(except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39) - Clause 269 - Transitionals and savings

Part of Finance Bill – in a Public Bill Committee at 9:30 am on 22nd June 2004.

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Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury 9:30 am, 22nd June 2004

The hon. Gentleman suggests an alternative to the arrangements that we have proposed. I fully accept that when in power the Opposition adopted an approach that meant that every pension regime in operation at that time was grandfathered. That is why we have a system in which eight pension regimes operate. We have responded to calls from the industry to introduce simplification with a single regime. We introduced a genuine and fundamental reform, removing all the past regimes and replacing them with a single regime for tax purposes. The approach that he advocates would not deliver any of the benefits of simplification, and we will discuss that when we debate his amendments to schedule 34.

Our proposal is radical and fair because it protects people's existing accrued rights under previous regimes and it introduces a simplified regime. The basic point that the hon. Gentleman wants me to put on record is that the lifetime allowance charge will not apply to pre-A-day funds where protection is cleared. Primary protection is there to give full rights to participate in the new regime, and enhanced protection allows pre-A-day rights to grow faster than inflation in return for a test that no further benefit accrual occurs after A-day, so rights accrued before A-day are protected in full, and future growth on pre-A-day rights can be protected. It is only post-A-day

contributions and service that need to be subject to the new regime. Of course, A-day is the date on which the regime is brought into force.

That is generous protection. It is more generous than the transitional protection arrangements that we first consulted on. The arrangements do not in any way seem retrospective. I commend the clause again to the Committee.

Question put and agreed to.

Clause 269 ordered to stand part of the Bill.