New
Clause
19
Defined
benefit schemes: amendment of
rules
‘The
Secretary of State shall lay regulations prescribing circumstances in
which a statutory override can be applied that enables scheme rules to
be amended to reflect the Pensions Act 2004 changes to the indexation
cap for service going forward and for the change in the revaluation cap
introduced under section
79.’.—[Mr.
Waterson.]
I beg to move, That the clause be read a Second time.
Brought
up, and read the First
time.
Mr.
Waterson:
The new clause is another return to the
simplification, or deregulation, agenda. It is very limited in scope;
it is for a limited statutory override. One of the issues looked at by
Messrs. Lewin and Sweeney in their review was statutory override. The
amendment is sponsored by the National Association of Pension Funds,
and the background is the whole thrust of trying to limit or reduce the
costs and burdens on sponsoring employers of existing defined benefits
schemes. Those costs have gone up a lot in recent years. The latest
NAPF annual survey showed that the administration costs of an average
scheme have risen by over 50 per cent. in the last two years alone.
That is a staggering figure.
The NAPF welcomes the
Government’s rolling deregulation programme—rolling is
just about correct, although it is not very fast. It
says,
“we believe the
Government could go further and accelerate the
process”.
That is a
marvellous piece of understatement. One way in which that could be
done, would be to introduce a limited statutory override into the Bill.
I have already touched on the work of the external deregulation
reviewers. They identified a problem whereby some schemes are unable to
take advantage of Government simplification measures, due to the way in
which their own scheme rules are drafted. It is not the law itself
that stops them, it is their own scheme rules. The problem is about how
that can be changed. Lewin and
Sweeney recommended that the Government should legislate to ensure that
employers and pension scheme trustees can override their scheme rules
in certain specific cases set down in the legislation. That would
include the right to make changes to the indexation requirements
introduced in the 2004 Act, and it should apply in other circumstances
such as the revaluation in clause 79.
As we near the end of the
Committee stage I may, for once, be pressing on an open door. The
Government have said that they agree with the measure in principle, but
they also believe that it should be possible to make such changes by
secondary legislation. The NAPF does not entirely agree with that
because of the complexity of the pensions set up at the moment. It
believes that we should send what it calls a “strong signal of
support” to those employers offering high-value occupational
pension schemes—something that I entirely agree with. It
says,
“the
amendment...seeks to put the matter beyond doubt and provide a
power—in primary legislation—which will enable the
Secretary of State to make regulations to extend the Pensions Act 2004
indexation changes and those set down in clause 79 of this Bill
regarding revaluation to all pension schemes.”
I have two final points that
are important to put on the record.
Mr.
O'Brien:
The hon. Gentleman will be aware that section 68
of the Pensions Act 1995 enables regulations of the sort that he
describes to be brought forward. In effect, the provision that would
enable us to bring forward the regulations is already there. If it were
the case that we intended to bring those regulations forward, that
prompts the question of what point the amendment would
serve.
Mr.
Waterson:
The obvious riposte to that is
to ask the Minister why he has not brought forward regulations, draft
or otherwise. The NAPF accepts what the Government are saying in
principle, but it thinks that we should send a strong message to
industry and sponsoring employers that this is possible. I do not want
to get into this too deeply, but there are wider issues about sections
67 and 68 of the 1995 Act. The Department’s view has been that
those sections do not bar pensions schemes from doing this, that or the
other. In fact, on the basis of legal advice, which as we all know is
rarely black or white, many employers have often felt that they are not
allowed by those sections to do certain things. We will return later to
those issues, particularly in relation to section 67. We still think
that it is worth proceeding with the new clause but if, when he comes
to speak substantively on this, the Minister can confirm that these
regulations are about to hit an unsuspecting world, I might take a more
charitable view on pressing the new clause.
Any decisions regarding changes
to scheme rules would still be subject to mutual agreement by the
employer and the scheme trustees and the changes would only affect
pension rights accrued in the future, not those earned in the past.
That is a chunk of consensus that is now accepted on all sides. It
emerges from Sweeney and Lewin that accrued rights should not be
tampered with. On that basis, I commend the new clause to the
Committee.
Mr.
O'Brien:
I am not sure that I entirely got the answer I
was seeking about why this particular new clause is necessary. I do not
think that there is any difference between my view and that of the hon.
Member for Eastbourne about the need to provide a statutory override.
We have already indicated, as a matter of policy, that we intend to
issue regulations for consultation later this year, which will enable
the override to be put in place. Given that we already have a statutory
capability to introduce those provisions, I do not detect from the hon.
Gentleman any convincing argument as to why we need to include it in
the Bill; I would be prepared to consider it if there was one. The
provision is there and we do intend to make this change; he is knocking
at an open door and it is important that the statutory override is put
in place.
