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Session 2003 - 04
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Standing Committee Debates
Pensions Bill

Pensions Bill

Column Number: 617

Standing Committee B

Tuesday 20 April 2004


[Mr. James Cran in the Chair]

Pensions Bill

9.30 am

Mr. Nigel Waterson (Eastbourne) (Con): On a point of order, Mr. Cran. First, I welcome you back to our proceedings in Committee. I hope that you had a refreshing and enjoyable Easter break, as I am sure we all did although it was marred slightly by a raft of Government new clauses and amendments that were tabled only last Thursday. I wish to flag up some issues concerning where we are with the Bill. You will know that a motion was tabled on the Floor of the House last night to extend our debates in Committee for another week and that no doubt there will be pressure to hold a meeting of the Programming Sub-Committee.

I wish to give the Minister a chance to update the Committee on where matters stand at present. The Government have dealt with section 67 simplification and consultation. They have said that other issues, such as defined contributions and limited price indexation, might be dealt with on Report. However, I wonder what else—if anything—of any significance will be proposed. I am not talking about minor drafting or consequential amendments; what amendments of any significance are likely to be tabled by the Government in Committee?

The Chairman: Of course, that is not a point of order for the Chair, but doubtless those who can deal with it will respond to it.

The Minister for Pensions (Malcolm Wicks): Further to that point of order, Mr. Cran. Will it be helpful if I respond briefly to the hon. Gentleman's points? I wish first, however, to welcome you back to the Chair for our final sittings. Members of the Committee will be aware that, at the end of our sitting on Thursday 1 April before the recess, I outlined the amendments that we planned to table for discussion in Committee. I am sorry that we were unable to table all the amendments during the recess, but we have been considering our plans. The Committee will note that some of the new clauses are on the amendment paper and, subject to progress, we may reach some of them today. After the bank holiday, we sent a briefing note to hon. Members about the new clause that will amend section 67 of the Pensions Act 1995. As they are aware, it deals with the modification of accrued rights.

However, I understand that some confusion arose about the briefing note on the new clauses that deal with the requirement for employers to consult on future pension changes, so we sent out again a briefing note about it last night. An explanation of new clause 33, entitled ''Increase in age at which short service benefit must be payable'', will be available at the end of this morning's sitting. The other amendments that have been tabled are self-

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explanatory. I must apologise to you, Mr. Cran, and to members of the Committee for the delay in tabling the new clauses and for any confusion concerning the distribution of briefing notes. No discourtesy was intended, as no one gains if a Committee has insufficient detail on which to judge its scrutiny.

Mr. Waterson: Further to that point of order, Mr. Cran. I am sure that my proposal will be of assistance to you and the Committee. Yet again, the curse of the briefing note has kicked into our proceedings. I have not seen either of the briefing notes to which the Minister referred. I have been trying with a wet towel around my head to understand the section 67 stuff, which I doubt we will reach today. However, it would be nice to know the thinking behind it.

Malcolm Wicks: Further to that point of order, Mr. Cran. I apologise again if briefing notes have not got through. I think that the hon. Member for Northavon (Mr. Webb) received the information and I know that those in my office were telephoning the office of the hon. Member for Eastbourne (Mr. Waterson) to see how we could best get information to him during what was inevitably a difficult period over the Easter holiday.

Clause 167

Meaning of ''reviewable matters''

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

The Chairman: With this it will be convenient to take Government new clause 16—Meaning of ''reviewable matters''—and Government new schedule 1.

Mr. Waterson: I wonder whether the Minister would take us through his new clause. It may be helpful, and afterwards I can raise certain issues.

Malcolm Wicks: We have discussed the main ideas of setting up a pension protection fund. We are now about to deal with some important consequential matters, after which we shall deal with issues regarding the new pension protection fund ombudsman. We have now had 16 sittings in Committee and, subject to the will of hon. Members, we may have six or so more sittings. As we expected, the Committee's proceedings are turning into more of a marathon than a sprint. That enables me neatly to note and congratulate the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Grantham—Gravesham—

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond): Gravesham.

