Pensions Bill

moved Amendment No. 65: 65: After Clause 18, insert the following new Clause— ““Minimum retirement income (1) The amount of the minimum retirement income in respect of each tax year shall be set by the Chancellor of the Exchequer by order at the level of the standard minimum guarantee prescribed under section 2 of the State Pension Credit Act 2002 (c. 16). (2) Before making an order under subsection (1), the Chancellor of the Exchequer shall consult such persons as he considers appropriate. (3) An order under this section (other than the order that applies to the first tax year during which this section is in force) must be made on or before 31st January of the tax year before the tax year to which the order applies.”” The noble Lord said: First, I declare my interest as a partner in the national, commercial law firm of Beachcroft LLP, as deputy president of the Chartered Insurance Institute and the other entries in the register, including my honorary fellowship of the Institute of Actuaries. We now move on to discuss a battery of amendments that touch on some profound and serious issues of principle. This debate has been well rehearsed in this House, in another place and beyond these precincts for many years. I am obliged to my honourable friends in the other place, including Nigel Waterson and Sir Malcolm Rifkind, for their hard work in helping to draft the amendments to which I now speak, including Amendment No. 65. To summarise the thinking that lies behindthese amendments, I concede immediately that annuitisation has its merits. It offers a simple and secure way of ensuring that a pensioner will be able to maintain a certain level of income throughout his or her retirement. There is nothing in these amendments that will stop pensioners looking for this simple and secure way of funding their retirement by continuing to buy an annuity at any point throughout their retirement. It is also palpably true that the guarantee of a certain minimum income, no matter how long one might endure, is to the general benefit of the taxpayer at large. Annuities can of course prevent pensioners spending their pension pots too quickly and being forced to fall back on benefits such as pension credit. Again, I should like to point out that these amendments do nothing to weaken that guarantee. Instead, they give pensioners a choice. Pensioners would be able to exercise choice over their pension funds with the single limitation that they must not recklessly spend them so that they end up becoming a burden to the long-suffering taxpayer. The largest amendment in the group, Amendment No. 66, allows for the establishment of a minimum retirement fund. In essence, this would be a savings scheme from which pensioners could draw down their retirement savings at a time of their choosing, as subsection (2) of the proposed new section makes clear. Subsections (3) and (4) of the new section ensure that a pensioner cannot draw out so much that the provider will no longer be able to guarantee a certain level of income for the rest of his or her life—a level that Amendment No. 65 establishes is set by the Secretary of State. The final two amendments are consequential. The Parliamentary Under-Secretary of State for Work and Pensions in another place suggested that there was no real demand for this sort of scheme, but that is certainly not the case in other countries. In Canada, a similar scheme is chosen by around 50 per cent of pensioners; indeed, it is the most popular savings vehicle in the country, and I reckon that the popularity of a scheme is not a bad criterion by which to judge it. On that basis, surely the fact that not one other country in the developed world has a compulsory annuitisation scheme akin to ours tells its own story. Ministers have already allowed those who find compulsory annuitisation unattractive a way out. The Christian Brethren must have set a record by now for the most references in parliamentary debates per capita. This tiny but admirable band of around 738 souls at the last count has a principled objection to the pooling of the risk of mortality, which is essentially how annuities work. Quite understandably, Ministers hold the opinion that religious convictions which do no harm to the general public or to the taxpayer should be permitted. Consequently, they have allowed members to take out alternatively secured pensions. What I find quite inexplicable is why the Government will not extend the same privilege to those who object to compulsory annuities on non-religious grounds. I hope that the Minister will be able to explain why a secular desire to avoid suffering the unnecessary costs and inflexibility of an annuity is considered less legitimate than the desire to avoid breaking a religious stricture. Members on these Benches believe that a person’s pension pot is his or her own property. Tax incentives for pension schemes are there to encourage people to save for their retirement; they do not and should not transfer moral or practical ownership of those schemes to the Government. Neither do they provide an excuse for the Government to interfere or meddle, beyond protecting the taxpayer from misconduct or maladministration, with how that retirement is tobe enjoyed. These amendments would therefore re-establish control for our fellow citizens over their own hard-earned money. They would also protect the taxpayer from being forced to bear the cost of any reckless decisions and allow for a secure income throughout retirement. So I would contend that these amendments are all about choice, freedom and the right to property. It is precisely—I must say to the noble Lord, Lord Oakeshott—because this is an issue of principle that I continue to harbour reservations about Amendment No. 80, which we are also debating. I look forward to hearing from him on that subject. This is because Amendment No. 80 concedes the all-important principle relating to freedom of action and seeks only to ameliorate the effects of a bad law. David Laws put it very well indeed at the Committee stage of this Bill in another place when he described the situation in the following terms: "““The problem here … is that we have a rather antiquated and illiberal system of obliging people to take annuities””.—[Official Report, Commons Pensions Bill Public Bill Committee, 8/2/07; col. 391.]" That was a fairly firm statement. I look forwardto hearing from the noble Lord, Lord Oakeshott, whether in the light of that statement he might feel able to support this group of amendments because Amendment No. 80 would merely postpone the age at which this rather antiquated and illiberal system may continue. There is always a temptation when in government to seek to expand one’s sphere of influence by exercising control over areas of human activity which are best left alone. There is a consensus that what we need—indeed, what we want—is for people to invest more for their old age. I believe these amendments would enhance the incentive to save, with no ifs and no buts. I beg to move.