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Mr. Moore : I beg to move, That the clause be read a Second time.


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Mr. Speaker : With this it will be convenient to take Government amendments Nos. 55 and 52 to 54.

Mr. Moore : The new clause extends entitlement to widows' benefit under the pre-reforms legislation to all women widowed before 11 April 1988. It will give legislative effect to the commitment that I made to the House on 28 February 1989.

When the reforms were introduced, women whose husbands had died before 11 April 1988 expected to receive widows' benefits based on the rules in force before the reform changes were made. For some widows receiving widows' allowance or widowed mothers' allowance on 11 April the reform changes meant that when their benefit ceased and their succeeding widow's pension entitlement was determined, they received either a reduced rate of pension or no pension at all. There was also a group of mothers whose youngest child was under 19 but no longer a dependant, who would have been entitled to the personal rate of widowed mothers' allowance but lost it under the reform changes. I have decided on the grounds of equity and fairness that all these entitlements should be restored. This means that these widows will regain their right to receive the benefits in line with their expectations on the day that they were widowed.

I want to make clear to the House the arrangements by which we are making payments to these widows. My Department has identified and contacted them and in many cases payments have already been made. Payments in those cases which are not covered by the commissioner's decision of 28 February--the majority--are being made on an ex gratia basis. Whilst it is right that this money should reach these widows as quickly as possible, it is not right to make ex gratia payments in the long term. Therefore, this clause includes the power to put these payments retrospectively on a statutory basis. It will also ensure, as the hon. Member for Derby, South (Mrs. Beckett) understands, that all widows receiving these payments will have access to all the adjudication rights associated with statutory benefits. These payments will, of course, be offset against any other maintenance or income-related benefit that may be or have been in payment. These changes are expected to affect beneficially 20,000 women at an estimated net cost to public funds of around £5 million in a full year.

Any widow who thinks that she may be affected by these changes and has not been contacted should approach her local social security office.

I commend this clause and the associated amendments to the House.

Mrs. Margaret Beckett (Derby, South) : As the Secretary of State is aware, there is a 12-month period during which people can claim. Some people in receipt of widowed mothers' allowance have children who may not have reached the age of 16, so the change in their benefit may not come into question until after that period. Am I right in thinking that the right hon. Gentleman is completely confident that all those people will be picked up by his Department during the ensuing year and that there is no risk that they will not receive the benefit that is due to them?

Mr. Moore : I am grateful to the hon. Lady. Like her colleagues, she has welcomed the new clause on another occasion.


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There will be no need to contact the women who are now in receipt of WMA when it converts--the date on which that happens will depend on the circumstances--to the widows' pension. That will automatically be picked up, so I can reassure the hon. Lady on that important point. Question put and agreed to.

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

New Clause 8

Abolition of earnings rule etc.-- (1) In section 30 of the principal Act, subsection (1) (the earnings rule) shall cease to have effect.

(2) In section 28(1)(a) of that Act (conditions of entitlement to Category A retirement pension) the words "and has retired from regular employment" shall cease to have effect.

(3) In section 29 of that Act (woman's Category B retirement pension)--

(a) in subsections (2) and (3) (first and second cases of entitlement) in paragraph (a), for the words "both of them have retired from regular employment" there shall be substituted the words "has become entitled to a Category A retirement pension" ; and (b) in subsection (5), paragraph (a) (retirement, in fourth such case, to have retired from regular employment) shall cease to have effect.

(4) For section 12 of the Pensions Act (deferred retirement) there shall be substituted the following--

"Increase of retirement pension where entitlement is deferred 12.--(1) Where a person's entitlement to a Category A or Category B retirement pension is deferred, Schedule 1 to this Act shall have effect for increasing the rate of his pension.

(2) For the purposes of this Act and the principal Act, a person's entitlement to a Category A or Category B retirement pension is "deferred" if and so long as he does not become entitled to that pension by reason only--

(a) that he has not satisfied the conditions of section 165A of the principal Act (requirement to claim) ; or

(b) that, in the case of a woman's Category B retirement pension by virtue of her husband's contributions, her husband has not satisfied those conditions with respect to his Category A retirement pension ; and, in relation to any such pension, "period of deferment" shall be construed accordingly."

(5) Subsection (1) above affects the rate of pension to which a person is entitled for the week in which that subsection somes into force as well as any subsequent week ("week" having the same meaning in this subsection as it had in the proviso to the said section 30(1) immediately before its repeal).

