxpayer. This is doubly true when one considers what a bad bargain buying an annuity can be. The Government’s own Young review, the interim findings of which will be the subject of the debate to come in a few moments, clearly pointed out what a waste of resources buying an annuity can be. That the Government are forcing people to spend their retirement money—and it is still their money—in such an unprofitable manner is simply shocking. That they seem completely unashamed that they are doing so is no less than appalling.

As we made clear in Committee, these amendments are a point of principle; my noble friend has just reiterated that. The issue that we were voting on is not

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how the tax provisions should be amended in response to retirement income funds as the Minister, and Ministers in another place, would like to make it. As the privilege reason makes clear, that is a matter for another place to decide on. These amendments did not presume to touch on it, as the Minister noted previously. I gently suggest that he occasionally read his own speeches, as I tend to read his. Instead, these amendments were an attempt to restart a debate that the Government promised but then failed to deliver. Where is the review on compulsory annuitisation that was promised by Mr Wicks in another place on 16 November 2004, at Hansard col. 1223, with “particular care and urgency”? We have not had it.

The Minister claimed that there was a point of principle behind his objection to the lifting of annuity requirements, but I am unable to find it in his response in Committee. All I can see is a statement where he claims that the retirement income funds do not provide a secure income for retirement, but there is unfortunately little more explanation than that. He should take this opportunity, as my noble friend has requested, to set out his principled objections more clearly. Indeed, the Government have already conceded the principle. The exemption for the Plymouth Brethren shows that there are less restrictive ways to guarantee a retirement income, and I assume that the Government were satisfied that alternatively assured pension schemes did not waste taxpayers’ money, since the Government themselves invented them. Can the Minister please explain why what was considered appropriate in that case is not now considered suitable for the population at large?

Lord Oakeshott of Seagrove Bay: My Lords, I have considerable sympathy for the points made, particularly by the noble Lord, Lord Hunt, about the procedure for dealing with these amendments. I will go into more detail on the invoking of privilege on the financial assistance scheme when we come to those amendments, but I agree with the noble Lord on this. It is particularly unfortunate when there has been no debate in another place. That really makes a farce of democracy.

On the substance of the amendments, as noble Lords will know from our previous debates, we on these Benches feel that the Conservative amendments are unnecessarily complicated. Simplicity is the key to sound pension arrangements. Like the noble Lord, Lord Skelmersdale, we still await the promised review. I remember it being promised in the light of the Turner report—I had detailed negotiations with Mr Wicks at that time—on the simple question of whether the age of compulsory annuitisation should be substantially raised, which is our preferred option. As the Minister said, we are trying to encourage people to work longer. Given how much longer people are working and the substantial increase in life expectancy and healthy life expectancy, we on these Benches believe that that age should be raised substantially and we expect and demand an answer on what has happened to the review.

Lord McKenzie of Luton: My Lords, I shall start by dealing with the issue of Commons privilege. I am advised that the constitutional position is that the

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House of Lords accepts the Commons’ financial privilege and does not challenge it. That extends to not querying the Commons’ decisions to rely on financial privilege. I must adhere to that advice.

The noble Lord, Lord Hunt, said that I said that the RIF was silent on certain tax issues. That is right, but this is to do with tax planning. We have to look at this in totality. The whole regime for pensions and any changes to the existing regime must encompass changes to the tax regime. Indeed, when this amendment was moved on Report, some noble Lords spoke about it giving an opportunity to accumulate a fund that could be passed on on death. There is no doubt that the intent of some of the people who supported the proposition related to getting a better tax deal than under the current arrangements.

The noble Lord asked what this has to do with the Government. It has a lot to do with the Government. If the Government set down, because they have a democratic mandate to do so, a tax regime that encourages and incentivises pensions savings, there is a set of rules to subscribe to. I touched on those rules and I am happy to repeat that, within the parameters of lifetime allowance and annual allowances, there is tax deduction on the way in and tax-free build-up of funds within the scheme, but there comes a time when that has to be converted into an annuity, which is taxable on the way out. That is the regime that the Government have set down; we are entirely entitled to say that it is the regime under which we operate. I hope that my remarks touched on the added tax benefit that the 25 per cent tax-free withdrawal gives the pensions savings regime, because part of the fund comes out in a way that is not taxable.

The noble Lord, Lord Skelmersdale, said that the Young report stated that buying an annuity is a bad bargain. That is an unjustified reading of the report. It stated that you could do better by taking the funds in a range of schemes in aggregate than by annuitising on an individual basis. In the 2006 report, there was a review of the annuities market—the biggest review that has ever taken place—and it concluded that annuities are fairly priced. There was substantial work to justify that.

Lord Skelmersdale: My Lords, is it not true that the Young report is, at least in part, about the globalisation of schemes and the purchasing of bulk annuities, which would be considerably cheaper than, if you like, drip-feeding? This amendment is about drip-feeding. They cannot be compared.

Lord McKenzie of Luton: My Lords, the noble Lord is right in identifying part of what the Young report said, but the point about the RIF proposals is that they would work only for people who have significant pension pots because the investment risk—the longevity risk—is with the fund, which needs to be a certain size to sustain it and to afford the sort of advice that it needs to deal with the asset management issues that flow from that. In a sense, that is consistent with the Young review.

The noble Lord pressed me, as did the noble Lord, Lord Oakeshott, about what had happened to the

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promise in 2004. I regret that I do not have a specific answer on that, but I will write to both noble Lords on the matter.

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