Introduction

Clause 18: Introduction

58.     Subsection (1) defines the three main concepts in this Part of the Bill.

59.      The first concept is “qualifying member of the RMPP”. This means a group of members of the RMPP specified by the Secretary of State by an order under this Part.

60.     The second concept is “qualifying time”. This is the cut off date by reference to which it is determined what rights or entitlements under the RMPP scheme are “qualifying accrued rights”.

61.     The third concept is “qualifying accrued rights”. These are the entitlements under the RMPP scheme that may be transferred to the new scheme under clause 19. Qualifying accrued rights will cover:

• rights of qualifying members or their beneficiaries to future benefits under the RMPP;

• rights of qualifying members or their beneficiaries to the current payment of a pension, or other benefit.

62.     Subsection (2) provides that “qualifying accrued rights” exclude money purchase benefits, but include other benefits related to additional voluntary contributions (for example those relating to the purchase of added years of service), and also include pension credit rights, which are pension rights provided to the ex-spouse of a member if that member’s pension benefit is divided between them pursuant to a pension sharing order on divorce.

63.     Subsection (3) provides that, if “qualifying members” includes members who are in service after the qualifying time, their “qualifying accrued rights” will be calculated as if they had left the scheme at the qualifying time. So, in the case of current or active (rather than retired) members, the right that is transferred is to be calculated by reference to service up to the qualifying time and by reference to the member’s salary at or near the qualifying time, in accordance with the RMPP rules. If further rights accrue in respect of service before the qualifying time (e.g. where the pension is linked to the member’s final salary), amendments to the RMPP scheme will make it clear that these further rights will remain in the RMPP scheme. The Secretary of State has power to amend the RMPP scheme under clause 21 to achieve this.

Powers exercisable

Clause 19: Transfer of qualifying accrued rights to new public scheme

64.     Subsection (1) confers power on the Secretary of State to establish a new scheme for pensionable service in the RMPP up to the qualifying time in respect of members designated as qualifying members. Subsection (2) allows the Secretary of State to transfer “qualifying accrued rights” of such members to this new scheme. The consequence of this transfer is that the corresponding liabilities of the RMPP scheme will be extinguished.

65.     Subsection (3) provides that the benefits payable by a new scheme may be increased on such basis as the Secretary of State may determine and gives the Secretary of State power to pay a transfer value in respect of a member’s qualifying accrued rights. It also enables the Secretary of State to include provision in the scheme for further payments to active members of greater value than a deferred pension.

66.     A new scheme established under this clause will not otherwise come within the definition of an occupational pension scheme in section 1(1) of the Pension Schemes Act 1993. Subsection (4) therefore provides that a new scheme may be deemed to be an occupational pension scheme for the purposes of applying any legislation to the scheme as may be prescribed by the Secretary of State.

67.     Subsection (5) provides that an order by the Secretary of State may provide for a new scheme to be treated as a contracted-out scheme and as capable of providing contracted-out benefits for the purposes of Part 3 of the Pension Schemes Act 1993. This will allow benefits which are contracted out under the RMPP scheme to transfer to the new scheme.

68.     Subsection (6) permits an order to have retrospective effect. This power may be used to enable the new scheme to be established with effect from a date before an order is made under this clause. This may be necessary if an effective date for the purpose of the transfer of liabilities has been agreed as part of a wider arrangement with a third party which precedes the date of an order. In addition this power would enable the Secretary of State to amend the new scheme rules to have retrospective effect, for example, to ensure that the rules complied with changes in legislation.

69.     Under subsection (7) the Secretary of State may provide for a new scheme to be administered by any person and may delegate to any person any functions exercisable by the Secretary of State under a new scheme.

Clause 20: Division of the RMPP into different sections

70.     Subsection (1) allows the Secretary of State by order to divide the RMPP into sections and to allocate assets, rights, liabilities and obligations between different sections, and to provide for different companies to participate in different sections. The Government envisages that this power will be required to create a section in the RMPP for Post Office Limited.

