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Written Ministerial Statements
Monday 12 March 2012
Cabinet Office
Principal Civil Service Pension Scheme
The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude): On 20 December I reported to the House on the heads of agreement on the principal civil service pension scheme to be introduced in 2015, which set out the Government’s final position on the main elements of scheme design. Since 20 December, my officials have been engaged in detailed discussions with the civil service trade unions over the remaining details of the principal civil service pension scheme. I can now report to the House that discussions on these final details of the scheme design for the principal civil service pension scheme to be introduced in 2015 have now concluded. The Government have made it clear this sets out our final position on scheme design, which we are asking unions to take to their Executives as the outcome of negotiations.
This is the proposed final agreement which reflects the conclusion of discussions on the final details with the civil service unions since I made my written ministerial statement on pension reform, on 20 December 2011, Official Report, column 150WS. The headline elements of the proposed final agreement remain unchanged from those reached on 20 December and the provisional accrual rate has been finalised.
The core parameters of the new scheme are set out below:
a. a pension scheme design based on career average;
b. a provisional accrual rate of 2.32% (equivalent to (1/43.1) of pensionable earnings each year;
c. revaluation of active members’ benefits in line with CPI; (any change in the method of indexation will be subject to consultation)
d. a normal pension age equal to state pension age, which applies both to active members and deferred members (for new scheme service only). If a member’s SPA rises, then NPA will do so too for all post-2015 service;
e. pensions in payment to increase in line with prices (currently CPI);
f. benefits earned in deferment to increase in line with prices (currently CPI);
g. average member contributions of 5.6%;
h. optional lump sum commutation at a rate of 12:1, in accordance with HMRC limits and regulations;
i. spouses/partner pension of three-eighths pension, in line with the current open scheme;
j. lump sum on death in service of two times salary;
k. ill-health benefits in line with those in the current open scheme;
l. actuarially fair early/late retirement factors on a cost-neutral basis;
m. an employer contribution cap and floor to provide backstop protection to the taxpayer against unforeseen costs and risks. This floor will also allow for an improvement in member benefits if the value of the scheme falls beyond a fixed level;
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n. abatement will not apply for post-2015 service in the new scheme when members return from retirement. Abatement rules for the current schemes will remain unchanged;
o. partial retirement rules for service in the new scheme will follow existing partial retirement rules. Members with service in both the existing and the new scheme will be able to apply for partial retirement under each scheme, under the limits that exist in current schemes;
p. members will be able to take any pension they have accrued under their existing schemes without having to also take any new scheme pension at the same time, under the limits that exist in current schemes;
q. for members wishing to retire before their state pension age, there will be an opportunity to pay additional contributions to fund earlier retirement of up to three years without an actuarial reduction. Contributions will ordinarily be payable by members, but individual employers will be able to choose to provide a contribution in very limited and exceptional circumstances, that must be approved by the Cabinet Office;
r. existing added years contracts will continue in the new scheme;
s. added pension arrangements will continue;
t. members who leave the new scheme and return within five years will have their deferred benefits increased as if they had been an active member. (The rate of dynamisation for active and deferred members will however be the same, as set out in points c and f above); and
u. the Public Sector Transfer Club will continue, and consideration will be given to the best method of operation in the reformed schemes, following further discussion with trade unions;
The scheme actuary has confirmed that this scheme design does not exceed the cost ceiling set by the Government on 2 November. Copies of the heads of agreement and scheme actuary verification have been deposited in the Libraries of both Houses.
Treasury
ECOFIN
The Financial Secretary to the Treasury (Mr Mark Hoban): The Economic and Financial Affairs Council will be held in Brussels on 13 March 2012. The following items are on the agenda to be discussed:
Financial transaction tax (FTT)
The presidency will update Ministers on the state of play of discussions on the financial transaction tax, and in particular the technical work that is being undertaken on this file. Ministers will then exchange views. The Chancellor has made it clear on a number of occasions that the UK does not support the Commission’s recent proposal for an FTT. As it stands, the proposal will have significant negative impacts on jobs and growth. To avoid a damaging relocation of financial trading, FTTs would need to apply in all financial centres, and not just the EU.
