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The Government have frequently assured us that they were seeking a consensus. What kind of consensus is it when only two options are put forward in the White Paper— for a fully elected or an 80 per cent elected House—which totally ignore the vast majority of opinion in this House that it should continue to be fully appointed? If the Government were really looking for a consensus or, to use the words of the noble Lord, Lord Wakeham, a compromise, surely the logical answer would be a 50:50 House. I am not saying for one moment that I would support that solution, and I doubt whether many of my noble friends on the Cross-Benches would support it, but it is surely logical. It is worth noting that that is the proposal included in the White Paper last year that was voted for by the Minister’s right honourable friend Mr Jack Straw.

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Does the Minister consider that the premise of the White Paper—that there are only two options to be considered: a fully elected or an 80 per cent elected House—is a serious proposal and not a deeply flawed one?

Lord Hunt of Kings Heath: My Lords, I do not agree. We need to go back to the reason why the first cross-party group was established: to enable both Houses to come to views on Lords reform and its membership. As we have heard, the Commons voted in favour of both 80 per cent and 100 per cent elected. Your Lordships voted only for a 100 per cent appointed House. Faced with that difference of view, and as the Commons has primacy, as your Lordships have always acknowledged, the Government decided that it was appropriate to carry out considered work on the options on which the Commons voted.

I understand where the noble Lord is coming from on compromise, and 50:50 sounds a comfortable compromise between both Houses. But, as he suggested, that proposal was comprehensively rejected by both Houses. That is why my right honourable friend the Lord Chancellor has taken forward the discussions on the basis of the Commons votes.

Lord Grocott: My Lords, is not a fundamental flaw at the heart of the White Paper that it treats the major reform of one House of Parliament as a stand-alone issue with no relevance to the rest of the constitution? Whatever the wishful thinking in the White Paper suggests, is it not inevitable that the relationship between the two Houses would change dramatically and permanently, with the role, powers and responsibilities of the House of Commons being diminished? Whatever people’s views on that might be, surely it is essential now that the Government recognise the work of the Cunningham committee, to which they have already subscribed and which has been the subject of unanimous support from both Houses of Parliament. It recommended that, before any further steps are made, the issue of an elected House of Lords and its impact on the powers of the Commons and the relationship between the two Chambers is fully examined, preferably at length.

Lord Hunt of Kings Heath: My Lords, I have been aware of my noble friend’s views on Lords reform for a long time. He puts his case very powerfully, but I disagree with him, although I certainly acknowledge—and I should have done so before—the enormously valuable work of my noble friend Lord Cunningham in his chairmanship of the Joint Committee on Conventions, which has informed the Government and the working group.

My noble friend says that an elected second Chamber would diminish the role and powers of the House of Commons. I do not share that view. All members of the working group and the Government are firm that the primacy of the Commons must and will be retained. Primacy is underpinned by the Parliament Act, by financial privilege and by the confidence that a Government must have in the House of Commons. Of course an elected or mostly elected second Chamber

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will feel confident in the powers it has; we should not run away from that, but at the end of the day it is still within the context of the primacy of the Commons.

Lord Higgins: My Lords, we have a system of government that is 100 per cent democratic, and I do not believe that having elected Members of this House would in any way increase that percentage.

The Government have set about this matter of achieving consensus in completely the wrong way. They have put far too much emphasis on a single vote in the House of Commons, when what was absolutely clear from that vote was the disagreement between the Front and Back Benches in both Houses and in both parties. They then set up a group that was totally unrepresentative of the Back Benches, where we had no effective say in the matter at all.

The Minister has put much emphasis on the primacy of the House of Commons. Since this matter goes back to 1911, it is not entirely clear that that primacy extends to total revolution of the constitutional situation. In some respects at present, in fact, the House of Commons is not totally unfettered. That is an important issue.

The second point is that there was a stitch-up with regard to election manifestos; the role of the manifesto in relation to this matter is extremely questionable.

Lord Hunt of Kings Heath: My Lords, the noble Lord is being a little unkind about the Government’s undertaking. We made clear in our 2005 manifesto that we would seek free votes of Parliament, and that is what we have done. It was not simply a vote in isolation; it took place in the light of a White Paper produced after constructive discussions between the political parties. That is not an unreasonable process. The Government could quite easily have produced a White Paper and a proposal without any consultation at all.

In the light of all the problems over many years about achieving longstanding reform of your Lordships’ House, this did and does appear to the Government to be the best way of achieving political consensus between the three main parties, which I believe provides the best foundation for taking reform forward.

Lord Steel of Aikwood: My Lords, is not the most surprising feature—

Lord Goodhart: My Lords, does the Minister agree—

Lord Howe of Aberavon: My Lords—

Lord Bach: My Lords, this is probably the last question, and it is the Liberal Democrats’ turn.