71.     Subsection (2) provides for an order made under this Clause to establish a separate section within the RMPP in respect of “qualifying accrued rights”, known as a “qualifying section of the RMPP”. This is a contingency measure, should it prove impractical to establish a new scheme for this purpose under Clause 19. An order for this purpose could not be made if an order under Clause 19 establishing the new scheme had already been made.

72.     The provisions in subsections (3) to (6) relate to a “qualifying section of the RMPP”, if one has been created.

73.     Under subsection (3) an order made by the Secretary of State may require the Secretary of State to provide financial support to a qualifying section of the RMPP by making payments to the RMPP trustee to enable the trustee to discharge the liabilities in respect of qualifying accrued rights.

74.     Subsection (4) includes provision to require the RMPP trustees to obtain the Secretary of State’s consent to the exercise of certain discretionary powers in the RMPP rules in relation to a qualifying section of the RMPP as the Secretary of State may prescribe.

75.     Subsection (5) limits this power to require consent to discretionary powers relating to making or increasing payments under the RMPP or amendments to the RMPP rules. The intention is to require the consent of the Secretary of State for the exercise of any discretionary power by the RMPP trustee or Royal Mail under the scheme rules (e.g. to augment benefits) or any amendment which would have the effect of increasing the qualifying accrued rights transferred to a qualifying section of the RMPP, and therefore the liabilities of the government under that section. Subsection (4) also provides that an order under clause 20 may authorise the Secretary of State to make payments to the RMPP trustee where discretionary powers under the RMPP in respect of the qualifying section have been exercised with the Secretary of State’s consent or to authorise the Secretary of State to increase payments under subsection (3).

76.     Subsection (6) allows an order to include provision securing that, in circumstances where a qualifying section of the RMPP has been created, the RMPP scheme continues to be treated as a contracted-out scheme for the purposes of Part 3 of the Pension Schemes Act 1993. This would be necessary because the qualifying section would not meet the criteria for being contracted out as it would not be an occupational pension scheme supported by an employer of any of the members.

77.     Subsection (7) allows an order under this clause to have retrospective effect. As with a new scheme established under clause 19, this may be necessary if an effective date for the purpose of the transfer of liabilities has been agreed as part of a wider arrangement with a third party which precedes the date of an order.

Clause 21: Amendments of the RMPP

78.     Subsection (1) provides that the Secretary of State may by order make amendments to the RMPP in such a way as the Secretary of State considers appropriate in connection with an order under clause 19 or 20.

79.     Subsection (2) provides that these amendments can cover benefits payable in respect of pensionable service before and after the qualifying time. This would enable amendments to the scheme rules in relation to benefits payable in addition to the qualifying accrued rights, so that it was clear whether these benefits were met from the RMPP scheme or from the new scheme established under clause 19. It would also enable amendments to be made to any other documents governing or relating to the financial support provided to the RMPP, to address the effect of dividing the RMPP into sections.

80.     Subsection (3) allows an order under this clause to have retrospective effect.

Clause 22: Protection against adverse treatment

81.     This clause provides two forms of protection against RMPP members’ benefits being adversely affected.

82.     Subsections (1) to (3) provide that the Secretary of State must secure that the pension provision for current and past members of the RMPP (including any such persons in a new scheme established under clause 19) accrued under the RMPP is, in all material respects, at least as good immediately after the exercise of any power provided under this Part to transfer liabilities from the RMPP to the new scheme, divide the RMPP into sections, and/or amend the RMPP, as such provision was immediately before the power was exercised. These provisions only apply to the Secretary of State when exercising those powers, and are not intended to constrain the ability of Royal Mail and the trustees of the RMPP to make amendments to the RMPP. Nor does it affect the ability of the Secretary of State to make any changes that may be required to the new scheme in the future, which is instead constrained by subsection (6).

