Malcolm Wicks: Yes, but I would prefer to deal with those issues when we get to the relevant moment. Those who are concerned about their pension rights being guaranteed stand more chance of that if the Bill receives Royal Assent than they would if we took the advice of those who declined to give it a Second Reading.
Question put and agreed to.
Clause 124 ordered to stand part of the Bill.
Pension compensation provisions
Mr. Waterson: I beg to move amendment No. 355, in
schedule 7, page 193, line 11, leave out from 'means' to end of line 13 and insert '90%'.
The Chairman: With this it will be convenient to discuss the following:
Amendment No. 417, in
schedule 7, page 193, line 11, leave out from 'means' to '100%' in line 13.
Amendment No. 356, in
schedule 7, page 193, line 24, leave out sub-paragraph (7).
Government amendment No. 478.
Amendment No. 418, in
schedule 7, page 200, line 11, leave out '90%' and insert '100%'.
Amendment No. 419, in
schedule 7, page 201, line 10, leave out '90%' and insert '100%'.
Government amendment No. 480.
Amendment No. 420, in
schedule 7, page 203, line 4, leave out '90%' and insert '100%'.
Mr. Waterson: Amendments No. 355 and No. 356 are the only ones in the group that were tabled by our party, but it may help if at the same time as discussing our amendments, I make some comments on the others.
The amendments all represent slightly different ways of coming at the same issue. Ours are probing amendments, designed to point out the slightly surprising distinction—I am not sure whether the hon. Member for Northavon used that word, but I think I understood what he was getting at—between giving only 90 per cent. compensation to those under retirement age, and giving 100 per cent. compensation to those who have reached normal pension age. That is almost an echo of our current difficulties with the priority order, albeit in a much more modest way.
The hon. Gentleman talked about a philosophical issue. I do not want to follow him too far down that route, but the question of why there should be such a
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cliff edge—to borrow the phrase use the National Association of Pension Funds—is almost a philosophical one. The NAPF bluntly says that it would like the cliff edge to be removed. Its perfectly legitimate position is that pensioners and non-pensioners alike should get 90 per cent. of their entitlement, up to a cap of £25,000 a year. It also has something to say about indexation and valuation; we will come to that under a different set of amendments.
NAPF has a point: it is difficult to see why there should be a distinction. I suppose that the reason for trying to level down to 90 per cent. could in part be a feeling that a 100 per cent. guarantee may be inappropriate in the circumstances. However, as I have pointed out, the Government's proposals are far from being a complete guarantee of people's pensions. I understand why the Minister is being ''broad-brush'', to use his phrase, but it is important that we do not allow people to go away with the idea that once the PPF has been set up, their pensions are fully guaranteed for good and all, because they certainly are not. There is a range of reasons for that, and the distinction between 90 per cent. and 100 per cent. is one of them.
It is interesting to see that the fact sheet produced for our deliberations makes no such extravagant claim for the PPF. It says:
''For the first time ever, individuals in defined benefit schemes based in the UK can rest assured they will always receive a meaningful pension, even if their company goes bust and leaves the pension scheme underfunded.''
That is not, I think, overselling the proposals in this part of the Bill, but people should be clearly aware that, although the PPF does of course provide a welcome safety net, it is only a partial safety net, and it certainly will not guarantee in full the pension rights that people may have built up over a great many years.
I think that we all have the Age Concern briefing, and I suspect that we will hear a bit more about that in a moment. It covers the issue from a different angle; the amendments that it suggests would level up the percentage to 100 per cent. for everyone in the scheme. It is difficult to disagree with that logic, and I am sure that we will hear it deployed in support of other amendments, too. Why should there be a distinction between the two groups of people simply because one group has retired and the other has not?
Age Concern says that it has worries about the amount of pension entitlement that people will receive under the new system. It says:
''We believe that the proposed Pension Protection Fund . . . benefits are not generous. In fact the actuaries Lane Cark & Peacock and the Occupational Pensioners Alliance both estimate that some pensioners may receive only 70 per cent. to 80 per cent. of their total pension promise under the PPF.''
We will certainly come back to the issue of the April 1997 cut-off date. Age Concern goes on to say:
''We have particular concerns about the difference in pension entitlements granted by the Bill for those under a company's normal retirement age and those above it. Pensioners under normal retirement age, who may have been given little choice in taking early retirement, are therefore likely to see their pensions cut''—
hence Age Concern's amendments.
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As I said, ours are only probing amendments; however, the same logic applies to the amendments that Age Concern rightly inspired. It seems odd that there should be a distinction between those receiving 90 per cent. and those receiving 100 per cent. I will allow those who are to speak to what are, in effect, Age Concern amendments to make more of the organisation's briefing and to say more about the logic behind those amendments.
The bottom line is the same for both sets of amendments: why is there that slightly odd distinction? What is the logic of it, and what is the fairness that is said to be behind it?
