§ 8.43 p.m.
§ Consideration of amendments on Report resumed. Clause 4 [Lump sum on the judicial officer's retirement or death]:
§ Lord Ackner moved Amendment No. 56:
§ Page 5, line 27, leave out ("two and one-quarter") and insert ("three").
§ The noble and learned Lord said: My Lords, this amendment relates to the lump sum to which a judge is entitled on retiring together with his pension, which is half his salary if he has done, according to this Bill,20 years' service. Perhaps I should put this in its historical context. Until 1950—that is more than 150 years after pensions became payable to the judiciary—the pension was two-thirds of the salary. But pension philosophy moves on, matters change, and it became fashionable, and indeed desirable, for a person to have as part of his pension facilities a lump sum. Accordingly, in 1950 two alterations were made in the judicial pension schemes.
§ First was the payment of a pension to widows and orphans, and the other was the reduction of the judicial pension from two-thirds to one-half in exchange for the judge having a lump sum equal to twice his pension. He lagged behind what happened in the public sphere, because in the public sphere it was three times the annual pension. The payment for widows and orphans came conveniently not out of the Treasury but out of the lump sum, so that he had his lump sum subject to contributing the appropriate portion thereof towards maintaining the widow and the orphans.
§ The two themes upon which there have been slight variations from time to time so far as the Government are concerned are, first, that the judges must conform to modern legislation, and, secondly, that my noble and learned friend the Lord Chancellor has triumphed in achieving the maximum tax-efficient scheme that was available. Whenever one has sought to achieve what occurs in the private sector, from whence of course the judges have been recruited, the answer inevitably is, "This is not what happens in the public sector, and you have now joined the public sector by ceasing to be self employed and becoming a member of the judiciary". This does not apply in this particular situation.
§ The current position is that the judges get twice their pension as a lump sum. Or, expressed more simply, once times their annual income, subject of course to the fact that the once times the annual income is the annual income that they are receiving at the moment of retirement. This is valuable because in the past—it may take some time for it to occur in the future—when there have been pay increases, however 1098 limited, a judge who retired on 2nd April following a pay increase on 1st April had his pension calculated upon that new salary with the increase. Now that is to be changed. Another downgrading of the pension facilities for judges, because his pension is based on the annual salary that he had averaged over the last year.
§ Coming back to the lump sum, it is once times what he is now in receipt of as his annual income on the moment of retirement, or, which amounts to the same, twice his annual pension. What is proposed in the Bill is to put that lump sum up to 2.25. That superficially sounds an improvement, but it is only superficial because there are what are known in this Bill as capping provisions. The judge's pension is not capped, kept down, to a sum that the Revenue consider to be the maximum sum, but the lump sum is capped and it is capped at £ 75,000.
§
If one takes the lump sum which is achievable by a Lord of Appeal in Ordinary on retirement—and I speak with some knowledge, having had that particular experience a matter of a few weeks ago—the lump sum is just in six figures, £ 100,000. But if I was appointed after the Act came into force the apparent generosity of 2.25 would soon disappear because anything above £ 75,000, which in that particular case would be £ 25,000 would be taxed at 40 per cent. Therefore, one must not be thought to be overlooking generosity when it does not exist. What we are seeking to do is to achieve a lump sum which is that which is achieved not merely in the private sector among those who commute their pensions—over 90 per cent. do so—but also in the public sector to which we are so frequently redirected whenever we refer to the private sector. In the public sector three times the annual pension is what is paid, and has been paid for a long time. Accordingly when the Top Salaries Review Body was asked its views on the situation it reported in the following manner. I wish to draw your Lordships' attention to what the Top Salaries Review Body stated as reported at col.712 of Hansard of 30th June during the Committee stage of the Bill. The TSRB said:
Tax free lump sum. Under the proposed scheme an annual pension is payable plus an immediate tax-free lump sum. The maximum annual pension, accrued over 20 years, will be equal to half pensionable pay (capped). The maximum lump sum will be equal to 2 x annual pension x 9/8".
That is 2¼ the figure to which I referred.
§
I now wish to stress the following remarks from the TSRB's comments to the noble and learned Lord the Lord Chancellor as regards his scheme. The TSRB further stated as reported in Hansard at col.713:
However, it is normal in public service pension schemes for the lump sum to equal 3 x annual pension.
It is noted that a factor of 2.25 is the maximum now allowed in the calculation of the optional lump sum under typical private sector final salary pension schemes. That factor applies to the pre-commuted annual pension, with a maximum of two-thirds of final salary. The maximum lump sum calculated on that basis is … equal to the automatic lump sum of 3 x annual pension under typical public service schemes".
