Previous SectionIndexHome Page


After clause 61

Lords amendment: No. 31, to insert the following new clause--Pension entitlement of present and former employees of NATS--


".--(1) In this section--
"NATS employer" includes NATS, any designated company which succeeds to the business of NATS and any employer other than a designated company which succeeds to or acquires any part of the business of NATS;
"NATS" is National Air Traffic Services Ltd whose air traffic services are to be transferred under the provisions of this Act;
"protected beneficiary" includes--
(a) any person who, on the transfer date, is employed by NATS and is an active member of the Scheme;
(b) any person who is employed by NATS on the transfer date, but is then too young to join the Scheme, and who subsequently joins;
(c) any person who is not an active member of the Scheme on the transfer date but who is subsequently entitled to rejoin as a NATS employee without a break in their continuity of employment;
(d) any person who is not an active member of the Scheme on the transfer date, but who is entitled to accrued pension rights under the Scheme at that date; and
(e) any person who is prospectively or contingently entitled to benefit under the Scheme on the death of a person covered under (a) to (d) above;
"relevant scheme" means the Scheme or any other scheme of a NATS employer that covers protected beneficiaries, and that provides benefits in respect of the protected beneficiaries which are at least equivalent in value to those applicable to the protected beneficiaries as at the transfer date;
"Scheme" means the Civil Aviation Authority Pension Scheme;
"transfer date" means the date of the transfer of NATS to the public-private partnership.
(2) NATS (or, if appropriate, the designated company) shall, subject to the consent of the Pension Schemes Office of the Inland Revenue, participate in the Scheme as a non-associated employer.
(3) If NATS (or the designated company) does participate in the Scheme as a non-associated employer, a proportion of the total assets of the Scheme shall be segregated for the benefit of the protected beneficiaries and the share of assets so segregated shall be equal in proportion to the proportion that the Scheme's liabilities in respect of the protected beneficiaries bears to the Scheme's liabilities as a whole.

15 Nov 2000 : Column 1005


(4) If NATS (or the designated company) is unable to participate in the Scheme, that NATS employer shall instead make available a relevant scheme for the benefit of the protected beneficiaries.
(5) If the shares or business of NATS (or the designated company), or any part of that business, is transferred to a NATS employer other than NATS or a designated company, that NATS employer shall become a non-associated employer in the Scheme and if that is not possible that NATS employer shall instead make available a relevant scheme for the benefit of the protected beneficiaries.
(6) For the purposes of subsections (4) and (5), if a NATS employer is to make available a relevant scheme other than the Scheme, a share of the assets of the Scheme (or of the previous relevant scheme if not the Scheme) shall be transferred to the receiving relevant scheme, calculated on the basis described in subsection (3).
(7) If a protected beneficiary transfers to the employment of another employer that also participates in the Scheme but which is not a NATS employer, that beneficiary shall remain a protected beneficiary for the purposes of the benefits to be provided to and in respect of him under the relevant scheme and if that beneficiary subsequently transfers back to the employment of a NATS employer he shall still remain a protected beneficiary.
(8) For so long as a NATS employer remains as a participating employer of the Scheme in respect of protected beneficiaries, one trustee of the Scheme shall be a member representative selected from amongst the protected beneficiaries, and one trustee of the Scheme shall be an employer representative of the NATS employer.
(9) The NATS employer shall contribute to the relevant scheme at no less than the rate recommended by that scheme's actuary as being sufficient to secure the accrued rights from time to time of the protected beneficiaries in full by the purchase of annuities and the NATS employer shall not be entitled unilaterally to suspend or terminate its contributions to the relevant scheme except upon its insolvency.
(10) On the full winding-up of a relevant scheme, or on a partial winding-up which involves protected beneficiaries, any shortfall in the assets required to buy out the accrued rights at that time of the protected beneficiaries shall be met in full by the relevant NATS employer and shall be treated as a debt on the employer.
(11) If, on the full or partial winding-up of a relevant scheme, as described in subsection (10), the trustees wish, rather than securing benefits by the purchase of annuities, to pay a bulk transfer to another scheme, that other scheme shall be a relevant scheme and the transfer value payable in respect of the protected beneficiaries shall be sufficient to secure a buy out of their accrued rights if the receiving scheme were to be wound up immediately following the transfer.
(12) The NATS employer shall provide future benefits in the relevant scheme which, in respect of the protected beneficiaries, are at least equivalent in value to those available under the Scheme at the transfer date.
(13) No amendment may be made to a relevant scheme which would result in a reduction of the accrued or future rights of protected beneficiaries, nor in an increase in the contributions payable by protected beneficiaries who are active members."

Mr. Raynsford: I beg to move, That this House disagrees with the Lords in the said amendment.

