|Pensions Bill - continued||House of Commons|
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Part 3: Money
396. Paragraph 18 provides for the Secretary of State, subject to Treasury consent, to make grants to the Authority out of money provided by Parliament.
397. Paragraph 19 provides that the Authority must prepare an annual statement of accounts and send a copy to the Secretary of State. It must also send a copy of the statement to the Comptroller and Auditor General, who will report on the statement and lay a copy of it before Parliament.
Part 4: Supplementary
398. Paragraphs 20 and 21 amend the appropriate legislation to disqualify members of the Authority from membership of the House of Commons or Northern Ireland Assembly.
399. Paragraphs 22 and 23 amend the Public Records Act 1958 and the Freedom of Information Act 2000 so that these Acts apply to records of, and information held by, the Authority.
400. Paragraph 24(1) defines key terms used this within this schedule.
401. Sub-paragraph (2) of paragraph 24 states that the functions of the relevant authority in relation to occupational pension schemes and personal pension schemes include any such functions conferred at any point after the passing of this Act.
Part 4: General
Clause 24: Consequential provision etc., repeals and revocations
402. Subsection (1) provides that the Secretary of State may make supplementary, incidental or consequential provision; or such transitory, transitional or savings provision as he deems appropriate for the purposes of the Act.
403. Subsection (2) gives effect to Schedule 7, which contains repeals and revocations as a consequence of the measures in the Bill.
404. Subsections (3) to (7) provide for when those repeals and revocations are to have effect. In essence, they are to have effect at the same time as the underlying provision in the Bill with which they are associated.
Clause 25: Financial provisions
405. This clause provides for any expenditure incurred by the Secretary of State by virtue of the Act (for example in setting up the Personal Accounts Delivery Authority), and any increase in sums payable under other Acts which are attributable to this Act, to be paid out of money voted by Parliament. The clause also makes provision for increased payments into the Consolidated Fund. These will occur as a result of section 165(5) of the SSAA1992, which provides for amounts to be paid into that Fund out of the National Insurance Fund which correspond to amounts paid out of voted money in respect of administrative expenses of the Secretary of State.
Clause 26: Northern Ireland
406. This clause applies to Orders in Council made while devolved government in Northern Ireland is suspended. If such an Order in Council states that it makes provision for Northern Ireland for purposes corresponding to those of this Act, it will not have to be passed by the affirmative resolution procedure but could instead be passed by the negative resolution procedure.
Benefit payment costs
407. By 2020, the total annual additional spend on pensioner benefits due to the reform package is estimated to be around £15bn in 2006-07 prices.
408. This is on top of existing projected annual spending on pensioner benefits of £95 billion in 2020 (in 2006-07 prices, assuming the state pension credit standard minimum guarantee is uprated in line with prices from 2008).
409. The table below shows the profile of the total annual spending on pensioner benefits as a percentage of GDP, with the whole state reform package taken into account:
410. The administration cost of pension reform given below represents a current best estimate. This includes both the Department for Work and Pensions' and HMRC's costs. This will be refined as these reforms are taken forward and more detailed planning is undertaken within each area of reform.
411. The total administrative cost in the period from Royal Assent to 2022 is estimated to be £211m.
412. This covers:
413. Some of the reform measures will lead to a gradual increase in the number of staff required to manage the caseload within The Pension Service.
414. This gradual increase will be offset by savings in staffing levels as a result of the simplification measures.
415. Overall the effect of reforms on public service staffing levels is considered to be marginal.
416. A full Regulatory Impact Assessment is published alongside the Bill. Copies are available from the library as well as from the Department for Work and Pensions Website (www.dwp.gov.uk).
Administration costs of proposed reforms
417. The costs set out below represent the estimated implementation and administration costs associated with the reforms set out in the Bill, and include costs to both the Department for Work and Pensions and HMRC.
State Pension reforms
418. It is estimated that the administrative costs of the state pensions reforms in the Bill will be in the region of £192million up to 2022. This figure includes both the costs of implementation and ongoing operational costs.
Personal Accounts Delivery Authority
419. It is estimated that the delivery costs of the Authority, as set out in this Bill, will total £21million in 2007-08 and 2008-09. Further legislation for personal accounts is intended, subject to the approval of Parliament.
Private Pension reforms
420. It is estimated that the abolition of contracting-out for defined contribution schemes and the conversion of guaranteed minimum pensions will cost £8million between 2009-10 and 2011-12.
Costs and benefits to individuals
421. The reforms as set out in the Bill are expected to have the following impact on individuals:
422. The effect of the reforms to state pension set out in the Bill will be to increase the percentage of people with limited contribution records who will be entitled to the full basic state pension. Women are disproportionately represented in this group, so will be affected more as a result of these reforms than men.
423. With reference to paragraph 422 above, some groups of ethnic minority women are particularly likely to have broken contribution conditions, or to have never worked in paid employment. Therefore these women will be affected more as a result of state pension reforms than other groups. No exact assessment of this impact can be made due to a lack of data.
Impact on Employers
Abolition of contracting-out for defined contribution schemes
424. The abolition of contracting-out for defined contribution schemes will have an impact on employers, as those currently running such schemes will have to start paying full rate National Insurance contributions.
425. However, under the current system the contracting-out rebate received by employers must be paid back into the scheme. This will no longer be the case.
