HC Deb 29 October 1954 vol 531 cc2355-68

Motion made, and Question proposed. "That this House do now adjourn."—[Mr. R. Allan.]

3.11 p.m.

Mr. John Peyton (Yeovil)

In raising this question of retirement pensions, I think it is desirable that I should start by saying that it is no part of my intention to impugn in any way the retirement principle where the pension is concerned. It is my purpose to invite the Joint Parliamentary Secretary and my right hon. Friend to make use of the present opportunity of the current review of the National Insurance benefits to consider very carefully the working of this retirement condition, particularly in relation to the earning group.

This point is a rather obscure one. As I understand it, it is that persons, to qualify for pension, must satisfy three conditions. They must have reached the required age; they must have paid the necessary contributions; and also they must have retired from regular employment. This last condition is laid down in Section 20 of the 1946 Act, which provides, amongst other things, that …a person may …be treated as having retired from regular employment…notwithstanding that he is engaged or intends to engage in a gainful occupation, if he is engaged or intends to engage therein only occasionally or to an inconsiderable extent or otherwise in circumstances not inconsistent with retirement. It is with the words "or to an inconsiderable extent" that I am principally concerned. In practice they have come to mean that a person will not be con- sidered to have retired from regular employment if he intends or does in fact work for more than 12 hours a week. For the first five years after the passing of the Act this requirement remained largely inoperative for the simple reason that a limit was imposed at that time of 20s. which could be earned each week without the rate of pension being affected. That had the effect of limiting also the hours a pensioner would work to below 12 hours a week.

However, when in 1951 the Government, very rightly in my opinion, took the step of raising the earnings limit from £1 to £2 a week the effect was that this retirement condition suddenly achieved a quite new significance. People who had retired, and particularly those about to do so, found that they were confronted with this hitherto comparatively unknown restriction.

What is the position of a person who has retired but who subsequently works for more than 12 hours a week? I believe that the answer is, or should be that no action would be taken unless it could be shown that the person concerned, at the time of his retirement, had no bona fide intention of limiting his hours of work. This is, however, a point on which there is a great deal of misunderstanding. Many employers are of the opinion that a pensioner cannot work for them for more than 12 hours in the week. I want the Joint Parliamentary Secretary to deal with that matter in his reply, or at any rate to give it his close consideration in the coming weeks.

To return to the position of those about to retire, there is an obvious anomaly in saying to a pensioner, "You are free to earn 40s. a week without your pension being affected,"if you say, at the same time," But if you work the requisite number of hours to earn that 40s. you are not entitled to a pension at all." That is what we are saying, in effect, to anybody who receives less than 3s. 4d. an hour. The position will be made worse if, as I hope, the Government subsequently raise the earning limit—unless, at the same time, the Government take some action about the retirement condition and bring it into line.

This is a comparatively short point but I believe it to be one of genuine obscurity and misunderstanding. I hope that it will receive the careful consideration of the Government, and that the Government will use the valuable opportunity of the current review to bring about harmony between the retirement condition and the earnings rule. In my opinion, there is a serious lack of harmony between them at the moment. The result of any improvement which the Government can introduce would be to allow the lower-paid pensioners the full benefit of a higher earnings rule, and the Government would be able to derive considerable satisfaction from removing a restriction which is frequently a source of injustice, and which certainly both perplexes and annoys many old-age pensioners.

There is no need for me to detain the House further. The Joint Parliamentary Secretary always gives great attention to the points which are put to him, and I ask him to give this matter very careful study because it is one about which there is a good deal of misunderstanding. It is well known that in these pension matters it is very important not merely that the law should be sensible and intelligible but that it should be understood and seen to be fair and reasonable by the large numbers of our people who are most intimately affected.

3.20 p.m.

Mr. H. Hynd (Accrington)

The hon. Member for Yeovil (Mr. Peyton) has raised a genuine grievance in a very reasonable way. As he said, this is a short point but it has been raised many times from both sides of the House in recent years and, undoubtedly, this problem causes great dissatisfaction in the country.

