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Session 2008 - 09
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Public Bill Committee Debates

The Committee consisted of the following Members:

Chairman: Robert Key
Baron, Mr. John (Billericay) (Con)
Barrett, John (Edinburgh, West) (LD)
Binley, Mr. Brian (Northampton, South) (Con)
Gwynne, Andrew (Denton and Reddish) (Lab)
Heald, Mr. Oliver (North-East Hertfordshire) (Con)
Howell, John (Henley) (Con)
Ingram, Mr. Adam (East Kilbride, Strathaven and Lesmahagow) (Lab)
Jones, Helen (Warrington, North) (Lab)
Kidney, Mr. David (Stafford) (Lab)
Ladyman, Dr. Stephen (South Thanet) (Lab)
Meacher, Mr. Michael (Oldham, West and Royton) (Lab)
Raynsford, Mr. Nick (Greenwich and Woolwich) (Lab)
Roy, Lindsay (Glenrothes) (Lab)
Selous, Andrew (South-West Bedfordshire) (Con)
Webb, Steve (Northavon) (LD)
Winterton, Ms Rosie (Minister for Pensions and the Ageing Society)
Eliot Wilson, Committee Clerk
† attended the Committee

Tenth Delegated Legislation Committee

Tuesday 17 March 2009

[Robert Key in the Chair]

