Pensions Bill

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Kevin Brennan: It is a notable social advance, and we could debate at length the nature of the risks that workers, employers and shareholders should have to accept with pensions. My intention in tabling the amendment was to stress my strongly held view that it is essential that people have confidence in their pensions, and the risk to the worker be minimised. After all, the purpose of the pension is to provide security, and the governing party to which Labour Members belong was founded to provide security for workers.

The Bill is a welcome step forward, and I shall not prolong the debate at this stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 204 ordered to stand part of the Bill.

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The Chairman: It would be helpful for me to know whether any of the Opposition parties want stand part debates on clauses 205 to 208.

Mr. Waterson: I would like to speak on clause 206.

The Chairman: Fine. I will take the clauses separately.

Clause 205 ordered to stand part of the Bill.

Clause 206

Inalienability of occupational pension

Question proposed, That the clause stand part of the Bill.

Mr. Waterson: I am sorry, Mr. Cran. I know that you had a rush of enthusiasm when you allowed me to speak on this clause. I have a fairly simple question.

The Government started off with a great burst of energy by providing us with a fact sheet on the first part of the Bill, but fact sheets seem to have dried up—but of course, I am still not on the mailing list. There may be constant circulation of such information, but perhaps I do not see it because I am not included.

I do not understand the concept of ''inalienability''. I cannot even pronounce it, let alone understand it. Perhaps the Committee could be given a brief explanation of how the clause improves on the existing provision in the Pensions Act 1995.

Mr. Pond: Let me explain the clause. It allows an occupational pension scheme to recover an accidental overpayment of pension to a member of the scheme. It can and does happen that a pension scheme makes a mistake in calculating a member's pension and pays them an incorrect amount. If the payment is an underpayment, the scheme is under an obligation to make good that payment.

It has been the practice in the past that the trustees of the scheme would recover any overpayment simply by reducing future payments of pension to the member. However, recent legal opinions have cast doubt on those arrangements and have said that such recoveries may not be tenable because of the provisions of section 91 of the 1995 Act.

However, the policy is clear. If there has been an overpayment of pension, it is only right that the scheme should be able to recover it. This clause makes it clear that schemes can make such recoveries and, taken together with the existing safeguards, provides a central way for pension schemes to deal with overpayments. First, section 91(6) of the 1995 Act provides that the scheme must give the member a certificate showing the amount to be recovered and its effect on his or her benefits. Secondly, if there is any dispute, the action for cost recovery cannot be undertaken unless a court has made an order to that effect.

I do not know whether the Committee wishes to prolong our considerations, or whether I could provide the hon. Gentleman with a briefing note or letter to explain precisely what is meant by inalienability. The burden of the clause is as I have described it.

Mr. Waterson: I am grateful for that explanation.

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Question put and agreed to.

Clause 206 ordered to stand part of the Bill.

Clauses 207 and 208 ordered to stand part of the Bill.

Clause 209

Debt due from the employer when assets insufficient

Mr. Pond: I beg to move amendment No. 284, in

    clause 209, page 134, line 37, leave out 'insolvency' and insert 'relevant'.

The Chairman: With this it will be convenient to discuss Government amendments Nos. 285 to 292, 282 and 283.

Mr. Pond: Amendments Nos. 284 to 292 would amend the clause, which would itself amend section 75 of the 1995 Act containing provisions on debts from employers when schemes wind up or their sponsoring employer experiences a relevant event. Clause 209 aligns those provisions with those on the pension protection fund and refers to events that are part of the processes relating to the PPF. If the Committee would like me to go through each of the amendments in turn I shall happily do so. However, I take it that the Committee would like to move on briskly.

Amendment agreed to.

Amendments made: No. 285, in

    clause 209, page 135, leave out lines 2 to 6 and insert—

    '(3) Subsection (2) applies only if—

    (a) no relevant event has occurred in relation to the employer in the period beginning with the appointed day and ending with the commencement of the winding up of the scheme, or

    (b) since the date of the last such relevant event but before the end of that period, a cessation event has occurred in relation to the scheme.'.

No. 286, in

    clause 209, page 135, line 8, leave out 'insolvency' and insert 'relevant'.

No. 287, in

    clause 209, page 135, line 20, leave out 'insolvency' and insert 'relevant'.

No. 288, in

    clause 209, page 135, line 22, leave out 'insolvency' and insert 'relevant'.

No. 289, in

    clause 209, page 135, leave out lines 24 to 29 and insert—

    '(a) if the qualifying relevant event is within subsection (6B)(za)(i)—

    (i) the occurrence, in relation to the scheme, of an event within paragraph (a) of subsection (6A) in circumstances where that event is the first event within that subsection to occur after the qualifying relevant event, or

    (ii) the commencement of the winding up of the scheme before any event within subsection (6A) occurs;

    (b) if the qualifying relevant event is within subsection (6B)(za)(ii)—

    (i) the occurrence, in relation to the scheme, of an event within paragraph (a) of subsection (6AA) in circumstances where an event within paragraph (b) of that subsection had not occurred since the qualifying relevant event, or

    (ii) the commencement of the winding up of the scheme before any event within subsection (6AA) occurs.'.

