Pensions: Sale of Annuities

Lord McKenzie of Luton Excerpts

Wednesday 19th October 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for repeating the Statement, but this is the second government U-turn on pension-related matters that we have seen in the space of just a few weeks—another example of a flawed approach to pension policy characterised by fanfare announcement, a period of rethink and then a retraction by press release. In this case, there has been an abandonment of plans for a secondary annuities market, as we have heard, which was never credible without consumer detriment.

At a time when we need to build confidence and sustainability in our pension system, what sort of message does this chaotic approach send to those we should be encouraging to save more for their retirement? How do the Government propose to address the £960 million additional black hole in their finances that now arises from the reduction in their projected tax revenues?

[Lord Young of Cookham]

I am grateful to the noble Lord for his measured response. On the first question, I do not think confidence in pensions would be enhanced if we went ahead with the scheme without adequate consumer protection. Against a background over the past 20 or 30 years of financial products being sold incorrectly, it would have been quite wrong to go ahead with this scheme. As I said, it was unlikely that a vibrant and competitive market would emerge and we could not get the market to work without undermining consumer protections.

On the figure pencilled into the Government’s accounts, had the policy gone ahead, it would have brought forward a certain number of tax receipts into the early years at the expense of getting those receipts in the later years. Overall, I think it will be neutral. It will be up to the Chancellor in his Autumn Statement to explain how the books will be balanced.