(6) The enactments mentioned in Schedule (Abolition of earnings rule etc.) to this Act shall have effect with the amendments there specified.'.-- [Mr. Moore.]

Brought up, and read the First time.

Mr. Moore : I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Paul Dean) : With this it will be convenient to take Government amendments Nos. 36 to 41.

Mr. Moore : The purpose of the new clause is to abolish the earnings rule for state retirement pension from 1 October 1989. There are one or two administrative points that might be of interest beyond the House. The new clause will give legislative effect to the important decision taken by my right hon. Friend the Chancellor and me and announced in the Chancellor's Budget statement on 14 March. It will also remove the condition that individuals must be "retired from regular employment". The clause


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therefore removes all the restrictions which prevent people enjoying their pension while continuing to contribute to the economy and to their own incomes through earnings.

At the moment, someone approaching pension age has to decide whether to retire from regular employment and claim his state retirement pension, or to defer retirement and get annual increments to his eventual pension of about 7.5 per cent. for the first five years after pension age. If he decides to claim his state retirement pension but continues working, his pension is reduced at the rate of 50p on every £1 earned between £75 and £79 a week, and at pound for pound for earnings over £79 a week. This means that someone who earns over £120 a week has his basic state retirement pension completely extinguished. The proposed changes are therefore wholly beneficial.

Dame Elaine Kellett-Bowman (Lancaster) : Will my right hon. Friend pay tribute to the late Sir Brandon Rhys Williams, who campaigned on this point for many years?

Mr. Moore : I am grateful to my hon. Friend. That suggestion will be welcomed by hon. Members on both sides of the House. I unreservedly give that commendation to our late colleague who can be regarded as having been in the forefront of many of these issues. Individuals over pension age will be able to carry on working without having their basic state retirement pension reduced. They will no longer be barred from receiving a full state retirement pension if they work more than a few hours.

Mr. Timothy Raison (Aylesbury) : Will my right hon. Friend confirm that this welcome measure is in no sense selective or targeted? It applies indiscriminately to all beneficiaries and retirement pensioners regardless of their income.

Mr. Moore : I have the distinct feeling that my right hon. Friend is leaping to get into the next series of debates. He is, of course, right on that point. He might be regarded as somewhat wrong--I do not want to pursue this point at large--in that there is a specific problem with regard to retirement which suggests that it covers, by definition, only a limited class of people.

We are retaining provision for people to defer drawing state retirement pension for up to five years, if they so wish. Increments will continue to be added during periods of deferral at the rate of about 7.5 per cent. per year of deferment, with a maximum increment to state retirement pension of 37.5 per cent. for five years deferral. In future this period of deferral will be known as "period of enhancement". This will allow people the option of building up a higher weekly pension for themselves for when they might need it later in life. Individuals who do that will be able to claim, as now, sickness benefit and unemployment benefit. Similarly, invalidity pensioners, as at present, will keep the current option of retaining invalidity benefit during the five years after retirement age, instead of claiming state retirement pension. Reduced earnings allowance will be available to those over pension age for as long as they are as now in regular employment.

4.30 pm

A large number of our elderly citizens stand to gain from these changes : there are 2,500 individuals who currently have their state retirement pension reduced by the earnings rule. Those individuals will be able to earn as much as they wish as well as receiving their state retirement


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pension. There are many more elderly people- -about 200,000--who are currently deferring receipt of their state retirement pension. We believe that most of them are likely to have declined taking their pension as a result of the earnings rule. There are also a huge number of pensioners who are not earning at present and there are about 200,000 earning less than £75 a week. For them, the abolition of the earnings rule will be a considerable incentive to start earning, and to earn more.

Letting pensioners know about these changes and getting their pensions to them will be a major undertaking. In advance of receiving Royal Assent, to ensure that all individuals coming up to pension age are fully aware of other changes, a note is now being included in the pension pack setting out these changes and making clear, of course, that they are subject to parliamentary approval. We plan to write to those people who appear to be deferring claiming their state retirement pension because of the earnings rule. Claim forms will be issued to them from 30 May. Individuals whose basic state retirement pension is currently reduced on account of earnings and whose order books span 1 October will have payments of pension included at the full rate from 1 October. My Department's central offices at Newcastle and North Fylde, as well as all 500 of our local offices, will be involved in processing the claims. I am pleased to say that, despite the size of the task, we are able to give effect to the change from 1 October.

