Clause
77
Interpretation
of
Part
Amendments
made: No. 134, in clause 77, page 36, line 29, leave out
‘or 6(3)’ and insert
‘, 6(3) or [Workers without
qualifying
earnings](2)’.
No.
142, in clause 77, page 37, line 12, at end
add—
‘“trustee or
manager”—
(a) in
relation to England and Wales or Scotland, is to be construed in
accordance with section 178 of the Pension Schemes Act 1993 (c. 48)
(trustees and managers of schemes:
interpretation);
(b) in
relation to Northern Ireland, is to be construed in accordance with
section 173 of the Pension Schemes (Northern Ireland) Act 1993 (c. 49)
(trustees or managers of schemes);’.—[Mr.
Plaskitt.]
Clause
77, as amended, ordered to stand part of the
Bill.
Clause
78
Abolition
of safeguarded
rights
Question
proposed, That the clause stand part of the
Bill.
Mr.
Waterson:
I am happy to relieve my hon. and
gallant Friend the Member for South-West
Bedfordshire—Captain Selous—and to take on the arguments
about a new set of
issues.
This
is our first sniff of the simplification—or deregulation, as it
is sometimes called—agenda. We shall hear much more about that
in a later sitting when we debate our new clauses relating to
conditional indexation, for example, so I will hold my fire on many of
the issues until
then.
The
Department commissioned an independent report on deregulation from
Chris Lewin and Ed Sweeney some time ago. They published their report
on 25 July 2007. The Government subsequently issued their own detailed
comments on the Lewin-Sweeney
document.
Of
course, I pay tribute to Chris Lewin and Ed Sweeney for their
labours—they obviously expended a lot of time and
effort—but it is interesting that on some of the key questions
they were unable even to agree among themselves. In some ways, what we
have is a fairly timid report with some fairly timid recommendations
about deregulation. With all due respect, the Government’s own
timidity about deregulation builds on
that.
1.30
pm
Why does that
matter? It matters because those of us who still believe that the best
way forward for many people is defined-benefit schemes are prepared to
try almost anything that might encourage a sponsoring employer to
continue providing a DB scheme open to both new members and existing
members. We know there has been a gentle trend of decline in
defined-benefit membership since, if I remember rightly, the late
1960s. On this Government’s watch, that decline
has speeded up dramatically, and bodies that should
know what they are talking about—such as the
Association of Consulting Actuaries—are warning all of us that a
second or third wave of companies might get out of the DB business in
the near future unless they are thrown a lifeline. I do not wish to
reopen the levelling down argument which we have exhaustively
investigated in previous debates, but the crunch moment for many of
them may come in 2012, or whenever the system of personal accounts
comes in. The
smokescreen of having a Government-sponsored, Government-backed scheme,
albeit with only a 3 per cent. employer contribution, might encourage
some employers—and I am not necessarily talking about
unscrupulous employers—to say to their employees, “We are
not going to carry on with our own scheme; here is a Government scheme.
It’s perfectly okay. Why don’t you enrol in that?”
We know from the National Association of Pension Funds that the average
employer contribution in traditional DB schemes is about 16 per cent.
That is going to make a very significant difference to people’s
outcomes for retirement. The onus is on us, on both sides of the
Committee, to grab any passing suggestion which can make it easier for
these employers to keep going.
I recently
had a trip to the Netherlands, about which I will say much more when we
talk about conditional indexation. I went there to find out why they
have something like 94 per cent. of all employees in DB schemes. It is
absolutely incredible. What are they doing right that we are not doing?
It is always difficult to export and import ways of doing things from
one country to another, although there are a lot of similarities
between what we do and what they do in the Netherlands. What they do is
to build flexibility into the system, making it more attractive for
employers to keep on with proper DB schemes. Lewin and Sweeney’s
starting point, which we accept as common ground for us and the
Government—and, I suspect, for the Liberal Democrats as
well—is that accrued rights should be protected. Any rights
acquired up to this date should be left alone.
Lewin and Sweeney said that
risk sharing should be facilitated, and I think that is important, so
that we get a third way—to coin a phrase—between DB
schemes and straightforward DC schemes where the whole risk is put on
to the employee rather than the employer. Their review has some
interesting things to say about other issues, particularly
principles-based legislation, which is a big topic, and perhaps not one
for today. There is the abiding problem of section 67 of the Pensions
Act 1995, about which debate rages as to whether it stops employers
changing some of the terms of existing pension
schemes.
