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Baroness Hollis of Heigham: My Lords, I thank the Minister for that reply which we shall obviously need to study. I am sure that we shall be happy with what he said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 139 not moved.]

Clause 56 [Equal treatment rule: exceptions]:

Lord Lucas moved Amendments Nos. 140 and 141:

Page 33, line 19, leave out ("women and men") and insert ("a woman and a man").
Page 33, line 22, leave out ("men and women") and insert ("a man and a woman").

The noble Lord said: My Lords, I spoke to these amendments with Amendment No. 137. I beg to move.

On Question, amendments agreed to.

The Earl of Buckinghamshire moved Amendment No.142:

Page 33, line 28, at end insert:
("( ) A variation is permitted by this subsection if it results from compliance with the requirements of sections 13 to 17 of the Pension Schemes Act 1993 (requirements for certification of occupational pension schemes providing guaranteed minimum pensions), sections 87 to 92 of that Act (protection of increases in guaranteed minimum pensions ("anti-franking")) or sections 108 and 110 of that Act (guaranteed minimum pensions) in circumstances where, if those requirements had not applied, the variation would not have occurred.").

The noble Earl said: My Lords, much to my surprise I find myself moving an amendment on guaranteed minimum pensions—one of the matters with which I promised myself that I would have absolutely nothing to do because this is an area of great complexity.

However, to move on, my amendment deals with a point that has been causing a considerable amount of uncertainty and practical difficulty in the administration of pension schemes. There is a need to make it clear that guaranteed minimum pensions for the members of contracted-out schemes do not have to be equalised for periods of pensionable service after 17th May 1990. Such equalisation is required for most scheme benefits following the European Court judgment in the case of Barber v. GRE, and some commentators have suggested that that applies also to guaranteed minimum pensions.

My amendment makes it clear that that process of equalisation is not required. The amendment is consistent with the principle established by the European Court decision on bridging pensions in the case of Roberts v. Birds Eye Walls, where it was ruled

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that bridging pensions were acceptable in occupational pension schemes, even though given to men and not women, because they resulted directly from a difference between the two sexes in the provisions of the state scheme; that is, in respect of the state retirement age.

Similarly, the different provisions between men and women in the calculation of guaranteed minimum pensions result from the differences in the state retirement age. If differing bridging pensions are acceptable under European law, as they are, then so are differing guaranteed minimum pensions.

I understand that the executive office of the Occupational Pensions Board has also written to practitioners with its view that unequal guaranteed minimum pensions are permissible under European law, though making it clear that schemes may wish to obtain their own legal advice on the point. Given that, why is the issue so unclear in the minds of trustees and scheme administrators? The reason appears to be because some legal advisers have not been willing to commit themselves to giving firm advice that the bridging pension principle is necessarily extensible to fields other than bridging pensions.

There are many schemes where the implementation of the decision in Barber v. GRE is being held up pending clarification of this issue. There are many schemes which are still refusing to accept transfers from other schemes until this question is resolved beyond doubt. Action by your Lordships' House, and by my noble friend the Minister, to clarify that issue would be welcome. I beg to move.

11.45 p.m.

Lord Mackay of Ardbrecknish: My Lords, the effect of the amendment would be to permit salary-related occupational pension schemes, which are contracted-out of SERPS, to pay pensions which are unequal between men and women. It would permit them to do so where the difference is the result of compliance with the legislation relating to the payment of guaranteed minimum pensions. It would permit them to do so only where, but for compliance with that legislation, the pension would otherwise be equal between men and women.

We are very well aware of the difficulties which face contracted-out salary-related schemes which are doing their best to comply with the requirements of equal treatment under European law, and at the same time comply with the contracting-out rules which are based on the current difference in the state pension age between men and women. We know that compliance with those rules makes it difficult for schemes to achieve equality. That is one of the reasons why we are taking the step of so-called breaking the links in 1997.

However, we cannot solve that problem by, in effect, saying in the Bill that, where inequality is the result of compliance with those rules, such inequality may be permitted. That would run counter to European law, and the Government could not possibly countenance such a step. The European Court of Justice has made absolutely clear, in rulings over recent years, that equality is required for periods of pensionable service from 17th

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May 1990—the date of its ruling in the Barber case. It has ruled that there may be certain exceptions to equal treatment where differences result from the use of sex-related actuarial factors, or where bridging pensions are payable, and we are providing for those exceptions in Clause 56. But it has not ruled that differences may be permitted where they result from GMPs.

GMPs do, in certain circumstances, create inequalities. But European law is clear that pensions must be equal for service from 17th May 1990. We do not believe that an exception along the lines envisaged by my noble friend would comply with European law.

As I said, one of the main reasons why the Government have decided to break the links with SERPS for future service, and to move to a contracting-out test of overall scheme quality, has been in recognition of the difficulties which the present unequal GMP arrangements create for schemes in equalising their overall benefits. We propose that the new arrangements should come into force, as I said, in 1997. We realise that that still leaves a problem for schemes with regard to GMPs accrued in the period between the Barber ruling in 1990 and the new arrangements in 1997. Of course there is no problem with regard to GMPs accrued between 1978 and 1990, since the law is clear that pensions may remain unequal in respect of pre-May 1990 service.

There can be no doubt that equality must be provided in the overall rate of pensions accrued since 1990, but we have concluded that contracted-out salary-related schemes should have the freedom and flexibility to make their own arrangements as to how that should be achieved, rather than having arrangements imposed on them by government. Unfortunately we do not believe that my noble friend's amendment would comply with European law. With that explanation of what I freely accept is a difficult and, I can understand for some people, unsatisfactory position, I trust that he will be able to withdraw the amendment.

The Earl of Buckinghamshire: My Lords, having listened to my noble friend's reply, I am even more convinced that I should have had nothing to do with moving an amendment on guaranteed minimum pensions. It is an important issue that needed to be raised. The position is still unsatisfactory. I shall read with great care my noble friend's words in Hansard, and feel free to return at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57 [Equal treatment rule: consequential alteration of schemes]:

The Earl of Buckinghamshire moved Amendment No. 143:

Page 34, line 1, at beginning insert ("Subject to subsection (1A)").

The noble Earl said: My Lords, this amendment relates to equalisation. In Committee I moved amendments which dealt with the matter. The amendments relate to the equalisation of pension rights and ensure that the employer's consent is sought before trustees or managers alter scheme rules to implement equalisation. Where the employer refuses consent, the

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trustees or managers of the scheme, or the employer, may apply to OPRA for an order to modify the scheme to secure conformity with the equalisation rule.

The amendment is being moved again because it is important to understand that the employer must pick up the balance of costs in pension schemes' defined benefit plans. Therefore, wherever possible, consent to the way in which the trustees equalise what is in effect a benefit improvement should also rest with the employer.

There are several ways of equalising pension ages. Some are more costly than others. It is only right that the employer should be involved in the decision. In Committee the Minister said that the Government believed that the trustees would consult the employer in those instances but that they appreciated the possible areas of conflict. He also said that they understood the anxieties that I had raised and would consider the amendment further. I beg to move.

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