RESERVE SCHEME PERSONAL PENSION (Hansard, 9 May 1973)

§ Mr. Dean
I beg to move Amendment No. 91, in page 102, line 6, at end insert: — ' (3) Subject to and in accordance with regulations, a person with entitlement or prospective entitlement to a reserve scheme pension may, at any time before the pension comes into payment, elect for payment of the pension to be postponed for any period (whether determinate or not), but not beyond the age of 70 in the case of a man, or 65 in the case of a woman; and where a person so elects, the rate of pension shall be subject to adjustment in the prescribed manner, so as to take into account any period between pensionable age and the time when the pension comes into payment'.

Mr. Deputy Speaker
With this amendment it will be convenient to take the following Amendments: No. 157, in page 102, line 6, at end add:— '(3) The Secretary of State shall make regulations prescribing the rates at which reserved scheme pensions shall accrue when the earner chooses to continue working beyond pensionable age', and Government Amendments Nos. 92, 94 and 95.

§ Mr. Dean
This point has been discussed on earlier amendments. The amendment introduces the concept of flexibility for those who postpone their 686 retirement. This is of particular interest to women with regard to the reserve pension scheme.
Having undertaken in Committee to consider further the possibilities of introducing an arrangement to enable payment of pension to be deferred and for the rate to be enhanced when the pension is put into payment later, we now put forward these amendments which I know will commend themselves to both sides of the House.
These amendments introduce, as it were, the bone structure of the arrangements and leave consequential detail to be filled in by regulations. The main point is that, under the arrangements proposed, everyone will have a choice to defer taking their pension at pensionable age, if they so wish. It will not be necessary to specify in advance the period of deferment. While no doubt in most cases the preference is likely in practice to be that the pension should come into payment at the time of retirement from work, we do not want to link payment with actual retirement as a statutory requirement. There are advantages in maximum flexibility, and we think that the choice should be left open. The only point is that the maximum period of deferment should, in our view, be to age 70 for a man and to 65 for a woman. These are the ages at which there is entitlement to the basic scheme pension as a matter of course without condition as to retirement, and this would allow a period of enhancement of up to five years at most which corresponds with practice in occupational pension schemes.
Our aim is that the eventual rate of pension should represent an actuarial adjustment to reflect the period of deferment. How this should be done, by what size of steps the enhancement of pension should proceed, and how parts of a year should be taken into calculation will be matters for regulations. These are details which I do not imagine the House would wish me to go into now.
For the rest, the terms of Clause 77, which deals with the reserve scheme widow's pension, are drawn on the basis of a pension which is not deferred and so relate to normal pensionable age. It will be necessary for some modification to be made to fit the circumstances where an election has been made to defer payment 687 of personal pension, and for this purpose regulations will be necessary.
Similarly, it will be necessary to make arrangements for fitting these deferred pensions into the bonus structure, with which Clause 78 is concerned. This, too, is a matter for regulations, and Amendments Nos. 94 and 95 make the necessary provision.
The whole package of amendments adds some complexity to the reserve pension scheme, but in our view, and clearly in the view of the House, the advantages gained are worth it. We have, in particular, been impressed by the arguments that have been advanced to the effect that a facility of this kind will be especially welcome to women, most of whom, it is said, will benefit from being able to continue at work beyond the minimum pensionable age of 60 and to retire later on a larger pension. This opportunity they will now have in the reserve pension scheme.

