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Amendment No. 12 is a variation on a theme that we discussed in Committee. Entitlement to the state second pension will be calculated on an annual basis, as is the case for SERPS. It would not be operationally feasible to move to a system that calculated entitlement on a weekly basis. As I explained, the second state pension is intended to help low earners through the low earners' boost, and carers through credits towards the second state pension. We believe that, in the interests of consistency, fairness and operational manageability, that is the right approach.
The amendment confuses the two. It would allow people who were entitled to invalid care allowance to top up an earnings factor that was otherwise below the lower earnings limit, so they could benefit from the low earners' boost, mixing and matching different gateways. That is a sure recipe for administrative complexity and anomaly. That approach would favour a particular group. It would not, for instance, benefit carers who do not claim invalid care allowance but who apply for home responsibilities protection instead, because it takes a year to accrue that. So we hope that the amendment will be withdrawn, or defeated if it is pressed to a Division.
Amendments Nos. 65 and 68, which show the co-operation between the Opposition and my hon. Friend the Member for Selly Oak, are interesting. We had an
interesting debate about these matters in Committee. Five or six Conservative Members spoke, each expressing a completely different opinion. Some wanted women at work, some wanted them at home and some could not quite decide where they should be. They really need to sort themselves out on this issue.
Almost 1.5 million women caring for young children will begin to build up entitlement to additional pension for the first time under the state second pension. It is designed to give most help to those who are least able to afford to make their own provision, which is why we are focusing on mothers of children below school age. We recognise that they have the fewest opportunities, as they are caring for younger children, to earn above the lower earnings limit. Many mothers of school-age children combine their caring duties with part-time work and could benefit from the state second pension's low earners' boost when they earn as little as £3,432 a year. [Interruption.] The hon. Member for Gainsborough (Mr. Leigh) may think it is boring, but it will enable women who work part-time on low pay to accrue additional pension, often for the first time, so that they can look forward to retiring on a reasonable income instead of on to means-tested benefits, as all too many do now. The old systems have not supported them, and an examination of income statistics and the number of women who manage to qualify through their own contributions for additional pension, and even the basic pension, will confirm that view.
Dr. Lynne Jones:
My hon. Friend talks about part-time earners. As I mentioned, people who work for 16 hours a week on the minimum wage will still not achieve the level of income to which she refers. What about those carers?
Angela Eagle:
My hon. Friend is right. The lower earnings limit implies between 17 and 18 hours a week. We hope that through the new deal, the new opportunities in the workplace and the support that the Budget has given to single parents and low earners, making work pay, many people will have the chance to improve the number of hours they work, reach the lower earnings limit and qualify for the low earnings boost.
Focusing help on those caring for children under school age matches the choices that most mothers make. Most mothers take career breaks or periods out of work when their children are very young; many go back to work as their children get older. In addition, 4.5 million low earners--70 per cent. of whom are women--will gain under the second state pension. My hon. Friend should celebrate that, and welcome it.
In view of that explanation, I urge the hon. Member for Sutton and Cheam to withdraw the amendment.
Mr. Burstow:
We have heard that a category of people on low incomes and with patchy records of receipt of invalid care allowance will find all the gates shut when it comes to the state second pension. Consequently, those people will not receive the low-income boost that the Minister rightly trumpets.
The Minister suggested that I should be doing her job by trumpeting the state second pension outside the House. I should be happy to support a benefit that truly boosted the pensions of retired carers, but I have set out why that will not happen. The numbers that the Minister gave us will prove illusory unless the workings and eligibility criteria of the invalid care allowance are substantially
improved. The Minister said that she would do something about that, but I hope that the Government will do more. Simply telling us that something is not operationally possible is not acceptable to thousands of carers who expect more of the Government.
This issue clearly needs further consideration at future stages, and we shall return to it in another place. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: No. 34, in page 93, line 23, leave out ", 48B(2) or 48BB(5)" and insert "or 48B(2)".
No. 35, in page 93, line 35, at end insert--
Mr. Rooker:
I beg to move, That the clause be read a Second time.
New clause 25 provides members of money purchase occupational pension schemes with a choice. They will be able to use the non-protected rights element of their accumulated pension fund, in respect of rights accrued from April 1997, to buy instead either an investment- based annuity or an index-linked annuity. Occupational pensions must be increased annually as follows: rights that accrue from 5 April 1988 in respect of guaranteed minimum pension and protected rights must be indexed by the retail prices index, capped at 3 per cent.; and all rights accrued in salary-related and money purchase schemes from 6 April 1997 must be indexed by the RPI, capped at 5 per cent. Protected rights in appropriate personal pensions are subject to the same level of indexation.
We consulted the pensions industry, employers and the public on whether it would be right to relax the current rules for money purchase pension schemes in order to allow schemes to offer investment-linked annuities to any member who might wish to choose that option as an alternative to a traditional index-linked annuity. Of course, the advantage of an investment-linked annuity is that it enables the annuitant to benefit from growth in a range of underlying investments after retirement, although that goes hand in hand with a risk of possible falls in pension income if investment performance is poor.
