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Session 2006 - 07
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General Committee Debates
Pensions Bill

Pensions Bill



The Committee consisted of the following Members:

Chairmen: Mr. Roger Gale, † David Taylor
Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)
Banks, Gordon (Ochil and South Perthshire) (Lab)
Brown, Mr. Russell (Dumfries and Galloway) (Lab)
Burt, Lorely (Solihull) (LD)
Creagh, Mary (Wakefield) (Lab)
Heppell, Mr. John (Vice-Chamberlain of Her Majesty's Household)
Hillier, Meg (Hackney, South and Shoreditch) (Lab/Co-op)
Keeble, Ms Sally (Northampton, North) (Lab)
Lancaster, Mr. Mark (North-East Milton Keynes) (Con)
Laws, Mr. David (Yeovil) (LD)
Penrose, John (Weston-super-Mare) (Con)
Plaskitt, Mr. James (Parliamentary Under-Secretary of State for Work and Pensions)
Pritchard, Mark (The Wrekin) (Con)
Purnell, James (Minister for Pensions Reform)
Selous, Andrew (South-West Bedfordshire) (Con)
Smith, Ms Angela C. (Sheffield, Hillsborough) (Lab)
Waterson, Mr. Nigel (Eastbourne) (Con)
Alan Sandall, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 23 January 2007

(Afternoon)

[Mr. David Taylor in the Chair]

Pensions Bill

Clause 1

Category A and B retirement pensions: single contribution condition
Question proposed [this day], That the clause stand part of the Bill.
4 pm
Question again proposed.
The Chairman: With this we are also considering the following: New clause 23—Entitlement to a Basic State Pension—
‘The Secretary of State shall prepare a report on those groups reaching state pension age in 2010 who will not be eligible for a full Basic State Pension.’.
New clause 29—Category A and B retirement pensions: contribution condition—
‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.
(2) In paragraph 5—
(a) delete sub-paragraph (2);
(b) in sub-paragraph (3) delete the words “The second condition is that” and, for the words “the requisite number of” in sub-paragraph (3)(a), substitute “30”; and
(c) delete sub-paragraphs (5) to (8) inclusive and insert the following sub-paragraph—
“(4A) Regulations may modify sub-paragraph (3) above for the purposes of its application in a case where—
(a) the contributor concerned has paid, or been credited with, contributions, or
(b) contributions have been deemed to be, or treated as, paid by or credited to him,
under the National Insurance Act 1946 or the National Insurance Act 1965.”.’.
New clause 30—Widowed parent’s allowance and bereavement allowance—
‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.
(2) After paragraph 5A (inserted by section 1(3) of this Act) insert—
“5B (1) This paragraph applies to a widowed parent’s allowance or bereavement allowance in a case where the contributor concerned dies on or after 6th April 2010.
(2) Paragraphs 5A(2) to 5A(4) of this Schedule shall apply to an allowance to which this paragraph applies as if it were a Category A or Category B retirement pension.”.’.
The Minister for Pensions Reform (James Purnell): It is a great pleasure and privilege to serve under your chairmanship again, Mr. Taylor, as we did in the Programming Sub-Committee. I know that you are an extremely experienced Chair and I look forward to your chairing our proceedings.
When we broke earlier, the Committee was no doubt fascinated by my saying that if the new clause were included in the Bill, the Pension Service would have to reassess the pensions of more than 2 million pensioners in one go. We estimate that in some 350,000 cases where the pensioner is getting pension credit, despite the significant expense that would be incurred, the provisions of the new clause would not make a penny of difference to the person’s total pension income. So there would be a significant amount of work, involving confusing notifications for many people with little or no overall gain in many cases. Although I understand that my hon. Friend the Member for Northampton, North tabled the new clause so that we could have this debate, which has been helpful, given its consequences I urge her not to press it.
New clause 30 focuses on a narrow issue of bereavement benefits. I understand the rationale behind my hon. Friend’s new clause, which would apply the new single contribution to widowed parent’s allowance and bereavement allowance. Although I, like every Committee member, have every sympathy for people coping with the effects of bereavement, I cannot see a clear rationale for changing the contribution conditions for bereavement benefits. Reducing the number of qualifying years for a full basic state pension to 30 years is designed to address the inequalities of outcome that currently exist for women, as we discussed this morning. However, those inequalities have built up over many years and bereavement benefits were only introduced fairly recently—in 2001—and are available to both men and women. Prior to 2001, widow’s benefits were only available to women. Our data on widowed parent’s allowance show no real evidence of unequal outcomes between men and women.
As one would expect, significantly more women than men receive bereavement benefits—around 25,000 women, compared with some 10,000 men—but that reflects the fact that men are far more likely than women to die before their spouse, because women live longer. However there is no significant difference in the proportion of men who qualify for full rate widowed parent’s allowance compared with women.
The existing contribution conditions for bereavement benefits allow the number of qualifying years to be reduced where a person dies before reaching state pension age. For example, if a man dies at 40 he would need to have accrued only 21 qualifying years for his widow to qualify for full widowed parent’s allowance if she were left with children. There is already a mechanism in the Bill to achieve the spirit of what my hon. Friend was trying to do. The current link between the contribution conditions for bereavement benefits and pensions is largely historical and has little basis today, given that bereavement benefits are paid to people of working age who have very different needs and responsibilities from those of pensioners.
My hon. Friend asked whether a widow might not qualify for bereavement benefits at the full rate, even though her husband would have qualified for a full basic state pension under the new rules. That is possible, but the number of cases will be fairly small, as the 30-year qualifying test has a marginal effect on the proportion of men, as we discussed earlier. A woman in that situation would not be any worse off than she is now, on her eligibility for bereavement benefits, but she would be better off than she is now on the basis of her eligibility for state pension benefits. In the same way as her husband would be better off in terms of his lower number of qualifying years for his state pension benefits, so would she. The Bill only improves the situation, compared with today.
Our priorities for working age benefits are to increase employment and to reduce child poverty. Change in the contribution conditions for bereavement benefits would have only little if any impact on either of those two issues. We are reducing the number of qualifying years so that people have better incentives to save to reflect the different caring contributions and patterns of work. That is appropriate for pension benefits, but we do not consider that it is appropriate for working age benefits. I urge my hon. Friend not to press her new clauses and extend that wish to new clause 23.
Mr. David Laws (Yeovil) (LD): I, too, welcome you to the Chair, Mr. Taylor. We made good progress under your fellow Chair this morning, and I hope that we will continue to do so this afternoon. I am grateful to the Minister for his response to the cluster of new clauses, especially new clause 23. I am sure that my memory will let me down although it seems a long time ago, but I think that the Minister undertook this morning to publish in the summer of 2007 the research that the Government describe in their response to the Select Committee’s report. I assume that that means before the House rises for the summer recess, although we can never be too sure about such definitions. I therefore hope that the information will be made available to us before we discuss the personal accounts Bill in the latter quarter of this year. Obviously, that information will be extremely useful. It will inform some of the other debates that we shall have later, including those under clause 3 so I shall not raise them now.
I raised earlier with the Minister the ability of the Department to give estimates after the reforms in 2010 of the proportion of male and female pensioners—the stock of pensioners—who will receive a full basic state pension. Although I might have missed it, I do not believe that he was able to respond to that point in the debate, which is understandable given the information that he needed at his fingertips. If he does not have the information now, would he at some stage put it on the public record? With those provisos, we do not intend to press our new clause to a Division.
Question put and agreed to.
Clause 1 ordered to stand part of the Bill.

