HC Deb 26 October 1971 vol 823 cc1457-9
13. Sir B. Rhys Williams

asked the Chancellor of the Exchequer if he will now take steps to encourage the trustees of occupational pension schemes to protect the rights of workers changing employment before the normal age of retirement, by the exercise of the discretion permitted to him under existing legislation determining the conditions under which such schemes are approved for exemption from tax.

Mr. Patrick Jenkin

No, Sir. My right hon. Friend the Secretary of State for Social Services has recently published his proposals for legislation to make preservation of pension rights compulsory, and in the Government's view that is the right way to deal with the matter.

Sir B. Rhys Williams

Is there any reason for taxpayers having to subsidise schemes which do not give protection of pension rights on change of employment? Does my hon. Friend agree that the principal reason that employees lose the benefit of their employers' contributions when they change their jobs is the imposition of the wholly unnecessary and, indeed, iniquitous mixed benefits rule by his Department?

Mr. Jenkin

My hon. Friend's views on the operation of the mixed benefits rule are well known. No doubt we shall have an opportunity to discuss these at a more convenient time. I must make it clear that the purpose of Inland Revenue control has never been in the past to ensure the adequacy of benefits. This new policy is now being introduced by my right hon. Friend the Secretary of State for Social Services.

Mr. Marks

Should not those who are to contribute to the Government's proposed reserve scheme also obtain some tax relief?

Mr. Jenkin

The hon. Gentleman knows that the tax relief for National Insurance contributions was withdrawn by our predecessors in 1965 because of the administrative problem of applying relief to varying sizes of contribution. We have reluctantly come to the same conclusion, regarding both the main new scheme and the reserve scheme. It is partly for this reason that the employee's contribution to the reserve scheme is less than half of the total contributions.

19. Mr. Meacher

asked the Chancellor of the Exchequer what was the total amount of tax relief granted in the last financial year on grounds of contributions to occupational pension schemes.

Mr. Patrick Jenkin

The cost of tax relief for employee's contributions for the year 1970–71 is provisionally estimated at £85 million. Employers' contributions are deductible as an ordinary business expense; if this expense were disallowed, the extra tax paid by employers for the same year is estimated at about £270 million.

Mr. Meacher

If the Government really believe in concentrating resources on those in greatest need, how do they justify spending far more money—as the Financial Secretary has explained—on employee and employer tax reliefs on contributions to occupational pension schemes for the wealthier few, than they do on the Exchequer supplement for all State pensions for the poorer majority?

Mr. Jenkin

The two things cannot be compared. If the hon. Gentleman wants to argue that the tax relief for superannuation contributions should be withdrawn he should have the courage to stand up and say so. This is saving for old-age retirement and for dependants of the employee, and both parties have sought to encourage these schemes to the utmost.

Mr. Boyd-Carpenter

Can my hon. Friend quantify the amount of taxation which it has not been necessary to impose because of the savings generated by these schemes?

Mr. Jenkin

If my right hon. Friend puts down a Question I shall do my best to get him an answer.

Mr. J. T. Price

Is the Financial Secretary aware that I, for one Member on this side of the House, strongly support occupational pension schemes and entirely reject the argument that to give tax relief to the contributor during the period of payment of this contribution is wrong? It is often forgotten by the critics that when the pension becomes payable to the recipient, who has qualified for it by a lifetime of contributions to the contributory fund, it is taxable, and that there is a drawback to the Treasury of most of the tax relief that has been given during the contributory period.

Mr. Jenkin

I entirely agree with the hon. Gentleman, who has put a very commonsense view.