Clause 1 - Amendment of the Income and Corporation Taxes Act 1988
Pension Annuities (Amendment) Bill
9:00 am
Ms Ruth Kelly (Economic Secretary, HM Treasury; Bolton West, Labour)
I appreciate the spirit in which the right hon. Gentleman asked his questions about the technical nature of the amendments. I understand that they are technical and that their purpose is not to undermine the Bill in any way. It is worthwhile to take
the right hon. Gentleman through some of the detail of the amendments so that he knows exactly their intentions and how they apply.
Clause 1(2)(a) as drafted suggests that the pension scheme will make provision for sums to be invested in the retirement income fund in the same way as for lump sums and annuities. Amendment No. 6 makes it clear that the retirement income fund is a designated part of the pension scheme and that the benefits will include withdrawals from that fund. In that sense, therefore, the amendment is purely technical and clears up a drafting error.
The right hon. Gentleman seems more concerned with amendments Nos. 15 and 16. Amendment No. 15 inserts the words
''Where a member elects to defer the purchase of an annuity such as is mentioned in section 634 he may, for such period as defers the purchase, designate part of the personal pension fund as a Retirement Income Fund under this section.''
I realise that this is getting very technical, but clearly, this is the right hon. Gentleman's Bill and he is interested in the amendments. The purpose of the amendment is to make it clear that the retirement income fund is part of the personal pension fund and that that fund will last only for the period permitted by the income withdrawal rule. The obvious consideration is whether we should have that rule under the Bill. Later on, I shall argue that it should still apply. I imagine that we will differ on the question of its re-insertion when we debate that part of the Bill.
Clause 1(7) inserts a new provision, section 637B, into the Income and Corporation Taxes Act 1988. The definition of the retirement income fund is inadequate as drafted because it implies that the fund is somehow separate from the personal pension fund. However, there is no proposal to amend section 633, which concerns the scope of benefits for a personal pension scheme, to include payments into a retirement income fund and amendment No. 15 removes any ambiguity by making it clear that the retirement income fund remains a designated part of the pension fund.
That leads on to amendment No. 16 and the right hon. Gentleman's concerns about the framework for protection of his proposed retirement income fund. Amendment No. 16 is consequential on amendment No. 15, which inserts a new provision into section 637B of the 1998 Act. Amendment No. 15 defines the retirement income fund and specifies that it must be established by a person designated under section 632(1) of the Act. With regard to a designated person, because the retirement income fund is now considered to be a designated part of the personal pension fund, it must be established in accordance with the general framework of the personal pension fund. Therefore, the amendment would not have an effect on investor protection.