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Session 2005 - 06
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Standing Committee Debates

Twentieth Standing Committee on Delegated Legislation

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Twentieth Standing Committee on Delegated Legislation

The Committee consisted of the following Members:


†Mr. Eric Forth

Afriyie, Adam (Windsor) (Con)
Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
†Anderson, Mr. David (Blaydon) (Lab)
†Butler, Ms Dawn (Brent, South) (Lab)
†Cawsey, Mr. Ian (Brigg and Goole) (Lab)
†Eagle, Angela (Wallasey) (Lab)
†Ennis, Jeff (Barnsley, East and Mexborough) (Lab)
†Goodman, Mr. Paul (Wycombe) (Con)
†Hall, Mr. Mike (Weaver Vale) (Lab)
Hogg, Mr. Douglas (Sleaford and North Hykeham) (Con)
†Joyce, Mr. Eric (Falkirk) (Lab)
Laws, Mr. David (Yeovil) (LD)
Randall, Mr. John (Uxbridge) (Con)
†Southworth, Helen (Warrington, South) (Lab)
Spink, Bob (Castle Point) (Con)
†Timms, Mr. Stephen (Minister for Pensions Reform)
Miss Margaret McBride, Committee Clerk

† attended the Committee

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Thursday 14 July 2005

[Mr. Eric Forth in the Chair]

Draft Civil Partnership (Contracted-Out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005

2.30 pm

The Minister for Pensions Reform (Mr. Stephen Timms): I beg to move,

    That the Committee has considered the Draft Civil Partnership (Contracted-Out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005.

The Chairman: With this it will be convenient to consider the Civil Partnership (Pensions and Benefit Payments) (Consequential, etc. Provisions) Order 2005.

Mr. Timms: It is a pleasure to be serving under your chairmanship, Mr. Forth, for the second time this week. You are always firm but fair. I should also like to take this opportunity to express my thanks to my hon. Friend the Member for Falkirk (Mr. Joyce) who has played an important, though silent, role in all four of the Standing Committees that I have spoken at this week.

These statutory instruments were laid before the House on 15 June and 29 June respectively and in my view are compatible with the European convention on human rights. The House debated at length the issue of scheme members accruing rights to survivor benefits for a civil partner.

Particular credit for the outcome marked in these statutory instruments, which I think will be widely welcomed across the Committee, is due to my hon. Friend the Member for Wallasey (Angela Eagle). I am pleased to see her in the Committee this afternoon; she lobbied hard for the measure and played a key role in securing this outcome. I pay tribute to her and I congratulate her on her election to the national executive committee of the Labour party yesterday.

The Act made a number of substantial amendments to primary legislation, and we explained in detail how we would use the powers in the Act that would enable additional consequential provisions to be made. These orders invoke those powers and make amendments to both primary and secondary legislation. The changes are detailed but essentially technical.

The first order amends the legislation relating to the requirements that occupational and personal pension schemes must comply with in order to contract-out of the state second pension scheme. The amendments ensure that schemes make provision for benefits for
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surviving civil partners. The subject of when scheme members will accrue rights to survivor benefits for a civil partner was debated at length. The original intention was for rights to accrue from the implementation date of civil partnership.

However, responding to widespread representations from my hon. Friend and others, the Government announced last October that the public service schemes would provide survivor benefits for civil partners based on members’ rights accrued from service since 6 April 1988, and that schemes that contract out would be required to provide survivor benefits based on the member’s contracted-out rights also accrued since 6 April 1988. That approach for civil partners is in line with existing provision for widowers. The order also provides an element of transitional protection for a widow or widower of a scheme member who died before the implementation date and who subsequently forms a civil partnership.

I turn now to the second order. Again, the amendments are mainly technical and follow the main policy of the Act. They afford the same treatment to civil partners in respect of pensions and benefits as is currently provided for spouses. The order amends private pension scheme provisions to ensure that civil partners have, as spouses do, a right to receive information. Primary social security legislation is also amended, which relates to the duty to furnish addresses for maintenance proceedings; up-rating of state benefits and alterations affecting awards of housing benefit and state pension credit.