§ In the view of the TSRB the lump sum under the proposed scheme for the judiciary should be improved from 2.25 to three times the annual pension. That would result in conformity with what occurs in the public sector.
1099
§
My noble and learned friend the Lord Chancellor had the benefit of the advice of his own independent consultant actuary, Mr. Alexander of Watsons. Mr. Alexander said in paragraph 3.10 of his comments:
After 20 years the total personal retirement benefit is a pension of one half of final pay plus a lump sum of 1.125 times final pay".
That is the same as 2.25 times the pension. He continued:
This equates to the Inland Revenue maximum pension of two-thirds of final pay if the lump sum is converted using a factor of £ 1 p. a. pension for each £ 6.75 of lump sum. By reference to the standard Inland Revenue conversion table this implies that retirement takes place on average at about age 73".
He was unaware, of course, of the new maximum age limit. He continued:
However this standard table does not necessarily represent fully the value of an index-linked pension".
I would add that that is the pension proposed under the Bill. Mr. Alexander continued:
By reference to a table which does so, the average retirement age implied by a factor of £ 6.75: 1
that is the 2.25 factor—
is around 77".
Therefore the 2.25 figure which applies the Treasury approach, or the Inland Revenue approach, presupposes that a judge retires not only two years after the present maximum retirement age but also seven years after the maximum retirement age under this Bill. Mr. Alexander shows therefore the mathematical fallacy of choosing the figure of 2.25. As I have indicated to your Lordships, we judges in the interim consulted our own independent consultant actuary. I have already said that we have sent a copy of the report to my noble and learned friend the Lord Chancellor. The independent actuary states at paragraph 4.7 of the report:
The recognised standard is a lump sum of 3 times the pension. However, an even higher multiplier should be given on the grounds that the lump sum is intended to replace the difference between the pension actually payable to a judge compared with what might have been paid to an equally senior employee in the private sector".
In the private sector the pension would be two-thirds of salary whereas for a judge it is to be one-half of salary. The difference is one-sixth of salary. An index-linked pension is worth about £ 12 for each £ 1 of pension and therefore a pension shortfall of one-sixth of salary should be compensated by a lump sum of 12 times one-sixth of salary, that is twice times salary, or four times the pension of one-half salary. The multiplier should therefore be four times and not 2.25.
§ We appreciated what would happen if we suggested the figure of four times. We realised that we would be told that that is what we might get in the private sector but that we were not in the private sector. Therefore we return once more to the public sector. Those in the Civil Service receive three times the lump sum—that is the public sector—so why on earth should not the judges receive that when they are being forced into this mould in other respects? I beg to move.
§ Lord BensonMy Lords, I am afraid I may repeat a certain amount of what the noble and learned Lord, Lord Ackner, has already said. I judge this matter on simple grounds. There seem to be five criteria by which this matter should be judged. First, in the private 1100 sector the lump sum usually works out, in the way the pensions are computed, at three times under current practice.
Secondly, in the public sector the figure is three times. Thirdly, the TSRB supports the figure of three times. Fourthly, the actuary whom the judges themselves had to consult, in default of proper advice being available to them, supports the figure of three times. Fifthly, the adviser to the noble and learned Lord the Lord Chancellor said:
good practice is represented by a lump sum of three times".Those are five separate criteria by which to judge this matter.In Committee the noble and learned Lord the Lord Chancellor said that he had concluded that two and a quarter times was reasonable having considered all the material. I am puzzled about what constituted the material he referred to. What other factors have been concealed from us which are known to the noble and learned Lord the Lord Chancellor? I hope that in the course of his reply the noble and learned Lord will be able to tell us what the material was that he considered which led him to arrive at the figure of two-and-aquarter times in the face of the five separate criteria which point to a different figure.
§ 9 p.m.
§ Lord Simon of GlaisdaleMy Lords, my noble and learned friend Lord Ackner introduced the amendment with his astonishingly lucid command of detail. He has been seconded by my noble friend Lord Benson with his vast professional experience and computerised mind. It is quite unnecessary and indeed would be idle to try to rival or repeat their expertise in the matter.1 merely wish to emphasise one or two points very shortly.
First, when lump sum payments were introduced into the judicial pension scheme for the first time in 1950 they were paid for by the judiciary. They were paid for by the judges consenting to a reduction of their pension from two-thirds of salary to one-half. Secondly, one must remember that in 1950 the rates of taxation were very much higher and the lump sum was proportionately more valuable than it is today.
Thirdly, on the face of it this seems to increase the lump sum by one quarter, but there are two factors to be set against that. The first is that, as my noble and learned friend said, that sum will be capped. Secondly, for that quarter improvement the judges have to work one quarter longer. Therefore, even if it were uncapped the judges would have no advantage. To treat that as an act of generosity or of bounty must remind your Lordships of Mr. Squeers ordering half a glass of milk, filling it up with water, sniffing it and saying, "Here's richness! ". I support the amendment.
