|Welfare Reform And Pensions Bill - continued||House of Lords|
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Schedule 6: Effect of state scheme pension debits and credits
The Schedule inserts sections 45B, 55A, 55B, and 55C into the Contributions and Benefits Act.
Paragraph 2 inserts section 45B. This provision covers how and when deductions will be made from an additional pension.
Subsections (2) to (7) explain how the reduction in the additional pension will be calculated. If a person becomes subject to the debit in or after the tax year immediately before he reaches pensionable age, the additional pension will be reduced by a weekly amount which is of an actuarially equivalent value to the state scheme debit. If, however, the debit is made before the tax year immediately before a person reaches pensionable age, the additional pension will be reduced by that weekly amount, expressed in terms of the valuation day, multiplied by the earnings factor percentage for the relevant tax year specified in the latest annual Revaluation of Earnings Factors Order (the current order is SI 1998/1137).
Paragraph 3 inserts sections 55A - 55C
Section 55A covers how and when a person will become entitled to a shared additional pension.
Section 55B provides for the shared additional pension to be reduced in the same way as the additional pension where it is subject to pension sharing. The section mirrors section 45B.
Section 55C provides for the shared additional pension to be increased where entitlement is deferred. The section is a counterpart to section 55.
Schedule 8: Part VI: Retirement Pensions.
Paragraph 30 inserts a new subsection (4A) into section 48A of the Contributions and Benefits Act. The new subsection provides that a pensioner who is not the widow or widower cannot gain an increase to a category B retirement pension of half of the weekly rate of additional pension payable to the deceased member.
Schedule 12 Part I: Amendments consequential on Parts III and IV of the Bill
The text of the Matrimonial Causes Act 1973 as amended by the Bill is set out in AnnexA; Annex B contains the text of the Family Law (Scotland) Act 1985 as amended.
Paragraph 1: section 37 of the Matrimonial Causes Act 1973 gives the court power to restrain the future disposal of, or future dealings with, property to protect an applicant's pending claims for financial provision on divorce. It also gives the court power, in certain circumstances, to set aside dispositions that have already been made. Paragraph 1 amends subsection (1) to include proceedings for a pension sharing order.
Paragraph 2 adds a new paragraph (fa) to paragraph 3 of Schedule 1 to the Supreme Court Act 1981. Paragraph 3 lists the proceedings in the High Court that are assigned to the Family Division. By paragraph (fa) all proceedings relating to debits and credits arising under clause 25(1) or 45(1) of the Bill are assigned to the Family Division.
Paragraphs 3 to 5 amend the Matrimonial and Family Proceedings Act 1984.
Paragraph 4 amends section 17 of the Act. This enables the court to make a pension sharing order on an application for financial relief in relation to a marriage dissolved or annulled overseas. A pension sharing order may not be made where the court has jurisdiction solely by virtue of a matrimonial home within the jurisdiction.
Paragraph 5 amends section 21 of the Act by adding provisions about pension sharing to the list of provisions that shall apply to orders made under section 14 and 17 of the Act.
Paragraphs 6 to 13 concern amendments to sections 8, 10, 12A, 13, 16 and 27 of the Family Law (Scotland) Act 1985 in consequence of the pension sharing provisions in the Bill, consistent with the changes to sections 25B, 25C and 25D of the Matrimonial Causes Act 1973. Two provisions are worth particular mention. Paragraph 11 inserts into section 13 (periodical allowance) of the 1985 Act a reference to a pension sharing order. This is in keeping with the principles of the 1985 Act that a periodical allowance should only be made if it is not appropriate or sufficient to make one or more of the property adjustment orders provided for in section 8, namely an order for payment of capital, transfer of property and now a pension sharing order.
Paragraph 12 amends section 16 of the 1985 Act which enables the court to make an order to vary or to set aside an agreement on financial provision. It may make an order where the agreement (or any term in it) was not fair and reasonable at the time it was entered into. The court may do so on granting decree of divorce or within such time as the court may specify on granting decree of divorce. The amendment to section16 limits the court's power to vary or set aside a pension sharing provision in an agreement so that the court may only do so at the time it grants decree of divorce. This is to avoid re-opening a pension sharing provision after it has been made. Any non-pension sharing terms of the agreement would not be affected by this limitation.
Paragraphs 14 to 22 amend the Contributions and Benefits Act .
Paragraphs 15 and 16: the amendments to section 20 and section 21 are consequential upon the provisions for the sharing of SERPS rights set out in Schedule3 of the Bill, which inserts a new section 55A (shared additional pension) into the Act.
