HL Deb 28 October 1975 vol 365 cc232-9

7.3 p.m.

The PARLIAMENTARY UNDER-SECRETARY of STATE, NORTHERN IRELAND OFFICE (Lord Donaldson of Kingsbridge) rose to move, That the Social Security Pensions (Northern Ireland) Order 1975, laid before the House on 13th October, be approved. The noble Lord said: My Lords, I beg to move that the Social Security Pensions (Northern Ireland) Order 1975, which was laid before this House on 26th September 1975, be approved. This Order has been made under paragraph 1 of Schedule 1 to the Northern Ireland Act 1974, which empowers Her Majesty by Order in Council to make laws for Northern Ireland during the interim period within the meaning of that Act. By reason of urgency the Order has been made without a draft having been approved by a resolution of each House of Parliament. If it is to continue to have effect, the Order must therefore be approved.

In the field of social security it is the policy to maintain exact parity between cash services in Northern Ireland and those in Great Britain, and the Order maintains that principle. The content of the Order, therefore, is for practical purposes the same as that of the Social Security Pensions Act 1975, together with the re-enacted provisions of the Social Security Act 1973, which I shall explain later. Generally speaking, the Order will come into operation on the same dates as the Social Security Pensions Act 1975. The main provisions of the Order should therefore come into operation in April 1978 but, as in Great Britain, provisions dealing with administration, in particular with the operation of the Occupational Pensions Board, the contracting-out of occupational pension schemes and the making of Regulations need to have early effect and have of necessity to come into force much earlier. A large part of the work of the Board in relation to contracting-out must be completed before the main Appointed Day. It was to enable this work and the preparation of subordinate legislation to go forward in step with that under the pensions scheme in Great Britain that the Order was made under the "urgent" procedure, without a draft having been approved.

The Order enacts for Northern Ireland provisions corresponding to those of the Social Security Pensions Act 1975. Its main purpose is to improve State pensions by providing for additional components based upon earnings above a specified amount. Provision is made for maintaining the value of pension rights earned, and of pensions, once they have been awarded. The Order introduces for Northern Ireland the new non-contributory benefit to be known as mobility allowance for persons within certain categories who are unable, or virtually unable, to walk. The Order also provides for employers with good occupational pension schemes to be able to contract their members out of the full State scheme and thereby take over responsibility for a part of the pensions that would otherwise be provided by the State. In return, employers and employees will pay contributions at a reduced rate.

Under the Social Security Act 1973, the Secretary of State for Social Services appointed the Occupational Pensions Board to serve the whole of the United Kingdom. This Order restates the Board's existing functions in relation to the preservation of benefit under occupational pension schemes and their modification and winding up, and for this purpose repeals and re-enacts in their application to Northern Ireland the appropriate parts of the Social Security Act 1973. The result will be that the constitution and internal procedures of the Occupational Pensions Board will continue to be fixed by the Social Security Act 1973, but the Board's functions in relation to schemes operating in Northern Ireland will he conferred by this Order. The Order also allocates to the Board functions for ensuring equality of access to occupational pension schemes for men and women.

As noble Lords may be taken to be already familiar with the details of the corresponding legislation enacted for Great Britain in the Social Security Pensions Act 1975, I do not think I need go through this Order article by article, but it is a complicated and important Order and so I shall summarise its content and draw attention to its main provisions. Part I is general and relates to title, commencement and general interpretation of the Order. Part II deals with contribution changes. Part III sets out the benefit changes and introduces mobility allowance. Part IV deals with contracting-out. Part V deals with the right of women at work to enjoy the same access to occupational pension schemes as their male colleagues, and makes other arrangements in relation to such schemes. Part VI is general and technical and contains supplementary provisions.

In effect the Order amends, rather than replaces, the existing legislation which is contained in the Social Security (Northern Ireland) Act 1975, and it is that Act which the Order refers to as the "principal Act". Much of the basic framework of that Act, particularly the general contribution structure, remains unaltered. The Order provides for the lower earnings limit for liability for Class 1 employed earners' contributions, to be set at the level of the basic component of the retirement pension, £11.60 in April 1975 terms, and for an upper earnings limit of seven times that amount. There will be a contribution of 6½ per cent. for employees and 10 per cent, for employers to replace the figures of 5½ per cent. and 8½ per cent. which came into operation last April.

