§ Mr. Deakins
I beg to move Amendment No. 20, in page 17, line 17 at end insert—'(2A) At the beginning of paragraph (b) of section 43(2) and paragraph (b) of section 65(2) of the principal Act (which as amended by the Child Benefit Act 1975 require the contributions mentioned in those paragraphs to be over and above those required for the purposes of section 23(1) (b) of the latter Act) there shall be inserted the words "except in prescribed cases,"'.
§ Mr. Deakins
These amendments are primarily of a technical nature. Sections 43(2) and 65(2) of the Social Security Act 1975, as amended by the Child Benefit Act 1975, make provision for the care of 200 a person claiming an increase of benefit—for example, sickness benefit or injury benefit—in respect of a child who is not living with him and whom he is under an obligation to maintain. He must make requisite contributions to the cost of providing for the child, and in particular he must contribute not only an amount equivalent to the dependency benefit he receives for the child but also an amount equivalent to the child benefit which he receives for that child.
There is, however, a special category of claimants, consisting of men separated or divorced from their wives with whom their child is living, who cannot qualify for child benefit though they will be able to qualify for dependency benefit by virtue of regulations replacing existing Sections 42(3) and 64(4). Those sections are being repealed by the Child Benefit Act.
It is the intention that in future, as in the past, such beneficiaries should have to contribute an amount equivalent to the dependency benefit towards the cost of providing for the child, but without the 201 need to contribute any additional amount on account of child benefit for which, as already mentioned, they will not be able to qualify. Doubt has been expressed as to whether amendments made to the Social Security Act by the Child Benefit Act allow regulations to be made to achieve this and the present amendments will put the matter beyond doubt.
The amendments to the Social Security Act need to come into operation from 4th April, a few days after Royal Assent is expected to this Bill because that is the date when payments of child benefit will begin.
§ Mrs. Chalker
The point of calling this a miscellaneous provisions Bill is well proved by these two small enabling amendments. I have only one question, because we have now had a further clarification, through the amendments, of a situation in connection with child benefit, which will become payable from April.
The hon. Gentleman has told us that it will now be a special category of claimant who will not be eligible to claim the child benefit. He has further explained that dependant's allowance will still be permitted in these cases. All this matter will be covered in the regulations enabled by these amendments.
Following our Child Benefit debate last week, and without straying out of order, I hope that it will be possible for the hon. Gentleman to tell us whether all the uncertainties, as I must still call them, in the memorandum of 28th January from the Minister for Social Security will require regulations which might, at the moment, be outside the scope of the amendments that could be made under the same difficulties that the hon. Gentleman has described on these amendments.
If the hon. Gentleman needs amendments to allow the necessary regulations for the special category of claimant not having eligibility to child benefit now, will he need other amendments to permit the regulations to offset the disregards which currently are not covered in any of our legislation? Otherwise I am happy to accept the amendments.
§ Mr. Deakins
As I understand the position, no further legislative amendments are needed to cover the remaining regulations needed for the child benefit 202 provisions. However, I take the point made by the hon. Lady, and, of course, we have the stage yet to come in another place, although we hope to keep it as short as possible in view of the timetable for the Bill. But I do not envisage that any further amendments will be needed on this point.
§ Amendment agreed to.
§ Mrs. Chalker
I beg to move Amendment No. 24, in page 17, line 44, at end insert—'(6) In sections 35(7) and 45(1) of the Pensions Act, for the words "the Scheme's normal pension age", there shall be substituted the words "pensionable age".'.This is a reincarnated form of Amendment No. 69 which we moved in Committee. I have noted that in the report of our Committee proceedings I am printed as saying "I bet to move". I hope that that misprint can be corrected because earlier this evening I would have said "I bet the Government will say 'no' to me again". However, I gather from whispers across the Table that the Government are feeling more inclined to Amendment No. 24 than they were to Amendment No. 69 in Committee. I make no apology for tabling the amendment again, because there is a background to the situation which should be explained and put correctly.