83.     Subsection (4) makes clear that subsections (1) to (3) do not require the Secretary of State to include any provision in a new scheme established under clause 18 that would be incompatible with any UK or EU law, should any questions concerning compatibility arise.

84.     Subsection (5) provides that the clause is not to be read as requiring the RMPP trustees or the Secretary of State (as regards the new scheme) to exercise their powers in a particular way, or as affecting their power to make future amendments to their respective scheme’s rules. It also makes clear that the new scheme need not be in the same form as the RMPP (for example it is not required to have trustees).

85.     Subsection (6) provides that the power of the Secretary of State to make any changes that may be required to the new scheme in the future may not be exercised in any manner which would, or might, adversely affect any provision of the scheme in respect of qualifying accrued rights, unless any member affected has given consent in accordance with requirements prescribed under subsection (7), or the modification has been made in a prescribed manner. This reflects the current protection for RMPP members under section 67 of the Pensions Act 1995.

Clause 23: Transfer of assets of the RMPP

86.     This clause enables the Secretary of State to provide by order for the transfer of assets from the RMPP to the Secretary of State, or the Treasury, or a fund established by the Secretary of State to hold the assets before they are disposed of and the proceeds paid into the Consolidated Fund.

87.     Subsection (2) provides that this power can only be exercised where there has been an order (defined as a “pensions order”) under either clause 19 (transferring accrued rights to a new scheme) or clause 20 which includes a requirement for the Secretary of State to make payment to the RMPP trustees in respect of a section in the RMPP scheme for qualifying accrued rights.

88.     Subsection (3) allows the Secretary of State to delegate the management and administration of the fund referred to in subsection (1) and to make arrangements for the payment of investment income from assets or the proceeds of sales of assets into the Consolidated Fund.

Clause 24: Restriction on power to transfer assets

89.     This clause places a limit on the assets that the Secretary of State may transfer out of the RMPP using the powers under clause 23.

90.     Subsection (1) requires that the ratio of assets to liabilities in the RMPP is no worse immediately after the transfer of assets under clause 23 than it was immediately before the transfer.

91.     If the Secretary of State makes an order under clause 20(3) providing for a payment to be made to the RMPP trustee in respect of qualifying accrued rights following the creation of a qualifying section of the RMPP, subsection (3) provides that the ratio will be assessed on the basis that those liabilities are extinguished.

92.     Under subsection (4) the valuation of assets and liabilities are to be made by a person, and in a manner, determined by the Secretary of State. Subsection (5) disapplies any provision in the RMPP which limits the calculation of the scheme’s liabilities by reference to the scheme assets. This has been included because pension scheme rules typically include provisions limiting the scheme’s liabilities by reference to the assets available in the event that the scheme is wound up.

Supplementary provisions

Clause 25: Taxation

93.     Subsections (1) and (4) of this clause allow the Treasury by regulations, to modify the way in which any relevant tax would otherwise have effect in relation to the new scheme, the members of the new scheme or a fund within clause 23(1)(c).

94.     Subsection (2) allows the Treasury to make regulations providing for the new scheme to be treated as a registered pension scheme under Part 4 of the Finance Act 2004.

95.     Subsections (3) and (4) allow the Treasury by regulations, to modify the taxation of the RMPP or members of the RMPP which would otherwise have resulted from anything done in relation to the RMMP or members of the RMMP by an order made under these clauses. This will enable tax provision to be made mitigating the tax charges that might otherwise have arisen in respect of transfers of assets and in respect of tax consequences for the Royal Mail group companies of the changes to the pension arrangements.

96.     Subsection (5) provides that regulations under subsections (1) and (3) can have retrospective effect provided that the regulations do not impose a charge to tax or withdraw a tax relief.

97.     Subsection (6) lists the taxes for which provision can be made and defines the terms used in the clause.

Clause 26: Information

98.     This clause enables the Secretary of State to make provision, by order, requiring prescribed persons to disclose information required by the Secretary of State for the purposes of the powers under Part 2 of the Bill.