§ The Lord ChancellorMy Lords, as my noble and learned friend Lord Simon of Glaisdale said, one has to take account of the tax position in considering these matters. The position is that tax is payable on the lump sum above the cap as a result of the general law. However, the actual amount of the lump sum is increased from two times the pension to 2.25 times the pension. I believe that it is right to look at that apart from the tax question.
1101 My noble and learned friend Lord Ackner pointed out that lump sums in the private sector can be one-and-a-half times pensionable pay—which would be three times the half salary or three times the pension—and in the public sector three times pension is also common, although in that case there is a 40 year accrual span.
In my submission the 12½ per cent. increase in the lump sum is appropriate in the judicial situation when one takes account of the fact that in the retained benefits to which I have referred once or twice in the course of these discussions the lump sum which is payable under the retained benefits also has tax advantages. Therefore, the distinction between the various schemes which have been referred to as comparable and this scheme is that in this case the retained benefits are available without their being taken into account. In other situations account would have to be taken of the lump sum element of the retained benefits in the calculation of what was available under the scheme.
Various advice has been referred to. That advice is based on what is available in the other situations. However, in my submission to your Lordships the distinction between those other situations and the present scheme is the existence of the retained benefits with their aspects of lump sum as well as of pension arrangements.
For those reasons I am not able to accede to the amendment.
§ Lord AcknerMy Lords, before my noble and learned friend sits down, will he tell us, bearing in mind that he has frequently said that he has achieved the most tax effective scheme attainable, whether he has sought the revenue's views as to whether it would accept that the judges should be treated in the same way as pensioners are treated in the public sector?
§ The Lord ChancellorMy Lords, I explained a moment ago that the distinction between those other schemes to which my noble and learned friend referred and this scheme is that under this scheme the pension holders are entitled to the retained benefits with the tax advantages which those benefits carry. It is for that reason that the 2.25 multiplier is appropriate here.
§ Lord AcknerMy Lords, I infer that that is a negative answer and that the revenue has not been asked as to whether it would accept that judges should be treated as other people are in the public sector.
I shall withdraw my amendment in the hope that by the time we reach Third Reading my noble and learned friend will make good his proposition that he has achieved the most tax efficient scheme attainable by consulting with the revenue, which controls these matters. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ The Lord Chancellor moved Amendment No.57:
§ Page 5, line 29, leave out subsection (2).
§ The noble and learned Lord said: My Lords, I have already spoken to the amendment with Amendment No.40. I beg to move.
§ On Question, amendment agreed to.
1102§ The Lord ChancellorMy Lords, if Amendment No.58 is agreed to, I cannot call Amendments Nos.59 to 61 inclusive.
§ Lord Ackner moved Amendment No.58:
§
Page 5, line 34, leave out subsection (3) and insert:
("(3) Where a person dies within five years of retirement his personal representative shall be granted a lump sum equal to five times the annual rate of pension less any annual sums paid to him by way of pension.").
§
The noble and learned Lord said: My Lords, this amendment was put before your Lordships at Committee stage because what was provided in the present clause resulted in a situation where a judge who died within one year of his appointment achieved precisely nothing. If he dies after two years, his widow gets very little. I need take little time on this for the simple reason that this is another of the proposed amendments in respect of which the draftsman found four months to be inadequate to put it into type. The noble and learned Lord the Lord Chancellor kindly indicated in a letter of 20th October addressed to my noble and learned friend the Lord Chief Justice (of which I have a copy) that he was considering an amendment on these lines. The letter reads:
I propose to modify the method by which the lump sum paid on death following retirement is calculated. I intend that the lump sum should be five times the deceased's annual pension at the time of retirement less any benefits already received".
I do not know—I am sure it is my fault—what is comprised in the words "less any benefits". If it involves the inclusion of the lump sum, it produces precisely the nil calculation of which I have complained. There is little point in speculating on what is meant by the drafting in this letter. What one needs to see—it is promised for Third Reading—are the actual terms of the amendment. They may be precisely what we have put in our amendment. It may be overoptimistic but by temperament I am an optimist.
§ Once again, I ask my noble and learned friend the Lord Chancellor if he will give the House an assurance that it will get the terms of that amendment not later than one week before Third Reading. Of course, we shall be delighted to receive it earlier. No doubt my noble and learned friend the Lord Chancellor would like to indicate whether I have correctly understood the position.
