359 Before Clause 229, insert the following new Clause— "Removal of compulsion to take annuities Notwithstanding any statutory provision or rule of law to the contrary, the requirement for pensioners to take their pension in the form of an annuity, together with the requirement to do so by the age of 75, shall cease to have effect, provided that the pensioner can demonstrate that he has resources to ensure that he will not become dependent on means-tested benefits."
359A The Commons disagree to this amendment for the following reason—
Because it would alter the area of taxation, and the Commons do not offer any further reason, trusting that this reason may be deemed sufficient.
359B The Lords do not insist on its Amendment No. 359, to which the Commons have disagreed for their reason numbered 359A, but do propose the following Amendment No. 359B in lieu thereof—
Insert the following new Clause— "Amendment of rules to take pension annuities by the age of 75 Any statutory provision or rule of law requiring a pension to be taken in the form of an annuity by the age of 75 shall be amended so that the age limit is 85."
359C The Commons disagree to this amendment for the following reason—
Because it would alter the area of taxation, and the Commons do not offer any further reason, trusting that this reason may be deemed sufficient.
My Lords, I beg to move that the House do not insist on its Amendment No. 359B to which the Commons have disagreed for their reason numbered 359C.
I shall try to be brief, because I suspect that there are few new arguments left to advance. We are now embarked on a process that we will need to approach carefully and responsibly; if we do not, we will go into further rounds of ping-pong and increase the jeopardy to the Pensions Bill and all the important measures in it. I am sure that no noble Lord wishes to see the Bill go down on the basis of a dispute over an amendment that was never part of the original Bill and is not part of the core arguments behind it.
The amendment concerning the raising of the maximum required age for annuitisation was reversed in the other place for the same reasons as was its predecessor on the previous day. Once again, and inevitably, it was disagreed with because it related to financial matters; it allows a member who defers vesting to continue to make tax-privileged contributions to his pension fund until he draws an income, and it creates a new tax relief by potentially allowing tax-advantaged retirement funds to be returned tax-free on the member's death.
As noble Lords will be well aware, the elected House has now spoken twice. It must therefore be evident that any other such amendment that this House agrees will be reversed on the same grounds, with the future of the whole Bill becoming increasingly precarious with each attempt. The Bill seeks to secure DB schemes both for the Pension Protection Fund and, in the shorter term, to help those who have already lost their pensions through the financial assistance scheme. It is therefore with considerable regret that I see the amendment tabled today.
I shall not repeat all the arguments; I doubt whether it would make much difference to noble Lords' minds at this stage. However, I wish to make three points. First, even were the other place to decide, quite implausibly, to let this type of amendment succeed at the third attempt, we could clearly not simply write it into the Bill at this stage without causing the utmost legislative confusion and uncertainty for those whose best interests we all seek to protect. If there were to be change, that change must be for future legislation.
Secondly, as my right honourable friend in the other place and I have repeatedly stressed, the Government are engaged and focused on this question. Noble Lords and their honourable and right honourable friends in the other place have clearly drawn our attention to the work and the data emerging from the Pensions Commission. We are therefore committed to revisiting the question of annuitisation age, on a careful and urgent basis, once the commission reports. In the light of the debates in your Lordships' House and the range of views expressed, I cannot believe that the commission could possibly overlook the issue. So, again, if there is to be a change, we are indicating the approach route to it.
I shall return to where I started. We are here today not really debating the question of annuitisation at all; we are debating the fate of the Pensions Bill, and the measures, including the key protection measures, for people whose pensions may otherwise be at risk after 20, 30 or 40 years of seeking in good faith to work and secure their pensions. If we prolonged this debate, those measures would be put at risk. For the sake of that Bill and of all those people, I now urge noble Lords to show the humanity, wisdom and possibily even the generosity that I would expect them to exhibit at this stage. I ask the noble Lord not to press the amendment and to allow the Bill finally to pass.