§ Mr. George Cunningham
Why was the opportunity not taken to provide for a person to retire at a lower age than that which is normal? I do not mean below the age of 60, but below the age of 65 for men? There will be no more actuarial difficulty about making that computation than there is about the actuarial problem of finding the right factors for deferring a pension.
Secondly—and I think that I read the amendment correctly—what is said is that the person may defer the pension. It does not say, at least in terms, to take the example of the woman who would have retired at the age of 60 but decides to defer to the age of 65, that she will have to pay the contribution between the ages of 60 and 65. I thought from what the Minister said in his presentation of the amendment that it was almost implicit that she might not in some circumstances. There will be different actuarial factors resulting if she is paying a contribution, and if she is not. Are there to be that number of variations in the options open? It would be a good thing if that were so, but it would complicate the business.
Thirdly, I want the Minister to confirm, if he will, something that was said yesterday. We were told that the inten- 688 tion is that even when, by this device, differences in retirement ages are removed, men's contributions will bear the burden of widows' pensions, and women's contributions will bear the burden of the longer life of women. I should have thought that as the Government are taking the opportunity to remove differences in retirement age from the calculation, and as the other two factors, first, operate in different directions and, secondly, almost balance each other, it would be better to get rid of the sex consideration entirely.
As I read the amendment, there is nothing in the wording to prevent that from being done. The regulations made under the terms of the amendment could provide that in these cases men and women will be treated indiscriminately as human beings, and in that way we could get nearer to the position which, in the discussion yesterday, it was generally agreed would come, and come fairly soon.
I wonder whether the Minister is prepared to say that he will be inclined to use the power that he is being given to treat men and women on an equal basis, and not on an approximately equal basis.

§ Mr. Dell
My hon. Friend the Member for Islington, South-West (Mr. George Cunningham) asked the Minister why the Government had not introduced an amendment to enable men to retire earlier than they do now, down to the age of 60. My hon. Friend will remember that yesterday we debated a new clause and an amendment which would have enabled that to happen, but the Government rejected it because I had not also put down all the necessary consequential amendments.
I agree that this is a relevant question. The Government apparently will face the absurdity of making up about a dozen different tables for different ages of retirement for men and women when, by adopting the principle that the tables are going to be so close that they might as well be the same, they could easily have got themselves into the position of having tables based on age of contribution and age of retirement, which is the simple thing to do, and the thing which I imagine we shall get to soon enough anyhow.
689 I have only one worry about the amendment, and it arises out of something that the right hon. Gentleman said yesterday. When I asked him what was intended by Amendment No. 91, he said: I did not say that as between 60 and 65 there will be any close approximation between a man's and a woman's accrual rate."— [OFFICIAL REPORT, 8th May, 1973: Vol. S56, c. 266.] I take it that that in no way detracts from the principle which the Government now accept, that where a man and woman both retire at 65 the rate of accrual for each year's contribution will be much the same. I do not think that the hon. Gentleman intended to say that, and this sentence does not necessarily mean that, but I should like once more on the record a clear statement of the fact that we are dealing with tables which imply that men and women will be treated virtually the same in this respect.
Now that they have introduced the amendment, the Government may have to confront another point which I raised yesterday—the implications for the basic pension. They will give considerable pension advantages here to people who defer their retirement but substantially lower rises in basic pension, proportionately, for other people who defer their retirement. People will not readily understand the difference, and that may be a problem which the Government will have to face at another time.

§ Mrs. Castle
I, too, would like to get one thing clear. I thought that the only thing preventing complete equity in accrual rates for men and women was the fact that women retired earlier. I thought that the House had accepted the validity of the argument that we should not take into account the fact that women live longer than men. If we are to take that fact into account, we had better start taking it into account in respect of other categories of worker who can be classified as living longer than other workers —for example, non-manual as against manual workers.
So I do not understand the obscurity as to the exact accrual rate which will be obtained at any particular age of retirement. Can we be categorically assured that it will be the same accrual rate for men and women if they have entered the scheme at the same age? 690 If we cannot have that assurance, the Government are merely highlighting an unfair discrimination on the grounds of sex.

§ Mr. Dean
The hon. Member for Islington, South-West (Mr. George Cunningham) asked me: why not allow retirement at an earlier age? We had discussions about this in Committee in regard to both the basic pension and the second pension, and the argument is still the same—namely, that to allow people to retire and to draw their pension at below retirement age would mean that a number of people may well not resist the temptation to retire earlier on an inadequate level of pension and may, therefore, be more inclined to become dependent on supplementary benefit later. I think that from his study of pension schemes the hon. Member will know the unhappy experience of other countries which have tried this.
The hon. Member also asked me, with regard to the deferred pension, to confirm that the person concerned would not have to pay contributions over the normal retirement age for an enhanced pension.

