New Clause 3 - Pension flexibility: Treasury review

Part of Taxation of Pensions Bill – in a Public Bill Committee at 4:45 pm on 18 November 2014.

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Photo of Teresa Pearce Teresa Pearce Labour, Erith and Thamesmead 4:45, 18 November 2014

It is a pleasure, Mr Weir, to serve under your chairmanship. I want to make a few points in support of the new clause. I support the review because, although most of us would agree that the annuity market has not worked well for annuitants for a long time, we do not know what will happen. The important thing to recognise is that the decision is not like buying a mobile phone, where, if it does not work, it can be traded in for a different one the next year. It is a one-off decision that will affect individuals and their family for the rest of their life. It is therefore really important that we get it right.

We agree that we want pension flexibility, but there are a number of risks, all of which seem to fall on the person who is about to retire. There is a risk that a person might pay too much tax, run out of money, purchase the wrong product or leave their spouse with no money should something happen to them. Those are all important issues. A review will show us whether things have gone as we intended. We all hope that opening up the pensions market will work well for the consumer, but, as is the case whenever anything is opened up to the consumer, we know that, as we sit here, people are working out exciting products to sell to people whose knowledge of the market is relatively unsophisticated. It is important that we have more than a single line of defence. The Minister has mentioned a second line of defence; if we are to have one, I hope that it is in regulation rather than voluntary, because there has been a circular dance of voluntary regulation in the annuities industry that has not worked.

We are discussing taxation—this is the Taxation of Pensions Bill—but a large number of people in this country think that pensioners do not pay tax. That is some people’s level of understanding. Has the Minister considered any options for public information or advertisements?