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The Deputy Speaker (Lord Geddes): My Lords, before calling Amendment No. 294, I must advise the House that if it is agreed to, I cannot call Amendment No. 295, by reason of pre-emption.

Baroness Barker moved Amendment No. 294:


"9 After paragraph 3B (inserted by paragraph 8 of this Schedule) insert—

"Treatment of lump sum of deceased pensioners


3C Where a person has accrued a right to a lump sum payment under paragraph 3A of this Schedule the value of the lump sum accrued by the time of death shall be payable to the estate of the deceased.""

The noble Baroness said: My Lords, as I said a moment ago, in Grand Committee we discussed the matter of deferments and lump sums, principally on the grounds that we thought, and still feel, that the provisions of the Bill were open to charges of discrimination in that they related only to spouses and to people who were married. We did not find the Minister's answers convincing at that point.

Nevertheless, there is another element about which we think that the Government's proposals regarding deferral of lump sums may be open to challenge under Article 1 of the first protocol of the ECHR, about the right to enjoy one's possessions. We had a discussion in Grand Committee, although not a particularly satisfactory one in terms of the Minister's response, about whether or not a deferred pension could or would be considered to be a possession and, therefore, something that should be treated as part of an individual's estate.

At this time of night, I do not wish to enter into much detail about the case of Muller v Austria in 1975, except that although in that case it was held that a state pension was not protected as such by Article 1, a property right might arise from making compulsory contributions to a pension fund. The basic state pension in this country requires compulsory contributions. The entitlement to a state pension depends on previously made national insurance contributions.
 
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When reaching state pension retirement age, pensioners have a legal right to receive those state benefits. On these Benches, we believe that a lump sum should be made up of past entitlements to pension payments to which there has been a clear legal right. Therefore, the deferred pension sum is as much the property of an individual as if he had taken the money when he was entitled to it and put it in a deposit account in his own bank. We therefore believe that, as the Bill stands at present, it is open to challenge on those grounds, and that is the reason for raising the matter again. I beg to move.

Baroness Hollis of Heigham: My Lords, the noble Baroness, Lady Barker, has helpfully returned to what I would call the legal arguments of the issue and she has invited further contributions. Again, I am trying to avoid repeating what I call the "blue sky" arguments that we entered into in Grand Committee.

The noble Baroness raised two main issues. The first concerns the legality of the proposed inheritance arrangements for the lump sum. These extend the rules that already apply to increments and would allow a surviving spouse—but no one else—whose married partner died while still deferring his pension to choose a lump sum payment derived from the deceased's deferment.

The question put forward by the noble Baroness is whether the lump sum constitutes a possession before the person deferring his pension makes a claim for it. If it does, then by restricting the payment of any lump sum to a surviving spouse if the deferrer dies before claiming, it is argued by the noble Baroness that we are at risk of being found to be in breach of Article 14, read in conjunction with Article 1 of the First Protocol of the European Convention on Human Rights, or, indeed, in breach of Article 1 of the First Protocol alone; that is, as the noble Baroness said, we are interfering both with the person's enjoyment of his possessions—I presume by not allowing him to dispose of it freely on his death, which is a little strained—and we are also discriminating against unmarried couples.

We do not accept those arguments. It is a well established principle in social security legislation that entitlement to benefits requires a claim to be made by the person. That principle has also been upheld in the European Court of Human Rights. In our view, therefore, the deferrer's right to a lump sum cannot precede his claim for it any more than his right to obtain his normal weekly pension cannot exist separately from the requirement to claim it.

Therefore, while a person may have an expectation that he will receive a payment as a result of contributing to the National Insurance Fund, we do not agree that that creates an obligation on the part of the state to make any payment of that benefit or that it creates an expectation on the part of the individual that he will receive a payment before a claim for it is properly made as required by law. Indeed, the deferrer is free to make a claim at any time, and naturally we would not be in any
 
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position to second-guess what the deferrer might choose by way of reward, be it a lump sum or increments, once he does make a claim.

The noble Baroness made the point that a person who defers is in no different a position from one who has drawn his pension and banked it and that therefore the accruing amount should be treated in the same way. As I hope I have made clear, we consider that there is a difference. The one has claimed his pension and is therefore entitled to do what he wants with it; the other has not. If we are right on this point—I am assured that we are—it therefore follows that we are not unreasonably interfering with the person's peaceful enjoyment of his possessions because, until such time as he has claimed his pension and chosen his lump sum, it is not his to enjoy.

On the issue of discrimination between married and unmarried couples—however cross he was about the previous amendment, I think that the noble Lord, Lord Skelmersdale, will support me on this—I simply say that we are doing no more or less than we do now with respect to the other elements of the state retirement pension.

As I have already said, we accept that an argument of principle is involved here, but it does not turn on the lump sum in isolation. The lump sum is intended to be an alternative form of taking the rewards of deferring the state pension. In that context, what would be the rationale for paying the lump sum to an unmarried partner but not the increments? As the noble Baroness knows, unmarried partners are not entitled to increments or even the basic state pension by virtue of their relationship to their partner. That applies only to married couples, and that is the law as it stands. Therefore, in our view, it makes no logical sense to separate the one element from the other.

I could continue, but I have tried to address the two points raised by the noble Baroness. One is the legal status. I have gone into that at some length in order to give the noble Baroness the legal basis and the considered legal view that we have sought. With regard to the second, concerning the unmarried partner situation, I have tried to suggest that what we are doing here is entirely fair. We are treating the lump sum as we will treat increments—no more and no less—and it applies to the spouse or the bereaved spouse and not to unmarried partners in either circumstance. To do the one rather than the other would produce new anomalies and new unfairnesses. I am afraid that I cannot accept the noble Baroness's amendment.

Lord Skelmersdale: My Lords, before the noble Baroness sits down, does she accept that there is no entitlement to a lump sum until it is asked for at the end of an extended retirement period and, therefore, by definition, the noble Baroness, Lady Barker, is asking for an ephemeral thing? Does the Minister further accept that this is the first time today that I have been in total agreement with what she says?

Baroness Hollis of Heigham: My Lords, that was such a splendid intervention. I have never yet heard of
 
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a basic state pension being called an "ephemeral thing". I was relishing that phrase and wondering how I might enlarge on it, but then the noble Lord spoilt it by saying that this is the first time we have been in agreement.

Lord Skelmersdale: My Lords, I said total agreement. There is a difference.

Baroness Hollis of Heigham: My Lords, let us hope that that is a difference without a distinction. With that, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Barker: My Lords, I thank the noble Baroness for her full and timely response to the points that I raised. I too find myself in complete disagreement with the noble Lord, Lord Skelmersdale. I do not believe that a basic state pension lump sum is ephemeral—far from it.

I thank the noble Baroness for the points that she made about discrimination against unmarried couples. Perhaps that is a fight for another day on another Bill when we may return to the matter and have more agreement between us than now.

On whether a deferred lump sum is a possession that should go to someone's estate, I still believe that the Government will find themselves open to challenge on that. Whatever the legal status of the matter, the noble Baroness has finally and comprehensively made the case against deferral. I do not believe that was in the Government's interests either. I see absolutely no reason why anyone in their right mind would wish to defer their state pension at all.

On that note, I thank the noble Baroness for putting those arguments on record, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.


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