Pensions Bill

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Mr. Pond: The hon. Gentleman makes an important and relevant point. I am pleased to reassure him and the Committee that his concerns have already been dealt with in the provisions.

I do not think that there is anything between us on the issue of trustees' further liabilities. It has been made clear that once the board has taken over responsibility, it has responsibility. The clause provides that, where a transfer notice is given to the trustees or managers of a scheme, the effect of the transfer notice is to transfer all the property, rights and liabilities of the scheme to the board. The trustees or managers of the scheme are discharged from their obligations to the scheme and the PPF board is required to pay compensation to scheme members on an ongoing basis.

The amendment, however, would allow the trustee or managers of a scheme to be discharged from any

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liabilities whatsoever relating to the scheme, and enable them to receive an indemnity and not be held responsible by the board for any consequences of their actions prior to the taking effect of the transfer notice.

The effect of schedule 6 is that only rights and liabilities of an occupational pension scheme transfer to the PPF. That does not include any personal liability of the trustees or managers in respect of their acts or omissions prior to the date on which the transfer notice was given. Prudent trustees should as a matter of course have indemnity insurance in respect of personal liabilities. The amendment would therefore appear to be unnecessary and I hope that with that reassurance the hon. Gentleman will feel able to withdraw it.

Mr. Waterson: I am thoroughly reassured by that response to my amendment; it was impertinent of me even to table it. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 123 ordered to stand part of the Bill.

Schedule 6

Transfer of property, rights and
liabilities to the Board

Mr. Waterson: I beg to move amendment No. 413, in

    schedule 6, page 191, line 40, at end insert—

    '2A Any claims for unfair dismissal or other breach of a contract of employment arising therefrom are payable in full by the Board.'

The amendment concerns another small point, which I dare say the Under-Secretary is about to tell me is already dealt with in the Bill. I shall plunge on regardless.

Schedule 6 sets out in some detail the property rights and liabilities being transferred to the board under clause 123. Paragraph 2(2) provides for any contracts of employment to be immediately terminated. I understand that that would include anyone who had been directly employed by the trustees. I am advised that the schedule should make it clear that any claims for unfair dismissal or unlawful breach would be payable by the board, not the trustees.

I think that the point involved in this amendment is subtly different from the one dealt with under amendment No. 411. Some genuine concern seems to have arisen about it, and I should be interested to hear from the Under-Secretary why my amendment is inappropriate.

Mr. Pond: While I am on a winning streak, may I suggest again to the hon. Gentleman that the legitimate points that he has raised have already been dealt with? He is right to say that any rights and liabilities under contracts of employment that would be transferred to the board are terminated and become void on the day preceding the day that the transfer notice is received by the trustees or managers of the scheme. That does not mean, of course, that any entitlement that people have in terms of unfair dismissal would no longer fall to the board.

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Schedule 6 also allows for any legal proceedings by or against the scheme or applications pending immediately before the transfer to be continued by or against the board. The amendment seeks to allow any claims for unfair dismissal or other breach of contract of employment arising from the issue of the transfer notice to be transferred to the board. However, subsection (2)(a) of clause 123 already provides for the property, rights and liabilities of a scheme to be transferred to the board once a transfer notice has been issued. Any contractual issues arising as a result of the transfer notice will be transferred to the board. Those would include outstanding employment issues. Under those circumstances, I hope that the hon. Gentleman will agree that the amendment is unnecessary.

9.45 am

Mr. Waterson: That serves me right. I am happy to accept the Minister's explanation, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6 agreed to.

Clause 124

The pension compensation provisions

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

Mr. Steve Webb (Northavon) (LD): When we get to schedule 7, which will be enacted by clause 124, in a moment, I expect that we will have a long and detailed discussion of the details of compensation under the PPF. However, under the rubric of clause 124, which sets out the overall framework, it would be helpful to have a brief steer from the Minister on the philosophy underlying the detailed decisions that the Government have taken about the structure of compensation. Clause 124 says that periodic compensation and lump sum compensation should be payable. Immediately, that raises a question. Clearly, we are worried about people's pensions but clause 124 is not just about pensions—it mentions lump sums, and allows the payment of lump sums even when the scheme rules did not.

There is a philosophical question about how far the PPF is trying to replace the pension arrangements that the scheme would otherwise have given, and how far it is trying to do something slightly different. For example, lump sums are payable under the clause even if they were not under the scheme, but in other cases, benefits that would have been payable under the scheme are not replicated in the PPF provisions. We will debate in detail the issue of unmarried partners and so on later, but a muddled approach underlies all our discussions about the benefit structure of the PPF.

The clause provides for a cap, but only for non-retired scheme members, not for retired scheme members. What is the philosophy behind that? If the schemes had run on, none of the caps would have applied. Why is there a cap in one place and not in another? Will the Minister clarify whether it is the Government's intention that the PPF will, as far as possible, try to give people what they would have got if

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their employer had not gone to the wall with an underfunded scheme, or are the Government trying to create a kind of pseudo-pension with certain characteristics that they think schemes should have, such as lump sums, even if the scheme did not have them, but without unmarried partners' benefits, even if the scheme had them? Do the Government have a model of an ideal scheme? What is the thinking that will underlie our subsequent discussions on the detail of the schedule to follow?

The Minister for Pensions (Malcolm Wicks): With your permission, Mr. Cran, I will comment on two points that were raised by the hon. Member for Eastbourne earlier.

The Chairman: Order. I am perfectly happy for you to refer to those two points, Mr. Wicks, but I would like to separate that from the current discussion. If the issue is germane to the clause, that is fine, but if it is not, let us find another way of talking about it.

Malcolm Wicks: I shall try to find another way of talking about it later; I was just trying to be helpful to the hon. Member for Eastbourne. For now, I will talk about clause 124 and touch briefly on the point made by the hon. Member for Northavon (Mr. Webb).

Clause 124 sets out the pension compensation provisions relating to the new fund. The detail of the compensation rules is provided in schedule 7, section 123(2)(c), and will be set out in regulations under section 130. The purpose of schedule 7 is to detail the PPF compensation provisions relating to scheme members, their survivor—or in certain circumstances, dependants—when their defined benefit pension scheme or hybrid pension scheme, with a defined benefit element, enters the PPF.

The clause enables the provisions in schedule 7 to be considered and applied in order to calculate PPF compensation entitlement. Without the clause, PPF compensation could not be paid to any member of an eligible scheme that had been taken over by the PPF.

It will be more helpful if some of the issues that were raised by the hon. Member for Northavon are discussed at the relevant time—when we discuss the schedule. I do not think that there is a simple one-line answer to his question, but the broad one is that on PPF compensation we are going for a simple, broad-brush approach whereby existing scheme pensioners are paid 100 per cent. of their pension rights and other scheme members are paid 90 per cent. I concede—though I make no apology for this—that from time to time we shall examine the specifics of the scheme.

On the subject of partners, when, sadly, a scheme member has died and a partner who is not married is receiving benefit, she or he will continue to do so; it seemed right not to interfere with an existing arrangement. Some characteristics are more scheme-specific, but broadly speaking we are not seeking to replicate every last detail of the rights under a scheme. We are going for a broader-brush approach. That is equitable, and we also think that such a system is simpler to administer. Wherever possible, we are going for simplicity.

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Mr. Waterson: I urge the Minister not to be too broad-brush, because we must remind those who are following the shaping of the Bill that there is a cap, and the board is given a power to reduce benefits. Leaving aside the issue of the 90 per cent./100 per cent. distinction, there is also the question of the 1997 cut-off. Anyone who thinks that the Bill will guarantee their pension, full stop, in a broad-brush way has been misled.

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