CLAUSE 38 - INHERITED SERPS
175. This clause amends section 52 of the Welfare
Reform and Pensions Act 1999 in three ways, all of which will
be reflected in affirmative regulations made under that Act.
176. Firstly, subsections (1) and (2) provide
that the introduction of the reduction in the proportion of a
SERPS pension from 100% to 50% which can be inherited by a surviving
spouse should be postponed from 6 April 2000 to 6 October 2002.
Subsection (3) provides a new power to further amend the period
of postponement by regulation, for example if large numbers of
claims are received by the scheme to be established under section
52(4) of the Act (the Inherited SERPS Scheme) shortly before the
end of the period in which such claims are to be determined.
177. Subsection (4) widens the nature of the
claims which may be determined under the Inherited SERPS Scheme
so as to also encompass people who were denied the opportunity
of considering taking relevant steps to protect their spouse's
position because they relied on incorrect or incomplete information.
178. Subsection (5) allows the regulations establishing
the inherited SERPS scheme to set specific criteria for the matters
and presumptions that may be used to determine whether a claim
under the scheme has been successful. This is necessary to reduce
the risk of fraudulent claims whilst ensuring that claims cannot
be dismissed solely because they cannot be supported by documentary
179. These matters are to be dealt with under
delegated legislation because of the need to consult with interested
parties before bringing forward the details of the scheme and
the need to allow for greater flexibility should the need for
change arise. The Welfare Reform and Pensions Act 1999 provides
that these regulations shall be subject to the affirmative procedure.
As such there will be a further opportunity for both Houses of
Parliament to debate the detail of the inherited SERPS scheme
before it is established.
CLAUSE 39 - HOME RESPONSIBILITIES PROTECTION
180. This clause inserts sub-paragraph (7A) into
paragraph 5 of Schedule 3 to the Social Security Contribution
and Benefits Act 1992. Paragraph 5 of Schedule 3 to that Act concerns
the contribution conditions which must be satisfied for Retirement
Pension and Widow's Benefits.
181. One of the conditions is that National Insurance
Contributions must have been paid or credited for "the requisite
number of years in the working life". Paragraph 5(7) allows
for the number of years to be reduced by those years in which
a person has been precluded from regular employment by responsibilities
at home, provided that National Insurance Contributions have been
paid or credited for at least 20 years (22 years from 2020).
182. As described above, the power provided by
new section 44A(2)(c)(ii) of the Social Security Contributions
and Benefits Act 1992 (as inserted by subsection (3) of clause
30) is intended to include within State Second Pension those people
precluded from regular employment because they are caring for
a sick or disabled person.
183. New paragraph 5(7A) provides for regulations
to be made regarding the provision of information to the Secretary
of State when a person wishes to show that they have been precluded
from regular employment by responsibilities at home.
184. Home Responsibilities Protection for basic
pension is given automatically to someone receiving Child Benefit
for a child under 16 for any year in which they have not earned
and paid enough National Insurance Contributions to acquire an
earnings factor sufficient to make the year count for pension
purposes. Under State Second Pension, someone receiving Child
Benefit for a child under 6 will automatically be treated as if
they had an earnings factor at the Low Earnings Threshold in any
year in which they have no earnings or earnings below the Lower
Earnings Limit for that year.
185. However, those meeting the prescribed conditions
(see the note on the delegated power in clause 30(3) above)
for caring for a sick or disabled person have to supply the
necessary information for this to be taken into account when assessing
their pension entitlement. Currently such notifications can be
made at any time up to state pension age for periods back to 1978
(when Home Responsibilities Protection was introduced).
186. It is intended that regulations will require
such notifications to be made by the end of the third year following
the year in which the caring activity took place. This requirement
will only apply to qualifying periods after the introduction of
State Second Pension. The purpose is to ensure that entitlement
to State Second Pension on the grounds of caring activity is established
and recorded timeously. It will also determine any years to be
excluded from the requisite number of years in the calculation
of basic pension.
187. The criteria for Home Responsibilities Protection
are set out in regulations (the Social Security Pensions (Home
Responsibilities) Regulations 1994 (S.I. 1994/704)). The
Department does not, therefore, consider it appropriate to include
the detail of this change on the face of the Bill.
CLAUSE 40 - SHARING OF STATE SCHEME RIGHTS
188. Clause 40 amends Section 49(4) of the Welfare
Reform and Pensions Act (WRPA) 1999 which deals with the creation
of state scheme pension debits and credits for the purpose of
pension sharing. Subsections (2) - (4) of clause 40 make symmetrical
amendments to sections 45B(7), 55A(6), and 55B(7) of the Social
Security Contributions and Benefits Act 1992 (inserted by Schedule
6 to the 1999 Act). Section 45B of that Act is concerned with
the reduction in the additional pension of the member whose pension
has been shared; section 55A deals with the calculation of the
additional pension acquired by the former spouse who was the beneficiary
of the pension share (who receives a "shared additional pension");
section 55B makes provision for the reduction of a shared additional
pension which has itself been the subject of a pension sharing
order or agreement.