The late Brian O'Malley accepted that in our pensions legislation employers would be reluctant to accept an open-ended liability to revalue guaranteed minimum pensions in line with increases in national average earnings for employees who were early leavers—people who left before their retirement date.
A special problem exists when an occupational pension scheme has a normal pension age below that of the State pension age. In Committee the amendment we moved on this aspect was resisted by the Government. The strongest reasons for the amendment were that it would be difficult for members of a pension scheme to elect an option to provide a better pension for a widow, or commute part of the pension for cash, as long as they could be in a worse situation than the law as it stood would put them.
In Committee I asked a number of questions which the Minister could not 203 then answer. But he used three arguments which must be corected in the House even if he is looking favourably on this amendment. It is nonsense to say that our proposals would mean that extra costs would fall on the State scheme. The costs involved are identical with the costs that would arise if all schemes for pensions involved some members retiring five years early. Presumably the Minister would not suggest that our proposals would present unacceptable dangers.
The Minister in Committee was certainly not kind to the Government Actuary, but he has had some more information since that debate. We must have a situation in which the fixed rate of 8½ per cent. and the limited rate of 5½ per cent. are designed to be equivalent to the full valuation, and that would not be an unfavourable situation.
Furthermore, the Minister said in Committee—and we took great exception to this suggestion—that the amendment would be a step towards a general fixed rate valuation—in other words, for people ceasing to contract out at any age. There is no substance in that comment, and I hope that he will retract it in the light of information which he has received since 28th January. The provision is related to normal pension ages and is strictly governed by the requirements of the Inland Revenue. There is no danger of its being extended downwards to lower ages.
I shall be delighted if the Government accept the amendment because, although we appreciate that some problems arise from the recent decision by the miners to accept an earlier retirement age, we believe that if our amendment were not accepted other unions would shortly be knocking at the Government's door saying "Why can this be done for the miners but not for other occupational pensions that fulfil the same situation?"
The Government obviously have been slightly persuaded by the outcome of their discussions with the National Union of Mineworkers. I look forward to seeing this provision on the statute book because it will clarify and rectify a large number of worries which the pensions industry has had before it for a long time.
§ Mr. Deakins
My right hon. Friend and I have given much thought to the points that were made in Committee on this topic, and he and I are conscious of the depth of feeling on this matter on the part of the pensions interests, as expressed by their representatives at a recent meeting with officials when a number of points on this and other matters were clarified.
The Government, in the spirit of the partnership so assiduously nurtured over the long months of debate on the Social Security Pensions Act and illustrated more recently in Committee, have no wish to be intransigent on this issue. Accordingly, we accept this amendment, subject to tidying up any technical drafting matters that may be found necessary in consequence. I hope that this further substantial concession will remove any doubts that may have existed about the Government's determination to get our momentous new pensions scheme off to the right kind of start, with the co-operation of all concerned.
§ Amendment agreed to.
§ Mrs. Chalker
I beg to move Amendment No. 25, in page 18, line 1, leave out 'Secretary of State' and insert 'Occupational Pensions Board'.
I do not wish to offend the Minister but wish only to assist him on this amendment. During the debate on Clause 19 in Committee, he made a masterful attempt to answer some of the technical points upon which I had been briefed, but some differences remained and it became obvious by the end of the debate in Committee on Government Amendment No. 66 that there were a number of technicalities left unanswered and many doubts still to be resolved. It seemed to us that the body that could help the Minister resolve those doubts was the Occupational Pensions Board. Not even the Minister's own Department could, in the short term, give him the answers to the fairly general questions that had been raised.
