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Pensions Bill

moved Amendment No. 127: 127: After Clause 88, insert the following new Clause— ““Minimum retirement income (1) The amount of the minimum retirement income in respect of each tax year shall be set by the Chancellor of the Exchequer by order at the level of the standard minimum guarantee prescribed under section 2 of the State Pension Credit Act 2002 (c. 16). (2) Before making an order under subsection (1), the Chancellor of the Exchequer shall consult such persons as he considers appropriate. (3) An order under this section (other than the order that applies to the first tax year during which this section is in force) must be made on or before 31st January of the tax year before the tax year to which the order applies.”” The noble Lord said: I shall speak to Amendments Nos. 128, 129 and 140 as well. I follow a number of my noble friends on this subject; the most persuasive speech was that made by my noble friend Lord Higgins on 15 November 2004, when he reminded us that this matter has a long history, stretching back over decades and many debates on various Bills. Indeed, he also reminded us that on several occasions this House has passed amendments to remove the compulsory age of 75. Therefore, it is with a sense of history that I seek to do exactly the same. I recall that one of the most persuasive parts of my noble friend’s speech on 15 November 2004 was when he referred to the Watson Wyatt study, a very comprehensive and technically well executed study about people’s attitudes to annuities. Over a reasonable sample survey, it came to the view that something like 58.8 per cent of those surveyed never wanted to annuitise their pension pots and something like 12.1 per cent wanted to do so later than required to at the time. Therefore, something over 70 per cent of the people surveyed were against annuitising their assets as the present law requires them to do. I am very pleased to have the opportunity of giving the House a further chance to make its views absolutely clear. We return to the question of whether the law should require pensioners to have converted all their pension saving into a lifetime annuity by the time they reach 75. The Finance Act 2004 outlines the law; namely, that pension income has to be taken before someone’s 75th birthday, either as an annuity—a secured pension—or as an alternatively secured pension. I recall that the upper age of 70 was set in the Finance Act 1970. In 1976 this was increased to age 75 for retirement annuities. When personal pensions were introduced by my noble friend Lord Fowler, the age limit was retained. I look forward very much to any contribution he may make on this very important subject. This is now important for three reasons: first, the growing acceptance of increases in longevity and the implications for pensions in the United Kingdom. I have been looking carefully at the tables, to which I referred in the previous debate. It is remarkable how 75 is viewed as relatively young. That is borne out by the figures. In 1981, life expectancy at the age of 65 for males was 14 and 18 for females. Life expectancy at the age of 75 was 8.1 for males and 10.7 for females. These figures have increased, so far as present tables are concerned, to life expectancy at age 65 of 19.5 for males and 22.2 for females. At age 75, it has increased for males to 11.4 and for females to 13.1. In 2050, it will increase at age 65 to 23.6 for males and 25.9 for females. It is foreseen that, at age 75, life expectancy will be 15.2 for males and 16.9 for females. One can well understand therefore why this is a key issue to consider. The second reason is that future increases to state pension age have been agreed by legislation; namely, the Pensions Act 2007. Thirdly, there has been a rise in the minimum age at which someone can take pension benefits, from 50 to 55 by 2010. There was a good debate on this matter some four years ago, when I recall the noble Lord, Lord Oakeshott of Seagrove Bay, being moved to say that, "““we would prefer no limit at all””.—[Official Report, 15/11/2004; col. 1229.]" It is obviously that the persuasiveness of my noble friend Lord Higgins had quite a dramatic effect, because we will hear later in this debate whether the noble Lord was overcome by the cogency of my noble friend’s arguments to make that clear statement and whether he still holds to it. My persuasive powers may not be as great as those of my noble friend, but we wait to see. Amendment No. 128 would set up a retirement income fund, so that there would be enough money to ensure an annual income above a minimum set by the Chancellor in Amendment No. 127. That level of income would ensure that the individual would not have recourse to the state and not be eligible for benefits such as pension credit. Amendments Nos. 129 and 140 are consequential. I suppose that we could look at a number of alternatives. The first is the simplest: to remove the age limit of 75 all together, which is what the amendments propose. I suppose that we could go down more complicated routes. For example, we could agree to increase the age of 75 by a year every two years, which was argued with me by the president of the Institute of Actuaries at a recent dinner that I attended as an honorary fellow. That is an understandable suggestion that would lead in the right direction but would be an alternative method. I suppose that we could also increase the age of 75 by the same increases as the state pension age, or we could just increase the age of 75 in accordance with increasing longevity. However, I am seeking in these amendments to try to apply the simplest approach; namely, to abolish the limit all together. I shall just indicate why I argue that case. First, I concede that annuitisation has its merits. Earlier in this debate, I made reference to my entries in the register of interests, where it is clear that I have for many years been involved in the insurance industry. I know that the industry regards annuitisation as a simple and secure way in which to maintain a certain level of income in retirement. Therefore, there is credence in having that as an option—but it should be a choice for the individual, who should be able to make up their mind as to whether they want to go down the road of annuitisation. However, we must safeguard the interests of the taxpayer by making sure that an individual cannot be reckless with regard to the pension pot. There are already exemptions for the Christian Brethren. I referred in the debate last year—as did my noble friend in the debate some four years ago—to the fact that the Christian Brethren, all 738 of them, had secured recognition of the fact that they objected to the pooling of mortality risk. We have asked on a number of occasions what the present situation was in that regard, and whether the Minister was minded to accept that others will have the same objection, on non-religious grounds. I know that on previous occasions he has said that it is a very dangerous road down which a Minister might travel, because of the problem of avoidance or, indeed, evasion—but primarily avoidance, which is perfectly acceptable but would not be accepted by the Government as an appropriate way in which to deal with this problem. I would argue, too, that the ownership of the pension pot lies with the person who has saved throughout their lives, often at the expense of their living standards, in order to put aside a substantial sum of money for their retirement. I mentioned earlier that I am proud to be chairman of a body called the Life Trust Foundation, which is now looking at the effects of increasing longevity on the individual’s capacity to cater for those later years. Adding quality life to years of life is a theme that has to be considered. More people are now turning their minds to how on earth we are going to provide for the fact that we will all live very much longer. The latest figures, some of which I referred to earlier, are quite remarkable. The Office for National Statistics and the Government Actuary Department’s figures predict that the cohort life expectancy for those aged 65 at present is projected to be 20.6 years for males and 23.1 years for females. That is an extensive period of time. Not only does it demonstrate that we are out of date in keeping to the limit of 75, but we should also be finding simpler and easier ways in which to enable people to save to cover their later years. That is a growing problem. The Life Trust Foundation has recently said that it is a bigger problem than climate change—the fact that so many people are living so much longer without really having had the opportunity to ensure that they have the necessary funds to maintain them in their old age. My final point is that these amendments would re-establish individual control over a pension pot for the person who has done so much to save that sum. Of course, we are talking about a market which is expanding rapidly. The ABI estimates that the UK pension annuities market has tripled in size in the past 15 years. Last year, premiums in the pension annuities market were over £11,000 million, and more than 400,000 contracts were sold, many to people who do not have very substantial sums and who need what I would give them in these amendments; namely, choice, freedom and the right to their property. I beg to move.