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Lord Higgins: My Lords, as I am trying to explain, that is not what we are doing in the amendment that has been returned by the Commons. More particularly, it is certainly not applicable to the amendment that we are now discussing.
When we discussed the original amendment, which has now been returned, I distinguished between whether there should be a requirement to take an annuity and whether it should be compulsory to take it at the age of 75. I have put forward the arguments in the Watson Wyatt report and I do not in any way retract from what I said, despite the remarks made by the noble Baroness. From that report, it is very clear that 58.8 per cent would prefer not to take it as annuity at all and 12.1 per cent would prefer to take it later.
That side of the argument raises all kinds of issues which we have been discussing. I understand that the Commons are not prepared to accept it. For that reason, I have tabled an amendment on the second leg of the argument; namely, that instead of being compelled to take it at age 75, they should be able to take it up to the age of 85. It will be clear to your Lordships that that is a compromise. It is not what I want, as I would have preferred the original amendment. None the less, it deals with substantial problems that arise in relation to the present arrangement.
Many people object to the fact that they are required to take an annuity at a particular moment in time. Instead of being able to exercise their discretion about whether to take it at a certain point or later, when they may believe that annuity rates will go up, they are prevented from doing so. That particularly concerns those approaching the age of 75 at the moment. I regret to tell your Lordships that I am not in that category.
6.45 p.m.
The important point is that life expectancy has undoubtedly risen. That is not in dispute. It is interesting to look at the history of the matter. As far as we can establish, the argument for taking one's pension pot in the form of an annuity dates back as far as 1921. In 1956, the age of 70 was established. Very interestingly, in 1976, only 20 years later, it was raised from 70 to 75. It is a long time since 1976, a longer time than elapsed before the previous increase. It seems not unreasonable to suggest that the time has come for the age to be raised to 80. That would mean that many people would have discretion to delay taking their annuity, if they wished to do so.
I shall make one point absolutely clear. The original amendment is established Conservative policy, and we shall bring it in as soon as we come into office—I
believe in a comparatively short time. That is our clear position, and that is what we want to go for. None the less, there is a case for raising the limit now to help those approaching 75, and the amendment would do that.On life expectancy, the noble Baroness referred to a letter, a copy of which the noble Lord, Lord Oakeshott, was courteous enough to send to me. As the noble Baroness has pointed out, he also sent a copy to the press and she did not have an opportunity to make it clear whether she had or had not misled the House, as the noble Lord suggested. That was unfortunate. It was not in line with the way in which we would normally behave in this House. It would have been better if the noble Lord had waited for a reply before going public on the issue. The argument that the noble Baroness has put forward this evening for why she quoted the figure, and why she does not believe it was misleading, is very technical. We wait to see what point the noble Lord, Lord Oakeshott, makes in response to what she has said. What is beyond doubt is that life expectancy has risen, which strongly supports the Motion that I am moving as a response to the Commons rejection of the amendment that we originally proposed in another place.
I have a couple more points. First, the noble Baroness says that the amendment will help only the rich. We reject that view. We do not believe that the amendment, or the other one, helps only the rich. Many people, who perhaps have retired, have more than one pension arrangement and have not cashed in—and may not now wish to cash in—their pension pots. However, they are not necessarily well off at all, but they may have kept a little in reserve and want to cash it in when they think that the moment is right. They would be helped by our original amendment, and they would be helped by what I now propose. They are not in any way only the privileged few—a slightly pejorative expression that the noble Baroness has used. A discussion took place in the other place about how many pensions individuals might have, but I shall not go into that issue.
In her closing remarks the noble Baroness said that we had had a marvellous report from Turner. It set out the arguments very clearly, but I do not believe there was much that was new either to the noble Baroness, myself or to many noble Lords. It is inconceivable that Mr Turner could succeed in thinking up any argument on this issue that we have not heard already. I cannot believe that he is so original in his methods of thinking that he would be able to do that. We know all the arguments on the issue. I believe that they support the amendment that I have pleasure in moving. I very much hope that the House will accept it. I beg to move.
Moved, as an amendment to the Motion that the House do not insist on its Amendment No. 359, to which the Commons have disagreed for their reason numbered 359A, at end insert "but do propose Amendment No. 359B in lieu thereof".—(Lord Higgins.)
Lord Oakeshott of Seagrove Bay: My Lords, let me start by making it clear that noble Lords on these
Benches support the amendment. If we had been able to do so, and it were not a Motion which could carry only one signature, we would have put our names to it.I shall return in a moment to the short substantive reasons why we support the amendment. Clearly, in view of the noble Baroness's opening remarks I should say a few words on that topic. I am sorry that I upset her with the points I made and with my questioning on this final area of disagreement after we all agreed that after Third Reading the Bill generally left this House much improved by the efforts on all sides.