Therefore, we felt that it would be a good idea to explore transferring the responsibility, from the Secretary of State to the Occupational Pensions Board, in respect of the issue of certificates upon the alternative solvency test that was the purposeof Amendment No. 66 in Committee. This amendment is intended to 205 allow further discussion on questions raised, but it also has its own reason. In this highly technical field, it would be much better to have the direct involvement of the Occupational Pensions Board which decides upon the alternative solvency test. That body will decide whether the conditions for contracting out and the insurance given by an employer wishing to contract out of the State pension scheme are sufficient to allow that. The OPB will advise the Department which will, in turn, advise the Minister. We all know that things that pass through three pairs of hands sometimes become slightly different in the handling. It would be far better if the OPB were directly concerned with the running of the alternative insolvency test. The Minister implied this when he said in Committee that the meaning of Clause 19—now Clause 18—fell to be answered by the OPB.
For practical reasons, it is a bad thing to have a removed approval process, and that is what we shall have, if it is left to the Secretary of State to make the decision. The OPB has the knowledge. The powers of the Secretary of State contained in Section 5 of the Social Security Pensions Act are sufficient for him to retain control over the OPB. If it were thought that the OPB was getting out of hand, the Secretary of State would not be inhibited from taking decisions in the interest of the pensions industry and developing strong second pension provision in this country.
If the OPB was vetted by the Department over every case it would multiply work and would not achieve the greater flexibility of the Social Security Pensions Act 1975 that the late Brian O'Malley sought in all our bipartisan discussions on the Act.
I have tried to think of any reasons why the OPB might prefer to have this responsibility placed on the Department, and I cannot think of any except that the OPB might not be prepared to adjudicate on the solvency of insurance companies, but that seems unlikely because of the protection that was given by the Policyholders Protection Act. There is no reason why the OPB should want to hand any responsibility over to the Department on that score.
In a letter of 4th February the Minister made it clear that several other things 206 would be expected. When we raised the question in Committee during debate on Amendment No. 65, I asked the Minister whether it would be necessary, with this alternative solvency test, for individual insurance policies to be issued in the case of people leaving a firm with a contracted-out scheme; or whether a group policy could cover the liability for that contracted-out scheme.
I expected the Minister to say that we could follow the Boyd-Carpenter Act of 1973 and allow group policies, but it seems from what has been written and said that the Minister and the Department are insisting that when insurance policies are issued in connection with alternative solvency tests they must be in the names of the early leavers from the scheme. This is madness. There is no objection to a requirement that individual policies should be issued if a scheme is wound up. That is normal practice since the trustees will usually cease to exist.
However, it does nothing for the security of benefits if, while funds are continuing—although members may be leaving—we are compelled to transfer benefits from a group to an individual policy. It will also add considerably to the administrative costs that the scheme will have to bear since more members leave than stay to retirement age.
Because of the pay policy and other things which have happened in this country, many middle managers are leaving schemes—in order to get more money in other jobs—when previously they would have stayed. If this trend continues, and the Government insist on individual policies covering every member, it will make nonsense of the sensible administration of the scheme. The increased cost will reduce the amount of money available to provide benefits for members, which is, after all, the real purpose of a pension scheme, whether occupational or otherwise. It will also increase the work of the staff of the Department, who are already over-burdened.
If the amendments are accepted, it will be easy to arrive at a sensible agreement with the Board on the way in which it should operate, without prejudicing the adequacy of the alternative solvency test, but taking account of the needs of the early leavers and the occupational pension rights within insurance companies or firms 207 and taking care of the people who will be beneficiaries.
We want that and not administrative difficulties. We could achieve our aim easily if only the Government were prepared to see group policies issued. I am sure that if the Government discuss this amendment with the Board members, they will make the same comments as I have made.
It is difficult to expect the Department always to have the right answers on such technical matters as the alternative solvency test. We should not expect it of the Department or the Minister, but we should expect it of the Board. That is why it was set up. I hope that the Minister will see the sense of an amendment, which gives the power, restricted by Section 5 of the Act, to the Board to get on with the job for which it was set up.
§ 12.15 a.m.
§ Mr. Deakins
The hon. Member for Wallasey (Mrs. Chalker) raised a number of points around the amendment and the related amendment, No. 26. Perhaps I can assure her that we stand by what I said in my letter to her dated 4th February. However, there is misunderstanding in the amendments.