426. There will be one-off costs with respect to the abolition of contracting-out for defined contribution schemes, which will affect approximately 4,000 out of a total of 69,000 occupational schemes.
Raising state pension age
427. It is estimated that the raising of state pension age will increase employment, which will restrain the growth of wages.
Impacts on Small Firms and Competition
428. The reforms in the Bill are not expected to have any significant effect on small businesses. In addition, no impact on competition is foreseen.
429. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Secretary of State for Work and Pensions, John Hutton, has made the following statement:
430. Clauses 1 and 2 make changes to entitlement conditions for Category A and B retirement pensions. It is possible that clause 1 might engage Article 1 of the First Protocol, in that it changes the contribution conditions for entitlement to those pensions for those reaching state pension age on or after 6 April 2010, meaning that those reaching state pension age prior to this date would have had to satisfy more onerous conditions to get a full state pension. The Government considers that this measure is compatible with the Convention rights as it is a proportionate response: those affected will have gone through their working lives fully aware of the conditions necessary to get a full state pension. As regards clause 2, it is also possible that a person who was subject to the old legislation might attempt to bring a claim under Article 1 of the First Protocol read with Article 14 arguing that they were subject to less favourable treatment under the previous legislation. The Government considers that this argument would have little chance of success for various reasons, not least because being subject to different legislation is unlikely to be accepted as founding a "status" under Article 14. Further, under Article 1 of the First Protocol, if a person were to argue that under the old legislation they were deprived of the possibility of claiming a Category B pension before their partner claimed their Category A pension, the response may be that they could not be said to have enjoyed a legitimate expectation to it at that time so as to have a "possession" under Article 1 of the First Protocol and that in defining conditions of entitlement, the state cannot be said to be interfering with them.
431. Clause 3 makes changes to crediting arrangements for the basic state pension. It is possible that this clause will engage Article 14 and Article 1 of the First Protocol. Again, this is because the changes will not apply to those reaching state pension age prior to 6 April 2010, who have to satisfy more onerous conditions to build entitlement to basic state pension. The Government considers that that this measure is compatible with the Convention rights for similar reasons as apply in relation to clause 1. It is intended to improve the prospects of a group that currently finds it harder to build entitlement to the basic state pension.
432. Clause 4 provides for the abolition of adult dependency increases. It engages Article 1 of the First Protocol as a consequence of the fact that no new payments of adult dependency increases will be made after 6 April 2010 and existing entitlements will end by 6 April 2020 at the latest. The Government considers that this measure is compatible with the Convention rights for the following reasons:
433. Clauses 5 to 8 amend the rules in relation to the up-rating of basic state pension and other benefits. It is possible that clause 5 will engage Article 1 of the First Protocol as the Secretary of State is given discretion as to how to estimate the general level of earnings for the purposes of up-rating the basic state pension. Additionally, clause 6 might engage Article 14 and Article 1 of the First Protocol, as it provides for widowed mother's allowance, widow's pension, widowed parent's allowance and bereavement allowance to continue to be uprated in line with prices, breaking the link with the up-rating of the basic state pension. The Government considers that this measure is compatible with the Convention rights because these benefits are not comparable with pensions in that they are paid to people with different needs and responsibilities. They are designed for people of working age as well, and other working age benefits are up-rated by prices. Similarities in their contribution conditions and those of pensions are for historical reasons.
434. Clause 9 provides for changes to deemed earnings factors with reference to the state second pension, and may engage Article 14 and Article 1 of the First Protocol on the same basis as clause 3 which relates to basic state pension. The Government considers that this measure is compatible with the Convention rights for the same reasons as those set out in relation to clause 3.
435. Clauses 10 to 12 provide for the simplification of accrual rates for the state second pension. It is possible that these clauses will engage Article 14 and Article 1 of the First Protocol in that they will affect the levels of pension attributable to accruals in the future. The Government considers that these measures are compatible with the Convention rights in that any reduction in the total level of state second pension payable to a person will be offset by their basic state pension gains through earnings up-rating (clause 5).
436. Clause 13 provides for the increase in state pension age for men and women and potentially engages Articles 1 and 14 of the First Protocol as some people will have to wait longer than others for their State Pension. The Government considers that that this measure is compatible with the Convention rights as the measure has a legitimate aim: the change in state pension age is necessary for valid socio-economic reasons and those affected will have many years' notice before the changes come into force.
437. Clauses 14 to 17 provide for the reform of occupational and personal pension schemes. Clause 14, which provides for the conversion of guaranteed minimum pensions, may engage Article 1 of the First Protocol in that it interferes with accrued rights. The Government considers that this measure is compatible with the Convention rights as the overall value of rights will be maintained. It is also possible that clause 15, regarding the abolition of contracting-out for defined contribution schemes, will engage Article 1 of the First Protocol, in that it removes the option of paying lower National Insurance contributions. The Government's view, however, is that this falls within the realms of paragraph 2 of Article 1, which allows the passing of laws that the State 'deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.'
438. None of the measures in this Bill have any effect on or are affected by any European Directive.
439. The following provisions will come into force on Royal Assent:
440. The following provisions will come into force on such day as the Secretary of State may by order appoint:
441. The other provisions of the Bill will come into force two months after Royal Assent.
|© Parliamentary copyright 2006||Prepared: 29 November 2006|