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The Parliamentary Under-Secretary of State for the Cabinet Office (Mr. Jim Murphy): I begin by congratulating my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) on securing a debate on this important subject. In my time in Parliament, I, like others, have come to know him as a diligent worker on his constituents' behalf; this is but the latest example of that work. Indeed, he mentioned—in a modest fashion—the work that he has done on behalf of Mrs. Cooper, his constituent, in the past two years or more. I was also pleased that we had a chance to hear from my hon. Friend the Member for Coventry, South (Mr. Cunningham), who, equally, continues to raise such issues on his constituents' behalf when he feels that they are not getting a fair deal under the current regulations. Indeed, he has a reputation throughout the House for standing up for his constituents and the industry in his constituency. I am pleased that my hon. Friend the Member for Sheffield, Attercliffe has allowed me almost an hour and three quarters to sum up; that is very kind of him. I am sure that he will understand if I do not take the full time allocated to me.
Before dealing with the specific matters raised by my hon. Friend, I want to stress, as I have done before, that the Government are committed to enabling all our pensioners to share in the country's rising prosperity. We have introduced a variety of measures since 1997 to achieve that aim and I will touch on them later. The Government have, of course, recently reached an agreement with the public service unions that aims to put public service pension schemes on a more sustainable footing. We have agreed that pensions for existing staff will continue to be calculated under the current rules and we are negotiating with the unions on the form of the scheme for new entrants. But we have made it clear that the costs of the civil service pension provisions as a whole must be contained within an agreed cost envelope. That is intended to deliver savings of £2.1 billion to the taxpayer over 50 years. So any improvements in one area of pension provision must be funded by further savings from elsewhere.
Turning now to the substance of the debate and the specific points that my hon. Friend raised, I want to outline how the rules for the payment of pensions to spouses of members of the civil service pension scheme have evolved over the years. In the past, as now, the Government have sought to provide their staff with pension arrangements consistent with those of other good employers. While some of the historical provisions may seem very restrictive now, at the time they would have been seen as unremarkable or, indeed, as relatively generous.
Widows' pensions have featured in civil service pension arrangements since 1949. At that time, there was no legal requirement for an employer to provide any
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benefits whatever to its employees' widows. The Superannuation Act 1949 introduced widows' pensions provided that the marriage took place during the civil servant's period of service. That was seen as consistent with the role of a good employer at that time.
Attitudes and social legislation have developed. Since April 1978, as my hon. Friend mentioned, pension schemes that contracted out of the state earnings-related pension scheme have to pay a widow's pension whenever a contributor dies and leaves a widow, irrespective of the date of the marriage. The civil service scheme was changed, but only in relation to service from 6 April 1978. Only service from that date counted for a widow's pension where a member married after leaving civil service employment.
The situation for women was slightly different. Female civil servants were not required to pay contributions for a widower's pension until July 1987. That change anticipated the requirement from April 1988 for contracted-out schemes to pay a widower's pension, irrespective of the date of the marriage. Again that was not applied retrospectively and only service from April 1988 counts for a widower's pension where the marriage has taken place after the woman left civil service employment.
The intention behind the payment of pensions to widows and widowers was to provide some measure of financial compensation for the loss of financial support that the beneficiary had received from their late husband or wife. So, if the beneficiary remarried or cohabited, the expectation was that they would look to their new spouse or partner for financial support. The UK state scheme has similar provisions. It was on that basis that the civil service pension scheme was costed and member contribution levels set. Some 127,000 widows' and widowers' pensions are currently payable under those provisions. My hon. Friend mentioned some specific facts and figures, but it is my understanding that some 150 to 200 pensions a year are stopped because the widow or widower no longer meets the conditions for payment.
