Parliamentary Pensions Bill
Orders of the Day — Supply
Mr John Smith (Lanarkshire North)
I beg to move, That the Bill be now read a Second time.
Like most pensions legislation this is, I am afraid, a technical and complex Bill. But the changes it seeks to introduce are not in themselves unduly difficult. There may be some aspects on which differing views in the House will be expressed—as, indeed, there always should be—but in the main I hope that this is a Bill which will commend itself to the whole House. It is not intended to be costly or controversial and I hope that it will enjoy a wide measure of support on all sides.
The purpose of the Bill is to implement the recommendations for improvements in the parliamentary contributory pensions scheme which were contained in report no. 8 from the Top Salaries Review Body. It also makes a number of lesser administrative changes in the scheme. The Review Body's report was, of course, presented to Parliament in July 1976, but at that time pay policy virtually ruled out any improvements in occupational pension schemes and we were not able to take any immediate action. From 1st August 1977 this was no longer the case, and we were able to consider implementing the Review Body's recommendations.
At this point, I should like to say a little about the Government's general approach to the Review Body's report. We have accepted all the recommendations as a package. I am sure that there are several additional changes which hon. Members might have wished to see in the Bill but which the Review Body did not recommend or even specifically reject. My right hon. Friend the Leader of the House has received a number of proposals of this kind. One can, of course, think of many ways of adding to the benefits of any pension scheme, and not least the parliamentary scheme.
Many of these suggestions are, at least on the face of them, attractive. An example is the thought that some improve- ment might be made in the benefits for dependent children. But I am sure that hon. Members would agree that we are always in a difficult position when it comes to determining our own conditions of service. It is reasonable that our conditions should match those of comparable occupations in the public service and elsewhere. On the other hand, we naturally want to avoid any suggestions of self-interest or over-generosity to ourselves.
There is great advantage, therefore, in our being able to refer these matters to the Top Salaries Review Body. In this way we can ensure that improvements in the scheme have regard to the overall level of benefits under it and that they are introduced only after careful costing and thorough research by an independent body. I am sure that this arrangement works well and to the advantage both of Members and of the taxpayer. It is for this reason that the Government are reluctant to depart from the Top Salaries Review Body's recommendations, particularly when a proposal put to them by hon. Members and others has been specifically rejected. We have no wish to weaken the Review Body's standing in these matters. Indeed, I should like to take this opportunity to express our appreciation to Lord Boyle and his colleagues for their work in this difficult field. One does not lightly enter the dense thickets of the legislation on the parliamentary pension scheme.
The main provisions of the Bill are, I think, by now fairly familiar to hon Members, and in view of the lateness of the hour I am sure that the House will not wish me to dwell now on the minor administrative provisions in the Bill. I shall, therefore, confine myself to describing the five main improvements introduced by the Bill, all of which do no more than bring the basic scheme for Members of the House of Commons up to the level of public service pension schemes generally.
The improvements in the Bill will make no difference to the basic pensions of Members, with the exception of the small group of present Members who served in the House between 1949 and 1955. The changes that the Bill makes are designed primarily to assist the dependants of Members and those Members who find themselves in particularly difficult personal circumstances—for example, serious ill health. The ill health retirement provisions are almost identical with those which have been available to civil servants since 1972.
The first main improvement, contained in Clause 1 of the Bill, is an option, to be exercised at the end of a Parliament, for Members with 25 years' service in the House to retire at age 62 with the full pension they have accrued to date—that is, without any actuarial diminution such as is done in the case of hon. Members who retire early, at the age of 60, under the present scheme.
The Review Body noted that some other pension schemes with a retirement age of 65 contained provision for early retirement on pension accrued to date. They considered that the present option for MPs to take an actuarially reduced pension from age 60 onwards imposed a heavy financial burden but that a general reduction in the retiring age of the scheme to, say, 60 would lead to few Members being able to accrue a full pension by the age of retirement. The Review Body concluded, on balance, that retirement at age 62 should be permitted at the end of a Parliament for Members with at least 25 years service in the House. This is, I am sure, a recommendation which will be widely welcomed.
Clause 2, which is very important, provides an option for Members to retire early on grounds of ill health with their reckonable service enhanced in certain circumstances. In all cases the Member must satisfy the Trustees that he ceased to be a Member as a direct consequence of his ill health, which was such as would prevent him from performing adequately the duties of a Member of the House of Commons. This is, we believe, a reasonable test for the Trustees to apply. Under Clauses 3 and 4, current members of the supplementary scheme who retire on grounds of ill health will be eligible to receive an early pension, but without enhancement of reckonable service—that is, confined to the Members' scheme. The same will apply to former participants in either scheme who retire from work on grounds of ill health after leaving Parliament.
The third main change is in Clause 9, which permits the Lord President by order to provide for the purchase of added years of reckonable service, at full cost to the Member, by periodical contributions from salary or by lump-sum purchase. Work on the preparation of this order is well advanced and it will embody all the Review Body's particular recommendations for the scheme. I hope that an early draft of the order can be made available to hon. Members who are interested before we reach Committee stage on the Bill. The provision applies to any Member serving at the passing of the Act.
Clauses 6 and 7 of the Bill seek to introduce improvements in the arrangements for widows' and dependants' pensions payable in respect of Members of the House of Commons in service after the passing of the Bill. Where a former Member dies after retirement, his widow will receive not less than the full amount of his pension for three months before she begins to receive the normal half-rate widow's pension.
Similarly, where a Member who had qualified for a pension dies in service his widow will receive not less than his full pay as a Member for a period of three months. If he was under 65 when he died, the widow's continuing pension after the three-month period will be calculated on the basis of enhanced reckon-able service, as if her husband had retired on grounds of ill health. Clause 7 provides a limited short-term benefit for widows and children when a Member dies in service who had not qualified for a pension.
Clause 10(3) provides for Members actually in service after the passing of the Act to receive an extension of back service credit from 10 years—as at present—to 15 years, for services as an MP before the introduction of the parliamentary pension scheme in 1964. The Review Body considered carefully whether all previous service should be reckonable for pension purposes. It concluded that this would not be appropriate but that a limited increase could be justified in the context of the package as a whole.
To pay for these changes, there has naturally to be some increase in contributions both by Members themselves and by the Exchequer. The total cost of the changes provided for in the Bill will be about £120,000 a year. This will be met partly by an increase in Members' contributions from 5 per cent. to 6 per cent. of pensionable salary and partly by an Exchequer contribution of some £60,000 a year. There is no increase in contributions under the supplementary scheme for office holders, because the great majority of the improved benefits attach only to the basic scheme for Members.
Some hon. Members may be interested in the effect of Clause 14, which may appear particularly complicated. The main purpose of that clause is to bring about a small improvement in the position of those who retire from the House of Commons and then hold offices in the House of Lords with fairly low salaries. At present they may not receive any part of their pension earned as a Member of the House of Commons, as long as they hold office in the House of Lords. Clause 14 would allow some or all of their pension to be paid up to the level where pension and salary together equal the current salary of a Back-Bench Member of Parliament. They will not, therefore, lose financially on moving from this House to take up an office in the House of Lords.
I am fairly sure, too, that I shall be asked why the Bill does not seek to improve the arrangements for severance pay for Members of this House. The answer is that severance pay is not a benefit payable under the Parliamentary Pension Scheme and it is, therefore, outside the scope of the Bill. But my right hon. Friend has already informed the House that there will be an early opportunity to discuss this matter during the forthcoming debate on Members' pay.