Paragraph 17 amends section 39 to ensure that the reduction in the member's additional pension as a consequence of pension sharing is also reflected in any widowed mother's allowance or widow's pension payable on the member's death.
Paragraph 18 amends section 43, which is concerned with which category of retirement pension a person receives when he is entitled to more than one. The new subsection (6) of section 43 provides that shared additional pension is not covered by the term "retirement pension". Thus, a person may receive it in addition to any category of retirement pension.
Paragraphs 19 to 21 amend sections 48A to 48C to ensure that the reduction in the member's additional pension in consequence of pension sharing is also reflected in any Category B pension payable on the member's death.
Paragraph 22 amends section 54(1) to provide for an election by a person to be treated as not having become entitled to a Category A or B retirement pension to apply also to any shared additional pension to which he may be entitled.
Paragraphs 23 to 27 amend the Administration Act to take account of the shared additional pension that will become payable to the former spouse in pension sharing cases.
Paragraphs 28 to 41 amend the Pension Schemes Act 1993.
Paragraphs 29 and 30 are consequential upon the creation of safeguarded rights in clause 32 of the Bill.
Paragraph 31 amends section 83 which contains provisions for revaluing the benefits of early leavers from occupational schemes from the date on which pensionable service ends until the scheme's normal pension age (NPA). The new subsection (1A) excludes benefits payable by virtue of pension credit rights, except, in the case of salary-related occupational pension schemes, to the extent that the benefits are payable by virtue of rights which involve the member being credited with added years of pensionable service.
Paragraph 32 amends section 85 to make it clear that the revaluation provisions in Chapter II of Part IV of the Act do not apply to such alternatives to pension credit as may be prescribed under the regulation-making power at section 101D(2)(b) inserted by clause 33 of the Bill.
Paragraphs 33 to 35 amend sections 93, 93A and 94 of the Act to exclude rights which are attributable to a pension credit from the provision relating to "Transfer Values" for members of occupational and personal pension schemes in Chapter IV of Part IV of the Act. (Separate provisions for Transfer Values in respect of pension credit rights are contained in Chapter II of Part IVA of the Act as inserted by clause33 of the Bill.)
Paragraph 36 inserts a new subsection (4) in section 96 of the Act to enable an occupational or personal pension scheme to prevent a member from making an application to exercise his right to a cash equivalent without also giving the trustees or managers of the scheme a transfer notice in respect of his pension credit rights under section 101F (as inserted by clause 33 of the Bill).
Paragraph 37 amends section 98 so that its operation is not affected by anything that happens in relation to rights under a personal pension scheme attributable to a pension credit. There are separate transfer provisions for pension credit rights and other rights.
Paragraph 38: the effect of this amendment is that where an application under Chapter IV of Part IV of the Act depended on the giving of a transfer notice under section 101F, the application under Chapter IV of Part IV can only be withdrawn if the notice is also withdrawn.
Paragraph 39 inserts a reference to Chapters I and II of Part IVA into section 129(1) of the Act and a reference to Chapter II of Part IVA into section 129(2) of the Act. Section 129 is concerned with the relationship between statutory requirements and scheme rules.
Paragraph 40 inserts a reference to section 25D of the Matrimonial Causes Act 1973 and Part IV of this Bill into section 178(a) of the Act. Section 178(a) gives the Secretary of State a regulation-making power to provide who is treated as a manager of an occupational pension scheme. The paragraph also inserts a reference to Chapter 1 of Part IVA into section 178(b) of the Act. Section 178(b) gives the Secretary of State a regulation-making power to provide who is to be treated as a trustee of a pension scheme for the purposes of various parts of the Act.
Paragraph 41 inserts a definition of "pension credit" and "safeguarded rights" into the general interpretation section of the Act.
Paragraphs 42 to 62 amend the Pensions Act 1995.
Paragraph 43: the amendment to section 3(2)(a) of the Act extends the circumstances in which the Occupational Pensions Regulatory Authority (OPRA) may prohibit a person from being a trustee of a scheme to include serious or persistent breaches of duty under Chapter II of Part IVA of the Pension Schemes Act 1993 (pension credit benefit transfer values).
Paragraphs 44 to 48: the effect of the amendments to sections 16, 17, 18, 20 and 21 of the Act is to exclude members whose only rights are attributable to a pension credit from the statutory consultation procedures relating to member-nominated trustees.
Paragraph 49: section 38 provides a power to enable the trustees of a scheme to defer the winding up of the scheme. The effect of the amendment is to give the trustees the option of either deferring winding up the scheme and permitting no new members to be admitted to it or admitting no new members except pension credit members.
