The Parliamentary Under-Secretary of State for Scotland (Ann McKechin): I beg to move,

I propose to provide you with a detailed explanation of the largely technical amendments that the order seeks to achieve. The order is made under section 104 of the Scotland Act 1998, which allows for necessary or expedient changes to UK legislation in consequence of an Act of the Scottish Parliament. It is made in consequence of the Scottish Parliamentary Pensions Act 2009.

The 2009 Act sets out updated arrangements for the payment of pensions in respect of Members of the Scottish Parliament and related office holders. Those office holders are the Presiding Officer and Deputy Presiding Officer of the Scottish Parliament; Scottish Ministers, including the First Minister; and junior Scottish Ministers. The purpose of the 2009 Act is to place the arrangements for the payment of pensions in respect of MSPs and related office holders on a more permanent statutory footing, largely replacing transitional arrangements made at the time of devolution. It sets out new rules for the Scottish parliamentary pension scheme which take account of developments in UK pensions, tax and equalities legislation.

The order makes minor amendments to ensure that from 1 September 2009, when the 2009 Act comes fully into force, aspects of reserved pensions legislation continue to apply appropriately to the existing pension schemes for MSPs and related office holders. Prior to the 2009 Act, pension schemes for MSPs and related office holders were the subject of a transitional order made under the Scotland Act 1998—the Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish Parliamentary Pension Scheme) Order. It was always intended that the Scottish Parliament would legislate to put the pension schemes of MSPs and related office holders on a more permanent statutory footing. Section 81(3) of the Scotland Act 1998 envisages that the Scottish Parliament would legislate to replace the transitional arrangements made at the time of devolution.

In addition, there have been a number of changes to UK legislation in the reserved areas of regulation of occupational pensions, tax and equalities that necessitated amendment of the provisions in the transitional order. Although section 81 of the Scotland Act 1998 permits the Scottish Parliament to make provision in relation to the pensions of MSPs and related office holders by resolution, an Act of the Scottish Parliament was needed in this case to bring about the necessary changes to the transitional order.

The 2009 Act continues the Scottish parliamentary pension scheme, subject to new rules set out in schedule 1 to that Act. Those new rules contain provisions for both MSP and office holder members. The separate, unfunded scheme for First Ministers and Presiding Officers set out in the transitional order is continued but closed to new members, who will be covered by the new rules of the Scottish parliamentary pension scheme.

The two amendments in the section 104 order are of a technical nature. They are required to ensure that certain reserved regulatory controls continue to apply appropriately to the Scottish parliamentary pension scheme and the existing First Minister and Presiding Officer pension scheme, once the 2009 Act is fully in place.

The first amendment is to section 11(7) of the Pensions Act 1995 and ensures that the pensions regulator continues, in limited circumstances, to have the power to adapt, amend or repeal the legislation which contains the rules of the Scottish Parliamentary pension scheme, and the First Minister and Presiding Officer pension scheme.

The second amendment is to section 249A(3) of the Pensions Act 2004. That requires the trustees or managers of occupational pension schemes to establish and operate internal controls. Section 249A(3) sets out various types of schemes that are exempt from that obligation. Such schemes include those that are established under an enactment and are guaranteed by a public authority. The Scottish parliamentary pension scheme, as currently constituted, falls within that exemption. However, once the 2009 Act is fully in place, the scheme will not be covered by the exemption as it will not be guaranteed by a public authority. Therefore, an amendment, adding the Scottish parliamentary pension to the list of exempt schemes under section 249A(3) is required.

Mr. Alan Reid (Argyll and Bute) (LD): Would the Minister expand on why this pension scheme should be exempt from the provisions that apply to nearly all other pension schemes—that is, that the trustees or managers should establish and operate internal controls? Why should this pension scheme be exempt?

Ann McKechin: This scheme has already had a system of regulation which was covered by a public authority, because it was covered by the Scottish Minister. The change here is that it is now under the control of the Scottish Parliament, as opposed to a Minister. That is the only technical change, but the pension regulator and the Government are satisfied that adequate provisions are in force, as I shall come to shortly.