With regard to the amendments of existing state retirement pension legislation, the order extends derived rights to civil partners. Those rights currently allow for the national insurance contributions of one spouse to be used in the calculation of state pension benefit of the other spouse. The broad intention is to put civil partners and bereaved civil partners on an equal footing with spouses and bereaved spouses. To comply with EC Directive 79/7/EEC on gender discrimination both male and female civil partners will have the state pension rights currently available equally to male and female spouses from the civil partnerships implementation date, and the remaining rights in 2010 when they become available to married men and widowers.

The new rules relating to the deferral of state retirement pension, which we introduced last year in the Pensions Act 2004, are also being amended by this order. Provided that any deferment lasts for a specified period of time a person will become eligible for either an increase in retirement pension or a lump sum payment when they claim their pension. However, where a spouse elects to defer his or her pension and the other spouse is entitled to a pension or additional pension based on his or her contributions, the election to defer cannot be made without the consent of the other spouse. This provision is being amended to afford the same right to a civil partner.

The order also amends the legislation that provides for a choice between an increased pension and lump sum following deferment, together with the legislation that sets out how these two forms of payment are
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calculated. These provisions allow for the surviving spouse of a person whose pension has been deferred to be entitled to either an increased pension or a lump sum in respect of the deceased’s deferment. The amendments extend entitlement to this “inheritable” increased pension or lump sum to surviving civil partners on the same basis as is currently applicable to widowers.

The orders appear complex but in fact they do no more than ensure that civil partners are afforded the same treatment as spouses in matters of pensions and state benefits. I understand that the Standing Committee earlier today agreed the main statutory instruments for the registration of civil partnerships and so I commend these orders to the Committee.

2.37 pm

Mr. Paul Goodman (Wycombe) (Con): It is a great pleasure to be here under your chairmanship, Mr. Forth, in my case for the first time this week; indeed, I think that it is the first time ever. I am sure that it will be an unforgettable experience. I echo the tribute that the Minister has already paid to you.

As the Minister said, these are complex provisions. I have not the mastery of all the technical details that other Members will naturally have. They will surely be familiar with every bracket and sub-bracket of the order.

Mr. Mike Hall (Weaver Vale) (Lab): If the hon. Gentleman has a problem with the complexity of the order he could have asked his colleagues, who are not in the Room, to give him some help.

Mr. Goodman: I would also be able to consult the Liberal Democrats. For a reason that escapes me, the hon. Gentleman did not draw attention to their absence.

I invite members of the Committee who are having any difficulty to turn to the explanatory memorandum. Unless I am misreading it, one section puzzled me somewhat. Paragraph 2 states that the purpose of the Act, of which these regulations are a consequence, is

    “to afford the same treatment to civil partners in respect of pensions and benefits as is currently provided for spouses”.

Yet paragraph 7.3 states:

    “The policy intention behind the order is to ensure that civil partners have similar treatment to spouses in the area of benefit payments and personal occupational pensions.”

I am not sure how the words “same” and “similar” marry up.

The whole Committee will want to ensure that, as it is the Government’s intention that civil partners are placed on the same basis as married couples, these regulations ensure that that happens. I therefore have a number of detailed questions for the Minister that I shall ask in a moment.

The tables in the explanatory memorandum showing the total annual costs to Government and to public service employers, the one-off administrative costs to Government and the annual costs to private pension-defined benefit schemes give different figures for a high take-up scenario and a low take-up scenario.
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Will the Minister say which of those scenarios he anticipates will come about, because the differences between the figures are by no means insignificant?

For example, table 1, which shows total annual costs to Government, gives a figure of £22.2 million for the high take-up scenario in 2050, and £11.6 for the low take-up. That difference is not insignificant. Will the Minister say what he expects the take-up to be?

Angela Eagle (Wallasey) (Lab): Will the hon. Gentleman also acknowledge the fact that same-sex partners have lived together and paid into pension schemes for many years, but have not been able to receive from the schemes benefits for which they have paid? We are not really talking about a cost, but about an equalisation of access that was broadly welcomed on both sides of the House when the primary legislation was passed.

Mr. Goodman: I am not denying the equalisation of access by asking which figure the Minister is expecting to be realised in, say, 2050, although I take the hon. Lady’s point.

