§ Mr. Kenneth Clarkeasked the Minister for the Civil Service what proposals he has for turning non-contributory Civil Service pensions into contributory pensions.
§ Mr. Charles R. MorrisAs I explained in the reply I gave to the hon. Member for Mid-Sussex (Mr. Renton) on 1st December, before being attributed to the30W equivalent Civil Service grade, all pay rates provided by the Civil Service Pay Research Unit for broadly comparable outside employment are specifically reduced by the precise superannuation contribution paid for personal benefits by those in such employment; and a further deduction is made to take account of differences in superannuation benefits. Civil Servants therefore forgo pay to help meet the cost of their pensions equally as if their pensions were contributory. A contributory scheme would thus imply correspondingly higher pay. It would also require a more complex and costly administrative machine to operate it. For these reasons, the Government are not convinced that there is a case, at the present time, to change the non-contributory basis of the scheme.—[Vol. 901, c. 355.]
§ Mr. Tim Rentonasked the Minister for the Civil Service if he is satisfied that the Civil Service Pay Research Unit's figure of 1.75 per cent. of salaries is adequate to take account of differences in pension benefits between civil servants and the private sector in the light of a current actuarial calculation, based on a 10 per cent. interest-rate, of the cost of providing inflation-proofing of salaries up to a maximum of only three per cent. per annum as 10 per cent. of salaries; and if he will make a statement.
§ Mr. Charles R. MorrisI am not aware of the full range of assumptions underlying the hon. Member's calculations, but I am advised by the Government Actuary that the contribution rate he quotes is, at face value, a considerable exaggeration. I am satisfied that the pay agreement works in a way which is fair to both the civil servant and the taxpayer. That agreement provides for the revision of the adjustment to take account of differences in benefits between the civil servant's pension benefits and those of the comparable employee in private industry and if any revision is found to be necessary it will, of course, be made when the pay agreement is again operating. It is estimated that the cost of the increase in Civil Service pensions paid from 1st December 1975 will be less than 2 per cent. of the total salary bill.
§ Mr. Tim Rentonasked the Minister for the Civil Service whether, when a 31W civil servant decides to retire early, inflation-proofing applies to the lump sum which is then credited to him but which is not paid until his normal retirement age is reached; and whether the whole of the sum is eventually paid tax-free.
§ Mr. Charles R. MorrisThe preserved lump sum of a civil servant who resigns before the retiring age is an integral part of his pension entitlement. Its purchasing power is therefore maintained in the same way as that of the continuing pension. Lump sum payments which form part of a superannuation benefit payable at the normal retiring age are tax-free under all approved pension schemes, whether in the public or the private sectors.