Clause 7 (Hansard, 19 May 1986)

§ Mr. Major
I beg to move amendment No. 39, in page 8, line 25, after 'below', insert 'and except in such cases as may be prescribed'. The amendment provides a power to make exceptions to the circumstances in which the 2 per cent. incentive payment will be made to newly contracted-out occupational pension schemes.
At present the Bill provides in clause 7 for the incentive payment to go to schemes which are newly contracted-out since January 1986 in respect of each job they cover which is also newly contracted-out since then. The incentive will apply for the five years, April 1988 to April 1993, as the House will be well aware.
There are cases where it will not be appropriate to make the payment. For example, it will not be appropriate where there might be a business take-over of a firm which had a contracted-out scheme for its employees. This might result in employments and a scheme which were newly contracted-out in the strict legal sense, but which were really the same jobs as before. It would not be appropriate to pay the incentive in this case. I think that I will carry all hon. Members with me in that observation.
The amendment provides the power to clarify that position beyond doubt, and I commend it to the House.

§ Sir David Price (Eastleigh)
I beg to move amendment No. 195, in page 8, leave out from end of line 28 to first 'the' in line 30.

§ Mr. Deputy Speaker
With this it will be convenient to take amendment No. 196, in page 8, leave out lines 37 to 40.

§ Sir David Price
As the House will appreciate, these are probing amendments. They follow logically from the amendments moved by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). They are, as it were, the other side of the coin. They are an alternative method of dealing with the problems that he identified, to which my right hon. Friend the Secretary of State responded with sympathy and understanding, and even with a promise that the last word had not been said on that. It is in that spirit that I can be remarkably brief, which will be to the relief of the entire House.
95 The purpose of my amendment is to offer a subsidy to all those who contract out of SERPS, whether they go to the occupational scheme or the personal pension scheme. In other words, the amendment takes up my right hon. Friend's concern about those people who have neither an occupational pension scheme nor a personal pension scheme. We know, as he pointed out in his Green Paper, that that has been a static situation for the past 10 years. All of us who care about the second pension want to see that opportunity opened up further. Part of the purpose of this Report stage is to throw out to my right hon. Friend different methods by which that can be achieved.
If my amendments were to be accepted they would avoid discrimination against those employees who have already joined occupational schemes. They would also avoid the undermining of such schemes, which in many cases have been set up with great care to ensure that members get the best possible pensions in later years.
The hon. Gentleman dwelt a little on that point. I shall not detain the House on it. I am sure that my right hon. Friend and his Department know my point. There is a feeling in the occupational pensions industry that particularly young members of this scheme could leave their existing scheme, go into a personal pension scheme and find themselves in the long run worse off, although in the short run they might contribute less. The House will understand that retirement is probably a more real matter to me than to the hon. Gentleman, who, I suspect, is a year or two lighter than I am. One should reflect on the measure of the scope of a pension scheme.
I think that most hon. Members would feel that any form of occupational or personal pension scheme should provide for a proper pension. Ideally, the best way is based on final salary or average earnings. It should include discretionary increases to keep pace with inflation. It should provide life assurance benefit, which is a new practice that has come in more recently. It should allow for earlier retirement, and it should provide widow's benefit. Those are the sorts of features that most of us today expect to see in pension schemes.
The case has not been made for discriminating in the incentive between either the occupational or the personal scheme. The object of my amendments is simply to raise the possibility that it would be better to give the incentive to both rather than to discriminate purely in favour of the personal scheme.

§ Mr. Fowler
There is no difference of opinion between my hon. Friend and me, because we both want to encourage the maximum number of good occupational pensions. The effect that my hon. Friend intends to achieve by this amendment seems to be that all members of all contracted-out occupational pension schemes should be able to qualify for the 2 per cent. incentive payment which is at the moment intended only for new schemes and newly contracted-out jobs. I am afraid I have to use the time-honoured phrase that the amendment is technically defective and would not achieve what is desired.
We estimate that at the moment the 2 per cent. incentive for pensions might cost about £60 million per year under our proposals. We further estimate that the amendment would increase the cost to about £1.5 billion per year and would mean nearly 1 percentage point more on national 96 insurance contributions. For that variety of reasons I must upstage my hon. Friend and tell him that I am not able to accede to his request.
I think I have made it clear to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) that I do not want to close the door on any change in the area of the 2 per cent. incentive. I shall reflect not only on what he has said, but on what my hon. Friend has said, and especially on the principle of what my hon. Friend has set forward. Perhaps my hon. Friend will understand if I advise the House to resist his amendment.

§ Sir David Price
Given the spirit of my right hon. Friend's reply, and in the knowledge that I am probably being rather more generous than usual in pushing my luck with the Treasury, I beg to ask leave to withdraw the amendment.