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Clause 1
Amendment of the Income and Corporation Taxes Act 1988
Mr. Garnier: I beg to move amendment No. 22, in
clause 1, page 1, line 6, leave out from 'Fund' to ', and' in line 7.
The amendment seeks to remove from clause 1 the words
''or sums for investment in a Retirement Failsafe Fund''.
They were included to cater for the religious objections of the Plymouth Brethren to proceeding through an annuity and to allow for other forms of financial instrument. I understand that my hon. Friend the Member for Arundel and South Downs recently received a letter indicating that the Brethren are in discussion with the Treasury. It is with their acceptance and approval that we move the amendment to remove them from the provisions of the Bill.
If those discussions between the Brethren and the Treasury prove to be fruitful—that is more likely to be the case if we do not aggravate the Treasury by keeping those words in the Bill—we shall have achieved two good things. First, we will have shortened the Bill. Secondly, we shall have provided the Plymouth Brethren with some other route by which to ensure that their pension arrangements can be catered for within their religious faith.
John Healey: I pause for a moment to deal with one of two issues that are raised by the amendment. As the hon. and learned Member for Harborough said, the amendment relates to the concerns of Christian Brethren. During the Committee stage of the previous Bill—I referred to it earlier, and the current Bill is something of a replica—hon. Members, including the hon. Member for Arundel and South Downs, tabled an amendment to allow a personal pension scheme to invest in a retirement failsafe fund. Again, that was done to meet the specific concerns of a group that had principled objections to annuities. The Committee accepted that amendment, but negatived another that contained a specification of a retirement failsafe fund and the conditions that it would have to meet. As a result, the Bill was defective when it left Committee. As the hon. and learned Member for Harborough explained, because that defect has not been put right, this Bill, too, is defective.
The hon. and learned Gentleman has explained how he seeks to correct the defect; and the Christian Brethren are now in discussion, but with the Revenue rather than the Treasury, because the Government recognise their concerns.
Jeremy Corbyn (Islington, North): Would the Minister explain the problem identified by the Brethren?
John Healey: It is not really for me to explain the views and principled objections of the Christian Brethren, but they believe that investing money through annuities is not the right thing to do. They are therefore unable to make that sort of provision. On the face of it, the Bill as amended would do nothing to assist the Christian Brethren.
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Mr. Flight: May I be of help? The Brethren have a religious belief that one should not gamble on life. They view insurance policies as a form of gambling; as a result, their religion does not permit them to invest in any form of insurance. Therefore, if they are to stick to their religious principles, they cannot use annuities.
John Healey: Nothing in the Bill now deals with those concerns.
It is important, because the hon. and learned Member for Harborough spoke of it, to mention the Inland Revenue's pension simplification review. It is in that context that discussions are taking place with the Christian Brethren. Their principled objections are based on the pooling on which annuities depend, but the review will completely change the pensions landscape. The hon. Member for Arundel and South Downs rather understated the significance of the measures that we consulted on; we are now weighing the responses to that consultation.
The Government's policy remains that tax privileged pension savings must be used to provide retirement income for life from no later than the age of 75, and for no other purpose. For those with personal pension schemes, the most financially efficient way of achieving that is to buy an annuity. That is clearly the right thing to do in the vast majority of cases. However, because of the Brethren's principled objections to the purchase of annuities, the simplification review looked for another way of turning pension savings into retirement income in a way that replicates the advantages of annuitisation without the pooling of funds.
The Government are considering views from a wide range of groups, including those with more narrow objections, to see what might be made to work. We aim to produce detailed proposals in the autumn. If possible, we aim to include draft legislation in next year's Finance Bill, with implementation in April 2005. However, the Bill no longer makes the sort of provision that members of this and previous Committees and those Members who spoke on Second Reading professed to be concerned about.
