HL Deb 12 July 1995 vol 565 cc1752-9

198 After Clause 121, insert the following clause:

Up-rating of pensions increased under section 52 of the Social Security Contributions and Benefits Act,

.—(1) For section 156 of the Social Security Administration Act 1992 there is substituted—

"Up-rating under section 150 above of pensions increased under section 52(3) of the Contributions and Benefits Act.

.—(1) This section applies in any case where a person is entitled to a Category A retirement pension with an increase, under section 52(3) of the Contributions and Benefits Act, in the additional pension on account of the contributions of a spouse who has died.

(2) Where in the case of any up-rating order under section 150 above—

  1. (a) the spouse's final relevant year is the tax year preceding the tax year in which the up-rating order comes into force, but
  2. (b) the person's final relevant year was an earlier tax year,
then the up-rating order shall not have effect in relation to that part of the additional pension which is attributable to the spouse's contributions.

(3) Where in the case of any up-rating order under section 150 above—

  1. (a) the person's final relevant year is the tax year preceding the tax year in which the up-rating order comes into force, but
  2. (b) the spouse's final relevant year was an earlier tax year,

then the up-rating order shall not have effect in relation to that part of the additional pension which is attributable to the person's contributions."

(2) In section 151(1) of that Act (effect of up-rating orders on additional pensions), after "and shall apply" there is inserted "subject to section 156 and". '.

199 Insert the following clause:

Graduated retirement benefit

'.—(1) In section 62(1) of the Social Security Contributions and Benefits Act 1992 (graduated retirement benefit), after paragraph (a) there is inserted— (aa) for amending section 36(7) of that Act (persons to be treated as receiving nominal retirement pension) so that where a person has claimed a Category A or Category B retirement pension but—

  1. (i) because of an election under section 54(1) above, or
  2. (ii) because he has withdrawn his claim for the pension,

he is not entitled to such a pension, he is not to be treated for the purposes of the preceding provisions of that section as receiving such a pension at a nominal weekly rate;"

(2) In section 150(11) of the Social Security Administration Act 1992 (application of up-rating provisions to graduated retirement benefit) for the words following "provisions of this section" there is substituted—

  1. "(a) to the amount of graduated retirement benefit payable for each unit of graduated contributions,
  2. (b) to increases of such benefit under any provisions made by virtue of section 24(1) (b) of the Social Security Pensions Act 1975 or section 62(1) o (a) of the Contributions and Benefits Act, and
  3. (c) to any addition under section 37(1) of the National Insurance Act 1965 (addition to weekly rate of retirement pension for widows and widowers) to the amount of such benefit."

(3) In section 155(7) of that Act (effect of alteration of rates of graduated retirement benefit) for the words following "provisions of this section" there is substituted—

  1. "(a) to the amount of graduated retirement benefit payable for each unit of graduated contributions,
  2. (b) to increases of such benefit under any provisions made by virtue of section 24(1) (b) of the Social Security Pensions Act 1975 or section 62(1) (a) of the Contributions and Benefits Act, and
  3. (c) to any addition under section 37(1) of the National Insurance Act 1965 (addition to weekly rate of retirement pension for widows and widowers) to the amount of such benefit". '.

200 Insert the following clause:

Extension of Christmas Bonus for pensioners

`.—(1) Section 150 of the Social Security Contributions and Benefits Act 1992 (Christmas bonus: interpretation) is amended as follows.

(2) In subsection (1), after paragraph (k) there is inserted— (1) a mobility supplement".

(3) In subsection (2)—

  1. (a) after the definition of "attendance allowance" there is inserted— 1754 "mobility supplement" means a supplement awarded in respect of disablement which affects a person's ability to walk and for which the person is in receipt of war disablement pension;"
  2. (b) in the definition of "retirement pension", "if paid periodically" is omitted,
  3. (c) in paragraph (b) of the definition of "unemployability supplement or allowance", after sub-paragraph (iv) there is inserted "or

(v) under the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939."

and accordingly, the "or" immediately following sub-paragraph (iii) is omitted.'.

