Pensions Bill

moved Amendment No. 78AP: 78AP: After Clause 130, insert the following new Clause— ““Additional Class 3 contributions (1) The Social Security Contributions and Benefits Act 1992 (c. 4) is amended as follows. (2) After section 13 insert— ““13A Right to pay additional Class 3 contributions in certain cases (1) An eligible person is entitled, if he so wishes, but subject to any prescribed conditions and to the following provisions of this section, to pay Class 3 contributions in respect of a missing year. (2) A missing year is a tax year not earlier than 1975-76 in respect of which the person would under regulations under section 13 be entitled to pay Class 3 contributions but for a limit on the time within which contributions may be paid in respect of that year. (3) A person is not entitled to pay contributions in respect of more than 6 tax years under this section. (4) A person is not entitled to pay any contribution under this section after the end of 6 years beginning with the day on which he attains pensionable age. (5) A person is an eligible person if the following conditions are satisfied. (6) The first condition is that the person attained or will attain pensionable age in the period— (a) beginning with 6th April 2008, and (b) ending with 5th April 2015. (7) The second condition is that there are at least 20 tax years each of which is a year to which subsection (8) or (10) applies. (8) This subsection applies if— (a) the year is one in respect of which the person has paid or been credited with contributions of a relevant class or been credited (in the case of 1987-88 or any subsequent year) with earnings, and (b) in the case of that year, the earnings factor derived as mentioned in subsection (9) is not less than the qualifying earnings factor for that year. (9) For the purposes of subsection (8)(b) the earnings factor— (a) in the case of 1987-88 or any subsequent year, is that which is derived from— (i) so much of the person's earnings as did not exceed the upper earnings limit and upon which such of the contributions mentioned in subsection (8)(a) as are primary Class 1 contributions were paid or treated as paid or earnings credited, and (ii) any Class 2 or Class 3 contributions for the year, or (b) in the case of any earlier year, is that which is derived from the contributions mentioned in subsection (8)(a). (10) This subsection applies (in the case of a person who attained or will attain pensionable age before 6th April 2010) if the year is one in which the person was precluded from regular employment by responsibilities at home within the meaning of regulations under paragraph 5(7) of Schedule 3. (11) The third condition applies only if the person attained or will attain pensionable age before 6th April 2010. (12) That condition is that— (a) the person has, in respect of any one tax year before that in which he attains pensionable age, actually paid contributions of a relevant class, and (b) in the case of that year, the earnings factor derived as mentioned in subsection (13) is not less than the qualifying earnings factor for that year. (13) For the purposes of subsection (12)(b) the earnings factor— (a) in the case of 1987–88 or any subsequent year, is that which is derived from— (i) so much of the person's earnings as did not exceed the upper earnings limit and upon which such of the contributions mentioned in subsection (12)(a) as are primary Class 1 contributions were paid or treated as paid, and (ii) any Class 2 or Class 3 contributions for the year, or (b) in the case of any earlier year, is that which is derived from the contributions mentioned in subsection (12)(a).”” (3) In section 1(2)(d) (outline of contribution system) after ““section 13”” insert ““or 13A””.”” The noble Lord said: My Lords, I have pleasure in moving this amendment and shall speak to the others in the group. We have listened to noble Lords’ concerns about the challenges that some women and carers have faced in building up entitlement to the state pension and the discrepancy in pension outcomes between today’s new male and female pensioners. I recognise the genuine strength of feeling on this important issue. I must start by paying tribute to my noble friend Lady Hollis for her tireless campaigning and for raising awareness of these difficulties during the passage of the previous Pensions Bill and in our deliberations on this Bill. We have always been sympathetic to her arguments, but to date we have struggled to find a well targeted and affordable way to help the people whom we are concerned about to plug gaps in their national insurance record. I acknowledge the acute disappointment expressed here and in the other place at our failure to find a solution so far. However, I am pleased to say that this amendment proposes a way forward that meets those tests of targeting and affordability. I am particularly pleased that, as I understand it, it has the full support of my noble friend. To ensure that help is targeted at those who need it the most we propose, first, that contributors will be able to buy six additional years of class 3 national insurance contributions—for years from 6 April 1975—over and above those permitted under the current time limits. That targets women currently approaching state pension age who have gaps in their records. Our evidence shows that the majority of those women require up to six years beyond those currently available to get a full basic state pension. Secondly, we propose that the right to buy additional contributions be limited to those reaching state pension age between 6 April 2008 and 5 April 2015. We have chosen April 2015 because by then 90 per cent of women reaching state pension age will be able to qualify for a full basic state pension if they take advantage of today’s class 3 rules. By then, far fewer women from these cohorts could benefit from buying the extra years allowed for by this amendment. Thirdly, we propose that an individual must have 20 qualifying years for state pension purposes on his or her national insurance record, taking into account full years of home responsibilities protection, before he or she can buy the additional contributions. That enables us to target help to those who have already made a significant contribution and are genuinely seeking to plug small gaps in their records. With these three measures in place, we believe, the 110,000 people whom we estimate will benefit from buying additional contributions will be those whose pension outcomes noble Lords are the most concerned about. As regards affordability, it is intended that the price of voluntary class 3 contributions will be increased. This will reflect the fact that the value of these contributions will increase after 2010, when an individual will need only 30 qualifying years to get a full basic state pension, which, of course, will be uprated by earnings in due course. It will also ensure that this special extension of the rules does not place new demands on the taxpayer. The Government usually announce the national insurance rate at the Pre-Budget Report, and they intend to increase the price of class 3 NICs to ensure that the overall package is cost neutral. There are many more details to be resolved. I hope that noble Lords will recognise the commitment that I am making today and will bear with us as we flesh out those details over the coming weeks and months. I beg to move.