REQUISITE BENEFIT FOR WIDOW (Hansard, 12 June 1975)

§ Mr. Kenneth Clarke
I beg to move Amendment No. 26 in page 25, line 6, at beginning insert 'One half of'.
712 This amendment touches on a small but sometimes important point arising from the widow's benefit. It arises when the situation occurs, as it often does, where someone entitled to a pension benefit dies and leaves behind not only a legal widow but other beneficiaries, such as mistresses, often described as common law wives, or dependent families who are 713 not legal and legitimate. Such situations obviously occur in day-to-day life.
The problem that often arises in practice concerns the person to whom the widow's benefit or its equivalent ought to be payable in individual cases. In practice most private occupational schemes, including the majority of schemes which we hope will be contracted out under the new scheme, exercise some discretion in deciding to whom to pay the equivalent of the widow's benefit in such circumstances. This discretion is important in individual cases.
The problem of what to do about this discretion for schemes which are contracted out was first raised in a similar situation under the 1973 Act when minimum standards were set down for private occupational schemes. A decision had to be taken by the House whether to allow such a discretion to continue to be exercised by the trustees of occupational pension funds. On that occasion the decision of the Government supported by the House and not opposed to by the then Labour Opposition, was in accordance with the terms of what is now Section 34(4) of the principal Act—that trustees should continue to have such a discretion.
The Government, without any pre-warning of a change of attitude on their part, have chosen to limit the discretion which trustees have in such cases to any excess pension entitlement over and above the guaranteed minimum pension. The clause lays down that the guaranteed minimum pension, a substantial earnings-related and inflation-proofed amount, should in all cases in contracted out occupational pension schemes be paid to the widow, and the discretion left to trustees is limited to any excess over and above the guaranteed minimum pension.
Obviously irregularities, if I may use that somewhat formal phrase, do not occur in the case of most people who die leaving someone entitled to a widow's benefit. But no one should pretend that we are dealing with only a few cases. Very many such cases occur when trustees have to consider the problem. I have been reliably informed that one large scheme finds that about 16 per cent. of cases in which widow's benefit is left behind by a deceased person involve problems of this kind. Discretion is exercised to allow payment to common 714 law wives, illegitimate children or other more suitable dependants, as opposed to the regular widow who may have been long since estranged from her deceased husband. There are such cases, 16 per cent. of them in the scheme I have quoted, in which that is entirely the right decision, of which most hon. Members would approve.
Of course the lawful widow has her entitlement even if she has long since been separated from her husband, but there can be cases, when a wife comes "out of the blue" on hearing of the death of her husband, in which it would be quite wrong for her to have the entitlement to the exclusion of financial help to a common law wife or family that the deceased left behind. In many cases, if the deceased member of the scheme were alive, it would very much more meet his wishes, and even his expectations of where his contributions were to go, if much better provision could be made for his illegitimate dependants or the woman who has been living with and dependent upon him for many years.
This was urged in Committee but was rejected by the Under-Secretary of State. I regret to say that in my opinion the arguments he used were not up to his usual quality. They smacked somewhat of a brief with which he had been supplied, on a basis inspired more by administrative tidiness, trying to bring matters in line with the State scheme, than with meeting the sensible justice of the case. The problem of successive Governments has been that a State scheme cannot have the same flexibility as far as the basic State pension is concerned because national insurance widows' benefits have always been payable to legal widows. No one can object to that. It would be quite impossible for the State and the National Insurance Scheme to set up the necessary machinery to enable discretion to be exercised in all such cases and for there to be the right amount of flexibility. That is inescapable.
In our opinion, however, there is no reason to go on to say that because the State cannot match that flexibility it would be wrong to permit discretion to be exercised by trustees of occupational pension funds who can exercise such discretion, and who do so in a reasonable way. As far as I am aware, no one has ever seriously challenged the way in 715 which trustees use this discretion. It is difficult to have a proper appeals procedure and so on, but in my constituency work and from inquiries I have made about the Bill I have no experience of any serious challenge to the exercise of this discretion by trustees. I have no doubt that there are some who might be challenged, but I believe that they would be only a tiny number.
It seems to me that in a 1975 Social Security Pensions Bill the Government ought to make provision for the kind of discretion I am describing, to allow trustees to do justice to the merits of an individual case, and not to discriminate unfairly against a person who was not legally married to a deceased person but was totally dependent on him or who may have children who were dependent on that deceased person. For that reason we wish to preserve this discretion. Similar amendments were moved in Committee but the Under-Secretary rejected them.
It will be noticed that there is a difference in the amendment we have now tabled, because the hon. Gentleman used some arguments about the changed position because of the rôle that guaranteed minimum pension plays in this scheme. We have tried to settle with the Government and suggest that there might continue to be discretion above one-half of the guaranteed minimum pension, so that the legal widow could have half of the guaranteed minimum pension in all cases but that the desirable discretion which I have been describing might be retained for any excess pension entitlement above that figure.

