Clause 1 - Provision for pension flexibility etc

Part of Taxation of Pensions Bill – in a Public Bill Committee at 10:15 am on 18 November 2014.

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Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 10:15, 18 November 2014

Similar points were made on Second Reading and in last week’s evidence session. One concern expressed by both the industry and those who will be giving guidance under the guarantee is that the intention behind this Bill, and perhaps the Pension Schemes Bill as well, has been caught up in the spin and hype about people being able to access massive pension pots to buy a Lamborghini, take a holiday and pay off the mortgage, while the same emphasis has not been put on the fact that the purpose of a pension is to provide for people’s lifetime in retirement. We have heard that people often do not think about the length of time over which their pension will have to provide for them, or about the standard of living that they want to have during that period. Some of those concerns expressed by the industry and echoed by my hon. Friend are very important.

To return to my point: yes of course people should have the flexibility to decide when and how best to turn their pension savings into retirement income, but they should also avoid exhausting their savings prematurely so that they have to fall back on the state. One aspect of this Bill and the Pension Schemes Bill that has perhaps had less coverage than it ought to have had is the  potential impact on some people’s social care eligibility; specifically, we have heard little about how the Bill will affect the notional income rules. I raised this issue during the evidence session because we need clarity. There is a group of people for whom there might be unintended consequences if they make the wrong decision. That is why the guidance guarantee is so important, even though many of those who could be affected might not take the guidance guarantee or would feel unable to move forward and take regulated advice.

There are rules that allow for people to be treated as having income that they do not actually get. The stated aim is to ensure that everyone pays a fair share towards supporting themselves and paying for social care, but presumably it is also to ensure that where people are entitled to annuities or drawdown income, they can take it. Perhaps some of those rules were easier to apply when the vast majority took an annuity, but new behaviours and the creation of new products that the Bill will set in train may well add additional layers of complexity, and I do not think that we have bottomed that out yet.