When this matter is brought forward the reply often is, "But the person who wants to continue need not retire at the age of 65, or 60 in the case of a woman." That is true in many cases, but not in all cases. Very often persons have no option about retiring at that age. It may be because of superannuation rules, it may be because they are in an employment the nature of which makes it difficult, if not impossible, for them to carry on beyond that age, or there may be rules about their employment which prevent them doing so. Therefore, they may have to retire at 60 or 65 while still perfectly capable of doing some work and while not merely willing, but anxious, to do so.

We all know that many people would be worse off physically and from the point of view of happiness if they had nothing to do beyond those ages. In theory, the earnings rule is fair, reasonable, logical and, no doubt, actuarially correct, yet in practice it appears to be unreasonable, unfair and even foolish. Many old people just cannot understand why, if they are prepared to do some work within their capacity beyond retirement age, they are not allowed to receive the money earned, or not allowed to work beyond what will mean their earning a certain amount.

There is a more sinister aspect of this question to which I do not want to attach too much emphasis. Undoubtedly there are cases where employers take advantage of the situation in order to get cheap labour. They tell many of these old people that they are not allowed to pay them more than a certain amount because to do so would affect their pension and, therefore, limit what they pay to 40s. I am not suggesting that there are many cases of that kind, but I have come across some in my constituency. That is something which must be borne in mind by the Minister.

I suggest that, without infringing the principle of the earnings rule, the Government might well look at this question again in the light of the changing value of money. Whatever the figure was which was felt to be fair when the earnings rule was first introduced it might well be thought that there is a good case now for raising that figure in view of the lower purchasing value of the pound. Thereby, whilst maintaining the principle, pensioners could be allowed to earn a little more within their capacity. I hope that the Minister will listen to the plea made by his hon. Friend in this matter.

3.23 p.m.

Mr. J. K. Vaughan-Morgan (Reigate)

I think it is a very good thing that the rather unexpected harmony which has prevailed in the world of art has allowed a short debate on this problem as a preliminary canter before the greater debates we shall no doubt have at a future date.

I entirely agree with the hon. Member for Accrington (Mr. H. Hynd). The earnings rule has never been understood by the great majority of people—not only those affected in the ordinary way, but even by many hon. Members of this House. Its purpose, as laid down by Lord Beveridge, was never got over to people: the reason why we need to have an earnings limit if we are to have highly desirable increments to pension.

I think part of the reason is that for many years there was not enough publicity given to the increments and to the attractiveness of staying on at work to earn a larger pension, either by the employers or by the employment exchanges, and incidentally, by the Ministry itself. In the old days, they sent out a circular virtually reminding pensioners that their pension was due in a short time. Now, I understand, there is a different procedure. Whilst notifying pensioners when the pension becomes due, the advantages of staying on at work are pointed out. I wish to support the plea for raising the earnings limit now, in accordance with the altered value of money. I think it should be made possible to do so without necessarily having a Statute each time.

When we were discussing the 1951 Pension Bill, I and some of my hon. Friends suggested that it should be possible to vary the deduction from the pension, that it was not necessary to take 1s. off the pension for each 1s. earned. It might be 6d. for each Is. earned. That was turned down as administratively impossible by the then Minister, the right hon. Lady the Member for Fulham, West (Dr. Summerskill). But, in the light of changing circumstances, I think that it might be worth considering again. Many of these difficulties arise from the interpretation of the decisions made by the Commissioners. We have a large volume of case law arising out of those decisions made from time to time on the 1946 and subsequent Acts—

Mr. Speaker

I think that [he point which the hon. Member is now making would involve legislation, and if that be so, it is out of order.

Mr. Vaughan-Morgan

I apologise to the House for being out of order. There are many anomalies, but no doubt a suitable occasion will occur for reviewing them.

3.27 p.m.

Lieut.-Colonel Marcus Lipton (Brixton)

In order to show that there is an equal volume of opinion on both sides of the House on this matter, I wish to support the argument that old people do not understand why this 40s. limit should operate and that it would be in the interests of the community as a whole—

Mr. Peyton

I agree with what the hon. and gallant Gentleman is saving, but my real point is that, as I understand the position now, an old-age pensioner who is only paid 2s. or 2s. 6d. an hour cannot earn even that 40s.