The effect of the two amendments would be to place the onus of deciding whether a policy or annuity securing the guaranteed minimum pension of an individual member satisfied the conditions to be restricted on the Occupational Pensions Board. This is to misconceive the Board's sphere of responsibility and the object of the clause.
The Occupational Pensions Board has the duty of ensuring that a pension scheme as a whole meets the requirements for contracting-out and subsequently supervising the scheme's finances to ensure that it can meet its liabilities for guaranteed minimum pensions. The object of the clause is to enable a scheme to discharge its liability for State scheme premiums in respect of individual members by purchasing an insurance policy or annuity securing the individual's guaranteed minimum pension from an insurance company. The duty of ensuring that an individual's guaranteed minimum pension is secured when he ceases to be in contracted-out employment lies with 208 the Secretary of State. He must be satisfied that the contracted-out scheme has properly secured the guaranteed minimum pension. Hence, when an individual's guaranteed minimum pension is secured in this way it is the Secretary of State who has to be satisfied that the insurance policy or annuity contract meets the prescribed conditions and consequently it is he who issues the certificate once he is so satisfied.
There may be some confusion of thought between the Occupational Pensions Board's alternative solvency test and the effect of this clause. The Board's alternative solvency test, which is set out in its recent memorandum, No. 39, is applied to insured schemes where liability for accrued rights and pensioners' rights premium is most unlikely to arise because the scheme's insurance contract provides for annuities to be bought out in the event of the scheme being wound up. This test can be applied by the Board under Section 41(2) of the Social Security Pensions Act as it stands. The provision made by the clause is to meet the wishes of the pension interests to discharge any possible liability for accrued rights or pensioners' rights premiums where a scheme of any type buys out the guaranteed minimum pensions of individual early leavers or members leaving on retirement.
It is intended that a bought-out insurance policy or annuity contract will have to meet five conditions. They are: first, that the insurance company is one that is subject to supervision by the Department of Trade, that is, that the insurance company is one to which Part II of the Insurance Companies Act 1974 applies; secondly, the policy or annuity must provide a pension at pensionable age that is at least equal to the beneficiary's guaranteed minimum pension at that age; if it is purchased before pensionable age, it must provide for the GMP to be revalued up to that age by 5 per cent. or 8 per cent; thirdly, the part of the pension payable under the policy or annuity that represents the guaranteed minimum pension must be non-commutable and non-assignable; fourthly, if the policy or annuity is in respect of a man, it must include provision for a contingent widow's guaranteed minimum pension; fifthly, the policy or annuity must be assigned to the beneficiary.
209 It is intended that the administrative procedures to operate the Secretary of State's certification should be as simple as possible consonant with the proper discharge of his responsibility. Basically, a statement by the insurance company that the policy or annuity contract that it has issued is in terms that meet the prescribed conditions will be accepted by the Secretary of State, as sufficient evidence for the issue of his certificate. A notification incorporating the certificate will be issued by the Secretary of State and copies will go to both the insurance company and the administrator of the scheme that has purchased the policy or annuity.
In view of that explanation, I hope that the hon. Member for Wallasey will withdraw the amendment.
§ Mr. Peter Bottomley (Woolwich, West)
The Minister has probably given a good reason for accepting the amendment. He said that there were five conditions and that the insurance company, have been approved by the Department of Trade, will issue a notification that it meets the Secretary of State's criteria. The Government should, therefore, accept the amendment. If the criteria are that simple, why cannot the Occupational Pensions Board fulfil the function that the Minister expects the Department to fulfil?
§ Mrs. Chalker
I was delighted to hear, in the Minister's closing words, that we shall now be going back to certificates of assurance. That is what we seemed to be saying, although he did not use those very words. In other words, it sounds as though what I had suggested as under the Boyd-Carpenter scheme will now be implemented by the Department.