201 Insert the following clause:

Contributions paid in error '. After section 61 of the Social Security Contributions and Benefits Act 1992 there is inserted—

"Contributions paid in error

61A.—(1) This section applies in the case of any individual if—

  1. (a) the individual has paid amounts by way of primary Class I contributions which, because the individual was not an employed earner, were paid in error, and
  2. (b) prescribed conditions are satisfied.

(2) Regulations may, where—

  1. (a) this section applies in the case of any individual, and
  2. (b) the Secretary of State is of the opinion that it is appropriate for the regulations to apply to the individual,

provide for entitlement to, and the amount of, additional pension to be determined as if the individual had been an employed earner and, accordingly, those contributions had been properly paid.

(3) The reference in subsection (2) above to additional pension is to additional pension for the individual or the individual's spouse falling to be calculated under section 45 above for the purposes of—

  1. (a) Category A retirement pension,
  2. (b) Category B retirement pension for widows or widowers,
  3. (c) widowed mother's allowance and widow's pension, and
  4. (d) incapacity benefit (except in transitional cases).

(4) Regulations may, where—

  1. (a) this section applies in the case of any individual, and
  2. (b) the Secretary of State is of the opinion that it is appropriate for regulations made by virtue of section 4(8) of the Social Security (Incapacity for Work) Act 1994 (provision during transition from invalidity benefit to incapacity benefit for incapacity benefit to include the additional pension element of invalidity pension) to have the following effect in the case of the individual,

provide for the regulations made by virtue of that section to have effect as if, in relation to the provisions in force before the commencement of that section with respect to that additional pension element, the individual had been an employed earner and, accordingly, the contributions had been properly paid.

(5) Where such provision made by regulations as is mentioned in subsection (2) or (4) above applies in respect of any individual, regulations under paragraph 8(1) (m) of Schedule 1 to this Act may not require the amounts paid by way of primary Class I contributions to be repaid.

(6) Regulations may provide, where—

  1. (a) such provision made by regulations as is mentioned in subsection (2) or (4) above applies in respect of any individual,
  2. (b) prescribed conditions are satisfied, and
  3. (c) any amount calculated by reference to the contributions in question has been paid in respect of that individual by way of minimum contributions under section 43 of the Pension Schemes Act 1993 (contributions to personal pension schemes),

for that individual to be treated for the purposes of that Act as if that individual had been an employed earner and, accordingly, the amount had been properly paid".'.

202 Clause 122, page 75, line 9, at beginning insert: '() In section 23(1) of the Social Security Contributions and Benefits Act 1992 (contribution conditions: supplemental), for "22(1) (a)" there is substituted "22(1)". () Section 54(4) of that Act (effect on advance claims for retirement pension of deferral of entitlement) is omitted. () For section 55 of that Act (deferred entitlement) there is substituted—

"Increase of retirement pension where entitlement is

deferred.

55.—(1) Where a person's entitlement to a Category A or Category B retirement pension is deferred, Schedule 5 to this Act shall have effect for increasing the rate of pension.

(2) For the purposes of this Act a person's entitlement to a Category A or Category B retirement pension is 'deferred' if and so long as that person—

  1. (a) does not become entitled to that pension by reason only—
    1. (i) of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim), or
    2. (ii) in the case of a Category B retirement pension payable by virtue of a spouse's contributions, of the spouse not satisfying those conditions with respect to his Category A retirement pension; or
  2. (b) in consequence of an election under section 54(1) above, falls to be treated as not having become entitled to that pension;

and, in relation to any such pension, 'period of deferment' shall be construed accordingly".'.

203 Page 75, line 9, leave out 'the Social Security Contributions and Benefits Act 1992' and insert 'that Act'.

Lord Mackay of Ardbrecknish

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 198 to 203 en bloc. I wish to speak also to Amendments Nos. 236, 327, 328, 330 and 381.

