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Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): However much I welcome the announcements on retrospective matters, I do not want that welcome to blunt my critical faculties in relation to these new clauses. To vest in a regulator the right to say whether a surplus can be considered in terms of the employer's benefit is a bridge too far.

I have considered regulators across a range of industries and I have not yet found one from a trade union background. They all seem to come from that group of people who have been involved in the world of the City for many years. I am drawn again to the wisdom of Woody Guthrie, the American folk singer. [Interruption.] Yes, he guides me on so many things.

John Robertson (Glasgow, Anniesland) (Lab): Here we go.

Mr. Purchase: No, no—my hon. Friend will be interested in this. On occasion, Woody Guthrie said:
 
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"I've been robbed more times by a man with a fountain pen than I ever have been by a man with a six-gun."

I have noticed that the Minister is holding a pen—it may not be a fountain pen—and the complexities of what he was explaining, which I tried desperately hard to follow, leave me a little apprehensive. Again, the conspiracy theory may be coming to the forefront, but who will the regulator be, who will he listen to and what note will he take of the workers' interests? How much will he or she be in hock to his or her colleagues in the City, who, frankly have only one interest in life: to ensure that they and their colleagues benefit to the greatest extent that they possibly can from our hard-earned wages?

We have gone through a recent period in history when, in another way, companies have taken very long pension holidays because the funds have been so much in surplus that it seemed pointless adding any more money to them. Yet we now find, of course, in the changed circumstances of a much reduced stock market valuation of pension funds, that that money could have been usefully put towards ensuring that workers actually got their pensions.

I welcome the announcements about retrospective pension failures because it is natural justice that something should be done, but are we not putting ourselves in the very same position again? Is it not likely that in the not-too-distant future—perhaps just 10 years down the line—a similar set of circumstances will occur where a surplus is paid back to an employer?

I make the point, as an aside, that we are talking about deferred wages. However they might be defined legally, the money is part of people's wages. It is theirs; it is not for someone to take it away from them again, which is what has been happening and to which I imagine these new clauses are designed to put an end. However, by any name we are talking about the employer taking out the money that has been put in by them exclusively, using whatever mechanism—the very dodgy one of a regulator worries me more than enough—when the money involved should be paid to the workers in any event but is taken back from them to pay a bonus, which is all I can call it, to an employer who can convince the regulator, or someone else, that the fund is so much in surplus that it is pointless not to take out that money. I think that I have a legitimate reason to worry.

The Minister will know that probably upwards of 500 people in Wolverhampton will, I hope, benefit from the retrospective provisions. What I do not want to happen is that whoever is standing here in 10, 15 or 20 years' time has to say exactly the same thing because the money that should rightfully be in workers' pockets, or at least in a very safe fund, has found its way back to the employer's pockets at the expense of the workers, who then find themselves with no pension. I hope that the Minister will give us a very convincing reply about why I should have any confidence in a regulator. However, if there must be a regulator, could that regulator have a duty to consult the workers' representatives before deciding to pay back any surplus?
 
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3 pm

Mr. Webb: I was asked by one of the broadcasters about today's deliberations, and I said that this debate was very much one for anoraks. However, this new clause touches on meaty issues relating to pensions, to our concerns about our constituents' pension rights and to the circumstances in which money can be taken out of pension funds. These are practical and important issues. I hope that "Today in Parliament" is listening.

I want to ask the Government to withdraw the new clause because there is a mistake in it. I am sure that the House has read all the texts carefully, but I have a confession to make. I have only just read the fine print of new clause 30 which will replace section 37 of the Pensions Act 1995, and I refer the Minister to proposed new subsection (3)(d). It says that

"the trustees are be satisfied that it is in the interests of the members".

The phrase "trustees are be satisfied" is not grammatical.

I will come to the point about pension surpluses in a minute, but I assume that the fact that the grammar is wrong partly reflects the speed with which the new clauses and amendments were tabled. I assume that the Government do not want an ungrammatical sentence to become part of the law of the land, but I do not know what "trustees are be satisfied" means.

Mr. Andrew Miller (Ellesmere Port and Neston) (Lab): "Are be" sounds like west country to me.

Mr. Webb: Yes, the phrase does have a west country ring to it, but I hope that the Minister will withdraw the new clause and table it again in another place with the grammatical error corrected.

There are other reasons why we should have substantive reservations about the new clause. Let me be sure that I understand what is going on. The Finance Bill and the pension simplification are getting rid of the 105 per cent. rule, and that must be a good thing. I hope that the Minister will stop me if I am wrong, but I understand that that rule—which said that a scheme that gets to 105 per cent. funding is so badly over-funded that we must take money out of it—is going. If I am right, that is a good and welcome change.

Whereas one of the ways in which a surplus could be disposed of hitherto was by providing enhanced benefits, the new clause says that there is no longer a requirement for that to be the first thing that a scheme does. The enhanced benefits that no longer have to be provided are indexation benefits—other than those already in the scheme rules—that relate to pre-1997 service. Post-1997 service must be indexed. Given that we are only in 2004, if someone coming up to pension age has worked in a company all their working life, three quarters or more of their service could be pre-1997 and could have no indexation rights attached to it at all. Surely if there is a surplus in the fund, the first call on that surplus should be to do something about the non-indexation of rights earned pre-1997. Money should not go out of the fund instead. If we are interested in avoiding pensioner poverty, in building up occupational pensions and in increasing funded pension rights, the first call should be pre-1997 indexation. It is surely wrong that the new clause allows an employer to request
 
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that money be taken out of the fund to the benefit of the employer when scheme members will receive pensions that will, to all intents and purposes, be frozen because of very limited price indexation. That worries me greatly.

The Government's goal is to raise from 40 per cent. to 60 per cent. the proportion of income in retirement that comes from funded pension schemes. Although the new clause might be an own goal, the Government can further their objectives by saying that before so-called surplus money can be taken out of a pension fund, it must be spent on the bare minimum of indexation of pre-1997 entitlements. That surely should have the first call. Although I welcome the abolition of the 105 per cent. rule—I never understood why we had to have it in the first place—I am unhappy about the suggestion that firms can simply take the money.

The Minister said that there would be a certification process and that the change would be in members' interests. However, I do not understand how it can ever be in members' interests for money to be taken out of a fund when their pre-1997 rights have not been indexed. When I intervened on the Minister, he said that the scheme has to provide buy-out rights. In other words, before a surplus comes out of a fund, the scheme must prove that it has enough money to meet the buy-out equivalent rights of some of the scheme members. However, those buy-outs presumably do not cover indexation for pre-1997, so there is no guarantee that the interests of the scheme's members will be looked after in respect of their pre-1997 rights, which, as I said, could be the majority of the accrued rights.

Although there must be certification that a change must be in the interests of the members, the test does not appear to be very strong. Therefore, the Minister should revisit the new clause not only because the grammar is wrong, but because it does not boost occupational pensions. It potentially undermines them.

The past few years have shown us that the valuation of funds is hugely volatile and that a certification at a point in time that there is enough money in the fund may prove to be wrong some years down the track. Given that stock markets can fall by half in three years, a certificate on a particular day that the valuation is enough to meet future liabilities is far from the same as saying that that will always be the case. One cannot certify that a scheme will always have enough money to meet the liabilities. One can only say at a point in time that it is one's best guess that there is enough money. That is not sufficient protection for scheme members.

I am simply not convinced that the new clause will protect the best interests of scheme members. When there is surplus, the requirement first to provide for indexation has been explicitly abolished, so I do not think that the interests of members will be served. This is a substantive issue and I am worried. I hope that the Minister can reassure us that scheme members' interests really will be served by the change.

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