§ Mr. DeanI beg to move Amendment No. 55, in page 67, line 21, after 'scheme' insert:
'either—(i)'.
§ Mr. DeanThese are technical amendments designed to ensure that any short service benefit or permitted alternatives to which an earner in recognised employment becomes entitled under the general preservation requirements must include his minimum benefits.
§ Amendment agreed to.
§
Amendment made: No. 56, in page 67, line 24, at end insert:
'or
(ii) makes any provision which under those requirements is permitted as an alternative to short service benefit (other than, in such cases as may be prescribed, provision for return of contributions or benefit in the form of a lump sum):'.—[Mr. Dean.]
§ Mr. DeanI beg to move Amendment No. 57, in page 67, line 44, leave out from 'payment' to end of line 45 and insert:
'when he attains that age or (with his consent in writing) at some later time:'.It is designed to introduce an element of flexibility into the recognition conditions by permitting schemes to postpone payment of a deferred minimum pension where the owner consents. It is intended primarily to cover the case where an earner continues working after a pensionable age and prefers, possibly for tax reasons, to defer receiving any of his pension entitlement until he finally retires.
§ Amendment agreed to.
§ Mr. David Crouch (Canterbury)I beg to move Amendment No. 58, in page 68, line 6, at end insert—
'(6) The scheme must not include provisions having for their effect the reduction of the minimum pension payable to a person by any amount in respect of any retirement benefit to which that person is entitled under Part I of this Act'.This is an extremely important amendment, so important that I came back from a Parliamentary Committee in Paris especially to move it. I must read to the House again the words in the amendment which go to its heart. They are:The scheme must not include provisions having for the their effect the reduction of the minimum pension payable to a person".That is the heart of what I would ask the House to accept. It is quite wrong that there should be a provision, even a loophole, that allows any reduction of a minimum pension which accrues and is earned from contributions by a would-be pensioner.This is the loophole which I seek to remove. It is possible today for an occupational pension scheme to be reduced by an amount equal to the national insurance pension earned from contributions by a pensioner and payable to him. It is the practice for such deductions to be made.
I think it would help the House if I read an extract from a typical set of standard rules of a pension scheme from a well-known company. I shall not mention its name. What I am about to illustrate is common practice throughout 603 occupational pension schemes. It reads as follows:
On retirement the Employee shall receive a pension of a yearly amount equal to one-sixtieth part of the Retiring Salary for every complete year of Service subject to a maximum annual pension of two-thirds of the Retiring Salary. Provided always that if the Employee shall have entered the Service on or after the 5th day of July 1948 the amount of the pension calculated as aforesaid shall be reduced by one-half of the amount of retirement pension from time to time obtainable by him if he were a single person without dependents under the National Insurance Act 1948 or any statutory amendment or re-enactment thereof or by such proportion as the Diretcors (with the consent of the Trustees) may think fit if any pension to which he may become entitled under any similar legislation of Northern Ireland or of Eire".To me, that is a revealing statement of a situation which exists today and has always existed. There has been a loophole in the insurance Acts all this time which has been taken advantage of by those who operate otherwise generous pension schemes. The scheme offered in my quotation is two-thirds less half of the amount of the State pension. When I heard this from a constituent, I thought it was quite staggering. A Conservative Member of Parliament always tends to hope that there will be two pension schemes. There is the State pension on the one hand, but that is merely a safety net to provide for the barest essentials in life, and on top of that pensioners are given the opportunity to provide for themselves. We hope that in occupational schemes employers will also make this contribution so that the extra provision is especially generous. I was amazed when I found that the second pension scheme was to have deducted from it the amount of the national insurance old-age pension.I believe that it would be helpful to the House if I read from a letter I received from my hon. Friend the Under-Secretary just under a year ago, when I first raised the point with him. He wrote to me on 31st May last year saying:
I should first explain that no occupational pension scheme is empowered to reduce national insurance pensions of its members. The pensioner has an inalienable right to his national insurance pension except where provided for in the National Insurance Act (for example, where the pensioner is in prison). It is, however, a common practice for schemes to be constructed to make allowance for the National Insurance Scheme. In consequence, 604 they have rules which provide for adjustment of their benefits to take account of national insurance contribution. Thus it is the occupational pension which is reduced, not the national insurance pension.That is splitting hairs. The fact is that a person's pension entitlement has been reduced, and the Department says that it is a common practice, something that it expects to happen. My hon. Friend continued:The net effect is the same either way but the distinction is an important one.I think that the distinction is a question of splitting hairs.
