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Lord Higgins: I am most grateful to the noble Baroness for that reply. Perhaps I may respond briefly.
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I say again that there is a very strong rumour that the Bill is, or may be, dropped in favour of a hunting Bill. I hope that the noble Baroness can make it absolutely clear that that is not the case.
Her remarks about amendments at the Report stage are certainly very welcome. But I find her remarks on the financial assistance scheme extremely worrying. She is saying, "Well, perhaps we may know where we are by Christmas or November or whatever". That means that we shall let the clause go through in its present state with the whole process being carried out effectively by statutory instrument. The noble Baroness outlined many things about which the Government have still not made up their mind and that means that this House will not be able to amend any of the decisions which the Government take. In those circumstances, we can return to the matter when we reach Clause 274. However, I begin to wonder seriously whether it should be in a separate Bill which can be properly debated; otherwise, the whole matter will be a total blank cheque and that is very worrying.
I shall not pursue the matter further now. But I think that the situation that the noble Baroness outlined with regard to the lack of decisions being taken and the present inability to provide any information within the timescale envisaged in the Bill raises very serious questions and we shall need to return to that point.
Lord Oakeshott of Seagrove Bay: On the subject of the financial assistance scheme, which I also raised, were the noble Baroness back in her role as a student rather than a university lecturer, I should award her an alpha for her prescription of the problem and a delta for progress or action in dealing with it. I share the views of the noble Lord, Lord Higgins: we really must have more facts and more information before the Bill goes through.
Clause 126, as amended, agreed to.
Clause 127 [Restrictions on winding up, discharge of liabilities etc]:
Lord Skelmersdale moved Amendment No. 195:
The noble Lord said: The last words that the Minister uttered were that the two are connected. In this case, the three are connected because one has to look forward in order to understand Clauses 127 to 210, the last subsection of which states firmly:
"This section is to be read subject to section 127 (which restricts the winding up of an eligible scheme during an assessment period)",
But there is great confusion in my mind because this whole section of the Bill—not the later clauses to which I have just referred but this whole part of the Bill—refers to the activities of the board. As I view the Bill, the winding up of an eligible scheme is normally the prerogative of the board. However, subsection (3) states that that prerogative can be overridden by the regulator in certain circumstances—not least under Section 11(3A) of the Pensions Act 1995. It seems to me that if my interpretation is correct, that is a recipe
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for endless rows and possibly ultimate disasters. Why should these two distinct bodies operate what is basically the same scheme? I beg to move.
Baroness Hollis of Heigham: I may be able to help the noble Lord by setting what we are trying to do in context.
The noble Lord's amendment would remove a reference to Clause 210—the backdating of winding-up—from Clause 127(3). That would remove some essential clarity from an otherwise complicated section of the Bill. Clause 127 restricts the winding-up of pension schemes and the discharging of liabilities during the assessment period because, for example, otherwise trustees could make decisions that might not necessarily be in the best interests of all members. Subsection (3) states that this restriction does not apply when a winding-up order is made by the,
when an order is made by the regulator to the trustees to wind up the scheme even though the scheme is in the assessment period, and at that point the trustees must comply.
At the end of the subsection, reference is made to Clause 210. Clause 210 provides that when such a winding-up order is given by the regulator, the winding-up must be backdated to the time immediately before the start of the assessment period. That means that the winding-up must be implemented as if the order had been given immediately before the assessment period. The winding-up order is backdated to ensure that the level of benefits that members receive after wind-up are in line with the winding-up provisions on scheme rules and not the PPF level of benefits, which ensures a higher level of benefits for members than would otherwise be the case.
In summary, the reference to Clause 210 in Clause 127(3) helps to clarify that when an order to wind up a scheme is made during the assessment period, the winding-up must be implemented as if the order had been made prior to the start of the assessment period—as if it were outside the assessment period. I hope that that explains why the provision is needed.
Lord Skelmersdale: Not quite. I should have thought that it would be quite obvious to the Minister that the wording of the amendment was a hook on which to hang my question. The Minister has not answered my question, which is, "What is the logic of having two bodies independently operating—one able to over-ride the actions of another—these windings up, or whatever the plural is?
Baroness Hollis of Heigham: First, I am confident that things would not happen in that way. Such a situation would occur only when the Pensions Regulator and the PPF are in complete accord. As it stands, no winding-up notice can take place during the assessment period, but occasionally it may be in the interests of scheme members for that winding-up to occur. For example, when there is some issue of crystallising debt, a winding-up scheme may enable the debt owed from the employer to be recovered earlier
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by the PPF. When it is in the interests of members, the Pension Regulator and the Pension Protection Fund can agree that there should be an intervention that should not wait until the end of the assessment period but should occur during the 12 months or so that the assessment period is running.
