Orders of the Day — Parliamentary and Other Pensions Bill

Part of the debate – in the House of Commons at 8:44 pm on 27th April 1987.

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Photo of Mr Alf Morris Mr Alf Morris , Manchester Wythenshawe 8:44 pm, 27th April 1987

I am grateful to the Leader of the House for his extremely kind reference to me in his opening speech. As he said, I have a very special interest in this Bill as chairman both of the managing trustees of the parliamentary contributory pension fund and the House of Commons Members' fund.

I pay tribute to the quiet and unpublicised, but often difficult and always painstaking, work of my fellow trustees in the service of their fellow Members. At the same time, I place on record here the unfailing help that we receive from Jim Dobson, Tony Lewis, Frank Brewer and all who work with them in the Fees Office. Nothing is too much trouble for them if they can help any Member of this House, past or present, or their dependants. The House as a whole owes them its gratitude.

The cumulative effect of six separate Acts of Parliament and 20 or so statutory instruments has made the parliamentary pension scheme, as it now exists, administratively very complex; and we have reached the stage where further amendments would make it extremely hard to follow. This Bill makes no changes to the rules of the scheme, or to the benefits available, but will enable the existing legislation to be consolidated in regulations or to continue to have effect as if contained in regulations, as appropriate, and will also enable future amendments to the scheme to be made by regulations. So the Bill, on which I congratulate the Leader of the House, is deserving of support on two counts. First, it will be more convenient and make the scheme more comprehensible to have it in a single document; and, perhaps more importantly, any future amendments will not be subject to the constraints of the parliamentary time available for primary legislation and can thus be implemented more quickly.

Contributions under the original Act in 1965 were expressed as a fixed sum of £150 a year from each Member with, effectively, a matching Exchequer contribution. There was provision for an additional Exchequer contribution to meet the cost of pensions in respect of non-contributory, but reckonable, service before the scheme started. The 1965 Act further provided that benefits and/ or contributions could be varied in the light of any surplus or deficiency revealed by an actuarial review of the fund.

By contrast, the Parliamentary and Other Pensions Act 1972 determined the Member's contribution at 5 per cent. of salary, leaving the Exchequer contribution to be determined by the Government Actuary at the appropriate level necessary to balance assets and liabilities. This means, of course—and it is essential for the fact to be understood by the House as a whole—that the fund can never go into surplus, no matter how well the investments perform. Equally, it means that the prospects of securing improvements in the scheme, based on successful investment management, are effectively vetoed since the Exchequer contribution correspondingly diminishes as a result. I ask the House to take very careful note of that point.

The amendments recommended by the Top Salaries Review Body in its 20th report were estimated to increase the cost of benefits under the scheme from about 18 per cent. to 22 per cent. of a Member's salary. It was therefore recommended that the Member's contribution should be, as before, approximately three eighths, or 8 per cent. Notwithstanding the review body's recommendation, the Government decided that the Member's contribution should be 9 per cent. The effect of that decision, endorsed by the House, has been to cause the Government Actuary to recommend a significant reduction in the Exchequer contribution from 3·3 times Members' contributions in 1985–86 to 2·3 in 1986–87 and only 2·0 thereafter. I must strongly emphasise to the House that this compares most unfavourably with other pension funds. The Government Actuary's Seventh Survey of Occupational Pension Schemes 1983, which was published in 1986, shows that across the board employers' contributions are 3·03 times employees' contributions. The multiple for the public sector alone is 2·6. Allowing for the fact that the parliamentary scheme's multiple also contains an element relating to pensions in respect of pre-1964 service, the Exchequer contribution to our scheme is inferior to that for the public sector taken as a whole.

There have, of course, been many improvements in the scheme over the years, in which the trustees have taken a leading role, not least those in the accrual rate; in the qualifying age/service conditions for early retirement at a general election; and the provision for ill-health retirement pensions. There is, however, a strong case for further improvements, and it is ultimately for the House to decide if and when they should be effected. Take, for example, the relationship between salary and pension. In 1975, the TSRB recommended a parliamentary, salary of £8,000, compared with £4,500 per annum then payable. Although the recommendation was not implemented in full (the salary moving only to £5,750) the Government of the day nevertheless permitted a higher notional salary to be implemented for pension purposes. Thus, the widow of a Member who died in service was awarded a pension correspondingly higher than would otherwise have been the case. The House may think that this precedent should be followed in all circumstances where a Government cannot see their way fully to implement TSRB recommendations on pay at the outset, as happened in 1983.