The principle of introducing greater flexibility for occupational scheme members was widely welcomed. Indeed, a number of annuity providers pointed out that investment-linked annuities have delivered better results in recent years than the traditional index-linked annuity. The new flexibility will apply equally to members of money purchase schemes, whether they buy an annuity or are provided with a pension by their scheme.
Protected rights are not covered by the new clause. As I said when I announced the results of the consultation exercise on 22 March, we intend to give further detailed consideration to issues that arise for protected rights before we decide whether to make any changes to the indexation rules that apply to them. We shall also give careful consideration to the comments that many respondents made on the wider question of the application of indexation requirements to occupational money purchase schemes.
I emphasise that the proposed change provides a genuine option for members of money purchase schemes. The alternative of buying a traditional index-linked annuity will remain available for those members who prefer the certainty of a specified annual rate of increase each year.
The new clause is quite narrow. I hope that it has the support of the House.
'(4A) For the purpose of applying sub-paragraph (1) above in the determination of the rate of any additional pension by virtue of section 48BB(5) above, in a case where the deceased spouse died under pensionable age, the divisor used for the purposes of sub-paragraph (1)(c) above shall be whichever is the smaller of the alternative numbers referred to below (instead of the number of relevant years).
(4B) The first alternative number is the number of tax years which begin after 5th April 1978 and end before the date when the deceased spouse dies.
(4C) The second alternative number is the number of tax years in the period--
(a) beginning with the tax year in which the deceased spouse attained the age of 16 or, if later, 1978-79; and
(b) ending immediately before the tax year in which the deceased spouse would have attained pensionable age if he had not died earlier.'.--[Mr. Rooker.]
Amendments made: No. 28, in page 30, line 3, leave out--
', under section 48A of that Act,'.
No. 29, in page 30, line 5, at end insert--
', in accordance with section 48A below and Schedule 4A to the Social Security Contributions and Benefits Act 1992,"'.--[Mr. Rooker.]
Amendments made: No. 30, in page 31, line 25, leave out "Pension Schemes Act 1993" and insert "1993 Act".
No. 31, in page 31, line 26, leave out--
'Social Security Contributions and Benefits Act 1992'
and insert "1992 Act".
No. 32, in page 31, line 30, leave out subsection (2) and insert--
'(2) Subsection (1) shall have effect--
(a) in relation to the application of section 44(5A) of the 1992 Act by virtue of sections 39C(1) and 48BB(5) of that Act;
(b) in relation to the application of section 44(5A) of the 1992 Act in the circumstances described in section 128(4) to (6) of the 1995 Act.
(3) In relation to the period--
(a) beginning with 6th April 2000, and
(b) ending with the day before the first regulations under section 48A(5) of the 1993 Act (as amended by subsection (1) above) come into force,
the Secretary of State shall be taken to have, and to have had, power to calculate and pay relevant pensions by reference to section 44(5) of the 1992 Act as modified by regulations under section 48A(5) of the 1993 Act.
(4) For the purposes of applying subsection (3) above--
(a) the substitution made by section 128(1) of the 1995 Act shall be ignored, and
(b) references in enactments to section 44(5A) of the 1992 Act shall (so far as necessary) be treated as references to section 44(5).
(5) The first regulations under section 48A(5) of the 1993 Act (as amended by subsection (1) above) may include provision in relation to--
(a) revising the calculation of a relevant pension;
(b) paying a relevant pension in accordance with a revised calculation.
(6) Relevant pensions are pensions which fall to be calculated--
(a) in the circumstances described in section 128(4) to (6) of the 1995 Act, and
(b) in relation to persons where, by virtue of section 48A(1) of the 1993 Act, section 44(6) of the 1992 Act has effect in any tax year as mentioned in section 48A(1) of the 1993 Act in relation to some but not all of a person's earnings.
(7) For the purposes of this section--
(a) the 1992 Act is the Social Security Contributions and Benefits Act 1992;
(b) the 1993 Act is the Pension Schemes Act 1993;
(c) the 1995 Act is the Pensions Act 1995.'.--[Mr. Rooker.]
'.--(1) In section 51(2) of the Pensions Act 1995 (annual increases in rate of pension) for "Subject to section 52" there shall be substituted "Subject to sections 51A and 52".
(2) After section 51 of that Act there shall be inserted--
"Restriction on increase where annuity tied to investments
51A.--(1) No increase under section 51 is required to be made, at any time on or after the relevant date, of so much of any pension under a money purchase scheme as--
(a) is payable by way of an annuity the amount of which for any year after the first year of payment is determined (whether under the terms of the scheme or under the terms of the annuity contract in pursuance of which it is payable) by reference to fluctuations in the value of, or the return from, particular investments;
(b) does not represent benefits payable in respect of the protected rights of any member of the scheme; and
(c) satisfies such other conditions (if any) as may be prescribed.
(2) For the purposes of this section it shall be immaterial whether the annuity in question is payable out of the funds of the scheme in question or under an annuity contract entered into for the purposes of the scheme.
(3) In this section 'the relevant date' means the date appointed for the coming into force of section (Restriction on index-linking where annuity tied to investments) of the Child Support, Pensions and Social Security Act 2000." '.--[Mr. Rooker.]
Brought up, and read the First time.
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