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202Clause 122, page 75, line 9, at beginning insert:
'( ) In section 23(1) of the Social Security Contributions and Benefits Act 1992 (contribution conditions: supplemental), for "22(1) (a)" there is substituted "22(1)".
( ) Section 54(4) of that Act (effect on advance claims for retirement pension of deferral of entitlement) is omitted.
( ) For section 55 of that Act (deferred entitlement) there is substituted—

"Increase of retirement pension where entitlement is deferred.

55.—(1) Where a person's entitlement to a Category A or Category B retirement pension is deferred, Schedule 5 to this Act shall have effect for increasing the rate of pension.
(2) For the purposes of this Act a person's entitlement to a Category A or Category B retirement pension is 'deferred' if and so long as that person—
(a) does not become entitled to that pension by reason only—
(i) of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim), or
(ii) in the case of a Category B retirement pension payable by virtue of a spouse's contributions, of the spouse not satisfying those conditions with respect to his Category A retirement pension; or
(b) in consequence of an election under section 54(1) above, falls to be treated as not having become entitled to that pension;
and, in relation to any such pension, 'period of deferment' shall be construed accordingly".'.
203Page 75, line 9, leave out 'the Social Security Contributions and Benefits Act 1992' and insert 'that Act'.

Lord Mackay of Ardbrecknish: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 198 to 203 en bloc. I wish to speak also to Amendments Nos. 236, 327, 328, 330 and 381.

This group of amendments deals with national insurance contributions and benefits. It covers a great deal of ground, although many of these amendments, despite looking extremely complicated, are designed to tidy up existing legislation.

Amendment No. 198 changes a highly technical provision of the benefits uprating legislation which does not fully reflect what is intended. It deals with legislation which is deficient and in which those who went before us did not quite reflect their intention in the legislative provision.

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Amendment No. 199 makes changes to the graduated retirement benefit to deal with entitlements where there is no entitlement to retirement pension as such. Perhaps it will suffice for me to reassure your Lordships that this is a tidying-up amendment to validate existing practice and put the matter beyond doubt. It will not affect the way in which we treat anyone in terms of the payments that they receive.

Amendment No. 201 deals with the problem that results from employees and self-employed people paying different rates of national insurance contributions. That is reflected in a slightly narrower range of benefits available to the self-employed. Although they are eligible for the basic state retirement pension, they do not generally qualify for the state earnings related pension, or SERPS as it is more generally known.

It is usually clear into which category a person's employment falls. But difficulties can occur when the contractual arrangements under which an individual works are not clear cut. That can result in someone being treated as an employee and erroneously paying Class 1 contributions. If it is then found that the engagement amounted to self-employment, current legislation requires that a refund of the difference between the contributions paid and the self-employed contributions that should have been paid should be offered. Any benefits awarded to which the individuals would not have been entitled had they paid self-employed contributions must be recovered. Future entitlement to benefit will be based on the revised record.

Someone in that position would lose SERPS rights which they believed that they had accrued. An error that has gone on, say, for some years, would mean that any refund would almost certainly be insufficient to make equivalent private provision to replace the lost rights, and the pension of someone who had retired would be reduced accordingly. Such a situation has arisen in respect of certain workers in the television and film industries.

We decided that it would be right to introduce some additional flexibility and this new clause is designed to achieve that. It would allow individuals to choose not to receive a refund and to keep their SERPS entitlement as if the erroneously paid Class 1 contributions had been properly paid. Contributions made to personal pension schemes will also be able to stand. Nothing will prevent individuals from applying for a refund, if that is what they want. The engager will be able to receive a refund of the contributions that he has paid in the normal way.

Such circumstances do not crop up every day but they cause genuine concern when they do. I believe that this welcome provision will enable us to deal with them.

Amendment No. 202 corrects an error which occurred during the consolidation of legislation on the Social Security Contributions and Benefits Act 1992. Again, I should be prepared to explain this amendment in some detail, but I can assure the House that our proposal simply validates existing practice so that it will not change what is happening in practice.

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Amendment No. 236 amends the provisions so that earnings paid from different employments are aggregated to determine the national insurance contributions that are due. The provision will apply only if an employee with different pensions arrangements has more than one employment with the same or with associated employers and the earnings have to be aggregated for calculating national insurance contributions. That does not happen very often. We estimate that fewer than 100 people a year will be affected. In simple terms, it will mean that people with a personal pension scheme will have contributions paid into it. We intend to bring this provision into effect from April 1996.

The amendment also provides for the rebate to be allocated to contracted-out money purchase scheme pensions ahead of contracted-out salary related schemes. That will maximise the entitlement of the individual in such cases. The change will come into effect from April 1997.