§ Mr. George Cunningham
Does the Minister mean, then, that, in the case of a person deferring the pension because he or she was going on working, it will not be open to that person to go on contributing into the scheme, nor will any contribution for that person go in from the employer?

§ Mr. Dean
Where the person goes on working the contributions will continue to be paid, yes.
The right hon. Member for Birkenhead (Mr. Dell) and the right hon. Member for Blackburn (Mrs. Castle) asked about the tables. This question was answered by my right hon. Friend the Secretary of State yesterday. If one takes the case of a woman who defers her retirement until the age of 65, this will mean that the pension to which she will be entitled will be virtually the same for the same level of contributions as in the case of a man who retires at the age of 65.

§ Mrs. Castle
It is that word "virtually" which puzzles me. What is 691 the virtue in having any difference? Why can they not be identical?

§ Mr. Dean
As the right hon. Lady knows very well, the main difference is the earlier retirement age. That is why there is the difference in the accrual rate. There are a few other factors which may make a marginal difference; not in all cases but in some cases. That is why 1 used the words "virtually the same".

§ Mrs. Castle
May we have an explanation of these other factors which make the difference? The House ought to approve those factors. If one of them is that women live longer, we ought to proceed against every section of workers that lives longer.

§ Mr. Dean
That is one of the factors. The other factor is that the man's contribution provides cover for the widow, whereas the woman's contribution does not.

§ Mr. George Cunningham
Does the Minister agree——

Mr. Deputy Speaker
I take it that the hon. Member is not about to make another speech. Perhaps he will address a brief question to the Minister, but nothing more than that.

§ Mr. Cunningham
I shall merely interject a question, Mr. Deputy Speaker.
The two factors of the longer life of women and the widow's pension contribution for men more or less balance. If one puts the two sexes on an equal basis, such difference as there was between them is halved because roughly the same number of men as of women are expected to be in the reserve scheme. Instead of a 5 per cent. difference between the two scales there would then be left only a 2½ per cent. difference. I am not asking the Minister to confirm precisely these calculations, but the answer is of that order. Are we to go through the nonsense of having different treatment for each sex for the sake of the man having a 2\ per cent. greater provision than women for the same contribution? Will the Minister look at this matter again. He has the powers——

Mr. Deputy Speaker
Order. The Minister can answer the hon. Gentleman now.

§ Mr. Dean
I mentioned the answer in introducing the amendment. Regulations will be required for the details on this point. I gladly tell the hon. Gentleman that I shall certainly consider the points that he has made before those regulations are laid.

§ Mr. Dell
I beg to move Amendment No. 185, in page 102, line 6, at end insert: — '(3) The reserve scheme personal pension shall be payable until the death of the pensioner, but should he die before the expiry of a five year period from the date of the first payment, it shall be paid to his widow until the expiry of the said five year period provided that the Reserve Pension Board may for that period if there is no surviving widow or if for any part of the said five year period there is no surviving widow, pay the pension to any dependant of the deceased earner or of the widow'. This is another attempt to press, in a way which in this case satisfies my hon. Friends, an amendment which I tried to get through in Committee. I am not trying to satisfy the Government, although I hope that they are satisfied by the amendment.
It is desirable to provide for the reserve pension scheme a guarantee that there will be five years of payment of the reserve pension as long as there is a dependant, primarily but not necessarily a widow, to benefit from it. That is what the amendment seeks to do. We should try to make it because the Government, or, indeed, anyone who introduces this sort of pensions system, will need to do something to persuade people of the desirability of making this sort of contribution which large numbers have not hitherto been accustomed to making. Many people will fear that their money will be wasted, that their contribution to the reserve pension scheme will be lost by such a fact as early death and that then their wife will get a lower widow's pension. This point could be dealt with by a five-year guarantee of the sort I recommend, and it is something which some good occupational pension schemes already do.
It also is very cheap provision because most people who live to pensionable age live for a further five years. It is a valuable provision for widows because it helps them to accommodate themselves 693 to the lower standard of living they will adopt at the end of five years.
When I moved the amendment in Committee the Minister made a number of points in criticism of my argument. He said that it was an inherent feature of insurance that it might be wasted. I suggest to him that this is a different situation, that this is compulsory insurance of a type to which people in this country are currently unaccustomed. If we can guard against the fear of waste and encourage people to co-operate more readily in the development of the reserve scheme, why should the Government refuse so to do when it could be done at such a small cost?
The other argument put forward by the Minister was that the fact that this is done by some good occupational pension schemes was nothing to do with the case. He said that it was done to prevent various types of anomaly within these schemes. He evidently does not believe that it is done on merit. I believe that it is done because managers of the occupational pension schemes believe that it it helpful to their employees and the widows of those employees.
My hon. Friend the Member for Rotherham (Mr. O'Malley), while accepting the general principle of such an amendment, did not like it in one respect in Committee because he feared that the money under my original drafting might simply go to the estate, whether or not there were dependants. He said that he might support me if I made a second attempt. I always welcome his encouragement, and, therefore, I have made a second attempt. I have limited it to the dependants of the beneficiary of the pension system. I had a residual hope that the Government might accept it, but, even they did not, it would give me pleasure if my hon. Friend accepted it.

