HC Deb 22 January 1965 vol 705 cc612-7

(1) Subject to subsection (2) of this section, any contributions paid under section 5 of this Act by deduction from the salary of a Member of the House of Commons (in this section referred to as "the contributor") shall be refunded by the Trustees with interest at the rate prescribed by this section from the dates on which they were respectively paid—

  1. (a) if the contributor dies while a Member of that House or after ceasing to be such a Member, and in either case no widow's pension, widower's pension or children's pension is or may be payable in respect of him under this Part of this Act;
  2. (b) if the contributor, not having become entitled to a pension under section 7 of this Act, has ceased to be a Member of that House and either—
    1. (i) he has attained the age of sixty-five years, whether before or after ceasing to be a Member; or
    2. (ii) five years have elapsed since he ceased to be a Member;
    and in either case he gives notice to the Trustees requesting the refund;
  3. (c) if the contributor becomes Prime Minister and First Lord of the Treasury, 613 Speaker of the House of Commons or Lord Chancellor.

(2) Where the contributor had become entitled to a pension under section 7 of this Act there shall be deducted from any sum payable to or in respect of him under subsection (1) of this section the amount paid or accrued on account of that pension.

(3) If a contributor to whom contributions have been refunded by virtue of subsection (1)(b) of this section again becomes a Member of the House of Commons, he may—

  1. (a) within the period of three months beginning with the date of his election, at his option; or
  2. (b) after the expiration of that period, if the Trustees so allow,
repay to the Trustees, with interest at the rate Prescribed by this section, the sum so paid to him; and for the purposes of this section the amount so repaid (inclusive of interest) shall to treated as a contribution paid, at the time of the repayment, by deduction from his salary under section 5 of this Act.

(4) Any sum to be paid to the Trustees under subsection (3) of this section may, if the Trustees so allow, be paid by instalments over such period not exceeding three years as the Trustees think fit.

(5) For the purpose of calculating reckonable service under section 7(5) of this Act, contributions refunded and not repaid to the Trustees under this section shall be treated as not having been paid.

(6) Any interest payable under this section shall be compound interest at the rate of three per cent. per annum, calculated with annual rests.—[Mr. Diamond.]

Brought up, and read the First time.

Mr. Diamond

I beg to move, That the Clause he read a Second time.

Whenever a Clause has to be fairly substantially amended it makes it much easier for hon. Members, instead of putting down a series of Amendments, if one takes out the old Clause completely and substitutes a new Clause, not because there are many Amendments or because they are substantial in effect but in order that hon. Members, looking at the new Clause, can read it as a whole. I hope therefore that the Committee will approve the method which the Government have adopted to make the position with regard to Clause 11 perfectly clear.

The new Clause provides for the return of contributions to a Member or ex-Member if he becomes Prime Minister, Speaker, or Lord Chancellor. It provides the detailed way in which one shall calculate the repayment and the interest. It also deals with a method of calculating the transfer value received by the trustees in respect of a new Member who has been contributing to another pension fund. If the Member in question subsequently becomes entitled to the return of contributions, the amount refunded ought to include his own contributions to that other pension fund.

Without going too much into the technicalities, the principle involved here, and throughout the Bill, is that one makes it perfectly easy for an individual to move in and out of Parliament, and in and out of jobs where there are pensions, without destroying in any sense the continuity of his pension rights. The way that is done is by arranging that at the time when he leaves one pensionable job and comes to Parliament he takes the right with him and a transfer payment is made. Therefore, when the time comes to draw a Parliamentary pension he is in the same position as if he had been in Parliament during the whole time, or throughout that period had been in pensionable employment notwithstanding that it was not in Parliament.

We would not want a Member to be embarrassed by going to a particular job and losing his pension rights. We would not want a Member to be discouraged from attempting to come to the House because he might lose pension rights which were available to him in the commercial job or industrial undertaking in which he was employed. We therefore provide for it in this way so that without any difficulty at all full pensions rights are preserved. I hope that this will be what the Committee would require. Any details which the Committee may want I can, of course, give if necessary.

Mr. Eric Lubbock (Orpington)

I should like to ask the Chief Secretary why it is that a Member who wishes to reclaim his contributions under subsection (1,b) of the new Clause has to wait five years before doing so after he has ceased to be a Member of the House. This is in a case where he has not served the 10 years which would entitle him to a pension under the Bill. The subsection also provides that he has to give notice to the trustees requesting that refund should be made. I should have thought that this would have been more or less automatic, because there would be no purpose in leaving his contributions in the fund, when one considers that if he comes back to the House later and if he has reclaimed them he can have put back into the fund the contributions which he has reclaimed and he is deemed to have had service for that earlier period in the House. I can therefore visualise circumstances in which a Member has ceased to be in the House after a period of less than 10 years where he would want to reclaim his contributions, and I do not see why he should have to wait five years before doing so.