§ Mr. Alec Jones
Certainly we had noticed the change between the amendment that is put forward this afternoon and the amendment moved in Committee. When I saw the change in the amendment I immediately went through the Committee stage proceedings and read the contributions made by several hon. Members in the Committee, including that of the hon. Member for Rushcliffe (Mr. Clarke), who, I noted, advised us that we should not stick so rigidly to the legal status of matrimony. I immediately went to The Times "Guide to the House of Commons" to check the hon. Gentleman's status, wondering whether 716 he was speaking in Committee as a Member of the House or as a barrister. I trust that that difficulty will be resolved with the hon. Gentleman's good lady when he gets home this evening.
Certainly it is true that deciding how one treats a legal widow as far as benefit is concerned, as against a common law widow if I may conjure up that phrase—the other kind of dependant—is not simple. I looked again at the points we made in Committee. There is still the significant point that there is an interrelationship between the State scheme and private pension schemes in the Bill, and it would cause considerable difficulties if the occupational pension scheme chose to pay a dependant other than a widow while the State scheme continued to pay only the widow.
The hon. Gentleman suggested that we had introduced this proposal without warning and that it really was a matter of administrative tidiness. I remind him that it was specifically spelt out in the White Paper that Under the contracting out scheme … the widow receives in total at least as much as if her husband had never been contracted out at all. That is the principle which we feel is worth maintaining. The widow's guaranteed minimum pension is a counterpart of the State scheme's additional component for widows, because if she does not receive it she will be worse off as a result of the contracting-out arrangement. It is a fundamental feature of these arrangements that no person shall be worse off than he or she would have been if there had been no contracting out.
Again, the hon. Gentleman made the point that in such cases, if we adopted this kind of amendment, these widows would be unable to exercise any statutory right of appeal against the scheme such as they would have if a State scheme pension were at stake. It is because we believe that the principle is right, while accepting that there are bound to be difficulties, just as there are bound to be grey areas in between, that we concluded that the right answer was that all widows should be treated in the same way, receiving the State scheme widow's pension and, where this applies, the widow's guaranteed minimum pension.
717 The hon. Gentleman spoke of excluding any financial help for the non-widowed dependant, the other dependant. I am quite sure he did not mean that but accepts that the schemes will still be able to exercise a degree of flexibility in relation to the excess over guaranteed minimum pension. We have looked at this and we accept that there are these difficult decisions to be made, but on balance we believe that we were right to stick to the principle as enunciated in the White Paper and implemented in the Bill.

§ Mr. Kenneth Clarke
I note that these proceedings are not being carried live on radio, so that I have no need to put on record that I have no personal interest at all in the amendments that I move. I am disappointed by the Under-Secretary's reply but on an entirely disinterested basis. I express disappointment, but as I believe that this is, for the immediate future, the last contribution by the Under-Secretary on this or any other pension Bill, I must say we regret that he is going back to his native country and will have new responsibilities elsewhere.
In his short stay with the very small band of Members who follow this subject closely, the hon. Gentleman earned the respect of both sides of the Committee for his work in pensions. I am sure that the Welsh Office will be extremely well served by him now that he has received his new posting. I trust that when he makes his first speech on his new responsibilities he will have a better case to argue than the one he has just argued in his final speech on the Bill.
I am overlooking some vital technical Government amendments which appear on the Paper. The hon. Gentleman will have to move those amendments with particular fluency and charm to erase the memory of the case he has just deployed.
I remain quite unconvinced and sorry that he relies so much on the discrepancies that would arise. There has always been a difference in practice between the State scheme and occupational pension schemes. Acceptance of our amendments would mean that some legal widows, whose husbands had been in contracted-out schemes, would be slightly worse off than widows whose husbands had remained in the State scheme. I can only 718 say, in the circumstances I am describing, that, given the justice of the case I have in mind, it will be only the just cases on which trustees try to exercise a discretion. There will be a minor discrepancy but not a serious problem for legal widows. That is an inconsistency and an anomaly which I should be prepared to accept in order to retain this valuable discretion.
I am sorry that the Government feel it necessary to negative the amendment. I trust that even at a later stage in another place there might be someone prepared to continue to argue the point.