HC Deb 26 April 1989 vol 151 cc1050-3
Mr. John Watts (Slough)

I beg to move, amendment No. 62, in page 41, line 45, at end insert `(h) any permitted difference on the basis of the sex of members, in the level of benefit payable from any employment-related benefit scheme which has an equal normal pension age for men and women which is lower than 65, between the ages of 60 and 65. Any difference in the level of benefit payable shall be a permitted difference if it does not exceed an amount equal to the basic state pension in force under the state scheme from time to time.'.

The Bill implements a European directive requiring equal treatment for men and women in pension schemes. However—

It being Ten o'clock, further consideration of the Bill stood adjourned.

Ordered, That at this day's sitting, the Social Security Bill may be proceeded with, though opposed, until any hour.—[Mr. Dorrell.]

Bill, as amended (in the Standing Committee), again considered.

Mr. Watts

Equal treatement does not extend to equal retirement ages, so the discrimination against men in the state retirement scheme and in other pension schemes, where it exists, will be allowed to continue. However, many enlightened employers, such as the Mars group, an important employer in my constituency, have followed, a policy of equal retirement ages for men and women and equal benefits for equal lengths of service.

I shall illustrate the difficulty which has arisen from the way in which the Bill implements the directive. If a man and a woman join a company at the age of 25 and retire at the age of 55 after 30 years service and both have a final salary of £15,000 a year, under the terms of the company scheme both would be entitled to an ultimate pension of £7,650 a year, made up of £5,383 from the company scheme and £2,267 from the state retirement pension. However, retiring at the age of 55, neither would qualify for state retirement pension, so it is company practice to pay a supplement of an amount equivalent to the state retirement pension to its pensioners until they reach state retirement age. That means that a woman would receive that payment for five years until she reached the age of sixty and a man would receive that payment for 10 years until he reached the age of 65 and was able to claim the state retirement pension.

As I understand it, the way in which the Bill enacts the directive would make such payments to the man between the ages of 60 and 65 unlawful because the woman would no longer be receiving that supplement as she would be in receipt of the state retirement pension. That has considerable consequences, and there are only two ways in which companies operating integrated schemes with common retirement ages would be able to comply with the law. They could remove the supplementary payments paid before state retirement age, but that would be a grave disincentive to people taking early retirement, and the effects on someone whose pension was based on a relatively low salary would be quite catastrophic.

If someone had a finishing salary of £8,000 a year, more than half the total benefit would be removed until they reached state retirement pension age. Alternatively, these schemes could continue to pay the supplement, but they would have to pay it to women between the ages of 60 and 65 so that women retiring after the same length of service and on the same salary would receive a total pension income of £2,267 a year more than their male colleagues. That is no equal treatment, and it cannot be what was in the minds of those in Brussels who drafted the directive.

This has been a matter of correspondence both between myself and my right hon. Friend and hon. Friends in the Department and between the company and officials. The company has taken opinion fom a very learned counsel and, equally, the Department has consulted its own lawyers. The lawyers have come to different interpretations of the directive and how it should be implemented. I pay tribute to my right hon. Friend and hon. Friends in the Department for the diligence they have shown in considering the matter.

I am not a lawyer, so I do not have to form my own view about which legal advice is correct. But even if I concede that the advice the Department has obtained from its lawyers is correct on this occasion, I still urge my hon. Friend to accept the amendment because the consequences I have described amount to a ridiculous piece of Euro-nonsense. If those consequences are what the Eurocrats in Brussels intended, the Government should be prepared to accept the amendment to ensure continuing true equality of treatment and should be prepared to be taken to the European Court by the unelected bunch of bureaucrats sitting on the other side of the English channel.

If we were to be forced to change our law to allow that absurd circumstance to apply, there would be outrage in the House and the country. It would highlight the way in which the powers of Brussels have encroached on the prerogatives of the House and in this case, as in many others, on basic common sense. I urge my hon. Friend to accept the amendment and, if necessary, to have the courage to accept the consequences of the big stick being wagged from Brussels.

The Parliamentary Under-Secretary of State for Social Security (Mr. Peter Lloyd)

I appreciate that the issue my hon. Friend the Member for Slough (Mr. Watts) has raised is of great importance for Mars, the leading employer in his constituency, and for his constituents who work there, and I congratulate him on the clarity with which he explained the problem that now confronts not merely Mars but other companies that run integrated pension schemes.