Mr. Tony Favell (Stockport) : Has my right hon. Friend shared my experience that groups who help elderly people warmly approve the proposals? I have been approached by many elderly people who say how pleased they are about the changes. Has my right hon. Friend shared that experience?

Mr. Moore : Of course I have. My only regret is that we could not have made the change earlier. It has been welcomed by hon. Members of all parties.

Payments will be backdated to 1 October. Our aim is to pay as many individuals as possible by Christmas and the remainder by the end of the financial year.

The expected benefit cost of the measures to public expenditure is £190 million in 1989-90 and £375 million in 1990-91. The Government believe that this new system will provide more choice and flexibility for older people who want to carry on working. It will remove the penalty which has been an important disincentive to elderly people continuing to contribute to society their particular skills and experiences. I commend the clause and the associated amendments to the House.

Question put and agreed to.

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

New Schedule

Abolition of Earnings Rule Etc.

Category A and Category B retirement pensions 1. In section 27 of the principal Act, subsections (3), (4) and (5) (retirement from regular employment) shall cease to have effect.

2.--(1) In section 30 of that Act, in subsection (3) (election to be treated as if entitlement to retirement pension had commenced) the following shall cease to have effect--

(a) in paragraph (a) the words "retired from regular employment or has otherwise" ; and

(b) the words "retired or".

(2) For subsection (5) of that section (advance notice of retirement) there shall be substituted the following--

"(5) In any case where--


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(a) a person claims a Category A or Category B retirement pension, and

(b) the date specified in the claim as the date on which entitlement to the pension is to commence falls after the date when the claim was made,

such a pension may be awarded as from the date so specified but, if so awarded, shall be conditional on the person's not ceasing to be entitled to the pension in consequence of any election under subsection (3) above."

(3) Subsection (6)(a) of that section (power to vary 5 year period in sections 27(5) and 30(1) ) shall cease to have effect.

Deferred entitlement to retirement pension 3.--(1) In Schedule 1 to the Pensions Act (deferred retirement) for the words from the beginning of the Schedule to "age" in paragraph 1 there shall be substituted--

"Schedule 1-- Increase of Pension Where Entitlement is Deferred-- Increase of pension where pensioner's entitlement is deferred 1. Where a person's entitlement to a Category A or Category B retirement pension is deferred,".

(2) In paragraph 2 of that Schedule, in sub-paragraph (1), for the words "period of deferment" there shall be substituted the words "period of enhancement".

(3) For sub-paragraph (2) of that paragraph (definitions) there shall be substituted--

"(2) In this Schedule--

incremental period' means any period of six days which are treated by regulations as days of increment for the purposes of this Schedule in relation to the person and the pension in question ; and the period of enhancement', in relation to that person and that pension, means the period which

(a) begins on the same day as the period of deferment in question ; and

(b) ends on the same day as that period or, if earlier, on the day before the fifth anniversary of the beginning of that period." (4) In sub- paragraph (3) of that paragraph, for the words "if he had retired on attaining pensionable age" there shall be substituted the words "if his entitlement had not been deferred".

(5) In sub-paragraph (5) of that paragraph, for the words "period of deferment" in both places where they occur there shall be substituted the words "period of enhancement".

(6) In sub-paragraph (6) of that paragraph, for the words "if he had retired from regular employment" there shall be substituted the words "if his entitlement had not been deferred".

(7) In paragraph 3 of that Schedule--

(a) for the words "period of deferment" there shall be substituted the words "period of enhancement" ; and

(b) for the words "if he had retired from regular employment" there shall be substituted the words "if his entitlement to the pension had commenced".

(8) In the heading preceding paragraph 4 of that Schedule, for the words "deferred retirement" there shall be substituted the words "deferred entitlement" ; and in that paragraph--

(a) in sub-paragraph (1)(b)(ii) for the words "if he had retired on the date of" there shall be substituted the words "if his period of deferment had ended on the day before," and

(b) in sub-paragraph (2)(c)(ii) for the words "if she had retired on the date of" there shall be substituted the words "if her period of deferment had ended on the day before".

