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31After Clause 61, insert the following new clause
(" .--(1) In this section--
"NATS employer" includes NATS, any designated company which succeeds to the business of NATS and any employer other than a designated company which succeeds to or acquires any part of the business of NATS;
"NATS" is National Air Traffic Services Ltd whose air traffic services are to be transferred under the provisions of this Act;
"protected beneficiary" includes--
(a) any person who, on the transfer date, is employed by NATS and is an active member of the Scheme;
(b) any person who is employed by NATS on the transfer date, but is then too young to join the Scheme, and who subsequently joins;
(c) any person who is not an active member of the Scheme on the transfer date but who is subsequently entitled to rejoin as a NATS employee without a break in their continuity of employment;
(d) any person who is not an active member of the Scheme on the transfer date, but who is entitled to accrued pension rights under the Scheme at that date; and
(e) any person who is prospectively or contingently entitled to benefit under the Scheme on the death of a person covered under (a) to (d) above;
"relevant scheme" means the Scheme or any other scheme of a NATS employer that covers protected beneficiaries, and that provides benefits in respect of the protected beneficiaries which are at least equivalent in value to those applicable to the protected beneficiaries as at the transfer date;
"Scheme" means the Civil Aviation Authority Pension Scheme;
"transfer date" means the date of the transfer of NATS to the public-private partnership.
(2) NATS (or, if appropriate, the designated company) shall, subject to the consent of the Pension Schemes Office of the Inland Revenue, participate in the Scheme as a non-associated employer.
(3) If NATS (or the designated company) does participate in the Scheme as a non-associated employer, a proportion of the total assets of the Scheme shall be segregated for the benefit of the protected beneficiaries and the share of assets so segregated shall be equal in proportion to the proportion that the Scheme's liabilities in respect of the protected beneficiaries bears to the Scheme's liabilities as a whole.
(4) If NATS (or the designated company) is unable to participate in the Scheme, that NATS employer shall instead make available a relevant scheme for the benefit of the protected beneficiaries.
(5) If the shares or business of NATS (or the designated company), or any part of that business, is transferred to a NATS employer other than NATS or a designated company, that NATS employer shall become a non-associated employer in the Scheme and if that is not possible that NATS employer shall instead make available a relevant scheme for the benefit of the protected beneficiaries.
(6) For the purposes of subsections (4) and (5), if a NATS employer is to make available a relevant scheme other than the Scheme, a share of the assets of the Scheme (or of the previous relevant scheme if not the Scheme) shall be transferred to the receiving relevant scheme, calculated on the basis described in subsection (3).
(7) If a protected beneficiary transfers to the employment of another employer that also participates in the Scheme but which is not a NATS employer, that beneficiary shall remain a protected beneficiary for the purposes of the benefits to be provided to and in respect of him under the relevant scheme and if that beneficiary subsequently transfers back to the employment of a NATS employer he shall still remain a protected beneficiary.
(8) For so long as a NATS employer remains as a participating employer of the Scheme in respect of protected beneficiaries, one trustee of the Scheme shall be a member representative selected from amongst the protected beneficiaries, and one trustee of the Scheme shall be an employer representative of the NATS employer.
(9) The NATS employer shall contribute to the relevant scheme at no less than the rate recommended by that scheme's actuary as being sufficient to secure the accrued rights from time to time of the protected beneficiaries in full by the purchase of annuities and the NATS employer shall not be entitled unilaterally to suspend or terminate its contributions to the relevant scheme except upon its insolvency.
(10) On the full winding-up of a relevant scheme, or on a partial winding-up which involves protected beneficiaries, any shortfall in the assets required to buy out the accrued rights at that time of the protected beneficiaries shall be met in full by the relevant NATS employer and shall be treated as a debt on the employer.
(11) If, on the full or partial winding-up of a relevant scheme, as described in subsection (10), the trustees wish, rather than securing benefits by the purchase of annuities, to pay a bulk transfer to another scheme, that other scheme shall be a relevant scheme and the transfer value payable in respect of the protected beneficiaries shall be sufficient to secure a buy out of their accrued rights if the receiving scheme were to be wound up immediately following the transfer.
(12) The NATS employer shall provide future benefits in the relevant scheme which, in respect of the protected beneficiaries, are at least equivalent in value to those available under the Scheme at the transfer date.
(13) No amendment may be made to a relevant scheme which would result in a reduction of the accrued or future rights of protected beneficiaries, nor in an increase in the contributions payable by protected beneficiaries who are active members.")
The Commons disagreed to this amendment for the following reason--
31ABecause all necessary protections in respect of pensions arising by virtue of employment with National Air Traffic Services Limited, or any subsidiary of that company, can be put in place without this amendment.
