National Insurance Credits

HC Deb 03 March 1995 vol 255 cc759-62W

Mr. Frank Field

To ask the Secretary of State for Social Security what changes had been made in the system of national insurance credits by 1965; what changes have been made since that date; and if he will estimate the impact of these changes on the number of people who have lost national insurance cover.

Mr. Arbuthnot

Between its inception in 1948 and the advent of RNI in 1975, the scope and operation of the credits system remained broadly unchanged.

The National Insurance (Contributions) Amendment Regulations 1960 provided for unemployed persons to have a part-time job compatible with their availability for full-time employment and continue to receive unemployment credits.

No other significant changes were made prior to 1965 or between 1965 and 1975.

The Social Security (Credits) Regulations 1975 made adaptations to the credits systems to accommodate the revised national insurance scheme. The revised system was based on tax years and reliance on credits was considerably diminished since the earnings-related contributions payable by employed earners meant that many people could achieve a qualifying year for future benefit purposes in a comparatively short period.

Apart from credits awarded for long-term benefit purposes only—class 3—all credits previously awarded at a class appropriate to the contributor's employment status became class 1 credits.

Other specific changes were as follows:

Special short-term benefit credits awarded to recent entrants into the national insurance scheme were extended to provide future cover for maternity allowance in addition to unemployment benefit and sickness benefit.

Credits in respect of education, training and unpaid apprenticeship up to age 18 were extended to cover all young people for the tax years containing their 16th, 17th and 18th birthdays.

The conditions for eligibility for credits in respect of approved training were eased by removing the qualification that the trainee would otherwise have become or remained unemployed and reducing the amount of contributions which needed to have been paid before the course commenced.

The special provision whereby class 3 contributions paid by a mature student during his course could be converted to class 1 or 2 for short-term benefit purposes only was removed.

Special credits available to a young person for short-term benefit purposes on termination of a period of small income exception were not replaced by a similar provision in respect of small earnings exception because of the anomalies that this would create.

Class 3 credits previously awarded to widows for specified weeks were extended to cover the whole of the tax year. Credits were also made available for the year of widowhood and in some circumstances the following year regardless of whether widows benefit was in payment.

The credits provisions of the Social Security (Credits) Regulations 1975 and the Social Security (Benefit) (Married Women and Widows Special Provisions) Regulations 1974 together with information about subsequent significant changes are as follows:

Class 3 starting credits

Introduced 1948. Count for basic retirement pension and widows' benefits. Awarded for the years in which the individual reaches the ages of 16, 17 and 18. Still current.

Class 1 starting credits

Introduced 1953. Counted for unemployment benefit, sickness benefit and maternity allowance. Awarded for the year in which the age of 17 was reached or any previous year. Abolished from 2 October 1988 to coincide with the tightening of the contribution conditions for sickness and unemployment benefits.

Starting credits for maternity grant purposes

Introduced 1948. Abolished from 6 April 1988 when maternity grant was abolished.

Approved training credits

Introduced 1948. Count for all benefit purposes. Available to those over 18 in full time training. Still current. From 4 September 1988, the requirement to have one qualifying year for benefit purposes in the three years preceding the course was abolished.

Termination of full time education, training and apprenticeship credits

Introduced 1953. Count for unemployment and sickness benefit. Available to those over 18 providing the course did not start after the individual reached the age of 21 and the course has actually finished. Changes from 2 October 1988 were as follows:

1. (a) Credits for maternity allowance purposes were abolished.
2. (b) Credits were no longer available to the individual for the tax year before he was 18.
3. (c) Credits were made available for one of the two relevant tax years for benefit purposes providing that the other year was a qualifying year. Change coincided with the tightening of the contribution conditions for sickness and unemployment benefits.

Credits for unemployment and incapacity

Introduced in 1948. Count for all benefit purposes. Available for each week of unemployment or sickness. In the case of unemployment credits, a small amount of work can be disregarded. Changes since 1975 are as follows:

1. (a) From 29 May 1977, provisions were put in place to prevent the use of severe disablement allowance credits to gain entitlement to higher rate contributory incapacity benefits.
2. (b) From 8 March 1982, the scope of disregarded work for unemployment credit purposes was extended to include work done for a charity.
3. (c) From 10 May 1987, the scope of incapacity credits was extended to include periods when the individual was working as a councillor.
4. (d) From 6 April 1988, the scope of incapacity credits was extended to include days in receipt of statutory sick pay.
5. (e) From 6 April 1992, the scope of unemployment credits was extended to include periods covered by a PILON—payment in lieu of notice.

Special credits on termination of marriage

Introduced 1948. Abolished 18 May 1989. For women whose marriage has terminated by reason of the death of their husband or otherwise to assist them in satisfying the contribution conditions for unemployment and sickness benefits and maternity allowance. Award for any relevant week in which the marriage subsisted provided that certain contributions have been paid since the marriage ended.

Widow's "running start" credits

Introduced January 1957. For the purposes of entitlement to sickness benefit, unemployment benefit or maternity allowance, where entitlement to WMA or WA ends other than by remarriage or cohabitation. Still current.

ICA credits

Introduced 12 April 1976. Count for all benefit purposes. Still current. Available for periods when invalid care allowance is payable.

Autocredits

Introduced 6 April 1983. Count for all benefit purposes. Still current. Awarded automatically to men for the tax years in which they reach the ages of 60 to 64 inclusive provided they are not liable to pay contributions.

SMP credits

Introduced 6 April 1987. Count for all benefit purposes. Still current. Awarded for periods when statutory maternity pay is available.

Jury service credits

Introduced 6 April 1988. Count for all benefit purposes. Still current. Awarded for periods of jury service.

DWA credits

Introduced 6 April 1992. Count for all benefit purposes. Still current. Available for periods when disability working allowance is payable.

Widows benefit credits

Introduced 1948. Counted for retirement pension purposes only. Awarded for each week for which widow's benefit was payable or a claim was pending. Abolished 1978.

It is not possible to estimate the impact of these changes on the number of people who have lost national insurance cover. Since the majority of changes have been favourable, there will be more gainers than losers in benefit terms.