This group of amendments deals with national insurance contributions and benefits. It covers a great deal of ground, although many of these amendments, despite looking extremely complicated, are designed to tidy up existing legislation.

Amendment No. 198 changes a highly technical provision of the benefits uprating legislation which does not fully reflect what is intended. It deals with legislation which is deficient and in which those who went before us did not quite reflect their intention in the legislative provision.

Amendment No. 199 makes changes to the graduated retirement benefit to deal with entitlements where there is no entitlement to retirement pension as such. Perhaps it will suffice for me to reassure your Lordships that this is a tidying-up amendment to validate existing practice and put the matter beyond doubt. It will not affect the way in which we treat anyone in terms of the payments that they receive.

Amendment No. 201 deals with the problem that results from employees and self-employed people paying different rates of national insurance contributions. That is reflected in a slightly narrower range of benefits available to the self-employed. Although they are eligible for the basic state retirement pension, they do not generally qualify for the state earnings related pension, or SERPS as it is more generally known.

It is usually clear into which category a person's employment falls. But difficulties can occur when the contractual arrangements under which an individual works are not clear cut. That can result in someone being treated as an employee and erroneously paying Class 1 contributions. If it is then found that the engagement amounted to self-employment, current legislation requires that a refund of the difference between the contributions paid and the self-employed contributions that should have been paid should be offered. Any benefits awarded to which the individuals would not have been entitled had they paid self-employed contributions must be recovered. Future entitlement to benefit will be based on the revised record.

Someone in that position would lose SERPS rights which they believed that they had accrued. An error that has gone on, say, for some years, would mean that any refund would almost certainly be insufficient to make equivalent private provision to replace the lost rights, and the pension of someone who had retired would be reduced accordingly. Such a situation has arisen in respect of certain workers in the television and film industries.

We decided that it would be right to introduce some additional flexibility and this new clause is designed to achieve that. It would allow individuals to choose not to receive a refund and to keep their SERPS entitlement as if the erroneously paid Class 1 contributions had been properly paid. Contributions made to personal pension schemes will also be able to stand. Nothing will prevent individuals from applying for a refund, if that is what they want. The engager will be able to receive a refund of the contributions that he has paid in the normal way.

Such circumstances do not crop up every day but they cause genuine concern when they do. I believe that this welcome provision will enable us to deal with them.

Amendment No. 202 corrects an error which occurred during the consolidation of legislation on the Social Security Contributions and Benefits Act 1992. Again, I should be prepared to explain this amendment in some detail, but I can assure the House that our proposal simply validates existing practice so that it will not change what is happening in practice.

Amendment No. 236 amends the provisions so that earnings paid from different employments are aggregated to determine the national insurance contributions that are due. The provision will apply only if an employee with different pensions arrangements has more than one employment with the same or with associated employers and the earnings have to be aggregated for calculating national insurance contributions. That does not happen very often. We estimate that fewer than 100 people a year will he affected. In simple terms, it will mean that people with a personal pension scheme will have contributions paid into it. We intend to bring this provision into effect from April 1996.

The amendment also provides for the rebate to be allocated to contracted-out money purchase scheme pensions ahead of contracted-out salary related schemes. That will maximise the entitlement of the individual in such cases. The change will come into effect from April 1997.

I turn now to Amendment No. 327. This amendment reverses the effect of the amendment which the noble Baroness and noble Lords opposite were successful in inserting into the Bill at Committee stage. Amendment No. 327 returns us to the original intentions.

The amendment which was passed in your Lordships' House would have had effect from the year 2023, when the first contributors who had been in SERPS for 44 years would reach state pension age. It would allow anyone to drop five years of nil or low earnings from their SERPS calculation. Those who stand to gain most would be people who had earnings at the level of the national insurance upper earnings limit for the greater part of their working lives but who had a few years of nil or low earnings. It would particularly help those who retired early.

