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Session 2003 - 04
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Standing Committee Debates
Pensions Bill

Pensions Bill

Column Number: 429

Standing Committee B

Thursday 25 March 2004


[Mr. James Cran in the Chair]

Pensions Bill

Clause 91

Administration levy

Question proposed [this day], That the clause stand part of the Bill.

2 pm

Question again proposed.

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond): Before we were so rudely interrupted, I was answering the question asked by the hon. Member for Eastbourne (Mr. Waterson) about the role of the Secretary of State in relation to the administration levy. I am sure that the Committee will have been hanging on my last words of the morning, so let me add what I was about to say.

As the pension protection fund will be funded by grant in aid, which we discussed in our lengthy debate on clause 90, the administration levy will recover the Secretary of State's expenditure. In practice, the Secretary of State's involvement will be minimal. The board will make recommendations to the Secretary of State about the rate needed to recover the amount of grant in aid each year. That will work on a flat-rate basis, in a similar way to the general levy that occupational pension schemes currently pay.

Once the rate has been approved, the regulator will carry out the practical collection of the administration levy on behalf of the Secretary of State. On a pragmatic point, we plan to introduce a system whereby the regulator collects all the PPF levies. That way, the schemes will receive only one bill, so easing their administrative burden. That is much like the situation with the council tax bill, which we are all used to receiving broken down into different elements. I hope that, with that explanation, the hon. Gentleman is happy for the clause to stand part of the Bill.

Question put and agreed to.

Clause 91 ordered to stand part of the Bill.

Clause 92 ordered to stand part of the Bill.

Clause 93

Annual reports to Secretary of State

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

Mr. Nigel Waterson (Eastbourne) (Con): We are delighted to have a double dose of you today, Mr. Cran.

The Chairman: Order. That is the second time I have received abuse this afternoon. The first time it came from the Under-Secretary, who said that I had

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rudely interrupted him this morning. However, I forgive hon. Members.

Mr. Waterson: Looking on the bright side, at least you are being abused by hon. Members both sides of the Committee, Mr. Cran. [Interruption.] We have been joined by the hon. Member for Chesterfield (Paul Holmes), one of the Liberal Democrats; that is nice.

I have a couple of questions. First, in subsection (4) there is rightly a requirement that the report be laid before both Houses of Parliament. Is it envisaged that there will automatically be a debate on it? I think we covered that when we discussed part 1, so I do not want to labour the point, and I understand that interest might wane as the fund goes from success to success. However, it would be sensible to hold such a debate, certainly in the first couple of years. I appreciate that the Under-Secretary cannot speak for the usual channels, but it would be nice to hear an expression of intent on that.

To go back to clause 88, does the Under-Secretary envisage that the statement of investment principles will be included in the annual report, among other things?

Mr. Pond: My reference to the rude interruption was aimed at parliamentary procedures and not at all to you instructing us on them, Mr. Cran.

It would not be normal to have a debate on the report laid before the House by the Secretary of State, although I quite understand the hon. Gentleman's suggestion that it would be of interest to Parliament. We want to ensure that it is subject to proper parliamentary scrutiny, but, as he says, a debate would be a matter for the usual channels. It is not envisaged that a provision for debate would be built into the legislation.

I think that the statement of principles will be included in the report. We will want the principles by which the board is to operate to be outlined in it. That will be an important part of the parliamentary scrutiny.

Question put and agreed to.

Clause 93 ordered to stand part of the Bill.

Clause 94

Duty to notify insolvency events

in respect of employers

Mr. George Osborne (Tatton) (Con): I beg to move amendment No. 256, in

    clause 94, page 57, line 14, at end insert

    'who shall have a duty to inform the members of the scheme'.

The Chairman: With this we may discuss the following amendments: No. 257, in

    clause 96, page 60, line 13, at end insert

    'who shall have a duty to inform the members of the scheme'.

No. 258, in

    clause 97, page 60, line 29, after 'scheme', insert

    'who shall have a duty to inform the members of the scheme'.

No. 259, in

    clause 102, page 63, line 25, after 'scheme', insert

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    'who shall have a duty to inform the members of the scheme.'.

No. 262, in

    clause 117, page 72, line 42, at end insert

    'who shall have a duty to inform the members of the scheme'.