My hon. Friend asked specific questions about how the Government track eligibility for payment of widows' and widowers' pensions. In the past, widows and widowers were sent an annual statement of entitlement to complete. If the individual did not respond after two reminders, the pension was stopped. However, some 20 years ago, the Treasury, which was then responsible for civil service pensions, decided to abandon the annual statement of entitlement exercise. Since then, all pensioners receive an annual letter from the payroll authority, which includes a reminder to all recipients of a widow's or widower's pension that they must notify Capita—the payroll authority—if they have remarried or begun cohabiting. As my hon. Friend suggested, notification may come from a third party, at which point the certificate of entitlement is sent directly to the person receiving the pension. In practice, some relationships may end prematurely. The civil service pension scheme rules allow the restoration of widows' and widowers' pensions if a new marriage or relationship ends.
As I said, some of the provisions may appear out of date. When we introduced a new civil service pension scheme in October 2002, the deal agreed with the unions was that the entire cost of the scheme improvements would be met by members paying higher contributions.
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The new scheme, which as my hon. Friend rightly said is called the premium scheme, provides higher pensions for members and improved provisions for dependants, but members of the premium scheme pay contributions of 2 per cent. more than those in the former scheme, now called the classic scheme. The difference is that contributions are 3.5 per cent. compared with 1.5 per cent, which, for the average civil servant in the premium scheme, means extra contributions of about £300 a year after tax.
Although the new scheme was intended for new entrants, it is important to note that we gave civil servants in service when the new scheme was introduced the option to transfer to the premium scheme, if they were prepared to pay the higher contributions. Those who chose to transfer all their service across also agreed that it would be reduced to reflect the improved, and more costly, benefits.
Inevitably, comparisons have been drawn between the more generous provisions of premium and the benefits paid under classic, which apply both to those who left the civil service before October 2002 and to the majority of serving civil servants who opted to stay put rather than transferring to premium. My hon. Friend understandably made that comparison this evening.
It is true that premium is more generous in certain aspects of the benefits available to widows and widowers of members. It provides a pension based on the member's entire service, even if the marriage began after the member left service. It also provides for a pension for life for a widow or widower, even if she or he remarries or cohabits, and pensions for unmarried partners.
Many other improvements have been made to public service pensions over the years, which, it has been argued, should be applied retrospectively. They all have clear benefits for members so it would be difficult to implement some and not others.
Mr. Betts: Did my hon. Friend say that notification by an individual or a third party is the only way that the rules can be enforced and that the Government do not have a proactive policy for finding people who may be in breach of the rules? Can he give a breakdown of the number of people whose pensions have been taken away due to their remarriage or cohabitation?
Mr. Murphy: I will be happy to provide the information that we have on those points. My hon. Friend's interpretation of what I said earlier is right. Previously—about two decades ago—the Treasury actively sought confirmation from recipients that their marital or cohabitation status had not changed, but it was faced with the challenge of responding to about 100,000 requests for information. The decision was taken, under the previous Government, not to continue with that process. My hon. Friend is right to conclude that the current process relies on recipients notifying the authorities of their changed status. He can of course try to reverse the position if he wants to do so. If there is additional information about the tracking procedure that I feel it necessary to provide, I will write to him.
The costs of retrospectively improving benefits above those originally promised to members are substantial. I cannot verify the figures cited by my hon. Friend, but the scheme actuary estimates that if the civil service
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scheme were to pay widows, and widowers, pensions for life, rather than stopping them on remarriage or cohabitation, we would face a one-off cost of about £300 million, plus an ongoing cost in respect of current members of about 0.1 per cent. of pay, which would be £15 million for the civil service scheme, but £150 million annually across the public services.
If the Government were to agree to a taxpayer-funded improvement in civil service widow and widower pension benefits, it would inevitably lead to pressure to provide similar improvements for other public service employees. My hon. Friend was generous enough to acknowledge that, if such a principle were included in the civil service scheme, there would be pressure to apply it across the public sector. For the whole public service, the Government Actuary's Department estimates the one-off cost at about £3 billion. Of course, in both cases there would also be a year-on-year cost to cover the build-up of further liabilities.
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