§ Mr. George Cunningham (Islington, South-West)Is the hon. Gentleman aware that table 26 on page 31 of the latest Government Actuary's report on occupational pension schemes shows that no fewer than 17 per cent. of the members of occupational pension schemes suffer the disadvantage to which he is drawing attention? That is one in six of all the members of occupational pension schemes.
§ Mr. CrouchI am grateful to the hon. Gentleman for that useful statistical contribution to support my argument.
I wanted to make two points in support of my amendment. I have already made the point that the politicians' claim for two pensions is being invalidated by the Bill. Secondly, when this loophole was allowed to appear in the National Insurance Act, 1946, it was very tiny, affecting a pension of £1 6s., or £1.30. A deduction of £1.30 a week does not amount to much more than £60 or £70 a year. Today, however, my constituent who raised the matter with me is having deducted, according to the rules of his scheme, half a pension worth £7.75, which means a deduction from his other pension entitlement under the occupational scheme of over £200. It could be the full amount of £7.75. That is what worries me.
Others more expert in pension problems than I will argue that that is normal, common practice. The problem is not so much that of an inadequate occupational pension—some schemes are very good—but rather that there is a reduction in what is expected by the employee, particularly an employee who might not have read the small print or who after many years has forgotten what was in the 605 rules. In the case I have quoted the reduction is only 50 per cent., but it could be more.
To me, it sounds wrong and I think that it is wrong. It creates dissatisfaction. When we are trying to mend industrial relations, labour relations and staff relations and to improve harmony in industry, it creates bad staff relations, bad industrial relations and bad labour relations. It is one of those little points that should be put right.
We are talking about the provision of two pensions for everyone in employment. I do not believe that one of the pensions should be robbed to pay for the other. It is a case of Peter being robbed to pay Paul, and I cannot accept that. I am not suggesting—there is no suggestion— that the value or part of the value of the State pension may be deducted from pensions payable under the State reserve scheme under Part III of the Bill. I accept that nowhere is there such a loophole.
9.0 p.m.
I should like an assurance from my hon. Friend the Under-Secretary that there is no such loophole for any deductions from pensions payable under the State reserve scheme. I hope that that is not intended. If that is so, I cannot accept that a different standard should apply to the private sector for which, for the first time, we are drawing up rules and regulations and a code. The House is accustomed to codes, but this is a code which it is important to get right. That is why I have sought to delay the House on a matter which I consider to be important.
§ Mr. Nicholas EdwardsMy hon. Friend the Member for Canterbury (Mr. Crouch) has made a valuable suggestion about the way in which firms could enhance their presentation and improve labour relations. I am not sure that the point is much more than that.
I intervene only because of the phrase which my hon. Friend used about robbing Peter to pay Paul. I think he will find that the contributions for the pension scheme were calculated on the basis that the level of pensions produced would be not two-thirds, but two-thirds less the deduction. In deciding the level of bene- 606 fits, including life cover and other subsidiary benefits, an employer would assess the various alternative options which he could give his employees out of a total pension contribution. He would compare the arrangements with what is now provided in the Bill.
The Bill lays down minimum standards. The example that was cited to us of a pension of two-thirds of final salary less a reduction for State pension would be very much higher than any of the minimum standards established in the Bill. I accept that there is room for misunderstanding.
I am a director of a company which has altered its pension scheme. It had such a provision but the company decided to do away with it. If people think that they will retire on two-thirds of final salary, that is what they should get. It is true that people do not necessarily read the pension scheme rules. I do not think my hon. Friend should make too much of this matter. He should not imply that in some way there has been a swindle and that the members of a scheme have been getting less than they paid for. That is misleading and should be corrected.
