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Some concerns were expressed in the consultation that an unrelated investor or company could be exposed to greater risk of a financial support direction as a result of the proposed changes. It is unlikely that an otherwise unrelated company in another venture capital portfolio who is strictly connected and associated with an employer but remote from the employer and its scheme could find itself liable under a direction for another group’s pension deficits. The current legislation already requires the regulator to consider all relevant facts, which can include the value of any benefits received from the employer, the company’s relationship with the employer including whether it controlled the employer, and the company’s connection or involvement with the scheme. It would likely be unreasonable for the regulator to issue a financial support direction where there was no persuasive evidence of such benefit, relationship or involvement.

Crucially, none of that is affected by this amendment, which simply relates to the closure of a loophole for triggering the financial support direction, not the range of persons to whom the financial support direction could be issued. It does not change the range of people who could be reached. I hope that puts matters clearly on the record for the noble Baroness and has reassured her again in an area where I know there are some concerns.

Baroness Noakes: My Lords, I thank the Minister for that response. I was aware that the amendment was defective; it was only for the purpose of putting the issue on the table and getting the Minister to describe the intention in relation to technically connected but in practice unconnected companies within, for instance, private equity groups. The Minister explained that reasonably. I beg leave to withdraw the amendment.

Amendment No. 78AN, as an amendment to Amendment No. 78B, by leave, withdrawn.

On Question, Amendment No. 78B agreed to.

Lord McKenzie of Luton moved Amendment No. 78AP:

78AP: After Clause 130, insert the following new Clause—

“Additional Class 3 contributions

(1) The Social Security Contributions and Benefits Act 1992 (c. 4) is amended as follows.

(2) After section 13 insert—

“13A Right to pay additional Class 3 contributions in certain cases

(1) An eligible person is entitled, if he so wishes, but subject to any prescribed conditions and to the following provisions of this section, to pay Class 3 contributions in respect of a missing year.

(2) A missing year is a tax year not earlier than 1975-76 in respect of which the person would under regulations under section 13 be entitled to pay Class 3 contributions but for a limit on the time within which contributions may be paid in respect of that year.

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(3) A person is not entitled to pay contributions in respect of more than 6 tax years under this section.

(4) A person is not entitled to pay any contribution under this section after the end of 6 years beginning with the day on which he attains pensionable age.

(5) A person is an eligible person if the following conditions are satisfied.

(6) The first condition is that the person attained or will attain pensionable age in the period—

(a) beginning with 6th April 2008, and

(b) ending with 5th April 2015.

(7) The second condition is that there are at least 20 tax years each of which is a year to which subsection (8) or (10) applies.

(8) This subsection applies if—

(a) the year is one in respect of which the person has paid or been credited with contributions of a relevant class or been credited (in the case of 1987-88 or any subsequent year) with earnings, and

(b) in the case of that year, the earnings factor derived as mentioned in subsection (9) is not less than the qualifying earnings factor for that year.

(9) For the purposes of subsection (8)(b) the earnings factor—

(a) in the case of 1987-88 or any subsequent year, is that which is derived from—

(i) so much of the person's earnings as did not exceed the upper earnings limit and upon which such of the contributions mentioned in subsection (8)(a) as are primary Class 1 contributions were paid or treated as paid or earnings credited, and

(ii) any Class 2 or Class 3 contributions for the year, or

(b) in the case of any earlier year, is that which is derived from the contributions mentioned in subsection (8)(a).

(10) This subsection applies (in the case of a person who attained or will attain pensionable age before 6th April 2010) if the year is one in which the person was precluded from regular employment by responsibilities at home within the meaning of regulations under paragraph 5(7) of Schedule 3.

(11) The third condition applies only if the person attained or will attain pensionable age before 6th April 2010.

(12) That condition is that—

(a) the person has, in respect of any one tax year before that in which he attains pensionable age, actually paid contributions of a relevant class, and

(b) in the case of that year, the earnings factor derived as mentioned in subsection (13) is not less than the qualifying earnings factor for that year.

(13) For the purposes of subsection (12)(b) the earnings factor—

(a) in the case of 1987—88 or any subsequent year, is that which is derived from—

(i) so much of the person's earnings as did not exceed the upper earnings limit and upon which such of the contributions mentioned in subsection (12)(a) as are primary Class 1 contributions were paid or treated as paid, and

(ii) any Class 2 or Class 3 contributions for the year, or

(b) in the case of any earlier year, is that which is derived from the contributions mentioned in subsection (12)(a).”