I
may be wrong, but I think the Government’s default position on
this is that section 67 does not stop people doing these things, which
might be worth doing. It seems to me that as long as many employers
think that—presumably on the basis of the legal advice they are
getting, since I know we lawyers are always ultra-cautious in these
matters—then perhaps we should be doing something about section
67. There is also talk about statutory override, but a new clause deals
with that so I shall return to the subject later. One recommendation
was for a change in the law on pension and divorce, hence clause
78—a clause of one and a quarter lines but of substantial
significance.
I mosied down to the Library to
dig out a volume called “Jackson’s Matrimonial Finance
and Taxation”, which gives some useful background. I hope that
there is not an eighth edition; the seventh is the best I can do. The
authors make the point that pension rights are nowadays one of the most
valuable assets to be argued about between the parties on divorce. When
it comes to dividing the matrimonial assets, the pension is more
important than ever. In Brooks v. Brooks, a famous case, many of
those issues were addressed, and much dissatisfaction was expressed
about the existing state of the law.
The view has
been expressed that as a matter of common law the courts still had some
power to offset—I think that was the expression—pension
rights versus other rights. For instance, if the husband—almost
invariably it is the husband—had built up a substantial pension
pot, the wife might get more of the equity in the house. In the Brooks
case, the House of Lords decided that there was such a jurisdiction. It
was the Pensions Act 1995—as a fresh-faced young Back Bencher, I
had the privilege to serve as a member of the Committee that considered
that legislation—that first gave the courts the power to attach
or earmark part of all of a pension or a commuted lump sum. That came
into effect in 1996. Under the Welfare Reform and Pensions Act 1999,
which came into effect in 2000, the concept of pension sharing replaced
that of pension splitting.
The issue has been round for
some time, but one of the difficulties is apparently the concept of
protected or safeguarded rights within pension funds.
The Government’s position was given in the deregulatory review
of private pensions. The review stated:
“There are concerns
about the complexity of the requirements and the
different treatment of pension credit rights. The Government agreed
that some of the requirements are unnecessary and, at the next suitable
opportunity, will repeal the legislative requirements relating to
safeguarded rights.”
The
review continued:
“The Government’s
proposals in this area were warmly welcomed by all the correspondents
who raised the issue.”
Pausing there for a moment, it is
interesting to note that I have not seen any briefing notes or evidence
from any outside bodies opposing the provision—nor have I seen
any that support it. I can only assume that a veil of silence has
fallen over the proposal, which must mean that everyone is happy with
it. If I get a sack full of letters as a result of
this speech, we will know differently. The review went on to say
that
“The
abolition of safeguarded rights will be taken forward in the Pensions
Bill.”
That is exactly
what is happening.
According to the explanatory
notes,
“Where,
on divorce or dissolution of a civil partnership, rights to a
person”—
to a
pension—
“are
shared under the mechanism in Chapter 1 of WRPA 1999, and those rights
include contracted-out rights, the law as it stands treats the
contracted-out rights in a different way from the other shared rights.
They are known as ‘safeguarded rights’ and are subject to
various
restrictions.”
Clause
78 and schedule 8 would abolish those restrictions completely, after
which
“shared rights
that derive from contracted-out rights will be treated in the same way
as other shared rights.”
That seems to be the right way
forward.
I believe
that some 10,000 pension sharing orders are made every year and in the
impact assessment the Government estimate that between 4,000 and 5,000
will be affected by the change. From what I can gather, it is something
that the courts would welcome, as would many of the couples involved in
these difficult divorces. Assuming that my understanding of the thrust
of the modest little clause is correct this side of the Committee
welcomes the
proposal.
Mr.
Plaskitt:
I am grateful to the hon. Gentleman for
supporting the clause in that way. It abolishes
safeguarded rights and as such is part of what will be a rolling review
of the pensions regulations designed to achieve a degree of
deregulation. He will of course know, having seen the Lewin and Sweeney
report, that there is no magic bullet that will achieve the
deregulation that we want. It is an exercise that needs to take place
over time, looking at all aspects of existing pension regulations. A
number of measures that we can take to achieve deregulation now appear
in the Bill. This is one of them and there are others that we will
debate either today or in later sittings. The hon. Gentleman is
perfectly right to identify that as one of those deregulatory steps and
I am pleased that he welcomes it. As he says, when a divorcing couple
or civil partners who are dissolving their relationship—it does
include that—seek a final financial settlement the court must
take into account the value of any pensions held by either party to the
divorce or partnership dissolution. One of the options open to the
court is to make a pension-sharing
order.