Moved, That the House do not insist on its Amendment No. 359B, to which the Commons have disagreed for their reason numbered 359C.—(Baroness Hollis of Heigham.)
rose to move Amendment No. 359D, as an amendment to the Motion that the House do not insist on its Amendment No. 359B, to which the Commons have disagreed for their reason numbered 359C, at end insert "but do propose Amendment No. 359E in lieu thereof—
359E Insert the following new Clause— "Amendment of rules to take pension annuities by the age of 75
Any statutory provision or rule of law requiring a pension to be taken in the form of an annuity by the age of 75 shall be amended so that the age limit is 80."
My Lords, the noble Baroness has, as far as one can see, rested her argument on the overall situation with regard to the Bill. There is a simple way round that dilemma: the Government should accept the amendment that I have just moved. It is entirely sensible and appropriate in all the circumstances.
The Government have been incredibly determined not to give anything away on the issue. We moved an amendment that was fairly wide-ranging. It had two aspects, as we discussed in earlier debates. We have since narrowed it down to the simple question of age. It will not have the consequences that we would like to see, and we have made it clear that the incoming Conservative government will attend to the matter at an early stage. The arguments have been discussed at length. I was going to say "ad nauseam", but that is merely the feeling that one has as one comes to the end of 90 hours of debate on a Bill.
None the less, the overall question in the original amendment that I proposed should be addressed. We have compromised: we suggested that the age limit should be 85. We are now compromising on our compromise, and it is only the intransigence of the Government that is creating the problem on which the noble Baroness relied almost exclusively in rejecting our amendment.
Naturally, I read with interest the debate in another place. We have discussed the extraordinary position of the Minister of State for Pensions, Mr Malcolm Wicks. In a previous debate, he could not even distinguish whether the figure that was being used in the debate—2,500—referred to the amount of money or the number of people. He got the two mixed up. He was the same yesterday. At the beginning of the debate, when he was seeking to reject the amendment that we are now discussing—Amendment No. 359B—he put forward a series of arguments to the effect that the matter was privileged and that the Commons ought not to agree to it, while relating his remarks to Amendment No. 359A, which was actually the government amendment. It took some while and several interventions, including interventions by the Deputy Speaker, for the Minister to find out where he had got to. His response was:
It was perhaps a little immodest of him to compare himself with presidents of the United States. Also, it was a rather derogatory remark. Clearly, he had not listened to the speech made at the Lord Mayor of London's banquet a few days ago, when the Prime Minister suggested that one ought not to make derogatory remarks about presidents of the United States, in particular Mr Bush. Mr Wicks is pretty much off the party line, not to say generally confused.
The noble Baroness did not repeat the arguments from earlier debates, although, no doubt, she believes that they also cover the issue that we are now discussing. She relied on two things. First, she relied on the very complicated proposal included in the Finance Bill by the Chancellor of the Exchequer that sought to do something to deal with the problem. As I have pointed out, his system is virtually incomprehensible, and the number of people who will take advantage of it is not likely to be great, in the same way as only a limited number of people take up tax credits and so on.
The other point, which the noble Baroness did not make, was that, in any case, the Chancellor's scheme does not come into effect until 2006, so a lot of people who are approaching 75 will not even be able to take advantage of it, whereas they would have been able to take advantage of what we propose. I do not know the reason for the delay; perhaps, no one, including the Chancellor, understands the scheme. Alternatively, it is because of the vested interests of those who will have a protected market for the provision of annuities.
The other argument that the noble Baroness put forward in an attempt to deal with our earlier amendment and, I presume, this one, was that we must wait for Turner. The best way to sum that up would be as a policy of "procrastinate now". Turner does not report until after the general election. The Government are relying on him to suggest a way to sort out the appalling chaos in our pension system, which has resulted from the actions of the Government since 1997.
Why do we suppose that Mr Turner, who presented an admirable summary of the factual situation, is the person best qualified to tell this House or the other place how we ought to reform pensions? It is essentially a matter for politicians. I do not think that waiting for Turner, in that sense, would do anything to help the situation, whereas our amendment would.
