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Session 2005 - 06
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Delegated Legislation Committee Debates

Draft Financial Assistance Scheme (Appeals) and (Modifications and Miscellaneous Amendments) Regulations 2005

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Eighth Standing Committee
on Delegated Legislation

Thursday 17 November 2005

The Committee consisted of the following Members:

Chairman: Mr. Mike Hancock

†Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)

†Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)

†Banks, Gordon (Ochil and South Perthshire) (Lab)

†Challen, Colin (Morley and Rothwell) (Lab)

†Heppell, Mr. John (Vice-Chamberlain of Her Majesty's Household)

†Khan, Mr. Sadiq (Tooting) (Lab)

Laws, Mr. David (Yeovil) (LD)

†Plaskitt, Mr. James (Parliamentary Under-Secretary of State for Work and Pensions) (Lab)

†Pound, Stephen (Ealing, North) (Lab)

†Randall, Mr. John (Uxbridge) (Con)

†Viggers, Peter (Gosport) (Con)

Villiers, Mrs. Theresa (Chipping Barnet) (Con)

Wallace, Mr. Ben (Lancaster and Wyre) (Con)

Waterson, Mr. Nigel (Eastbourne) (Con)

†Whitehead, Dr. Alan (Southampton, Test) (Lab)

†Wright, Mr. Iain (Hartlepool) (Lab)

Alan Sandall, Committee Clerk

†attended the Committee

The following also attended, pursuant to Standing Order No. 118(2):

Penning, Mike (Hemel Hempstead) (Con)

[Mr. Mike Hancock in the Chair]

Draft Financial Assistance Scheme

(Appeals) Regulations 2005
2.30 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt): I beg to move,

    That the Committee has considered the Draft Financial Assistance Scheme (Appeals) Regulations 2005.

The Chairman: With this it will be convenient to consider the Draft Financial Assistance Scheme (Modifications and Miscellaneous Amendments) Regulations 2005.

The Minister has been kind enough to circulate a correction to the papers, which are available and I hope that everyone has them. He will draw them to our attention during his opening comments.

Mr. Plaskitt: I bid you a warm welcome to the Chair, Mr. Hancock, for our deliberations this afternoon.

The regulations were laid before the House on 26 October. We stated that we would introduce appeals regulations during the debate on 12 July, when we discussed the Financial Assistance Scheme (Appeals) Regulations 2005 and the Financial Assistance Scheme (Internal Review) Regulations 2005, or FAS, as I will refer to them during the debate.

Many hon. Members will recall that the Government first announced the setting up of an assistance scheme in May 2004, during the passage of the Pensions Bill, which was amended to include powers to set up the FAS. This is an important provision for those people most severely affected by pension losses resulting from their schemes winding up undefended. We ensured that work on introducing the main FAS regulations that set up the scheme and detailed how it was to operate was not delayed.

Those regulations, as hon. Members will know, came into force in the summer, together with the internal review regulations. The FAS was operational from the beginning of September, so affected scheme members will receive assistance as soon as possible.

Mr. Nigel Waterson (Eastbourne) (Con): Will the Minister tell the Committee when he expects the first payments under the FAS to be made to individuals?

Mr. Plaskitt: We expect first payments to be made before the end of this calendar year.

We concentrated first on implementing regulations that were essential for the FAS to ready itself for business. The internal review regulations introduced provisions for the internal review of reviewable terminations made under the FAS—the first stage of the review process. We wanted to ensure that if, after that stage, the person concerned were still unhappy with the review decision, they had access to a second
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independent route through which to challenge decisions. That second route is covered in the regulations dealing with FAS appeals arrangements. The other set of regulations before us today provides necessary modifications to the Pensions Act 2004 related to the introduction of the FAS appeals regulations and amendments, albeit minor, to other FAS regulations.

As many hon. Members may already be aware, anyone who could be materially affected by FAS determinations—the member or their survivor—could request an internal review of that determination. The Financial Assistance Scheme (Appeals) Regulations 2005 will allow such a person who is dissatisfied with the outcome of the review to request an appeal against an internal review decision.