Lord McIntosh of Haringey rose to move, That this House do not insist on its Amendment No. 31 to which the Commons have disagreed for their reason numbered 31A, but do propose Amendments No. 31B and 31C in lieu thereof--
31BAfter Clause 88, insert the following new clause--
(" .--(1) The Secretary of State may by order make provision for the allocation of assets, rights, liabilities or obligations between different sections of the Civil Aviation Authority Pension Scheme.
(2) An order under this section may include provision for or in connection with--
(a) securing that the Scheme continues to be approved for the purposes of the relevant enactments;
(b) the amendment of the Scheme;
(c) the manner in which questions arising under the order are to be determined.
(3) The reference in subsection (2) to the amendment of the Scheme includes a reference to the amendment of--
(a) the trust deed of the Scheme;
(b) the rules of the Scheme;
(c) any other instrument relating to the constitution, management or operation of the Scheme.
(4) An order under this section may be made so as to have effect from a date falling before the making of the order.
(5) In making an order under this section the Secretary of State must secure that each person falling within subsection (6) is overall in materially at least as good a position, as respects pension arrangements, as a result of the order.
(6) A person falls within this subsection if--
(a) he is or has at any time been a contributing member of the Scheme, or
(b) he is or may become entitled to benefits in respect of a person falling within paragraph (a).
(7) A contributing member of the Scheme is a member who makes, and whose employer makes in respect of him, contributions under the Scheme.
(8) The relevant enactments are--
(a) Chapter I of Part XIV of the Income and Corporation Taxes Act 1988 (retirement benefit schemes);
(b) Part III of the Pension Schemes Act 1993, so far as relating to occupational pension schemes.").
31CClause 95, page 60, line 6, at end insert--
("(11A) The power to make an order under section (Civil Aviation Authority Pension Scheme) is exercisable only after consultation with the trustees of the Civil Aviation Authority Pension Scheme.").
Lord McIntosh of Haringey: My Lords, I should like to reassure the House right from the beginning that the Government regard the matter of pensions protection for air traffic control staff as one of great importance. Pensions affect us all, and I can well understand why this is a matter of such importance to NATS employees. I must therefore make it clear that we would not act in any way that would put them at threat. We are not doing so.
We have looked in some detail at the adequacy of protections for NATS employees. We believe that there are already a number of non-statutory protections in place which amount to a very strong regime of safeguards, even before the amendments I am now moving and the new guarantee I shall describe in a moment. I shall attempt to explain, as briefly as possible, the existing protections. Some of this will, of course, be very familiar to the House because we have discussed these matters before on more than one occasion. None the less, these are key points on which the House needs to be clear.
First, the Civil Aviation Authority pension scheme, to which NATS staff currently belong, is to be amended to make it possible for staff employed by the public/private partnership to remain members of that scheme. This will involve NATS becoming a non-associated employer within the scheme. This arrangement will prevent cross-subsidy between the new NATS section of the scheme, which will relate to a company classified to the private sector, and the CAA section of the scheme, which will remain in the public sector. It will enable NATS staff to continue to enjoy the benefits that they currently enjoy.
Secondly, current pensioners and deferred pensioners within the scheme will remain unaffected by the PPP. They will remain in the Civil Aviation Authority pension scheme and they will be in the CAA section of the scheme, which will also include current CAA staff. This section will, as I have just said, remain in the public sector. Both groups of pensioners will continue to receive benefit in exactly the same way as they do now.
Thirdly, returning to the position of existing NATS staff, we have made it very clear to all those bidding to be our strategic partner in the PPP that securing the continued participation of current staff in the scheme is a fundamental condition of being considered for that role. In addition, we will be putting into the strategic partnership agreement a binding commitment, enforceable at law, that guarantees the continuation of that right on terms at least as favourable as those now existing. This is a very significant safeguard, underpinned by the Government's continued participation in the PPP.
Fourthly, NATS staff will also enjoy the protections on pensions that exist under the law of the land, such as the Pensions Acts of 1993 and 1995. These provide, among other things, protections for accrued benefits and funding levels.
Finally, but most importantly, yet another level of protection exists in the scheme's trust deed and rules. These are unusually restrictive and protective of members' interests. It is not uncommon for the sponsoring employer of a pension scheme to have the ability to reduce the level of benefits for future service (known as "prospective benefits"). However, no employer who participates in the Civil Aviation Authority pension scheme has that particular power, because the restrictive power of amendment in the trust deed provides that amendments cannot be made to reduce prospective benefits. Let me spell that out. Under the CAAPS, the future benefits have to continue to be at least as good as the accrued ones. This is a very valuable protection indeed. For the avoidance of doubt, let me make it clear that the new strategic partner will not have the ability unilaterally to change the trust rules. They are embedded so that change can come only with the consent of the trustees.