Paragraph 50: the effect of the amendment to section 51(6) is to exclude pensions derived from pension credit rights from the requirements to index pensions in payment in section 51 of the Act.
Paragraph 51: the amendment to section 53 is consequential upon the amendment to section 51(6) above.
Paragraph 52: section 67 imposes restrictions on the power to alter occupational pension schemes to enhance the security of entitlements and rights accrued by members. The effect of this amendment is to bring former spouse members within the scope of section 67 and give them the same protection as that enjoyed by other members.
Paragraph 53: the amendment to section 68(2) extends the powers to alter occupational pension schemes or modify them by resolution to enable them to accommodate pension credit rights.
Paragraph 54: the amendment to section 73 in clause 34 provides for pension credit benefit to be included in the preferential liabilities on the winding up of a scheme to which section 56 of the Act applies. The new subsection (3A) is designed to ease administration. It will mean that a scheme will not be required to separately identify the part, if any, of pension credit rights which is derived from voluntary contributions.
Paragraph 55: this amendment will enable a scheme to which section 73 applies to discharge its liability for pension credit benefit on winding up under section 74(3)(b).
Paragraphs 56 to 58: the effects of the amendments to sections 91, 92 and 93 of the Act are to include pension credit rights within the provisions concerning assignment, forfeiture, bankruptcy etc that relate to occupational pension schemes.
Paragraph 59: amends section 99(2) of the Act to enable an inspector to enter the premises of an occupational pension scheme in connection with the provisions relating to pension credit transfer values inserted into Chapter II of Part IVA of the Act by clause 33 of this Bill.
Paragraph 60: extends the definition of member in section 124(1) of the Act to include a pension credit member and makes other consequential amendments to the interpretation of Part I of the Act consequential upon the Bill.
Paragraphs 61 and 62 amend section 166 and section 167(4) of the Act to reflect the changes from "pension scheme" to "pension arrangement" in, respectively, sections 25B to 25D of the Matrimonial Causes Act 1973 and the corresponding provisions in the Family Law (Scotland) Act 1985.
Schedule 13: Repeals
Part II: Pensions on Divorce etc.
The Matrimonial and Family Proceedings Act 1984 [part of section 21]
The Family Law (Scotland) Act 1985 [section 10(10) and (11)
The Family Law Act 1996 [section 9(8), sections 16 and 17]
Part III: Pension Sharing
The Pension Schemes Act 1993 [part of section 178(a)]
The Pensions Act 1995 [part of section 3(2)(a) and section 38(2)]
PART V: WELFARE
CHAPTER I: SOCIAL SECURITY BENEFITS
Clause 48: Extension of entitlement to state Maternity Allowance
In the 1999 Budget, the Chancellor announced a reform of Maternity Allowance so that women earning below the lower earnings limit for NI contributions, and at least £30 a week, would be entitled to the benefit for the first time. Clause 48, which was added to the Bill at Commons Report (Hansard vol. 331, col. 643), makes the necessary changes to the legislation.
There are two maternity benefits for pregnant working women. Statutory Maternity Pay (SMP) is administered and paid by employers; Maternity Allowance (MA) is paid by the DSS.
Maternity Allowance is paid to women who do not qualify for Statutory Maternity Pay, to the self-employed, and to recently employed women. To qualify, they must have worked and paid National Insurance contributions for at least 26 of the 66 weeks ending with the week before the expected week of childbirth.
Both SMP and MA provide a basic weekly benefit for employees of £59.55 (the same as Statutory Sick Pay) for up to 18 weeks. SMP beneficiaries, however, receive 90% of their average earnings for the first 6 weeks, if this is higher. The self-employed and recently employed receive a lower rate of Maternity Allowance of £51.70.
Summary of changes
Clause 48 extends Maternity Allowance to women who earn below the LEL. The changes:
allow women with several low paid jobs to add together their earnings, and get MA for the first time;
allow self-employed women who hold a Small Earnings Exception from paying National Insurance contributions to get Maternity Allowance of £27 a week (90% of £30);
remove the lower rate of MA, so that the self-employed and recently employed receive the same basic rate of benefit as employed women.
The clause gives the power to set out the details (e.g. how average weekly earnings should be calculated) in regulations.
The clause amends section 35 of the Contributions and Benefits Act which contains the rules for Maternity Allowance, and adds a new section 35A.
Subsection (1) replaces section 35(1) of the Act, which sets out the qualifying conditions for Maternity Allowance.
The only substantial change here is in the inserted subsection (1)(c). Currently subsection (1)(c) says that a woman must meet National Insurance contribution conditions to qualify for MA. The new subsection says instead that she must earn above the "Maternity Allowance threshold" (defined in new section 35A(6) - described below - as £30).
