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Finance (No. 2) Bill

I shall give a more detailed explanation of the £100 million cost of the new clause in a moment, but I can tell the hon. Gentleman that the median pension pot is about £25,000 a year, although many people get much less than that. To achieve an annuity of that size, a person would have to have a pension pot very substantially above the median amount. The pension pots of 19 people out of 20 would be too small to give an annuity of that size. We are talking about a policy that would benefit only the wealthiest 4 or 5 per cent. of the population in pension pot terms. The hon. Member for Northavon also made a point about tax. We pay substantial amounts of tax relief on the way in and, if we were to have an equivalent tax take on the way out, to make sure that people saving for a pension were not advantaged by knowing that they could pass it on with inheritance tax paid at the end, inheritance tax would need to be substantially higher than the current rate. I accept that Members have tabled supporting amendments to apply inheritance tax charges, but the reason that the cost will be £100 million is that charging inheritance tax would not come anywhere near to clawing back the kind of tax benefit that a person would receive from going in with tax reliefs but then not buying an annuity. The fear is that there would be a substantial amount of tax planning for pensions that avoided the need to buy an annuity. The number of beneficiaries might rise slightly above the 4 per cent. of the population who would benefit from new clauses 3 and 7, but it would still be a minority pursuit, which would be expensive for the taxpayer and would require tax rises elsewhere, to no benefit.