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Pensions Bill

I thank the noble Baroness for the amendment, which gives me a chance to clarify the Government’s position. I believe that we have made quite clear our commitment to banning pension transfers into and out of the personal accounts scheme. Our rationale for banning the transfers of pension funds to and from personal accounts, as with the contribution limit that we have just been discussing, is to minimise the impact on the market caused by the scheme’s introduction in 2012 and to ensure that the scheme remains focused on the target market of low to moderate earners. Furthermore, the transfer ban is designed to promote simplicity for employers, individuals and the personal accounts scheme, as transfers can involve complex financial decisions and processes for all parties. Our policy on transfers was widely supported by our stakeholders. However, as always, we must allow the scope for some exceptions. First, we propose that there will be two exceptions to the prohibition on transfers into personal accounts. These relate to pre-vested pension rights and pension credits on divorce. These are tightly defined circumstances and we do not believe that these exceptions will dilute the focus on the target market or have a significant impact on the financial services industry. We will set out the detail of the ban on the transfer of pension funds into personal accounts in the scheme order, as I explained earlier. We plan to prohibit transfers out of personal accounts under Clause 111 of the Bill and we intend to amend the rules in the existing legislation, the Pension Schemes Act 1993, to prevent members from transferring out of the personal accounts scheme. We recognise that the transfer-out ban could complicate the decumulation arrangements for individuals over 55 who may want to aggregate all their pension pots in different schemes into one pension fund in order to purchase an annuity. My noble friend Lady Hollis and the noble Lord, Lord Oakeshott, in particular, have touched on this. Making an exception for stranded pots is a further area that we want to consider in some detail before we introduce the transfer-out regulations. We will look at that seriously. PADA and DWP are currently working jointly on developing the likely content and approach of the secondary legislation, the scheme order, and non-legislative scheme rules for a public consultation in March 2009. Amendments Nos. 112A and 112B would place a blanket ban on all transfers, in and out, until 2017. I have some sympathy with the idea of a bedding-in period, effectively allowing the personal accounts scheme and the existing industry to adjust before 2017, when transfers may again be permitted. Indeed, our commitment to a ban on transfers and a subsequent review in 2017 will achieve this. However, as I have explained, we cannot support the idea of a blanket ban. It is important that we allow limited scope for a number of closely defined transfers that will benefit scheme members but will not impact adversely on the pensions market. Even in the short time between establishing personal accounts and the 2017 review we do not believe that it makes sense to prevent, for example, transfers of pension shares on divorce into personal accounts. We will keep the position on transfers under review as the personal accounts scheme evolves and the wider market impacts become better understood. The 2017 review will address this issue specifically. In response to the question put by the noble Baroness, Lady Noakes, the current proposition is that the review will take place in 2017. It will decide what will happen to the ban: whether it will be lifted and within what timescale. I hope that the noble Baroness is reassured by my iteration of our commitment to limit transfers in all but an extremely limited range of cases and I ask her to withdraw the amendment.