Lieut.-Colonel Lipton

I was fully seized of that point. It is quite impossible for a considerable section of old-age pensioners to earn more than 3s. 4d. an hour and to qualify under the present regulations. There are a number of old people who have retired for one reason or another and who have to fall back on a pension. I appreciate that there are increments of pension in return for full-time work after the retiring age of 60 for women and 65 for men. There are all kinds of reasons why people, having retired, do not wish to give up work altogether.

We live in a state of society in which we hope that old people will stay on in their jobs as long as possible. I think that is essential from the point of view of production as well as of the happiness of the old people themselves. I hope therefore that the Parliamentary Secretary will be able to hold out some prospects this afternoon. We are not trying to make life awkward for the new Joint Parliamentary Secretary. We hope that he will be able to make some kind of response which will give not merely financial pleasure but psychological satisfaction to a very large number of old people.

3.30 p.m.

Mr. Eric Johnson (Manchester, Blackley)

I take the opportunity briefly to support what has already been said from both sides of the House. I agree that my hon. Friend the Member for Yeovil (Mr. Peyton) has raised an extremely important issue. On more than one occasion I have stressed the need for an increase in the amount that old-age pensioners can earn without incurring deduction from their pension. I admit that I was not aware of the rule which prevents them working for more than 12 hours a week. If there is to be any increase in the amount which they may earn, and one hopes that there will be, the importance of the question raised becomes much more apparent.

It also seems that as pensions increase — and we hope that they will increase even more—the amount a pensioner may earn without incurring deduction from his pension should also be increased to some small extent. It has been said that if we increased the amount of pension without deduction that would discourage people from postponing retirement. Nobody wants to discourage that, but I cannot believe that a small increase of, say, El in the allowed amount of earnings would have that effect. If a man were allowed to earn even £3 without incurring a deduction a male pensioner would only be able to earn £4 12s. 6d. I believe that that would not encourage him to postpone retirement. Many of those who postpone retirement do so for the excellent reason that they want to. That is as important as the question of the amount of money they may earn. Many people feel that they are able to go on working after the age of 65 and they want to go on. I do not believe that any change would prevent them.

If one is able to continue in full employment, there is the question of the greater security of one's job rather than that of being dependent on pant-time casual work, and there is the added attraction that one will get an increased pension on eventual retirement. However, the present rate is too small. It is rather unfair to people who cannot do a full-time job even if they would like to, and it is equally unfair, as the hon. Member for Accrington (Mr. H. Hynd) pointed out, to those who are compelled to retire owing to the conditions of their employment.

I hope very much that the opportunity of the five-year review will be taken by my right hon. Friend to consider these matters, which although they may seem small, are most important to a lot of old people. I hope that something can be done to remedy these small defects.

3.34 p.m.

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Ernest Marples)

I am sure that the House is grateful to my hon. Friend the Member for Yeovil (Mr. Peyton) for raising this important issue. I am also deeply indebted to him because, as I am new at this job, it made me study very hard to get my mind clear on the subject of these provisions.

Before I try to explain the situation, which I do not believe is fully appreciated by all hon. Members, I would say in reply to my hon. Friend the Member for Manchester, Blackley (Mr. E. Johnson) that it is realised that this is a deep human problem which will require a lot of careful and sympathetic consideration during the next few months. I assure him that it will receive that attention from my right hon. Friend

I am in a dilemma. If I deal with the point about increasing the earnings limit of 40s. or making the deduction 6d. in respect of every 1s. earned, I shall be transgressing the rules of order, because that would require legislation. Therefore, I think the best thing I can do is first to explain the rule as it now stands.

