HL Deb 26 March 1970 vol 308 cc1500-3
LORD BOWLES

My Lords, I beg to move that this Report be now received.

Moved that the Report be now received. —(Lord Bowles.)

On Question, Motion agreed to.

Clause 7 [Group Insurance Business]:

LORD BOWLES moved Amendment No. 1:

Page 6, line 32, at end insert— ("() For the purposes of section 41 of the principal Act and Schedule 8 to the Finance Act 1966 (which impose limits on the benefits which may be assured by registered friendly societies and branches) the limits in paragraphs (l)(c) and (1)(d) of paragraph 5 of the said Schedule 8 (which relate to life or endowment business which is not tax exempt) shall apply separately in relation to the amounts which may be received—

  1. (a) by way of group insurance business; and
  2. (b) by way of other business ").

The noble Lord said: I beg to move the first Amendment in my name. The purpose of this Amendment is to give relief from a difficulty which would otherwise face friendly societies who might wish to include life or endowment cover in their group insurance schemes. Each of the persons whose lives are insured under a group insurance scheme is required by the Friendly Societies Acts to be an individual of the insuring society. Also, Section 41(1) of the Friendly Societies Act 1896, as modified by paragraph 5 of Schedule 8 to the Finance Act 1966, limits the aggregate amount which a member may receive from any one or more societies. The limits are £500 by way of gross sum or £104 by way of annuity under tax exempt life or endowment business, and £2,000 (or £3,000 in the case of a mortgage protection policy) by way of gross sum, or £208 by way of annuity under non-tax exempt life or endowment business.

Under the existing law any sum received by way of life insurance by a member of a group insurance scheme must be aggregated with the amount assured on the death of that member under other friendly society insurances. The amount which may lawfully be paid under a group insurance scheme to a particular member therefore varies in accordance with the amount of cover which that member already has under other friendly society contracts.

It would be desirable from the employer's point of view to be able to provide under a group insurance scheme a death benefit of a specific amount, for example, one year's salary, which would apply to all members of the group. But if an employee already had a friendly society policy he might not, owing to:he permitted limits of insurance, be eligible to join the scheme. The fact that certain employees might be debarred in this way from benefiting under the scheme might be regarded as unfair, particularly where the employer was contributing to the scheme. This Amendment gives relief so that any sums assured by a society under a group insurance scheme of up to £2,000 or £3,000 by way of lump sum, or £208 by way of annuity need not be aggregated, for the purposes of the limits, with other sums assured to the member under other non-group insurance scheme contracts, provided that the group insurance scheme business is non-tax exempt business. This Amendment is in line with the alternative suggestion put forward by the noble Lord, Lord Drumalbyn, on the Committee stage of the Bill. I beg to move.

LORD DRUMALBYN

My Lords, I should like to thank the noble Lord for this Amendment, and for the explanation he has given of it. Is he aware that the representative associations of friendly societies wholeheartedly welcome the Amendment, which, as he said, follows the second of the two courses that I suggested in Committee? Naturally I should have preferred the first alternative, for the reasons I gave, but I can quite see that that might have been interpreted as a major change in the friendly societies legislation not appropriate to a tidying-up Bill.

There are three short points that I should like to raise: two of them are connected. As the noble Lord has said, this Amendment relates only to the non-tax exempt business that is covered by paragraphs (l)(c) and (d) of paragraph 5, Schedule 8 to the 1966 Finance Act. I assume that a society, if it so wished, would be able to operate group business under (l)(a) and (b) within the tax exempt limits, but that it would then have to take into account any personal cover that employees had already arranged for themselves in the field of tax exempt business. In that case, the employer would have to ask his employees, one by one, what personal cover each had. Thus the purpose of the Amendment would be defeated, so far as tax exempt business was concerned. I take it that this is so. But what I want to be quite satisfied about is that although the Amendment refers only to sub-paragraphs (c) and (d) it would also be possible for group business to be done under sub-paragraphs (a) and (b).

Secondly, under paragraph 5 of the 8th Schedule to the 1966 Finance Act, the Chief Registrar may, with the consent of the Treasury, increase from time to time any of the limits in paragraphs (1)(c) and (d), so far as individual policies are concerned. I should like to ask the noble Lord whether he will confirm that such increases will equally apply to group business. I feel certain they will, but I think it would be right to have it on the Record that they will. Connected with that I should like to ask whether the Chief Registrar is intending to increase them in the near future. I am told that, on the basis of the official index of retail prices, it would be necessary, in order to maintain the values of these two limits of £2,000 for life and endowment business and £3,000 for mortgage protection policies, to raise them, in round figures, to £2,350 and £3,525 respectively. I wonder whether the Chief Registrar intends to increase them in the near future in order to maintain their values.

LORD BOWLES

My Lords, on the first two points that the noble Lord raised, where he wanted more clarity, I can assure him in the first place that his assumption that a society could still, if it so chose, operate group business under paragraph (l)(a) and (b) of Schedule 8 is correct. In that case it would be operating within the tax exempt limits, and would have to take into account benefits which members of the group may be entitled to personally and individually. On the second point, I can confirm that if and when an order is made by the Chief Registrar under sub-paragraph (3) of paragraph 5 of Schedule 8 to the Finance Act 1966 increasing the permitted limits for non-tax exempt business, the increase specified in the order will apply equally to group business.

The noble Lord finally asked whether the Chief Registrar had any present intention of raising the limits. I can assure the noble Lord that the Chief Registrar has power, with Treasury consent, to raise the limits which apply generally to the amounts that members may receive from friendly societies by way of death benefits, endowment or annuity. In this context group insurance cannot be considered in isolation. Any further increase in the general insurance powers of friendly societies would require further examination and consultation in the light of the circumstances existing at that time. It is not even certain that the friendly societies movement as a whole would welcome an increase in the general limits.

On Question, Amendment agreed to.

Clause 11 [Citation, construction, extent and commencement]:

LORD BOWLES moved Amendment No. 2: Page 8, line 35, after ("except") insert ("subsections (3) and (4) of section 7 and ").

The noble Lord said: My Lords, I beg to move Amendment No. 2. The effect of this Amendment is to make subsections (3) and (4) of Clause 7—which define group insurance business and make such business non-aggregatable with other insurance business for the purpose of insurance limits—extend to Northern Ireland. This is necessary because Schedule 8 to the Finance Act 1966, which applies the insurance limits, extends to Northern Ireland. My Lords, I beg to move.

On Question, Amendment agreed to.