Mr. Osborne: Unlike other Committee members, Mr. Cran, I have not been rude to you—[Hon. Members: ''Yet.''] Indeed.

Amendment No. 256 relates to clause 94 and the other four amendments relate to later clauses. Without getting into a substantive discussion about the later clauses, it is worth touching on the principle. The amendments are basically the same in that they require the trustees and managers of a pension scheme to keep the members informed about what is happening to the scheme as it is dealt with by the PPF and the board.

It is probably wrong to use the term ''well managed'' because a well managed scheme would not be looked at by the PPF. One would hope that conscientious managers and trustees would keep members of the scheme fully informed about what was happening to it. However, that will not always be the case. There may be instances when trustees and managers are negligent or do not take the time and trouble to inform scheme members of what will be a traumatic experience for them.

We have spoken many times—indeed, we mentioned it only this morning—of the anxiety that people feel when their pension is in trouble, the company is facing insolvency and their scheme may be underfunded. That could be the most stressful experience of their life. Without straying into the subject covered by this morning's debate, we all have constituents who have gone through that. We know that it is not only a time of enormous uncertainty, but that there is often a vacuum of information. It is often difficult to get information on what is happening to a scheme and a pension, and scheme members read about it in the newspaper without hearing about it first-hand.

The amendments would impose a duty on trustees and managers to inform scheme members. We have used the identical phrase in each amendment which would insert in the various clauses an obligation on trustees and managers so that they

    ''shall have a duty to inform the members of the scheme''.

The circumstances in which they shall have that duty are different, which is why there are different amendments.

Amendment No. 256 applies to clause 94, which requires the insolvency practitioner to give notice to the board within the notification period, and would require the trustees, having been informed by the practitioner, to pass on that information to the scheme members. One hopes that good, conscientious trustees would let scheme members know that the company with which they have a scheme is entering insolvency. However, the amendment is merely a failsafe mechanism—a belt-and-braces approach—to ensure that they do that.

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Clause 96, to which amendment No. 257 relates, requires an insolvency practitioner to issue a notice about whether a scheme rescue has occurred or is not possible. Again, there is an obligation to inform a number of people, including the board, the regulator, the trustees and managers of the scheme. Our amendment would put a subsequent obligation on the trustees and managers of that scheme to tell their members.

Amendment No. 258 applies to clause 97, which deals with an insolvency practitioner's failure to issue a required notice. The board will issue the notice that should have been issued by the insolvency practitioner to the trustees and the managers. The amendment would simply require the trustees and managers to inform scheme members in that circumstance.

Amendment No. 259 applies to clause 102, which relates to the board's duty when it receives an application from the trustees or managers of a scheme because the employer is no longer a going concern. It requires the board to confirm whether a scheme rescue is not possible or whether such a rescue has occurred. Again, scheme members should be kept informed in such circumstances.

Amendment No. 262 jumps way ahead to clause 117, which we may get to before Easter if we are very lucky. The clause deals with circumstances in which the board ceases to be involved with an eligible scheme. Again, scheme members should be informed in such circumstances. The principle of keeping people informed is pretty straightforward.

As I understand it, the point of the PPF is first and foremost to provide protection for pensions and to try to avoid the situation in which 60,000 or so people have lost part or all of their pensions. However, there is a secondary objective: to restore faith in occupational pensions. Part of that could be achieved by giving an assurance that scheme members would be more involved with and kept more informed about their occupational pension schemes. We have discussed other provisions—member-nominated trustees and so on—that would achieve that. It would be good to extend that principle to this part of the Bill so that as a scheme goes through the fairly traumatic process of being considered and examined by the PPF, the scheme members are kept fully informed.

I say ''fully informed'', but some of the information required would be fairly basic: whether a company has gone insolvent, whether there could be a rescue attempt or whether the PPF is still involved. One would hope that the trustees would keep scheme members informed in such circumstances. However, it is possible to imagine circumstances in which they would not. I am thinking of schemes that have been badly run by negligent people in which the trustees, managers and, perhaps, employers have had little or no concern for the scheme members.

After all, the PPF will deal with some of the worst managed schemes in the country. In such circumstances, the amendments provide a fall-back position that puts a duty on trustees and managers to

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keep scheme members informed about one of the most important things in their lives: their pension.


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