Ministers will be asked to agree to Council conclusions on the AMR and hold an exchange of views. The AMR is based on a “scoreboard”, where each member state is assessed against 10 macroeconomic indicators, and an accompanying analysis. These are designed to indicate where potential external and internal imbalances may exist. The UK exceeds the threshold values on four indicators: real effective exchange rate, export market share, private sector debt and public sector debt.
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The Commission will then conduct in-depth reviews on 12 member states, to assess whether imbalances or excessive imbalances exist. These member states are: the UK, Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Hungary, Italy, Slovenia, Spain and Sweden. These reviews will be published in May. Greece, Ireland and Portugal and Romania are already under enhanced economic surveillance as part of their payment assistance programmes and are therefore not subject to in-depth reviews.
The Government support the macroeconomic imbalances procedure, on which the AMR is based. They are taking determined action to rebalance the UK economy and ensure a return to sustainable growth, including through: tough and credible action to tackle the deficit; a new strategy to increase house building and stabilise the housing market; and boosting exports and rebalancing the economy towards regional growth.
(Possible) Follow-up to the European Council on 1-2 March 2012
The presidency may inform Ministers on the follow-up to the March European Council conclusions. Ministers will then exchange views. On growth, the Council conclusions set out an appropriate time line for addressing the EU-level growth agenda, in line with the Prime Minister’s letter with 11 other member states. The Government are content with the Council conclusions. The intergovernmental treaty was signed by 25 member states in the margins of European Council. The Government welcome the signing of the treaty: it is in the UK’s interest for the euro area economies to achieve stability and growth, and for the treaty to work to achieve this.
Follow-up to the G20 Meeting of Finance Ministers and Governors on 25-26 February 2012 in Mexico
The Commission will debrief Ministers on the main outcomes of the G20 Finance Ministers’ and Central Bank Governors’ meeting in Mexico City on 25 and 26 February. The main items on the agenda were the global economy and framework for growth, IMF resources, financial regulation and commodities. The issue of IMF resources dominated the discussion, and the G20 agreed that euro area countries will reassess the strength of their support facilities in March. This will provide essential input into the G20’s ongoing consideration to mobilise resources to the IMF. At the G20, the Chancellor stressed that IMF resources to support individual countries cannot be a substitute for further credible steps by the euro area to support their currency. The next G20 Finance Ministers’ meeting will be in the margins of the IMF spring meetings in Washington.
Implementation of the Stability and Growth Pact
Following the Council decision on 24 January that Hungary has taken no effective action to sustainably correct its excessive deficit, the Commission has proposed that the Council suspend €495 million of cohesion fund (CF) commitments to Hungary in 2013. Ministers will be invited to adopt the Council decision. The suspension of CF commitments to Hungary represents 0.5% GDP and 29% of total CF commitments for the year. The Commission believes this to be both an effective and proportionate amount. The UK will not oppose the Commission’s proposal.
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Information on the informal ECOFIN on 30-31 March 2012
The presidency will inform delegations about the informal ECOFIN which will be held in Copenhagen on 30 and 31 March.
Eurogroup will be meeting on 12 March. Ministers will be debriefed on the Eurogroup discussions, before formal ECOFIN starts. Ministers are likely to discuss the economic situation. Ministers may also discuss the issue of the next president of the European Bank for Reconstruction and Development. The UK supports the need for an open and transparent process in selecting the president.
Education
Teacher's Pension Scheme (England and Wales)
The Minister of State, Department for Education (Mr Nick Gibb): On 20 December the Secretary of State for Education reported to the House on the heads of agreement on the teachers’ pension scheme to be introduced in 2015, which set out the Government’s final position on the main elements of scheme design. Since 20 December, Ministers have been engaged in detailed discussions with the teacher and lecturer unions over the remaining details of the teachers’ pension scheme. I can now report to the House that discussions on these final details of the scheme design for the teachers’ pension scheme to be introduced in 2015 have now concluded. The Government have made it clear this sets out our final position on scheme design, which unions agreed to take to their Executives as the outcome of negotiations. This includes a commitment to seek Executives’ agreement to the cessation of any industrial action on pension reform. The final scheme design outlined is conditional on acceptance of this proposed final agreement.
