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Baroness Turner of Camden: I thank the Minister for this very comprehensive explanation of the Government's policy. Of course, she has again referred to new SERPS rather than old SERPS, SERPS as it originally was. But I will let that go. The Minister knows that I supported old SERPS and was not very happy about what happened to it.

However, everybody would want to encourage disabled people to take up employment wherever they can. The problem is, as everybody knows, that it is not easy for many. It was because of that that it was felt necessary to look again at the provisions in the Bill in

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relation to disabled people. I am not at all certain that I entirely accept everything that my noble friend has said, but certainly she said a lot and very fast. I will look at it in detail in Hansard. If I think that I ought to return on the issue of disablement and rights for disabled people, I will do so, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No.118 not moved.]

Lord Goodhart moved Amendment No 119:

    Page 27, line 39, at end insert--

("(e) the pensioner--
(i) did not have an earnings factor for the year equal to one greater than the qualifying earnings factor for the year; but
(ii) would have had such an earnings factor if he had earnings equal to the lower earnings limit in each week in which paragraph (b), (c) or (d) would have applied to him if the words "throughout the year" had been omitted.").

The noble Lord said: The amendment raises an issue on the same subject as the last group of amendments, but in a somewhat different form and it is concerned with a different problem.

Under the new Section 44A of the Social Security (Contributions and Benefits) Act 1992 which is inserted by Clause 30 of this Bill, that section does two things. First, it effectively treats anyone with earnings below the lower earnings threshold, which is £9,500, but at or above the level that qualifies for contributory benefits, as having earnings equal to the lower earnings threshold. Secondly, it treats some people as having been credited with earnings that they did not actually have. Clause 44A(2)(a) deals with the former issue. Subsection (2)(b), (c) and (d) deal with the second aim--that is, the crediting.

People can apply for crediting for the state second pension if the invalid care allowance or incapacity benefit is payable or if they have home responsibilities of certain kinds which preclude them working. But in each case, that condition must be satisfied throughout the whole of the year. That may well disqualify a pensioner in respect of the year of entry and exit; that is, the year during which invalid care allowance or other benefits were first payable and the year in which they cease to be payable.

It is possible that in the year of entry or exit, someone may qualify under paragraph (a) because he has had an actual earnings factor above the qualifying earnings factor; in other words, because his earnings have been sufficient to qualify him for a pension in that year. But he is less likely to qualify under paragraph (a) if he gives up the job and transfers to, let us say, invalid care allowance or home responsibilities early in the year or if he is lower paid and, therefore, takes a longer time to reach the qualifying earnings factor. For pension rights to depend on the time of year at which the status changes from earnings to credited earnings creates wholly random anomalies.

Secondly, for pension rights to be more difficult to obtain for the poor than for those with higher earnings is plainly unjust. The purpose of this amendment is to

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avoid the anomaly. It allows pensioners to claim an earnings factor for the entry or exit year by combining actual earnings under paragraph (a) for the period in work with notional weekly earnings for the period when they are entitled to invalid care allowance, incapacity benefit or have home responsibilities. Those notional weekly earnings are treated as equal to the lower earnings limit.

The potential exclusion of entry and exit years is plainly unfair. An answer along the lines of this amendment seems simple and would exclude most, although not all, of the unfairness. It may well be that the wording could be improved but the principle seems to me to be obviously correct. I beg to move.

Baroness Pitkeathley: I am happy to support this amendment to which I have added my name. That is because the contribution condition requiring receipt of invalid care allowance during the whole of a year causes problems for carers.

It causes problems for two groups of carers in particular: first, those who have lost ICA because the person being cared for has had one or more periods in hospital or in respite care, which in total amount to more than 28 days in six months. The second group comprises those who have lost ICA because they have earned more than £50 occasionally but whose earnings over the year do not reach the lower earnings limit for national insurance contributions.

On Second Reading, I gave your Lordships some examples from my personal experience and that of the Carers National Association.

I am absolutely certain that it is not the Government's intention to penalise carers either for taking advantage of a respite care break or for attempting to combine paid work with caring. On the contrary, I know that the Government's aim is the opposite of that. Evidence of that is given to us in the National Strategy for Carers which is working successfully. But penalising carers is what happens, however inadvertently, because of that throughout-the-year rule. Therefore, I urge the Minister to think again about this and to think about some small changes which may be made which would be of great benefit to carers.

7.15 p.m.

Baroness Hollis of Heigham: Amendment No. 119 would allow people with an earnings factor below the qualifying earnings factor for the year to benefit from the low earner's boost in state second pension where they were entitled to invalid care allowance, home responsibilities protection, or long-term IB for part of a year. The amendment does not cover those receiving severe disablement allowance, but I suspect that that may be an oversight which the noble Lord would rectify were he to revisit this matter.

Our proposals for a state second pension will give carers and long-term disabled people the opportunity to build up entitlement to a second pension for the first time. From the outset, some 2 million carers, including

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those caring for young children, and a similar number of disabled people, will begin to build up entitlement to the state second pension. Each qualifying year will be worth approximately £1 a week in additional pension in today's terms. There will be no limit to the number of years of caring which can count towards state second pension entitlement. Since the state second pension, like SERPS, is a contributory benefit, there will be a simple work attachment test for disabled people at the point of retirement.

Entitlement to the state second pension will be calculated on an annual basis on a person's surplus earnings, as is the case for SERPS. That is the amount by which someone's earnings exceed the annual lower earnings limit. That means that we need to look at someone's earnings over the whole of the tax year in question. That is consistent with the annual returns made by employers on each employee's earnings in the preceding year. For example, someone who has earnings between the annual lower earnings limit and the low earnings threshold for the year in question will benefit from the low earner's boost. Someone who has been entitled to invalid care allowance or long-term incapacity benefit throughout the year will be credited into the state second pension. We believe that in the interests of consistency, fairness and operational manageability, this is the right approach.

There are also some practical difficulties associated with the amendment. For example, HRP is not available for part years of caring activity. It would be quite difficult for employers or the department to move to a system which calculated entitlement on a weekly basis. That is why we believe that it is necessary to meet the qualifying criteria for the whole year.

It may be that this amendment confuses the two different ways of qualifying for the state second pension. It would allow someone who is entitled to ICA, HRP or long-term IB for part of a year to "top up" an earnings factor otherwise below the annual lower earnings limit, so that he could benefit from the low earner's boost. He would be mixing and matching the two qualifications which occur in the course of a year.

I understand the thinking behind this amendment. For example, someone may have six months on ICA which will qualify him and six months in work above £67 which, if it were for the whole of the year, would have qualified him. I can understand the argument that such a person should not lose a full year's entitlement. Interesting and important points have been raised. It is a very difficult issue both in terms of the read-across to other situations, particularly that of HRP, and in its practical implementation, as I have suggested. There would need to be a follow through of such a calculation for anyone with credits for a part-year. There would be a need to look at contracted-out cases and HRP. Employers would have to be asked to keep weekly records.

As the Minister handling the Bill in this House, I can say that we have already wrestled with that issue. There are very real difficulties in what the amendment seeks to achieve, even though I understand the

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thinking behind it, which is well intentioned. In order to give the Committee some assurance, I am willing to take the amendment away to see whether we can meet the issues raised. The amendment presents almost as many anomalies as it may solve at present. But that does not mean to say that we cannot look at it again. I am sure that the Committee will understand that I make no absolutely no commitment because if we could have found an easy solution to the problem, I like to think that we should have found it already. But I understand that the Committee may want us to reflect on what has been said this evening and, in that spirit, I suggest that the Committee allows me to do so.

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