The noble Baroness referred to the overall position on the Bill. There is the Pension Protection Fund, which was in the original Bill, and the financial assistance scheme, which was added at a late stage in the Commons. Helpful though such measures are—I do not dispute that—and despite the unfortunate side-effects that the Bill will have, encouraging some employers to abandon final salary schemes, in order to avoid a levy, the PPF and the FAS are sticking plasters on a gaping wound created by the Chancellor's actions, particularly the change in advance corporation tax, which has depleted the resources available to pension schemes by some £25 billion. It is interesting to compare that amount with the £400 million that the Chancellor has put forward for the financial assistance scheme. That sum is almost universally regarded as inadequate. When the scheme is implemented, the protection afforded to those whose pension schemes have already gone bust is likely to turn out to be a bitter disappointment. Taking into account the assets of the various schemes, one need only divide the amount of money by the number of potential beneficiaries over 20 years or so to realise that the amount concerned will not be adequate.
The Minister in the other place sought to argue that the amendment would affect the "area of taxation". I was mistaken the other day in thinking that the reason for which the Commons rejected our original amendment was based on a formula that was not normal. I gather that it is not used as frequently as some of the others but is used on occasion. We ought to consider the matter. The phrase "area of taxation" is much too vague to allow us to distinguish whether the basis on which your Lordships' amendments are rejected is sufficiently precise. At all events, it is not the least bit clear how the proposal will seriously affect taxation.
The trouble is that Mr Wicks seems to have difficulty reading out his brief precisely. That is not something of which I would accuse the noble Baroness. She always reads out her brief very precisely. Not only that, she then explains in her own words very cogently what it actually meant. Mr Wicks, on the other hand, appears incapable of doing either, so it is difficult to understand from the debate in the Commons the exact grounds on which he rejected the amendment and argued that there would be an increase in taxation. We must reject the argument picked up by some parts of the press that it is somehow a tax loophole. It is not. No doubt, the noble Baroness can explain it all to us.
It is appropriate for your Lordships again to take a view on this. As I say, it is a compromise of a compromise. It is only the intransigence of the Treasury—of course, it is the Treasury that is driving these issues, not the Department for Work and Pensions, which is more preoccupied with problems in the Child Support Agency and so forth—that is really at stake. This is a reasonable amendment. I beg to move.
Moved, as an amendment to the Motion that the House do not insist on its Amendment No. 359B, to which the Commons have disagreed for their reason numbered 359C, at end insert "but do propose Amendment No. 359E in lieu thereof".—(Lord Higgins.)
My Lords, we on these Benches support this amendment, which is a reasonable compromise, as we supported the two previous amendments on this topic. The noble Lord, Lord Higgins, has been a very assiduous reader of Hansard. My honourable friend Steve Webb and I work extremely closely on this Bill. As noble Lords can see, he is here now. I was down in the Commons Chamber last night listening.
It is only fair to the noble Baroness to quote Mr Webb, who said:
"It was intriguing to compare and contrast the approaches adopted by the two Ministers: Baroness Hollis gave detailed, careful and thorough arguments, none of which stood up, but they were at least comprehensive; the Minister for Pensions [Mr Wicks] simply said that privilege applied".—[Hansard, Commons, 17/11/04; col. 1434.]
I think that it is useful also to have that on the record in this place.
Let us think back to 1976: I remember it well. I was a special adviser to Roy Jenkins in a Labour government even more distinguished than this one. The noble Baroness will also remember that period well. We both stood in the October 1974 general election. We both narrowly failed to get elected to Parliament. She was 33. I was 27.
That was a generation ago. Even on the measure of life expectancy preferred by the noble Baroness, it has risen by four years since then. Why is it that the age of 75 for compulsory annuitisation is the only age limit in the pensions world that is frozen in 1970s aspic?
As the noble Baroness said, the elected House has spoken twice. Clearly, none of us want to see this Pensions Bill lost, but there is a very reasonable and sensible compromise here on the table. I listened carefully to her remarks that noble Lords on the opposition Benches have drawn their attention to this issue and, indeed, to its discussion of the Turner report: she can say that again.
