House of Commons portcullis
House of Commons
Session 2005 - 06
Publications on the internet
Standing Committee Debates

Draft Occupational Pension Schemes (Levies) (Amendment) Regulations 2006

Column Number: 1

Second Standing Committee on Delegated Legislation

The Committee consisted of the following Members:


Mr. Eric Forth

†Afriyie, Adam (Windsor) (Con)
Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
Burrowes, Mr. David (Enfield, Southgate) (Con)
Clark, Greg (Tunbridge Wells) (Con)
Clelland, Mr. David (Tyne Bridge) (Lab)
Hamilton, Mr. Fabian (Leeds, North-East) (Lab)
†Heppell, Mr. John (Vice-Chamberlain of Her Majesty’s Household)
†Johnson, Ms Diana R. (Kingston upon Hull, North) (Lab)
†Laws, Mr. David (Yeovil) (LD)
†Lazarowicz, Mark (Edinburgh, North and Leith) (Lab/Co-op)
†McCafferty, Chris (Calder Valley) (Lab)
†McKechin, Ann (Glasgow, North) (Lab)
†Ruddock, Joan (Lewisham, Deptford) (Lab)
†Stringer, Graham (Manchester, Blackley) (Lab)
†Timms, Mr. Stephen (Minister for Pensions Reform)
†Waterson, Mr. Nigel (Eastbourne) (Con)
†Watkinson, Angela (Upminster) (Con)
Mark Etherton, Committee Clerk

† attended the Committee

Column Number: 3

Monday 13 March 2006

[Mr. Eric Forth in the Chair]

Draft Occupational Pension Schemes (Levies) (Amendment) Regulations 2006

4.30 pm

The Minister for Pensions Reform (Mr. Stephen Timms): I beg to move,

    That the Committee has considered the draft Occupational Pension Schemes (Levies) (Amendment) Regulations 2006.

May I welcome you to the Chair, Mr. Forth? The regulations provide for the Pension Protection Fund administration levy for the financial year 2006–07. They also provide that there will be no levy for the Pension Protection Fund ombudsman for 2006–07.

A key plank of the Government’s approach to protecting the deferred benefits of occupational pension schemes has been to establish the Pension Protection Fund, which opened its doors on 6 April last year. Some 53 schemes are currently in assessment for entry to the PPF, which is funded through levies on eligible schemes, and we have had debates about those levies in recent weeks, although today’s debate might be somewhat more straightforward.

The pension protection levy and the assets of schemes that are taken into the PPF ensure that funds are in place to meet any compensation obligations. However, it is important that such funds are reserved for paying compensation, so a separate administration levy is raised to meet running costs and initial set-up costs. The set-up costs are being recovered over a three-year period.

We have also provided for a disputes procedure. There is a two-stage internal process within the PPF, and if people are still not content, they can refer their case to the newly established independent PPF ombudsman. So far, no reviewable matters have been raised with the PPF for resolution through its two-stage internal process and nor have there been, as yet, any complaints of maladministration against the PPF. So far, therefore, no cases have reached the PPF ombudsman.

The Secretary of State initially funds the work of the PPF ombudsman from money provided by Parliament. A levy can be raised to cover that expenditure, but for the financial year 2006–07, as in the current financial year, no PPF ombudsman levy will be needed, because costs are expected, once again, to be small. Regulation 2(2) therefore provides that the PPF ombudsman levy is not payable for the coming financial year.

Regulation 2(3) deals with the administration levy, which is calculated using a rate per member of a
Column Number: 4
scheme. That is a variable rate, which is based on the number of scheme members on a scheme’s reference day, and the regulation brings the administration levy reference day into line with that for the pension regulator’s general levy.

The main provision is regulation 2(4), which provides that the administration levy payable in the coming financial year will be the same as in the current financial year. There is no need to increase the levy.

Regulations 2(5) to 2(7) make technical amendments to the principal regulations as an adjunct to separate provisions for schemes with multiple employers. Regulation 2(8) avoids double liability for schemes in Northern Ireland.

The regulatory impact assessment for the Pensions Act 2004 estimated the annual administrative cost of running the PPF at about £15 million. The regulations will lead to about that amount being raised in 2006–07, as in 2005–06.

I am satisfied that the regulations are compatible with the European convention on human rights, and I commend them to the Committee.

4.34 pm

Mr. Nigel Waterson (Eastbourne) (Con): It is a great pleasure to serve under your inspired leadership this afternoon, Mr. Forth.