Mr. Garnier: Of course, it does not need to, because the Plymouth Brethren are in useful discussions with the Revenue—or the Treasury: it does not matter which—and anything that I do to upset those discussions would be entirely counterproductive. I do not want to do that; I want to produce something that best helps the Brethren, and the route that they have chosen is to have discussions with the Revenue. By removing those words, I would be fulfilling their request. I do not think that there is anything terribly suspicious about that, nor is it damaging to the Bill. The hon. Gentleman's arguments about previous Bills, although this one is a replica of what I might call the ''David Curry'' Bill, are beside the point.
John Healey: I do not suggest for a moment that there is anything suspicious, but I am taking this opportunity to confirm the points that are of concern to the Christian Brethren. Because of the carry-over from the previous Bill, this amendment relates to the particular discussions and provisions considered then. I welcome the hon. and learned Gentleman's
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confidence that making appropriate provision for the Christian Brethren is best pursued through working with the Inland Revenue, and can be left to us, rather than including such provision in the Bill. The technical change is a tidying-up change. In many respects, it has no substantive force in the Bill.
Mr. Garnier: I am not sure where that leaves me, other than to feel it unnecessary to repeat what I have already said. The Minister's historical overview of the previous Bill was interesting but not exactly germane to the arguments that we are not having, if I may say so, this afternoon. This seems to be a benign and useful change to the Bill, and if it makes the Plymouth Brethren's life and the Revenue's life easier, why not celebrate that and invite the Committee to accede to the amendment?
Amendment agreed to.
John Healey: I beg to move amendment No. 24, in
The Chairman: With this it will be convenient to discuss amendment No. 27, in
clause 1, page 2, leave out lines 10 and 11.
John Healey: The two amendments relate to the point on gender neutrality that the hon. and learned Member for Harborough touched on when commenting on the sittings motion. I have to say to him that gender neutrality is not the same as gender equality. The change made by the Bill does not recognise the differing life expectancies of different groups that insurers take into account when setting annuity rates. The Bill would remove the right of insurers to underwrite personal pension annuities on the basis of gender and to allow that to be taken into account as a risk factor. It would instead force personal pension annuity providers to use composite annuity rates averaging male and female factors.
The argument is that women get a raw deal because they receive lower annuity rates than men, but the value of an annuity is the same for men and women because it reflects the average life expectancy. Other aspects being equal, an annuity payable to a woman may be smaller than that payable to a man, but will on average be paid over a longer period because of a woman's longer average lifespan. My hon. Friend the Member for Hendon (Mr. Dismore) explained that clearly and at some length on Second Reading, on 7 March. It is worth reminding the Committee of that, because it underpins the Government's concern. Hence these two amendments.
Lynne Jones: There are other groups that have a greater life expectancy, but the Government have never decided that more affluent people, for example, or people from different ethnic groups, have a different life expectancy. Why should women be discriminated against in this way just because, on average, they happen to be fortunate enough to live longer? In any case, men are gradually catching up with women. This is an argument of the past. It is time that women had fair treatment.
John Healey: I do not accept that this is an argument from the past. I hope that in the relatively
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brief remarks that I shall make to explain the Government's position, I will be able to deal with my hon. Friend's concerns. In particular, we deal with the different levels of affluence that affect lifespan in various ways in the tax system, as she knows.
I have figures for the top rates currently available, taken from the annuity direct rates table published in June. A 65-year-old man who purchases an annuity for £100,000 might receive £603 a month. The comparable figure for a female purchaser of the same age is £565 a month. For simplicity, those are figures for level annuities. However, if one looks at what those people would receive during their respective life expectancies, the male's total payments over his expected lifespan of 17 years would be £123,050, whereas over the female's life expectancy of 20 years, she would receive £135,720. Interest and inflation rates clearly play a large part in assessing the value of those amounts, but the simple figures illustrate that the value of a woman's annuity is no less than that of a man's. Other aspects being equal, an annuity payable to a woman may be smaller than that payable to a man, which is the concern of my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones), but it will on average be paid over a longer period.
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