Observation (CEACR) - adoptée 2008, publiée 98ème session CIT (2009)

The Committee notes the Government’s reply to its previous comments, which refers to the information provided in the 40th annual report on the application by the United Kingdom of the European Code of Social Security.

Part III (Sickness benefit) of the Convention. The Committee notes the detailed information concerning the inclusion of the Child Tax Credit into the calculation of the replacement rate of the short-term benefits provided by the Government in reply to its previous conclusion. It also notes that the Government’s next report will include full details on the implementation of the new Employment and Support Allowance which is to be introduced from 27 October 2008.

Part IV (Unemployment benefit). The Committee recalls that the system of social protection against unemployment in the United Kingdom comprises various social security benefits including contribution-based and income-based Jobseekers’ Allowances (JSA), working tax credits, which make low-paid jobs more attractive for the unemployed, and a wide range of means tested social assistance benefits, which offer protection against poverty. The Committee would like the Government to show in its next report, on the basis of updated statistics, that the number of persons protected by the benefits included in the system attains the coverage required by Articles 5 and 21 of the Convention. Please indicate the amounts of these benefits which would be payable in the case of unemployment to a person having received the reference wage of an ordinary adult male labourer, determined under Article 66 of the Convention. The Committee would also be grateful to receive updated information for the same time period on the total number of unemployed persons in the country, the percentage of unemployed persons receiving the contribution-based JSA alone and the income-based JSA alone, as well as the average duration spent on these benefits before returning to work.

Part V (Old-age benefit), Article 28(a) (level of benefit). In its previous comments, the Committee noted that the rate of retirement pension for a standard beneficiary in 2006, represented 32.06 per cent of the reference wage, which is far below the minimum replacement level of 40 per cent prescribed by the Convention. In view of the ongoing pension reform in the United Kingdom, the Government was asked to indicate the part of the replacement income in retirement which, in the forecasted time frame, would be provided by the Basic State Pension (BSP) and the Second State Pension (SSP), as well as the part which would be supplied from the savings in the personal account. In reply, the Government indicated that for the median earner gaining £24,440 in 2007/08 earning terms and reaching state pension age in 2055, total weekly retirement outcomes in the year of retirement would represent £223 and ensure the replacement level of 47.5 per cent. Of this total, BSP (£82) and SSP (£69) in 2055 will ensure the replacement level of only 32.16 per cent, the same as in 2006, which will remain below the level prescribed by the Convention. The Committee understands, therefore, that to reach the projected replacement level of 47.5 per cent, the Government is counting on the private savings accrued within personal accounts, which are expected to generate a private pension (£72) providing about one-third of total retirement income. The Committee wishes the Government to provide an actuarial forecast under the best possible scenario showing by which year private pensions of at least 50 per cent of all employees in the country would be such as to ensure, together with BSP and SSP, the total retirement income of these employees, which will attain the 40 per cent replacement level guaranteed by the Convention. Please also indicate whether the current financial crisis has made it necessary to introduce corrections in the ongoing pension reform as regards the sustainability of the state pension system and the expected growth of private pensions.

Part X (Survivors’ benefit), Article 63, paragraph 1(a) and paragraph 2(a), (Level of benefit). To receive 100 per cent basic rate Widowed Parent’s Allowance (WPA), the late husband must have had qualifying years for about 90 per cent of the years in his working life. If the number of qualifying years is less than the number needed for a 100 per cent basic rate, the allowance is reduced accordingly; no allowance is payable if the number of qualifying years is less than a quarter of the number needed. The report states that, if 25 qualifying years yielded 100 per cent, the 15 qualifying years would equate to 69 per cent and five qualifying years would equate to nil. This explanation raises doubts that the above rule for calculating the qualifying period of the deceased husband for his wife’s entitlement to the WPA would ensure the level of protection of the widow guaranteed by the Convention. While the condition of having 90 per cent of the years in the breadwinner’s working life counted as qualifying years might be more favourable in case there were no, or very few, gaps in the breadwinner’s working career, the situation would be reversed for widows whose late husband’s working career has been considerably shorter than his working life. Thus, having 15 qualifying years out of 20 years of working life will result in 25 per cent reduction in the WPA, bringing it below the level required by the Convention, and having only five qualifying years, which should give entitlement to a widow’s reduced benefit under Article 63(2)(a) of the Convention, will result in no benefit at all. The Committee would like the Government to show in its next report, on the basis of the updated calculations, that in all cases covered by the Convention, the protection offered to a standard beneficiary by the WPA and other relevant benefits will not be less than the minimum replacement level of 40 per cent fixed by the Convention.