I agree that the regulations will not detain us long—something that they do not have in common with the torrent of other regulations that is emerging from the 2004 Act. The regulations seem not to have stirred great excitement out there in the real world. Indeed, when they went out to consultation to a long list of the great and the good in the pensions world, they produced only one response on a technical issue, although the background document does not tell us what that was—perhaps it was only a spelling mistake. That is hardly surprising because, on the whole, the regulations are not about charging or increasing levies.

I want to touch on a couple of issues. The Minister said that the administration costs of the PPF board will be dealt with separately, and not be paid for by the general taxpayer. The note on policy background states that the levy

    “covers expenditure by the Secretary of State in establishing the Board”.

It would be interesting to know whether the Minister has an up-to-date total for that expenditure.

I take some modest credit for the obvious savings for British industry that will result from the lack of a levy to cover the costs of the PPF ombudsman. The original proposal was to have a plethora of ombudspeople, but the Government accepted our suggestion that the same person or persons should inhabit the skin of the pension and the PPF ombudsmen. The fact that the PPF ombudsman has not so far received a single reference suggests that it was a wise decision. In any event, it has clearly produced some savings, in that British business will not be involved with the ongoing costs. We are pleased about that.

Column Number: 5

It is difficult to find anything to say against this modest measure. It will not be charging a levy or increasing an existing levy, and for that we give much thanks.

On the subject of ombudsmen, such modest regulations are bound to be overshadowed by the parliamentary ombudsman’s report on Wednesday about whether the Government failed for a number of years to inform people of their pension rights and the protection of those pension rights. I suspect that, when we look back, the latter will be the big pension story of the week and not, I am sorry to say, the draft Occupational Pension Schemes (Levies) (Amendment) Regulations 2006.

4.37 pm

Mr. David Laws (Yeovil) (LD): May I, too, welcome you to the Chair, Mr. Forth? My comments on the regulations, which seem fairly uncontroversial, will also be relatively short. The Minister said that a PPF ombudsman levy would not be needed in the financial year ending 31 March 2007. He also referred to the modest costs of covering that Government responsibility. How much will the costs have to be before the Government need to impose a levy?

4.38 pm

Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): I welcome you to the Chair, Mr. Forth. I am surprised that the Front-Bench spokesmen for the Conservative party and the Liberal Democrats said that there is nothing much in the regulations to discuss and that they would not detain us long. I know that you, Mr. Forth, are interested in extensive parliamentary scrutiny, and many things in the regulations are worthy of lengthy discussion. We could be here until 6.29 were I to address the Committee at length for that purpose. However, given that not all hon. Members share my enthusiasm for parliamentary scrutiny, I shall ask one question.

How does the Minister envisage making the availability of the ombudsman service widely known to those who might wish to pursue complaints? It is sometimes difficult for ordinary members of the public to appreciate how to gain recourse to such bodies. It would be worth while giving us an indication, either now or in writing.

Column Number: 6

Although many issues would be worthy of fuller debate, I shall leave that for another day, as I want to give other hon. Members the opportunity to make a full contribution to the debate.

4.40 pm

Mr. Timms: I am delighted by the warm welcome that has been given to this instrument across the Committee.

The hon. Member for Eastbourne (Mr. Waterson) asked about the set-up costs. We estimate that those will be about £8.5 million; approximately £5.7 million together with capital expenditure of £2.9 million. This year’s administration levy will collect £1.9 million towards that—with a further £0.65 million to be collected to recoup capital expenditure and capital charges, depreciated over five years—and the administration levy for next year will collect a further £2.6 million in set-up and capital costs. Therefore, we expect to recoup the £8.5 million over three years.

I cannot tell the hon. Member for Yeovil (Mr. Laws) precisely what the threshold will be for a PPF ombudsman levy to be raised. We will consider the matter again next year. The pensions ombudsman has provision for staff to do the work but because, as I said, no internal matters have yet been raised, it will be a while before there is any. However, it might be necessary next year.

My hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) raised the interesting matter of how arrangements for the PPF ombudsman will be made widely known. It up to the PPF to make its own arrangements, including publicising its complaints procedure. I imagine that it will do so on its website and elsewhere, although I have not checked the website to find out whether that is the case. Anybody submitting a complaint will need to be made aware of the fact that if he is unhappy with the outcome when the PPF has conducted its own review, he will have access to the services of the ombudsman. It will be for the PPF to inform the scheme member of his right to appeal to the PPF ombudsman.

I am delighted that the instrument has general support, and I commend it to the Committee.

Question put and agreed to.


    That the Committee has considered the draft Occupational Pension Schemes (Levies) (Amendment) Regulations 2006.

Committee rose at eighteen minutes to Five o’clock.


House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2006
Prepared 14 March 2006