§ The Lord ChancellorMy Lords, I wrote in the terms to which my noble and learned friend Lord Ackner has referred as a result of consideration of this matter. My intention was to take account in the calculation of the lump sum in the benefits received. But I would want to make clear, in view of the way my noble and learned friend has recounted this matter, that the decision I have taken has been capable of being taken only fairly recently. It is not the draftsman who has been waiting to do the work over the past four months; it is a question of being able to make the necessary decision. The draftsman has been instructed on the basis I described in the letter. I certainly believe it should be possible to produce the amendment in this matter at least one week before Third Reading.
§ Lord AcknerMy Lords, on that most helpful assurance, I beg leave to withdraw my amendment. Amendment, by leave, withdrawn.
§ Lord Ackner moved Amendment No. 59:
§ Page 5, line 36, after ("pension") insert ("increased by any pension paid under section 19").
§ The noble and learned Lord said: My Lords, Amendment No.59 concerns another esoteric part of pensions law and practice. I hope I shall be able to explain it simply. The death benefit paid to a widow is at present capped. That means that if it is above £ 75,000, up to 40 per cent. of anything beyond that figure is paid by way of tax. If one is achieving the most tax-efficient scheme obtainable, there seems to be no reason to pay tax unnecessarily.
§
Therefore I rely first upon what the Top Salaries Review Body said in its comments to my noble and learned friend on this particular subject. I read from paragraph 3.12 of the observations sent to my noble and learned friend:
A death-in-service benefit of 1½ x pensionable pay"—
which is to become at least twice having regard to my noble and learned friend's amendment—
(capped) is low and there is therefore no need for the cap to restrict benefits. The cap on death-in-service comes into play only when the tax-free lump sum exceeds four times the capped salary at the date of death. The cap applies to the benefit, not to the pensionable pay".
If further support were required for the wisdom of that proposition. it is to be found in the assistance rendered to my noble and learned friend the Lord Chancellor by the Government's own consultant actuary, none other than Mr. Alexander of Watson's, to whom reference has been made earlier. On page 4 of his comments, he says:
We further note that if pay exceeds the "cap", the gratuity in excess of 1½ x"—
shortly to become at least two—
the cap would be paid from the unapproved scheme and would therefore be taxed. We recommend that instead all of the death gratuity is paid from the approved scheme, thereby ensuring that no tax would be payable. This is possible because in all cases 1½ full pay"—
I interpose again to say that that applies equally to twice full pay—
will he less than the Inland Revenue maximum gratuity payable from the approved scheme of 4 x capped pay".
Our own expert, Mr. Wynne-Griffith, says:
The part of the lump sum death benefit that relates to salary in excess of the "cap" will be taxed (as pointed out by the Independent Actuary)
that is, Mr. Alexander of Watson's—
It is possible to enhance the benefit up to 4 times the lesser of salary or the cap and so avoid the tax. This is common practice in the private sector. It seems peculiar that judges should have such a low level of benefit and still be exposed to tax on some of it when, in the private sector, the whole of a larger benefit is paid free of tax".
So all sides—the TSRB, the Government's own independent consultant actuary and the independent consultant actuary to whom the judges have been obliged to have recourse—make the same observation. Once again, I ask in the spirit of humility: how is it that this is the most efficient tax effective scheme when all three experts say that that should not occur? One is obliging the judges under the scheme to pay more tax than the Revenue requires. I beg to move.
§ 9.15 p.m.
§ The Lord ChancellorMy Lords, as my noble and learned friend said, this amendment seeks to improve the level of lump sum payable on death in service or death in early retirement by ensuring that the whole of any such lump sum (including such part of those lump sums as is derived from salary above the pension cap) are not taxable. This pension cap is a part of the modern pensions law which applies to all other members of society, no matter what their career paths or the peculiarities of their chosen profession. One of its features is that our particular scheme is different from the general in respect of the retained benefits. Up to twice the salary, lump sum death benefit can be paid without taking account of retained benefits.
If the lump sum multiple should exceed twice the salary, retained benefits need to be brought into the calculation. That is the position. Therefore the reason for this system is the retained benefits arrangement which I have described and which I believe is extremely appropriate in the case of the judges.
My noble and learned friend made an observation in relation to one of the earlier amendments after I had sat down when he was withdrawing his amendment. It is quite inappropriate to suggest that I have not discussed all these matters with the Inland Revenue. As I have stated, I represent Her Majesty's Government; and all aspects of the Government are available to me. However, the explanation of the situation is the one that I have just given.
§ Lord AcknerMy Lords, before my noble and learned friend sits down, do I take it from his last answer that the Inland Revenue has declined to supply the same tax facilities to the judges in relation to capping benefits as applies generally to the remainder of the public?
