Clause 13.—(TRANSFER TO AND FROM OTHER PENSION SCHEMES.) (Hansard, 29 March 1965)

§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)
I beg to move, That this House doth agree with the Lords in the said Amendment.
The purpose is to ensure that, when a Member leaves the House of Commons and his pension rights are transferred to another pension scheme, not only his contributory service but also his noncontributory service in respect of which pension rights have accrued shall cease to be reckonable for pension under the Members" scheme. This is to cut out any possibility of a double entitlement.
The need for the Amendment arises from an error in drafting. The House will remember that, under Clause 7(5), reckonable service for the purpose of calculating a Member"s pension comprises two kinds of service. First, there is service after 16th October last, in respect of which contributions are paid by deductions from salary under Clause 5. That is, of course, a contributory service. Secondly, there is service before 16th October, 1964, by a person who is a Member after that date up to a maximum of 10 years. The reckoning of this service is paid for by Exchequer deficiency contribution under Clause 6. That, of course, is the non-contributory service.
Clause 13 provides for transfers to certain other pension schemes when a Member leaves the House and the transfer value is then payable in respect of service for which pension rights have accrued—both the pre-October, 1964, non-contributory service and the post-October, 1964, contributory service.
The intention of subsection (4) was to provide that any service before the date of the transfer payment should cease to 1202 be reckonable service. This was obviously necessary if a double entitlement was to be avoided. As originally drafted, the subsection achieved that object but it was redrafted in Committee, following Amendments which had been made to Clause 11. I think that it was at this stage that the error arose so that now the subsection only achieves half its object.
It provides that contributions paid by deduction from salary under Clause 5 should be treated for the purpose of calculating reckonable service as though they had not been paid, but the subsection makes no provision for the noncontributory service before 16th October, which is paid for by Exchequer deficiency contribution. This, of course, should also cease to be reckoned on payment of transfer value. The transfer value as provided for in subsection (1) must be sums repaying the value of that person"s accrued pension rights in the Members" contributory pension fund. Those rates necessarily include the credit for service before October, 1964, which is being paid for by the Exchequer.
The effect of the Clause as it stands would be to allow a man with a maximum of ten years" back service, who left the House with a transfer value which fully represented the value of his accrued rates for those 10 years, to receive, in addition, a pension for those 10 years on reaching the age of 65—in effect, a double pension. This is plainly wrong, so the Amendment cuts out the double entitlement by providing that, when a transfer value is paid, any service before the date at which the payment is made—that is to say, both contributory and non-contributory service—shall cease to be reckonable.
Perhaps I may point out now that the subsequent Amendment removes the earlier provision which applied to contributory service only and which is now needless.

§ Mr. Selwyn Lloyd (Wirral)
I shall detain the House only a moment. I accept what the hon. and learned Gentleman the Financial Secretary has to say. This was a clear mistake and it is right to correct it. It is the kind of mistake which does happen when the House takes the Committee stage of a 1203 Bill which includes complicated provisions like this at a late hour of the night, after a procedural row, and then takes it again at short notice the next day.
We had difficulties about these Clauses and put forward one or two points about them, but there was not time to think them out and consider them properly. We made a mistake, without doubt, and we should be grateful to the other place for discharging its duty as a revising Chamber.

§ Sir David Renton (Huntingdonshire)
Where the pension is valued for transfer in the way described by the Financial Secretary, does the non-contributory element have the same weight in transfer value as the contributory element?

§ Mr. A. Woodburn (Clackmannan and East Stirlingshire)
Before my hon. and learned Friend answers that point, may I say that I understood that the first pension scheme was purely ex gratia and had no rights at all. I thought that it was purely a matter of a pension being granted, but not as of right, and I should like my hon. and learned Friend to explain how rights can be transferred from a pension scheme which, so far as I know, has no rights.

§ Mr. MacDermot
In reply to the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), I will say only that I do not think that the Amendment was drafted either late at night or between a late night debate and the following day. This is the kind of error which may arise in complicated provisions of this kind.
The right hon. and learned Member for Huntingdonshire (Sir D. Renton) asked whether the transfer value payment in respect of non-contributory service bore the same weight as that in respect of contributory service. I think that it does, but I will check that and, if there is any difference, I will let the right hon. and learned Gentleman know.

§ Sir D. Renton
I do not know whether I require the leave of the House to speak again.