I turn now to Amendment No. 327. This amendment reverses the effect of the amendment which the noble Baroness and noble Lords opposite were successful in inserting into the Bill at Committee stage. Amendment No. 327 returns us to the original intentions.

The amendment which was passed in your Lordships' House would have had effect from the year 2023, when the first contributors who had been in SERPS for 44 years would reach state pension age. It would allow anyone to drop five years of nil or low earnings from their SERPS calculation. Those who stand to gain most would be people who had earnings at the level of the national insurance upper earnings limit for the greater part of their working lives but who had a few years of nil or low earnings. It would particularly help those who retired early.

Amendment No. 327 returns us to the position in which, once SERPS matures, the calculation would be based on reckonable earnings over the whole working life. Our proposals will ensure the continued affordability of the SERPS scheme into the future while protecting the position of vulnerable groups. We have made arrangements to cushion the impact of our reforms on people who would have particular difficulty in building up additional pension provision. We have confirmed that we shall fulfil our commitment to bring in the necessary regulations to extend home responsibilities protection to SERPS. That will allow for up to more than half the working life to be disregarded in the SERPS calculation for those with caring responsibilities and those receiving incapacity benefits. The Bill also introduces a measure to provide help for families and working disabled people with low incomes on family credit and disability working allowance to improve their additional pension entitlements.

The best 44 years provision would have made inroads into the steps that we have already taken to put SERPS on a long-term sustainable basis. It would raise long-term expenditure in a way which I can only describe as poorly targeted, because high earning men would gain as well as low earning women. This amendment puts us back on track and I urge noble Lords to accept it.

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Amendment No. 200 is essentially a tidying-up amendment. There is an anomaly in the legislation because the mobility component of disability living allowance qualifies for a Christmas bonus but the war pensions equivalent does not. That distinction was never intended. Payments have in fact been made to war pensioners on an extra-statutory basis, but we should like to set the matter right in legislation. These amendments will validate existing practice. I beg to move.

Moved, That the House do agree with the Commons in their Amendments Nos. 198 to 203.—(Lord Mackay of Ardbrecknish.)

6.15 p.m.

Baroness Hollis of Heigham: My Lords, I should like to speak to Amendment No. 327, which removes the amendment won in your Lordships' House. That would have allowed SERPS to be drawn from the 44 best years rather than 49 years.

I am very sorry that the Government are being so churlish and mean on such an amendment. We pressed this amendment in your Lordships' House in order to save public funds on social security expenditure. The Government were equalising state pension age and retirement age for women, raising it from 60 to 65 years. So women are to work five years longer. But because they work five years longer, and being older and perhaps a little more frail, they are more likely also to suffer reduced earnings. So working five years longer, usually at somewhat lower rates, meant that they were working five years longer for a lower pension than they would have had if they had retired five years earlier at age 60, as the scheme would be now.

We argued that by floating off those five weakest years—not necessarily at nil or even low earnings, but at somewhat lower than the optimal earnings—women, though working five years longer, would not be the poorer as a result. It was at least some well targeted, modest compensation for the fact that women are working longer.

The Government now seek to remove that amendment—I am sure that their Motion will go through—by saying that it was poorly targeted and would benefit highly paid men as well as low paid women. That is nonsense. I do not know any highly paid men who are in SERPS as opposed to having opted out into an occupational pension or private scheme. It is absurd to think that highly paid men are in SERPS. We know that those who remain in SERPS are precisely those who do not have access to occupational pensions or private pension provision. They are low paid women and low paid men.

The problem with the amendment is that, far from being poorly targeted, it was targeted all too well. It was targeted at women who were being asked to work longer for less, and targeted at men in such low paid work that they never merited moving into an occupational scheme. Because it was targeted all too well and because it did something to mitigate the effect of this Bill on low paid women and low paid men, the Government have chosen to overturn it. That is churlish and ungenerous. When we look at the increasing division in society in terms of

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incomes, as substantiated by the Rowntree Report and the like, the Government are parachuting all the worst features of growing insecurity and poverty among women and low paid men in the world of work into the world of retirement as well.

I have to say, "Shame on the Government" for overturning an amendment that we could have afforded; that was well targeted; and that would have stopped women at least from having to work longer for less. The Government's behaviour on this issue is churlish and mean. I hope the signal will go out that, for all their talk about a society at ease with itself, as soon as we try to do something to give that legislative impact the Government overturn it as speedily and as quietly as they can. That is deplorable.

On Question, Motion agreed to.


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