Pensions Bill

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Clause 114

Binding valuations

Amendment made: No. 457, in

    clause 114, page 70, line 20, leave out 'determination' and insert 'approval'.—[Malcolm Wicks.]

Clause 114, as amended, ordered to stand part of the Bill.

Clause 115

Schemes which become eligible schemes

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

Mr. Waterson: The clause is one of those shell clauses that do not really give much away about what they mean. Inevitably, it begins, ''Regulations may provide . . . '' It is hardly worth my breath to ask, but I assume that there are no draft regulations in the offing, and we cannot see what will be in them. It would be helpful if the Minister could walk us through what might be in the regulations, when they appear.

As I understand the clause, the board has to satisfy itself that what was otherwise an eligible scheme

    ''was not such a scheme throughout such period as may be prescribed''.

Again, it is a bit difficult to comment until we get some idea of what kind of period we are talking about. The clause goes on to say that

    ''the Board must refuse to assume responsibility''.

I am lost as to what kind of situation the clause is trying to deal with, and it would be helpful if the Minister could talk us through the thinking behind it.

Mr. Pond: Draft regulations are not yet available. I wish to explain the overall purpose behind the clause, which, as the hon. Gentleman says, is to protect the PPF from abuse by schemes that manipulate their structure in order to become eligible for PPF compensation, when they were not eligible, and thus subject to the requirement to pay the levy, in a prescribed period preceding the assessment date. The clause is essential to stop abuse by schemes and to protect businesses from subsidising such schemes through the pension protection levies.

Without the clause, the PPF could be required to pay compensation to any scheme that manipulated itself so as to become eligible to benefit from the PPF.

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The hon. Gentleman asked for examples, such as schemes that convert benefits from money purchase schemes into final salary schemes. The provision sets out that regulations may prescribe the period that the board can refuse to assume responsibility for a scheme in respect of changes made to its structure.

The intention is that a scheme will be required to have been an eligible scheme, and thus to have paid the levy, for three years in order to be taken over by the PPF. When a scheme has been established for less than three years, in order to be taken over by the PPF it will have to have been an eligible scheme from the date of entitlement to the date of the insolvency event, or clause 101 application or notification.

The clause requires the board to issue a withdrawal notice ending its involvement with a scheme to the regulator, trustees and managers of the scheme and any insolvency practitioner acting in relation to the employer when it is required to refuse to assume responsibility for a scheme. It is crucial that the PPF is able to protect itself against moral hazard, so that the fund will be sustainable in the long term, and that responsible levy-paying employers do not subsidise those who would seek to manipulate the PPF rules.

In answer to the specific questions raised by the hon. Gentleman, I can say that the three-year period will not be specified in primary legislation, so that the PPF board will have the flexibility to protect itself against moral hazard. Specific periods are not usually specified in primary legislation, so as to ensure that it is not too restrictive.

Question put and agreed to.

Clause 115 ordered to stand part of the Bill.

Clause 116 ordered to stand part of the Bill.

Clause 117

Circumstances in which Board ceases to

be involved with an eligible scheme

Amendment made: No. 458, in

    clause 117, page 72, line 16, leave out 'before the end of' and insert

    ', and no further insolvency event occurs in relation to the employer, during'.—[Malcolm Wicks.]

Malcolm Wicks: I beg to move amendment No. 380, in

    clause 117, page 72, line 30, after 'occur' insert

    'before the end of the period of six months beginning with that date'.

It might be helpful if I briefly set the amendment in context before I talk about it specifically. Clause 117 provides for circumstances in which the board ceases to be involved with an eligible scheme on the occurrence of a withdrawal event. The so-called withdrawal events provided for are when a scheme rescue notice is issued by an insolvency practitioner, the board confirms a scheme rescue in cases where no insolvency practitioner is involved, and the board refuses to assume responsibility for a scheme as a result of a determination under clauses 115 and 116 on the grounds of moral hazard. In circumstances where a withdrawal notice is issued, the involvement of the PPF will cease and the scheme will either run on

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following a scheme rescue or proceed to wind-up outside the PPF.

The clause is crucial in defining a key stage in the PPF entry process, and following the completion of any appeals process applicable or resolution of any outstanding appeals. The withdrawal notice marks the end of the assessment period of such schemes. This is essentially a drafting amendment to clarify the process set out in clause 117, which provides for circumstances in which the board ceases to be involved with an eligible scheme on the grounds of a withdrawal event.

Amendment agreed to.

Clause 117, as amended, ordered to stand part of the Bill.

Clause 118

Consequences of the Board ceasing to

be involved with a scheme

Amendment made: No. 381, in

    clause 118, page 73, line 21, leave out paragraph (a).—[Malcolm Wicks.]

Clause 118, as amended, ordered to stand part of the Bill.

Clause 119

Requirement to wind up schemes with

sufficient assets to meet protected liabilities

Amendments made: No. 460, in

    clause 119, page 73, line 38, leave out subsections (1) to (5) and insert—

    '(1) Where, in relation to an eligible scheme, an assessment period within section 104(2) or (4) comes to an end because the conditions in subsection (2) of this section are satisfied, the trustees or managers of the scheme must—

    (a) wind up the scheme, or

    (b) where the winding up of the scheme began before the assessment period (whether by virtue of section 177 or otherwise), continue the winding up of the scheme.