§ Mr. Speaker
I thought that the right hon. and learned Gentleman had successfully sought to intervene in the Financial Secretary"s speech.

§ Sir D. Renton
The reply which we have been given requires comment, more especially in view of what was said by the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn), who "thought, as I did, that the noncontributory element which was being transferred was purely ex gratia. I am somewhat surprised to find that in assessing the transfer value, this ex gratia element is to be given equal weight with the contributory right, which it is obviously right to transfer.

§ Mr. MacDermot
I am not sure what the right hon. and learned Gentleman means by saying that this is ex gratia. Obviously, it is ex gratia in the sense that it is non-contributory, not counterbalanced by any contribution from the Member, but it is a pension to which he is fully entitled as a matter of right, provided that he qualifies under the Bill"s provisions. It is not in any sense discretionary, if that is what the right hon. and learned Gentleman means by ex gratia. It arises fully as an entitlement as of right. That follows from the provisions of Clause 7(5,b) which states that reckonable service is service as a Member of that House before that date"— which is 16th October, 1964— by a person who is a Member of that House at any time after that date. There is then the limitation that that service can be for only 10 years. Thereafter the whole of the entitlement of the Member is in relation to contributory service and no distinction is drawn between the two kinds of reckonable service, that is to say, that which is based on the contributory element and that which is based entirely on the Exchequer contribution.

§ Sir D. Renton
I gave way to the Financial Secretary and I had not finished what I had intended to say. It may be perfectly right, and I think that it is, when we are dealing with this as a domestic matter, to accept that Members who have been here for some years—and I must declare my interest—should have the right, back to 10 years, of accumulating a right to pension on retirement at 65 or later.
However, we are now dealing with the transfer of pension rights and doing so in a state of some uncertainty, because the Treasury is to be given power to transfer 1205 rights accrued under the Bill to any scheme approved by the Treasury, and we do not know what such schemes may be. It is a very strange proposition that ex gratia non-contributory rights should be transferred to schemes with which Parliament normally has nothing to do, at least, not Members of Parliament.
I must say that I find this situation somewhat puzzling. It is unfortunate that its exact nature should come to light at such a late stage and I do not suppose that there is anything that we can do about it, but at some stage the Financial Secretary should take the opportunity publicly to clarify the matter.

§ Mr. MacDermot
I am taking that opportunity now, so far as I am able. I think that the right hon. and learned Gentleman"s fears are groundless. There is no scheme which has to be approved by the Treasury. The scheme referred to in subsection (1) is a scheme in which the trustees may, at the request of any Member, pay into or for the purposes of any fund or scheme, being one of the two kinds of schemes set out in the subsection, sums representing the value of that person"s accrued pension rights. Those sums have to be certified as such by, or calculated in accordance with tables prepared by, the Government Actuary. This is no way dependent on any discretionary element resting in the Treasury.
As I pointed out, the accrued rights are rights in respect of reckonable service and no distinction is drawn in the Bill between reckonable service which rests on contributions made by Members and reckonable service which is entirely non-contributory. The answer to the right hon. and learned Gentleman is that no distinction is drawn. The two kinds of service are of equal weight. In no way is the payment in respect of the non-contributory element discretionary. It is fully a matter of right.
I think that this also answers the question of my right hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Woodburn).

§ Mr. Woodburn
I appreciate that service is equal in both cases, but I understood that the first pension was payable only if there were certain circumstances which made it payable and that there was no right to the first pension in cash. I was unable to understand how there could be any possibility of a double pension as the earlier pension scheme was purely discretionary; so that if a person got, say, £900 from the second pension scheme, he would automatically be excluded under the rules of the first.

§ Mr. MacDermot
I think that my right hon. Friend is referring to something else, namely, the difference between a pension which is payable out of the present existing Members" Fund and a pension which will be payable under the pension scheme when the Bill becomes law. Those are quite different matters. This Amendment is concerned solely with the transfer of value payments which arise exclusively out of rights accruing under the pension scheme. Under the existing Members" Fund system, of course, there are no accrued rights and the payments are of a discretionary nature and there is no question of any transfer of value in relation to any sum which might become payable out of the existing fund.

§ Sir D. Renton
rose——

§ Mr. Speaker
The right hon. and learned Gentleman requires the leave of the House to speak again.

§ Sir D. Renton
If I may have the leave of the House briefly to say——

Hon. Members
No.

§ Mr. Speaker
I heard leave being declined.

Hon. Members
Shame.