§ The Lord ChancellorMy Lords, that would be a quite improper inference to draw from what I said. I stated that one has to take account of the fact that in this scheme the retained benefits are allowed with a tax advantage. With the schemes to which my noble and learned friend referred, that is not a feature. It is because of the additional feature of the retained benefits with their tax advantage, including lump sums, that the point arises.
§ Lord Morton of ShunaMy Lords, before the noble and learned Lord sits down, perhaps I may raise this point. We have heard much about retained benefits. That may be of great interest to people who have had very high incomes at the senior Bar in London. However, speaking as a Scot, that does not apply—as I am sure that the noble and learned Lord knows full well—among those who are appointed as sheriffs. I suspect that it does not apply in England and Wales to those who are appointed as circuit judges.
It is ridiculous if the pension scheme is to be worked out on the basis that those appointed as judges are expected to have had an income at the Bar of hundreds of thousands of pounds when that is demonstrably not true for the vast majority of those appointed.
§ The Lord ChancellorMy Lords, we are in danger of transgressing the rules of order. However, with the leave of the House, I answer in this way. The tax provisions which enable people, if they so wish, to have retained benefits apply to those who are at the Bar and become sheriffs in Scotland just as they do to those who may become members of the circuit Bench in England. The benefit is available to people with far more modest incomes than hundreds of thousands of pounds. I was never in that category by quite a long chalk.
§ Lord Taylor of GosforthMy Lords, before my noble and learned friend sits down, perhaps I may ask how many deficiencies in this Bill are the retained benefits to be found to cover? To every point that has been raised, my noble and learned friend has prayed in aid the retained benefits. The retained benefits were the answer to the 15 years,20 years point. The retained benefits were the answer to the point that my noble and learned friend Lord Ackner raised a few moments ago. The retained benefits are the answer to this point. How many holes in the Bill can the retained benefits fill? How many deficiencies will they be prayed in aid to cover?
§ The Lord ChancellorMy Lords, one has to remember that with their advantages the retained benefits are a feature of the scheme. Therefore in so far as questions are raised, I require to refer to them as an aspect of the scheme which distinguishes it from another. It is not a question of holes in the scheme which are met by the retained benefits. It is that the scheme cannot be considered without giving effect to the fact that it allows for the retained benefits. They are intended to enable the persons who are in a previous career to make pension provisions during the time that they work in that career in a tax efficient way with the appropriate tax relief. It is during that part of their career that they have this opportunity. During the later part of their career when they become judges it is appropriate to take that into account as part of the arrangement that this provision allows for them.
§ Lord AcknerMy Lords, during the debate on the accrual period of 15 years (increased to 20) I set out four reasons why I respectfully submitted that the retained benefits are a red herring. Those reasons are recorded in Hansard and I do not propose to repeat them.
It is perfectly clear that if, as we all believe, a considerable proportion of the judiciary, certainly circuit judges and sheriffs, have no, or no significant, retained benefits because of the expense of dealing with their mortgages and/or their children's education, it would be totally wrong for them to bear the burden of suffering from an inability to enjoy what the rest of the public enjoy merely because there would be some High Court judges, in all probability, who had been able to afford to spend sizeable amounts of money on pensions before—and I emphasise this—they reached the age of 50 or thereabouts.
Accordingly, I give my noble and learned friend the Lord Chancellor notice that on Third Reading I shall seek to introduce amendments enabling judges to opt 1106 in or to opt out according to whether or not they ask for their retained benefits to be taken into account. I imagine that the circuit judges will say, "Keep the retained benefit concession of which you speak; I would rather serve 15 years than have my non-existent retained benefits taken into account. Keep your retained benefits concession; I would rather have three times the lump sum. Keep your retained benefits concession; I would rather have the death benefit uncapped", and so forth. By that means my noble and learned friend will have achieved that which he says is so important; that those who have valuable retained benefits must, so he believes according to the new philosophy, have them taken into account. It is totally inequitable constantly to reply in relation to those who have no, or no significant, retained benefits, "On behalf of the Government I have decreed that although you do not have this advantage you will nevertheless suffer the disadvantages which you would not otherwise have suffered had you been an ordinary member of the public."
On that basis, and with that suggestion of what will be contemplated in the future, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Ackner moved Amendment No.60:
§ Page 5, line 38, at end insert ("increased by any pension paid under section 19).
§ The noble and learned Lord said: My Lords, this is a minor amendment. I am told by those who know better than I that under the Social Security Act 1973, in particular Section 63(2), (3) and (4) and Schedule 19, there is an obligation for the Bill to refer to the fact that there is an entitlement, even though there has been service of only two years, to the appropriate pension for that period. That is my understanding of the obligation, which can be checked.
