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Finance (No. 2) Bill

I am sure that you are right, Madam Deputy Speaker. There will be other times when we can debate those tax policies and we are looking forward to learning the details in due course. I will provide the hon. Member for Northavon with details of our costings and look forward to his providing us with details of his. Turning to the specific proposals under discussion, as outlined by the hon. Member for Fareham, we have before us a proposal to allow people to set up a retirement income fund from which they may make withdrawals on reaching the age of 75, provided that they first purchase an annuity to secure a minimum income requirement. New clause 7 provides for the equivalent facility for dependants. I have explained already in answer to Opposition interventions why that would be inconsistent with both the principles that have guided our approach to annuity policy over the past few years and the cautious and careful flexibility that we have introduced over the past couple of years and why it would represent a substantial cost to the Exchequer. I could also explain at length why the proposals are bureaucratic, complex and technically flawed, but I will resist the temptation. Suffice it to say that we urge Opposition Members not to spend £100 million tonight on those measures and, instead, to continue to support us and the wider industry in implementing the Turner commission proposals and the wider A-day pension simplification that we have introduced. A consensus on pensions policy has eluded us for a long time—it is something that we hope to achieve—so let us make it a consensus about the importance of using tax relief to benefit the majority, rather than a very small minority. Turning to amendments Nos. 62 and 14, which cover the recycling of lump sums. As the hon. Member for Fareham says, those amendments were motivated by a concern that the recycling rule might catch certain cases of normal retirement planning. His view is that the guidance notes restrict the scope of the legislation and that, without the guidance notes, clause 159 would have far wider ramifications than is intended. In Committee, I offered to circulate any significant material changes to the guidance to the hon. Gentleman, to give him a chance to comment if we made any such change. On the basis of his speech this evening, I am happy to offer that opportunity more widely if any other Opposition Member would like to be consulted on the guidance. That offer was in no way intended to be ad hominem. I will endeavour to ensure that there is proper consultation on those matters. More importantly, following the tabling of amendments Nos. 62 and 14, I took the opportunity to reconsider the legal status of both the legislation and the guidance notes and to hold discussions with relevant legal and technical specialists. Following those meetings, I am pleased to be able to assure the House that the recycling legislation does not have the wider ramifications that the hon. Member for Fareham fears and that the guidance has no concessionary or discretionary effect whatsoever. The guidance notes contain a number of worked examples because, as the right hon. Member for Suffolk, Coastal (Mr. Gummer) would agree if he were here, the world is a complex place and people can construct many different kinds of turbocharged recycling schemes to try to avoid tax. It is important that people understand the way in which the Revenue will proceed in each kind of case. I have quoted to the hon. Member for Fareham in interventions the views of the Chartered Institute of Taxation on these matters. We have tried to be consultative and to listen to those in the industry and to ensure not only that their comments are incorporated into the legislation, but that the guidance provides the fullest explanation of our intent, so that, as I said earlier, we can ensure that expensive tax avoidance is not tolerated and that innocent pension savers are not disadvantaged by those clauses. On the basis of the assurances that I have given the hon. Gentleman this evening, I hope that he will agree that to try further to clutter tax legislation by trying to move guidance notes into legislation is unnecessary. I ask him not to press amendments Nos. 62 and 14 and accept my assurances instead. Finally, I want to make a short comment on Government amendments Nos. 31 and 97. The new pensions tax regime, which came into force on 6 April, removed a number of outdated and complex rules. The pension tax simplification changes included provisions for the rationalisation of the lump sum payments that pension schemes can make. One of those lump sums—a short-service refund lump sum—may be paid when someone has less than two years’ pensionable service and effectively permits a refund of the contribution that the member has paid into the scheme. One of the requirements of the short service refund lump sum is that the payment extinguishes all the member’s entitlement to benefits under the scheme. We have recently received representations from the industry that that requirement would cause difficulties for contracted-out money purchase occupational schemes, which, to comply with Department for Work and Pensions protected rights legislation, must retain for the member certain rights within the scheme. That could effectively prevent such schemes from providing short service refund lump sums, where they would otherwise meet all the conditions for their payment. Amendment No. 31, therefore, provides for an exception to the requirement that all the member’s entitlement to benefits under the scheme must be extinguished to the extent that the scheme must retain certain rights of the member to comply with other legislative requirements. That amendment will introduce a welcome relaxation in the rules for the pension industry. I urge members to accept it. I know that it will be widely welcomed by the industry, following the consultations that we have had in recent weeks. Amendment No. 97 will correct a minor technical error in the changes we are making in the Bill to the available transitional protection and ensure that a missed consequential change is incorporated into the legislation. To summarise, I invite the hon. Member for Fareham to withdraw the motion on new clause 3, not to press new clause 7 or amendments Nos. 107 to 120 and to join us in a consensus on pensions that does not allow tax relief to be diverted to tax avoidance by a small number of people. I ask him not to press amendments Nos. 62 and 14 on the recycling clause and accept my assurances that we will proceed properly in future and consult on any change in the guidance. I ask the House to accept Government amendments Nos. 31 and 97, which will further strengthen the long-term regime for pensioners in this country.