Clause 205 - Benefit crystallisation events and amounts crystallised

Part of Finance Bill – in a Public Bill Committee at 5:00 pm on 15 June 2004.

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Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary To the Treasury, Economic Affairs, Shadow Chief Secretary to the Treasury 5:00, 15 June 2004

I do not believe that the Minister's responses were entirely realistic or correct. It is relatively easy to convert from a defined benefit scheme to a defined contribution scheme, whereas to convert a pot of money saved in a defined contribution scheme into a defined benefit pension is considerably more difficult.

The materiality of the difference in treatment, as things stand and as my hon. Friend pointed out, is substantial. Those in a DB scheme effectively have a limit that is some 50 per cent. higher than those in a DC scheme. That is grossly unfair and unacceptable, particularly in the context that my hon. Friend referred to, namely that those in the private sector are—if hon. Members will pardon my language—screwed by comparison with those with generous public sector DB pensions. The provisions here are not complex. They are extremely easy, as is the arithmetic. One simply says—it applies equally whether people draw down or buy an annuity—''Here's the crystallisation date and here's the pot of money. The Government actuary can tell you precisely what annuity that pot of money would buy, so multiply it by 20 and Bob's your uncle.'' There is nothing very difficult about that, and the calculation is then on exactly the same basis as that for the DB scheme.

There is, in the background, the implication of what provision there is for inflation and whether there is a spouse's benefit. That is part of the reason, as my hon. Friend pointed out, for the size of the gap. It is disingenuous to say that it is nice and simple and actuaries are happy with it. I can assure the Minister that out there in the real world, the majority of people in the private sector with defined contribution pensions are distinctly unhappy at being thus disadvantaged. If the Government do not think that our amendment deals with all aspects of the matter, it behoves them to think a bit more about it.