§ Whether or not I am right, it is wrong that there should not be in a Judicial Pensions and Retirement Bill a reference to an entitlement of which the judges will know nothing unless it is included in the Bill. That is the reason for this modest amendment and I hope that my noble and learned friend the Lord Chancellor will accept it. I beg to move.
§ 9.30 p.m.
§ The Lord ChancellorMy Lords, I am sorry to say that I find it difficult to understand how Amendment No.60 provides a basis for the point which my noble and learned friend Lord Ackner has just made. However, I am happy to read carefully what he said. I believe that the Social Security Act payments are preserved under the provision, but I am willing to look at that matter. However, Amendment No.60 does not appear to bear directly on the point.
§ Lord AcknerMy Lords, it is entirely my inadequacy which has led to the difficulty. It is as simple as this. In view of the legislation in the Social Security Act 1973 every pension must provide that if a person has served at least two years he is entitled to whatever is the right figure for those two years. That is an obligation which lies upon the Government. Leaving aside the strict law, when putting the 1107 entitlement of a judge to a pension into primary legislation, I should have thought that the Government should put in the totality of his entitlement and not expect him to have to look in other legislation to see whether there is something additional.
The amendment states:
The appropriate Minister shall make regulations providing deferred pensions, lump sums and other derivative benefits at appropriate rates and subject to appropriate conditions for persons who cease to hold qualifying judicial office after serving two years therein without becoming entitled to a pension under subsections (1) to (4)".The justification for the obligation is to be found at Section 63 and Schedule 19 of the 1973 Act. I have confessed to my inadequacies but I do not believe that I can make the matter any clearer.
§ The Lord ChancellorMy Lords, I believe that there is a misunderstanding. We are dealing with Amendment No.60. I believe that my noble and learned friend is speaking to Amendment No.65. I understand his point as covered by Amendment No.65 but I am suggesting that is not covered by Amendment No.60. I believe that there has been a misunderstanding.
§ Lord AcknerMy Lords, I apologise. Amendment No.60 deals with another technical aspect of pension practice. In the ordinary private sphere the widow of a senior executive receives two-thirds of the pension of her husband on his death. That is based upon his having a two-thirds pension himself. In the case of a judge, the pension is fixed at a maximum of one-half his annual salary, but, in addition, there is a mandatory lump sum. He has not, as in the private sector, the option to commute. He is obliged to keep to the one-half and accept the lump sum.
In order to equate the position with the widow in the private sector, the judge's widow should not be provided with one-half of the judge's pension as such but there should be included an increase resulting from the actuarial calculation of the value of the lump sum which has been paid or is payable. The object is to increase the widow's pension by taking into account not only her husband's pension of one-half but the lump sum which is part and parcel of the pension provisions. Otherwise, you are affording to the widow less than half of the husband's entitlement.
§ The Lord ChancellorMy Lords, again I have a little difficulty in connecting the noble and learned Lord's comments with the precise amendment. I believe that the matter is covered by what I said in relation to Amendment No.59. Indeed, I had understood that Amendments Nos.60 and 61 were to be grouped with Amendment No.59. The underlying principle is the same for all three.
§ Lord AcknerMy Lords, it may be entirely my fault but I fail to understand the answer to my submission. I am seeking to introduce into the legislation an entitlement for the widow's pension to be increased by the pension equivalent of the lump sum. It is an actuarial calculation to be added on to the one-half of the widow or widower's pension.
§ The Lord ChancellorMy Lords, I have a little difficulty in following that. It may be that the wisest course is for me to read what my noble and learned friend said and seek to deal with the matter in correspondence. The basic situation covered by Amendment No.59 is also the underlying principle that applies in Amendments Nos.60 and 61. The reasons I gave were concerned with that. If I have not properly understood the submission of my noble and learned friend, I shall endeavour to read it and understand it at more leisure later.
§ Lord AcknerMy Lords, on the basis that further thought will be given to the proposition, I shall beg leave to withdraw the amendment. It may assist my noble and learned friend to refer again to the report of our consultant actuary, Mr. Wynne-Griffith, which we sent to my noble and learned friend as far back as last July. The point is now covered. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No.61 not moved.]
§ The Lord Chancellor moved Amendment No.62:
§ Page 5, line 43, leave out ("one and a half times") and insert ("twice").
§ The noble and learned Lord said: My Lords, in this amendment I am proposing to increase the relevant benefit from one-and-a-half times to twice. That has already been the subject of discussion. My noble and learned friend referred to the fact that that is what I am doing. I beg to move.
§ On Question, amendment agreed to.
§ Lord Ackner moved Amendment No.63:
§ Page 5, line 43, leave out ("one and a half) and insert ("three").
§ The noble and learned Lord said: My Lords, this is a rival amendment to Amendment No.62. It relates to the death benefit.
