Pensions: Sale of Annuities

Debate between Lord Young of Cookham and Lord Stoneham of Droxford

Wednesday 19th October 2016 Lords Chamber

[Lord Stoneham of Droxford (LD)]

Well, well, well, my Lords, what has happened to the party of freedom and freedom of choice? The Government promised us stability in the general election. That was lost by the referendum result. They promised us an economic plan, which is now in shreds. Page 3 of their manifesto said that the Conservatives would,

“give you the freedom to use your pension savings as you want”.

No. Now they will not.

There was a flagship announcement by George Osborne in March 2015 of another government initiative. It had a good headline, and a total lack of follow-through once Steve Webb, the Pensions Minister, was no longer in government. Therefore, inevitably, the Government are left abandoning it. People are locked into poor-performing annuities and they deserve an escape route. I have four questions for the Minister.

How are people being informed of this change, particularly those who would like to get out of their locked-in annuity policies? What help will the Government give to people locked into these poor performing annuities? Is this reversal due to the low interest rates following Brexit totally destroying the returns on lump-sum annuities? Finally, by making this announcement outside Parliament, is this another example of the Government not being in control of what they are doing and economic and pension policy being dictated by the markets?

[Lord Young of Cookham]

I am grateful to the noble Lord. On the timing of the announcement, sometimes the market-sensitive nature of an announcement means it has to take place at a specific time, quite often when the Stock Exchange is not open. So far as those who are disappointed are concerned, the information available to the Government is that only 5% of those with annuities would be likely to have taken up this offer had it gone ahead, so roughly 95% will not be affected by the announcement. It is independent of any level of interest rates; it is not a function of quantitative easing or anything like that. I see that Steve Webb, to whom the noble Lord referred, has said that the decision is “disappointing” but “understandable”, implying that he goes along with it.

The final point about information is a good one and I will see what we can do to let people know. I suspect that many will have read the newspapers and are aware that this option will no longer be available.

Pension Protection Fund

Debate between Lord Young of Cookham and Lord Stoneham of Droxford

Tuesday 13th September 2016 Lords Chamber

[Lord Young of Cookham]

My noble friend is absolutely right that when gilt yields fall, the deficits go up. There is an international accounting standard, to which we are obliged to adhere, that indicates how the deficits are to be valued. As I said, they are volatile; should interest rates go up, the deficits would go down. But I am grateful to my noble friend for putting it in that broader context.

[Lord Stoneham of Droxford (LD)]

My Lords, at a time when most private sector companies have ended their final salary pension schemes—and, indeed, the Government have conducted very substantial reforms of public sector final salary schemes—is it appropriate that the Bank of England’s senior management scheme should be subsidised heavily, oblivious to the policies that the Bank of England is making, which affect people’s pensions?