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Pensions Bill

I do not think so. The nature of the regime that would have to be established, particularly given the opportunity for withdrawing significant one-off lump sums in circumstances where someone might plan to be non-resident for a period, would require a raft of anti-avoidance provisions that would fetter the fundamentals of our current pension saving schemes. None of these options is compatible with the basic and fundamental purposes of pension savings—to provide the member with an income in retirement. As I said, I would also like to consider the tax consequences of the amendments. These amendments do not indicate how withdrawals would be taxed. The expectation would be that a form of taxation would apply, but in most cases it would seem likely that the tax charge on RIF withdrawals would be less than the amount of tax relief enjoyed on these funds. RIF savings would clearly be tax advantaged compared with other forms of savings. Given the apparent ability of those with sufficient other income to extract RIF savings at will, there is a danger that it would become a vehicle into which other savings are recycled for tax advantage, rather than encouraging new retirement savings. It would be unfair to expect taxpayers to foot the bill for people who take the tax relief for pension savings but do not use the accumulated funds to provide an income in retirement. It is unclear what would happen to the RIF on a member’s death but, given what is proposed by Amendment No. 140, which I shall move on to shortly, it seems that these clauses would allow a small group of wealthy individuals to pass their pension funds on to their heirs on death. There is no rationale for taxpayers to support bequests in this generous way. One of the primary considerations of current pension provision products is that they provide an income that is guaranteed for at least the rest of the person’s life. With the proposed RIF, there is a risk of the individual running out of money in retirement. This is because it is impossible to accurately assess an individual’s life expectancy. How on earth would that be done? Insurance companies can protect the average life expectancy of particular cohorts. The noble Lord, with his expertise, does not need me to tell him that. The RIF requires an individual assessment to be made that enables a guaranteed income for life to be provided, regardless of how long the life is, by pooling the risk. Annuities achieve exactly the same outcome for defined contribution pension schemes as exist for defined benefit schemes or, for that matter, state pensions; namely, that pensions are paid as a regular stream of income until death and, barring dependants’ pensions, that they end on the member’s death. No refund of contributions is given to the estate but everyone has the peace of mind of knowing that the pension will continue to be paid regardless of how long they live. In essence, these amendments would benefit those who are able to take advantage of the tax relief given for pension savings to build up substantial pension pots, but who then want to use the accumulated fund for a purpose other than providing an income in retirement. In other words, the proposed RIF would provide significant tax benefits to the wealthiest in society at the expense of the taxpayer. I will pick up on a number of points about the current range of pension pots. I take the point that, over time, more people will build up a significant retirement pot. However, the current figures show that, for 2007, a total of 445,871 annuities were sold, only 3.2 per cent of which—14,000—were for pension pots of more than £100,000. We also have figures for the first quarter of 2008, which show that 3.7 per cent of those sold were for pots of more than £100,000. I accept that that may change over time, as more people save in pensions and as personal accounts get under way. The Government have said that they will keep under review what happens in terms of the age at which someone should annuitise in future.