(3) In section 1(2)(d) (outline of contribution system) after “section 13” insert “or 13A”.”

The noble Lord said: My Lords, I have pleasure in moving this amendment and shall speak to the others in the group.

We have listened to noble Lords’ concerns about the challenges that some women and carers have faced in building up entitlement to the state pension and the discrepancy in pension outcomes between today’s new male and female pensioners. I recognise the genuine strength of feeling on this important issue.

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I must start by paying tribute to my noble friend Lady Hollis for her tireless campaigning and for raising awareness of these difficulties during the passage of the previous Pensions Bill and in our deliberations on this Bill. We have always been sympathetic to her arguments, but to date we have struggled to find a well targeted and affordable way to help the people whom we are concerned about to plug gaps in their national insurance record.

I acknowledge the acute disappointment expressed here and in the other place at our failure to find a solution so far. However, I am pleased to say that this amendment proposes a way forward that meets those tests of targeting and affordability. I am particularly pleased that, as I understand it, it has the full support of my noble friend. To ensure that help is targeted at those who need it the most we propose, first, that contributors will be able to buy six additional years of class 3 national insurance contributions—for years from 6 April 1975—over and above those permitted under the current time limits. That targets women currently approaching state pension age who have gaps in their records. Our evidence shows that the majority of those women require up to six years beyond those currently available to get a full basic state pension.

Secondly, we propose that the right to buy additional contributions be limited to those reaching state pension age between 6 April 2008 and 5 April 2015. We have chosen April 2015 because by then 90 per cent of women reaching state pension age will be able to qualify for a full basic state pension if they take advantage of today’s class 3 rules. By then, far fewer women from these cohorts could benefit from buying the extra years allowed for by this amendment.

Thirdly, we propose that an individual must have 20 qualifying years for state pension purposes on his or her national insurance record, taking into account full years of home responsibilities protection, before he or she can buy the additional contributions. That enables us to target help to those who have already made a significant contribution and are genuinely seeking to plug small gaps in their records.

With these three measures in place, we believe, the 110,000 people whom we estimate will benefit from buying additional contributions will be those whose pension outcomes noble Lords are the most concerned about.

As regards affordability, it is intended that the price of voluntary class 3 contributions will be increased. This will reflect the fact that the value of these contributions will increase after 2010, when an individual will need only 30 qualifying years to get a full basic state pension, which, of course, will be uprated by earnings in due course. It will also ensure that this special extension of the rules does not place new demands on the taxpayer. The Government usually announce the national insurance rate at the Pre-Budget Report, and they intend to increase the price of class 3 NICs to ensure that the overall package is cost neutral.

There are many more details to be resolved. I hope that noble Lords will recognise the commitment that I am making today and will bear with us as we flesh out those details over the coming weeks and months. I beg to move.

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4.15 pm

Baroness Hollis of Heigham: My Lords, I am so very glad to support this amendment today. I was never quite sure that this day would arrive. This will, in future, help women like Pam, who fostered more than 70 children for Surrey County Council and did not get a stamp for any of those years. It will help women like Carol, with two children of her own, who also cared for her grandmother, who was bedridden for 10 years with arthritis, a frail mother-in-law and a father-in-law suffering from dementia, and also fitted in voluntary work in a hospice. Such lives of quiet heroism.

By being able to buy back an additional six years of national insurance, many women coming up to retirement will, as my noble friend said, now be able to build a full state pension—and others a pension much enhanced. Even if women, or men, took out a loan, the pension increase would more than cover the cost of that loan. In this climate of financial tsunami, a secure state pension matters even more to the lower paid.

Of course, I would like this to go further. Ideally, it would be back-dated for older women who had already reached state pension age. I also noticed that my noble friend said that the price of voluntary NI contributions needs to rise, irrespective of this amendment, because from 2010 its value will go up by 50 per cent for men and, therefore, it is reasonable to adjust the price accordingly. The 20-year rule announced by my noble friend is also very sensible, as it excludes the casual Australian backpacker but will help all those women who, for example, can do better from buying back than on the married women’s dependency stamp, or who would otherwise be better off on pension credit.

