§ Mr. Denzil DaviesI beg to Amendment No. 21, in page 18, out lines 2 to 5 and insert
'the second and third columns there shall be substituted—
"Sum Percentage £3,600 18 £4,200 21 £4,800 24 £5,400 27 £6,000 30".'.
§ Mr. SpeakerWith this we may take Amendment No. 22, in page 18, line 5, at end insert
'and for the percentages 16, 17, 18, 19 and 20 there shall be substituted, respectively, the percentages 18, 21, 24, 27 and 30'.
§ Mr. DaviesThis amendment deals with retirement annuity relief. The matter was raised in Committee. I gave an undertaking then—and despite it the Opposition divided the Committee—that we would look at the limits of special rates for older people. I am glad to say that the amendment fulfils that undertaking. Indeed, it goes a little further than an amendment moved in Committee which was more limited in the percentages proposed. It gives a better profile, as it were, in that the steps are more gradual, going up to 30 per cent. at top level.
§ Mr. Paul Dean (Somerset, North)I am grateful to the Minister of State for listening to the pleas made in Committee and to the plea that I made for the self-employed annuitants on Second Reading on 28th April. I declare an interest in pension matters.
Although Amendment No. 22, standing in my name, is similar to Amendment No. 21, I put it down very much on the principle that half a loaf is better than no bread. I welcome the obvious improvements that Amendment No. 21 represents, but at the same time I must put it to the Minister that it is not adequate in modern conditions and perhaps is not the best way of dealing with the problem. I want briefly to put two propositions which seem to me relevant.
First, many, though not all, self-employed people cannot possibly make pension provision for themselves or their wives under the present retirement annuity 168 arrangements. They cannot possibly hope to keep pace with the rate of inflation without putting aside more money than the present regulations will allow. In other words, they are being condemned to lose out in the inflation race. It might be that in many cases they are not in a position to afford even what the amendments will allow, but I put it to the Minister of State that in those cases where they can be afforded, the present arrangements are not adequate when one takes into account the rate of inflation.
The second proposition is that even under these more favourable arrangements there will be a positive discrimination against the self-employed when one takes account of the new pension arrangements that are coming into operation next April for employees. There are two reasons for that assertion. As from April 1978, under the new pension arrangements there are two new important safeguards for retirement. Pension contributions, whether to the State scheme or to a contracted out scheme, will be on an escalator. They will be revalued annually in line with the increase in average earnings. In addition, pensions in payment will also be on an escalator. They will be increased annually in line with increases in prices, up to the guaranteed minimum level. The State will meet the cost of this guarantee for both the State and the occupational pension.
There will be those two important additional safeguards for employees as from next April, but the self-employed will get neither of them. They are excluded from the new arrangements. I do not wish to argue the merits of that tonight. It might be that in all the circumstances the Government were right to decide not to include the self-employed in the new arrangements, but the point is that they are excluded from the new guarantees that are being introduced for employees.
Because they are excluded, the Government have a special obligation to provide a fair deal for the self-employed to enable them to provide reasonable security for themselves and their families. I submit that even with the improvements in the amendments the present arrangements do not measure up to those criteria. If it is thought right for the State to lay down a standard for employees, it should 169 be equally right that a similar standard should be available for the self-employed.
The main problem will arise with older people who have not so far made adequate provision for themselves. It might be asked why during the early part of their working life they have not made adequate provision. As the House knows, there are very good reasons why that might not have been possible. A self-employed person building up a business needs to put back into the business every penny that he is not paying in taxation. He is ploughing back his money in the earlier years of his working life, and he cannot afford to put money into a retirement annuity. That is one large group of people about whom we are talking who reach middle age or even later without having the opportunity to build up provision for their retirement.
There is another equally important group, and that is those large numbers of self-employed who, for the first part of their working life, have been employees and therefore have not been able to take advantage of these arrangements. It might be that in these cases they have some preserved pension rights as employees, but these will often amount to very little in value. It is wrong to assume that contributions will be made by the self-employed over a 40-year period. That is more likely to be the exception than the rule. Late entry will be more usual.
I am not asking for anything exceptional. Most employees can get a two-thirds pension with only 10 years' service and can top up their contributions towards the end of them working life. What is already available to employees, who also have the other advantages to which I have referred, should be similarly available to the self-employed.
I commend to the Government the suggestion of the Consultative Committee of Accountancy Bodies, the Institute of Actuaries, the Bar Council and the Law Society who suggest, with the support of the National Federation for the Self-Employed, that, shortly before retirement, a self-employed perm should be allowed to make a single premium payment, up to an amount sufficient to secure a two-thirds pension on the basis of some average 170 of final earnings, with tax relief being spread back over, say, six years. Without such a provision, the self-employed will not be in a broadly equivalent position to employees.
I realise that, in this Bill, the Government will go no further than the welcome amendment for which I commend them. However, it is not adequate and something along the lines of what I propose is necessary if we are to give the self-employed a reasonable chance to provide adequate security for themselves in retirement.
§ Mr. David HowellMy hon. Friend the Member for Somerset, North (Mr. Dean) has campaigned with great vigour over the years for the self-employed and particularly in relation to provision for their retirement.
This part of the Bill deals with non-pensionable employment and the position of those who wish to put aside something for their old age but who are not covered by employee pension arrangements. We pressed the case of these people in Committee and received a moderately sympathetic reply. The Minister of State undertook to look at the point made by my hon. Friends, though he said he would not consider those born after 1915. He was wedded to 1915 for reasons that were not made fully clear.
The Minister has looked at the question of changing the percentage figures over the full range laid down in existing legislation and has brought forward the modest amendment. I join other hon. Members in asking why we need these restrictions on those who wish to put aside some money to provide for retirement. We may have to examine the fundamental questions behind all these rules and regulations. In the meantime, the amendment is a small step forward and is all the more welcome from a Government that is the hammer of the self-employed. I know that they do not take the issue of the self-employed seriously, except to give them an occasional kick. At the moment they have stopped doing that and have given them a slight benefit. We welcome it from the Conservative side.
§ Amendment agreed to.