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Premium On Termination Of Contracted-Out Employment

Volume 893: debated on Wednesday 11 June 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

'(1) This section has effect as to the cases in which an earner's employer may pay a state scheme premium where—

  • (a) the earner's service in contracted-out employment by reference to an occupational pension scheme is terminated before he attains the scheme's normal pension age or (if earlier) the end of the tax year preceding that in which he attains pensionable age; and
  • (b) he has served for less than five years in contracted-out employment by reference to the scheme;
  • and a premium under this section may be referred to as a "contributions equivalent premium".

    (2) If—

  • (a) the earner's service is terminated in any way except by his death or by the scheme's ceasing to be contracted out; and
  • (b) his period of service is not one which conforms to the appropriate extent with the preservation requirements of Part II of the Social Security Act 1973,
  • his employer may elect to pay a contributions equivalent premium with a view to extinguishing the earner's accrued rights to guaranteed minimum pensions under the scheme.

    (3) If the earner's service is terminated by this death and he dies leaving a widow, his

    employer may elect to pay a contributions equivalent premium with a view to extinguishing any such accrued rights in respect of the widow'.—[ Mr. O'Malley.]

    Brought up, and read the First time.

    With this we shall consider Government new Clause 3 and Government Amendments Nos. 30 and 34.

    The two new clauses make two changes from the existing Clause 40. They introduce, first, the term "contributions equivalent premium" and, secondly, a new provision to permit employers to buy back a widow into the State scheme where the earner dies during the first five years of contracted-out service.

    Our proposal has been tabled in response to representations from pension interests. It provides more flexibility for the employer, who is thus able to buy out a widow's small guaranteed minimum pension by paying a contributions equivalent premium to the State scheme.

    There are administrative drawbacks to paying small pensions. If a widow had an entitlement to any pension in excess of the guaranteed minimum pension, the scheme would be able to make lump sums available under Clause 37(3).

    I am happy to welcome both new clauses in the name of the right hon. Gentleman. New Clause 2 replaces Clause 40, which deals with the situation of early leavers with less than five years' service. It has never been the cause of any disagreement between us and merely clarifies the position. We welcome the sincerity which the Government have shown in the provision to buy back the widow's reserve guaranteed minimum pension, which is tiny. We urged this on the Government in Committee and pointed out the great difficulties faced by schemes having to pay out these tiny reserve pensions. The Government have responded to what we said, and we are glad to see that they have included this provision in the Bill at this stage.

    Question put and agreed to.

    Clause read a Second time, and added to the Bill.