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Noble Lords may have noticed that I have not returned at Report with my request that, from the moment that a unisex retirement age is achieved, men and women should be treated equally for annuities and not, as now, on the basis that women have a presumed longer life. Sadly, although I thank everyone who spoke to my amendment, there was not sufficient support for it from either the Government or the Opposition. Nor indeed have the women's organisations got their act sufficiently together on this issue to press it forward, although I look forward to developments there, too. Ironically, this justice for women, on which we are rightly congratulating the Government and especially the noble Baroness, Lady Hollis, is another illustration of why that other continuing, blatant annuities discrimination should and could have been remedied in the Bill.
Above all, throughout our debates on the Bill, I, like other noble Lords, have been hugely grateful to the noble Baroness, Lady Hollis, for her help and formidable pensions expertise. I should like to thank her for the legacy of vital information contained in the speech that she made in Committee on 14 July this year in support of my amendment. The material in that speech alone is enough to reassure me that the argument for sex equality in annuities will eventually be won.
Baroness O'Cathain: My Lords, the Minister opened his comments by saying I have pleasure and we have listened. Both those things are wonderful so I thank him very much. Of course, like everyone else, I must thank the noble Baroness, Lady Hollis. I first came into contact with her when we were in government dealing with pension splitting on divorce some 13 or 14 years ago. I realised then what a formidable person we had and how lucky we were to have her in this House. Ever since then, she has done by quiet determination some things that all of us try to do but do the wrong way, so well done to her. She thanked everybody for the cohorts of support she receivedfrom the Federation of Small Businesses, the Women's Institute, Age Concern and so forthbut none of that was likely to come together in a voluntary manner without her constant, gracious, charming but determined impact. She is wonderful and we are wonderfully lucky to have her. I have been wonderfully blessed in working with her. I thank her very much.
Lord Mackay of Clashfern: My Lords, I was one who experienced defeat at the hands of the noble Baroness when we were in government. She convinced me a long time ago of the propriety of this amendment, which has now been made. I would like to join in congratulating her on the way that she has conducted this and on the result achieved. No doubt there are Oliver Twists about in connection with these amendments, but I am sure that the Minister will do his best to achieve such justice as is possible. I congratulate him also.
Lord Oakeshott of Seagrove Bay: My Lords, I am sorry if I spoil the congratulatory party. My noble friend Lady Thomas has already put on recordand I
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I must comment on the way in which last weeks announcements were handled. There was no problem for James Purnell with the favourable publicity: he was there in the centre of the photograph when he was claiming credit. However, when there was any question of what the bill would be, he was airbrushed out. On a matter such as this, where feelings are so strong, I would have thought that the Government would have told us what the bill and the extra costs will be. The strength of feeling in this House and in the country is such that it is disappointing that the Government have been allowed to get away with taking the credit at no cost. We on these Benches would have been happy to support more money being put in. We think that, for women, this is at the moment a bit of a pig in a poke.
Lord McKenzie of Luton: My Lords, I am grateful to all noble Lords who have spoken in this short debate, and, despite some adverse comments, for the warm acceptance that these provisions have elicited. I am also grateful for the praise that has been universally, and quite rightly, heaped on my noble friend Lady Hollis. I say to the noble and learned Lord, Lord Mackay, that I have shared his experience of being defeated by the noble Baroness. One trepidation I have is that, now that this campaign is won, what on earth is my noble friend going to move on to next? Perhaps I will think about that later.
My noble friend talks about these things not in terms of aggregates and numbers, but how they will affect real peoples lives. I know that is what drives her passion. She makes the point also about the importance of a secure basic state pension. I will come to the issues around the price of class 3 contributions. Irrespective of this measure, post-2010, people will be able to buy one-30th of a year with a years contributions, rather than a 44th or a 39th, as at the moment. This means that there should be an adjustment in class 3. However, this should not be seen as an increase.
I say to my noble friend, Lord Clarke, that I understand his point, which I believe the noble Lord, Lord Skelmersdale, dealt with in part. When changes are made in legislationand the changes we made last year will be a very significant improvement in the pensions outcome for womenthere is always an issue about the extent to which you apply resources and effort to unpicking the inequalities of the past. One issue we looked at was whether we could apply the 2010 rules to all existing pensioners. However, noble Lords will remember that the price tag for that was very substantial, and unaffordable. Inevitably, there will be a cut-off point and some people will fall one side of it rather than the other. However, I am mindful of my noble friends comments and am certain that we will do all that we can to help people who fall outside these provisions. In particular, we will ensure that they are able to benefit fully from the reliefs and pension credit that would otherwise be available.
I thought that the noble Lord, Lord Skelmersdale, said that we were reluctant to recognise the inequality in the pension system. However, the whole thrust of the Act that we passed last year was to dramatically change the landscape for women whose working lives would be wholly or substantially under the new regime. We are very proud of that, although the noble Lord made the point that changes such as this inevitably produce cliff edges. He asked several questions. Certainly, the measures that will make the change cost-neutral will be applied only to class 3 national insurance contributions. They will be applied to all class 3 contributions, which I think is what he asked. He also asked when this would all take effect. The detail is still being worked on but it is ultimately for the Treasury to deal with these matters and I expect it to do so in the normal way at the Pre-Budget Report.
