§ 3 Clause 1, page 1, line 21, at end insert ("but there shall be no requirement to take out a stakeholder pension in the form of an annuity by a specified age").
§ The Commons disagreed to this amendment for the following reason—1162
§ 3A Because it is inconsistent with the condition that a stakeholder pension must have tax exemption or tax approval.
§ Lord McIntosh of Haringey
My Lords, I beg to move that the House do not insist on their Amendment No. 3 to which the Commons have disagreed for their reason numbered 3A.
Moved, That the House do not insist on its Amendment No. 3 to which the Commons have disagreed for their reason numbered 3A.—(Lord McIntosh of Haringey.)
§ Lord Higgins
My Lords, this amendment relates to the question of annuities, which we debated at some length during earlier stages of the Bill. I think that the answer given by the other place to the amendment we put forward; namely, that,it is inconsistent with the condition that a stakeholder pension must have tax exemption or tax approvalis most interesting.
The main point made during earlier debates was that the present rule, whereby those who have to take their pension are required to do so at the latest by the age of 75, is a matter of considerable concern, not least because the average age of the population is getting steadily higher and a number of people find that the rule is to their disadvantage. The debate in another place was rather curtailed because of the guillotine. It was clear throughout the debates that Ministers seemed to be complaining that they could not give specific answers because there was a guillotine when in fact the latter had been imposed by the Government.
However, having said that, perhaps I may concentrate on the answer which has now been given. It is of course the case that those taking out pensions receive tax relief when they contribute towards the pension, although it is also the case that they are taxed on that pension when they receive it. So, to that extent, the arrangement we have is asymmetrical. The Government have indicated that they are considering the issue. I wonder whether I may press the Minister further as to whether it is likely that they will reach a decision in the near future.
The main objection put forward by the noble Baroness, Lady Hollis, during the previous debate was that if people were not compelled to take an annuity they might spend the money and become a charge on public funds. I should have thought that that could be overcome if people were only allowed to take the sum, other than by an annuity, to the extent that the annuity which remains ensures that they are above the level of income support. It is also true to say—this is implicit in the Government's reason—that not only must you not become a charge on public funds but also, to some extent, you must take an annuity because if you cannot take it with you, you cannot leave it behind you. The concern increasingly in people's minds is whether the tax relief given is something which ought to bar people from taking a form of pension, other than an annuity, providing they do not become a charge on public funds.
1163 I merely wish to ascertain whether the Government's thinking has moved forward since the matter was debated in another place. It seems clear to me that something must be done, at least as far as concerns the 75-year rule.
§ Lord McIntosh of Haringey
My Lords, as he said, the noble Lord did debate this matter at some length when it was last before the House. At that time, we said that the Government were in the process of reviewing the drawdown rules. That is indeed the case, and the review includes consideration of the whole issue of mandatory annuity purchase. However, I do not want to raise the noble Lord's hopes too high. We are reviewing these issues on a not quite continuous basis, but on a frequent and regular basis.
From the fact that a review is taking place, the noble Lord should not draw the conclusion that we have accepted his arguments about annuities. The arguments are very fundamental. Indeed, I can put the main argument in one phrase: pension funds must be used to provide pensions. This is a deal. Pension contributions are made with tax relief. The noble Lord is right to say that the tax relief is on the contributions and not on the ultimate pension. Just before the election, the noble Lord's party suddenly came forward with the quite unexpected suggestion that the tax relief should be on pensions and not on contributions. That had never been debated anywhere and was a totally new proposition, which would have had huge inter-generational benefits and disbenefits that were never debated at any time. Presumably—God forbid!—if the noble Lord's party had won the election, that would have been a manifesto commitment which we might have been stuck with.
That is not the case here. There is a great deal of continuity in public policy of governments of both complexions. The public policy issue here has not changed. If you have gained tax relief for pension contributions, in the end that must be used for pensions; in other words, to ensure that you do not become a burden on the public purse. There are all sorts of ways in which that can be modified. The drawdown contributions introduced in 1995 were certainly a compromise. However, from the fact that a review is taking place, I do not wish the noble Lord to draw the conclusion that there is any agreement with the arguments that he and other noble Lords put forward when the Bill was previously before the House.
§ On Question, Motion agreed to.