This proposed final agreement reflects the conclusion of discussions on the final details with teacher and lecturer unions since the Secretary of State made his written ministerial statement on pension reform, on 20 December 2011, Official Report, column 157WS. The headline elements of the proposed final agreement remain unchanged from those reached on 20 December.
The core parameters of the new scheme are set out below:
a. a pension scheme design based on career average;
b. an accrual rate of 1/57th of pensionable earnings each year;
c. revaluation of active members’ benefits in line with CPI + 1.6%;
d. normal pension age equal to state pension age, which applies both to active members and deferred members (new scheme service only). If a member’s SPA rises, then NPA will do so too for all post-2015 service;
e. pensions in payment to increase in line with prices index (currently CPI);
f. benefits earned in deferment to increase in line with CPI;
g. average member contributions of 9.6%, with some protection for the lowest paid (subject to the detailed arrangements for determining future contribution structure, as shown in annex A of the proposed final agreement);
h. optional lump sum commutation at a rate of 12:1, in accordance with HMRC limits and regulations;
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i. spouses/partner pension in accordance with current provisions;
j. lump sum on death in service of three times FTE salary;
k. ill-health benefits the same as those in the current open scheme;
l. actuarially fair early/late retirement factors on a cost-neutral basis except for those with a NPA above age 65 who will have early retirement factors of 3% per year for a maximum of three years in respect of the period from age 65 to their NPA;
m. an employer cost cap to provide backstop protection to the taxpayer against unforeseen costs and risks (as set out at paragraph 5 and annex B of the proposed final agreement);
n. the public sector transfer club will continue, and consideration will be given to the best method of operation in the reformed schemes;
o. phased retirement arrangements which reflect those in the current scheme, with the additional option of a third drawdown of benefits after a member’s 60th birthday;
p. abatement will not apply to service in the reformed TPS. Abatement rules for the current scheme will remain unchanged;
q. members who leave the scheme and return within five years will have their accrued service in the current (NPA 60/65) scheme linked to their final salary at retirement; and
r. flexibilities to allow members to elect to pay a higher contribution rate in return for a higher accrual rate for a particular year, at full member cost, within existing limits on additional pension.
s. members who in the new scheme have a normal pension age higher than 65 will have an option in the new scheme to pay additional contributions to reduce or, in some cases, remove any early retirement reduction that would apply, if they retire before their normal pension age. Only reductions that would apply in respect of years after age 65 can be bought out and the maximum reduction that can be bought out is for three years (that would apply to a member with a normal pension age of 68 or higher).
The Government Actuary’s Department has confirmed that this scheme design does not exceed the cost ceiling set by the Government on 2 November. Copies of the proposed final agreement and GAD verification have been deposited in the Libraries of both Houses.
Energy and Climate Change
Radioactive Waste Management
The Minister of State, Department of Energy and Climate Change (Charles Hendry): I am pleased to inform the House of three announcements from my Department—the Department of Energy and Climate Change (DECC)—with regard to the safe management of radioactive waste. First, DECC is today publishing its response to the public consultation on the “Desk-based Identification and Assessment of Potential Candidate Sites for Geological Disposal”.
Alongside the response we are also publishing a high-level framework—informed by our consultation—that sets out the process for identifying and assessing potential candidate sites within volunteer areas in England. The framework more clearly defines stage 4 of the Managing Radioactive Waste Safely (MRWS) process for implementing the geological disposal of higher-activity radioactive waste.
The consultation, which ran from June to September last year, considered how desk-based studies would be used by the Nuclear Decommissioning Authority (NDA)
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to identify potential sites following a decision to participate by a local community at the end of stage 3 of the MRWS process. It also set out how potential sites would be assessed against agreed criteria and how decisions would be made—both at the local and national level—on which potential sites should go forward for detailed geological assessment in stage 5.
Having considered all responses received during the consultation the Government have concluded there was general support for our proposals for site identification and assessment and for the criteria which will be used to identify and evaluate potential candidate sites.
