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Standing Committee Debates
Child Support, Pensions and Social Security Bill

Child Support, Pensions and Social Security Bill

Standing Committee F

Tuesday 7 March 2000

(Afternoon)

[Mr. William O'Brien in the Chair]

Child Support, Pensions and Social Security Bill

New clause 4

Annual report on service pensions,

war pensions and war widows' pensions

    `.—After section 169 of the Pensions Act 1995 there shall be inserted—

    169A.—(1) The Secretary of State shall lay before Parliament on or before the last day of April 2001 and annually thereafter a report for the previous financial year on service pensions, war pensions and war widows' pensions, setting out in particular—

    (a) the numbers of those in receipt of such pensions;

    (b) an assessment of whether the payments made during the year in respect of those pensions have been sufficient to prevent their recipients suffering any unnecessary hardship; and

    (c) what plans, if any, he has to improve the well-being of those recipients, whether by means of changes to the level of payments made in respect of those pensions or otherwise.

    (2) In preparing the report referred to in subsection (1), the Secretary of State shall—

    (a) consider any representations made to him by individual recipients of the pensions referred to in that subsection or organisations representing their interests; and

    (b) consult such other persons or organisations as appear to him to be appropriate.'.—[Mr. Burstow]

Brought up, and read the First time.

Question proposed [this day], That the clause be read a second time.

4.30 pm

Question again proposed.

The Chairman: I remind the Committee that with this we are taking new clause 21—War pensions for widows: entitlement—

    `(.—(1) Subject to subsection (2), a widow in receipt of a widow's pension under any of the enactments mentioned in subsection (3) (``the DSS pension'') and in receipt of a pension paid under the Armed Forces Pension Scheme shall on remarriage or when living together as husband and wife with a member of the opposite sex only retain the Forces Family Pension (attributable).

    (2) Subsection (1) does not apply to a widow in receipt of a basic pension under section 44 of the Social Security Contributions and Benefits Act 1992; and a widow in receipt of such a pension who has remarried or is living together as husband and wife with a member of the opposite sex may not retain the Forces Family Pension (attributable).

    (3) The enactments referred to in subsection (1) are—

    (a) the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 1983, and any order re-enacting the provisions of that order,

    (b) the Personal Injuries (Civilians) Scheme 1983, and any subsequent scheme made under the Personal Injuries (Emergency Provisions) Act 1939,

    (c) any scheme made under the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939 or the Polish Resettlement Act 1947 applying the provisions of any such order as is referred to in paragraph (a),

    (d) the order made under section 1(5) of the Ulster Defence Regiment Act 1969 concerning pensions and other grants in respect of disablement or death due to service in the Ulster Defence Regiment.)'.

Mrs. Jacqui Lait (Beckenham): I was just about to conclude by saying that if the motion is withdrawn we shall return to the new clause later.

The Chairman: The mover of the new clause indicated this morning that he wanted to withdraw it.

Motion and clause, by leave, withdrawn.

New clause 18

Long term solvency of trust-based

stakeholder schemes

    `Trust-based stakeholder schemes shall be regulated and monitored as to their long term solvency.'.—[Mrs. Lait.]

Brought up, and read the First time.

Mrs. Lait: I beg to move, That the clause be read a Second time.

The new clause seeks to probe, and I am sure that the Minister will be able to reassure me on the issues that it raises, which were brought to my attention by the Investment and Life Assurance Group. The group was concerned about stakeholder schemes based on trustees, which might not be solvent for the first few years of their existence. Understandably, one imagines that the regulatory regime for insolvent pension schemes is draconian. The group was concerned that a regulatory regime should be established for trust-based stakeholder schemes and that it should be able to provide for the particular and unfortunate circumstances that I have described. Such circumstances might apply to a scheme for the first few years of its existence, until it becomes solvent and able to exist in its own right, without any comeback on the trustees. One of the biggest problems for stakeholder schemes will be finding trustees. If potential trustees think that they will be penalised because of the initial years of some schemes, it will be even more difficult to secure their participation.

