HC Deb 14 July 1987 vol 119 cc1040-4
Sir Brandon Rhys Williams

I beg to move amendment No. 44, in page 13, line 26, at end insert `or, in the event that the member is not survived by a spouse, to an employee of his.'.

The Temporary Chairman

With this it will be convenient to take the following amendments: No. 42, in page 14, line 3, leave out subsection (6).

No. 43, in page 14, leave out line 25.

Sir Brandon Rhys Williams

I think I am right in supposing that the significance of the surviving spouse is connected with the decision to move towards unisex treatment of pensions, so that a balance is found between the claims of a male employee, or a male member of the scheme, and the claims of a female employee. I certainly welcome that move. I should not want to do anything to upset it. In fact, I am only too anxious to do everything I can to support it.

I am grateful to the Chair for taking, in conjunction with amendment No. 44, my amendments Nos. 42 and 43. They raise a slightly different point, but the amendments are so fully related that the Chair's discretion in grouping them is perfectly right.

My intention in amendment No. 44 is rather narrow, but it arises from the general principle that, as I understand it, when a man reaches the normal age of retirement he will have a certain life expectation, whereas if a woman retires at the same age she is likely to have a much longer life expectation. Therefore, her claim on the fund for an annuity will extend over a longer period and have a greater value than that of a man with an identical career record or other form of entitlement under the scheme. Therefore, women have the advantage over men in so far as they are likely to benefit for longer from the annuity which they are entitled to claim under the scheme.

On the other hand, men have an advantage over women in the actuarial tables in that they are more likely to leave a surviving spouse for the obvious reason that, a man's expectation of life being shorter, it makes it more likely that the woman will survive him. If we are to recognise that the benefit to the survivor is part of the entitlement which has been acquired through the earnings achievement of the member of the scheme, it is not right that the subsequent conduct of the spouse should be relevant in the calculation. Equally, where there is no spouse in the case where a man's wife has died before he does, or where the reverse might be the case, it is not right that the scheme should benefit and the household should suffer.

The amendment seeks to deal with the case of a man whose wife has died who may take a caretaker or some other person to look after him for a salary. That is not uncommon and the rules should not exclude that person being designated by the original member of the fund as the person who is entitled to continue to draw the benefit which we have decided should be allocated to the survivor under the standard rules. That is why I have moved that we should acid the words "to an employee" of the member when deciding what to do about the residual annuity after the original member has died.

The other amendments in the group refer to the conduct of the survivor. It is objectionable, if I have interpreted the clause correctly, that the annuity should be shut off if the surviving spouse remarries. The surviving spouse's conduct in deciding to get married again should not determine what the member's asset was worth when he ceased employment and the benefit of the pension scheme was awarded to him.

I have often thought it a most disagreeable condition that where a wife in particular remarries after her husband's death, the scheme shuts off her benefit. It is a vindictive clause and the woman should not be expected to remain single after her husband has died in order to obtain the benefit of his assets.

It may be that there is something else to this which I have not detected, but it appears to suggest that if the surviving annuitant does not go through a marriage ceremony to another party but continues to live in the same house with that person, the scheme has to go on paying. It is only if there is marriage that the scheme is entitled to dry up the annuity.

If I am straying from the correct interpretation of the clause, I can only apologise, but the Bill has not been before us long enough for hon. Members interested in such points to consult experts who can explain such provisions.

If one looks at the comparable statutory instrument No. 1100 emanating from the DHSS called "The contracting out widowers' guaranteed minimum pension regulations" we find something different. The DHSS goes further in considering the conduct of the survivor and deals with the question of where a widower has entered into a new relationship with another woman. Paragraph 33(2)(b) provides: There is excluded from the periods prescribed … any period during which he is under pensionable age and a woman to whom he is not married are living together as husband and wife Paragraph (c) says: If after he has attained pensionable age if immediately before he attained that age he and a woman to whom he was not married were living together as husband and wife. That is more specific than the clause we are discussing and it is an example of where liaison between the DHSS and the Inland Revenue has not been complete.

I am not trying to score points in respect of that, but I want to understand the nature of the provision. I hope that my right hon. Friend will tell me whether I am right in thinking that these provisions have the effect that the subsequent conduct of the surviving spouse can reflect on the value of the asset which has been earned by the member of the scheme during his lifetime.

8.15 pm
Mr. Blair

Unfortunately, I cannot support the hon. Member for Kensington (Sir B. Rhys Williams) in his amendment, for two reasons. First, as I understand il, amendment No. 44 would considerably change and, indeed, widen the scope of the annuities that would be permissible under clause 24. The annuity would be payable not only to a surviving spouse of a dependant, but even to an employee of his. The employee may be a person in the category to which the hon. Gentleman referred, but the term "employee" can be much wider. It may well be that if the person was self-employed and employed several people it could extend to them. That is going way beyond the purpose of the original legislation.

Secondly, sub-paragraph (6) does not insist that the annuity cease to be payable on the marriage of the annuitant; it simply allows that the annuity cease to be payable on the marriage of the annuitant. The word is "may" not "shall", and that is probably a critical distinction. Therefore, it is entirely up to those who are phrasing the terms of the annuity to decide whether they want that annuity to cease on the marriage of the annuitant. That is perfectly rational. They may decide that if the person remarries it is not necessary for him to have the benefit of the annuity in the ordinary way.