We are dealing with retirement pensions, and the emphasis is on "retirement." What do we really mean by "retirement"? "Retirement" means different things to different people. When the man-in-the-street says he has retired from work, it means that he has given up work altogether. I should like one day to say "I have retired from work, and shall not do any more." However, for insurance purposes under the Act retirement does not necessarily mean that a man need stop work altogether; he is allowed to draw retirement pension although he may still be doing some work This applies to men aged between 65 and 70 years and women aged between 60 and 65.

The Minister can do very little at the moment, because the law is laid down by Parliament and he must observe it. The interpretation of the law is not by the Minister but by an independent statutory authority; first, the insurance officer, then the local appeal tribunal and, finally, the National Insurance Commissioner. I will deal first with the law and then with its interpretation.

As my hon. Friend said, Section 20 says that a person shall be entitled to a retirement pension if he is over pensionable age and has retired from regular employment. Section 20 lays down, among other provisions, two tests which are independent of each other. The first test is what I call a qualifying test, and that is contained in subsection (2), and the second test is what I call a continuing test, and that is dealt with in subsection (5). The latter test is applied continuously. I will deal with the two tests absolutely separately.

The first test is the qualifying test; it is the first hurdle. The question will be whether the man has retired from regular employment. What is the test for that? When he reaches the age of 65, the man says," I have retired from employment," and the insurance officer will want to know whether he has qualified as retired. The man will be treated as having retired for insurance purposes if he continues to work provided that he works in any one of three ways. The first is if he works only occasionally; the second is if he works to an inconsiderable extent; and the third is if he works otherwise in circumstances not inconsistent with retirement.

The Minister does not interpret these rules; they are interpreted by the independent statutory authorities. The commissioner has interpreted the words "to an inconsiderable extent." His measure is that it is not more than 12 hours or one quarter of the normal working hours, whichever is the more favourable to the applicant. However, that is only one of three ways in which the man can prove his retirement.

If the man does not come under that provision, he may come under one of the others. The commissioner has laid it down that the governing test is whether the work is consistent with retirement. In fact, some people intend to work, and actually work, more than 12 hours a week, and they can still be treated as retired, leaping the first hurdle and qualifying for retirement pension. That relates to the qualifying test; a man can still work more than 12 hours a week, provided that his employment is not inconsistent with retirement. That is the start of the old-age pension—

Lieut.-Colonel Lipton

rose—

Mr. Marples

Might I first finish? I should like to get the matter clear without interruption, and I hope that the hon. and gallant Gentleman does not think that I am discourteous.

The commissioner has also said that the number of hours worked, though material, is not conclusive in the first test as to whether or not a man qualifies for retirement. Each case is decided on its merits and it is the independent commissioner who does that.

That is the first hurdle, and it is what I should call in a general way—although there are one or two exceptions—a once-for-all test. Other people have stood at this Box and have spoken about once-for-all, but this really is a once-for-all test for retirement pension, and, once the applicants are over that hurdle, unless there is something false in their declaration, they can start with a retirement pension.

The second test is a continuing test operated under Section 20 (5), which is the earnings rule, and there is nothing in it which stipulates the number of hours a man is allowed to work. The reason for the earnings rule is that a man may go through the formality of retiring, and then, after a short while, go back to his regular employment. If he could do that, and there was no earnings rule in force, he could go back to work after one month's retirement, and would get the retirement pension; and for four years and 11 months which he was in work would get the retirement pension and the full earnings.

That is the reason for this rule, and the words of the Act provide that a man can have his pension and earn up to 40s. a week, and that if he earns more than 40s. a week the rate of pension is reduced by 1s. for every complete shilling of the excess earnings. Against the 40s. there are allowed expenses such as travelling expenses, which normally are not admitted for Income Tax purposes.

Mr. Peyton

It is precisely on this point that I should like to question my hon. Friend. The provisions which he mentions may have that interpretation, as I am sure they do, but, nevertheless, they are badly and wrongly applied in many cases.

Mr. Marples

That may or may not be so, but the independent commissioner who ultimately decides the matter is not my right hon. Friend.