I was interested to note and welcomed the gradual movement towards a firmer commitment to a review, as the Financial Times refers to it today, in the words that the noble Baroness used, even compared to the words of Malcolm Wicks last night. We welcome that. But we still believe that this is a sensible, realistic amendment. Yesterday, 57 noble Lords on these Benches voted for the amendment to raise the age to 85. That was the best turnout from these Benches since the days of Lloyd George. I invite my noble friends to support this resolution in the Lobby with equal fervour now.
My Lords, I am sure that it was always in the back of the noble Lord's mind anyway. I assume that the age of 85, which he proposed yesterday, was essentially proposed as a bargaining counter or a negotiating ploy. Certainly, there was no realistic prospect of the Government accepting it.
In contrast, setting the age at 80 is entirely fair and logical. It reflects the increase in average life expectancy since the age of 75 was originally proposed, as the noble Lord, Lord Oakeshott, has just pointed out. For that reason alone, I hope that your Lordships will vote for the amendment.
My Lords, I will be brief. No one wishes to rehearse all the arguments at this stage. I want to pick up just one particular point and make a couple of general remarks. My first point concerns the teasing remarks made by the noble Lord, Lord Higgins, about the other end, the 250,000 and so on.
I was there, but the noise and hubbub in the Chamber was such that I was not absolutely sure that I could hear every word correctly. On reading Hansard, my suspicion was confirmed that the confusion about whether the figure referred to 250,000 people or £250,000 was triggered—if I may say so—by Mr Webb. He inadvertently derailed the debate and with it my honourable friend who subsequently tried to bring it back on the rails. It was one of those situations where that could very easily happen, but it was obviously clarified quite quickly.
I just want to repeat that I do not think that anyone in your Lordships' House—certainly after the very long but never wearisome, of course, debates that we have had on the Pensions Bill—could doubt that the challenges facing pensions in general and final salary schemes in particular are interlocked with concerns about increased longevity, a reduction in age dependency ratios of pensioners to workers and, of course, the risk associated with relying on a stock market that has turned out to be as volatile as it has in recent years.
In that context, I am sure that it is inconceivable to your Lordships, as well as to me, that the issue of longevity will not run through the Adair Turner report, whether it is associated with the rise that some people have called for, but which I do not support; the rise of the state pension age; the issue of longevity in terms of the lifetime styling of funds going into pension funds when working out the appropriate FRS17 risk behind DB schemes; or in terms of the future of DC schemes.
It is so key to the whole future of pensions and pension stability that I cannot conceive that it will not be included. In that process, therefore, it is inconceivable that Mr Turner will not take on board the issue of whether 75 years old remains a fit and appropriate age at which to require people to annuitise their money purchase pots.
Having said that, we have already had an extraordinarily valuable report from Mr Turner, which followed the House of Lords' report on the economics of ageing, on which I think that the noble Lord, Lord Oakeshott, was involved. Given that report, and given that his report will be produced in the autumn about one year away, it seems to me inappropriate as well as downright stubborn—if I may say so—to seek to push the Government, to bounce the Government even, into a position on that in advance of the Turner debate, which may open up an understanding of the ramifications across the whole pension field.
If that review was not forthcoming fairly soon, perhaps I may have somewhat more sympathy with the noble Lord's case for a sort of tokenist gesture from the Government. That is not the case. I cannot conceive that it will not be considered by the Turner review. In the light of that, we will have a much more secure position if your Lordships, the Government and the other House wish to take that issue further and forward.
The elected House has spoken twice. This is the point at which we should accede. On opening, I said that this Bill is about seeking—I know that the noble Lords, Lord Higgins and Lord Oakeshott, all of your Lordships and the House at the other end seek—to secure as best we can pensions for which people have spent their working years trying to build up in order to float them off poverty in retirement.
At the core of this Bill is a Pension Protection Fund or a financial assistance fund for those who do not come within the scope of the levy and the PPF. We have crawled over this Bill absolutely rightly. I am the first to admit that in conjunction with Members of both Benches opposite the Bill is in a more robust and appropriate state than when it entered this House.
