Clause 6 - Recalculation and backdating of transitional rate in special cases

Part of Pensions Bill – in a Public Bill Committee at 3:15 pm on 2nd July 2013.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 3:15 pm, 2nd July 2013

Clause 6 covers a slightly unusual set of circumstances. If somebody has been contracted out of SERPS or the state second pension in the past but their employer pays a premium to put them back into the state second pension, we need to make sure that they do not retire before that has happened and find that we do not have a legal basis to recalculate their state pension after that has happened.

To give an example of how this could happen, imagine a person is relatively close to pension age, they join a workplace pension that has a rule that they will not get any pension if they have not been in it for two years. They leave the company, they never got their two years, so they built up no occupational pension but neither did they build up any SERPS pension because they were contracted out. They would end up with nothing for that period. In those circumstances, the firm pays a premium to put them back into SERPS. We therefore need to ensure that if that were to happen after the person had reached pension age, for example, we would have the legal power both to redo the foundation calculation to ensure that everything was as it would have been if the employee had been in SERPS all along, and to give them the correct pension. Clause 6 is simply about  recalculating and backdating the transitional rate in the special case that I have described. It is in the spirit of what hon. Members would expect, so I comment it to the Committee.