I want to make it clear that there is a wide discrepancy between the figures the noble Baroness gave and those in the Turner report. The Turner report says—and I will explain how this came about—that it took the Government Actuary's 2002 base projections as its base case assumptions. It then points out that by 2004 the Government Actuary's department—that is what Turner is talking about; it is not something it has dreamt up—said that life expectancy at 65 would be 14.8 years and that today it is believed to be 19 years. That is what I was basing my figures and my request on.
Obviously, in normal circumstances if we had been in Grand Committee or something like that and there was no time pressure, one would wait. However, as soon as I read the noble Baroness's remarks in Hansard I rang up her private office. I was told what her figures had been based on. In particular, let me point out—and I shall be interested when we get the technical notes; we do not want to go into too much detail today—that office said to me quite clearly that the figures she had given me were based on a 2001 projection of 16 years, even on the basis that she prefers. I said, "Please send me any more information if you can".
However, in the situation we were in, with the matter coming up in the House of Commons in the afternoon, it was exceptionally important that we got our position across and on the record and also that my honourable friend Steve Webb was able to raise the matter.
I listened carefully to the Minister. She said that life expectancy at 65 is now 82. Is it not the case that, even on her own basis, life expectancy is now 17 years and not 16 years? So, obviously to that extent we would welcome a correction.
We support the substance of the amendment. Clearly, the exact level at which one puts the cap depends to some extent on what view one takes of life expectancy. But the principle of a substantial increase on 75 is incontrovertible, whichever life expectancy rate increase one prefers.
I have some sympathy with the arguments expressed both in this and the other House by the Government on the question of who will benefit. It is not only rich people who will benefit. But I think that we should accept that on balance this will be of more benefit to better-off people. That does not mean that just because people are better off they should not be treated fairly and that the rules for them should not reflect major changes in life patterns and life expectancy.
So, even accepting that, we believe that this is a sensible amendment. The time is long overdue, if not for this restriction to be abolished, at least for it to be substantially increased. On that basis, we strongly support the amendment.
Lord MacGregor of Pulham Market: My Lords, I was fascinated by the Minister's concluding paragraphs—if I heard them aright. After spending about nine-tenths of her time explaining why her mind was set absolutely against this proposal, she gave herself a let-out clause—an escape hatch, as it were. She finished by saying that she recognised that this was one of the few elements of compulsion in the pension scene. She recognised all the arguments about life expectancy and longevity and that if the Pensions Commission came back with different arguments in favour of it that she would be prepared to look at that.
Of course, all that was based simply on the increase in life expectancy. We know that already. We do not need to be told that by the Pensions Commission. So I think that the Minister was giving herself a little bit of an escape hatch, but actually we do not need it; we know already.
I want briefly to make three points in support of the amendment. First, the Minister spent some time saying—and certainly she is correct for many people—that over the piece one would have better returns from taking the annuity earlier rather than waiting until a much later age. That is not the point. In many cases that would be true and many people would be advised to do that. But it is not for the Government to say that; it is for individuals to make their own decisions on these matters. There is a question of choice here, to which my noble friend Lord Higgins referred in his speech when winding-up the other day. I entirely agree that it is a very important element in this argument.
Secondly, the Minister talked a great deal about avoiding inheritance tax as a result of raising the age to 85 or removing the requirement altogether. I have to say that in the vast majority of cases the inheritance tax would be 40 per cent on those sums if they were passed on and not consumed during the person's lifetime. So there is a tax taken at the end of the day in return for the tax benefits that are gained from making the contributions to the personal pension in the first place.
Finally, I want to make one point about the current age cut-off. In our last debate the Minister made the point, quite fairly, that interest and annuity rates are lower now. The annuity rates are lower partly in response to low inflation. So, if low inflation continues people are not particularly worse off from having lower interest rates.
That argument is based entirely on the supposition that inflation rates will remain where they are. I challenge anyone to suggest that that will necessarily be true. So what about the situation where somebody aged 73 has to take out an annuity at a very low annuity level because of low interest rates and four years later finds that inflation starts to move ahead substantially again? That would have been a wrong
decision to make, forced by the compulsion of taking an annuity at the age of 75. I think that that is a very good reason for raising the age barrier from 75 to give people the individual choice. That is why I strongly support the amendment.
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