Mr Chairman, you may also wish to note that, in addition to the order, it is proposed that two sets of regulations will be made by UK Ministers further to the Scottish Parliamentary Pensions Act 2009. The Department for Work and Pensions is currently consulting on drafts of these regulations and will take forward the Occupational Pension Scheme (Scottish Parliamentary Pensions Act 2009) regulations and the Occupational Pension Scheme (Public Service Pension Schemes) regulations. The latter of these two sets of regulations will be made jointly by the Department of Work and Pensions and HM Treasury. That is why this scheme is different from a private pension scheme, because there will be direct regulation, which will be imposed at a UK level.

The 2009 Act was the product of a Committee Bill brought forward by the Scottish Parliament. It is intended that the newly appointed fund trustees of the Scottish Parliamentary contributory pension fund will issue guidance to the members of the Scottish Parliamentary pension scheme on the new scheme rules, which are effective from 1 September 2009.

The order demonstrates the Government's commitment to working with the Scottish Parliament to make the devolution settlement work. I hope you will agree that the order is a sensible use of the powers in the Scotland Act and that the practical result is something to be welcomed. I commend the order to the Committee and I beg to move.

Mr. Ben Wallace (Lancaster and Wyre) (Con): Thank you, Mr. Weir, I am delighted to serve under your chairmanship today. I thank the Under-Secretary of State for Scotland, the hon. Member for Glasgow, North, for making such a dry subject more interesting and certainly better delivered than some of the explanatory notes I have had to pick through. The exciting topic of consequential and technical amendments to Scottish Parliament pensions is obviously not one that has gripped the public attention, nor is it likely to do. We on this side of the House have no objection to these consequential changes, they are a sensible and good demonstration of joint working in devolution and the Scotland Office and officials should be congratulated for anticipating the consequential issues when they drew up the Scotland Act, allowing us to spot the tedious yet important hurdles that may appear in such financial arrangements.

I do not have to declare an interest—I was a member of the Scottish Parliament pension scheme, but when I came to the Mother of all Parliaments, I, of course, transferred it, being confident that this Parliament will probably be here longer than the Scottish Parliament. Having no more to say on this subject, we on this side will not oppose this regulation and wish it good speed.

Mr. Reid: I have just one or two more questions for the Minister. In the explanatory note it says that the changes in the pension scheme for former First Ministers and presiding officers will save £850,000 every four years, that is, over £200,000 a year. Since there are only two former First Ministers and two former presiding officers, that seems a huge cut in their pensions. [Hon. Members: “Hear, hear.”] Clearly that has widespread support within the Committee, but would the Minister expand on where that saving will be achieved? Also, the Government Actuary’s Department has costed the revised Scottish Parliamentary pension scheme against the existing scheme and it says that, under the new rules, the cost would not be materially different from the cost of the existing scheme. Would the Minister expand on whether there will be a saving or an increase, and how much difference she would envisage there being?

Ann McKechin: My understanding is that the Government Actuary’s Department has costed the revised Scottish Parliamentary pension scheme against the existing scheme and their conclusion is that the expected cost of the scheme under the new rules would not be materially different from its cost under the existing scheme rules. It should be reassuring to the public that they anticipate no additional cost. Obviously, the costs are borne in terms of the consolidated fund. Liabilities for the existing First Minister and presiding officer of the pension scheme are drawn from the consolidated fund, because it is a pay-as-you-go scheme. Clearly, the closure of the scheme and the generosity of its terms, which obviously apply as soon as a First Minister or presiding officer steps down from their post, rather than at the statutory retirement age, which is the normal case under the Parliamentary pension scheme, means that there is a very much greater additional cost to that pay-as-you-go scheme.

The fact that that has been closed to new entrants is, in the calculations of the Government Actuary’s Department, a saving of approximately £850,000 for every four years. Obviously, as more members join the scheme, the greater the cost would emerge over the years. I think that is to be welcomed and, as I have said, the Government Actuary’s Department has costed the scheme against the cost of the new scheme under the existing rules. The current employer contribution cost based on the payroll to 31 March 2008 is £1.583 million per annum and I understand that the final employer contribution costs for the financial year ending 31 March 2009 are currently under preparation.