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New Clause 19

Volume 77: debated on Thursday 18 April 1985

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Amendments Relating To Protection Of Pensions

  • In subsection (1) of section 41A of the Social Security Pensions Act 1975 (protection of earners' pensions), the following words shall be substituted for the words from "than" to the end—
  • "(i)in a case where by virtue of paragraph 9(2)(b) of Schedule 16 to the Social Security Act 1973 a pension is provided by way of complete substitute for short service benefit, than the weekly rate of that pension; and
  • in other case, than the relevant aggregate.".
  • (2)The following subsection shall be inserted after subsection (1B) of that section—
    • "(1C) In subsection (1) above "the relevant aggregate" means the aggregate of the following—
  • (a)the relevant sum;
  • (b)the excess mentioned in subsection (1)(c) above; and
  • (c)any amount which is an appropriate addition at the time in question.".
  • (3) In subsection (1) of section 41B of that Act (protection of widows' pensions), the following words shall be substituted for the words from "than" to the end—
  • (i) in a case where by virtue of paragraph 9(2)(b) of Schedule 16 to the Social Security Act 1973 a pension is provided by way of complete substitute for a widow's pension, than the weekly rate of the pension so provided; and
  • (ii) in any other case, than the relevant aggregate.".
  • The following subsection shall be inserted after that subsection—
    • "(1A) In subsection (1) above "the relevant aggregate" means the aggregate of the following—
  • (a)the relevant sum;
  • (b)the excess mentioned in subsection (1)(c) above; and
  • (c)any amount which is an appropriate addition at the time in question.".
  • (5)In subsection (3) of that section, for the words "assumption specified in subsection (4) below" there shall be substituted the words "prescribed assumptions".
  • (6)Regulations under that subsection may be framed so as to have effect as from 1st January 1985.'.—[Mr.Whitney.]
  • Brought up, and read the First time.

    With this it will be convenient to discuss Government amendments Nos. 129, 130, 131, 134 and 135.

    With this new clause we enter the mysterious world of franking. Anybody who takes a regular interest in occupational pension matters will recall just how complicated these provisions were in the legislation that was passed in 1984. We found that there were certain defects in the provisions. This caused us to try to remedy those defects. Inevitably they are of a technical and complicated nature, but I shall be as brief and clear as possible about what is inevitably a very complex subject.

    Sections 41A to E of the Social Security Pensions Act 1975 were inserted by last year's Health and Social Security Act. That legislation overrode scheme rules, which means that it had a direct effect upon schemes. Certain scheme rules were not overridden. These are known as protected provisions. Included in these was the rule that early leavers could be provided with an alternative to what is described as short-term benefit, by which is meant the preserved pension entitlement due to the early leaver under section 9(2) of the 1973 Act.

    The intention was that in these cases schemes would give the alternative and not have to provide any extra anti-franking benefit at state pension age. Beneficiaries would be able to ensure that any increased value in their benefit rights was reflected in the alternative, because generally these alternatives can be given only with the member's consent. We now find that where the alternative is a pension in the same scheme—for example, a smaller pension paid earlier—there is still a requirement to provide at state pension age an anti-franking increase. That was never our intention.

    The new clause will ensure that in these cases no anti-franking increase need be paid when the member reaches state pensionable age. Our intention is that the increased value required to give protection against franking should be reflected in the amount of pension put into payment in the first place.

    Further minor problems are dealt with in the new clause. Section 41B of the 1975 Act requires the schemes to make an assumption to enable them to calculate the amount of widow's pension due, but it is drafted in a restrictive manner to prevent other assumptions being made. The new proposal allows for a relaxation of that restriction so that other assumptions can be made in the calculation of the benefit. I commend the new clause to the House.

    7.15 pm

    I am afraid that we are back to our usual slightly less charitable mood. I noted with interest the Minister's remarks that those who follow our debates will get regular doses of anti-franking. That is not quite how he put it, but that is what is involved.

    These proposals were first discussed in Committee on the Health and Social Security Bill of 1984. They were amended on Report. They were amended during the proceedings in Committee on the present Social Security Bill. They are being amended again on Report, and no doubt they will be amended again in another place as the Government seek to get their legislation right. However, we are becoming inured to the fact that these proposals are perpetually to be found in Social Security Bills.

    I make only one other observation. If I understand correctly the clause and the amendments that go with it, the Government are at least being consistent about their proposals for personal portable pensions in removing the protection of a guaranteed minimum pension and encouraging people to stand on their own feet. The alternative formula gives them freedom, but it conveys the idea that they are being given the freedom to lose rather than to gain benefits. However, it is obviously quite consistent for this to be part of the anti-franking measures. From that point of view, we do not question it.

    Question put and agreed to.

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