I am trying to put the matter quite clearly. This has no connection with the qualifying test, and there is no mention of hours under the earnings rule. Therefore, as my hon. Friend said that a man cannot work 20 hours, my answer to him is that he can. What is the test? It is whether he receives 40s. or more. An accountant who has retired may work for four hours at 10s. 6d. an hour and earn 42s., whereas another man might work for 20 hours in a garden at 2s. an hour to earn 40s. It is only the amount of money that is earned that matters, and not the number of hours worked.

Mr. H. Hynd

Before the Joint Parliamentary Secretary leaves the point about earnings, may I ask him a question? He has made a strong point of the fact that there would be a temptation to pretend to retire and earn up to 40s. or more than that. Is it not a point that there is such a wide difference between the 40s. earnings plus the pension and the average wages today that no man would he subject to that temptation? Would it not be far better for him to continue working at full wages than retire, because of the great loss he would sustain, even if he was trying to earn a little bit on the side?

Mr. Marples

That is an entirely different point.

What I was saying was that, when a man says that he has retired and given up his job and asks for his retirement pension, he receives it. Without the earnings rule, if, after a month, he went back into his job, for the next four years and 11 months he would draw his retirement pension and his earnings, and it is for that reason that the earnings rule was brought in. I am simply trying to distinguish between the qualifying test and the earnings rule.

There is another provision in Section 20 which is not widely known example, if he retired at the age of 65 It is contained in subsection (4), and it provides that for every year which a man works between the ages of 65 and 70, he can, after having paid the additional contributions in the usual way, receive an additional sum of money added to his retirement pension at the age of 70. For example, if he retired at the age of 65, he would get 32s. 6d. per week; if he retired at the age of 70, he would get another 15s. per week—that is to say, 47s. 6d., the 15s. being calculated as being Is. 6d. per week for every 25 contributions paid. This means that virtually every six months the pensioner can earn another Is. 6d. on his pension,

I expected that not many people would know about this, but I find on looking at social surveys that have been made that a much larger percentage than I thought—over 90 per cent.—find out about this and know the benefits that they can get. As to whether that rate should be increased or whether the earnings rule should be 6d. or 9d. in the 1s. or any variation of the existing law, obviously nothing can be done pending the review that my right hon. Friend has in mind.

The points that hon. Members have mentioned will be taken into account when my right hon. Friend is considering the earnings rule and the provisions of Section 20 and whether it requires amendment. In addition, we shall be receiving advice from the Phillips Committee, which has been set up to examine the financial and economic implications of old age. If we can get all this evidence together and examine the problem sympathetically, taking evidence from a number of interested parties, not only old-age people themselves but employers and employees, it may be that, after making exhaustive inquiries, we can make the position very much better.

I hope above all that it is clear that the earnings rule is separate from the qualifying test and that a man is not necessarily debarred from working for more than 12 hours a week after he has retired. The test is whether he earns more than 40s.; it does not matter whether it takes him 100 hours or two hours to earn it. After earning the 40s., a pensioner is subject to the earnings rule.

I agree with my hon. Friend the Member for Reigate (Mr. Vaughan-Morgan) that publicity in the earlier stages was perhaps misdirected and rather obscure. One of the features that ought to be dealt with by my right hon. Friend, and is, in fact, being considered now, is the question of whether he can make his publicity more attractive, more direct and more easily understood by the old people. I am grateful to my hon. Friend for his suggestion.

I hope I have met most of the points, but if any hon. Member still is not clear perhaps we can clarify any doubts by correspondence between us.

Mr. H. Hynd

Is the Joint Parliamentary Secretary quite certain that nothing can be done to meet this point without legislation? I should have thought it was possible to do it in some way by Departmental action.

Mr. Marples

I can only read to the hon. Member Section 20 of the Act. Subsection (5) states: Where the earnings of a beneficiary who is less than five years over pensionable age have exceeded twenty-shillings"— that was amended subsequently to 40s.— for the week preceding any week for which he is entitled to a retirement pension, the weekly rate of his pension shall for the last mentioned week be reduced by one shilling for each complete shilling of the excess. That cannot be altered except by legislation.

Question put, and agreed to.

Adjourned accordingly at Ten Minutes to Four o'Clock.