Lord Goodhart: My Lords, does the Minister agree that Tony Blair’s commitment in 1997 that no one party should have a majority in the House of Lords has contributed greatly to its effectiveness ever since? Does he also agree that if the first-past-the-post system or alternative-vote system had been in force for elections to this House, his party, the Labour Party, would have

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been in an overwhelming majority after the 2005 general election, at least among the political parties? Is it not therefore clear that some form of proportional representation will be essential if this House is to continue to play the role it does after we have become a partially or wholly elected Chamber?

Lord Hunt of Kings Heath: No, my Lords, I do not accept that at all. That is why the White Paper puts forward four options in the appendices. It looks at past election results and makes predictions about how voters might have voted, although it is very difficult to come up with firm calculations. Depending on which electoral system is adopted, there might be majorities for one party if it was successful over three elections, but in most cases there would not be an overall majority.

Your Lordships' House has worked well for any number of reasons. We intend to build on that, and I believe that the White Paper will enable us to do so.

Pensions Bill

4.55 pm

House again in Committee.

Lord Hunt of Wirral moved Amendment No. 127:

The noble Lord said: I shall speak to Amendments Nos. 128, 129 and 140 as well. I follow a number of my noble friends on this subject; the most persuasive speech was that made by my noble friend Lord Higgins on 15 November 2004, when he reminded us that this matter has a long history, stretching back over decades and many debates on various Bills. Indeed, he also reminded us that on several occasions this House has passed amendments to remove the compulsory age of 75. Therefore, it is with a sense of history that I seek to do exactly the same.

I recall that one of the most persuasive parts of my noble friend’s speech on 15 November 2004 was when he referred to the Watson Wyatt study, a very comprehensive and technically well executed study about people’s attitudes to annuities. Over a reasonable sample survey, it came to the view that something like 58.8 per cent of those surveyed never wanted to annuitise their pension pots and something like 12.1 per cent wanted to do so later than required to at the time. Therefore, something over 70 per cent of the people surveyed were against annuitising their assets as the present law requires them to do. I am very pleased to have the opportunity of giving the House a further chance to make its views absolutely clear.

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We return to the question of whether the law should require pensioners to have converted all their pension saving into a lifetime annuity by the time they reach 75. The Finance Act 2004 outlines the law; namely, that pension income has to be taken before someone’s 75th birthday, either as an annuity—a secured pension—or as an alternatively secured pension.

I recall that the upper age of 70 was set in the Finance Act 1970. In 1976 this was increased to age 75 for retirement annuities. When personal pensions were introduced by my noble friend Lord Fowler, the age limit was retained. I look forward very much to any contribution he may make on this very important subject.

This is now important for three reasons: first, the growing acceptance of increases in longevity and the implications for pensions in the United Kingdom. I have been looking carefully at the tables, to which I referred in the previous debate. It is remarkable how 75 is viewed as relatively young. That is borne out by the figures. In 1981, life expectancy at the age of 65 for males was 14 and 18 for females. Life expectancy at the age of 75 was 8.1 for males and 10.7 for females. These figures have increased, so far as present tables are concerned, to life expectancy at age 65 of 19.5 for males and 22.2 for females. At age 75, it has increased for males to 11.4 and for females to 13.1. In 2050, it will increase at age 65 to 23.6 for males and 25.9 for females. It is foreseen that, at age 75, life expectancy will be 15.2 for males and 16.9 for females. One can well understand therefore why this is a key issue to consider.

The second reason is that future increases to state pension age have been agreed by legislation; namely, the Pensions Act 2007. Thirdly, there has been a rise in the minimum age at which someone can take pension benefits, from 50 to 55 by 2010.

There was a good debate on this matter some four years ago, when I recall the noble Lord, Lord Oakeshott of Seagrove Bay, being moved to say that,

It is obviously that the persuasiveness of my noble friend Lord Higgins had quite a dramatic effect, because we will hear later in this debate whether the noble Lord was overcome by the cogency of my noble friend’s arguments to make that clear statement and whether he still holds to it. My persuasive powers may not be as great as those of my noble friend, but we wait to see.

Amendment No. 128 would set up a retirement income fund, so that there would be enough money to ensure an annual income above a minimum set by the Chancellor in Amendment No. 127. That level of income would ensure that the individual would not have recourse to the state and not be eligible for benefits such as pension credit. Amendments Nos. 129 and 140 are consequential.

I suppose that we could look at a number of alternatives. The first is the simplest: to remove the age limit of 75 all together, which is what the amendments propose. I suppose that we could go down more complicated routes. For example, we could agree to increase the age of 75 by a year every two years, which was argued with me by the president of the Institute of

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Actuaries at a recent dinner that I attended as an honorary fellow. That is an understandable suggestion that would lead in the right direction but would be an alternative method. I suppose that we could also increase the age of 75 by the same increases as the state pension age, or we could just increase the age of 75 in accordance with increasing longevity.

However, I am seeking in these amendments to apply the simplest approach; namely, to abolish the limit all together. I shall just indicate why I argue that case. First, I concede that annuitisation has its merits. Earlier in this debate, I made reference to my entries in the register of interests, where it is clear that I have for many years been involved in the insurance industry. I know that the industry regards annuitisation as a simple and secure way in which to maintain a certain level of income in retirement. Therefore, there is credence in having that as an option—but it should be a choice for the individual, who should be able to make up their mind whether they want to go down the road of annuitisation. However, we must safeguard the interests of the taxpayer by making sure that an individual cannot be reckless with regard to the pension pot.

