§ 7. Mr. Eric Illsley (Barnsley, Central)What proposals he has to relax the Inland Revenue rules regarding the amounts of money which individuals can withdraw annually from pension funds [3328]
§ The Economic Secretary to the Treasury (Ruth Kelly)The Government seek to help people to provide for their financial security and comfort in old age. Pensions should provide a secure income throughout retirement, guarding against the risk of savings running out. The Government keep the rules under review and remain open to suggestions of workable and affordable alternative methods for delivering a secure income in retirement.
§ Mr. IllsleyI welcome my hon. Friend's commitment that pension funds should be able to provide an income throughout retirement, but is she aware that, due to the lack of availability of gilts in this country, the fall in the value of some pension funds and the interaction of the Inland Revenue rules, the income for some pensioners who run their pensions in that way is falling year on year? Will she consider the impact of the Inland Revenue rules, which I understand were examined as recently as 1999, to see whether any adjustment can be made to prevent that fall in income?
§ Ruth KellyI presume that my hon. Friend refers to the current state of play on annuities. Annuities are specifically designed to fund a guaranteed income stream in retirement. Certain proposals have been made for their reform. The problem is that the proposals that we have received so far have severe drawbacks. They do nothing to help pensioners who have very small savings, and it is not clear that they would not be costly. However, I remain open to suggestions about how the regime could be reformed. If any hon. Members know of any proposals that are workable and affordable, of course I will listen to what they have to say.
§ Mr. John Greenway (Ryedale)The hon. Lady will know that my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) has tabled a Bill on this matter. Second Reading is not until January, so I hope that the six months available can be used constructively to look again at the proposals of Dr. Oonagh McDonald on the draw-down of annuity by the age of 75. Many constituents of hon. Members on both sides of the House believe that that rule needs to be changed and is leading to gross injustice.
§ Ruth KellyI certainly understand the concerns that the hon. Gentleman has raised although I repeat that, at the moment, annuities are the only way of providing a secure income flow in retirement. Of course, we have to consider other proposals, and in the next six months, I hope that people will make serious proposals for reform. The hon. Gentleman proposed that we consider Dr. McDonald's suggestions, which are interesting but have cost implications. If annuities and savings funds became more flexible, it is of course possible that people would start to use them not only as savings vehicles for their future pension but also as inheritance vehicles. There is that risk, in which case the cost implications could be severe. However, as I said, I am interested in hearing sensible, efficient and workable proposals. If I can be shown that they are not costly, of course the Treasury will take them extremely seriously.