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9.45 pm
Mr. Webb: I beg to move, That the clause be read a Second time.
The House will be relieved to hear that this will be a brief contribution, prompted by two cases of perceived injustice in the way the benefits system treats people who have just reached state pension age. People receive their first state pension on the Monday after they reach state pension age, even though they may have been 65 or 60, as the case may be, for up to six days. That is six sevenths of a week, and it can leave a person reaching state pension age short, to their way of thinking, by as much as £100.
I should like to draw attention to the cases of two people. The Minister will be familiar with the case of Mr. Maiden, constituent of my hon. Friend the Member for Edinburgh, West (Mr. Gorrie), who felt aggrieved by the fact that he missed out on several days' worth of pension. He took the Benefits Agency to a tribunal and won. An article in Choice magazine, from April 1999, says:
That case was brought to my attention by a constituent, Mr. Wells, who was 65 on a Tuesday and therefore lost six days' worth of pension. He says that although it is not
a huge sum, it is a matter of principle. He took his case to appeal and lost. I told him that I would bring the matter to the attention of the House with a view to rationalising the slightly odd situation where a person can have reached the qualifying age for the state pension but not be entitled to draw it for nearly a week thereafter.
I have written to the Minister on the issue previously, and the responses tend to say that the same is true of other benefits, so if the person was receiving another benefit before reaching state pension age, that would run on for the six days and there would be no loss; but of course that is not true of someone who is in employment immediately prior to reaching state pension age.
Thus the purpose of new clause 11 is to try to tidy up the legislation, to make it plain that entitlement starts when one reaches 60 or 65. It does not matter terribly that the payment may not be made until the next Monday; but the entitlement should date from the date of reaching state pension age. That seems only just and fair. I hope that the computers are not a barrier and that the Minister will accept the new clause.
Mr. Rooker:
First, I make it clear that the way in which the pension is paid does not cheat pensioners. When I was elected to the House years ago, my constituents asked me similar questions. I received replies from Ministers and asked parliamentary questions, so perhaps this is a generational issue.
I wish to put several points on the record, and one is that we must be careful about the language we use. Two principles were set down in 1948 and they have remained the same since. First, retirement pension is paid weekly in advance, so I shall not return to the arguments about ACT and whether it should be paid four weekly in arrears. Secondly, it is paid in whole weeks, not in part weeks.
There is no sense in beating about the bush and, earlier today, I answered a question from the right hon. Member for Caernarfon (Mr. Wigley). The consequence of making the pension payable from someone's birth date is that, when the payment is no longer required because the pensioner has died, we would have to try to claim back the extra few days' payment. Frankly, we are not prepared to countenance that.
A pension is paid from the Monday following someone's 60th or 65th birthday and continues to be paid until the Monday after it is no longer required. In the sensitive period after someone has died, no attempt is made to claim back from the family any extra days paid.
I must disabuse hon. Members of their notions of the effects of ignoring the consequences of the new clause. The oncosts of part weeks would be £20 million a year. Because of the Public Accounts Committee and the requirements of accounting officers, we simply cannot write off £20 million.
Nobody loses out under the present system. Pensions are paid from Monday to Monday and they are paid in whole weeks. It has always been like that, and we do not propose to change the current system. I do not deny that, in due course, we want to pay pensioners by ACT, and the period covered by the payments will form part of the discussions in the next couple of years. Obviously we shall not pay four weeks in arrears; that is totally out of the question.
I do not want to offer any hope for change, because the consequence of paying pensions in part weeks is that we would have to claim back money after a pensioner was deceased. We are not prepared to countenance that. Frankly, I doubt that, if Members of the House were in my position, they would take a different view.
Mr. Webb:
That was an interesting response, but not the one that I expected. I fear that I must report back to my constituent that he did not get his £100 when he was 65, but that his estate will receive it the week he dies. That seems to paraphrase the Minister's reply. I am not sure that my constituent will be happy with that, but I shall not try the House's patience any further. Given that I have received a different response from the ones that the Minister has given me in writing, I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
Brought up, and read the First time.