There are already exemptions for the Christian Brethren. I referred in the debate last year—as did my noble friend in the debate four years ago—to the fact that the Christian Brethren, all 738 of them, had secured recognition of the fact that they objected to the pooling of mortality risk. We have asked on a number of occasions what the present situation was in that regard, and whether the Minister was minded to accept that others will have the same objection, on non-religious grounds. I know that on previous occasions he has said that it is a very dangerous road down which a Minister might travel, because of the problem of avoidance or, indeed, evasion—but primarily avoidance, which is perfectly acceptable but would not be accepted by the Government as an appropriate way in which to deal with this problem.

I would argue, too, that the ownership of the pension pot lies with the person who has saved throughout their lives, often at the expense of their living standards, in order to put aside a substantial sum of money for their retirement. I mentioned earlier that I am proud to be chairman of a body called the Life Trust Foundation, which is now looking at the effects of increasing longevity on the individual’s capacity to cater for those later years. Adding quality life to years of life is a theme that has to be considered. More people are now turning their minds to how on earth we are going to provide for the fact that we will all live very much longer.

The latest figures, some of which I referred to earlier, are quite remarkable. The Office for National Statistics and the Government Actuary’s Department’s figures predict that the cohort life expectancy for those aged 65 at present is projected to be 20.6 years for males and 23.1 years for females. That is an extensive period of time. Not only does it demonstrate that we are out of date in keeping to the limit of 75, but we should also be finding simpler and easier ways in which to enable people to save to cover their later years. That is a growing problem. The Life Trust Foundation has recently said that it is a bigger problem

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than climate change—the fact that so many people are living so much longer without really having had the opportunity to ensure that they have the necessary funds to maintain them in their old age.

My final point is that these amendments would re-establish individual control over a pension pot for the person who has done so much to save that sum. Of course, we are talking about a market which is expanding rapidly. The ABI estimates that the UK pension annuities market has tripled in size in the past 15 years.

Last year, premiums in the pension annuities market were over £11,000 million, and more than 400,000 contracts were sold, many to people who do not have very substantial sums and who need what I would give them in these amendments; namely, choice, freedom and the right to their property. I beg to move.

Lord Skelmersdale: My name is coupled with that of my noble friend Lord Hunt of Wirral on these amendments. I congratulate him on putting down this series of amendments yet again. Compulsory annuities at age 75 is one of those subjects which has developed into a campaign in this House. I first observed it when, as my noble friend Lord Hunt reminded us, my noble friend Lord Higgins moved an amendment to the then Pensions Bill in 2004.

A noble Lord: Oh!

Lord Skelmersdale: It is true; I first observed it then. Since then the issue has arisen from time to time, not least in last year’s Pensions Bill. Make no mistake about it: your Lordships’ campaigns have a habit of getting on to the statute book. One, in particular, is graven on my heart. Over 12 years the late Lord Rugby campaigned vigorously to break the opticians’ monopoly on the sale of reading spectacles. It came to a head when I was a very junior health and social security Minister and was able to put my limited weight behind it. A suitable amendment, moved by the late Lord Winstanley, came to a vote and your Lordships agreed to it—just. The Government in another place confirmed it, and now reading glasses—cheap ones at that—can be bought anywhere. No doubt some noble Lords use them.

That simply would not have happened without the support of the Government of the day; so it is with my noble friend Lord Hunt’s amendments. The Official Opposition, here and in another place, stand four-square behind the abolition of compulsory annuities, which, incidentally, do not exist, so far as I can discover, in any G8 country. It should not be possible for anyone of any age to so run down their savings as to bring them into the benefits culture. In other areas, this is actually illegal. That is why my noble friend has coupled the abolition of compulsory annuities with a retirement income fund in Amendment No. 128, in which the thought I outlined is incorporated in proposed subsection (2)(4). It is noteworthy that the minimum retirement income which must remain in the fund is set by the Chancellor of the Exchequer. So the Government of the day remain in total control, as they do now with compulsory annuitisation.

The Bill means that almost anyone working consistently from the age of 20 to state retirement age could end up with a pension pot of, I believe, around £240,000.

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Thus the Minister’s complaint last time we discussed this—that these amendments will only benefit 3 per cent of the very rich—just does not stand up. Another of his complaints is that a retirement income fund will be left with money in it and will form part of the owner’s estate when he dies, and that, unlike the rest of his estate, it should not be capable of being shared between his survivors and anyone else to whom he wills his residuary estate.

We should not forget that pensions have two foundations: personal savings, which under this Bill are at least 3 per cent of the employee’s annual income, and the employer’s minimum 4 per cent, which is deferred wages. Both belong to the individual, just as much as his house or the value of his ISAs or other savings. Why should they not be passed on in his will to whomever he wishes? Is not this a basic human right? It is most certainly a basic human need.

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