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The losers on this are going to be people in their 70s. I much regret that, and it is on the conscience of the Liberal Democrats that they have done that. The noble Lord, Lord Oakeshott, referred to tactics. I fear that his tactics this afternoon have not been very bright and the losers are a number of pensioners and people coming up to pension age. I very much regret that.
27 Oct 2008 : Column 1413
Baroness Greengross: My Lords, I support the amendment. I hope that the Government and the Minister will agree to reconsider this in the light of what has been said by the noble Lord, Lord Oakeshott, about increased longevity, which I think the Government and most people in this country underestimate. The change is phenomenal. Since the rules were brought into play, there has been an enormous change in life expectancy. We now have legislation encouraging older people to stay on at work. We have a great deal of encouragement for flexibility in work, in retirement and in increased activity to a much older age than we could have imagined in 1976 or 1986.
In the light of that, it is absolutely essential that the age at which you need to convert savings into an annuity should be looked at again, I hope to as high an age as possible, or removed. It is high time that the Government took these proposals seriously in the spirit in which they are intended. Please look again and see whether something can be done.
Lord MacGregor of Pulham Market: My Lords, I very much regret that I was not able to be present for the earlier debate, owing to a long-standing lunchtime engagement that I had in Norfolk. I would certainly have strongly supported my noble friend Lord Fowler in his proposal.
This proposal is obviously second best, but I wish to support it on the obvious ground of longevity, which the noble Lord, Lord Oakeshott, and the noble Baroness have just mentioned. Clearly, this is changing the whole scene for pension funds in so many ways. There is also another point—if this was raised in the earlier debate, I apologise for repeating it. The Bill is supposed to be about some further encouragement for everyone in pension provision. People have had so much discouragement already with company pension schemes, final salary schemes diminishing and so on. I can think of very few things more likely to discourage them than in the next two years to have a whole crop of media stories about people who had expected to have a pension beyond the age of 75, based on the kind of equity levels that we have had until recent years, who discover that there will be a massive reduction in the pension that they can get from the annuity after the age of 75. That is if the noble Lord, Lord Oakeshott, is right, and I suspect he is, that there will not be a big improvement in the equity situation in the next two or three years. That applies in particular to people over the age of 72 and approaching 75 now. One can just imagine the sob stories that there will be every weekend in the papers about that sort of thing. I ask the Government to look at it again, because it will be yet another discouragement among the many that there have been for people voluntarily to make greater contributions to their pensions themselves.
Lord Howarth of Newport: My Lords, the noble Lord, Lord MacGregor of Pulham Market, has just made a powerful speech adding to the arguments that were put forward in the earlier debate, and I certainly do not intend to repeat any of them. I simply say to the Minister that there will be a not insignificant number of people who, under the present dispensation, will face an appalling crisis in their personal lives. I
27 Oct 2008 : Column 1414
Lord Skelmersdale: My Lords, following on from that point, surely the same happens at whatever age you decide to annuitise; whether 80, 85 or 90. The crunch point can come at any point. The Minister said that, although not quite in those terms, on the last “abolition of annuitising” amendment. You just do not know whether it will come at a particular point for you. It is inevitable that annuity rates and the value of pension pots will vary over time. Who is then to say that annuitisation at any particular age will be appropriate for a particular individual, or even in general? It is only if you believe, and I have said that I do not, that there should be an age by which you have to annuitise your pension pot that you can argue for or against a particular age. I am not in that position, seductive though it might be—it clearly is on both sides of the House—to some noble Lords.
I do not know whether it will be of any comfort to those noble Lords, but in all the discussions that we have had I have never heard anyone say that 75 is 10 years after the current state pension age. Only the Minister can tell us whether that was the Treasury’s original intention. If so, do the Government intend to compound their error of keeping to a specific age when state pension age for men and women increases to 66 in 2024, 67 in 2034 and 68 in 2044? Each rise will be phased in over two years. In other words, do the Government intend as a long-term expedient to have compulsory annuities when people are 76, 77 or 78? Perhaps the noble Lord could help the House by telling us.
Lord McKenzie of Luton: My Lords, this has been a shorter debate, and I seek not to reiterate all the points that I made when discussing the proposed temporary suspension of the age 75 “annuitisation requirement”.
I say to the noble Baroness, Lady Greengross, that of course the Government keep this under review, and we will continue to do so, although we are not in a position tonight to accept either of the amendments in this group. It is interesting that there is a difference of view. The noble Lords, Lord Fowler and Lord Skelmersdale, said that they did not want any age by which you have to annuitise. I am not sure whether that translated to them not wanting any age at all at which some form of crystallisation of income stream must take place. If that is their proposition, they have not said anything about the inheritance tax consequences.