No doubt other noble Lords will wish to press my noble friend on further details. I shall just spend a last moment or two to say thank you. First, I thank the press, from the Daily Mail through to the Guardian, and particularly to that inner group of friends and colleagues from the Equality and Human Rights Commission, Age Concern, Help the Aged and Carers, which built a broad coalition of support, including the Federation of Women’s Institutes and the Federation of Small Businesses, from NAPF to the trade unions to the Fawcett Society. Furthermore, I thank the DWP, which, as my noble friend said, has always been sympathetic in so far as it was allowed to be—and, above all, my right honourable friend James Purnell, Secretary of State, who in last year’s and this year’s Bill together will help to transform the situation for women’s pensions. He has been a true friend to women.

Finally, and above all, I express my gratitude to your Lordships tonight. Thanks to your support all round the House, 500,000 women will be able to build a decent state pension. They will find it worth saving; many now will not need to turn to income-related, means-tested benefits; and all of them will have a decent recognition of the contribution that they have made to society through caring and family responsibilities. Without your Lordships, it would not have happened. Indeed, I rather doubt that it could have happened in the other place at all. It is a really good and special thing that we together have done—and, if I may, on behalf of 500,000 women, I thank you all very much indeed.

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Lord Clarke of Hampstead: My Lords, I have not been a regular attender during the passage of this Bill and, until last Sunday, I had no idea of the problems that a minority will face when this measure goes through. It would be churlish not to recognise the sterling work of those who pursued this matter for so long and, in particular, my noble friend Lady Hollis. However, I draw the House’s attention to an anomaly. Some of your Lordships may have read about it in the Daily Mail; my noble friend has just mentioned that it has been supportive.

The Daily Mail published a report on Monday about Felicity Hammerton, who falls outside the 6 April deadline and will not be able to get the full benefit. At this very late stage—although I know that I cannot change anything—in his consideration of further details, will the Minister not lose sight of the fact that there is a need to go further? I understand about affordability and that there are difficulties, but I also understand the plight of women such as Felicity Hammerton who, through no fault of their own, fall outside the advantage that has been given to the large number of women to which my noble friend Lady Hollis referred. My plea, as much as I can muster any plea at all, is that that is not lost sight of and that, if it becomes affordable and if things change, it will be revisited with a view to extending the potential beneficiaries in the way I described.

Lord Skelmersdale: My Lords, I referred in Committee to the fact that your Lordships’ campaigns eventually become law, so I am sure that everyone in the House will join me when I say how delighted I am to congratulate the noble Baroness, Lady Hollis. Her perseverance in this matter has been quite outstanding even by the standards of your Lordships’ House, where many of us are dedicated to seeing a particular injustice eradicated, and I am sure that no government concession has ever been more deserved. The battle has certainly been hard won. Right up until last week there was little indication that the Government would ever accept that the inequality which persists between the sexes in attaining full eligibility for the state pension warranted a move of this kind.

The battle has also been protracted because of the ever present concern for cost. The Minister has managed to present us today with a package which he claims to be cost-neutral. There is no doubt that if such an apodictically beneficial result as the one sought by the noble Baroness could have been delivered without regard to cost, we would have wrapped up the issue long ago.

That brings me to the contribution of the noble Lord, Lord Clarke. When one is making changes to social security benefits—in essence, a state pension is a social security benefit—there are always, alas, cliff edges. The trick among policy-makers is to make sure that the cliff is as low as possible. I am afraid that I cannot remember a single occasion in the years that I have been studying this matter when there has not been a cliff edge of some kind in any changes that have been made. Perhaps the noble Baroness, Lady Hollis, will be able to correct me on that statement.

The Minister has stated that the price of class 3 NICs will be raised soon anyway to account for the fewer years that will now be needed to qualify for a full

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state pension. As I understand it, the 110,000 or so people who might benefit from the move initiated by the noble Baroness, Lady Hollis, will be included among the many more who will benefit from the new requirement to pay NICs for only 30 years rather than 39 or 44. I cannot express absolute, totally unqualified approval because, although these amendments are claimed to be cost-neutral as regards the government purse—which was my objection to the original suggestion of the noble Baroness, Lady Hollis, last year—they will not be cost-neutral for contributors. No doubt more people will be receiving a full state pension, but they will have paid for such a benefit themselves.