Ill-health retirement is another subject of concern. On retirement for reasons of ill health, service is enhanced to twice its actual length if that is less than 10 years or, if service is more than 10 years, to 20 years or by six and two thirds years, whichever is greater. In no case can the enhancement be greater than the period from the date of retirement to sixty-fifth birthday. The current practice of the Inland Revenue would permit a pension based on potential service to age 65. So if a Member retires on ill-health grounds at the age of 55, with 23 years' service, under the parliamentary pensions scheme his or her pension is based on 28 and two thirds years, whereas under Revenue rules it could be based on 32 years. In the 10 cases we have had to date, seven pensioners would have benefited under a change to the Revenue maximum.

I turn now to the death in service gratuity. The gratuity payable on death in service is a sum equal to a Member's salary. The Revenue limit is four times salary, including any retained benefits. If the gratuity in the parliamentary scheme were to be set at twice the Member's salary at the date of death, the question of retained benefit could be ignored. On current salary, the widow of a Member who died in service would, therefore, receive £37,000, compared with the Revenue limit of double that amount, less any retained benefits as defined by it.

The pension paid to widows and widowers is currently one half of the Member's notional ill-health pension. The Revenue maximum is two thirds of the Member's notional ill-health pension, based on potential service to age 65. So if a Member dies in service at the age of 55, with 22 years' service, the widow or widower would receive over £2,500 a year less than the Revenue maximum allows. Moreover, under our scheme, the widow's or widower's pension ceases on remarriage or cohabitation, whereas, under Revenue practice, it may continue for life notwithstanding remarriage or cohabitation.

Some of the public comment there has been on clause 4 of the Bill, which allows for the payment of a pension to Lord Maybray-King's widow, must have left many of those we represent with the impression that the widows of Members of Parliament are extremely well provided for. While Lady Maybray-King's pension would, in any case, not be payable from the parliamentary pensions scheme, but from the Consolidated Fund, it may thus be instructive to spell out in this debate just how much the generality of widows of Members of Parliament are entitled to receive.

If a Member died, over the age of 65, with 30 years' service, his widow's pension would be £4,604. In the case of a Member who died, under the age of 65, with 14 years' service—and with an enhancement of over six and a half years—the long-term pension of his widow was less than £2,800 a year. That is the reality behind some of the public comment there has been about clause 4 of the Bill, and right hon. and hon. Members may feel that the time has now come to look at improvements in widows' benefits that would bring them more into line with those in some other schemes. In particular, a case could be made for a minimum pension based on not less than 10 years' actual and notional service. At the present time, this would provide a widow's pension of £1,800 a year which very few people here, or anywhere else, could describe as extravagant.

I am, of course, very much aware how strongly many right hon. and hon. Members feel about the payment of a year's salary as resettlement grant to Members who retire under the age of 65, but not to their colleagues, often with much longer service, who have reached that age when t hey leave the House. Resettlement grant is payable from the Consolidated Fund and not from the parliamentary pensions scheme, but the Leader of the House has been made fully aware of the strength of feeling on this issue which, no doubt, others will want to speak about as the debate proceeds.

If we accept the hints given both by the right hon. Gentleman and the Prime Minister last Thursday about the length of time left to us before this Parliament is dissolved, the Bill now before us may have two Second Readings, one before the election and one afterwards. If that proves to be the case, there will be ample time for suggestions made in this debate to be fully considered before we enact the Bill.

As of now, as chairman of the managing trustees, I am glad to have had the opportunity provided by this debate to indicate both the restraints on the parliamentary pensions scheme and, at the same time, some of the improvements I should like to see, especially for Members' dependants. I hope that they will be given due attention by both sides of the House and that today's hopeful precepts on improving the scheme, or at least some of them, will become tomorrow's practice. It is within the power of the House to make that happen.