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Finance (No. 2) Bill

The Conservative new clause 3 provides an alternative to the current position, whereby people are forced to buy an annuity with their pension funds when they reach 75. The Conservatives have made that proposal before, most notably through the private Member’s Bill of the hon. and learned Member for Harborough (Mr. Garnier) in 2002. As the hon. Member for Fareham (Mr. Hoban) said, the issue was raised more recently in connection with the Finance Act 2004 and the Pensions Act 2004. I draw the House’s attention to the ping-pong with the other place at the later stages of the Pensions Bill. This very matter was one of the most significant issues debated and it was the collapse of the Conservative vote in the House of Lords that prevented the opportunity of the provision being written on to the statute books. If the Conservative peers had been able to vote, perhaps we would not be debating the matter now. The new clause is designed to limit the requirement to purchase an annuity to the amount that would give the annuitant a minimum retirement income, and it would provide greater flexibility over the remaining residual fund. That contrasts with the current situation in which 75 per cent. of the funds from a money purchase pension must be used to purchase an annuity by the age of 75. Since the scheme was set up, life expectancy has increased considerably, which alone might provide the Government with a reason to look into the matter again. The new clause would amend the Finance Act 2004, set up a retirement income fund and create a rule whereby withdrawals cannot be made unless the individual has purchased a relevant annuity that is linked to the retail prices index. The hon. Member for Fareham will know that the Liberal Democrats have supported the approach in principle in the past and we do not intend to change our minds today—we will still be on the side of the angels. However, I have one query about the drafting of the new clause in respect of an issue that my hon. Friend the Member for Northavon (Steve Webb) has mentioned. The principle behind the minimum retirement income is that it exists to prevent individuals from withdrawing all their money from their pension and falling on to state benefits. The annuity that would need to be purchased under new clause 3 would prevent that from happening, but in terms of qualifying for state benefits, all income is taken into account, not just the income from the annuity. The hon. Member for Fareham assumed that my hon. Friend the Member for Northavon was talking about fluctuating income, but it could affect someone with a steady income close to the minimum income. If they were below it, they would fall on to state benefits. However, under the provision, all the money in the pension pot would need to go into the annuity to provide a minimum income that, together with their other income, might take them significantly above the minimum income requirement in the new clause. I hope that the hon. Member for Fareham will clarify the operation of the new clause in that respect. Finally, I have a question for the Economic Secretary. The Secretary of State for Work and Pensions promised a review of the pensions situation following the Turner report. When might we see that?