Pensions Bill

My Lords, I thank the noble Lord for moving the amendment; it gives us a chance to discuss an important issue. The Government fully support the objective underlying the amendment. People choosing an annuity should have the best possible understanding of the options available to them, and of the potential impact that their choices can have on their own retirement income and that of their dependants. However, the Government also believe that it is vital to avoid imposing unnecessary, and potentially costly, legislative burdens on pension savers and annuity companies. The most effective way of ensuring that people make an informed annuity choice is to give them the best possible information at retirement, rather than legislating to make them sign additional forms. I agree with the noble Baroness, Lady O’Neill. If you get people to sign forms and tick a box, there is a great risk that they will take their eye off the ball of what they should really be doing: ensuring that people have information. We are actively working to ensure that people have good information about their annuity choices. Legislation and FSA rules require providers to disclose relevant information about annuities to members and for members to sign the contractual documentation to take an annuity. In addition, FSA rules more generally require firms to treat their customers fairly and to disclose relevant information. These rules ensure that a baseline level of information is available in all cases. However, we recognise that more can be done. Improving information was a key recommendation of the Government’s review of the open market option published with the Pre-Budget Report in 2007. Following one of the recommendations of the review, the Pensions Advisory Service has launched an online annuity choice tool to help people understand the complex issues involved. Initial feedback from those who have used the tool has been very positive. The Government support, and are taking, this type of action to help people make the right annuity choice. Therefore, while I support the spirit of the noble Lord’s amendment, it seems unnecessary. There is also the issue of compliance. A process would need to be determined for when an individual did not receive a form, or did not want to sign it, and all that that entails. In conclusion, the Government agree that it is vital that people should make an informed choice about their annuity, but we do not agree that legislating to add more forms and administration to the process of choosing is the right way to achieve this. Following the noble Lord’s discussion with Legal and General, I should be happy to engage with him and Legal and General to elicit any views that it may have, even if it is not particularly wedded to this approach. We have a shared objective, but I am not convinced that this prescription is the right way to go.