Amendment No. 327 returns us to the position in which, once SERPS matures, the calculation would be based on reckonable earnings over the whole working life. Our proposals will ensure the continued affordability of the SERPS scheme into the future while protecting the position of vulnerable groups. We have made arrangements to cushion the impact of our reforms on people who would have particular difficulty in building up additional pension provision. We have confirmed that we shall fulfil our commitment to bring in the necessary regulations to extend home responsibilities protection to SERPS. That will allow for up to more than half the working life to be disregarded in the SERPS calculation for those with caring responsibilities and those receiving incapacity benefits. The Bill also introduces a measure to provide help for families and working disabled people with low incomes on family credit and disability working allowance to improve their additional pension entitlements.

The best 44 years provision would have made inroads into the steps that we have already taken to put SERPS on a long-term sustainable basis. It would raise long-term expenditure in a way which I can only describe as poorly targeted, because high earning men would gain as well as low earning women. This amendment puts us back on track and I urge noble Lords to accept it.

Amendment No. 200 is essentially a tidying-up amendment. There is an anomaly in the legislation because the mobility component of disability living allowance qualifies for a Christmas bonus but the war pensions equivalent does not. That distinction was never intended. Payments have in fact been made to war pensioners on an extra-statutory basis, but we should like to set the matter right in legislation. These amendments will validate existing practice. I beg to move.

Moved, That the House do agree with the Commons in their Amendments Nos. 198 to 203.—(Lord Mackay of Ardbrecknish.)

6.15 p.m.

Baroness Hollis of Heigham

My Lords, I should like to speak to Amendment No. 327, which removes the amendment won in your Lordships' House. That would have allowed SERPS to be drawn from the 44 best years rather than 49 years.

I am very sorry that the Government are being so churlish and mean on such an amendment. We pressed this amendment in your Lordships' House in order to save public funds on social security expenditure. The Government were equalising state pension age and retirement age for women, raising it from 60 to 65 years. So women are to work five years longer. But because they work five years longer, and being older and perhaps a little more frail, they are more likely also to suffer reduced earnings. So working five years longer, usually at somewhat lower rates, meant that they were working five years longer for a lower pension than they would have had if they had retired five years earlier at age 60, as the scheme would be now.

We argued that by floating off those five weakest years—not necessarily at nil or even low earnings, but at somewhat lower than the optimal earnings—women, though working five years longer, would not be the poorer as a result. It was at least some well targeted, modest compensation for the fact that women are working longer.

The Government now seek to remove that amendment—I am sure that their Motion will go through—by saying that it was poorly targeted and would benefit highly paid men as well as low paid women. That is nonsense. I do not know any highly paid men who are in SERPS as opposed to having opted out into an occupational pension or private scheme. It is absurd to think that highly paid men are in SERPS. We know that those who remain in SERPS are precisely those who do not have access to occupational pensions or private pension provision. They are low paid women and low paid men.

The problem with the amendment is that, far from being poorly targeted, it was targeted all too well. It was targeted at women who were being asked to work longer for less, and targeted at men in such low paid work that they never merited moving into an occupational scheme. Because it was targeted all too well and because it did something to mitigate the effect of this Bill on low paid women and low paid men, the Government have chosen to overturn it. That is churlish and ungenerous. When we look at the increasing division in society in terms of incomes, as substantiated by the Rowntree Report and the like, the Government are parachuting all the worst features of growing insecurity and poverty among women and low paid men in the world of work into the world of retirement as well.

I have to say, "Shame on the Government" for overturning an amendment that we could have afforded; that was well targeted; and that would have stopped women at least from having to work longer for less. The Government's behaviour on this issue is churlish and mean. I hope the signal will go out that, for all their talk about a society at ease with itself, as soon as we try to do something to give that legislative impact the Government overturn it as speedily and as quietly as they can. That is deplorable.

On Question, Motion agreed to.