First, let me reassure the House that the Government regard the matter of pensions protection for air traffic control staff as one of great importance. Pensions affect us all, and I can well understand why it is a matter of such importance to NATS employees. I must therefore make it clear that we would not act in any way that would put them under threat, and we are not doing so. We have considered in some detail the adequacy of protections for NATS employees. We believe that the necessary protections are in place without the need for this amendment. I shall attempt to explain, as briefly as possible, what the protections are.

15 Nov 2000 : Column 1006

7.45 pm

First, the Civil Aviation Authority pension scheme, to which NATS staff currently belong, is to be amended to make it possible for staff employed by the public-private partnership to remain members of that scheme. That will involve NATS becoming a non-associated employer within the scheme. This arrangement will prevent cross-subsidy between the new NATS section of the scheme, which will relate to a company classified to the private sector, and the CAA section of the scheme, which will remain in the public sector. It will enable NATS staff to continue to enjoy the benefits that they currently enjoy.

Perhaps I can digress briefly to explain the position of current pensioners and deferred pensioners within the scheme. I assure the House that the position of these two groups will remain unaffected by the PPP. They will remain in the Civil Aviation Authority pension scheme, and they will be in the CAA section of that scheme, which will also include current CAA staff. This section will, as I have just mentioned, remain in the public sector. Both groups of pensioners will continue to receive benefits in exactly the same way as they do now.

Returning to the position of existing NATS staff, we have made it very clear to all those bidding to be our strategic partner in the PPP that securing the continued participation of current staff in the scheme is a fundamental condition of being considered for that role. In addition, we will put into the strategic partnership agreement a binding commitment--enforceable by law--that guarantees the continuation of that right on terms at least as favourable as those that exist now.

Mr. Don Foster: Will the strategic partnership agreement be made public?

Mr. Raynsford: As the hon. Gentleman will recall, a draft of the strategic partnership agreement was made available to all members of the Committee considering the Bill. The matter was discussed in detail in Committee, and that is a sign of our absolute commitment to open government in this respect.

Mr. Foster: I asked the Minister that question because the issue was raised in the other place when Lord Brabazon asked Lord Whitty whether the strategic partnership agreement would be published. Lord Whitty replied:


Why did Lord Whitty say that?

Mr. Raynsford: Lord Whitty said that for the obvious reason there will inevitably be some confidential elements in the document. The key point is that we have made a commitment on the provisions relating to the guarantees for pensions, and we made available the draft document to the Committee, so that there could be a thorough consideration of all the basic principles behind the strategic partnership agreement.

The commitment that I outlined is a very significant safeguard, underpinned by the Government's continued participation in the PPP. NATS staff will also enjoy the protections on pensions that exist under the law of the land, including the provisions in the Pension Schemes Act 1993 and in the Pensions Act 1995. They provide, among

15 Nov 2000 : Column 1007

other things, protections for accrued benefits and funding levels. Yet another level of protection exists in the scheme's trust deed and rules. These are unusually restrictive and highly protective of members' interests. It is not uncommon for the sponsoring employer of a pension scheme to have the ability to reduce the level of benefits for future service, which are known as "prospective" benefits. However, no employer who participates in the Civil Aviation Authority pension scheme has that particular power, because the restrictive power of amendment in the trust deed provides that amendments cannot be made to reduce prospective benefits. That is another very valuable and important protection.

I am sure that some hon. Members will draw attention to the precedents for statutory protection in past privatisations. I shall focus on the most recent case where a comparison is made--that of the underground railway staff in London. The London Underground case is much more complex than that of NATS. In the case of NATS, we are arranging a once-and-for-all transfer of the company to the private sector. There is no subdivision of the company and there is no reorganisation of the industry into a number of parts, so there is no need for provision to deal with the subcontracting that occurs in the railway industry. There is no provision for the return of some parts to the public sector, nor are the trust deeds of the two schemes or the arrangements for changes to those deeds comparable--prospective benefits could be changed under the London Underground deed. The two cases cannot, therefore, be regarded as comparable.

Before 1997, the range of outcomes of transfers to the private sector, in terms of pension protection, was highly variable. In 1997, this Government set out to reform the protection of pensions. In 1998, interim new guidance was issued by the Cabinet Office under the title "Better Quality Services". It emphasised the importance of protecting staff pensions in any restructuring that involved private sector partners, and required the quality of that protection to be a factor in assessing bids for partnership. Then, in June 1999, the Treasury issued definitive guidance under the title "A Fair Deal for Staff Pensions", which was incorporated into broader guidance on treatment of staff issued by the Cabinet Office at the beginning of the year.

The objectives of those reforms were simple: to take the fear out of public sector reform and sales as far as pensions were concerned, and to set a common standard of protection that all projects should pass. We now have a comprehensive framework of protections in the standard of treatment of staff. It is a fair deal not only for the staff but for private sector businesses that bid to enter into partnership to deliver public services.


Next Section

IndexHome Page