Pension Provision

Oral Answers to Questions — Work and Pensions – in the House of Commons at 2:30 pm on 15th October 2001.

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Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 2:30 pm, 15th October 2001

If he will make a further statement on the McDonald report into pension provision.

Photo of Alistair Darling Alistair Darling The Secretary of State for Work and Pensions

As I told the hon. Gentleman when he asked a similar question on 25 June, we shall continue to discuss with interested parties and with him, no doubt, whether it is possible to devise workable and affordable alternatives to the annuity purchase requirement.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

As the House will be aware, the Government have stalled for three years on considering stopping people having to buy annuities by the age of 75. The argument that the Secretary of State made previously involved concerns for tax revenues, but there is a meeting, of which he will be aware, between the Treasury and the Retirement Income Reform Group on Wednesday. If the Treasury's fears are allayed, will he confirm that the Government will move ahead in earnest and before retiring pensioners suffer further damage? My concern is that the real policy may be that which the Minister for Pensions commented on to the Trades Union Congress this summer.

Photo of Alistair Darling Alistair Darling The Secretary of State for Work and Pensions

I am aware that a meeting is taking place, but the problem with which the hon. Gentleman must come to terms is that the majority of people in this country have only a small sum with which to purchase their pension pot—about £30,000 on average. We must think long and hard about changing from the present system to a new one that might benefit a few people, but which might disadvantage the majority. None of us wants that, and I make a point that bears repetition.

Some people face difficulty because of increased longevity and because interest rates are generally lower. On the other hand, annuity rates vary substantially and I repeat what the Government have said previously: many people would be well advised to seek the best offer on retirement, because the current difference—between 5 per cent. at the lower end and 12 per cent. at the top end—is dramatic.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

Does the Secretary of State know of the other proposals on annuities provision such as those from the Tenon group? Does he agree that if such proposals are shown to be workable and if they would not result in loss of revenue to the Treasury, the Government should implement them as swiftly as possible?

Photo of Alistair Darling Alistair Darling The Secretary of State for Work and Pensions

It is certainly true that if someone proposed a much better scheme that cost no more and gave pensioners lots more money, most Governments would consider it. I am aware of the latest proposals—indeed, I have received a copy of the letter that set them out—but I repeat the point that I made to Mr. Flight. The current position is that the vast majority of those who are retiring have, on average, £30,000 available to purchase an annuity. Any question of drawing down a lump sum is academic, assuming that they expect to live for a reasonable number of years into retirement.

I am not against change and the Government will consider alternatives if they are better, but we cannot embark on a course of action that might benefit a few people, some of whom are substantially well provided for, at the expense of the majority. I ask my hon. Friend to examine the implications of all those proposals, because, as with so many on the matter, one must ask where they are coming from, exactly what drives the desire to make reforms and who they would benefit.