The regulations appoint the pension protection fund ombudsman, or a deputy PPF ombudsman, to hear appeals against internal review decisions made by the scheme manager of the FAS. The regulations specify the persons who may appeal to the ombudsman: this is any interested person to whom a notice of a review decision, or subsequent review decision, has been given by the FAS scheme manager under regulation 16 of the internal review regulations.

Interested persons are defined as anyone who can apply under regulation 6 for a review of a reviewable determination under the internal review regulations. They are such people as beneficiaries, potential beneficiaries, trustees or those persons' representatives.

The regulations also include the time limits for making an appeal. An appeal must be made within two months, beginning with the date on which the FAS scheme manager's review decision was given. The regulations also specify the information that must be contained in the notice of the appeal, which must be made in writing and contain details of the date of the review decision. It must also contain a copy of the decision that is being appealed and the grounds on which the appeal is being made.

If an appeal relates to a member-eligibility or member-assessment decision, the notice of appeal must state who the beneficiary or potential beneficiary is, if that person is not the appellant. The name and address of the scheme trustees or managers must be included in the notice of appeal if the appeal relates to scheme notification or eligibility. It must also be signed and dated by the appellant, or a representative acting on his behalf.

Under the regulations, there is a set procedure that must be followed by the ombudsman when he receives notice of an appeal, including the sending of an acknowledgement of the notice of appeal to the appellant or his representative. The ombudsman must also send copies of the acknowledgement to each other party to the appeal or their representatives. When an appeal relates to a scheme-notification or scheme-eligibility decision, he must take reasonable steps to publicise to all other interested persons the fact that an appeal is being made.

The ombudsman is also required to send copies of any subsequent written representations to all parties to the appeal, and to publicise the existence of such
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representations in the case of appeals relating to scheme-notification or scheme-eligibility decisions. Due to the fact that trustees of pension schemes that have already completed wind-up before contacting the FAS operational unit are unlikely to hold up-to-date information on all scheme members, they may not be able to notify all those members that an appeal has been made. The requirement to publicise will ensure that members of qualifying pension schemes who are affected by such a decision are given the opportunity to contribute to the appeals process.

However, when the appeal relates to a member-eligibility or member-assessment decision, there is no requirement for the ombudsman to publicise that an appeal has been made, or publicise other relevant documentations, because such decisions relate only to the individual member. The ombudsman will have the power to join two or more appeals on the same matter relating to scheme notification or scheme eligibility. That means that he will be able to make a single determination in respect of them all. In some cases, that should speed up the time taken to reach a determination, and it will reduce the overall costs.

The regulations allow the ombudsman to convene an oral hearing when appropriate. He can request an expert opinion for an appeal in respect of the FAS. The ombudsman can pay costs or expenses incurred by parties to the appeal, witnesses who have been requested to attend an oral hearing and any person whom he has appointed as a representative of a party. However, the ombudsman must have given prior approval for those incurred costs and expenses.

I turn now to the second statutory instrument. The draft Financial Assistance Scheme (Modifications and Miscellaneous Amendments) Regulations 2005 set out the modifications required to the Pension Act 2004 in order for the PPF ombudsman to carry out his duties in respect of the FAS appeals scheme. The statutory instrument also includes some amendments to the Financial Assistance Scheme Regulations 2005, the Financial Assistance Scheme (Internal Review) Regulations 2005 and the Financial Assistance Scheme (Provision of Information and Administration of Payments) Regulations 2005. All these amendments are necessary to provide essential clarification on certain aspects of the FAS, and they will ensure that it operates effectively. Hon. Members will be aware of how important it was to get FAS up and running so that members could receive assistance as soon as possible.

