The
Committee consisted of the following
Members:
Chairman:
Mr.
Mike Weir
Brown,
Mr. Russell
(Dumfries and Galloway)
(Lab)
Browne,
Des
(Kilmarnock and Loudoun)
(Lab)
Cairns,
David
(Inverclyde)
(Lab)
Carmichael,
Mr. Alistair
(Orkney and Shetland)
(LD)
Griffiths,
Nigel
(Edinburgh, South)
(Lab)
Heald,
Mr. Oliver
(North-East Hertfordshire)
(Con)
McKechin,
Ann
(Parliamentary Under-Secretary of State for
Scotland)McGovern,
Mr. Jim
(Dundee, West)
(Lab)
Reid,
Mr. Alan
(Argyll and Bute)
(LD)
Reid,
John
(Airdrie and Shotts)
(Lab)
Roy,
Mr. Frank
(Lord Commissioner of Her Majesty's
Treasury)
Strang,
Dr. Gavin
(Edinburgh, East)
(Lab)
Timpson,
Mr. Edward
(Crewe and Nantwich)
(Con)
Wallace,
Mr. Ben
(Lancaster and Wyre)
(Con)
Watkinson,
Angela
(Upminster)
(Con)
Whittingdale,
Mr. John
(Maldon and East Chelmsford)
(Con)
Miss J. Chandola, Miss G.
Holmes-Skelton, Committee
Clerks
attended the
Committee
Fifth
Delegated Legislation
Committee
Tuesday 30
June
2009
[Mr.
Mike Weir in the
Chair]
Draft Scottish Parliament Pensions Act 2009 (Consequential Modifications) Order 2009
10.30
am
The
Parliamentary Under-Secretary of State for Scotland (Ann
McKechin): I beg to move,
That the
Committee has considered the draft Scottish Parliament Pensions Act
2009 (Consequential Modifications) Order
2009.
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 1998the
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 schemesthat 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.
10.37
am
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 interestI 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.
10.38
am
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 Actuarys 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?
10.39
am
Ann
McKechin: My understanding is that the Government
Actuarys 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 Actuarys 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
Actuarys 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.
Question
put and agreed to.
Resolved,
That the
Committee has considered the draft Scottish Parliament Pensions Act
2009 (Consequential Modifications) Order
2009.
10.41
am
Committee
rose.