§
My noble and learned friend the Lord Chancellor had the benefit of the advice of an independent consultant, Mr. Alexander, of Watsons, whose firm advised the Top Salaries Review Body on pensions for Members of Parliament. In his report to my noble and learned friend, he said:
There has been a clear trend of improvement in this area amongst pension schemes generally and good practice is represented by a lump sum of three times".
In the light of that recommendation by the independent consultant I tabled the amendment. I beg to move.
§ Lord BensonMy Lords, I am puzzled by Amendment No.62 which inserts "twice". I can see no reason why the lump sum paid on death should be any different from that paid on retirement. As the House has heard, we have argued very strongly for the purposes of subsection (1) of the clause that payment should be three times. There is no reason why on death it should be any smaller sum. I share the views of my noble and learned friend Lord Ackner about the government adviser's advice which seems conclusive. I cannot understand why the noble and learned Lord the Lord Chancellor does not follow the advice of his own adviser.
1109 Also the judges themselves have taken advice on this and it is the same. Their advice is that in 75 per cent. of private sector schemes pay under these conditions is three and four times the salary. In the face of that evidence, on what grounds does the noble and learned Lord the Lord Chancellor put forward the figure of two? I say in parenthesis that I hope on this occasion that we shall not again have the question of retained benefits brought out. At this end of the Chamber we are getting rather tired of the subject. One can play the card once, but one cannot play the same card three or four times in the same game.
To change the metaphor, one simply cannot stop up every hole and every flaw in this Bill by crying out "retained benefits!"I hope that it will not be referred to again. But do not let me be deflected from the point that all the advice that has been given both to the noble and learned Lord the Lord Chancellor himself and to the judges is that the figure should be three times. On what specific ground has any different figure been chosen?
§ The Lord ChancellorMy Lords, I believe that technically we are dealing with Amendment No.63. So far as I am concerned the situation is that, having considered the matter in the light of what is available in the public service generally, the correct figure for this particular benefit is twice pensionable pay. That is the provision of the Principal Civil Service Pension Scheme. The schemes for Members of Parliament and the fire and police services have this particular provision.
The noble Lord, Lord Benson, does not wish to hear any more about retained benefits. I can understand why he says that. However, I have to point out that the retained benefit is a factor which distinguishes this scheme from others. I have no doubt that at least the noble Lord, Lord Benson, is suggesting that that is the answer to everything. It is an unavoidable characteristic of the scheme. Therefore, when any aspect of the scheme is called in question, one must look at the whole of it, including that provision.
The proposed lump sum on death-in-service benefit which I am proposing is twice the pensionable pay. That is equal to four times the full pension of half pay. That is higher than the retirement lump sum benefit and therefore surely it seems generous enough. For these reasons, I am unable to go beyond the twice figure that I have put forward in Amendment No.62 to which your Lordships have assented.
§ Lord MishconMy Lords, before the noble and learned Lord sits down, will he take it for granted that from these Benches we are also a little fatigued at the repetition of retained benefits? Perhaps I may quote the rather adorable words of the noble and learned Lord, Lord Ackner, who said—and I do not know whether he noted it—that he thought that the suggestion was a red herring. Later on in his speech he said that it was inedible.
§ 9.45 p.m.
§ Lord AcknerMy Lords, in the optimistic prospect that my noble and learned friend might give more thought to this matter, I quoted his own expert. Our own expert, to whom we were obliged to go, says this:
The lump sum on death is only 1½ times salary. This is a very low level of benefit indeed".I pause there. He was right because your Lordships have increased the lump sum to twice salary having resisted that attempt in Committee. So, our adviser was right in saying that one and a half times was too low. Let us see how he continues. He stated:It is seen to be even less generous when set in the context of the very low level of spouse's pension in these circumstances".That is a reference back to the fact that a widow or widower gets no part of the pension equivalent of the lump sum.He then went on to say:
The private sector pays much more (75 per cent. of schemes pay 3 or 4 times salary: NAPF survey)—and particularly so to senior employees, in my experience".There is the further material upon which I hope that my noble and learned friend will reflect. He is to be congratulated—and I do congratulate him—on recognising that one and a half times salary was too low and on increasing that to two. In the time before Third Reading, perhaps he will reflect upon the proposition that has been made by both his own adviser and our adviser that two is still too low and that the figure should be at least three. On that basis, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No.64 not moved.]
§ Lord Ackner moved Amendment No.65:
§
Page 6, line 1, at end insert:
("( ) The appropriate Minister shall make regulations providing deferred pensions, lump sums and other derivative benefits at appropriate rates and subject to appropriate conditions for persons who cease to hold qualifying judicial office after serving two years therein without becoming entitled to a pension under subsections (1) to (4) above.").
