Pensions Bill

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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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