When a divorced
scheme member’s sharable pension rights
include contracted-out rights, the former spouse’s share of
those rights is know as the safeguarded rights, and those rights are
subject to a detailed regulatory regime, similar to but not the same as
the rules for contracted-out rights from which they are
derived.
We have
received representations, both as part of the deregulatory review of
private pensions and also prior to the review, that safeguarded rights
serve no useful purpose, that they restrict the options available to
the member and just add administrative complications to pension
schemes. We have been persuaded by those arguments and have taken the
opportunity to bring forward the clause and to remove safeguarded
rights. That is a useful, and I am pleased to hear a supported, step
towards the process of
deregulation.
Mr.
Waterson
:
One likes to think that the concept of
safeguarded rights was introduced originally for some purpose. Has the
Minister been able to identify who or what it was meant to protect at
the time, or has it been a complete misnomer from the
start?
Mr.
Plaskitt:
Safeguarded rights were introduced for
contracted-out benefits—derived from the national insurance
rebate—to protect public funds. Therefore, safeguarded rights
were created to protect the national insurance rebate when
contracted-out rights were shared between the parties to a marriage or
a civil partnership. They were broadly intended to reflect
contracted-out rights and to ensure that those rights were securely
protected and used for their intended purpose, that is to provide an
income in retirement.
When they were introduced it was thought that they
provided additional protection to pension credit
members, but since they do not require a minimum level of payment that
is not in fact the case. They were introduced for good reasons but have
proved to be unnecessarily bureaucratic and that is why we brought
forward the proposal to abolish them. I am pleased that the hon.
Gentleman supports that and I hope that it will therefore become part
of the
Bill.
Question
put
and agreed
to.
Clause
78
ordered to stand part of the
Bill.
Clause
79
Revaluation
of accrued benefits
etc.
Question
p
roposed
, That the clause stand part of the
Bill.
1.45
pm
Danny
Alexander:
First, I want to echo some of the comment made
by the hon. Member for Eastbourne about both the importance of the
deregulatory review and the work that came out of
that, and of the deregulatory agenda more generally, aimed at
protecting, where possible, existing defined benefit schemes. Some of
the matters that we will come to discuss, particularly under the new
clauses, are ones for which I have considerable
sympathy.
However,
I would be grateful for a bit more information from the Minister on the
evidence base for the Government’s decision to include the
provision to reduce the cap on growth funds for deferred members of
certain occupational pension schemes from 5 per cent. to 2.5 per cent.
Obviously, the main argument in favour of clause 79 and the associated
schedule 2 is that it will provide support for the remaining defined
benefit schemes. That certainly has been the representation made to the
Committee by organisations such as the National Association of Pension
Funds and the Engineering Employers Federation, which made the point
both in its evidence and the briefings it
supplied.
I would like
to know what evidence the Minister has that this will do
something to slow the closure of defined benefit schemes. It is
interesting to look at what the independent reviewer said around this
idea.
“We are
not inclined to recommend a change in approach to the revaluation
requirements for deferred benefits. Although there will be some cost
savings for final salary schemes (partially offset by extra
administrative costs due to the need to revalue two separate tranches
of benefit at separate rates) these would be made entirely through
reduction in the value of the benefits of those who leave the scheme
before pension age. We have seen no evidence that this change would
ease administration, encourage risk sharing or slow closure of final
salary
schemes.”
That
is a fairly strong view from the people the Government asked to conduct
the independent review into deregulation. I would be interested to hear
on what basis the Government and their officials reached the opposite
conclusion, which led to the inclusion of this provision in the
Bill.
Certainly,
representations from other organisations—I particularly draw the
Committee’s attention to the TUC and to Unite in this
context—suggested that what this provision could potentially
mean is a significant erosion of some members’ benefits.
Depending on the measure that is used, inflation is currently running
at around 4 per cent., which would mean that deferred pensions
would be worth 1.5 per cent. less per year in real terms at the moment,
if this arrangement applied now. Over a long period, if those
arrangements were maintained—the Minister will no doubt draw
attention to the Government’s inflation target and so
on—this could amount to deferred pensioners, perhaps those who
deferred a long time in advance of retirement age, losing quite a
considerable proportion of the benefits they would have expected to
receive. As
with many other provisions in the pension system, there is currently,
therefore, a risk. I wonder to what extent the Government have
evaluated the possibility that this change could potentially have a
significant effect, particularly on women pensioners. Women pensioners
suffer from a number of different aspects of our pension system and I
would like to hear from the Minister that the impact on women is
something he has particularly taken into account in considering and
bringing forward the proposed
change.