Draft Financial Assistance Scheme and Incapacity Benefit (Miscellaneous Amendments) Regulations 2009
4.30 pm
The Minister for Pensions and the Ageing Society (Ms Rosie Winterton): I beg to move that the Committee has considered the draft Financial Assistance Scheme and Incapacity Benefit (Miscellaneous Amendments) Regulations 2009.
It is a pleasure to serve under your chairmanship, Mr. Key. The financial assistance scheme provides assistance to qualifying members of qualifying defined benefits schemes who face pension losses because their scheme was underfunded at the point when it was wound up, and the employer is insolvent, or no longer exists, or has a compromise agreement in place. Because the Government recognised the difficulties experienced by those who through no fault of their own could not collect occupational pension benefits for which they had saved, we set up, in 2005, the Pension Protection Fund, to protect people whose pension scheme failed after 2005. The PPF is funded by a levy on schemes. For those who were members of pension schemes that failed between 1997 and April 2005, we set up the financial assistance scheme, with funding from the taxpayer.
In December 2007 we announced a package of enhancements to the financial assistance scheme, which means that those who are entitled to assistance receive payments broadly equivalent to the compensation paid by the Pension Protection Fund. We have already introduced regulations so that all eligible members can receive 90 per cent. of their expected pension from their normal retirement age, instead of the previous 80 per cent. for those within three years of retirement age. Without the financial assistance scheme, many eligible members would receive a significantly lower pension, or even no pension at all.
We have paid more than £50 million to 10,420 people so far, and we estimate that about 140,000 people will receive assistance from the financial assistance scheme in the long run. The FAS pays assistance in the following circumstances: when members reach their normal retirement age, with a lower limit of 60 and an upper limit of 65; from any age, when the member is terminally ill and expected to die within six months; and from up to five years before normal retirement age where the member is unable to work as a result of ill health and is expected to remain so until normal retirement age. Those ill-health payments are actuarially reduced to reflect the fact that they are paid from an earlier age.
The draft regulations before the Committee introduce a fourth instance in which assistance can be paid, and that is to members aged 55 and above who are experiencing severe ill health—that is, they are suffering from a progressive disease that is expected to lead to death after a period of between six months and five years. Assistance in those cases would be unreduced. We have introduced the draft regulations in response to concerns that a small number of people with ill health that would lead to significantly reduced life expectancy could otherwise be excluded from early access to assistance under the current ill-health provisions. The additional provisions are likely to affect only a small number of people. However, the impact on those people should be hugely beneficial.
The Government responded to stakeholders’ and campaigners’ concerns that a small number of members who had been severely ill for some time were disadvantaged because the draft regulations were not in place. Draft regulation 7 therefore makes provision to put such people in the position that they would have been in if severe ill-health payments had been available since May 2004 when the financial assistance scheme was announced.
First, severe ill-health payments can be made for periods before the date of application in cases where a person can demonstrate that they would have met the qualifying conditions at an earlier date. Secondly, provision is also made for survivors or personal representatives to apply for severe ill-health payments for a past period on behalf of anyone who would have met the qualifying conditions, but who has unfortunately died before the regulations came into force. Thirdly, a scheme member currently receiving reduced ill-health payments will be allowed to apply for the new, unreduced severe ill-health payments if they believe they would have met the qualifying conditions if the provisions had existed earlier.
Furthermore, regulation 2 amends the Social Security (Incapacity Benefit) Regulations 1994 to provide that FAS payments are treated as pension payments for the purposes of that benefit. I am sure that the Committee will be pleased to know that we hope to start making payments to those who qualify by the end of April, subject to the provision of relevant information from applicants and their medical practitioners. I hope that the Committee agrees that the Government have listened and responded to campaigners’ concerns, and that the regulations ensure that there is a comprehensive package of provisions to cater for the range of circumstances that may unfortunately prevent FAS members from working until their normal retirement age. The regulations are compatible with the European convention on human rights and I commend them to the Committee.
4.36 pm
Andrew Selous (South-West Bedfordshire) (Con): It is a pleasure to serve under your chairmanship, Mr. Key, and I welcome you to the Chair. There is widespread agreement on the need for the regulations, and the Conservative party warmly welcomes them, so the Committee need not be detained for long. The regulations introduce a degree of retrospective legislation, which I am generally against when it involves removing entitlement. However, in this respect, such legislation gives people an additional entitlement in tragic circumstances, so it is right and proper, as are the provisions to make payments to a deceased’s estate in certain circumstances, which I also welcome.
We welcome the severe ill-health test which, as the Minister has outlined, is now applicable to all those over 55, and not only those within five years of their normal retirement date, who suffer from a progressive disease and are expected to die within five years. That is also right and proper, and is to be warmly welcomed, as are the provisions in relation to incapacity benefit. The fact that, under the regulations, FAS payments will be treated as pension payments when considering eligibility for incapacity benefit is only fair to those who are not entitled to that benefit due to other non-FAS pension payments.
As I have said, we broadly support the regulations, but there are one or two issues that I wish to raise. The Minister said that the regulations will benefit a small number of people; frankly, they would be worth introducing if they benefited only one person. However, will the Minister give us an idea of the numbers involved so that we can have some sense of scale? Furthermore, are there any particular types of diseases—industrial diseases perhaps—that are likely to be covered by the provisions that were excluded when the six-month rule, which the regulations amend, was in place? Finally, on behalf of the Unionist party, may I point out that some of the regulations do not apply to Northern Ireland, so I would be extremely grateful if the Minister would explain the position in relation to that important part of the UK in her concluding remarks?
4.38 pm
John Barrett (Edinburgh, West) (LD): The Liberal Democrats, too, welcome the regulations. When we studied the details of what was originally proposed, it was rather gloomy because we were dealing with shortened life, the six-month rule, terminal illnesses and so on. Many Members of Parliament have family and friends who fell into those categories, so I welcome today’s changes. Sadly, the insolvency of employers in the recession will be an increasing problem, so anyone who benefits from the financial assistance scheme will appreciate it. However, I have one question. The provisions say that establishing an individual’s life expectancy will be a role for the Department’s medical advisers, but the final decision will rest with the FAS scheme manager. In our constituencies, we all know of people who have gone along to appeals and found that the doctor and consultant have given one view, and the expert on behalf of the Department for Work and Pensions has not agreed with it. What will the appeals procedure be in such cases at a time when a family are having to deal with a terminal illness, as well as a Government Department and a lot of other issues? The need to ensure they receive their money at the right time is something that should be clear. I am also pleased that the actuarial calculations for someone who has reduced life expectancy under the changes will not mean that they receive a reduced amount of money. It is perfectly natural to assume that someone who does not have long to live will not draw a pension for a long time into the future. As I have said, we broadly welcome the changes.
4.41 pm
Ms Winterton: I thank the hon. Members for Edinburgh, West and for South-West Bedfordshire for their support for such important regulations. Let me address the issue of Northern Ireland. A corresponding provision will be made to cover people in Northern Ireland. As for how many people will benefit from the regulations, it is hard to estimate. We expect the numbers to be very low. None the less, I take seriously the comment of the hon. Member for South-West Bedfordshire that even for one person, this could make an important difference. Currently, there are more than 100 people [Official Report, 24 March 2009, Vol. 490 c. 1-2MC.] receiving reduced ill-health payments. We expect only a small percentage of those people to meet the criteria for severe ill-health payments. In addition, those benefiting from the new provisions will include a small number of people who are not currently eligible for reduced ill-health payments because, for instance, they are more than five years from their normal retirement age.
As for how the system will work through to appeal, we will ask people to send the relevant information to medical advisers at the FAS operational unit. The decision can be reviewed internally, but eventually someone can go to the Pension Protection Fund ombudsman if they feel that they have not been dealt with properly. It is quite difficult to be specific about the types of diseases. One example that I was discussing earlier today was coronary heart disease. Normally, when we consider progressive diseases we think of illnesses such as Parkinson’s disease and multiple sclerosis. However, in the case of coronary heart disease, if someone has a heart attack, they might have a heart bypass, fully recover and expect to live for longer than five years. Some people may find that the effects of coronary heart disease mean that their prognosis is less than five years. Therefore, a payment is related more to how the individual is judged by their physician as opposed to our being able to link it to particular diseases.
Mr. Oliver Heald (North-East Hertfordshire) (Con): On the question of ensuring that people are aware of the new rights that will be available to them, I notice that the explanatory notes refer to putting information on the website and updating leaflets. However, in cases in which someone has died, and the estate wishes to make a claim under the provisions, will that be enough? Is the Minister satisfied that all the people who might make a claim will be aware of the new provision?
Ms Winterton: As the hon. Gentleman may know, there are a number of lobby groups, which have, in a sense, represented those people. There are some people of whom we are aware, and whom we will possibly contact ourselves anyway, given that the regulations will hopefully be passed. We can contact some of the known survivors, and we will make every effort to try to contact others if we are able to access information about them. However, given that there has been a high-profile campaign, we hope that people will be aware of their right to apply.
As I said, we introduced the draft regulations in response to concerns that there were a small number of people with ill health that leads to significantly reduced life expectancy, who could otherwise be excluded to early access to assistance under the current ill-health provisions of the financial assistance scheme. I hope that the Committee will agree that we have listened to campaigners’ concerns and developed the regulations though careful consultation. Even though they are most likely to affect a small number of people, the regulations will have a significant and positive impact on those who are affected by severe ill health, and I commend the regulations to the Committee.
Question put and agreed to.
4.47 pm
Committee rose.

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