It may be helpful if I raise at this stage a purely drafting point. It is only if one looks at the annotations at the side of clauses 24 and 25 that one realises that they refer to annuities after the death of members. Otherwise, one has to read clause 24 in conjunction with clause 21. Clause 24 simply follows on the conditions already laid out in clause 21. That is slightly unsatisfactory; perhaps the Minister will have somebody look into that, because there have been difficulties in construing statutes where there are qualifications on the scope of a particular clause which are placed in annotations rather than the body of the clause.

Mr. John Greenway

I cannot support the amendments of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). It is important that the House should realise that we are dealing with personal pensions acquired by the individual on a money purchase basis. From an actuarial viewpoint the real issue is the provision of a pension for a member of a scheme—the person who is buying the pension policy. The more people and conditions one puts on the payment of benefit after the member's death, the less pension benefit the individual will obtain in his retirement. The actuaries would have great difficulty in dealing with a position in which one carried on paying an employee an annuity after the death of a member.

Mr. Norman Lamont

I want first to apologise to my hon. Friend the Member for Kensington (Sir B. Rhys Williams) for misrepresenting his views during discussion of the previous amendment. I know from long experience that my hon. Friend has not only an answer to most problems, but a detailed answer. In fact, I was completely aware of the solution that he had to the problem that we were discussing—the long transitional period. I apologise for describing his views in shorthand, which led him to think that I was not familiar with them.

Clause 24 sets out the conditions applicable to annuities payable under a personal pension scheme to a surviving spouse or dependant of the member after his or her death. I should stress that those conditions reflect current law and practice as they relate to retirement annuities. There are no changes; these are the existing practices. Persuasive as I find my hon. Friend on many issues, I do not find him quite so persuasive on this one, for the reasons given by the hon. Member for Sedgefield (Mr. Blair) and by my hon. Friend the Member for Ryedale (Mr. Greenway), who rightly emphasised the difficulty for the whole personal pensions and annuity markets if one went on adding conditions.

I shall come to amendments Nos. 42 and 43 in a moment; I had more sympathy with them initially than with amendent No. 44, which would allow an annuity to be paid to an employee of the member—even, as the hon. Member for Sedgefield emphasised, if he was not a dependant and there was no surviving spouse or dependant of the member. As my hon. Friend the Member for Kensington knows, at present, such annuities can be paid only to someone who is a dependant. Revenue practice has been, I think, to accept a reasonably broad definition of "dependant", and I can confirm that that will continue to be the case. My hon. Friend is proposing to widen this scope for annuities to be paid even to people who have only the most tenuous connection with the member.

I return to the point about the generous tax reliefs upon which the whole subject that we are discussing is based. Given that we have such generous tax reliefs, I can see no justification fo enabling someone who was not a dependant to benefit in that way. If the position were as my hon. Friend described it for amendments Nos. 42 and 43, he would have been entirely right and I would have shared his feelings, but, as the hon. Member for Sedgefield grasped—I congratulate him on doing so—the present rules are permissive.

At present, an annuity paid to a surviving spouse or dependant may cease if the person receiving the annuity subsequently marries or remarries; but there is no objection to such an annuity being payable for the whole life of the annuitant in the normal way. The amendment would prevent an annuity payable in these circumstances from ceasing on the subsequent marriage of the recipient. That would remove an element of choice. It is entirely right that we should have a market that allows people to choose annuities or personal pensions providing for either circumstance. I share my hon. Friend's feelings that the provision would be insensitive if it were as inflexible as he thought it was. However, it is not, and we have a market here that can meet many different circumstances.

Sir Brandon Rhys Williams

I fear that my right hon. Friend the Minister has not quite got the point that I wish to make. I am not happy with provisions that appear to drive people into cohabitation rather than formal marriage. It appears to me that that is permissible as one of the options that the clause would make available. My primary concern is to protect the unisex quality of the pension asset so that, at the date of award, whether the person is male or female, his or her expectation of the benefit that he or she would draw from the scheme would be the same. Since, as I pointed out earlier, the man has to rely on the fact that the scheme provides assets in one form or another that continue after his death, in order to have the equivalent value from the scheme that a woman would get in otherwise similar circumstances at the same age—of course, she would expect to live longer—I do not want the man to lose that asset for any reason.

The scheme should not be able to treat the man badly because he has died younger than the woman would have done in the same circumstances, and has therefore got less benefit from an asset for which he has saved. If there is no surviving spouse, I want the asset that we allocate to the survivor to be available to go to someone else, or to some other objective. It might not be a large one, and it would probably taper. If a man lived to be 99, the benefit for the survivor need not be large, but if he died a year after he qualified for his pension, the asset that the pension scheme would hold on his behalf ought to be large and should not be forfeited because he does not have a surviving wife, or because she has chosen to remarry.

It is not right to undermine the attempt to put men and women on the same footing in pension schemes. I hope that my right hon. Friend will give further consideration to that matter. I do not seek to press him on it now, but if he studies what I have said he will realise that we are potentially reintroducing inequality of the sexes, and that does not seem right.

Mr. Norman Lamont

My hon. Friend is making the point that, as a woman has a longer life expectancy, the annuity costs more. He wants the system to be unisex. There is nothing to prevent the annuity lasting for the widow's lifetime, but the system allows it to stop if she marries again, and there is an element of choice for the person who takes out the contract. The Government require contracted-out personal pensions to be unisex. Annuities from voluntary contributions allow a choice to the member. However, I shall look at what my hon. Friend has said to determine whether the position is unsatisfactory.

Sir Brandon Rhys Williams

In view of my right hon. Friend's helpful assurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 24 ordered to stand part of the Bill.

Clause 25 ordered to stand part of the Bill.

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