The Order improves State pensions for retirement, widowhood and invalidity by providing for the contributor with a full record a pension in two parts: a basic component and an additional component on earnings which exceed the qualifying earnings level. The basic component will be the flat-rate pension in force when the new arrangements begin—£11.60 per week, in April 1975 terms. The additional component will represent 11 per cent. of earnings above £11.06 and up to a ceiling of seven times that figure—that is slightly over £80 per week—for each year of contributions under the scheme. After the scheme has been in operation for 20 years, the additional component will amount to a 25 per cent. return on earnings between these two amounts. Thereafter there will be no addition to the figure of 25 per cent., but the pension will be based on the relevant earnings in each contributor's best 20 years of employment. I repeat that the pensions will be protected against inflation. There is provision to increase pensions in Northern Ireland in line with any increases awarded in Great Britain.

The Order abolishes the contribution option for married women and widows but provides for special arrangements for the woman who is married or widowed at the appointed day. Women will pay the same contributions as men with the same earnings and qualify for the same rate of benefit. Women who do not stay in employment but spend the greater part of their lives as housewives will, as now, be entitled to a pension based on their husband's contribution record. A woman entitled to benefit on both her own contributions and her husband's will be able to draw the larger of the two basic pensions and will in either case be entitled to any additional component which she herself has earned. Where a person, usually, but not necessarily, a woman, has to leave the employment field to stay at home and bring up a family or look after an elderly or sick relative, the new scheme will provide for her pension rights to be protected during the years in which she has responsibilities at home. On retirement a widow will be able to draw both her own earnings-related pension and that to which she is entitled by virtue of her husband's contributions, although she will not be able to receive more than one basic component which is £11.60 in April 1975 terms. Nor will she be able to draw more in total than the maximum pension payable under the scheme to one contributor. The Order makes the same sort of provision for men, so that a man whose wife dies when she is over 60 years and he is over 65 years will be entitled to both additional components in the same way as a widow subject to the same limits and the same maximum as I have outlined as applying to widows.

I shall now deal with the contracting-out provisions. The Order provides for employers with good occupational pension schemes to contract their members out of the full State scheme and thereby take over responsibility for a part of the pension that would otherwise be provided by the State. There will be no provision for contracting-out of the State pension scheme on the lowest band of earnings which count toward the basic component, but employers will be able to contract out of the additional component. The two main conditions that an occupational pension will have to satisfy in order to contract out are, first, that it must provide personal pensions, based on final salary or average salary revalued in line with the growth of earnings generally, available not later than age 65 for men and 60 for women, with an annual accrual rate equivalent to at least 1/80th of the pensionable salary. This corresponds to the rate of accrual of the additional component under the State scheme. For widows a pension must be provided equal to at least half of the husband's pension at the time of his death. Secondly, the pension of each scheme member must not be less than a minimum—the guaranteed minimum pension—at least equal to the pension he has foregone in the State scheme. For widows the scheme must provide a guaranteed minimum of at least half the husband's guaranteed pension at the time of his death.

Where members leave a contracted-out scheme after less than five years of contracted-out service, or where a scheme ceases to be contracted-out or has to be wound up, there are arrangements for the scheme to reinstate or "buy-back" members into full State pension entitlement by means of a payment of a premium to the State scheme. The Occupational Pensions Board will decide whether an employment is to be treated as contracted-out and will issue certificates where they are satisfied that conditions for contracting-out are satisfied. I made it clear earlier that the Board will continue to serve the United Kingdom as a whole. The Board will also exercise supervision over the funding and solvency of contracted-out schemes. Both members of contracted-out pension schemes and their employers will pay a reduced contribution to the State scheme on earnings between the lower and upper earnings limits. The rates will be 2½ per cent. less for the earner and 4½ per cent. less for the employer.

