Pensions Bill

My Lords, my noble friend Lord Fowler is quite right to remind us that in last year's Pensions Bill we passed an amendment moved by my noble friend Lord Hunt of Wirral, which abolished the rule that people holding pensions must take an annuity by the time that they are 75. He and I were more than a little annoyed that in another place, the amendment was not even debated. It was deemed out of time because of the guillotine. My noble friend moved the amendment again in Committee earlier this year, although he withdrew it due to the Government’s enduring obduracy. Time has shown just how percipient he was in moving it; but his amendment, although remaining the Opposition's long-term policy, needs to be adapted to the situation in which we now find ourselves. After the worst autumn for the economy that most of us can remember, the financial security of pensions has deteriorated significantly. I congratulate my former temporary boss and noble friend Lord Fowler on picking up on something that my right honourable friend Mr Hague said at Prime Minister's Questions on 15 October. Referring to the extraordinary economic times we are now in, he spoke with feeling about the pensioners who are forced to buy an annuity, perhaps on reaching retirement or, by law, at least by the age of 75. He made the point that they will be locked into a lower income for the rest of their lives. In the amendment, my noble friend proposes a temporary suspension of those arrangements. To be fair, Ministers have said previously that they will look at that. Indeed, the right honourable lady Ms Harman, in response to my right honourable friend Mr Hague, conceded that, "““the impact on family finances, businesses and jobs has been sudden””." She continued: "““It is important to consider the question of the impact on people—albeit a small number of people—who have to buy their annuities within a certain period of time ... I know that the Department for Work and Pensions is talking to the Treasury about the issue””.—[Official Report, Commons, 15/10/08; col. 787.]" It is an old saying that talk is cheap. It is the results, if any, of that talk that matter, and, currently, as I am sure the Minister is about to tell us, the omens are not good. Notwithstanding the fact that we on these Benches have always believed that the Treasury was 100 per cent wrong to maintain the rule of compulsory annuitisation by the age of 75, we reluctantly accept the right of another place to put the boot in and say, ““No way””. At least, we did. However, as the right honourable lady said last Wednesday, the situation has indeed changed, and for the worse. She claimed that very few were affected, but the number is growing. If memory serves me right, the noble Baroness, Lady Hollis, told us in 1974 that we were worrying about only 1 per cent or so of pensioners. Last year, the noble Lord, Lord McKenzie, told us that it was 3 per cent of those in the group with pension pots of more than £100,000, although both figures now need to be updated. The last figure that I heard was 5 per cent, but the exact figure hardly matters when the Government admit that Amendments Nos. 78AP and 78AQ on the buy-back of state pensions, welcome though they are, will help only a maximum of 110,000 people. As my noble friend Lord Fowler has said, alternatively secured pensions were invented for fewer than 1,000 Plymouth Brethren. Not only that, the £100,000 figure on which annuity rates are quoted has become totally meaningless. In October last year, the FTSE 100 stood at a smidgeon under 6,500. On 1 October this year, it had fallen to 4,959.60. By 16 October, it had dropped through the floor, and closed at 3,861.40. Over the weekend, it dropped again, and significantly, stood at 3,765 at lunchtime today. The net result of all this, as my noble friend Lord Fowler has just pointed out, is that the FTSE is down by more than 30 per cent this year. It is not impossible to believe the NAPF when it says that pension pots, too, have shrunk by more than 30 per cent; nor that, according to Aon Consulting, assets of direct contribution schemes have plummeted from £552 billion to £395 billion, despite the £6.7 billion of contributions paid in by employers and employees during the year. These figures are already out of date because they are last week’s figures. Doubtless the situation is even worse today, as we are told that the FTSE dropped another 5 per cent at the end of last week. In other words, the £100,000 on which annuity rates are quoted has become less than £70,000. What a time to take your annuity. It is no good the Minister saying, as I expect he will, ““You should have taken it earlier””. Hindsight is a wonderful thing, but in this case it goes against the grain of human nature, particularly in uncertain times when people will delay taking out their annuities for as long as possible in the hope that the Stock Exchange will rise. That is precisely why the Government need in their back pocket the statutory instrument that my noble friend proposes. It is not, as he said, a blanket abolition of compulsory annuities; it would enable the Government to be flexible at a time of their choice but at a time of severe volatility on the stock market, which is precisely what we are seeing now.