My noble friend Lord Brett tabled Amendment No. 31, which this House approved on Report, and with which the Commons subsequently disagreed. We consider that the amendment has some technical flaws that cause difficulties, in particular, for the trustees of the Civil Aviation Authority pension scheme. I believe that my noble friend would not disagree with this. Instead, the Government are proposing a package that meets the legitimate concerns on pension arrangements of both the trustees and NATS staff who will be employed by the PPP. The measures I am about to describe are new since this House last considered the issue and add further protections over and above those that I have already mentioned.
The package is made up of two elements. First, the Government have tabled Amendments Nos. 31B and 31C, which we propose should replace Amendment No. 31. The purpose of these two amendments is to meet the concerns that have been expressed with regard to the pension arrangements by the scheme trustees. Amendment No. 31B provides the Secretary of State with a power to make an order by negative resolution which will enable him to allocate the assets, rights, liabilities or obligations of the Civil Aviation Authority pension scheme between different sections of the scheme. Amendment No. 31C confirms that the power can be exercised only after the trustees of the scheme have been consulted.
I am sure that noble Lords will recall from our previous debates that the scheme is to be divided into two sections. The first section is the CAA section, which will cover CAA employees, together with all pensioners, irrespective of whether they were employed by the CAA or NATS prior to the establishment of the PPP. The second section is the NATS section, which will embrace all current staff who are in the employment of NATS when the PPP is created.
The responsibility for making an equitable division of assets and so forth between the two sections rests with the trustees. They are understandably concerned at the prospect of a disaffected member mounting a legal challenge to any decision they may reach, and wish to guard against this eventuality. As was made clear on Report, they were intending to make an application for a court order to provide them with the necessary protection. Noble Lords will be well aware that court proceedings could become lengthy and costly. The order made by the Secretary of State under the terms of our amendment will provide the trustees with the protection that they are seeking and so avoid the need to resort to court action.
I come now to an important point. The amendment ensures equitable treatment for all scheme members and their dependants by specifying that in making an order for the division of the fund, the Secretary of State must secure that every potential beneficiary is in materially at least as good a position, as regards pension arrangements, as a result of the order. I am sure that the House will welcome this addition of a protection of staff to the face of the Bill. I imagine that the trustees will welcome these amendments as well.
The second element of our package does not involve making an amendment to the Bill. Its aim is, however, broadly the same as that which my noble friend wished to achieve with Amendment No. 31. That aim is to provide protection for the pension benefits currently enjoyed by NATS staff. I understand that staff have particular concerns over a possible future change of ownership or a "TUPE" transfer of part of NATS' current activities, or a change of attitude on the part of a future government.
The Government have, therefore, devised a scheme that I shall explain to the House. The scheme will give the fullest possible protections in the circumstances of concern to staff. It is, for staff, as good as having protection on the face of the Bill yet, at the same time, does not cause the Government the problems that would flow from offering the protections in that form.
The essence of the scheme is as follows. The Government would, as part of the PPP, ensure that each and every NATS employee at the time of the sale is required to be permitted to stay in CAAPS--or a scheme that is at least as good as CAAPS--in the opinion of the courts or an independent trustee--and continue to build up CAAPS benefits on the same basis as they do now. I shall come back to the role of the trustee shortly.
On that basis, there is no way that NATS could erode that right or those benefits without the consent of each individual concerned. If NATS tried to do this, the employee would have the individual right to go to court to prevent NATS from cutting back on his or her benefits, and to require NATS to continue to provide for the benefits that he or she has or could reasonably be expected to earn under CAAPS.
The Government would also create a process for an independent third party--called a "trustee of promise"--to have the role of guaranteeing the implementation of this promise. The third party chosen would almost certainly be an independent trust, such as, for illustrative purposes only, the Law Debenture Trust Corporation, although we have not yet approached that body. The Government will examine the possibility of involving staff representatives in this in some way. The third party could act quickly and relatively informally to ensure that NATS was adhering to its promise. Using legal rights to be given to it, either under general trust law principles or under the Contracts (Rights of Third Parties) Act 1999, the third party would have the ability to enforce its decisions if it was necessary to do so.
I hope that the House will agree that this two-part package gives the fullest possible protections to both the trustees and to NATS staff. It is, for staff, as good as protection on the face of the Bill, without causing the Government the problems that would flow from offering statutory protection. It will also serve to remove the difficulties presented by Amendment No. 31.
Moved, That the House do not insist on their Amendment No. 31 to which the Commons have disagreed for their reason numbered 31A, but propose Amendments Nos. 31B and 31C in lieu thereof.--(Lord McIntosh of Haringey.)
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