As I mentioned at the outset the Order enacts, for Northern Ireland, legislation corresponding to that recently enacted for Great Britain. It maintains the principle that there should be exact parity between cash social services in Northern Ireland and those in Great Britain. I apologise for the length of this explanation. The contents of the Order are non-controversial, but it is a matter of the greatest importance to a large number of people. Therefore, I thought I owed the House a fairly full explanation. My Lords, I beg to move that the Order be approved.

Moved, That the Social Security Pensions (Northern Ireland) Order 1975, laid before the House on 13th October, be approved.—(Lord Donaldson of Kingsbridge.)

7.15 p.m.

Lord BELSTEAD

My Lords, I am grateful to the noble Lord, Lord Donaldson, for his thorough explanation of this immensely complicated Order which is based upon the Social Security Pensions Act 1975. It is true that that Act had a large measure of agreement, except that from this side of the House in both Houses we argued that the second pensions scheme could have been linked with the tax credit plan. With that proviso, and as the Order cannot be amended, I agree with the noble Lord, that although it is quite right that he should give the thorough explanation he has, there is no point in going into great detail on both sides of the House on matters which were the subject of very lengthy Committee stages both in another place and in your Lordships' House.

There are two general points I should like to be allowed to put to the Government. Undoubtedly, the arrangements for the scheme represented by this Order will be very expensive. In the last few days we have heard announced the raising of the National Insurance contributions. Under the Government's new scheme there will be no savings to fund the second State pension; instead, contributions are to be used at once to pay for existing pensions. Also, with inflation running as it still is, I cannot believe that the Government's statistical assumptions when the scheme was originally introduced will be anywhere near accurate.

Those two points alone lead me to the conclusion that eventually this plan is bound to be more costly than was originally envisaged. As a consequence, I want to ask the noble Lord whether the Government intend that the undertaking, which the noble Lord gave at the very beginning of his statement, for parity in cash social services between Great Britain and Northern Ireland, should indeed hold good not only for this scheme but for the future and in general. This undertaking stems originally from the White Paper on constitutional proposals which were made in 1973 under the previous Government, that in matters of social security Northern Ireland will be treated equally with the rest of the United Kingdom. I can envisage a future Government looking wtih startled eyes at the pension expenditure figures, and saying that some savings for Northern Ireland ought to be made to balance the cost of other services, for security, for unemployment which runs so tragically high in Northern Ireland, for industrial development—those sort of things which can be exceptionally expended upon within the Province.

I therefore ask the noble Lord to consider a single simple question: that the Government renew the unequivocal undertaking that in matters of social services for the future Northern Ireland and Great Britain are to continue to be treated equally within the United Kingdom.

7.20 p.m.

Lord DONALDSON of KINGSBRIDGE

My Lords, I am grateful to the noble Lord for his acceptance of this rather complicated Order. I can answer his question very easily. I said at the beginning of my speech that in the field of social security it is the policy to maintain exact parity between cash services in Northern Ireland and those in Great Britain. The Order maintains that principle. I give an absolute assurance that that is this Government's intention, and I think it binds future Governments.

Baroness PHILLIPS

My Lords, since he mentioned parity, may I ask the Minister whether the earnings rule which applies to retirement pensioners in Great Britain applies equally to Northern Ireland? Also, is the mobility allowance dependent upon the withdrawal of the tricycle, or do they not have that scheme in Northern Ireland?

Lord DONALDSON of KINGSBRIDGE

My Lords, to answer the second question first—without notice, so I will write confirmation—this allowance is not dependent upon the tricycle. Would the noble Baroness repeat her first question?

Baroness PHILLIPS

Yes, my Lords. The Minister referred to parity in what is given. I wondered whether those concerned equally had parity with what is taken away. I refer to the earnings rule, by which if one earns more than a certain amount the retirement pension has to be repaid.

Lord DONALDSON of K1NGSBRIDGE

My Lords, the answer to that question is, yes. There is parity on both sides.