To accompany the Government response we have produced a framework document which contains the agreed criteria and a high-level description of the desk-based site identification and assessment process for England. It reflects the proposals presented in the public consultation including a number of additions and clarifications to the criteria, in response to comments we received. It confirms that sites will be assessed using multi-criteria decision analysis (MCDA) as a tool to aid decision making and it sets out the next steps to develop this methodology, including the development of scoring scales and the weighting of the criteria.
The Government are committed to a staged siting process based on voluntarism and partnership and the invitation for more communities to come forward to find out more about the siting process remains open. The documents published today demonstrate continuing progress in the process for siting a geological disposal facility for the long-term management of higher-activity radioactive waste. I am placing copies of the documents in the Libraries of both Houses. The documents are also available on the DECC website at:
http://www.decc.gov.uk/en/content/cms/consultations/mrws_ siting/mrws_siting.aspx.
Secondly, I am announcing today the triennial review of the Committee on Radioactive Waste Management (CoRWM). Triennial reviews of non-departmental public bodies (NDPBs) are part of the Government’s commitment to ensuring accountability in public life. In common with all such reviews, this has two aims:
to challenge the continuing need for an NDPB to carry out this role—both its functions and form; and—if it is agreed it should remain as an advisory NDPB;
to review its control and governance arrangements to ensure it is complying with recognised principles of good corporate governance.
I will announce the findings of the review later this year. If you would like further information, or to contribute to the review, please contact my Department at: radioactivewaste@decc.gsi.gov.uk.
Thirdly, I am publishing today a strategy for waste planning bodies, regulators and waste producers on solid low-level radioactive waste (LLW) from the non-nuclear industries (such as hospitals and universities). The strategy provides further guidance on our policy to encourage the disposal of such low-level waste locally where suitable permitted facilities exist. It complements an existing strategy on LLW from the nuclear industries which was published by the Nuclear Decommissioning Authority in 2009. The new strategy is available on the DECC website at: http://www.decc.gov.uk/en/content/cms/meeting_energy/nuclear/radioactivity/waste/low/low.aspx.
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Health
NHS Pension Scheme (England and Wales)
The Secretary of State for Health (Mr Andrew Lansley): On December 2011, I reported to the House that a heads of agreement had been reached on a new NHS Pension Scheme for England and Wales for introduction in 2015. The heads of agreement set out the Government’s final position on the main elements of scheme design.
Following this, my Department has been engaged in detailed discussions with health sector trade unions and employer representatives over the remaining details for the new NHS pension scheme. I can now report to the House that these discussions have concluded and the outcome reflected in a proposed final agreement. The headline elements of the proposed final agreement remain unchanged from those set out in my previous statement to the House concerning pension reform on 20 December 2011.
The Government have made it clear that the proposed final agreement represents our final position on scheme design. The final scheme design is conditional on acceptance by trade unions of the proposed final agreement. Trade unions have agreed to take this proposed final agreement to their Executives as the outcome of negotiations. Furthermore, the proposed final agreement includes a commitment by trade unions to seek Executives’ agreement to the cessation of any further industrial action on pension reform.
The core parameters of the new scheme are set out below:
a. a pension scheme design based on a career average revalued earnings methodology;
b. an accrual rate of l/54th of pensionable earnings each year with no limit to pensionable service;
c. revaluation of active members’ benefits in line with the consumer price index plus 1.5% per annum;
d. a normal pension age equal to the state pension age, which applies both to active members and deferred members (new scheme service only). If a member’s state pension age rises, then their normal pension age will do so too for all post-2015 service. Those within 10 years of their current normal pension age are excluded and accrued rights will also be related to current normal pension age;
e. pensions in payment to increase in line with inflation (currently consumer price index);
f. benefits to increase in any period of deferment in line with inflation (currently consumer price index);
g. member contributions on a tiered basis to produce a total yield of 9.8% of total pensionable pay in the scheme;
h. optional lump sum commutation at a rate of £12 of lump sum for every £1 per annum of pension foregone up to the maximum limit on lump sums permitted by HM Revenue and Customs;
i. the current flexibilities in the 2008 section will be included in the 2015 scheme—early/late retirement factors on an actuarially neutral basis, draw down of pension on partial retirement and being able to retire and return to the pension scheme;
j. ill-health retirement pensions to be based on the current ill-health retirement arrangements but with enhancement for higher tier awards to be at the rate of 50% of prospective service to normal pension age;
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k. spouse and partner pensions to continue to be based on an accrual rate of 1/160th. For deaths in retirement, spouse and partner pensions will remain based on pre-commuted pension;
l. the current arrangements for abatement (for service accrued before and after 2015) will be retained;
m. the lump sum on death in service will remain at twice actual pensionable pay;
n. for members who in the new scheme have a normal pension age higher than 65 there will be an option in the new scheme to pay additional contributions to reduce or, in some cases, remove any early retirement reduction that would apply if they retire before their normal pension age. Only reductions that would apply in respect of years after age 65 can be bought out and the maximum reduction that can be bought out is for three years (that would apply to a member with a normal pension age of 68 or higher);
o. added years contracts in the 1995 section will continue on compulsory transfer to the 2015 scheme;
p. arrangements to purchase additional pension will continue;
q. the public sector transfer club will continue and further consideration will be given to the best way of operating it in the reformed schemes; and
r. there will be an employer contribution cap.