It would be wrong to jeopardise this Bill now for the sake of a vote on something that is essentially extraneous to it. We may have a range of views about that. That debate will continue over the next year and, I do not doubt, the year after. That is the right place and time for that debate to occur. It is not now.
I urge your Lordships to allow us to give people outside the signal that they need; that both Houses of Parliament and all parties in both Houses of this Parliament want to ensure the security of people's final salary pensions. There is an honourable and honest debate to continue, which will continue. This is not the place for it now. I ask your Lordships to pass this Bill.
My Lords, as she has throughout our previous debates amounting to something like 90 hours on this matter, the noble Baroness has replied in a courteous manner. I should like to take this opportunity to say how much I appreciate that. But she did not raise in any way what effect this might have on the Revenue. We have had no figure for that.
The fact that this concerns only a certain number of people deferring their annuity for a bit longer, and only those approaching the age of 75, cannot mean a very large sum of money. The noble Baroness has given no indication of how much, but it could not be very large. There is therefore no reason why the Government could not accept this amendment and we hope that, on reflection—they have a little time before it goes to the other place—they will do so.
The noble Baroness appears to rely heavily on Mr Turner. Yes, he has produced a report which was well presented and made the public more aware of the problems. Interestingly, he did not, as have others, put enormous stress on the effect of the Chancellor's change in advanced corporation tax on final salary schemes. However, the crucial issue here is that this matter has been debated time and again and there are no new arguments. I cannot believe that Mr Turner will come up with something to which we can say, "My goodness. No one ever thought of that". I say that because we have debated this so many times over the years on Private Member's Bills, Motions and so forth. That has been clear throughout.
From the point of view of the noble Baroness, there is something of a constitutional issue to consider. What one does on policy of this kind, with the data helpfully summarised by Mr Turner, is a decision that politicians have to take. The Conservative Party has taken a view on both aspects of this issue, not only on the narrow point of the age limit, and has made its position absolutely clear. It is therefore not appropriate to delegate this to someone who has set up a commission on pensions, even though the noble Baroness argues that we must wait and see what Mr Turner says and then we will do it.
My Lords, I did not say that. I said that we would need to wait and see what he does, and in the light of that we would all be able to decide the appropriate way forward.
My Lords, we have had all the arguments and it is now appropriate, as the Conservative Party has done, to take a decision on the matter. Regardless of what is said by Mr Turner, who is not an elected Member of Parliament or a Member of this House, it will not be decisive. I understand that the noble Baroness accepts that.
My Lords, I hope that the noble Lord will forgive me for interrupting a second time. I sought to make the point that there is no automaticity here. I would not wish it to be thought that there is any automaticity between what Mr Turner recommends and what the Government do. All I am saying is that it would be unreasonable to expect the Government to move in advance of a major report which will look at the implications not only of longevity, but also across the field at other issues such as compulsion. Given that that is in the offing over the course of the next year, it is wise to have that as a part of our background concern.
My Lords, there may be other areas which have not previously been investigated in any depth where Turner can make helpful suggestions. But few issues have been investigated in as great a depth as this and therefore I do not think that it is a reasonable argument.
In view of the fact that the noble Baroness has given us no indication of the cost, I wish to test the opinion of the House.
My Lords, I beg to move that the House do now adjourn during pleasure.
Perhaps I need to give a little explanation. As the House knows, the Commons are in the process of considering the Hunting Bill. After that, they will consider the amendment to the Civil Contingencies Bill which we have sent back. So two Bills are still in play. Thanks to that most recent splendid victory, one of the Bills is now awaiting Royal Assent.
The position is simply that we cannot be precise about when we shall consider the Hunting Bill because the House of Commons cannot be precise about when it will be sending it to us. However, it is unlikely to be before 4.30 p.m. I shall adjourn the House awaiting messages from the Commons—words to that effect will appear on the annunciator—but please watch the annunciator. One should never repeat a gag, but it might be worth it this time: this really is the last day—I hope.