This can be
quite a complex area, as the hon. Gentleman said, so I want to ensure
that when we publish the regulations we have time for the various
employers’ groups and others to look at the regulations and give
us their views. That is the better way forward. The new clause would
not prevent us from doing that, but it is unnecessary for that purpose.
I aim to have a consultation later this year to achieve what the hon.
Gentleman seeks. I hope that it will then be brought into effect by
Parliament, either this year or in the early part of next year, so the
change that he seeks is on its way, and not even at a slower pace than
that sought by the new clause. The reason we have not brought it
forward so far is that we have been working on the Bill—there is
a limit to the availability of parliamentary draftsmen and officials to
do everything at once. I wish that such resources were unlimited, but
they are not. I will seek to bring forward the changes as quickly as is
reasonably possible.
Mr.
Waterson:
I am delighted that the Minister thinks that he
has the powers to do this, and at some point might even use them. I
appreciate the point about limited availability of parliamentary
draftsmen, which is why we have tried to help him out by drafting the
relevant provision. I do not think that he has raised any technical
issues on that particularly. He has confirmed my worst fears that this
is indeed part of what is called a rolling deregulatory programme. We
would like to see it roll a bit faster, that is all that I am really
saying. Now it is all going to be swept up in the review. Another
review was announced in the Chamber today, I gather, so I think that we
are up to 57 reviews since the current Prime Minister took
over.
Mr.
O'Brien:
I assure the hon. Gentleman that we are not
reviewing the statutory override idea at all; we are merely going to
put it into regulations. The Lewin and Sweeney review has been
completed so there are no more reviews, it is just a matter of getting
the regulations out there, consulting on them to get them right, and
getting them
implemented.
1.30
pm
Mr.
Waterson:
Yes. Let us not go further into the nature of
the Lewin and Sweeney exercise, but it seems like a wartime convoy
going at the speed of the slowest ship when there seems to be a lot of
consensus on what needs to be done. The Minister has the powers, and we
should get on and do it. Clearly, the door at which I am
pushing, and which is supposed to be open, is stuck. Until the odd-job
man makes an appearance, I beg to ask leave to withdraw the
motion.
Motion and
clause, by leave,
withdrawn.
New
Clause
21
Personal
account sharing on
divorce
‘(1) Any sum may be
transferred from one personal account into another personal account
when—
(a) a divorce or
dissolution of a civil partnership leads to a court order or agreement
by mutual consent splitting the assets of the parties
concerned;
(b) the court order
or agreement by mutual consent instructs that a proportion of the value
of the personal account of the transferor should be made the property
of the transferee; and
(c) both
the transferor and the transferee hold a personal
account.
(2) In this section
“the transferor” and “the transferee” shall
be defined as in section 83 of this Act.’.—[Andrew
Selous.]
Brought
up, and read the First
time.
Andrew
Selous (South-West Bedfordshire) (Con): I beg to move,
That the clause be read a Second
time.
It is my duty to
give my hon. Friend the Member for Eastbourne the odd rest during our
proceedings as he has borne the brunt of our efforts for a
while.
New clause 21
would ensure that there are provisions for the sharing of personal
accounts on divorce or the ending of a civil partnership. It has been
supported by the Equality and Human Rights Commission, and I am
grateful for the brief that it
provided.
The new
clause is simple. I am well aware of the concerns expressed by both
Ministers, and indeed by Tim Jones and Paul Myners of the Personal
Accounts Delivery Authority in the evidence sessions, that we need to
keep the administration of personal accounts simple. They do not want a
mass of transfers in and out, which I believe are barred until 2017. If
there is a criticism of new clause 21, it is probably that it is modest
in scope, too restrictive and would not help enough people because it
relates only to couples when they both have a personal account. The
issue is not easy, and we are not talking about new money coming into
the personal account scheme or money going outside in its
entirety.
Paragraph
(b) allows transfers by mutual consent, which I hope the Minister has
noted. That is important because I learned from the Equality and Human
Rights Commission briefing that although pension sharing rules on
divorce were introduced in December 2000—since they were
introduced there have, sadly, been more than 1 million petitions for
divorce—figures from the Department for Constitutional Affairs
reveal that in the year to September 2007, less than 8 per cent. of
divorcing couples obtained pension-sharing orders. That tells me that
there is a real problem in this area, and that an asset, which in many
cases may be worth as much or perhaps more than the former matrimonial
home, is not being fairly shared. A wife may have contributed greatly
to a marriage over many years or may have taken time off to look after
children or a sick
relative, and it is absolutely right and important that she should enjoy
the proceeds of pension contributions to which she has a right, given
her part in the marriage over many years. This is an area that couples
often find contentious, and believe will be complicated, or perhaps
they are not even aware that it is possible to have a claim on a former
spouse’s
pension. I hope that
the new clause commends itself to the Minister. I know that there is a
bar on transfers before 2017, but I repeat that we are not talking
about transfers out of or into the personal account scheme. We are
talking only about changing the fair sharing of pension pots within the
personal account scheme. I think that in 2017 it would probably be
necessary to go beyond the provisions in new clause 21 and perhaps look
at other cases. I hope that the Minister, perhaps when he replies, will
give the Committee an indication of whether the review of transfers in
and out, in 2017, will take into account that very important
aspect.
