Retirement Income Reform Bill

Part of the debate – in the House of Commons at 10:04 am on 7 March 2003.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon 10:04, 7 March 2003

I am sure that my hon. Friend makes his point exceedingly well, and if he catches your eye, Mr. Deputy Speaker, he will be able to develop those thoughts at length.

It would be regrettable if the Bill were to reach Committee stage because it requires so much heavy engineering that it would make the railways pale into insignificance. [Interruption.] I thought that that would wake up the hon. and learned Member for Harborough. The Bill is so flawed that if it reaches Committee, it will never come out again. The Inland Revenue proposals and the Department for Work and Pensions document "Modernising Annuities" will make it necessary to table so many amendments that it will take for ever to deal with them all.

For the purposes of the debate, I made an assumption earlier about multiple policies, but the Bill is entirely silent on the subject. At the last count, I had four private pension plans. The last time that we debated this matter, Mr. Greenway said that he had 11 pension plans. We do not know whether we would have to put all our policies into the system proposed by the Bill or whether we could pick and choose. I can see that there would be many cunning tax-avoidance schemes—I could put one policy in the system but withhold the others to maintain my annuities. There could be all sorts of juggling as people bought different policies, which would not be sensible. If the Bill reaches Committee, I urge the hon. and learned Member for Harborough to consider how multiple policies ought to be dealt with.

I urge the hon. and learned Gentleman to consider transitional arrangements because, as far as I can see, there are none in the Bill. It will straddle the introduction of pension credit and the continuing growth of stakeholder pensioners, so there is inevitably potential for loopholes to be created. There is also the problem of people's existing policies. It is incumbent on the hon. and learned. Gentleman to tell everyone with a pension policy where they stand and whether their policy will have to be changed. On the other hand, he may wish to introduce transitional arrangements, in which case the Bill would apply only to pension funds to which people sign up from next year or the year after, giving them time to adjust. Perhaps the hon. and learned Gentleman intends to introduce retrospective legislation, of which the House has almost always fought shy. I think that there have only been two pieces of retrospective legislation—I can remember the name of one but not the other.

Regrettably, the hon. and learned Gentleman has failed to examine the security of investments. The Bill refers to schedule 10 of the Insurance Companies Regulations 1994, which specifies permitted investments. However, those investments could be risky. We have already discussed certain aspects of investment, and annuities are generally secured against gilts. Schedule 10, which could be used to liberalise the investment regime, may go too far the other way, so I urge the hon. and learned Gentleman to consider restricting his implementation of that provision. That matter is very serious. We have seen, for example in Equitable Life, what happens when projected returns from investment are too high. We have seen the problems that arise when pension funds rely too much on equities, and we have read in the financial pages of the Sunday papers about scandals. However, the hon. and learned Gentleman's proposal, instead of providing more security of investment, provides less. He is in favour of a wild west form of annuity, not the security that people want for their retirement.

As I draw my remarks, regrettably, to a close, I shall return to the hon. and learned Gentleman's press release, in which he sets out what he hopes to achieve in his Bill:

"I have tried to design a Bill whose principles are simple to understand and which is free of unnecessary technicalities or detail . . . Whilst it does not cure all the problems faced by pensioners it goes some way to offering practical assistance."

I have demonstrated that the Bill achieves none of that. It is not easy to understand—although there is nothing in the Bill to understand—and is riddled with Henry VIII clauses. Definitions and figures are entirely absent. From the hon. and learned Gentleman's point of view, it is conveniently free of technicalities and detail, because he has not had to deal with them. However, when one is dealing with such issues one cannot help but get into technicalities and detail.