There is a minor change in the inserted subsection (1)(b). This makes clear that if a woman works for part of a week, this counts as a whole week for the test of recent employment.
Subsection (2) makes some consequential amendments.
Subsection (3) adds a new section 35A to the Contributions and Benefits Act. This sets out the rates at which Maternity Allowance will be paid, and gives the power to make the detailed arrangements of the earning test through regulations.
Any woman whose average earnings are at least equal to the qualifying Maternity Allowance threshold (to be set at £30), but less than the LEL, will get a rate of MA equal to 90% of her average earnings - inserted subsection(3).
The inserted subsections (4) and (5) of new section 35A contain powers to make regulations. It is intended to use the regulations to: define "earnings".
For the self-employed, it is intended to base the calculation on notional earnings. For every week that a woman pays a Class 2 contribution, she will be treated as having earnings equal to the LEL in force for that week. To help the low paid self-employed, a self-employed woman who holds a certificate of Small Earnings Exception will be treated as having earnings equal to the Maternity Allowance Threshold applicable in that week (subsections 4(b) and 5(c)).
define the period and the method to be used for calculating earnings. The exact period has yet to be decided, but it is intended to take an average of at least 13 and at most 26 weeks' earnings from the 66 week period used in the employment test. Women will be able to take account of their best weeks' earnings when choosing which weeks to use (subsection (5)(a) and (b)).
provide that the total earnings in any one week may come from a number of different jobs and/or self-employed earnings. The aim is to ensure, for example, that a woman with three jobs earning £20 a week can add those earnings together to make total weekly earnings of £60. Or, a self-employed woman with a small earnings exception, who is also employed at £20 a week, could add together her notional earnings from self-employment (£30) to the £20 she earns as an employee. This would give her total earnings for that week of £50 (subsection (5)(d)).
Subsection (6) of new section 35A provides that the "Maternity Allowance threshold" is to be £30.
Subsections (7) and (8) provide that the Secretary of State may increase this amount for any tax year after 1999/2000 by order. The amendment made by paragraph32 of Schedule 8 to the Bill will have the result that any such order would be subject to affirmative resolution: i.e. approval in draft by both Houses of Parliament. This is in line with the current procedure for uprating benefits.
Subsection (4) of clause 48 provides that the new arrangements for Maternity Allowance will apply to woman whose expected date of confinement begins on or after 20 August 2000, with the first payments possible under the new rules being payable from April 2000.
Maternity Allowance, like Statutory Maternity Pay, may be paid from the 11th week before the week in which the baby is due. It is also payable where the baby is born prematurely. This can be as early as 19 weeks before the expected week of birth. So, women expecting a baby during the week commencing 20 August 2000 could receive Maternity Allowance as early as April 2000 if their baby arrives prematurely.
Schedule 8 Part VI contains some minor consequential amendments, and Schedule 13 some consequential repeals.
CLAUSES 49-51: BENEFITS FOR WIDOWS AND WIDOWERS
These clauses replace the benefits currently paid to widows with a new set of bereavement benefits, which may be paid to both men and women. A consultation document, A new contract for welfare: SUPPORT IN BEREAVEMENT (Cm 4104), was published in November 1998 setting out the Government's proposals. Those proposals have subsequently been carried forward into the new legislation, although some elements of these reforms are due to be introduced through secondary legislation.
Since 11 April 1988, there have been three principal benefits available to women who have been widowed. They are each based upon the National Insurance contributions record of the late husband rather than that of the widow herself. Even if the late husband failed to satisfy the contribution conditions, there may be an entitlement to benefit if his death was caused by an industrial accident or disease. The three benefits are:
Widowed Mother's Allowance (WMA) - a taxable benefit for widows with dependent children or who are expecting their late husband's baby. It comprises a basic allowance for the widow herself, an allowance in respect of each additional child, and any Additional Pension (i.e. State Earnings Related Pension (SERPS)) for which she qualifies. It ends when the only or youngest child ceases to be a dependant;
Widow's Pension - a taxable benefit for widows who are not entitled to WMA or whose WMA has ceased. It is made up of a basic pension and an Additional Pension (SERPS); the calculated amount of benefit varies, depending on the woman's age when she was widowed or stopped receiving WMA.
Entitlement to both WMA and Widow's Pension ends if the widow re-marries. In addition, neither of these benefits is payable for any periods during which she and a man live together as husband and wife. Similarly, a Widow's Payment is not payable if, at the time of her husband's death, she is living together as husband and wife with another man.