I hope that I
have set out where we are coming from in tabling new clause 21. I hope
that the Minister realises the seriousness of the matter, given that,
as I have just said, less than 8 per cent. of divorcing couples
currently obtain pension sharing orders. If he cannot accept the new
clause, as drafted, I hope very much that he will reassure us that the
Government are aware of the importance of the matter and intend to do
something about
it.
Mr.
John Greenway (Ryedale) (Con): I think that my hon. Friend
is on to something with this new clause. I want to make a brief point
that he did not touch on in his otherwise excellent
rÃ(c)sumÃ(c) of the new clause. He has said that it will apply
only when a divorcing couple both hold personal accounts. One of the
attractions of the personal account scheme will be its low cost. On
Tuesday, in Committee, we discussed changes to provisions for pension
splitting on divorce and the prospect of further work to be done by the
Government. However, it is not clear whether someone could transfer
their money into a personal account. I see nothing in the Bill that
would allow for that.
Clause 100, which I have been
rereading along with its explanatory note, deals with the exclusion of,
rather than allowing, transfers. Such transfers would entail very
little cost. In fact, there would probably be no cost at all, other
than a charge that might be levied by the scheme for such a transfer.
Given that we are probably dealing with relatively low-income earners,
I find the prospect of the new clause particularly attractive. I am not
sure whether it needs to be included in the Bill, or whether a power to
deal with it in regulations is buried in the detail. However, on
principle, I support my hon. Friend’s suggestion. I regret only
that I did not spot the new clause earlier and add my name to
it.
The
Parliamentary Under-Secretary of State for Work and Pensions
(Mr. James Plaskitt):
This is indeed an
important matter and I am grateful to the two hon. Members who have
just spoken on it. As I said, the new clause would replicate for
personal accounts the effect of provisions in the Welfare Reform and
Pensions Act 1999. Pension sharing was a flagship policy of the
Government’s first pensions reform and the arrangements in the
1999 Act will apply to the personal accounts scheme, as they do to all
other occupational
pension schemes. Given that the Act provides already for pension sharing
for occupational schemes, we have not duplicated the provisions in the
Bill.
If a couple
divorces and the court makes a pension sharing order, the trustees of a
scheme will arrange for the former spouse or civil partner to be
awarded a pension credit, which will be a share of the member’s
pension rights. The trustees will then discharge the pension credit
into a pension scheme in the former spouse’s name, who will then
become a pension credit member of that
scheme.
Andrew
Selous:
I am reassured by the way in which the Minister
started his remarks. For the sake of clarification, we heard a lot
during the evidence sessions about no transfers at all before 2017, but
is the Minister now saying that it will be possible in divorce cases to
move money in and out before
2017?
Mr.
Plaskitt:
We covered that in previous debates on divorce
and arrangements for it. The arrangement is that the pension credits,
as they are called, that come out of a divorce settlement and are
awarded by the courts can be transferred into such personal pension
schemes—the point covered by the hon. Member for
Ryedale—but there is a ban on them subsequently being
transferred
out.
Scheme rules
determine whether a scheme will accept the pension credit members.
Occupational pension schemes are not obliged to accept them, and very
few do. Some existing schemes do not accept them if the former spouse
has no connection with the sponsoring company. It is our intention that
personal accounts will accept the discharge of a pension credit into
personal accounts if that is what the former spouse wishes, provided
that the pension credit has come from the personal account or the
former spouse has a personal account in his or her own right as either
an active or deferred
member.
The former
spouse may have the pension credit discharged into another pension
arrangement, such as a personal pension, if that is what they prefer.
There is no compulsion to use personal accounts. The
Government’s detailed intention to pension sharing in personal
accounts will be covered in the scheme order. I am grateful that the
new clause has provided the opportunity for me to explain our
intentions. I hope that I have offered assurances. Our proposals are
wider in scope than the new clause would allow, and I hope that the
hon. Gentleman will agree to withdraw it.
Andrew
Selous:
I am indeed reassured by what the Minister. He
will recall that, at the start of my remarks, I almost criticised the
new clause by saying that it was more restrictive than I had wanted it
to be. As always, I was fearful that the hon. Gentleman would say that
we were overdoing it by putting forward a proposal that was too
complicated. However, what he said about the scheme order is good news
and, on that basis, I beg to ask leave to withdraw the
motion.
Motion and
clause, by leave, withdrawn.
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