I should also like to ask about the interest rate applicable to these contributions, as mentioned in subsection (6). I should have thought that the 3 per cent. per annum applied to these contributions is a very low rate when one looks back on the market rate of interest over the last few years. In effect, what it amounts to is that a Member who has not qualified for pension and reclaims contributions has lent money to the fund at a rate lower than the market rate. In view of the unprecedented heights to which interest rates have soared during the period of office of this Government, I should have thought that a variable interest rate applicable to these contributions would have been more appropriate. Perhaps it could be tied to the Bank Rate or to the Public Works Loan Board rate. The fact is that a person could invest this money much more advantageously elsewhere than at the 3 per cent. he will receive from the fund if he reclaims his contributions.

Sir D. Renton

It might be convenient if I followed in the debate the hon. Member for Orpington (Mr. Lubbock) with whom I agree on the questions which he has asked.

There is another point which affects a good many hon. Members potentially. It affects especially those who are self-employed, professional men who will not go back to pensionable employment, to use the Chief Secretary's phrase, if they lose their seats for a time. Naturally, I think of members of my own profession but I think that it applies to all professional men, because they have to rely on their own private pension schemes to which we all contribute in one way or another for our old age. But this is not pensionable employment. It may be that the Government have considered their position and have decided that it is too difficult technically to deal with it. If that is so, I should like to know the reason why it is not possible to deal with it.

On the other hand, it may be that their position has not been considered by the Government, in which case I would ask the Chief Secretary if he would kindly do so. It is very important, because many Members on both sides of the House would be affected in that way.

2.0 p.m.

Mr. Diamond

May I deal with the easier question first, the question of the 3 per cent.? The hon. Member for Orpington (Mr. Lubbock) appreciates that these are long-term rates, and long-term rates do not vary with the market rate or Bank Rate to anything like the same extent. They tend to be fairly firm. One has to make a calculation over a long period, and this is the figure which the Government actuary thought right.

The hon. Gentleman will appreciate also that income such as interest coming into the fund is, as provided by the Bill, tax-free. I was speaking, therefore, about a tax-free rate of interest.

Mr. Lubbock

One has to pay the tax if one withdraws contributions paid into it, just as in any other pension scheme, does one not?

Mr. Diamond

I do not quite follow that intervention. As regards taxability, payments going into the fund are a full deduction for tax purposes from the tax liability of the hon. Member who makes them, so that he has full tax allowance on making his payments into the fund. Then, following his payments into the fund, any accretions by virtue of income received such as dividends on the investments of the fund are free of tax. So the whole build-up of the fund is tax-free and it is right, therefore, that when payments come out of the fund by way of pension, they shall be taxed.

Mr. Lubbock

I do not think that the hon. Gentleman quite understood the point which I was making. If an hon. Member who has left the House withdraws his contributions before he has reached 65 years of age, he will have to pay back to the Exchequer the tax which he saved on those contributions when he made them in the first place.

Mr. Diamond

If, for example, he takes those contributions with him in the form of a transfer payment to a new pensionable employment, having his rights continued in that new employment, what the hon. Gentleman says is not so, and I think that he appreciates that.

We are talking only about the rate of interest. The rate of interest has to take account of the whole variety and generality of circumstances in which the rate of interest applies. The best answer I can give is that this is the rate which has been worked out by the Government actuary, having regard to the scheme as a whole. I think that the hon. Gentleman will find that it is a very common interest rate in all these schemes. My impression is of having seen this figure more than any other in all schemes of this kind making similar provision. It is the most likely long-term rate having regard to all the transactions which will affect the rate, including the effect of taxation.

I was asked, also, the rather more difficult question about the five-year period. I can only say here that this is a recommendation of the Lawrence Committee. It seems a reasonable recommendation. I go this far with the hon. Gentleman and the right hon. and learned Member for Huntingdonshire (Sir D. Renton) in saying that it is possible to have two views about it. However, the Lawrence Committee, no doubt, came to its conclusion broadly on the basis that one needs a certain amount of time to make up one's mind about whether one wants one's contributions back, whether one might return to the House again, and all the other questions, and there is something to be said for a period of this kind. It is the Committee's recommendation. The Government have accepted the view throughout that, if one is setting up a scheme based on a full and detailed report by an outside committee, one is in the most reliable logical position if one goes the whole way as regards the principles and structure of the scheme, and this is part of it. On the whole, I think that it is a wise provision.

Question put and agreed to.

Clause read a Second time and added to the Bill.