Amendments made: No. 436, in
clause 211, page 177, line 9, leave out from 'would' to end of line 10 and insert
', on the valuation assumptions (see section (Valuation assumptions)), be available for the provision of benefits to or in respect of the individual under the arrangement if'.
No. 437, in
clause 211, page 177, line 14, leave out from 'would' to first 'the' in line 16 and insert
', on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if'.—[Ruth Kelly.]
I beg to move amendment No. 417, in
clause 211, page 177, line 30, after 'is', insert
'that part of the value of the individual's benefits under the arrangement which relate to'.
Clauses 210 and 211 are about calculating the lifetime allowance for people who have been non-resident in the UK and have, therefore, not benefited from UK tax relief, but are members of UK pension schemes and have made contributions to those schemes. The clauses disregard those contributions for the purpose of the lifetime allowance or, rather, they increase the lifetime allowance by the equivalent of those contributions.
However—this is the point of our amendment—the lifetime allowance increases only by the amount of the contributions made and not by the investment growth on those contributions. That seems unnecessarily harsh and unfair. More and more people work in different countries and attempt are being made throughout Europe to encourage more Europe-wide pension schemes.
One hopes that Britain is well placed to take advantage of that attempt because it has such a successful financial services industry. We want to do what we can to encourage the industry, but it seems that we are placing a small hurdle in the way of the pensions sector. That is, as I said, unfair. The Government have conceded the principle that the contributions have not attracted tax relief and the lifetime allowance should be increased as a result. Surely the same principle extends to any investment growth on those contributions.
The amendment seeks to increase the enhanced lifetime allowance available to relevant overseas individuals who have other money purchase arrangements. Such individuals are entitled to a lifetime allowance enhancement factor, which is applied to the standard lifetime allowance to arrive at the increased allowance. The factor is based on the amount of contributions paid during the period when the individual was non-resident. That is a straightforward and simple calculation. The amendment seeks to introduce an additional element to the calculation to bring in the investment build-up on the contributions.
In many respects, the hon. Gentleman makes reasonable points. The aim may be to bring the calculation of the lifetime allowance enhancement factor for money purchase arrangements more into line with the equivalent calculation for other arrangements, such as defined benefit arrangements. However, defined benefit arrangements cannot be calculated by reference to contributions because, in a defined benefit scheme, it is often impossible to identify the contributions made in respect of a particular individual, so there would be different rules according to the different ways in which different types of scheme operate. The amendment would have a disproportionately complicating effect on the calculation and is not precise enough to be workable. It is not clear how that part of the value of the individual's benefits would be calculated.
As I have said, we must help taxpayers and schemes by providing clear and unambiguous valuation rules whenever possible. Our approach is an example of the clarity that people desire, and I urge the hon. Gentleman to withdraw the amendment.
To sum up what the Financial Secretary seems to be saying, she has a fair point, but there is an element of rough justice and to make the system work some people will lose out. That is a disappointing answer and I do not accept her argument that the amendment would force the Government to make a great distinction between defined benefit and defined contribution schemes. The method of calculating those points, as we have discussed at length, is different, so it is not as though it is an additional distinction that does not exist at the moment. It might be difficult to apply that principle to defined benefit schemes, but it would not be that difficult to devise a way of calculating investment growth in defined contribution schemes if those contributions were clearly tagged on entry into the scheme.
I declare an interest as someone who has several years' contributions in the Canada pension plan, which is a state plan and is partially funded. It would be almost impossible for anyone to work out my contributions after a lapse of around 30 years between making the contributions and drawing a pension as an overseas pensioner. I shall probably receive around three Canadian dollars a month.
My second point about the amendment is to ask the hon. Gentleman what ROIC means.
First, the hon. Gentleman says that it is difficult to identify his contributions from 30 years ago, but the Government will have to do that anyway under the new regime and uprate his lifetime allowance by the equivalent amount. They clearly believe that that can be done, which is why they have introduced the mechanism.
In reply to the hon. Gentleman's second point, the clause states that the
''ROIC is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the active membership period during which the individual is a relevant overseas individual''.
That is the meaning in the Bill and in our amendment.
I imagine that it stands for relevant overseas individual contributions. It is a Government formula.
The hon. Gentleman touches on a point made by the National Association of Pension Funds which I raised at the beginning of this debate. Many of the formulae in the Bill are unfamiliar to the industry, which believes that they could have been expressed more clearly. I am tempted to try to catch your eye, Mr. McWilliam, during the debate on the next Government amendment, which is about adjusting one of the formulae, and we could have this debate then.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 211, as amended, ordered to stand part of the Bill.