HC Deb 30 March 1971 vol 814 cc1377-9

Next, occupational pension schemes. The House will remember that last year's Finance Bill contained Clauses dealing with these schemes and that, because of the imminent dissolution of Parliament, they were accepted without much debate.

We gave an undertaking to review these provisions, and this we have done, in consultation with those most concerned with the provision of pension schemes. I recognise the practical difficulties facing the F.S.S.U. (the Federated Superannuation System for Universities) and similar schemes in coming to terms with the new rules and, though I cannot accept their claim to be allowed to remain as they are indefinitely, even as closed schemes, I think that the case has been made out for a fairly long transitional period before existing schemes must conform with the new tax code. I propose accordingly to defer to 1980 the appointed day for universal conformity with the new rules.

An earlier appointed day will however be appropriate in the case of entirely new schemes or schemes which are making substantial changes in their rules and I propose therefore that in those cases conformity with the new rules shall be required where tax approval is sought after 5th April, 1973.

The reduction in the "death in service" benefit proposed by last year's legislation has been much criticised as too severe, and I agree with those criticisms. The maximum lump sum—as distinct from widow's or dependant's pensions—which could be provided on death in service was then fixed at two years' salary. I propose to raise this figure to four years' salary exclusive of any return of contributions. This should give schemes much more flexibility.

I propose also to improve the arrangements under which the self-employed and employees for whom a pension scheme is not available can get tax relief for premiums paid to provide themselves with a retirement annuity. In the first place, I propose to raise the limits on the qualifying premiums. These were fixed as long ago as 1956 at 10 per cent. of relevant earnings up to a maximum of £750 per annum and are now clearly out of date; I propose to raise these limits to 15 per cent. and to £1,500.

Sir Gerald Nabarro (Worcestershire, South)

Just what I said last night.

Mr. Barber

That is why I glanced at my hon. Friend.

This will permit substantially better annuities all the way up the earnings scale. These changes will take effect as from the tax year 1971–72.

There is one other change I propose for the same category of people—the self-employed and employees for whom a pension scheme is not available. This will enable part of the annuity to be taken in the form of a tax-free lump sum. This is not permissible at present: but now that lump sums may be allowed in all occupational pension schemes, I do not think it right to maintain this ban. I propose therefore that, for annuities which begin to be payable in 1971–72 and later years, an amount approximating to that allowed in occupational schemes can be taken in the form of a lump sum.