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Clause 265
Amendments made: No. 216, in page 192, line 2, leave out second 'and'.
No. 217, in page 192, line 3, at end insert ', and
( ) section [Financial assistance scheme for members of certain pension schemes] (financial assistance scheme for members of certain pension schemes).'.—[Malcolm Wicks.]
Clause 273
Amendment made: No. 218, in page 196, line 21, at end insert—
'( ) regulations under section [Financial assistance scheme for members of certain pension schemes] (financial assistance scheme for members of certain pension schemes);'.—[Malcolm Wicks.]
New Clause 20
'(1) This section applies where there is an assessment period in relation to an eligible scheme.
(2) The Board may review a reviewable ill health pension in respect of a member under the scheme if—
(a) disregarding section [Effect of a review], the member would be entitled to compensation under paragraph 3 of Schedule 7 in respect of the pension if the Board assumed responsibility for the scheme,
(b) the member did not attain normal pension age in respect of the pension before the assessment date, and
(c) the pension is attributable to the member's pensionable service under the scheme or another scheme.
(3) An ill health pension in respect of a member under the scheme is reviewable for the purposes of subsection (2) if the member is entitled to the pension by reason of an award under the scheme ("the award") which was made—
(a) in the period of three years ending immediately before the assessment date, or
(b) before the end of the prescribed period beginning with the assessment date, in response to an application made before that date.
(4) Where—
(a) before the assessment date, an application was made under the scheme for the award of a pension before normal pension age by virtue of any provision of the scheme rules making special provision as to early payment of pension on grounds of ill health, and
(b) the trustees or managers of the scheme failed to decide the application before the end of the period mentioned in subsection (3)(b),
section 10 of the Pensions Act 1995 (c.26) (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure that the application was decided before the end of that period.
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(5) Where—
(a) the award was made in response to an application which—
(i) was made on or after the assessment date, or
(ii) was made before that date but not decided by the trustees or managers of the scheme before the end of the period mentioned in subsection (3)(b), and
(b) in the absence of this subsection, the award would take effect before the assessment date,
the award is, for the purposes of determining the compensation payable under this Chapter in a case where the Board assumes responsibility for the scheme, to be treated as taking effect after the date on which the decision to make the award was made.
(6) Regulations must prescribe the procedure to be followed in relation to the review of a pension under this section and any subsequent decision under section [Effect of a review].'.—[Mr. Pond.]
Brought up, and read the First time.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond): I beg to move, That the clause be read a Second time.
Madam Deputy Speaker: With this it will be convenient to discuss the following:
Government new clause 21—Effect of a review.
Government new clause 22—Interpretation of sections [Reviewable ill health pensions] and [Effect of a review].
Government amendments Nos. 99, 104, 105, 111 and 145.
Mr. Pond: Given the spirit of celebration evident in our proceedings this afternoon, I hope that there is considerable agreement about how to move forward and improve the Bill. In Standing Committee, an Opposition amendment was tabled with the aim of giving the pension protection fund board the power to review any early retirements that took place in the three years prior to the assessment date, and to make retrospective adjustments where it appears that the award created an unfair advantage to certain scheme members.
We agreed to consider the essence of that amendment. These amendments introduce new clauses to review the awards of early retirement by scheme trustees or managers on the grounds of ill health.
We have specifically focused on scheme members who have retired early on the grounds of ill health, because that is the only way in which scheme members under NPA can receive the 100 per cent. level of compensation and be exempt from the compensation cap on entry to the PPF. Scheme members who have taken early retirement other than on the grounds of ill health will be subject to the 90 per cent. level of compensation and the compensation cap, so they are unlikely to be able to create an unfair advantage.
The clauses allow for the board to review certain cases of early retirement on the grounds of ill health where the award was made in the three years prior to the assessment date, or in limited circumstances where the application had been made before the assessment date. Other conditions for review must also be satisfied—for example, the member must be under normal pension age immediately before the assessment date.
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The board will consider whether the original decision by the trustees or managers regarding the ill health award was based on a mistake or was made in ignorance of a relevant fact. The board will also consider whether the member should have been entitled to an ill-health award at any stage before the assessment date.
The new clause is an important addition to our moral hazard powers. It will work in conjunction with the requirement that some rule changes that were made should be disregarded in certain circumstances. Together, they will be a significant deterrent to individuals looking to take advantage of the PPF.
Amendments Nos. 99, 105 and 111 are technical amendments relating to the new clauses. Amendment No. 104 will amend clause 127, on the board's obligation to obtain valuation of assets and protected liabilities, to require prescribed information to be included in the written valuation. That may include details of some of the basis of the valuation. Amendment No. 145 will insert a new paragraph into schedule 7.
The admissible rules are the scheme rules, excluding certain recent rule changes that were made, or took effect, in the three years prior to the assessment date. If the combined effect of the recent rule changes and recent discretionary increases result in an increase to the cost of the protected liabilities at the assessment date, those changes are to be disregarded. Entitlement to compensation is based on admissible rules rather than scheme rules. That is an integral part of the moral hazard provisions, to ensure that pension schemes do not increase their liabilities in the knowledge that the PPF will be required to meet those liabilities.
If an individual has been receiving a pension and the scheme rules under which the pension was awarded are disregarded for PPF purposes, in some cases we will want to ensure that he or she can still receive payments of compensation from the assessment date. We also want to ensure that any compensation to which the individual becomes entitled will take account of scheme benefits that the individual may have already received. Regulations will set out how such a person's compensation is to be determined. The effect of the amendment will be to prevent scheme members from being inadvertently affected by the PPF admissible rules and from losing their PPF compensation or gaining unintended enhanced compensation.
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