Malcolm Wicks: Gravesham. Grantham is associated with another notable parliamentarian. I congratulate my hon. Friend on completing the London marathon in four hours and 15 minutes. He tells me that that was slightly worse than last year, but he was drafting new clauses as he was running.

Mr. Waterson: The chicken?

Mr. Pond: The hon. Gentleman referred to the chicken. It was a little disconcerting at 19 miles to find

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myself with a rhinoceros and three chickens still in front of me. Although this Committee's proceedings deprived me of the time to do the training necessary to improve on my previous time, they prepared me in other ways. The marathon was sometimes a painful event, and it took a long time. At the end, one ended up in the place in which one began. In that sense, experience of this Committee prepared me well.

Malcolm Wicks: The intention is to replace clause 167 with new clause 16, which would provide a list of pension protection fund board decisions that could be disputed. The Government amendments have the following objectives.

First, as a drafting point, we have decided that, as the list of reviewable matters is extensive, it would be best placed in a schedule: new schedule 1. Secondly, the new schedule would extend the list of reviewable matters. Thirdly, new clause 16 would allow regulations to delete items from the reviewable matters list, if that was required. Finally, the new clause would provide a mechanism for determining whether the board had failed to reach a decision by reference to a prescribed time limit.

I do not intend to discuss each individual addition to the list of reviewable matters in detail; to do so would take up a great deal of valuable time. However, I would like to make the following point. As well as adding to the list of reviewable matters, the list would now include the failure of the board to reach determinations in certain circumstances.

If, for example, the board failed to determine a person's entitlement to PPF compensation within a prescribed period, that person would be able to ask the PPF board to undertake a review. The general intention behind the list of reviewable matters is to make clear in legislation which of the board's decisions could be challenged. On the face of it, it may seem reasonable to allow any board decision to be challenged, but there are good reasons for the dispute procedures to have relevant parameters.

For example, the fact that a compensation rate of 90 per cent. is payable to non-pensioners is not open to dispute, because it is set out in legislation. It is the calculation used for all, and there can be no deviation from it. Allowing such a decision to be challenged would result in delays and raise expectations that a different outcome was possible when it was not. Although PPF members would be unable to challenge the 90 per cent. compensation level, other matters regarding their compensation rate could be challenged. For example, if the board had based someone's compensation rate on 10 years' rights when they had had 20 years' rights, that, of course, could be disputed.

In a similar vein, schemes would be unable to dispute the formula used for calculating the levy. However, they would be able to challenge the board's decision that they were an eligible scheme and therefore had to pay the levy. If the levy calculation had been based, for example, on an incorrect

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membership number, the scheme would also be able to challenge the amount of levy payable.

The clause aims to provide a procedure for dealing with PPF disputes that is fair and transparent, and that provides clarity of approach for people to raise disputes if they have a right to do so. It sets out those matters that may affect the civil rights of interested parties, and provides the basis on which actions may be challenged.

Mr. Waterson: I add my congratulations to the Under-Secretary on his achievement. I hope that he raised a great deal of money for his favourite charity.

One of the briefing notes that has reached me, and I am grateful for it, is about the complexities of clause 167 and new clause 16. Let me say two things at the outset. First, I can see the logic, from a drafting point of view, of re-casting that as it has been done. However, it has the maddening effect, which is familiar to all hon. Members who have dealt with large Bills, that when we re-cast our amendments on Report we will have to change all the numbering. But we cannot have everything—at least, not in opposition.

Secondly, I should like to make another substantive general point, which I will, perhaps, develop in more detail on clause 168 to put in context my remarks on new clause 16. Do we need a review? We are in danger of developing a cumbersome and bureaucratic system. We will deal with the role of the ombudsman and everything else later. The Government are trying to mirror the provisions of the European convention on human rights and have been nervous about getting out of kilter with what that proposes. However, we are creating a new bureaucracy, when the answer is, perhaps, to cut out the review and go straight to the next stage. I will develop that point in a moment.