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No. 290, in

    clause 209, page 135, line 46, at end insert—

    '(6AA) The events within this subsection are—

    (a) the issuing of a notice under subsection (2) of section 102 of the Pensions Act 2004 confirming that a scheme rescue is not possible;

    (b) the issuing of a notice under subsection (3) of that section confirming that a scheme rescue has occurred.'.

No. 291, in

    clause 209, page 135, line 47, at end insert—

    '(za) a relevant event occurs in relation to the employer in relation to an occupational pension scheme if and when—

    (i) an insolvency event occurs in relation to the employer, or

    (ii) the trustees or managers of the scheme make an application under subsection (1) of section 101 of the Pensions Act 2004 or receive a notice from the Board of the Pension Protection Fund under subsection (5)(a) of that section,'.

No. 292, in

    clause 209, page 136, line 4, leave out paragraph (b) and insert—

    '(b) a relevant event (''the current event'') in relation to the employer is a qualifying relevant event if it occurs on or after the appointed day and either—

    (i) it is the first relevant event in relation to the employer to occur on or after that day, or

    (ii) since the date of the last relevant event which occurred before the current event (but not before that day), a cessation event has occurred in relation to the scheme,

    (ba) ''appointed day'' means the day appointed under section 98(2) of the Pensions Act 2004 (no pension protection under Chapter 3 of Part 2 of that Act if the scheme begins winding up before the day appointed by the Secretary of State),

    (bb) ''cessation event'' means—

    (i) in the case of a relevant event within paragraph (za)(i), an event within subsection (6A)(b), (c) or (d), and

    (ii) in the case of a relevant event within paragraph (za)(ii), an event within subsection (6AA)(b), and'.—[Mr. Pond.]

Adam Price (East Carmarthen and Dinefwr) (PC): I beg to move amendment No. 316, in

    clause 209, page 136, line 14, at end insert—

    '(4A) In subsection (8) leave out ''not''.'.

This is not the most elegant amendment, and it is certainly not the longest that has been tabled so far. Nevertheless, it is important because it seeks to ensure that pension fund debts under the terms of the clause are preferential debts for the purposes of the Insolvency Act 2000. Any pension debt, in the case of an underfunded final salary pension scheme, is not treated as a preferential debt. The upshot of that is that the prospects of recovery are small, because the schemes come behind a long list of preferential debtors, particularly those with floating charges over the company's assets. Preferential debts have included the Inland Revenue and Customs and Excise, although I understand that under the Enterprise Act 2002 Crown debts no longer constitute preferential debts. Those with floating charges are at the core of preferential debts, although there is currently a list of employer debts. Some of the social security contributions may apply up to a limit of a year, and some of the employer contributions to the state pension scheme—and to a contracted-out scheme—

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may apply up to 12 months before the time of insolvency.

The pension fund deficit is, by and large, excluded from that list of preferential debts. In the case of Allied Steel and Wire, as the hon. Member for Cardiff, West will know, £57 million of the £82 million recovered for preferential debt by the receiver will go to the banks, mostly Lloyds TSB. Some £20 million will go to Gerling NCM, a supplier of scrap metal that remortgaged the company, and just £5 million will go to the workers.

That problem applies in other cases, too, such as that of HH Robertson. In that case, an asset stripper moved in, bought the company for a dollar, took the assets out and left a massive hole in the pension fund. The assertion was that if there had been protection under the Insolvency Act 1986, giving the pension fund preferential treatment, that action would not have proceeded in the same way. Under that Act, if, once the insolvency expenses and any secured claims have been dealt with, the total preferential debts are greater than the assets left, the assets are shared out equally among the preferential debt holders. That would be a means of preventing creditors from trying to get their cash out and foreclosing on their loans. That may well have been practice in the ASW case, too.

If banks realise that they are no longer at the front of the queue for the assets of the company that they push to insolvency, and realise that they will have to take a share along with the pension fund deficit, it may not be so attractive for them to consider sending that company into insolvency.

Much of what I have said relates to the current legal situation, and that will, of course, be changed by the Bill. However, there are two points of relevance to the provisions of the Bill. One relates to the period after the pension protection levy comes into force, and the other is the transitional period. Concerns have been raised that, after the creation of the PPF, some creditors will feel that they are in a better position to release their cash from companies, because they will view that prospect with greater equanimity knowing that there is a safety net in place. Creditors may act against companies in order to get their cash out, and there may be a spate of companies being pushed into insolvency so that people can take early advantage of the new provisions under the PPF. Clearly, changing the position as regards preferential debt would also make creditors think twice before initiating such a strategy.

Secondly, there is the interim or transitional period after enactment but before the PPF comes into force. I imagine that that issue is probably engaging Ministers, as they weigh up the issue of what we do about workers at ASW and other companies. Clearly, if there is a deal, and some form of compensation is offered, there is the question of what happens to companies that go into insolvency a week after those arrangements have been announced. There may be a similar rush by creditors to move companies into insolvency, so that they can get their cash out, knowing that some kind of compensation arrangement is available that will help in relation to

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the pension fund deficits and help avoid any negative public relations for the creditors involved. I can understand why that may be a factor in the Government's deliberations.

4.15 pm

Once again, changing the situation as regards preferential debt arrangements for pension fund deficits would provide at least some bar.

 
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