However, it still leaves the problem that there are large areas of doubt which Ministers cannot by themselves resolve, and no one would expect or ask them to do so. But even with the combined forces of their Department, without the ongoing working knowledge of the Occupational Pensions Board they are obviously at a loss to resolve these matters fully. I still maintain that it would be very useful to have the OPB involved in the way described by the amendments, which are limited anyway. I am not totally convinced that the Secretary of State has to be the person who will issue the certificates.
210 During our debates on this issue over the last couple of months, we have found out a great deal more about what is going on. I have learned a lot, and I seem to remember the Minister saying that he had learned a lot, too, on this issue. Many hon. Members think that we do not talk in normal language when we come to the occupational pension schemes that we have on our statute book. But it is quite important that we are taking the advice of the industry, both through the Department and though the Opposition, when we consider these matters. I have not raised lightly the suggestion that we should replace the Secretary of State by the OPB in this amendment. I raised it because we skirted around the point, despite our new learning in Committee, for quite a long while.
Returning to the letter that the Minister sent to me on 4th February, it was obvious then that we still had not made ourselves entirely clear to each other about sorting out the difficulties. They are technical difficulties which neither the Minister, with his back-up, nor the Opposition Front Bench, with a rather more limited back-up than that at the Minister's disposal, could clarify fully. That is really the reason why we feel it most important that the OPB should be further involved.
It is true that when the Minister wrote to me following our debates in Committee at the end of January, he sought to answer a number of the questions, but it seems that even with his efforts since then, probably with the back-up of the OPB, there is no certainty in the industry that this is the best way that we can make the occupational pension scheme work.
When I was talking in Committee about the options other than buying back State scheme premiums in order to maintain the value of the guaranteed minimum pensions we got into some difficulty. Perhaps I did not then understand the matter as fully as I should have done. That may be true. When we talked about the mixed test, the Minister agreed to take the matter away and look at it. In his letter to me of 4th February he said about the mixed test,You then asked about what you called a 'mixed test' and I can tell you that the OPB have indicated that they are prepared to consider, on an individual scheme basis, extending their alternative, insurance-based, solvency test 211 to schemes using a limited revaluation (that is revaluation at 5 per cent. and a state scheme premium payment). Until some of these schemes' applications have been considered by the OPB I cannot, however, develop this point further.The crucial point is in that last sentence. It is not until the OPB has discussed the whole of this matter that the Minister can move. That is why in the issuing of certificates on this basis it is considered very sensible to see whether it might not be better done by the OPB with all the skills at its disposal.
§ Mr. Newton
I rise only briefly to support the amendment. Underneath all the complexities which can be argued either way regarding the Board is one relatively simple point. The Government are in the process of setting up an elaborate structure for their new pension scheme and are generally giving the Occupational Pensions Board the duty of oversight of that scheme. It seems senseless and inefficient not to give the maximut amount of responsibility to that Board, but to divide the responsibility and in some cases to make two bodies liable to have a say in the same thing.
§ The experience of the nationalised industries is that the process of having Ministers coming in at this, that and the other point in a system which is basically being run by somebody else has bred inefficiency, delay, excessive bureaucracy and unnecessary duplication. The Minister maintains that that will not happen because there is a legitimate and sensible separation of functions.
§ This proposal has been put forward by the pensions interests outside this House. It has not been dreamed up for political reasons. Therefore, there must be a strong case for allowing the Occupational Pensions Board, which will build up experience and expertise, to deal with this matter. We should maximise the use of that experience and expertise and minimise the part that the Minister plays in the day to day operation of the scheme.