Clause 27: Orders and regulations

99.     Subsection (1) of this clause provides that before the Secretary of State exercises his powers under clause 19(1) or (2) to establish a new scheme or transfer qualifying accrued rights, or exercises his powers under any other clause in this Part, the RMPP trustees must be consulted. Subsection (2) provides that the Secretary of State may not make an order under this Part, other than under clause 26, without the consent of the Treasury.

Part 3: Regulation of postal services

Summary and Background

100.     Part 3 of the Bill provides for a new regulatory framework that will apply to all postal operators. This new regulatory framework provides for the implementation of the amended Postal Service Directive 97/67 EC (“the Directive”).

101.     The Bill abolishes the criminal offence of conveying certain letters without a licence currently contained in the Postal Services Act 2000. In the new regulatory framework for postal services, there will be no need to apply for a licence. Persons will automatically be entitled to provide postal services provided that, if required, they notify OFCOM of this intention and comply with certain regulatory conditions set by OFCOM.

Postal services

Clause 29: Postal services, postal packets and postal operators

102.     This clause defines “postal services”, “postal packet” and “postal operator”. The definitions are the same as those used in the Postal Services Act 2000 (section 125), except for one change in relation to “postal operator”. Subsection (4) excludes from the definition of “postal operator” persons who only receive packets on behalf of another (either as agents or otherwise), and subsection (5) confers a power on the Secretary of State to prescribe circumstances in which that exclusion does not apply. The regulations are subject to affirmative resolution procedure.

Clause 30: General authorisation to provide postal services

103.     This clause provides that persons may provide postal services without the need for a licence or authorisation but that OFCOM may impose conditions on people who do provide postal services. The conditions that can be imposed are designated USP conditions (clauses 35 and 36), USP access conditions (clause 37), USP accounting conditions (clause 38), general universal service conditions (clause 40), essential conditions (clause 46), general access conditions (clause 47) and consumer protection conditions (clauses 48 and 49).

The universal postal service

Clause 31: Duty to secure provision of universal postal service

104.     Subsection (1) of this clause provides that the primary duty of OFCOM in relation to postal services is to secure the provision of a universal postal service. This clause should be read in conjunction with paragraph 55 of Schedule 10 to the Bill, which amends the Communications Act 2003 to provide that, in pursuing their duties in relation to postal services, OFCOM must give priority to the duty under this clause to secure the provision of a universal postal service.

105.     Subsection (2) makes it clear that OFCOM’s duty to impose access conditions, and other regulatory conditions, is subject to their duty under subsection (1) to secure the provision of a universal postal service.

106.     This clause also requires OFCOM to carry out their functions in relation to postal services in a way that they consider will secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service, and defines access points.

Clause 32: The universal postal service

107.     Subsection (1) provides that OFCOM must set out in an order, which will be known as the “universal postal service order”, a description of services that they consider must be provided in the United Kingdom as a universal postal service. This subsection also provides that they must set out the standards with which those services must comply.

108.     Subsection (2) provides that before making or modifying the universal postal service order, OFCOM must assess the extent to which the postal market in the United Kingdom is meeting the reasonable needs of users. This “market testing” is to enable OFCOM to determine what services (if any), other than those specified in this clause, should be provided as part of the universal service in the United Kingdom, in order to meet the reasonable needs of users.

109.     Subsection (3) provides that, as a minimum, the universal postal service must include at least one delivery and one collection of letters every day other than a Sunday or a public holiday and at least one delivery and one collection of other postal packets every day other than a Saturday, Sunday or public holiday; a service of conveying postal packets at affordable prices determined in accordance with a uniform public tariff; a registered delivery service and a insured items service; and a service of free petitions to Parliament and devolved legislatures. Subsection (5) makes it clear that international mail is included in the minimum requirements of the universal postal service.