    (2) The conditions are—

    (a) that subsection (2) or (2A) of section 120 (scheme rescue not possible but scheme has sufficient assets to meet the protected liabilities) applies in relation to the scheme,

    (b) that—

    (i) the trustees or managers did not make an application under that section or section [schemes required to wind up but unable to buy out liabilities](1) within the authorised period (within the meaning of section 120(4A)) (or any such application has been withdrawn), or

    (ii) if such an application was made, it has been finally determined, and

    (c) that, if an application was made under section 120, the Board is not required to assume responsibility for the scheme by virtue of section 121(2).

    (3) For the purposes of subsection (2)(b)(ii) an application is not finally determined until—

    (a) the Board has issued a determination notice in respect of the application under section 121 or, as the case may be, [schemes required to wind up but unable to buy out liabilities],

    (b) the period within which the issue of the notice may be reviewed by virtue of Chapter 6 has expired, and

    (c) if the issue of the notice is so reviewed—

    (i) the review and any reconsideration,

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    (ii) any reference to the PPF Ombudsman in respect of the determination, and

    (iii) any appeal against his determination or directions,

    has been finally disposed of.

    (4) Where, in relation to an eligible scheme, an assessment period within section [closed schemes: further assessment periods](2) comes to an end because the conditions in subsection (5) of this section are satisfied, the trustees or managers of the scheme must continue the winding up of the scheme begun (whether in accordance with this section or otherwise) before that assessment period.

    (5) The conditions are—

    (a) that an application is made by, or notice is given to, the trustees or managers of the scheme under section [applications and notifications where schemes have insufficient assets],

    (b) that the valuation obtained by the Board in respect of the scheme under section [duty to assume responsibility for closed schemes](3) has become binding, and

    (c) that the Board is not required to assume responsibility for the scheme by virtue of section [duty to assume responsibility for closed schemes](1).'.

No. 461, in

    clause 119, page 74, line 35 , leave out '(4)(a)' and insert '(1)(a)'.—[Malcolm Wicks.]

Clause 119, as amended, ordered to stand part of the Bill.

Malcolm Wicks: I beg to move amendment No. 459,

    That Clause 119 be transferred to the end of line 45 on page 76.

As was mentioned earlier during our debates on clause 104, the amendments on closed schemes mean that clause 119 should now be transferred to the end of line 45 on page 76.

Mr. Osborne: Ah!

Malcolm Wicks: I did not realise that this was so interesting. That will mean that what is now clause 119 will stand part of the Bill after the current clause 121.

Mr. Waterson: I am grateful that, as a courtesy, we were given advance warning of this motion, although for the life of me I still do not really understand why we are moving the hapless clause 119 within the batting order, but it obviously matters to somebody, so who am I to stand in their way?

Question put and agreed to.

Clause 120

Application for reconsideration

Amendments made: No. 462, in

    clause 120, page 75, line 7, leave out from beginning of line to 'for' in line 8 and insert

    'Where subsection (2) or (2A) applies in relation to an eligible scheme, the trustees or managers of the scheme may make an application to the Board under this section'.

No. 463, in

    clause 120, page 75, line 10, leave out subsection (2) and insert—

    '(2) This subsection applies where—

    (a) a notice confirming that a scheme rescue is not possible in relation to the scheme has been issued under section 96(2) and the trustees or managers have received a copy of that notice under section 96(6) (or, in a case to which section 97 applies, under subsection (4) of that section),

    (b) the valuation obtained by the Board under section 112 in respect of the scheme has become binding, and

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    (c) the Board would have been required to assume responsibility for the scheme under section 99 but for the fact that the condition in subsection (2)(a) of that section was not satisfied.

    (2A) This subsection applies where—

    (a) the Board has issued a notice under subsection (2) of section 102 confirming that a scheme rescue is not possible in relation to the scheme and the trustees or managers have received a copy of that notice under subsection (4) of that section,

    (b) the valuation obtained by the Board under section 112 in respect of the scheme has become binding, and

    (c) the Board would have been required to assume responsibility for the scheme under section 100 but for the fact that the condition in subsection (2)(a) of that section was not satisfied.'.

No. 464, in

    clause 120, page 75, line 19, leave out subsection (4) and insert—

    '(4) An application under this section must be made within the authorised period.

    (4A) In this section ''the authorised period'' means the prescribed period which begins—

    (a) where subsection (2) applies, with the later of—

    (i) the day on which the trustees or managers received the copy notice mentioned in paragraph (a) of that subsection, and

    (ii) the day on which they were notified of the binding valuation mentioned in paragraph (b) of that section, and

    (b) where subsection (2A) applies, with the later of—

    (i) the day on which the trustees or managers received the copy notice mentioned in paragraph (a) of that subsection, and

    (ii) the day on which they were notified of the binding valuation mentioned in paragraph (b) of that subsection.'.—[Mr. Pond.]

 
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