§ Mr. DeanI am grateful to my hon. Friend the Member for Canterbury (Mr. Crouch) for raising this point. He has done a service to the House by coming back from his commitments in Paris in order to raise it. What I shall say to him about the arrangements under the new scheme will, I hope, satisfy him completely. I am glad that my hon. Friend the Member for Pembroke (Mr. Nicholas Edwards), with his expert knowledge of pension arrangements, has already anticipated the position after the reconstruction that has been made in the scheme to which he referred.
The recognition conditions under the Bill will always be additional to any benefits provided through the basic scheme. That is already the effect of the Bill. The methods of calculating the minimum benefits and the earnings on which they are based are such that any integration with or reduction by the basic scheme benefits is impossible at the minimum level. That applies not only to an occupational pension scheme which qualifies for recognition but applies to the reserve pension scheme.
607 Occupational pension schemes, over and above the minimum level which I have mentioned, will remain free to integrate with the basic scheme any benefits they choose to provide over and above that minimum. This is because we are concerned in the Bill only to lay down the minimum standards, and we must accept that any provision over and above them is a matter for the employer concerned in consultation with his employees.
Nevertheless, integration above the minimum standards may well begin to seem less attractive as employees recognise the importance of occupational pension schemes and realise that they can only secure the maximum benefits in retirement if there is not integration in the basic scheme.
I hope I have satisfied my hon. Friend that the point on which he expresses very understandable concern will be offside under the new arrangements. I hope and believe, that, as the concept of two pensions becomes generally accepted in the community, we shall find in practice that this will apply not only, as it must do under the Bill, to the minimum benefits in recognised occupational schemes and benefits in the reserve pension scheme, but also on a voluntary basis to benefits over and above that. I hope my hon. Friend feels that he has fulfilled a valuable function by coming back from Paris to raise this important issue and that I have clarified it to his satisfaction.
§ Mr. CrouchCan my hon. Friend clarify the term "offside"? By that term, is he seeking to close the loophole which I say exists? Could he elaborate on the term, which was definite in that respect?
§ Mr. DeanYes. I assure my hon. Friend that the loophole he mentioned, or whatever one likes to call it, will not be possible under the new arrangement because a recognised occupational pension scheme will be obliged to provide at least the minimum benefits which are required for recognition purposes, and these must be provided over and above whatever benefits the individuals concerned are entitled to under the basic scheme.
§ Mr. CrouchI have listened with great care to what my hon. Friend has said, 608 and I am glad he came back on my intervention to strengthen what he said about what I call the "loophole". I am not altogether happy, however, because I have been long enough in this House to recognise that it is valuable in our legislation to dot the i's and cross the t's. One does not work in our Committees for a long time without recognising that that is an essential part of our function. Good debating is only one side of it; good drafting is another. I am sorry that my hon. Friend has not gone as far as I would have liked, but he has accepted what I think is the spirit of my amendment and I shall watch very closely to ensure that it is enacted in that way.
I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Mr. Deputy Speaker (Mr. E. L. Mallalieu)With this we are to take Amendment No. 66, in page 71, leave out lines 35 to 37.
§ Mr. DeanThe effect of these amendments is to remove the regulation-making powers to prescribe when the minimum personal or widows' pensions should cease to be payable on the death of the beneficiary.
The intention was to permit schemes which pay pensions in arrears to terminate the benefit as from the pay day prior to death. Such a provision would have assisted schemes administratively, but there was some concern, when this was discussed in Standing Committee, that it could lead to financial loss for the beneficiary's dependants at a time when they were most in need. We have therefore, reconsidered this in the light of the views expressed in Committee, and have concluded that the possible loss of benefit outweighs the administrative advantages of such a provision.
§ Mr. O'MalleyWe are grateful to the Government for listening to our representations on this subject, taking them into account and coming to the conclusion that at least on this one minor occasion the interests of the individual recipient should come before the administrative convenience of the scheme. While 609 I welcome the amendment, I feel that it is a pity that on broader issues the Government have been unable to give the interests of individuals priority over administrative convenience.
§ Amendment agreed to.