To quote the
independent reviewers
again:
“Although
available data is patchy, it seems to us that women could be
proportionately affected by a reduction in the cap, because they are
more likely to earn pension benefits early in their careers and then
leave the workforce for periods of time to undertake caring
responsibilities.”
Clearly,
in the Bill that went on to become the Pensions Act 2007, the
Government made the argument that at least some of the changes that
they were bringing forward were there to support and advance the
position of women pensioners. Though the Bill did not go as far as some
of the amendments tabled by my hon. Friend the Member for Yeovil
(Mr. Laws) at that time, we did welcome the progress that
was made. There is a concern, however, that the current
Bill—subject to what the Minister has to say in response about
the evidence he has looked at in relation to the impact on women
pensioners—is actually sending some quite mixed
messages.
The
argument, which has some force, that has been
advanced particularly by the NAPF is that the
measures contained in the clause and in schedule 2 are necessary to
help protect existing defined benefit schemes. The representation from
the TUC has suggested that this change might, in some circumstances,
encourage employers to close high-quality existing schemes,
saying:
“The
statutory revaluation cap also provides protection for current
employees in defined benefit pensions, not least when employers make
changes to schemes. If for example a scheme was closed to future
accruals, all the existing members would be treated as deferred members
with their benefits adjusted for inflation up to statutory
cap.”
In
other words, if the scheme is closed and people are therefore able to
apply the lower cap that is proposed, there is a potential advantage to
employers of closing the scheme. That is the TUC's argument. I wish to
hear what consideration the Minister has given to that important point,
because it needs to be thought through properly before the item we are
discussing is put on the statute
book.
Finally, I
should like to hear the Minister’s answer on this
complicated issue, about which there are arguments on both sides. I
wish to be reassured that the impact that the provision may have on
young people's incentive to save was considered properly by the
Government when drafting the clause. Clearly, in the modern labour
market, we all know—I guess that Members of Parliament are more
conscious of it than most—that there is no such thing as a job
for life. [I
nterruption
.] Perhaps the Minister
thinks there is; perhaps the hon. Member for Eastbourne does. People
often move from job to job and might have several jobs—or even
two, three, four, five or six jobs in a year—and under the Bill
there will be the opportunity for automatic enrolment in respect of
every one of those jobs, because having left an employer and moved to
other employment, people are therefore deferred in the context of
earlier employment. What impact does the Minister think the reduction
in the cap would have on the incentives for people to join pension
schemes throughout their lives, given that doing so could result in a
reduction of the benefits that they could receive from the pension
schemes from earlier periods of
employment? I should
be interested to hear the Minister's answers to all those important
questions, before we move on and agree to the clause standing part of
the
Bill.
Mr.
Waterson:
I suppose that the hon. Member for Inverness,
Nairn, Badenoch and Strathspey should know about having more than one
job, because not only is he trying to shadow the Department that it is
possible for 40 per cent. of all Government spending, but he is also
chief of staff to his new party leader. Clearly, he is a renaissance
man. However, I do not agree with him. I do not agree with the TUC,
either, which was wrong to throw its toys out of the pram when this
proposal surfaced. We Conservatives were quick to support the
Government on this matter, but we said, in other ways, that they should
be going further and
faster.
The TUC needs
to take a trip to Holland, because the unions there are closely
involved in running the big sectoral defined benefit schemes and are
totally on the same page as employers’ organisations on how such
things are run and on having flexibility built in. People like those at
the TUC need to get on board with the idea that it is about having a
choice between having a Rolls-Royce pension and, perhaps, a Jaguar or
even a Volvo one, if that is their tipple. However, if people insist on
a Rolls-Royce pension, they may have no such scheme at all and may end
up with an employer reverting to a simple defined contribution scheme
or, when the day dawns, pointing his employees towards the personal
accounts with their 3 per cent. employer contributions. So there are
some real dangers of people, such as those in the TUC, overplaying
their hand. All credit to Ministers for at least coming up with this
brand of risk sharing and
flexibility.
I commend
the hon. Member for Inverness, Nairn, Badenoch and Strathspey for
picking a quote out of the Lewin and Sweeney report that sounded
clear-cut and black and white on the issue, but it seems to me that the
more relevant quote from their report is
this:
“Once
again, we find good arguments on either side of this
question.”
