Finance Bill

I hear what my hon. Friend is saying. He is almost certainly correct, albeit somewhat partisan. I shall learn lessons from what he has said, but I am attempting to forge a consensus with the Opposition and so shall move on. As I was saying, there was an earnings relief of 5 per cent., but the market remained very undeveloped. Essentially, term assurance is a pretty low-cost, high-volume sort of market, and the amount of tax relief available was not sufficient. This Government reviewed the position at the end of the previous decade, as part of establishing an integrated tax regime for personal and stakeholder pensions. Consultations were held in September 1999 and February 2000, and the Government consistently made it clear that"““pension contributions are not a way of getting tax relief on various insurances that would not otherwise qualify for relief.””" The Government held that the primary aim of pension tax relief was to encourage saving in a pension. After the consultation of February 2000, the Government stated:"““Many respondents argued that it should be possible to include an element of life assurance cover within a pension. But they did not support the use of a flat rate limit… The Government has decided that life insurance can be included so long as it does not exceed 10 per cent. of the contributions paid.””" History shows that what had been a very small market before that decision became a negligible one, and that 10 per cent. of overall contributions was not sufficient to incentivise people to go into the pension-related term assurance market, given the nature of the business. The Government embarked on a process of simplification, at each point making it clear that the goal was"““to encourage people to save in a pension””." That was what drove our thinking. In the second pension simplification document of December 2003, we said that"““the Government wishes to ensure that pensions remain a vehicle for providing income in retirement…Pensions saving is to provide an income in retirement...It is not a route for conserving and passing on capital””." That was the background to the debate on the 2004 Finance Bill, when the then Financial Secretary undertook the pensions simplification process. However, there was no reference in the legislation to pension term assurance—the expression did not exist at the time. The market for pensions-related term assurance was negligible at the time, and there was no intention to encourage a term-assurance market link to pensions, nor any discussion of such an intention during proceedings on the Finance Bill. There was a simplification of the pensions and tax regime to provide income in retirement. There was some discussion between the industry and the Government as to whether the simplification would lead to the growth of a pension term assurance market and whether the changes in tax relief for pensions might lead to migration or churning in the term assurance market. However, there was no consensus for the view that the changes posed a material risk. Following discussions with industry players, the then Financial Secretary concluded that there was not a material risk that the changes we were making to tax relief for pensions retirement income would be likely to lead to a rapid growth in a pensions-related term assurance market.