§ My hon. Friend the Member for Wallasey (Mrs. Chalker) has made out a very strong argument for the amendment.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 14, Noes 105.213
|Division No. 70]||AYES||[12.26 a.m.|
|Bain, Mrs Maragert||Gray, Harrish||Stewart, Rt Hon Donald|
|Beith, A. J.||Howells, Geraint (Cardigan)||Thorpe, Rt Hon Jeremy (N Devon)|
|Boscawen,Hon Robert||Monro, Hector|
|Crawford, Douglas||Penhaligon, David||TELLERS FOR THE AYES:|
|Freud, Clement||Smith, Cyril (Rochdale)||Mr. Peter Bottomley and|
|Glyn, Dr Alan||Steel, Rt Hon David||Mr. Tony Newton.|
|Anderson, Donald||Eadie, Alex||Mendelson, John|
|Archer, Peter||Ellis, Tom (Wrexham)||Mikardo, Ian|
|Armstrong, Ernest||English, Michael||Morris, Alfred (Wythenshawe)|
|Ashton, Joe||Ennals, David||Morris, Charles R. (Openshaw)|
|Barnett, Guy (Greenwich)||Ewing, Harry (Stirling)||Murray, Rt Hon Ronald King|
|Bates, Alf||Fernyhough, Rt Hon E.||Newens, Stanley|
|Bean, R. E.||Foot, Rt Hon Michael||Oakes, Gordon|
|Bidwell, Sydney||Fowler, Gerald (The Wrekin)||O'Halloran, Michael|
|Bray, Dr Jeremy||Fraser, John (Lambeth, N'w'd)||Orme, Rt Hon Stanley|
|Brown, Hugh D. (Proven)||Garrett, John (Norwich S)||Ovenden, John|
|Brown, Robert C. (Newcastle W)||George, Bruce||Park, George|
|Buchanan, Richard||Hamilton, James (Bothwell)||Richardson, Miss Jo|
|Callaghan, Jim (Middleton & P)||Hardy, Peter||Robinson, Geoffrey|
|Canavan, Dennis||Harrison, Walter (Wakefield)||Roderick, Caerwyn|
|Carmichael, Neil||Hooley, Frank||Rodgers, George (Chorley)|
|Cocks, Rt Hon Michael||Hunter, Adam||Sedgemore, Brian|
|Cohen, Stanley||Jackson, Miss Maragaret (Lincoln)||Selby, Harry|
|Coleman, Donald||Kerr, Russell||Silkin, Rt Hon John (Deptford)|
|Cook, Robin F. (Edin C)||Lamond, James||Silverman, Julius|
|Cox, Thomas (Tooting)||Latham, Arthur (Paddington)||Skinner, Dennis|
|Crowther, Stan (Rotherham)||Lestor, Miss Joan (Eton & Slough)||Small, William|
|Cryer, Bob||Lomas, Kenneth||Smith, John (N Lanarkshire)|
|Cunningham, G. (Islington S)||Loyden, Eddie||Snape, Peter|
|Davidson, Arthur||Lyon, Alexander (York)||Spearing, Nigel|
|Deakins, Eric||Lyons, Edward (Bradford W)||Spriggs, Leslie|
|Dean, Joseph (Leeds West)||McDonald, Dr Oonagh||Stallard, A. W.|
|Dempsey, James||McElhone, Frank||Stewart, Rt Hon M. (Fulham)|
|Doig, Peter||MacFarquhar, Roderick||Taylor, Mrs Ann (Bolton W)|
|Dormand, J. D.||Madden, Max||Thomas, Mike (Newcastle E)|
|Douglas-Mann, Bruce||Mallalieu, J. P. W.||Thomas, Ron (Bristol NW)|
|Dunn, James A.||Marks, Kenneth||Tinn, James|
|Urwin, T. W.||Ward, Michael||Wise, Mrs Audrey|
|Varley, Rt Hon Eric G.||White, Frank R. (Bury)||Woof, Robert|
|Wainwright, Edwin (Dearne V)||Whitlock, William||TELLERS FOR THE NOES:|
|Walker, Harold (Doncaster)||Williams, Alan Lee (Hornch'ch)||Mr. Ted Graham and|
|Walker, Terry (Kingswood)||Wilson, Alexander (Hamilton)||Mr. David Stoddart.|
§ Question accordingly negatived.