§ Mr. Duncan SmithTo ask the Secretary of State for Social Security (1) what amount is unpaid with respect to national insurance rebates for contracted out private pensions; [73996]
(2) what interest has accrued on the money which has not been paid to contracted out private pensions as national insurance rebates; [73998]
(3) for how long the national insurance rebates to contracted out private pensions have not been paid; [73997]
(4) what estimate he has made of the loss of investment profit from the failure of the payments of the national insurance rebates to contracted out private pensions. [73999]
§ Mr. TimmsThe information is not available in the format requested.
The calculation of the National Insurance Rebates contains an assumption that they are paid in the October following the end of the tax year for which they are due. Normally around 90 per cent. of payments have been made by that date, increasing to 95 per cent. by December. This year by October 14 per cent. had been paid, by December this had increased to 46 per cent. Currently 77 per cent. has been paid.
The delay in payment of the age related rebates has allowed the retention of Government gilt's which would otherwise have been sold to meet the age related rebate payments. In determining any potential gain to the National Insurance Fund as a result of the delay, certain assumptions need to be made about the pattern of payments that would have been made and the rate of return on gilts. Assuming certain payment patterns and 711W a 6 per cent. rate of return then the gain to the National Insurance Fund is tentatively estimated to be around £58 million.
We have been paying compensation at the rate of 0.5 per cent. per month for each month of delay, since November 1998. To date £21 million has been paid and it is estimated that the total compensation figure will be around £38 million.
We have not made any estimates about the actual loss of investment incurred as a result of the delays. Instead we have implemented a system to compensate individuals which takes into consideration the following factors: First the calculation of the rebate, in particular the assumption within the calculation that the payment is made in October, following the end of the tax year for which it is due. Second the need to provide certainty for scheme members and personal pension holders. Third the investment return prevailing at the time (September 1998) and finally the need for straightforward and cost effective administrative arrangements which would minimise the additional work required by pension providers, scheme administrators and Contributions Agency.
The level of compensation was discussed with the Government Actuary's Department who agreed that 0.5 per cent. per month represented a reasonable level of compensation given the prevailing market conditions in September 1998 and on the assumption that the arrangements put in place at that time were designed to cover a few months delay.