That is very
much in the mode in which they discuss almost everything in the report.
I do not criticise them, in that they were coming at the issue from
different
directions. They are both experienced men with a lot of expertise, but
they simply could not agree on some of the fundamental
issues.
Danny
Alexander:
The hon. Gentleman is right in what he points
out about the report. The purpose of what I said was simply to hear
from the Government the reasons why they had decided to come down on
one side of the argument rather than another when the independent
reviewers had not been able to do
so.
Mr.
Waterson:
It certainly was not the conclusions of Sweeney
and Lewin that persuaded the Government to do
anything specific. In a masterpiece of draftsmanship, they finally came
up with this immortal line. As the hon. Gentleman accurately said, they
did not recommend a reduction in the cap, but they concluded by saying
that they
would
“understand if
Government took the view that, when looking at the package as a whole,
a reduction in the cap from 5 per cent. to 2.5 per cent. was one of the
measures
needed”.
If
I was a Minister receiving that report, I would probably be tearing my
hair out. [Interruption.] The Minister has been, obviously, or
somebody has. It seems strange to produce a report with so few firm
conclusions. Perhaps that illustrates the minefield that we are in at
the moment, but let me be absolutely clear about this. We think that
the prize is to retain and encourage DB schemes, which will always
produce the best possible retirement income, broadly speaking, for
individuals—much better, let it be said, than personal accounts
and significantly better, on average, than DC
schemes.
Again, to
their credit the Government, in their own conclusion,
said:
“The
Government remains concerned about the continuing decline in
occupational pension provision and that, if nothing is done, the
decline will continue...It is clear that there is no single
‘magic bullet’, or, as this consultation has shown,
‘a consensus
option’.”
We agree
with all of that. There is no single magic bullet, but there is a
package of different things, some of which are in the Bill but some of
which are not yet, that we think could give the necessary impetus to DB
schemes for the
future.
As
I understand it, the measure is meant to take effect from January 2009
and will affect only rights accrued after that date. The basic
principle, which I think is common ground, is that any rights accrued
before this legislation will not be touched at all. The Government
estimate that
“a
reduction in the cap would deliver potential savings for employers of
up to £250 million...a
year”,
possibly rising to
as much as £400 million a year. That is worth having in what is
a difficult environment for companies running these
schemes.
I totally
agree with the NAPF. When it commented on this aspect of the Bill when
it was published, it described it as “an important first
step”. We agree. We also agreed with Pensions Week when
it said:
“Most
notable by its absence in the bill was any conclusion over the
industry’s proposals for risk-sharing
strategies.”
We
shall come on to that in much more detail, but in this instance we
think that the Government are right and they have our full
backing.
2
pm
Mr.
Plaskitt:
This has been a helpful debate on an
important change that the clause introduces. I am
grateful to the hon. Member for Eastbourne for his expression of
support for it. My problem with the approach of the hon. Member for
Inverness, Nairn, Badenoch and Strathspey is that he has taken this
entirely in isolation, and based his criticisms of it as through it
were a stand-alone change. It needs to be seen in the context of
everything else that is happening. The reform is part of a broad
package. That is what Turner asked us to do; it is what everyone has
understood needs to be done. For example, the hon. Gentleman tried to
argue that this specific form would in some way be particularly
disadvantageous to women. He should bear in mind the whole
package.
For example,
we have already made changes, which will apply in due course, to the
number of years required to qualify for a state pension. The main
beneficiaries of that reform are women. The majority of those in the
income bracket who will, we hope, become participating members of the
new personal schemes introduced by the Bill will also be women. The net
effect of all the measures being taken will be substantially to improve
the pension position of women in the future. I suggest that the hon.
Gentleman should bear all of these things in mind, because this is part
of making a sustainable
whole.
Danny
Alexander:
I think that I acknowledged, in what I said
earlier, that the measures taken in the previous Pensions Bill, as well
as the personal accounts, will have benefits for women. My intent was
not necessarily to criticise these arrangements, but to probe the
Minister’s evidence base on aspects of the clause, so that the
Committee can be assured that all potential criticisms have been looked
into in deciding to bring the measure
forward.
Mr.
Plaskitt:
I am coming to that. I understand that the hon.
Gentleman wants to know the evidence base, and I will come to it in
detail in a moment. I wanted to reassure him on the
broader context. One thing on which we all agree is that good quality
occupational pension provision has to be encouraged. Traditionally, in
our country, such provision has tended to be made up of
defined-benefit, often final salary, schemes. However, due to a
combination of factors such as high life expectancy and lower
investment returns, the cost to sponsoring employers of running
defined-benefit schemes has increased significantly over recent years.