In table 3, which shows the one-off administrative costs to Government, I was caught by the section that reads:

    “IT systems for changes to state pensions and benefits”.

Will the Minister explain what those IT changes are? I sat through the last parliamentary inquiry on the Child Support Agency’s IT systems, and I want to be certain that everything is in order.

Cutting through the detail of the regulations to the main point, can the Minister guarantee that no one will lose their access to state benefits as a result of the order, and that civil partners will not be disadvantaged compared with married couples? A straightforward affirmation that no one will lose and that the two will be treated equally would be helpful.

Finally, Stonewall has made detailed points about the order. The Minister will probably be familiar with those points, but they should be aired. Following lobbying during the passage of the Bill, the Government pledged to give civil partners survivor pension rights, backdated to 1988. They promised to introduce regulations, and we have them today. Stonewall argues that nothing has been said about the non-contracted out element of pension schemes, which it rightly says is often more lucrative.

The Government are planning to introduce regulations to amend the Employment Equality (Sexual Orientation) Regulations 2003 to provide that employers will have to provide the same benefits to civil partners as they do for married couples in respect of service. Following the debate in another place on 7 July, Stonewall understands that HM Revenue and Customs will amend its rules for pension schemes to ensure that they treat civil partners in the same way as married couples for survivor pension eligibility, again in respect of service, after 5 December.

Most large occupational pension schemes currently provide such benefits to same-sex couples. However, that is at the discretion of the trustees. There is no automatic right for such pensions to be given rights from 1988. Stonewall wants the Government to clarify
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the obligations that will be placed on pension schemes in respect of civil partners receiving automatic survivor pensions in the same way as married couples—in other words, without having to prove financial interdependence—and for that to apply for all.

Stonewall is also asking for clarification from the Government on such survivor pension rights accruing from 1988. That would match the provisions for the contracted-out element as well as the position that public sector schemes will be in, subject to parliamentary approval.

That, Stonewall says, was the thrust of the debate on Third Reading and was what most MPs believed was the outcome of the debate. The proposal would provide parity, and I would be grateful if the Minister could respond to those points.

2.45 pm

Angela Eagle: I congratulate the Minister on bringing forward the order. As someone whom he kindly identified as having something to do with the Government’s realising that there was an issue and changing the original Bill as it went through the House, I welcome the order and the fact that we have reached this far.

Perhaps we have even won the arguments, because, doughty as he is, the hon. Member for Wycombe (Mr. Goodman) is on his own. The Liberal Democrats, who often make the most noise about equality, have not even bothered to turn up to demonstrate their support for the order. It is good to win arguments about equality and fairness, and I would like to put on record on my appreciation of the Government’s flexibility and willingness to listen and change the legislation.

The Minister needs to address the technicalities that have been raised about the non-contracted elements of private sector schemes, so that the order fulfils the requirements for parity that were discussed during the passage of the primary legislation through the House. The hon. Gentleman set out some of those issues, but perhaps I could ask the question slightly differently. Are there any ways in which the parity that we have set out to achieve in occupational pensions and non-contracted out schemes differs materially for same-sex partners as compared with married couples?

Overwhelmingly, I am more than happy to welcome the changes that the Minister is introducing. However, I am interested in the technical detail, so that we can check whether we are getting exactly what we thought we would get when the original changes were made in the primary legislation.

Mr. Timms: I am grateful for the welcome that the Committee has given the changes. The hon. Member for Wycombe asked whether the treatment of civil partners was the same as, or similar to, that of spouses. The best answer that I can give is that widows and widowers are currently treated differently from wives and husbands. A married woman can claim a basic state pension based on her husband’s contribution
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record and a widow can inherit state pension rights, regardless of the age at which her husband dies. However, a married man cannot claim a basic state pension based on his wife’s contribution record and a widower can claim inheritance rights only in certain circumstances, so there is a difference.

As I said in opening the debate, civil partners will be treated on a par with widowers until 2010, when the position between male and female spouses will be equalised, as will that between civil partners. That is why it would not be right to say that the treatment is identical. There is a difference, which will be removed in due course.

