My Lords, following my noble friend Lady Hollis, I support the inquiry about the pricing structure and whether we will know that by the time the Bill completes its passage through your Lordships’ House. I listened carefully to the Minister’s explanation, because at the heart of it this is basically a savings plan. It is effectively an annuity arrangement. It is attached to the additional state pension but you could delete all that and describe the fundamental proposition here very much as an annuity. We know that that cannot be done because the DWP does not have the power to do it. However, we should be clear what this is about.
It is attached to the additional state pension and gives people a chance to enhance provision they have made in that respect. As I understand it, you could avail yourself of this opportunity if there was currently no additional state pension due—or there was a very significant amount of additional state pension due because you had been investing heavily in it, certainly above the level of the single tier of pension. Indeed, if somebody was contracted out of additional state pension I think they would still be able to avail themselves of this opportunity. I am just trying to work out how easily that sits with the whole concept—this is all about people who have reinvested in additional state pension, not just about an investment product.
I did not find the rationale for leaving these arrangements open for only a limited period, and the online survey is a bit difficult to interpret. Can the Minister give us any more information about the expectation of the number of people likely to take this up and the amounts that they are likely to take up? The Minister said—and this was said in the briefing session as well—that nothing has been scored in respect of these proposals so far as the public accounts are concerned, but presumably it will be scored at the next Budget, and certainly credit for any take-up of this will feature in the year 2015-16, presumably with its consequential impact on the deficit and government debt arrangements. Indeed, the lump sum would be taken out in the year in which it is received, and the flow of pension contributions will just score over the years and decades ahead.
Given the nature of this, I am interested to understand the sort of explanations and information that people will be given when they are looking to make their choices. In a sense, the information about their class 3 and 3A voluntary contributions is relatively straightforward, but we are in an environment where we know the annuities market is generally very opaque. The Financial Conduct Authority is on the point of publishing a review of the annuities market. Given the closeness of this product to annuities, what sort and range of advice and information is it proposed that the Government
will provide for people thinking about taking up these opportunities? We accept some of the potential benefits. In a sense, it is risk free; it is inflation protected; and it can be shared on divorce. One sees the benefit of those arrangements, but I have one or two queries on the wording of the amendment which I hope the Minister can help me with.