Summary of changes
The changes introduced by this part of the Bill consist of :
a "Widowed Parent's Allowance" equivalent to Widowed Mother's Allowance, and including any Additional Pension (SERPS) - for parents who are bereaved of their husband or wife. Entitlement continues until the youngest or only dependent child in the family is aged 16 or up to age 19 if still in full-time further education. This benefit will be available to fathers already widowed when the scheme comes into force;
widows and widowers aged 45 and over with no dependent children will receive a weekly, age-related benefit (with no SERPS component) for six months. This is to be known as a "Bereavement Allowance";
only men and women widowed before the new provisions take effect will have entitlement to Incapacity Benefit on the basis of their late spouses' contributions.
The package of proposals includes two further measures which can be introduced by regulations using existing powers:
men and women aged 55 and over at the start of the new arrangements who are widowed during the subsequent five years and whose entitlement to the Bereavement Allowance has expired, will have special access to Income Support. In other words, they will not be required to claim Jobseeker's Allowance and meet its conditions of being available for and actively seeking work. In addition, a new premium will be available in the income-related benefits to ensure that these recipients retain an income that is at least equivalent to the amount of the Bereavement Allowance.
Commentary on clauses
Clause 49: Bereavement Payment
Subsection (1) replaces the Widow's Payment with a new benefit, which will be payable to both men and women - to be known as the "Bereavement Payment". Section 36 of the Contributions and Benefits Act which provided for the Widow's Payment is therefore substituted by a new section, which refers to "person" and "spouse" rather than "woman" and "husband". It enables the Bereavement Payment to be paid to men or women whose spouse dies on or after the date on which the provision comes into force ("the appointed day").
The inserted section 36(2) preserves the principle that prevented a widow from receiving a Widow's Payment if, at the time of her husband's death, she was living together with another man as husband and wife. That same principle will apply with Bereavement Payment where the surviving spouse is, at the time of the late spouse's death, living together as husband and wife with a person of the opposite sex. There is no definition of "living together as husband and wife" in legislation, but the concept has been well developed in social security case law.
Subsection (2) replaces Part II of Schedule 4 to the Contributions and Benefits Act, so that the amount of the Bereavement payment will be £2,000. Widow's Payment is worth £1,000.
Clause 50: New allowances for bereaved spouses
This clause introduces two new benefits for bereaved spouses - Widowed Parent's Allowance and Bereavement Allowance. It does so by inserting four new sections into the Contributions and Benefits Act: sections 36A, 39A, 39B and 39C (the current benefits are defined at sections 37-40). All references below are to sections of the Contributions and Benefits Act.
The inserted section 36A sets out when the new benefits, and when the existing scheme, should apply. It provides that:
If they are women, they will still be able to claim Widowed Mother's Allowance, Widow's Pension and Incapacity Benefit (on the basis of their husbands' contributions), under the current rules. Then, if a widow is aged 45 or over when her Widowed Mother's Allowance ends, she will still be entitled to receive Widow's Pension and/or Incapacity Benefit. If she is under 45, she will still be entitled to receive Incapacity Benefit;
If they are men, they will still be entitled to Incapacity Benefit on the basis of their wives' contributions (as provided by the existing section 41), if they meet the qualifying conditions;
The one difference is that existing widowed fathers will be entitled to the new Widowed Parent's Allowance, if they satisfy the qualifying conditions on the appointed day.
The inserted section 39A provides for the Widowed Parent's Allowance. It reproduces the rules that currently apply to Widowed Mother's Allowance (set out in section 38), but extends the new benefit to widowers.
The inserted section 39B provides for the Bereavement Allowance. Most of the entitlement conditions of Widow's Pension (in section 38) are retained, but with the following exceptions:
the benefit is only payable for a maximum period of 26 weeks beginning with the date of death;
no additional pension (State Earnings Related Pension - SERPS) will be paid with the benefit (though note the provisions for SERPS in Retirement Pension for widows and widowers in clause 51).
The inserted section 39C provides for the rates at which the two new benefits are payable.
Subsection (2) makes provision for the weekly rate of a Bereavement Allowance. It is to be paid at a basic rate only with no additional pension.
Subsection (5) preserves for Bereavement Allowance the rules which vary the amount of benefit according to the age of the widow when her husband dies or when her entitlement to Widowed Mother's Allowance ends. There is a 7% deduction from the full rate of benefit for each year she is aged under 55 at that date-and, once determined, the amount stays fixed. The same rule applies to all surviving spouses for Bereavement Allowance.
|© Parliamentary copyright 1999||Prepared: 24 May 1999|