§ Mr. O'Malley
I recall the debate which took place on an amendment in Committee where the issue raised by the amendment was considered, and I am grateful to my right hon. Friend for having taken the trouble to draft a revised amendment which certainly meets with my approval, if that is of any consolation to him. I can only hope that since the Government tonight have reached the situation where they have 694 been almost defeated once, they will not risk the possibility of losing a Division on this amendment and that they will, therefore, accept it.

§ Mr. Dean
I will not comment on what the hon. Gentleman has just said, because it was clearly meant fairly light-heartedly at this late hour.
The right hon. Member for Birkenhead (Mr. Dell) said that he had tried to meet one of the objections made to a similar amendment in Committee—the possibility of the pension going to the estate, which I think he accepted would not be the most useful way in which the money going into the scheme could be used. But I am sorry to have to disappoint him by saying that the main argument against the amendment, on the analogy with occupational schemes which provide lump sum for death before retirement to which the right hon. Gentleman referred, still holds, because the reserve scheme is in an entirely different position.
It is true that the proposal is in line with certain features which many occupational schemes have included as standard, whereby payment of pension is guaranteed either for a period of years or until the pension payments have used up the contributions paid by the member. These arrangements have a twofold purpose. While the pensioner was still at work cover for widowhood benefit, if provided at all, would commonly be on a group insurance basis and for a lump sum benefit; once he had retired, however, cover for death after retirement was not widespread. Guaranteed payment of pension for a period, therefore helped the transition from the one situation to the other, in case the pensioner died before he had managed to get even his own money's worth out of the scheme.
Secondly, the provision avoided highlighting the position of the member who left the scheme just before he retired and had his contributions refunded, and who would contrast with the member who died soon after retiring. The situation in the reserve scheme will be quite different. Cover for widow's pension will be universal, and will apply to deaths both before and after pension age.
These are still the main reasons, and they still hold good.

§ Mr. Dell
I did not expect the Minister to accept my amendment. I notice his continuing resistance to any attempt to improve the reserve pension scheme, but it will have to be improved. If the only difference between 7 million members of the reserve pension scheme and the 14 million members of the reserve pension scheme that the Secretary of State was threatening us with, at the end of his last intervention on the tax question, is whether or not a member receives a tax concession on his contribution, I can tell the Minister that there will be far more than 7 million in the reserve pension scheme, because, for various reasons, it will be attractive and for many people better than occupational pension schemes at the minimum level.
Therefore, it will have to be improved, and there will be enormous pressure to improve it. The Government do themselves no good by resisting every attempt to raise the levels of the scheme, as they have done here.
I know that the Government have made one concession to the arguments we have just discussed. They have, with hindsight, agreed to give people some enhancement if they work longer. Much more will have to be done to the reserve pension scheme because of the pressures people will exercise to ensure that they get a decent return on their contributions and that sufficient is done for older people.
However, perhaps the argument is wasted at this time of night.