(9) In paragraph 5 of that Schedule (married women) for sub-paragraphs (1) and (2) there shall be substituted--

"5.--(1) For the purposes of paragraphs 1 to 3 above in their application to a Category B retirement pension to which a married woman is entitled by virtue of her husband's contributions, a married woman who would have become entitled to such a pension on an earlier day if her husband's entitlement to his Category A retirement pension had not been deferred shall be treated as having (in addition to any other period of


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enhancement) a period of enhancement which begins on that earlier day and ends on the same day as her husband's period of enhancement. (2) The reference in sub-paragraph (1) above to the day on which the woman's husband's period of enhancement ends shall, where the marriage is terminated before that day, be construed as a reference to the day on which the marriage is terminated."

(10) In sub-paragraph (3) of that paragraph--

(a) for the words "if he had retired on attaining pensionable age" there shall be substituted the words "if his entitlement had not been deferred" ; and

(b) for the words "if she and her husband had so retired" there shall be substituted the words "if neither her nor her husband's entitlement to a retirement pension had been deferred".

(11) In Schedule 20 to the principal Act (glossary of expressions) there shall be inserted at the appropriate places

"Deferred" and "period of deferment" (in relation to entitlement to a Category A or Category B retirement pension) See section 12 of the Pensions Act.

"Period of deferment" (in relation to a Category A or Category B retirement pension) See "deferred" and "period of deferment" above." Unemployment and sickness benefit 4.--(1) In section 14 of the principal Act, in subsection (2) (conditions of entitlement for unemployment and sickness benefit) for paragraphs (b) and (c) there shall be substituted

"(b) on that day the person--

(i) is over pensionable age, but not more than five years over that age ; and

(ii) would be entitled to a Category A retirement pension (section 28) if his entitlement had not been deferred or if he had not made an election under section 30(3) below ; or

(c) on that day the person--

(i) is over pensionable age, but not more than five years over that age ; and

(ii) would be entitled to a Category B retirement pension by virtue of the contributions of his deceased spouse, but for any such deferment or election."

(2) In subsection (6) of that section (rate of benefit : disregard of certain increases) the words following paragraph (c) shall cease to have effect.

Invalidity pension 5.--(1) In section 15 of that Act (invalidity pension) in subsection (1)(b)(ii) for the words "and not having retired from regular employment" there shall be substituted the words ",but not more than five years over it,".

(2) For subsection (2) of that section (additional conditions for those over pensionable age) there shall be substituted--

"(2) The conditions of this subsection are that on that day-- (

(a) the person would be entitled to a Category A retirement pension (section 28) if his entitlement had not been deferred or if he had not made an election under section 30(3) below ; or

(b) the person would be entitled to a Category B retirement pension by virtue of the contributions of his deceased spouse, but for any such deferment or election."

(3) In subsection (6)(a) of that section (regulations making provision for persons over pensionable age corresponding to section 50A) the words "but have not retired from regular employment" shall cease to have effect.

Category C retirement pension 6. In section 39(1)(b) of that Act (Category C pension for retired women over pensionable age whose husband is entitled to such pension) the words "and has retired from regular employment" shall cease to have effect.


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Increases for dependants 7. Section 48(2) and (3) (application of earnings rule in connection with increase of Category A pension in respect of dependants) shall cease to have effect.

Industrial injuries benefit 8.--(1) In section 50A of the principal Act (sickness benefit in respect of industrial injury) in subsection (3)(b) for the words "but has not retired from regular employment" there shall be substituted the words "but who is not for the time being entitled to a Category A or Category B retirement pension."

(2) In section 59B of that Act (retirement allowance etc) in subsection (1) --

(a) in paragraph (b), for the words from the beginning to "from" there shall be substituted the words "gives up" ;

(b) in paragraph (c), for the words "retired or is deemed to have retired" there shall be substituted the words "gave up such employment" ; and

(c) in the words following that paragraph, for the words from "retires" onwards there shall be substituted the words "gives up regular employment and may become entitled to it again only if he returns to regular employment."

(3) In subsection (3) of that section (duration of entitlement) for the words "Unless he makes an election in accordance with regulations under section 30(3) above" there shall be substituted the words "Unless he returns to regular employment".

(4) For subsection (4) of that section there shall be substituted--

"(4) If he returns to regular employment, his entitlement to retirement allowance shall cease on the day on which he does so ; but he may again become entitled to reduced earnings allowance or, if he again gives up regular employment, retirement allowance." (5) In subsection (5) of that section (rate of benefit) for paragraph (a) there shall be substituted--

"(a) 25 per cent. of the weekly rate at which he was last entitled to reduced earnings allowance ; or".

(6) After subsection (6) of that section there shall be inserted-- "(7) Regulations may--


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