HC Deb 26 March 1998 vol 309 cc275-6W
Mr. Duncan Smith

To ask the Secretary of State for Social Security what steps she(a) has taken and (b) will take to ensure that changes to national insurance contributions contained in the Budget will not reduce the rebate for contracted out occupational pensions. [36359]

Mr. Denham

The changes to the structure of the National Insurance system announced in the Budget by my right hon. Friend the Chancellor of the Exchequer will ensure that it is simpler, fairer and more employment friendly.

It was recognised that the change to employer contributions could affect the rebates. At present, employers have a rebate on earnings above the lower earnings limit (LEL) up to the upper earnings limit (UEL). We will ensure that employers will still receive a rebate on those earnings even though they will not necessarily pay National Insurance Contributions (NICs) in respect of them.

For those with contracted-out occupational schemes, we will be putting down some minor amendments to the Pension Schemes Act 1993 in the Social Security Bill which is currently before Parliament. This will enable a rebate to be paid on earnings between the LEL and the new level at which employer contributions commence. The provisions will also allow employers to deduct this rebate from their overall NICs bill. This will ensure that, as far as the employer's rebate is concerned, the position remains unchanged.

There will be no change to the current arrangements for appropriate personal pensions. The rebate arrangements do not differentiate between employee and employer contributions. The rebate is paid on earnings between the LEL and the UEL and this will continue to be the case.

My right hon. Friend the Chancellor of the Exchequer made it clear that the benefit position of employees would be maintained and these proposals meet that commitment.

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