Lord Skelmersdale: My Lords, the noble Lord has misunderstood that part of the argument. No one is suggesting that annuities should be made illegal. Of course, annuities will continue in one form or another. What the noble Lord, Lord Fowler, I hope, and I have sought to persuade the House of is the abolition of compulsion.
Lord McKenzie of Luton: My Lords, I understood that point, but if there is no requirement to crystallise some form of income flow from the pension pot at any
27 Oct 2008 : Column 1415
Lord Skelmersdale: My Lords, I would love to. Both last year and this year, the amendments in question have taken it on board that the tax regime would change. It is for the Government to produce the tax regime, not the Opposition.
Lord McKenzie of Luton: My Lords, it is interesting if that is implicit, or perhaps now explicit, in the Opposition’s proposal. It certainly was not so in relation to the RRIF, which is one variation of achieving what the noble Lords want. More specifically on the amendments, I will go over the issues around tax relief, because pension savings receive significant tax relief—some £18.9 billion in 2007-08. By the time an individual retires, it is very possible that well over half their fund may be made up of tax relief. In exchange for this, it is not unreasonable that pension savings are used to provide an income in retirement. Tax relief is given so that people do not have to fall back on means-tested benefits and to encourage pensioners to save for a reasonable income in later life. Increasing the age at which income must be paid would mean that a minority of people would be able to use tax-relief pension savings to benefit their heirs, at a cost to the Exchequer. That would devalue the reason for which tax relief is given.
7 pm
Amendments Nos. 77 and 77A would increase the age at which an individual must begin to receive a retirement income. I stress that that is not compulsory annuitisation. I can appreciate that having an age-related requirement raises questions about its continuing applicability over time. However, I assure the House that the Government are committed to monitoring the available evidence around this requirement.
While it is an undeniable fact that general longevity has been increasing, the latest evidence available shows that at present only 5 per cent of people have taken a retirement income after the age of 70. For 19 out of 20 people, taking a secure income from pension savings happens by the age of 70; they do not even wait until 75. Moreover, despite increasing longevity, evidence shows there has been little change to the age of retirement. In fact, figures from the Office for National Statistics show that the average retirement age has increased by about only one year since 1984. Therefore there is no “cliff edge” at 75 for the majority of people. They generally take the income from their pension savings when they need it—when they retire in their early or mid-60s.
On the question of why the age of 75 continues to be appropriate, there is the issue of the age at which most people retire. The average retirement age is 63.8 years.
27 Oct 2008 : Column 1416
Overall, the evidence suggests that raising the age would be of no benefit to the vast majority of people who use their pension savings for the intended purpose—providing an income in retirement. Those with other sources of income who wish to leave their pension invested can do so through an alternatively secured pension. Therefore it would seem that such changes would benefit only those who seek to delay securing an income in an attempt to avoid tax charges on death. This is neither the purpose nor the intention of pension savings, and that would be of benefit only to those who had no need of their pension savings to provide an income in retirement.
As I said, we are committed to monitoring the available evidence and will consider a review of the age limit if that appears justified. That is the commitment I can give, but I cannot go beyond that. On that basis, I hope that noble Lords will not press their amendments.
Lord Oakeshott of Seagrove Bay: My Lords, that response was disappointing and I am bound to say that I did not see the significance of the arguments that the Minister used at the end of his speech— that most people have already started taking the income before the age of 75 and that that is their choice. However, that is not the reason for saying that 75 is the right age for compulsory annuitisation. Secondly, he said that because returns are unrealistic for people beyond the age of 75, it was right therefore for annuitisation to be compulsory. The whole point is that if people do not like the returns, they will obviously not take them; however, I do not see why that is an argument that 75 is the right age.
I thank noble Lords who have spoken, particularly those who supported the amendment, including the noble Baroness, Lady Greengross, and the noble Lords, Lord MacGregor and Lord Howarth. I should say to the noble Lord, Lord Fowler, in clarification of the substance of my argument, that I tried to reach compromise on an amendment on which the Government could have been beaten. I congratulate him on his ingenuity in working his temporary amendment—if I may refer to it that way—into the Bill rather earlier than otherwise would have been the case. I should be clear that we on these Benches were happy to combine and support the amendment of the noble Lord, Lord Fowler, on an age limit of 80. The Question would have been put in prime time if the Conservatives had not chosen, for their own reasons, to move another amendment, which they perfectly well knew we would not support. Let us not have any nonsense about whether the Government could or could not have been beaten today. They could have been beaten on the amendment of the noble Lord, Lord Fowler, which we were happy to support, to raise the age to 80—which we are now talking about. Let us not have any disinformation on that point. We were quite happy to give our support; we offered to do that and were rejected.