The noble Lords, Lord Skelmersdale and Lord Oakeshott, pressed me to say what the cost will be. Initial modelling suggests that the price increase will be around half the existing rate, but I should also stress that the existing rate is a substantial reduction on the actuarial value. The current cost of a class 3 contribution is £8.10 a week but its current actuarial value is something like £45, so there is still a substantial gap between the two.
Lord McKenzie of Luton: My Lords, I am saying that some of the initial modelling shows that it would take a 50 per cent increase for the package to be cost-neutral. If you took away the adjustments for the class 3 contributions, the present net value of the cost would be about £600 million, which is about one-third of the figure that we talked about in relation to the original proposal. However, I stress that there will in any event be a need to adjust the class 3 price simply because the deal changes post-2010, and only the
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The noble Lord, Lord Skelmersdale, made the point that it will not be right for everyone to take up this opportunity. Those who have, or are heading for, pension credit could spend money but get just a net nil out of it. He is absolutely right about that, as he is with regard to the importance of an information campaign to ensure that people have the right information.
Lord Kirkwood of Kirkhope: My Lords, it would be helpful if the Minister could confirm that the national insurance recording system should have the details of the 110,000 people involved. The noble Lord, Lord Skelmersdale, rightly suggested an information campaign but, with a little software tweaking, would it not be possible for letters to be sent to those people saying that this is an offer they should seriously consider in future?
Baroness Hollis of Heigham: My Lords, something like 550,000 women could benefit, but our estimate of the take-up could be substantially lower than that. Of course, that depends absolutely on the point that the noble Lord has madethat is, how far women know about this very attractive deal for them to build up their pension.
Lord McKenzie of Luton: My Lords, my noble friend is right. I stress again that some of the detail and the practicalities have to be worked through. I talked about an information campaign and certainly that would not preclude letters being sent to individuals for whom the opportunity may be beneficial.
The noble Lord, Lord Skelmersdale, asked about reduced rate contributions. The right to use class 3 contributions to buy back extra years for the periods when reduced rate contributions were paid is not available. It is not permitted under the current rules and there are no proposals to change that. Therefore, if someone paid a reduced rate contribution for an earlier year, they could not now replace it with a class 3 contribution. However, that is not a change; it is the existing law.
Lord McKenzie of Luton: My Lords, I would like to think about that as I am not sure it does, so perhaps I could revert to the noble Lord. I look to the Box, from where some help may be coming down on that, and in the interim I may move on to another point. I think that the noble Lord was asking about people who have contracted out of the state second pension. Class 3 national insurance contributions only help people to build up entitlement to basic state pension and bereavement benefits. They do not help people build up entitlement to state second pension, so on that issue this amendment would have no impact on such entitlements and it makes no difference whether somebody is contracted out of the state second pension.
Lord Skelmersdale: My Lords, that is a lovely answer but, unfortunately, it is to a question that is not at all what I asked. Perhaps the Minister can send me one of his multifarious letters in due course.
The noble Baroness, Lady Thomas, also raised the point about the cut-off and the people who will potentially benefit from that. I think that I have dealt with that point: inevitably, introducing any change will mean that some fall within its provisions and some outside it. On her point about access to good information or its availability, I agree on the access to advice. We have discussed that in another context and the noble Baroness makes a good point.
The noble Baroness, Lady Howe, ingeniously raised again the issues around annuities. She will forgive me if I am not drawn into that debate again now; maybe my noble friend will turn her attention to that as the next campaign. The noble Baroness, Lady OCathain, was supportive of this and on behalf of my noble friend I am grateful for her comments. On cost, for the noble Lord, Lord Oakeshott, I think that I have dealt with that. The net present value, subject to class 3 changes, is £600 million. Issues around pension credit are important, for we need to get information out so that people do not take up that opportunity if it will not benefit them.
I hope that I have dealt with each point raised, and am grateful to all noble Lords for the support for this measure. I conclude by thanking my noble friend Lady Hollis again for all of her efforts: perhaps she could go easy on me for the next few months, if she would not mind.
(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.
(a) beginning with 6th April 2008, and
(b) ending with 5th April 2015.
(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.
(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.
(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.
(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).
The noble Lord said: Finally, my Lords, I will move government Amendment No. 79 and speak to Amendments Nos. 80 to 84. As has been observed, there are a number of regulation-making powers in the Bill. The Government have adopted the recommendations of the Delegated Powers and Regulatory Reform Committee on the appropriate resolution for those various powers and, as a consequence, the Bill provides for a variety of procedures for resolution. Some regulations are for affirmative resolution, some for affirmative resolution the first time they are used and some for negative resolution. These amendments are a legal
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We believe that is particularly important for the regulations under the employer duty. It is impossible to talk about the automatic enrolment process, for example, without also covering opt-outs and refunds. These amendments, therefore, allow us to lay a coherent package of regulations before Parliament, enabling proper scrutiny of the related secondary legislation. I beg to move.
The repeal in section 38(5)(a)(ii) of the Pensions Act 2004 has effect in accordance with paragraph 15(1) of Schedule (Contribution notices and financial support directions under Pensions Act 2004) to this Act.
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