Clause 2

Category B retirement pension: removal of restrictions of entitlement
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt): I welcome you to the chairmanship of the Committee for our sitting this afternoon, Mr. Taylor.
We now come to the provision that ends the requirement that entitlement to category B pension is dependent on a category A pension having been claimed by the person’s spouse or civil partner. Hopefully, clause 2 is one of the more straightforward clauses in the Bill. It simply will remove the current restriction on entitlement to a category B pension, which is a pension based on the contribution of a person’s spouse or civil partner rather than on that person’s own contribution in situations when the spouse or civil partner defers claiming his or her category A pension.
Category B pensions for married people and people in civil partnerships are payable at about 60 per cent. of the standard rate of basic pension. They are still commonly known as married women’s pensions, but from 2010 they will be available to some married men and people in civil partnerships.
Ms Sally Keeble (Northampton, North) (Lab): Is that payable only when the person who receives the category A pension defers or is it applicable in all cases such as if the person who receives the category A pension has not reached retirement age? Does it mean that a woman aged 58 years or 62 years can claim it if her husband is also 62 years and therefore not reaching his pension?
Mr. Plaskitt: Both parties have to have reached retirement age. I am just about to clarify such matters. My hon. Friend has anticipated the material to which I am about to refer.
A person can only qualify for a category B pension if their own entitlement to a category A basic pension is lower than a category B rate. For example, a married woman with entitlement to a category A pension at50 per cent. of the standard rate would have her pension topped up by 10 per cent. to the category B rate.
Under the current rules, a person cannot qualify for a category B pension until both he or she and his or her spouse or civil partner have reached pension age, and the spouse or civil partner has actually claimed his or her category A pension. This clause removes just the latter restriction—one that limits choice and that can create complicated decisions on whether to defer drawing state pension.
To help my hon. Friend and other members of the Committee with an illustration, let me introduce Mr. and Mrs. Jones. Mr. Jones is considering deferring his category A pension because he plans to work on for two years after reaching state pension age, but Mrs. Jones has already reached state pension age and is drawing a small category A pension based on her own contributions. If Mr. Jones defers his pension, then Mrs. Jones will not qualify for her category B pension until he eventually claims. So, Mr. Jones faces an invidious choice. He would like to accrue deferral benefits—a lump sum or extra weekly pension—on his own pension, but that would mean that his wife would not be able to draw her pension.
Andrew Selous (South-West Bedfordshire) (Con): It is also my pleasure, Mr. Taylor, to welcome you to this second sitting of our Committee. I have had the pleasure of serving under you before, and look forward to doing so again.
Clause 2 is short and uncontroversial. It is generally to be welcomed and I see no amendments or new clauses tabled in relation to it. The removal of a restriction on entitlement to category B retirement pension has to be generally welcomed, meaning that, in future, it will be possible for one member of a couple to receive such a pension even if the other has deferred a category A pension. This is particularly important, as more and more people are likely to be deferring their pensions by keeping on working, as older people generally enjoy better health and working in later life—past state pension age—becomes more common. As the Minister said, there are clearly benefits to deferring a pension in the increases that come later. Because we are going to see more of that, Opposition Members are happy to see clause 2 in the Bill.
Question put and agreed to.
Clause 2 ordered to stand part of the Bill.
 
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Prepared 24 January 2007