Mrs. Lait:
I beg to move, That the clause be read a Second time.
Madam Speaker:
With this it will be convenient to discuss new clause 19--Use of rebates and extra monies--
Mrs. Lait:
I am afraid that these new clauses are rather technical, but I shall try to be as brief as possible.
New clause 18 relates to the principle of stakeholder pensions' concurrency with other pensions. The Government have recently suggested that they did not want concurrency, but that they would consider it for people on lower earnings. Why is it not a good idea for all people to use concurrency if they have the ability to pay and if it falls within the amount that they can use tax free?
The objection is that concurrency would mean a tax break for the rich. Many people, whatever their income, do not put enough money into pension schemes to give them a reasonable retirement income, and I suggest that if there is scope in the tax system for them to use up more money on pensions, it is, to say the least, shortsighted not to allow them to use stakeholder pensions to do so.
There are a number of other arguments for concurrency which I shall briefly deal with. The first is simplification. Concurrency would reduce the need for individuals to get advice on whether they should stay in or join an occupational scheme. The second argument concerns the complication of additional voluntary contributions. Stakeholder pensions could replace AVCs and freestanding AVCs because they would be better value for money.
Concurrency would also simplify regulatory issues, because there would not be the same need for stakeholder scheme providers to police members' employment arrangements. It seems odd to use the word "inertia" about pensions, because the last thing we want is for people to be inert when it comes to providing for themselves. However, there is an argument for making inertia work for, rather than against, pension provision. It would be easier for somebody to continue to pay into their stakeholder scheme when they joined an occupational scheme.
Another argument that has reared its head before is that there would be a potential for mis-selling if somebody opted out of a good occupational scheme because there was no concurrency. Concurrency is also useful for a flexible labour market and it would help existing schemes. There is plenty of scope for people to take up concurrent stakeholder pensions, because the average private sector employee in an occupational scheme contributes 4.7 per cent. of earnings to that scheme, so there is plenty of room for a stakeholder pension on top.
The arguments against concurrency relate to revenue loss, but there will be future savings to the Government on means-tested benefits. People are not already using up all their legal entitlement to pension contributions, and as we work on the basis of people paying tax as they get money out of their pension scheme, more tax will be paid in the longer term, because we will have better-off pensioners.
There are strong arguments for concurrency, and it has been recommended by bodies as disparate as the TUC, the Engineering Employers Federation and the National Association of Pension Funds. I urge the Government to reconsider concurrency on the basic policy principle of ensuring that as many people as possible take up as much of their pension entitlement as they can.
The second part of new clause 18 deals with rebates, and it, too, aims to encourage people to make better provision for themselves. There may be rebates in excess of those for SERPS which could be paid into a stakeholder pension. They would be small sums, but a stakeholder pension is designed for such sums. That would be a sensible way to enable people to use their allowances and, with concurrency, would help people to make pension provision. It would also be a useful pensions vehicle for large numbers of employees.
Ron was triumphant . . . although the Department of Social Security says his success doesn't set a precedent.
In other words, the tribunal decided that this man should have been paid his pension from when he was 65, not from the following Monday. However, the Department of Social Security decided that although the tribunal had found against it, it would not apply that rule to other people.
'.--(1) A person shall be able to hold both a stakeholder pension and an occupational pension concurrently and without financial penalty.
(2) Any rebates or extra monies that may be payable to a person, and which are greater for Stage 1 of the State Second Pension than for SERPS, shall be paid into a stakeholder pension.'.--[Mrs. Lait.]
'.--( ) Where rebates or extra monies are payable they shall be applied as follows--
(a) rebates shall be paid into Contracted Out Money Purchase Schemes; and
(b) extra monies shall be applied to Contracted Out Salary Related Schemes.'.
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