The Government Actuary’s Department (GAD) has confirmed that this scheme design does not exceed the cost ceiling set by the Government on 2 November 2011. The proposed final agreement and GAD verification have been placed in the Library. Copies are available to hon. Members from the Vote Office and to noble Lords from the Printed Paper Office. The documents are also available at:
www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_133003.pdf
Transport
Light Dues
The Parliamentary Under-Secretary of State for Transport (Mike Penning): The appropriate provision of marine aids to navigation preserves life at sea and protects our coasts from pollution, a task the Government entrust to the three general lighthouse authorities for the United Kingdom and Ireland. However, we must balance this responsibility against the efficiencies demanded of all public sector organisations and our continued drive to minimise cost.
In my written ministerial statement of 26 July 2010, Official Report, columns 75-76WS, I stated my desire to provide the shipping industry with long-term stability in the level of light dues paid for marine aids to navigation. In December 2010, I made a commitment not to increase light dues for at least three years; the industry welcomed it, and I remain committed to it, Official Report, column 24WS.
Over the last year, I have continued to work with the general lighthouse authorities to identify where it is prudent and appropriate to rationalise services, enlisting the expertise of the authorities’ joint strategic board to examine the question of pension liabilities and ever-closer working between the general lighthouse authorities themselves. We have identified and exploited considerable opportunities for greater efficiency, the most notable relating to aids to navigation monitoring centralisation,
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buoy yard reorganisation and staffing reductions. These have succeeded in lowering running costs substantially, against a targeted five year reduction of 17% the general lighthouse authorities now expect to achieve 19%.
Furthermore, the Department for Transport tendered and replaced part of the general lighthouse fund investment portfolio to facilitate its use for a general lighthouse authorities staff pension reserve; the new portfolio reduces investment risk and facilitates stability.
These initiatives and efficiencies have enabled me to freeze light dues this year. Since I became shipping Minister, there has been a real terms light dues reduction of around 10%.
Work and Pensions
Personal Independence Payment
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller):
During consideration of the personal independence payment (PIP) clauses of the Welfare Reform Bill on 17 January, the Government
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announced their intention to have a graduated introduction of the new benefit. To ensure a smooth introduction, the launch will be undertaken through a phased approach, commencing initially with a subset of new claimants. This will ensure processes and procedures are working fully before moving to process all new claims and then reassessing existing disability living allowance (DLA) claimants.
Bootle benefit centre (Bootle BC) will administer the first new claims from spring 2013, from areas including Merseyside, north-west England, Cumbria, Cheshire and north-east England. People in these locations will be the first to claim the new benefit. The primary reason for selecting the Bootle BC is that it handles DLA new claims in volumes that will provide a robust test of PIP processes and new computer systems. During this period, new claimants in all other parts of the country will continue to claim DLA as now.
The remaining network of benefit centres currently administering new claims for DLA will start to take on new claims for PIP from summer 2013, once evidence is in place that processes are working as intended. In addition this network will handle continuing DLA claims for children. Blackpool benefit centre will undertake PIP reassessment activity for existing DLA claimants aged 16 to 64.