I welcome you back to the Chair, Mr. Atkinson.
I recognise that the Opposition are, in tabling the amendments, raising an important issue, about which there is some concern. I have argued to the Committee that schedule 35 brings about a balance, on the one hand preventing people from making large increased contributions to pre-empt the reduced relief that is available from April 2011, and on the other ensuring that those who continue with their normal, regular pattern of pension saving will receive higher rate tax relief until the new legislation takes effect in April 2011.
It would have been impossible to design an arrangement that accurately predicted what someone would have contributed to their pension if the future changes had not been announced, so we decided that the fair way to proceed was to look back at past behaviour, to identify forestalling, as opposed to regular pension savings. Those regular pension contributions will continue to attract tax relief, at the individuals marginal rate, until the new regime is introduced in April 2011.
Schedule 35, as we have heard, defines regular contributions as those made quarterly or more frequently. It includes provisions to protect regular pension savings, made under different types of arrangements that were in place on Budget day. It is for obvious reasons more difficult to identify as normal contributions that are made less frequently, particularly when that requires looking back over previous years, not least because the A-day changes that we touched on this morning have altered pension saving habits for some people.
The Opposition amendments are intended, first, to extend protection for annual contributions. By and large the amendmentsthe buffet that we have to choose fromwould do that with reference to an average of previous contributions made by individuals, accounting only for those years within the previous three years in which contributions were made.
The hon. Member for Fareham spent a little time discussing amendment 228 and the replacement of specific provisions in the schedule, for different pension saving arrangements, with something much shorter. That would create some significant and potentially expensive avoidance loopholes, but it could also have significant adverse consequences for some people, with the loss of the protection that the Bill provides for wholly commercial and unexceptional situations.
The amendment would also amend the definition of regular contributions, so that the highest contribution in the past tax year, multiplied by the frequency of payment, would determine the amount protected. Individuals are already protected if their regular contributions have changed as part of a contractual arrangement; but, of course, if the frequency of payment increased it would create an obvious loophole.
We recognise that for some people, particularly those in personal pension arrangements, contributions are often made annually, on an ad hoc basis, as their financial circumstances allow. I entirely accept the points made by the hon. Members for Taunton and for Henley about that. I reassure them that there is no intention of damaging the interests of self-employed people or any other group. The provisions therefore include an annual limit of £20,000 on which individuals are entitled to higher-rate relief. It is worth bearing in mind, as we debate this, that those are people in unusual circumstancesthose whose income exceeds £150,000, that is, 1.5 per cent. of pension savers. That group will continue to enjoy full higher rate relief of up to £20,000 a year, even if they have made no contributions at all over the past few years.
I appreciate that for those with less regular contribution patterns, the £20,000 figure may represent a lower pension contribution than they have tended to make in the years since A-day. The hon. Member for Fareham was right to refer to my Budget day statement, which welcomed views on ways to ensure that that groups contributions were protected in the same way as those of more frequent contributors. While continuing to achieve our core objectives, we need to ensure, as Opposition Members recognise, that the regime remains effective against the risk of forestalling, which is a real risk.
I want a fair regime that is also effective in protecting the Exchequer. We continue to work closely with industry and to gather evidence to identify who is affected and to quantify fully the scale of the issue. Currently, it is not clear how many people would be disadvantaged by the arrangements in the way that hon. Members have suggested. I hope that we can obtain information from industry on that and on the contribution patterns and levels over previous years. So far that information has been difficult to obtain.
Without effective anti-forestalling legislation, some £2 billion could be at risk. I will shortly be meeting industry representatives to explore the issue in more detail. As I said this morning, I am prepared to return to the subject on Report if necessary. In doing so, I will bear in mind the ideas in the buffet presented this afternoon. I am happy to say to the hon. Member for Taunton that I shall be working seriously and do recognise the genuineness of the points raised. With that in mind, I hope that the hon. Member for Fareham will feel able to withdraw his amendment.