Mr. Webb: The hon. Gentleman has already observed that the level of cover is not all that good anyway. People who have already retired get 100 per cent. of something, but that something, for example, is not indexed. Having recognised and acknowledged that, he then wants to cut back further through the amendment, presumably to keep the levy down. Is he not worried that on one hand he says that the protection is not as good as it looks anyway, and on the other he moves an amendment to cut it further? Is he not worried that that would undermine the whole scheme?
Mr. Waterson: I do not think that the hon. Gentleman's intervention is unfair, or designed to be so. However, I really hope that, when the Bill emerges from this Committee, the scheme will work. Given the eloquent way in which hon. Members such as the hon. Member for Cardiff, West and others have described the problems of those who have already lost out because of the use of words such as ''guarantee'' in the past, it would be extraordinarily unfair and inappropriate if the Bill ended up sending people the message that they are getting more than they are.
There is a real danger—I thought this before I saw the comments of some leading pension lawyers—that the fund will get into trouble very early on, largely because of the way in which it has been set up. Later we shall discuss the issue of the levy in much more detail; I am sure that you are looking forward to that, Mr. Cran. There will be a temptation to cut the benefits, because that would be the only way out. The Government have said that they are not going to back the fund. The fund will have claims on it and limited resources because of the reduced flat-rate levy in the early years. It will have little choice but to cut benefits. I would prefer that the Bill progressed on an honest rather than a false prospectus.
For the benefit of the hon. Member for Northavon, I want to clarify a point that I made earlier. My amendment is really a probing amendment, as I am sure the other amendments are. I can see the argument for levelling up as well; I just do not see the reason for one figure of 100 per cent. and one of 90 per cent. In fairness, I think that the hon. Gentleman made a similar point.
Finally, I want to return to the heart of what we are offering people in the Bill. The Minister is famously on record as saying that it is not an insurance scheme and not a pension scheme. That leaves the question—
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answers on a postcard, please—as to what it actually is.
I do not know whether the Minister ever reads the briefings that are sent out. Due to the European dimension of the Allied Steel and Wire claim and others, I received a briefing via UKRep, our Government's representative in Brussels. It has an interesting note about the pension protection fund. The briefing ends with the immortal lines:
''The PPF, however, is an insurance scheme and no insurance scheme can cover against events that have already happened.''
There is still a question mark hanging in the air about what this animal is.
Amendment No. 355 is a probing amendment. There is a lot of force in the other amendments, which may have been inspired by Age Concern; they make a lot of sense. However, I see no sense in making the arbitrary distinction of 90 per cent. and 100 per cent., depending on whether a person has retired or not.
Mr. Bill Tynan (Hamilton, South) (Lab): I begin by clarifying the situation as regards Age Concern. I have had discussions with Amicus, of which I am a member, about the amendment that stands in my name and that of my hon. Friend the Member for Glasgow, Anniesland (John Robertson). I had much pleasure in tabling the amendment.
Age Concern certainly supports the amendments, but they are probing amendments. We have to remember that the full intention of the fund is to give confidence as regards people who may find that they lose their pensions. I would start from the basis that we are creating confidence by establishing the fund in the right vein. It would be abhorrent if we reduced the pension of existing pensioners from 100 per cent. to 90 per cent., so I would dismiss amendment No. 355, which was moved by the hon. Member for Eastbourne.
Obviously, compensation is payable under schedule 7. The schedule determines the formula, but I want to examine the general principle behind it—that compensation for pensions in payment at present is 100 per cent. of the pension due under the scheme while that for the other pensions suggested in the Bill is 90 per cent. Nowhere in the explanatory notes, in the Minister's contribution on Second Reading or on the DWP website is there an explanation of why we should have the 90 per cent. target. I suspect that it is based primarily on protections in other financial compensation schemes, but I would like to hear how the Minister sees the situation. My first question, therefore, is why 90 per cent. was selected rather than 100 per cent. My second question is what the cost difference to the PPF would be if the levy were set at 100 per cent. That is an important point. Is it a matter of funding, or could funds not support such a provision?
Another point that must be raised relates to the guaranteed minimum pension and the state second pension. Will those benefits be protected at 100 per cent. under the PPF? There is concern that payments under the state second pension and the guaranteed
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minimum pension could be reduced because they would be calculated at the 90 per cent. rate and would lose their value. What knock-on effect would that have on other pension benefits?
In moving an amendment to change the rate from 90 to 100 per cent., I understand that existing pensioners receive 100 per cent. If we really want to restore confidence in the fund so that it is generally accepted among those who are concerned about losing their pensions, we should look at 100 per cent.
I am looking for the Minister to tell me how he sees the present situation. We could have a tiered system of compensation that is based on the fact that it is normally poorer people who build up a guaranteed minimum pension or a state second pension. We could introduce a tiered system for pension schemes, with people on different levels—say, £10,000, £15,000 or £20,000. We could then build the system up on that basis. Of course, 90 per cent. of £30,000 or £35,000 could be acceptable, but setting compensation at 90 per cent. of the poorest people's pensions could have a dramatic effect on those individuals.
The amendments are intended to probe different issues, and when the Minister responds, we shall know where we go.