New Clause 2 - Pension flexibility: Treasury analysis

Part of Taxation of Pensions Bill – in a Public Bill Committee at 3:30 pm on 18 November 2014.

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Photo of David Gauke David Gauke The Financial Secretary to the Treasury 3:30, 18 November 2014

I will resist the temptation to examine the hon. Gentleman’s claim that all measures during his time as a Minister were well considered and thought through. I have read his book and thoroughly enjoyed it. I shall re-read it to discover the answer to my question.

On the issue of investment in infrastructure, the hon. Gentleman quoted some numbers. Those are the ABI’s figures, not the Treasury’s. The point is that annuities will remain the right product for many people. The regular cash flow profile and potential long duration of infrastructure assets will continue to be attractive for backing long-term liabilities such as annuities. As such, infrastructure is likely to remain an attractive investment for institutional investors, including the insurers. He raises a perfectly reasonable point, but I do not think we should overstate the risks.

I also make the point—although I suspect, Mr Weir, that you would not want me to dwell on this—that the national infrastructure plan is already delivering a large  number of projects. I think there are 800. We are making great progress, and we hope that with our long-term economic plan we will be able to further deliver infrastructure projects in the years ahead. However, Mr Weir, do not let me be drawn down that route.

The hon. Member for Kilmarnock and Loudoun asked whether people would know what tax they would be charged before accessing their pension flexibly. When an individual accesses their pension flexibly, it will be taxed under PAYE in the same way as any other pension payment. If they have a tax code from their P45 or they provide the pension scheme with specific information to work out their tax code, they will be taxed as they would for any other pension income. If they do not have that information after the first payment, HMRC will issue a tax code that can be used against any further payments that they receive from that particular pension.

I have tried to address the questions raised by the hon. Member for Kilmarnock and Loudoun. I appreciate the spirit in which she tabled her new clause and I have given it a great deal of thought this afternoon. However, I fear that I will follow the precedent of many distinguished Treasury Ministers before me and tell the Committee that even after long reflection I cannot accept her new clause. Should it be pressed to a Division, I must advise voting against it.