The hon. Gentleman asked how much take-up of civil partnership we expected. We think that by 2010 there will be between 11,000 and 22,000 people in civil partnerships, and by 2050 between 42,600 and 85,100. It is difficult to be precise. Those estimates are based on the experience of Scandinavian countries that have registered partnership arrangements—I think that the first was in Denmark in 1989—but there is some uncertainty about what will happen here.

I can assure the hon. Member for Wycombe that nobody will lose out as a result of anything in these regulations. To be completely frank, I should say that there will be an impact through the rules on income-related benefits, because same-sex couples who live together as though they are civil partners will be treated in the same way as opposite-sex couples living together as husband and wife. They could receive rather less than they would have received as two single individuals.

The changes required to IT are nothing special. My hon. Friend the Member for Wallasey will remember, as I do, the difficulties with such changes in the past. In this instance, the changes are straightforward and will not cause any great difficulty.

On the backdating of provisions for non-contracted-out schemes, if an occupational pension scheme is not contracted out, or provides benefits over and above the contracted out rights, the scheme rules will set out the conditions for the payment of survivor benefits under that scheme. We have taken the view that those are matters for the schemes to decide, subject to the sexual orientation regulations. We do not think that the Government should intervene, or that all schemes should be required to bear the cost of paying extra benefits for past periods. That is consistent with the approach that we have taken until now, but I accept that the hon. Member for Wycombe might want to come back to me on that.

Angela Eagle: Is my right hon. Friend saying that it is up to private pensions schemes to set up a different requirement for a same-sex couple to have access to survivor’s benefits—for example, to have to prove financial interdependence or some such thing—and that he thinks that the law should allow private sector pensions to create their own new barriers to equal access to survivor benefits?

Mr. Timms: No. The sexual orientation regulations prohibit trustees and managers from treating civil partners less favourably than spouses purely
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because of their status in respect of service after 5 December 2005, because such treatment would amount to discrimination on the grounds of sexual orientation. That rule binds managers and trustees of all occupational pension schemes. Those regulations cover the point, at least in respect of future service.

Angela Eagle: Is my right hon. Friend then saying that, although there cannot be discrimination in future, there could still be a difference in access for survivor benefits going back to 1988?

Mr. Timms: Those are matters to be determined by the schemes, not by the Government. In this case, given the arrangements that apply, that is our view.

Mr. Goodman: If there is a difference in access going back to 1988, is that consistent, in the Minister’s view, with the commitments that the Government made on Third Reading?

Mr. Timms: It is certainly my understanding that the answer is yes. Of course, I was not the Minister making those commitments. I will have a look at the record and make absolutely sure of the matter.

Angela Eagle: I hope that the Minister will look at the record. I do not want to give him a hard time after welcoming all the great progress that has been made, but it was not the understanding of those of us who worked on this concession that we would be in such a situation. It is not that we doubt that we are moving forwards, as no one ever doubted the commitment to equality from 2005 onwards, but my hon. Friend will know that there is an issue here, especially with regard to survivor benefit. It is often in such cases—where, for example, a couple have been living together long-term, going back to 1988—that there is most need. That is
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what the whole idea of parity is about. I am most concerned to ensure that the interpretation of what was agreed that the Minister gave today actually stands.

Mr. Timms: We are speaking only of non-contracted-out schemes, for which there are significantly fewer levers available to Government than for contracted-out schemes. That is the reason for the difference.

Let me comment on what Her Majesty’s Revenue and Customs will be doing about the issue. There will be amendments to the practice notes in light of the Civil Partnership Act 2005. The amendments will coincide with the general changes being made to the tax legislation to treat civil partners in the same way as married couples for tax purposes, and those changes will take effect from 5 December 2005. I understand that the new practice notes will be available from that date, too.

The two orders represent an important and welcome step forward, and I commend them to the Committee.

Question put and agreed to.


    That the Committee has considered the Draft Civil Partnership (Contracted-Out Occupational and Appropriate Personal Pension Schemes) (Surviving Civil Partners) Order 2005.



    That the Committee has considered the draft Civil Partnership (Pensions and Benefit Payments) (Consequential, etc. Provisions) Order 2005.—[Mr. Timms.]

Committee rose at three minutes to Three o’clock.


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