110.      The minimum requirements of the universal postal service are broadly similar to those set out currently in the Postal Services Act 2000 (section 4) and comply with the requirements of Article 3 of the Directive defining the universal postal service.

111.     Subsection (4) defines a “postal packet” for the purposes of subsection (3). This definition is the same as the definition of “relevant postal packet” in the Postal Services Act 2000 and implements Article 3 of the Directive.

112.     In Part 3 of the Bill, the universal postal service means the universal postal service as defined by OFCOM in their order.

Clause 33: Definitions for purposes of section 32

113.     This clause gives the definitions of “insured items service”, “public holiday”, “qualifying Parliamentary petitions and addresses”, “registered items service” and “uniform public tariff” for the purposes of clause 32.

114.     The clause broadly reproduces the definitions used in the Postal Services Act 2000 at section 125 (registered service and public holiday), section 100 (Parliamentary petitions), and section 4 (uniform public tariff). Parliamentary petitions and addresses are those petitions to Her Majesty sent to members of Parliament, the Scottish Parliament, the National Assembly for Wales or the Northern Ireland Assembly, or petitions addressed to any of these legislatures or their members (or the Clerk of the Scottish Parliament), or those forwarded to Her Majesty (or in Northern Ireland the Secretary of State). Petitions and addresses (other than those forwarded to Her Majesty or the Secretary of State) fall within the definition only if they do not exceed 1kg and are sent without covers or in covers open at the side.

115.     This clause also introduces the definition of “insured items service”, defined by Article 2(10) of the Directive, which makes specific provision for the payment of an amount up to the value declared by the sender in the event of theft, loss or damage of a postal packet.

Universal service providers

Clause 34: Designation of universal service provider

116.     OFCOM may designate a single postal operator as the universal service provider. They must publish the designation. OFCOM may also review the designation and consider what (if any) designated USP conditions (see clause 35) should continue to apply to the designated universal service provider.

117.     The procedure for making designations must be provided in regulations made by OFCOM. The procedures must be efficient, objective, proportionate, transparent and should not give rise to any undue discrimination. These regulations must provide that if all of the universal service conditions that apply to the designated universal service provider are revoked then the designation should cease to have effect.

118.     OFCOM must notify the European Commission of the designation and the identity of the person designated. They must also notify the European Commission when the designation ceases to have effect.

119.     Article 4 of the Directive provides that each member State must ensure the provision of the universal service and that member States may designate one or more undertakings as universal service providers so that the whole of the country is covered.

120.     Article 4 also provides that member States must notify the European Commission of the identity of universal service providers that they designate and that the designation shall be subject to periodic review. This clause therefore implements these provisions of the Directive.

Clause 35: Designated USP conditions

121.     Subsection (1) describes the designated USP conditions that OFCOM may impose on the designated universal service provider under clause 34. OFCOM may impose the following types of requirement on the designated universal service provider. The first is a requirement to provide a universal service in accordance with the standards set out in the universal postal service order. The second is to provide, or make arrangements for the provision of, access points for the purposes of a universal postal service. The third is to provide specified information about the services it is providing pursuant to any requirements imposed under the first two types of requirement. The fourth is to provide specified postal services free of charge to blind and partially sighted people. OFCOM may also impose a requirement to do anything else that they consider appropriate for the purposes of or in consequence of the preceding requirements.

122.     Subsection (2) provides that a designated USP condition may only be imposed if it appears to OFCOM it is necessary to do so in order to secure the provision of the universal service in accordance with the standards as set out in the universal service order (made under clause 32).

123.     Subsections (3) and (4) provide that a designated USP condition may also set tariffs (price controls) for the provision of a universal service or part of a universal service. OFCOM must ensure that the prices that are set are affordable, take account of the costs of providing the service or part of a service, and that they incentivise the service to be provided efficiently.

124.     Subsection (5) provides that a designated USP condition may also impose performance targets.