27 Oct 2008 : Column 1417
Let me make it clear that we do not support a temporary change because that would be completely unworkable; I am unaware of any serious pension provider or anyone else who has examined such a proposal and said that it would work. It would create more uncertainty and instability in a very unstable situation. That is why we were unable to support such a proposal, but we believe that the age of compulsory annuitisation should be raised. Ideally, we would like it to be raised to 85 and we wish to test the opinion of the House.
7.06 pm
On Question, Whether the said amendment (No. 77) shall be agreed to?
Their Lordships divided: Contents, 46; Not-Contents, 99.
Addington, L. [Teller]
Alderdice, L.
Barker, B.
Best, L.
Bonham-Carter of Yarnbury, B.
Bradshaw, L.
Clement-Jones, L.
Cotter, L.
Craigavon, V.
Crisp, L.
Dear, L.
Dykes, L.
Falkland, V.
Falkner of Margravine, B.
Fearn, L.
Garden of Frognal, B.
Hamwee, B.
Kirkwood of Kirkhope, L.
Lee of Trafford, L. [Teller]
Ludford, B.
McNally, L.
Maddock, B.
Mar and Kellie, E.
Neuberger, B.
Northover, B.
Oakeshott of Seagrove Bay, L.
O'Neill of Bengarve, B.
Patel, L.
Ramsbotham, L.
Razzall, L.
Redesdale, L.
Rennard, L.
Roberts of Llandudno, L.
Rogan, L.
Rowe-Beddoe, L.
Sharp of Guildford, B.
Shutt of Greetland, L.
Smith of Clifton, L.
Thomas of Gresford, L.
Thomas of Winchester, B.
Tonge, B.
Tordoff, L.
Tyler, L.
Walmsley, B.
Walpole, L.
Williamson of Horton, L.
Adams of Craigielea, B.
Adonis, L.
Ahmed, L.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Bassam of Brighton, L. [Teller]
Bernstein of Craigweil, L.
Bilston, L.
Borrie, L.
Boyd of Duncansby, L.
Bradley, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Campbell-Savours, L.
Carter of Barnes, L.
Carter of Coles, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Corbett of Castle Vale, L.
Davidson of Glen Clova, L.
Davies of Oldham, L. [Teller]
Dixon, L.
D'Souza, B.
Dubs, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Gordon of Strathblane, L.
Goudie, B.
Graham of Edmonton, L.
Grantchester, L.
Grocott, L.
Harris of Haringey, L.
Hart of Chilton, L.
Haworth, L.
Henig, B.
Hilton of Eggardon, B.
Howie of Troon, L.
27 Oct 2008 : Column 1418
Hughes of Woodside, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Kirkhill, L.
Lea of Crondall, L.
Leitch, L.
Lofthouse of Pontefract, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Moonie, L.
Morgan, L.
Morgan of Drefelin, B.
O'Neill of Clackmannan, L.
Patel of Bradford, L.
Pendry, L.
Pitkeathley, B.
Prosser, B.
Prys-Davies, L.
Radice, L.
Richard, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Sewel, L.
Simon, V.
Smith of Finsbury, L.
Snape, L.
Soley, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Thornton, B.
Triesman, L.
Tunnicliffe, L.
Wall of New Barnet, B.
Warner, L.
Warwick of Undercliffe, B.
West of Spithead, L.
Whitaker, B.
Woolmer of Leeds, L.
Young of Norwood Green, L.
Resolved in the negative, and amendment disagreed to accordingly.
7.17 pm
Lord Fowler moved Amendment No. 77A:
77A: Before Clause 123, insert the following new Clause—
“Amendment of pensions annuities rule
Any statutory provision or rule of law requiring a pension to be taken in the form of an annuity by the age of 75 is amended so that the age limit is 80.”
The noble Lord said: My Lords, I shall be very brief because I think we all know where we now stand on annuities. As I said, my preferred option was the suspension of the compulsory annuity rule. The Government voted that down with the help of the Liberal Democrats and I deeply regret that. We missed an opportunity to change the pension position of this country and I think that we will live to regret it.
However, raising the age limit to 80 is an option. Given the result of the Division that we have just had, I am not unbelievably optimistic but I think that it is a better option than an age limit of 85. It has some of the characteristics of the suspension; it would serve the interests of people who are coming up to the age where they take an annuity; and I think it would protect their interests. I therefore commend the proposal to the House. I beg to move.