For the most part, it would be best for the winding-up to await the determination of the assessment period, but there may be an occasion when, for example, there may be concerns that, given the issues of debt, creditors and so forth, it is sensible to have an earlier rather than a later winding-up. The provision allows that to take place.
Lord Skelmersdale: I am sorry, but that still does not help. Since the board started this process, why cannot the board re-determine it, if it feels it is necessary? Why does the regulator have to come into the equation?
Baroness Hollis of Heigham: The PPF does not have the power to give winding-up orders until the assessment period is completed. In other words, the winding-up powers of the PPF kick in after the assessment period, which will run for up to a year. The Pensions Regulator's powers run up to the point at which the powers of the PPF take over. It is simply a question of timing and which body has the power. However, the power will be exercised only after close consultation and I suspect that there will be no dispute. One could, I suppose, reconstruct the Bill so that the powers of the Pension Protection Fund were brought back to the beginning of the assessment period, but one would then have to rewrite what we mean by the assessment period. It is simply a perfectly sensible division of labour, given the way that the clock ticks over the assessment period. I do not envisage any problem at all.
Lord Skelmersdale: The noble Baroness, not unusually, gives the impression that I am making a bit of a mountain out of a molehill. I will have to consider what she said because at this precise moment I remain unconvinced. We may well come back to the issue at the next stage. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham moved Amendment No. 195A:
Page 87, line 26, leave out from "period" to "no" in line 28 and insert ", except in prescribed circumstances and subject to prescribed conditions—
The noble Baroness said: In moving Amendment No. 195A I shall speak also to the amendments grouped with it. This group of government amendments provides specific compensation for members who have been a scheme member for only a very short period; who have rights that have accrued under the scheme but would not be entitled to full benefits. These benefits will be payable to a member who stays in the scheme until normal pension age and are known as long service benefits.
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A new paragraph 19A, which will be introduced later in Committee, has been inserted into Schedule 7. It applies to members whose pensionable service terminates on commencement of the assessment period and who do not have a right under Chapter 5 of Part 4 of the Pension Schemes Act (protection for early leavers) or rights under the scheme which give them the same level of benefits as those who stay until the scheme's normal pension age. In these cases, if a member has a right under the admissible rules to either, or a choice of, a transfer payment or refund of their contributions, then compensation will be payable at a level of 90 per cent of the transfer payment sum or refund of contributions, whichever is the greater. In other words, we are protecting those who may not have been in the scheme for two years or more.
New paragraph 30A of Schedule 7 provides that where a member's pensionable service is terminated on the commencement of the assessment period and, as a result, the member has a right to elect a cash transfer sum or contribution refund under Chapter 5 of Part 4 of the Pension Schemes Act 1993, then the member will receive compensation in the same way as other active members of the scheme as if they had rights to long service benefit. Regulations will enable modifications to Schedule 7 to ensure that the member is not entitled to double compensation in respect of the same rights under the scheme.
Amendment No. 234AJA will be formally introduced later in Committee and provides regulations under subsection (2C) of Clause 157 to provide which liabilities of the trustees the board are to discharge; that is, the liabilities that would have existed but for the discharge under Clause 152. The regulations will include provision for the trustees to discharge their liability in relation to a refund of contributions or transfer payment sum in respect of a member, where the right arose before commencement of the assessment period.
Amendment No. 199D provides that where a scheme is being wound up then the benefits payable during the assessment period should not be the reduced level payable on winding up but the full scheme benefits capped at the PPF level of compensation.
Amendment No. 195A amends Clause 12, which is headed "Restrictions on winding up, discharge of liabilities etc", to provide that discharges of liabilities can occur during the assessment period in prescribed circumstances and subject to prescribed conditions; for example, payment of a contribution refund where the right arose before commencement of the assessment period.
Amendment No. 199E provides a recognition that it may not be practicable to expect trustees to be able to reduce benefits paid to PPF levels immediately and that there will, therefore, be some risk of overpayment. In these circumstances we are concerned that scheme rules may not always provide trustees with the power to recover overpayments and this amendment ensures the trustees will have this power.
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Finally, a number of consequential amendments have been made—Amendments Nos. 199F, 220D, 220B, 224A, 224B, 224C, 232A, and 232B—which make appropriate references to paragraphs 19A and subsections (2) and (2A) of Clause 157.
I hope that noble Lords will agree to these amendments. They are vital to ensure that the members referred to by these amendments do not lose out because the board of the PPF has assumed responsibility for their scheme. I therefore ask that, as they are entirely benevolent, these amendments be accepted by your Lordships. I beg to move.
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