There are a few points arising from what the Minister said on the helpful explanatory note. If there is to be a review, it is most important that the list sets out those issues where the board has failed to reach determinations, let alone where it has made the wrong determination. One of the clear examples in the explanatory note is where the board fails to determine a person's entitlement to PPF compensation within a prescribed period. On a human level, that will be one of the most important reasons for having such reviews—and another good reason for trying to short-circuit the system. However, we are considering another part of the Bill, which will be heavily underpinned by regulations later on. I will not even raise the grant regulations, because I have long since given up on that.

Although it is difficult to get a handle on the time scale that Ministers, for example, might have in mind, perhaps I may use this example to draw the Minister out. This is a clear case of somebody who may be in personal difficulties because they have not been given the compensation to which they are entitled, their company has gone bust and their pension scheme has left them high and dry. What time scale is envisaged for trying to deal with such issues? Presumably, some issues would be relatively easy to deal with and could be dealt with rapidly on the basis that they were simply book-keeping or technical errors by those running the

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system. For example, the Minister mentioned the question of 10 or 20 years. The note talks about trying to produce clarity of approach. I am concerned—I shall develop this in a debate on another clause—that we shall get into a confusing, rather than a clarity-inducing, situation.

Paragraph 3 of the schedule, which, as the note says, was omitted from the list in clause 167, deals with the question of the scheme's trustees having to apply to the board to assume responsibility if they think that

    ''the employer is unlikely to continue as a going concern, and . . . the prescribed requirements are met''.

That is set out in clause 101(3). There is a similar provision in subsection (4), and so on. That is an important provision, so why was it left out? Perhaps there was a reason why, at the time of first drafting, it was thought that it was not appropriate for this part of the Bill.

Another issue arises in paragraph 5 of the schedule—formerly clause 167(d)—which has now been set out in different wording:

    ''a scheme that is eligible to enter the PPF should not start to wind up during an assessment period if it has insufficient assets to meet its PPF level of liabilities. The Board may validate . . . the action of a scheme's trustees or managers to wind up the scheme''.

That significant decision has to be made by the board. Is there any view that there should be a fast-track way of dealing with that kind of determination and review, where there are problems with a scheme? I congratulate the Government on belatedly putting forward the regulations relating to wind-ups. We look forward to debating those, I hope fairly soon. I believe that those regulations are due to come into force in May; that is good news, albeit belated. There is some read-across to paragraph 5 of the schedule. Is there any way of having a fast-track approach to dealing with the matters?

Another important point relates to paragraph 10. As I understand it, that paragraph includes a brand new provision, although I may stand to be corrected. The provision follows the introduction of the large schemes requirement. According to the notes,

    ''Where a scheme rescue is not possible for a large scheme and the scheme has sufficient assets to meet its PPF level of liabilities, the trustees or managers must apply to the . . . Board for authority''.

That is an important decision. It will be interesting to hear from the Minister how that relates to the relationship between the PPF level of liabilities, the statutory funding requirement and the requirements of FRS 17; we have already touched on the subject.

9.45 am

I will give a final example, because from anyone's point of view, the redrafted schedule is pretty voluminous. Paragraph 14, formerly clause 167(j), is about the

    ''determination . . . of a person's entitlement to compensation''.

That partly relates to a point that I made earlier. A person might challenge the number of years of accrued rights on which his compensation is based. That strikes me as another clear example of something that could affect a person significantly. Is there not an argument for a fast-track approach to the reviews, or for some

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reviews to move faster than others? Does the Minister have an idea of an overall global time scale in which the matter should be resolved?

The note makes it clear that the formula—and so, for example, the 90 per cent. figure for non-pensioners—cannot be disputed. However, there may be a genuine dispute about the number of years' accrued rights, about how someone's compensation is calculated, or even about someone being denied compensation. Those issues must be resolved rapidly, either by cutting out the review stage altogether—that is an option, and we will perhaps say more about it later—or by ensuring a fast-track method of challenge for those concerned. I hope that that is helpful.

As I say, I entirely understand the logic of how the provisions have been recast. It is helpful to have so much more detail included, but many details are still out there somewhere in draft regulations.


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