I understand that regulatory regimes are already in place that allow such circumstances to be monitored and regulated with a lighter hand. I hope that the Under-Secretary will reassure me and the Investment and Life Assurance Group on its concerns and ensure that they are dealt with.

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): I hope that I can reassure the hon. Lady. I am not sure what she means by the word ``solvent'' in respect of the pension funds about which she spoke. The new clause would introduce a requirement for trust-based stakeholder pension schemes to have their solvency regulated and monitored. Stakeholder schemes will, however, be money purchase arrangements under which the members' contributions and associated investment growth will build up a fund. Upon retirement, this fund will provide a pension, usually by the purchase of an annuity.

The liabilities of the scheme are, by definition, equal to the value of its assets. There will, therefore, be no minimum funding requirement for stakeholder schemes similar to that which is used to underwrite final salary occupational schemes. The issue of insolvency does not have much meaning in that context. We should, however, consider the question whether schemes can operate effectively within the maximum allowable charges. I am not sure whether the hon. Member for Beckenham was getting at that matter rather than the minimum funding requirement, which does not exist for the schemes in question. I hope to reassure the hon. Lady by clarifying how trust-based schemes and their requirements will operate.

The trustees of a trust-based stakeholder scheme will be responsible for undertakings made by the scheme. The Welfare Reform and Pensions Act 1999 sets out a number of requirements for the conduct of trust-based stakeholder schemes. Those broadly follow many of the requirements for occupational schemes, which are set out in the Pensions Act 1995. For example, trustees are responsible for selecting and monitoring an appropriate fund manager. They must prepare a statement of investment principles. Trustees and their fund manager must consider possible investments, the balance between them, and the risk and expected return. If a scheme undertakes to operate within a charge limit, it will be for the trustees to ensure that arrangements are in place for that to happen.

Trustees can be insured against some of the liabilities that they take on in that role. We will need to see whether the insurance market is able to offer insurance against an overrun in costs. It is too early to tell whether that will be the case, but the most practical way of dealing with potential difficulties will be through the contractual arrangements that trustees make with those organisations that provide services to the scheme.

As many respondents to last year's consultation on scheme governance identified, it will generally be the case that the provider of services agrees to deliver those services for a pre-determined share of the overall scheme charges. It is therefore the provider in those circumstances who is responsible for cost overruns, not the scheme or its trustees. Similarly, in some schemes, a sponsoring organisation, such as a trade union, might take on that liability to limit the individual liability of the trustees.

In the event of malpractice, such as theft or fraud from a scheme, section 81 of the Pensions Act 1995, as applied by schedule 1 of the Welfare Reform and Pensions Act 1999, provides stakeholder schemes with protection and allows trustees to apply to the pensions compensation board for compensation. Existing financial service compensation arrangements will also apply in the case of the insolvency of, say, an investment manager who is holding funds on behalf of the scheme.

The regulation of trust-based stakeholder schemes will fall to the Occupational Pensions Regulatory Authority. The Pensions Act 1995 gives OPRA wider-ranging functions and powers to ensure that trustbased stakeholder schemes operate within the law and are safe and well run, so that people can have confidence that their anticipated retirement income will be there when they need it.

We have always said that one of underlying characteristics of stakeholder schemes is that they will offer members security. By that, we mean that schemes will have a governance structure to give members confidence that they are secure and run in their best interests. The arrangements that we have put in place for trust-based stakeholder schemes will achieve that.

Mrs. Lait: I am grateful to the Under-Secretary for that reassurance. Questions remain on whether the regulatory regimes will operate with a light hand if there are potential difficulties and with a view to the long-term future. Provided that the stakeholder pension trust base is regarded as being sound, it should be no more onerous for people who volunteer to be trustees to monitor and regulate it. On the basis of the Under-Secretary's response, which I might examine in more detail, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 19

Pensions and annuities

    `.—The Secretary of State may, by regulations, introduce alternative arrangements to those contained in sections 28, 28A, 28B and 29 of the Pension Schemes Act 1993 to the extent that he deems appropriate.'.—[Mrs. Lait.]

Brought up, and read the First time.

 
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