§ 5.54 p.m.
§ Sir Brandon Rhys Williams (Kensington, South)
I beg to move,That leave be given to bring in a Bill to amend the law relating to schemes providing pensions, annuities, retirement and other benefits.The Bill I hope to have leave to introduce deals with a subject to which I have alluded on a number of occasions in recent years, namely, the need to protect the pension rights of members of occupational pension schemes on change of job.
This is a matter about which there is no dispute as to principle between the parties. The problems, and they are formidable, arise from the difficulties of implementation and timing. I hope that in my Bill I can make three specific recommendations as to implementation which will commend themselves to the House.
First, the Inland Revenue stipulation, generally known as the "mixed benefits rule", should be withdrawn. Under this rule, in the great majority of cases, trustees are unable to give to the employee the benefit of the employer's contributions, even if they wish to do so.
Secondly, the House should take a decision on the vexed question of transferability or preservation. Transferability is the ultimate ideal. It presents formidable difficulties over valuation which have, however, been solved with considerable ingenuity in the public sector. I am bound to admit that in the private sector these problems of valuation still give rise to considerable dispute and anxiety, and I believe that the course I must recommend to the House at this stage is to make preservation compulsory and transferability legal and easy.
If, however, we come to rest simply on preservation of pension rights, then we must recognise that in times of severe inflation the asset left behind by the beneficiary in the scheme of his first employer may dwindle away until it is ultimately worth very little. The recommendation which I am making is that a preserved pension should, in times when interest rates are reflecting the general anxiety of the market about inflation, be required to 1408 be augmented in the hands of the original trustees and that it should not merely be kept at book value.
There is also the thorny question of a man's own contributions to contributory schemes. The best solution we could adopt here is, I believe, in accordance with the principle of the Finance Act, 1970, namely, that all schemes should allow the beneficiary the option to take a lump sum of approximately one-quarter on eventual retirement. If we follow that principle, but make it possible for beneficiaries to draw a lump sum on withdrawal from the scheme at any age, we shall have brought the contributory and non-contributory schemes on to the same footing and will, I think, have found a solution which is acceptable to beneficiaries and easy for trustees to implement.
I come to the difficult question of timing. I understand the objections of people engaged in the management of pension schemes that this is not the moment for a further upheaval. Almost every occupational scheme is now in the course of revising its rules to comply with the provisions of the Finance Act, 1970. This must be understood to be a serious undertaking which is placing considerable strains on trustees, their accountants, actuaries and other advisers.
Moreover, we hope that before the end of this Parliament the Government will have introduced a new Measure covering National Insurance and all earnings-related schemes; this, too, may cause a serious upheaval for the pension movement. Nevertheless I hope that those who feel that this is not the moment to introduce further complications into the management of occupational pension schemes will, when they have studied the recommendations I am making, agree that their implementation would not put any serious additional strain on the trustees of these schemes.
There remains the question of the cost to employers. This has been estimated officially at over £100 million a year over the whole sphere of employment. It is difficult to obtain an accurate estimate of what it would cost employers in the private sector, but I believe that to give transferability would cost about £1 million a week. This is a not inconsiderable sum at a time of financial anxiety. 1409 The good employer is probably already paying £2 or £3 a week into an occupational scheme, on top of wages, for the average employee. The House should, therefore, consider carefully whether this is the moment to add a stipulation which would require the employer to put another 10p, 20p or even 30p a week on to the weekly contribution for the average employee. Indeed, is it right at all that what could be considered retrospective legislation should be introduced in this way by the House?
The reason why the House should act is partly in recognition of the extremely valuable tax concessions which are available to occupational pension schemes. These concessions are given because these schemes are recognised as serving a genuine social purpose. It is, therefore, appropriate that they should alter their rules so as to comply with the general expressions of public opinion in regard to this question of preservation on change of job. We should also look at this question from the side of the beneficiaries. Men and women today are losing their pension rights at a rate of at least £100,000 each working day. That seems to provide the House with a good reason for acting at once. I trust, therefore, that the House will give me leave to introduce the Bill.
§ Question put and agreed to.
§ Bill ordered to be brought in by Sir B. Rhys Williams, Mr. David Crouch, Mr. Robert Edwards, Mr. Nicholas Edwards, Mr. Emlyn Hooson, Mrs. Kellett, Mr. McCrindle, Mr. Maude, Mr. Neave, Miss Quennell, Mr. J. T. Price, and Mr. Raison.