§ Mr. Higginsasked the Secretary of Social Services if he will take steps to ensure that the surrender value of insurance policies held by a formerly self-employed person no longer in work will be disregarded in calculating whether available capital exceeds the £2,000 limit imposed on those applying for supplementary benefit.
§ Mrs. ChalkerNo. Life assurance policies are an accepted form of saving and it is right that their surrender value should be treated as a capital resource for supplementary benefit purposes in the same way as other forms of saving. While such policies are often intended as a form of saving for retirement, the fact that a person intends his savings to be used in retirement has never been considered a sufficient reason for not expecting him to use them, to some extent at least, if he falls on hard times before reaching retirement age.
The recognised way for a self-employed person to provide for his retirement is by means of a contract under section 226 of the Income and Corporation Taxes Act 1970. Premiums under such a contract are invested by the life office and provide, in due course, a retirement annuity; any surrender is expressly prohibited in the legislation. Rights being acquired by this means would not be taken into account as an available capital resource if supplementary benefit were claimed, so that the self-employed person is in the same position as the employed person who has pension rights under an occupational pension scheme.
I shall be writing to my right hon. Friend about this.