§ The noble and learned Lord said: My Lords, I believe that I have already spoken to this amendment, but I shall do it again because I made such a poor showing. It may be that having said it once, your Lordships will be able to respond straight away and I will not need to take up the time of the House but now I shall reculer pour mieux sauter if that is not the case.
§ The Lord ChancellorMy Lords, I followed the argument when my noble and learned friend made it before, although it was slightly earlier in our proceedings. I find myself in the novel situation of trying to resist being given an additional regulation-making power by my noble and learned friend. I do so not because I do not wish to make regulations governing preserved pensions, but because I already have that power in conjunction with the Secretary of State under the provisions of Social Security Act 1973, Section 65.
The existing arrangements are established under the existing judicial pensions scheme by the Judicial Pensions (Preservation of Benefits) Order 1988. I anticipate that a new order will have to be made in connection with the new scheme, but I do not believe 1111 that any additional powers are necessary. I am sure that my noble and learned friend Lord Simon of Glaisdale and probably my noble friend Lord Renton would feel it inappropriate to give unnecessary regulation-making powers in this Bill when they already exist under the Act to which I have referred.
§ Lord AcknerMy Lords, that still leaves the deficiency unremedied, which is that in what is meant to be primary legislation covering judicial pensions, there is not inserted any reference to an obligation that exists to pay even though only two years has been served. For the purpose of ensuring that this primary legislation is as complete as it should be, I respectfully submit that that should be included otherwise it is a situation which is, so to speak, on a suppressio veri by not being brought to the attention of the judiciary who will look to this Act with no doubt a varying lack of enthusiasm for enlightenment on their pension facilities.
§ Lord RentonMy Lords, I take the point that something on the lines of what the noble and learned Lord implies in this regulation-making power should be dealt with but it would not mean very elaborate provisions to turn that into primary legislation.
§ Lord AcknerMy Lords, with the assistance of the noble Lord, Lord Renton, which seems to be now on offer, perhaps I can withdraw the amendment and see how we can better cater for it at Third Reading. On that basis, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ The Lord Chancellor moved Amendments Nos.66 to 68:
§ Page 6, line 2, leave out ("(5)") and insert ("and,").
§ Page 6, line 3, leave out ("subsection (4) above") and insert ("this subsection").
§
Page 6, line 4, at end insert:
("(6) A person to whom a lump sum is paid under subsection (1) above but who resumes service in qualifying judicial office shall not he required to refund the lump sum; but if the whole or any part of it is not refunded, an amount equal to so much of it as has not been refunded shall he deducted from any lump sum which subsequently becomes payable to or in respect of him under subsection (1), (3) or (4) above.").
§ The noble and learned Lord said: My Lords, I spoke to these amendments with Amendment No.40. Therefore, with your Lordships' leave, I propose to put them en bloc. I beg to move.
§ On Question, amendments agreed to.
1112§ Clause 5 [Surviving spouse's pension]
§ Lord Ackner had given notice of his intention to move Amendment No.69:
§ Page 6, line 8, leave out paragraph (b).
§ The noble and learned Lord said: My Lords, like those noble Lords whom I saw hesitating a moment ago I had assumed that we would not be progressing beyond Clause 4 and reaching the emotional subject of widow's pensions, their remarriage or lack of remarriage and the like, particularly as we have covered most of the contentious field on the pensions' aspect and further proceedings on the Report stage are scheduled for Thursday this week.
§ Lord MishconMy Lords, I have what I hope is a helpful submission to make to the House. I am told that it is by no means the rule of law—and certainly not of the Medes and Persians—but that it is customary to try to reach the end of the numbers shown on the groupings document. The last number is 74. I therefore assumed that the custom would be observed.
§ Lord Simon of GlaisdaleMy Lords, we had a very long Statement in the middle of our deliberations. We have made very good progress. It is now eight minutes to ten o'clock and I suggest that what my noble and learned friend Lord Ackner proposed is right. The noble Lord, Lord Mishcon, mentioned number 74. In fact the last number is 77.
§ Lord Morton of ShunaMy Lords, while consultation appears to be going on through channels that are sometimes described as usual, it would seem unreal to go to Amendment No.74 which is half way through Clause 5 and more proper to stop at the end of Clause 4 where we are now. In addition, I have had some indication that the noble and learned Lord the Lord Chancellor may have some intention to make some changes in regard to the provision relating to widows, widowers and others. Perhaps by Thursday those amendments will be available.
§ Lord MishconMy Lords, from these Benches I certainly do not object.
§ [Amendment No.69 not moved.]
§ House adjourned at six minutes before ten o'clock.