Mainly as a result of these cost pressures, we have seen a decline in
the number of schemes which are open to current and new
employees.
While the
Government have no power to control many of the underlying cost
factors, what we can do is review legislation which affects
occupational pension schemes, and seek wherever possible to minimise
the cost burdens arising from such provision. If a member leaves an
occupational scheme before reaching pensionable age, the pension rights
which have been left behind in the scheme—the deferred
rights—can be undermined by inflation if no revaluation
increases are provided by the scheme over the period of deferral. That
is why schemes are required to award a minimum level of
revaluation on such rights. When in the 1980s the
statutory revaluation requirement was introduced for deferred pensions,
it was recognised that it would be counter-productive and wrong to
impose a potentially unlimited cost burden on schemes. The balance of member
protection and scheme affordability was set by requiring schemes to
revalue deferred pension rights by the rate of inflation over the
period of deferral, or by 5 per cent. per annum, whichever is less.
When the 5 per cent. cap was set, inflation was running at a
significantly higher level than it is now. In fact, over the previous
five years, it had averaged almost 9 per cent. In other words, the
balance was struck such that there was no expectation that schemes
would have to protect deferred pensions fully against inflation. Due,
however, to the sustained reduction in inflation in recent years, that
is now the effect of the 5 per cent. cap. The similar cap which applies
to the limited price indexation requirement on pensions in payment has
already been reduced to 2.5 per cent. per annum, and bringing the
revaluation cap into line with this figure was one of the proposals
considered as part of the recent deregulatory review of private
pensions. We think that it is sensible to include this reform in a
package of measures to help employers to continue to provide
occupational pension schemes for their work forces.
In judging that a reduction in
the revaluation cap is now appropriate, the
Government are clear that pension rights that have already
accrued—this point was made by the hon. Member for
Eastbourne—should not in any be affected by the introduction of
the lower 2.5 per cent. cap. We have drafted the legislation carefully
to make sure that that is absolutely clear.
The Committee
will have noted that schedule 2 makes equivalent changes to the
provisions of the Pension Protection Fund, so that the shape of PPF
compensation continues to reflect the statutory requirements of the
pension scheme. It would be perverse for a compensation scheme to offer
better benefits than those that a person would have expected from their
own pension
scheme.
The hon.
Member for Inverness, Nairn, Badenoch and Strathspey asked for specific
evidence. Let me share with him the extent of support for this measure,
the endorsements that it has received and the reasons why it has been
endorsed. For example, this clause is specifically endorsed by the
National Association of Pension Funds, the Association of British
Insurers, the Engineering Employers Federation and the Co-op
Group.
In endorsing
the clause, the EEF said that the reduction in the cap
would
“make it more
likely that those schemes that have been closed to new members will
decide to remain open for future accruals to existing
members”.
I think that
the hon. Member for Inverness, Nairn, Badenoch and Strathspey would
like to see that happen and there is evidence, from those in the field,
that that would be the effect.
The CBI also gave us a little
more insight in this area. If the hon. Member for
Inverness, Nairn, Badenoch and Strathspey does not mind, I will share
with him the full extent of their support for the measure, because what
the CBI said is interesting in the context of the way that the hon.
Gentleman spoke. The CBI told us:
“Firms have faced an
escalating burden of cost in running DB schemes over the past decade,
resulting from longer lives and higher regulatory costs. Where
appropriate, it is right to reduce these burdens to improve scheme
health. The proposals to amend the limited price indexation (LPI) cap
to 2.5% for deferred members...is therefore welcome. As this is a
forward-looking measure, scheme members will know from the outset what
rate of revaluation their savings will have and will not be
“unfairly” re-valued. Reduction to 2.5% is also
appropriate to delivering the original intention of the legislation -
limited price indexation - in the current the economic
climate.”
I
hope that the hon. Member for Inverness, Nairn, Badenoch and Strathspey
will accept those arguments. This is a measure that reflects
today’s lower inflation environment and it is part of a package
of wider deregulatory measures. We hope and believe that it will
help employers to maintain defined benefit
occupational pension provision into the future. Therefore, I hope that
the hon. Gentleman will support this clause.
Question put and agreed
to.
Clause 79
ordered to stand part of the
Bill.
Schedule
2 agreed
to.
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