§ '(1) The Board may, if they think fit, and subject to any conditions they think proper to impose, approve an annuity contract under section 226 of the Taxes Act (approval of retirement annuity contracts), notwithstanding that the contract provides that the individual by whom it is made may require a sum representing the value of his accrued rights thereunder to be paid by the person with whom it is made to such other person as he may specify, that sum to be applied as the premium or other consideration under an annuity contract made between the individual and that other person and approved by the Board under that section.
§ (2) References in subsection (1) above to the individual by whom the contract is made include references to any widow, widower or dependant having accrued rights under the contract.
§ (3) Where in pursuance of any such provision as is mentioned in subsection (1) above of an annuity contract approved under section 226 of the Taxes Act, or of a corresponding provision of a contract approved under section 226A(1)(a) of that Act (contracts for dependants), a sum representing the value of accrued rights under one contract ("the original contract") is paid by way of premium or other 611 consideration under another contract ("the substituted contract"), any annuity payable under the substituted contract shall be treated as earned income of the annuitant to the same extent that an annuity payable under the original contract would have been so treated.
§ (4) In section 230(7) of the Taxes Act (purchased life annuities, other than retirement annuities), there shall be added at the end of paragraph (b) the words "to any annuity payable under a substituted contract within the meaning of section (Retirement annuities) (3) of the Finance Act 1978, or".
§ (5) In section 323(4) of the Taxes Act (pension business), for the words from ",being a contract" onwards in paragraph (a) there shall be substituted the words "(being a contract approved by the Board under that section), or any substituted contract within the meaning of section (Retirement annuities) (3) of the Finance Act 1978".'.—[Mr. Robert Sheldon.]
§ Brought up, and read the First time.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
I beg to move, That the clause be read a Second time.
This new clause meets the undertaking which I gave to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and allows a person with a retirement annuity contract with a life office to take the value of his accrued benefits and place them with another life office offering rather better terms. It is known as the "open market" option. At present, a taxpayer who has his contract with the life office has to make use of the same life office and is not able to make the change in the way which the hon. Member for Cirencester and Tewkesbury proposed. I was persuaded by his arguments, and the new clause will give a taxpayer the power to do so. It will also give the same power to his widow or any other dependant in regard to annuities under separate contracts. I am glad to be able to implement the undertaking which I gave.
§ Mr. Peter Rees
I do not wish to detain the House, because on behalf of the Conservative Opposition Benches I welcome the new clause. Perhaps I should reveal a personal interest, since in the course of my professional life I have entered into several such annuity contracts. I am not aware that at present I am in negotiation to transfer them to any life or other office, but none the less I suppose that at some point in time I might be a beneficiary under the new clause.
612 Obviously we welcome the new clause, which is a warm response from the Financial Secretary to points made both by my hon. Friend the Member for Blaby (Mr. Lawson) and by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) during the final stages of our debates in Committee. We are glad to note that on occasions the Financial Secretary can take account of the points which we put to him. As I have said, I do not wish to qualify my thanks and congratulations to him—except in one regard.
I notice that in subsection (1) this is all subject to conditions whichThe Board may, if they think fit,impose. I am always a little hesitant about this. We should like some indication about what kind of conditions the Board of Inland Revenue might think proper in this kind of case. I appreciate that the permutations, details and situations which can be encountered in this area are endless and that it may be necessary slightly to circumscribe the situations in which a transfer can be made. I am sure that it would be of assistance to those who are concerned in this area if we were to have some indication from the Financial Secretary, even if in rather general terms. Perhaps he could indicate that the terms under which approval will be granted will be published.
However, at present I do not express any major reservation. As I have said, I think that it would be for the convenience of the House and of those who are concerned with these matters if the Minister could enlighten us as I have suggested.
§ Mr. Robert Sheldon
I should be happy to look at the point about publication of the terms under which approval will be granted in the light of what the hon. and learned Gentleman has said. I should like to consider it further.
§ 10.45 p.m.
§ Mr. Graham Page
May I press the Financial Secretary a little further? It is necessary that there should be some guidelines. I was hoping that he right hon. Gentleman would remove the word "consider" from what he said just now and assure us that there will be guidelines on which those advising the persons concerned will be able to judge what the 613 conditions are likely to be. Obviously, one must be flexible about this. When one applies the conditions to any particular case, the commissioners should have flexibility. But some definite guidelines would be of very great help to those concerned in this.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.