189. The provisions relating to cash equivalent
calculations in other pensions legislation are necessarily complex
(matters) and therefore left to delegated legislation and the
Department believes that the calculations to place a cash equivalent
on state scheme rights should be dealt with in the same way.
190. The provisions in subsection (1) of clause
40 enable the Secretary of State to make regulations providing
for the calculation and verification of the cash equivalents of
state scheme additional pension rights which have been the subject
of a pension sharing order or agreement.
191. The clause provides a sub-delegation power
(new subsection (4A)) which may be used when a valuation of state
scheme rights is required for the purposes of creating a pension
debit and credit. The power does two things: it allows the valuation
to be calculated and verified in such a manner as may, in the
particular case, be approved by or on behalf of the Government
Actuary; and, that in carrying out a valuation, the Government
Actuary will act in accordance with guidance from time to time
prepared by a person prescribed by the regulations. The reference
to "guidance" and "person prescribed", relates
to actuarial guidance in relation to the calculation of cash equivalents
prepared by the Institute of Actuaries and the Faculty of Actuaries.
192. Similar provisions are already in place
for other pension sharing provisions in the WRPA 1999 where a
valuation of pension rights is needed. Without these provisions,
detailed tables would have to be provided in regulations which
would themselves have to be amended, by a further statutory instrument,
each time the Government Actuary decided that the methods and/or
the assumptions underlying the tables needed to be changed.
CLAUSE 41 - DISCLOSURE OF STATE PENSION INFORMATION
193. This clause provides that state pension
information can be passed to employers and pension scheme providers
unless individuals have indicated that they do not want such information
disclosed by "opting-out". It also provides that state
pension details can be passed to other third parties provided
the express consent of the individual concerned has been obtained.
194. In the Department's view the detail of the
"opt-out" procedure is appropriate to secondary legislation.
Regulations provide the flexibility to allow the detailed operation
of the "opt-out" procedure to be amended following consultation
with employers and pension providers and to be adjusted in the
light of operational experience. This will allow the procedure
to be refined to ensure that its operation achieves a high level
of take-up of the new service and minimises the administrative
burden on employers and pension providers.
195. Subsection (2) enables regulations to confer
a power on Secretary of State to disclose state pension information
to the persons described in subsection (3)(a) to (e) (trustees
and managers of occupational and personal pension schemes, employers
and third parties engaged in the provision of financial information
services). Subsection (2)(a) provides that an application to the
Secretary of State for disclosure of the information must be made
in a prescribed manner. It is intended that regulations made under
this clause will provide that applications should be made in writing
and should only relate to those individuals who have indicated
that they wish their state pension information to be disclosed
either by giving their express consent or where appropriate by
not opting-out. Subsection (2)(b) provides that the prescribed
conditions in subsections (4) and (5) must be complied with for
such a disclosure to be made.
196. Subsection (4) specifies the minimum conditions
that must be included in regulations made under this section.
Subsection (4)(a) provides that, with regard to third parties
engaged in the provision of financial information services, regulations
must include the condition that disclosure can only take place
with the consent of the individual concerned.
197. Subsection (4)(b) provides that, for other
persons referred to in subsection (3) i.e. trustees or managers
of occupational and personal pension schemes and employers, regulations
must include the condition that disclosure can only take place
with the consent of the individual concerned or the alternative
condition provided for in subsection (5).
198. It is not envisaged that regulations will
impose any further conditions. However, setting the conditions
in regulations provides the flexibility to set additional conditions
in the light of operational experience.
199. The alternative condition in subsection
(5) relates to the "opt-out" procedure and is intended
to be used to prescribe in regulations the steps that have to
be taken by the employers or pension providers concerned to ensure
that individuals who would receive the new combined forecast are
aware that they can opt-out of the process. Steps will include
a clear indication to individuals of what is intended and how
they may opt out of the process by a written notification. Minimum
time limits for the process will be set to ensure that individuals
have adequate time to consider what is intended and to take opt-out
action if they wish to do so.
200. Employers and pension providers will be
consulted on the detail of the "opt-out" procedure.
It is intended that once regulations are in place it will be trialled
in a number of pilots before the full service is rolled out. It
will then be decided whether any adjustments need to be made.
201. Subsection (6) confers a power on the Secretary
of State to make regulations to specify what information relating
to an individual may be used by an applicant for state pension
information to ensure that the right information is identified
and disclosed by the Secretary of State. This information is likely
to include the surname and forenames of the individual concerned,
date of birth, National Insurance Number and any identifying staff
or pension scheme number.