7.18 pm
On Question, Whether the said Motion (No. 77A) shall be agreed to?
Their Lordships divided: Contents, 50; Not-Contents, 89.
Addington, L.
Alderdice, L.
Barker, B.
Bonham-Carter of Yarnbury, B.
Bradshaw, L.
27 Oct 2008 : Column 1419
Cotter, L.
Craigavon, V.
Crickhowell, L.
Crisp, L.
D'Souza, B.
Dykes, L.
Falkner of Margravine, B.
Fowler, L.
Garden of Frognal, B.
Geddes, L.
Greengross, B.
Griffiths of Fforestfach, L.
Hamwee, B.
Kirkwood of Kirkhope, L.
Lee of Trafford, L.
Lucas, L.
MacGregor of Pulham Market, L. [Teller]
McNally, L.
Maddock, B.
Mar and Kellie, E.
Masham of Ilton, B.
Monson, L.
Neuberger, B.
Northbrook, L. [Teller]
Oakeshott of Seagrove Bay, L.
O'Neill of Bengarve, B.
Patel, L.
Ramsbotham, L.
Razzall, L.
Redesdale, L.
Rennard, L.
Roberts of Llandudno, L.
Rogan, L.
Sharp of Guildford, B.
Sheikh, L.
Shutt of Greetland, L.
Thomas of Gresford, L.
Thomas of Winchester, B.
Tonge, B.
Tordoff, L.
Tyler, L.
Ullswater, V.
Walpole, L.
Williamson of Horton, L.
Adams of Craigielea, B.
Adonis, L.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Barnett, L.
Bassam of Brighton, L. [Teller]
Bernstein of Craigweil, L.
Bilston, L.
Borrie, L.
Boyd of Duncansby, L.
Bradley, L.
Brennan, L.
Brooke of Alverthorpe, L.
Campbell-Savours, L.
Carter of Barnes, L.
Carter of Coles, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Davidson of Glen Clova, L.
Davies of Oldham, L.
Dixon, L.
Dubs, L.
Evans of Parkside, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Gordon of Strathblane, L.
Goudie, B.
Graham of Edmonton, L.
Grantchester, L.
Grocott, L.
Harris of Haringey, L.
Haworth, L.
Henig, B.
Hilton of Eggardon, B.
Howells of St. Davids, B.
Hoyle, L.
Hughes of Woodside, L.
Hunt of Chesterton, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Kirkhill, L.
Lea of Crondall, L.
Leitch, L.
Lofthouse of Pontefract, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Maxton, L.
Meacher, B.
Moonie, L.
Morgan, L.
Morgan of Drefelin, B.
O'Neill of Clackmannan, L.
Patel of Bradford, L. [Teller]
Pendry, L.
Pitkeathley, B.
Prosser, B.
Richard, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Sewel, L.
Sheldon, L.
Simon, V.
Snape, L.
Soley, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Thornton, B.
Triesman, L.
Tunnicliffe, L.
Wall of New Barnet, B.
Warner, L.
Warwick of Undercliffe, B.
West of Spithead, L.
Whitaker, B.
Young of Norwood Green, L.
Resolved in the negative, and Motion disagreed to accordingly.
27 Oct 2008 : Column 1420
7.30 pm
Lord Skelmersdale moved Amendment No. 77B:
77B: Before Clause 123, insert the following new Clause—
“Disclosure in the public interest
In section 87 of the Pensions Act 2004 (c. 35) (other permitted disclosures), insert at the end of subsection (2)—
“(i) if, and to the extent that, having regard to the rights, freedoms and legitimate interests of any person, the disclosure is necessary in the public interest.”
The noble Lord said: My Lords, this is a slightly strange amendment for the Bill. Over the summer, my eye was caught by an article that appeared in Professional Pensions headed:
“TPR removes authority for 29 schemes from GP Noble”.
The article stated that the schemes were under the control of Nottingham-based GP Noble, but are now under the trusteeship of Independent Trustee Services. Official Pensions Regulator documents confirm this fact.
A spokeswoman for the regulator quite rightly declined to comment on individual cases, as this is restricted information under the Pensions Act 2004. That is a correct interpretation of Section 82 of the Act, which makes it quite clear that restricted information must not be disclosed,
- “by the Regulator, or ... by any person who receives the information directly or indirectly from the Regulator”.
However, although disclosures are allowed under Sections 84 to 87, nowhere, as far as I can see, does the Act say that, if the press discovers that the regulator is working on a case or has decided to pursue a particular course of action, that information is restricted.
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