During our work on developing the appeals regulations we identified the need to clarify some definitions to ensure that there was consistency. Additional areas were also identified as needing specific amendments to ensure that the policy intention was reflected clearly. Through a modification to the section of the Pensions Act 2004 dealing with the PPF ombudsman's duty to prepare an annual report, the ombudsman will now be required to provide the Secretary of State with a report covering specifically the duties that he has carried out in connection with FAS appeals for each financial year. The ombudsman will be accountable to the Department for the duties that he carries out. The
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modifications also provide the power that enables the making of the provisions in the appeals regulations to meet costs and expenses.

These regulations will allow the ombudsman to refer a question of law arising from the investigation of an appeal in relation to the FAS to the High Court in England and Wales or in Northern Ireland, or a Court of Sessions in Scotland. They also ensure that the determinations and directions of the ombudsman are enforceable in a county court in England and Wales or in Northern Ireland and in the sheriff court of any sheriffdom in Scotland. The ombudsman will also be able to refer to court anyone who is guilty of an act or omission in relation to the investigation of an appeal, or who obstructs the ombudsman in carrying out his duties. Amendments have also been made to the FAS Regulations 2005 by substituting regulation 18 of those regulations and by making other consequential and minor amendments.

The substitution of regulation 18 will enable initial payments to be paid to survivors of qualifying FAS members who die after their pension scheme started to wind up. That amendment also clarifies the dates from which initial payments to survivors and terminally ill people will be payable and the dates at which such payments will cease. That will ensure that FAS moneys are not paid out unnecessarily. In addition, consequential amendments have also been made to schedule 2 to clarify how initial payments payable to survivors will be calculated. Where a request for initial payments is made on behalf of a survivor, the initial payment will be calculated taking into account any interim pension that the scheme may be paying to the survivor. Some minor amendments have also been made to the FAS (Internal Review) Regulations 2005 to clarify certain requirements.

I shall explain their purpose. First, the duty of the scheme manager to give a review decision does not arise unless and until an application is received in the proper form. Secondly, an application for a review is made only when it is received by the scheme manager and if it is made within the relevant time scales and in the prescribed manner. Finally, only interested persons who receive notices of review decisions may appeal against those decisions. An interested person is anyone who may apply for a review of a reviewable determination under regulation 6(1). Such persons are a beneficiary or potential beneficiary, the trustees of a scheme or in some cases a representative of any of those persons. Where a beneficiary or potential beneficiary is unable to act on his own behalf his representative will be considered to be the interested person.

The final amendment to the internal review regulations relates to the time limits for requesting a review. Currently there is no set time limit for members to request a review of member eligibility or member assessment decisions. This amendment will impose a one-month time limit. Where the scheme manager considers that there are reasonable grounds for the application for an internal review not to have been made within the specified time, it is our intention that the Secretary of State will have discretion to extend that limit to 12 months.
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I wish to draw to the Committee's attention one aspect of the amendment that I have just described. There is a typographical error in regulation 5(7), at sub-paragraph (c). That is the regulation that deals with the time for making an application for a review of a reviewable determination. Hon. Members will have noted that, at the end of that sub-paragraph, the current wording is ''insert (or b)''. It should read ''insert (or c)''. The current wording would allow the scheme manager to extend the existing time scale in which to request a review of member-related decisions to 12 months where he considers that there are reasonable grounds for so doing. As there is currently no time scale in which to request a review, the scheme manager would be extending an already unlimited time scale by 12 months. As we made clear in the explanatory memorandum, the intention was to introduce a one-month time limit, with discretion to extend that new time scale to 12 months. As drafted, the regulation allows for the one-month time limit but not for the extension. That is regrettable, and we shall amend the regulation at the earliest opportunity.

The one-month time limit will ensure that any reviews take place at a time when the relevant information is still likely to be readily available. It will also be helpful for operational planning purposes. For member-related decisions, it was felt that a shorter time scale of one month, compared with two months for scheme decisions, was sufficient and reasonable as the decision affected only the individual. For scheme decisions, there is already a discretion to extend the time limit up to 12 months. As I said, we shall ensure that that is also the case for member-related decisions.

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Prepared 17 November 2005