The particular point raised by the amendment concerns the application of the equal treatment requirements in schedule 4 to the Bill to integrated occupational pension schemes. Ironically, those schemes have already gone a considerable way towards the adoption of equal treatment for men and women, and I applaud them for that. They have introduced at 60 a common pension age for both men and women for pensions payable under the scheme. However, in calculating the benefits payable, they treat men and women differently between their 60th and 65th birthdays. Men are paid what is known as a bridging pension to compensate for the fact that, unlike women, they are not entitled to state retirement pension for that period, as my hon. Friend has explained.

The amendment seeks to ensure that schemes such as the Mars scheme will be able to continue to pay bridging pensions to men between 60 and 65 after January 1993, when the schedule comes into effect, but will also be able to restrict the amount of any bridging pension to the current rate of basic state retirement pension. I am sympathetic to my hon. Friend, as he knows, and to those schemes which would stand to benefit from his amendment, but I cannot, I am afraid, recommend to the House that it be incorporated in the Bill, and at the end of my speech I shall be inviting my hon. Friend to withdraw it.

I shall not give all the arguments and background to the position, as the hour is late, but I shall write to my hon. Friend again because he deserves the fullest explanation, as do his constituents and Mars, which has taken a leading part in arguing on his side of the case. I will explain that, subject to certain specified exceptions, the directive requires the adoption of the principle of equal treatment, which means that there can be no discrimination on the basis of sex, either directly or indirectly, in the provisions of occupational pension schemes, and it refers specifically to three areas. These are, first, the scope of the schemes and conditions of access, secondly, the obligation to contribute and the calculation of contributions and thirdly, the calculation of benefits and the conditions governing the duration and retention of entitlement to them.

Paragraph 2(4)(d) of schedule 4, introduced in Committee, already makes use of the permitted derogation to permit schemes to continue to provide different ages at which pensions come into payment to men and women. This is, of course, of no benefit to the schemes which my hon. Friend's amendment would assist. They already have an equal pension age for men and women. The exception applies to pensionable ages for the granting of pensions.

We do not believe that the payment of a higher pension to a man for five years from age 60 comes within the definition of the exception, nor, if a bridging pension is taken to be an arrangement separate from other pensions payable under the scheme to both men and women, can it escape from being a benefit restricted to a single sex.

As my hon. Friend suggested, it would certainly have been easier for the Government to adopt a wider interpretation of the directive, but to do so would have been neither wise nor in the long-term interest of the schemes.

We are unwilling to lay ourselves open to proceedings in Luxembourg that we have failed to comply with the treaty of Rome if we are sure that we are bound to lose. Equally, we would like to protect schemes from proceedings instituted, as it is likely they would be, either by the Commission or by women between 60 and 65, who would rightly submit that they were being treated by their scheme less favourably than men because their scheme had calculated and was paying them a pension on a basis inferior to those of their male colleagues.

I have great sympathy with my hon. Friend's argument and with the situation in which Mars and similar pensions schemes find themselves. I can assure him, however, that we have looked long and hard at the exact wording of the exception and it is with regret that we have concluded that bridging pensions in integrated schemes are beyond the scope of the derogation.

To adopt my hon. Friend's amendment would have the United Kingdom in breach of its obligations under the treaty and leave both the Government and individual schemes vulnerable to an unfavourable judgment by the European Court. Although I am sorry to have to ask my hon. Friend, I hope that he will feel able to withdraw his amendment now.

Mr. Tony Banks

Don't. Die first.

Mr. Watts

I thank my hon. Friend the Minister for the tone of his reply, but not entirely for its content. I realise that he would make both himself and me rather unpopular with hon. Members of all parties if he had replied to me at much greater length. I should be grateful—as I am sure the House would be—and would find it helpful if my hon. Friend replied at greater length in writing as he has offered to do, and if he would place that reply in the Library of the House so that every hon. Member can see the facts of the Government's position.

In view of the conciliatory tone of my hon. Friend's reply, despite its disappointing content, I beg to ask leave to withdraw the amendment.

Amendment, by leave withdrawn.

Amendments made:

No. 56, in page 42, line 25 leave out 'relevant' and insert 'service-related'.

No. 57, in page 42, line 28 leave out 'relevant' and insert 'service-related'.

No. 58, in page 45, line 29 leave out 'relevant' and insert 'service-related'.

No. 59, in page 45, line 35 leave out 'an exempt' and insert 'a limited'.

No. 60, in page 45, line 36 leave out -"'exempt' and insert "'limited'

No. 61, in page 45, line 48 leave out "'relevant' and insert "`service-related'.—[Mr. Peter Lloyd.]

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