I would not be doing my job if I did not ask several more questions that need to be asked on this matter. In particular, by how much does the Minister envisage the price of class 3 NICs rising? Can he confirm that this price rise will be implemented in the next Budget, or will it be implemented in 2010 when the operation starts? Will the rise be extended across all classes of NICs or just be restricted to one? Above all, can he assure us that the increased revenue the Government will receive will be no more than the extra payments they will make? If this is not to be the case, then what we are seeing here is not a cost-neutral proposal but a revenue-raising one cunningly attached to the delivery of a genuinely praiseworthy aim. Are we therefore—I hope to goodness we are not—looking forward to another stealth tax?

I would also be interested to hear from the Minister how much of a saving the Government expect to make on pension credit payments as a result of these provisions. I am interested to hear how many of those eligible to make these contributions the Government are expecting to participate. Concerns have been aired in the media—after all, it is too much to expect that such a positive news story for the Government would be postponed until Parliament had heard of their intentions—about both too high and too low a take-up. Not only have commentators noted that some who would benefit from making these extra contributions might be unable to find the money to do so, but quite rightly there is a real possibility that some of the 40 per cent of pensioners likely to be eligible for pension credit might waste their money on voluntary contributing, only to realise that that will result in no additional retirement income. We often raised this subject in the early stages of the Bill.

I hope that the Minister will go into some detail about what kind of information campaign the Government intend to wage to ensure that neither of these unwelcome outcomes comes to pass. Who will conduct it? Will it be the pensions agency or some other body? Will the Minister also confirm that all the restrictions that currently apply on who may buy class 3 NICs will be extended to these extra contributions as well? Will those with the married women’s stamp or those who contracted out even for a short period be able to take advantage of the provisions?

I realise that I have spoken for quite a long time but these questions need to be asked in order to make a proper assessment of this welcome outcome.

Baroness Thomas of Winchester: My Lords, from these Benches, we, too, welcome the Government’s change of heart. We pay our own tribute to the Minister,

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who has worked hard to make it happen, and to the noble Baroness, Lady Hollis, who also has worked tirelessly to reach this outcome.

I fear that it is in the nature of concessions that, the minute one is made, and a good one at that, people always want more. The noble Lords, Lord Skelmersdale and Lord Clarke, have spoken about that. There will, of course, be women who are bitterly disappointed that they are being left out. Some thousands of women—men as well as women, but mostly women—will certainly benefit if they can afford to buy the missing years outright or can take out a loan to do so and have 20 years’ national insurance contributions already under their belt. However, the Government have set the bar quite high. There are many more thousands, mostly but not exclusively women, who are not able to access a higher pension because they have no chance of fitting in 20 years of national insurance contributions.

One other group for whom the door has been firmly shut is those who are already over 60, even if they have not yet picked up their pensions. I again refer noble Lords to the case reported in the Daily Mail on Monday concerning one lady. Are the Government prepared to look again at this situation? After all, it cannot affect that many women.

I should like, finally, to draw attention to some sage advice by the pensions guru Dr Ros Altmann which also echoes what the noble Lord, Lord Skelmersdale, has just said. She warns those with an incomplete national insurance record to take expert advice before they buy back extra years, because they might qualify for means-tested pension credit. She also warns those who do not have good health to take advice before buying extra years.

This brings me back full circle to the importance of the availability of good financial advice, rather than just general information, for those about to retire. As time goes on, such advice becomes more and more important. I hope the Government will keep us informed of the measures they are taking in that matter.

Baroness Howe of Idlicote: My Lords, I add my congratulations to those already offered to the noble Baroness, Lady Hollis, on the courageous and determined battle she has fought on behalf of us all and which she has at last won, or at least won as far as one could expect at this stage. I also congratulate the Government on the real improvements that they have introduced in the Bill following the Turner report’s recommendations, particularly the improvements for carers, the majority of whom are women.

We should always remember that women are among the poorest pensioners. It remains shaming that only 30 per cent of women compared with 95 per cent of men currently retire on the full basic state pension. By 2010, however, that percentage will have increased to 75 per cent, even if it is likely to be as far away as 2025 before men and women reach the state retirement age with an equal entitlement to the full basic state pension. This pathway all too clearly illustrates, once again, the considerably greater sacrifice that women have made and will continue to make. By the time that an equal retirement age is achieved for both sexes, women will

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have sacrificed some seven years from their original or earlier state retirement age of 60 while men's loss will be about two years, from 65 to 67.

4.30 pm

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