Pension Annuities (Amendment) Bill

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Ruth Kelly: I beg to move amendment No. 26, in page 2, line 43, leave out ''annually'' and insert ''for each financial year''.

The Chairman: With this it will be convenient to take the following amendments: No. 27, in page 2, line 44, after 'order', insert 'before 31st January in the preceding financial year'.

No.28, in page 3, line 2, at end insert—

    '(2) An order under this section shall be made by statutory instrument and shall be subject to annulment in pursuance of a resolution of either House of Parliament'.

Ruth Kelly: The amendments are designed to be helpful. Clause 2 requires the minimum retirement

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income to be set by the Chancellor of the Exchequer, by order. For the financial year in which the Act comes into force, the order must be made within two months of the date on which it is passed. In subsequent years, the order must be made annually.

The ongoing rule is inadequate, leaving uncertain the timing of future orders and the period for which they will have effect. Amendments Nos. 26 and 27 remove that uncertainty and ensure that the provision is workable. They make it clear that the minimum retirement income will be set to apply for each financial year and that the order setting the income level must be made before 31 January of the preceding financial year.

The Bill gives the Chancellor an unfettered power to set the minimum retirement income at any level that he chooses. One might assume that that power would be used reasonably by future Chancellors, but of course one can never be sure of that. Such a power should therefore be subject to parliamentary scrutiny. Amendment No. 28 provides that the order be made by statutory instrument subject to annulment by resolution of either House of Parliament.

Amendment agreed to.

Amendments made: No. 27, in page 2, line 44, after ''order'', insert—

    ''before 31st January in the preceding financial year''.

No. 28, in page 3, line 2, at end insert—

    ''(2) An order under this section shall be made by statutory instrument and shall be subject to annulment in pursuance of a resolution of either House of Parliament''.—[Ruth Kelly.]

Clause 2, as amended, ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

New clause 1

Application of Act

    ''(1) Subject to subsection (2), this Act shall apply only where an individual becomes a member of a personal pension scheme after the date on which this Act is passed.

    (2) Any individual who was a member of a personal pension scheme before the date on which this Act is passed may elect for his membership of the scheme to be governed in accordance with this Act.''.—[Mr. Flight.]

Brought up, and read the First time.

Mr. Flight: I beg to move, That the clause be read a Second time.

New clause 1, in essence, provides that someone who is already a member of a money purchase pension scheme at the time when the Bill becomes an Act should have the option of remaining under the existing rules pertaining to that scheme or coming under the new arrangements. If they were not already a member of such a scheme, they would be bound by the new arrangements.

The underlying principle is the point made on Second Reading, to which I alluded on amendment No. 30. We would not want to place people in a position that could be less to their benefit than remaining under existing law, especially when they had been saving up in a pension scheme. It is clearly wrong to change the rules when people are already on

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track with their pension saving. That relates in particular to the point already made about those who might have to use a considerable part of their money purchase saving pot to buy the retirement income annuity. For safety, that shall have to be inflation-linked for the future, as has been prescribed. Many people might want to buy a fixed-rate annuity for the higher running yield that that gives. That could be potentially unfair. The correct approach is to give people who are on track the right to stay under the present arrangements and to make the new arrangements apply on an obligatory basis only to those who join a pension scheme after this law has changed.

Ruth Kelly: I understand the motivation behind the hon. Gentleman's new clause and I do not think that it would add significantly to the costs of the Bill. It would, however, add a new layer of complexity and red tape to the system of taxation and pensions, which the Government are incredibly keen to simplify. We recognise that pension tax rules, which are now difficult to understand or operate, have increased over the years.

A number of different tax-approved pension vehicles recognise the different employment circumstances from which pensions can arise. They give employers and employees flexibility and choices on pension provision. As changes have occurred, some schemes have been closed to new members, but as long as existing members continue to draw benefits from them, the tax system needs to continue to recognise and lay out rules for each one. That protects members' entitlements, as well as maintaining the integrity of the tax system. As the hon. Gentleman will be aware, that has given rise to great complexity in the existing system. I have already spoken about the different exercises with which the Government are involved to reduce that level of complexity to make the system as transparent and simple as possible.

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I therefore believe that the hon. Gentleman's amendment would move us in the opposite direction by introducing a new tier of regulation and complexity. For those reasons, I resist his amendment.

Question put and negatived.

9.45 am

The Chairman: I will now put the question that the Committee do report the Bill, as amended, to the House.

Mr. Curry: I want to thank you for the way in which you have chaired the Committee, Mr. Stevenson. It has turned out to be shorter than we feared. I also thank the Minister for the good humour that she has brought to the discussion, which is enormously important and is going to get much bigger. I hope that the Bill will be a little pebble in the Government's shoe that makes them realise that something must be done.

The Chairman: Order. That is kind. There are pebbles in shoes and there are grits in oysters. I thank members of the Committee and everyone who has supported it; it has been a pleasure.

Question put, That the Chairman do report the Bill, as amended, to the House:—

The Committee divided: Ayes 5, Noes 2.

Division No. 8]

AYES
Curry, Mr. David Drew, Mr. David Flight, Mr. Howard
Jones, Lynne Quinn, Lawrie

NOES
Kelly, Ruth
Ryan, Joan

Question accordingly agreed to.

Bill, as amended, to be reported.

Committee rose at thirteen minutes to Ten o'clock.

The following Members attended the Committee:
Stevenson, Mr. George (Chairman)
Curry, Mr.
Drew, Mr.
Flight, Mr.
Jones, Lynne
Kelly, Ruth
Quinn, Lawrie
Ryan, Joan

 
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Prepared 28 February 2002