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"(2A) But where, on the commencement of the assessment period—
(a) a member's pensionable service terminates, and
(b) he becomes a person to whom Chapter 5 of Part 4 of the Pension Schemes Act 1993 (c.48) (early leavers: cash transfer sums and contribution refunds) applies,
no benefits are payable to or in respect of him under the scheme during the assessment period.
(2B) Section 141(2) (retrospective accrual of benefits in certain circumstances) is to be disregarded for the purposes of determining whether a member falls within paragraph (a) or (b) of subsection (2A).
(2C) Nothing in subsection (2A) prevents the payment of benefits attributable (directly or indirectly) to a pension credit during the assessment period in accordance with subsection (2)."
Page 89, line 20, at end insert—
"(2D) Where at any time during the assessment period the scheme is being wound up, subject to any reduction required under subsection (2) and to subsection (2A), the benefits payable to or in respect of any member under the scheme rules during that period are the benefits that would have been so payable in the absence of the winding up of the scheme.
(2E) Subsections (2), (2A) and (2D) are subject to sections 141(1) to (1B) and 145(9A) (which provide for the adjustment of amounts paid during an assessment period when that period ends other than as a result of the Board assuming responsibility for the scheme)."
 
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Page 89, line 20, at end insert—
"( ) For the purposes of subsections (2) and (2A) the trustees or managers of the scheme may take such steps as they consider appropriate (including steps adjusting future payments under the scheme rules) to recover any overpayment or pay any shortfall."
Page 89, line 23, leave out "subsection (2)" and insert "subsections (2) and (2A)"

On Question, amendments agreed to.

[Amendment No. 200 not moved.]

Baroness Hollis of Heigham moved Amendments Nos. 200A to 200D:

Page 89, line 25, after "scheme" insert "—

(a) in such circumstances as may be prescribed subsection (2) does not operate to require the reduction of benefits payable to or in respect of any member;
(b) "
Page 89, line 44, leave out subsection (6).
Page 89, line 44, at end insert—
"( ) Regulations may provide that, in prescribed circumstances, where—
(a) a member of the scheme died before the commencement of the assessment period, and
(b) during the assessment period, a person becomes entitled under the scheme rules to a benefit of a prescribed description in respect of the member,
the benefit, or any part of it, is, for the purposes of subsection (2), to be treated as having become payable before the commencement of the assessment period."
Page 89, line 45, after "(2)" insert "or (2A)"

On Question, amendments agreed to.

On Question, Whether Clause 130, as amended, shall stand part of the Bill?

Lord Higgins: Clause 130 concerns the payment of benefits in the assessment period. There are one or two points about which I am not quite clear. Subsection (2) states:

"The benefits payable to or in respect of any member under the scheme during the assessment period must be reduced to the extent necessary to ensure that they do not exceed the compensation which would be payable to or in respect of the member in accordance with this Chapter".

I am not quite clear who will be paying these benefits at that stage in the assessment period. Will it be the trustees or the board? If it is the trustees, how are they to know what compensation will be payable in respect of the member in the circumstances set out?

I am somewhat concerned about subsection (3), which relates to civil penalties under Section 10 of the Pensions Act 1995 and applies to,

"a trustee or manager who fails to take all reasonable steps to secure compliance with subsection (2)".

I do not understand how the trustee is to know. In fact, I am not clear why it should be "a trustee or manager". Perhaps the noble Baroness will also clarify that point.

Baroness Barker: Perhaps I may ask a question in addition to those posed by the noble Lord, Lord Higgins. It relates to subsection (4) and to those people on benefits who carry on working after retirement age. The Bill refers to the payment of pensions, lump sums and other benefits being postponed but, unlike the equivalent situation under state pension legislation,
 
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there seems to be no provision for those payments to be put somewhere—into a deferred pot, for example—and to be paid at a later stage.

As the Bill stands at the moment, a person who continues to work derives no benefit at all. My concern is that this will cut across the steps the Government are trying to take to enable people to continue to work after pension age. I realise that it refers to the assessment period, but it is silent on the matter of benefits being accrued in any way. I should like the noble Baroness to clarify that matter.

Baroness Hollis of Heigham: The trustees will pay benefits during the assessment period to pensioners. The payments that the pensioners receive will be exactly the same under the PPF as in the scheme—that is, 100 per cent. There is no particular complexity about that.

However, if people become deferred members— because, for example, the scheme is in the process of being wound up and so on—the situation will become complex and the PPF will provide technical support to the trustees to deal with those difficult issues. I fully accept that.

As to those who are due to work after retirement age, the benefits of deferment will be set out in regulations. We hope that they will match those in scheme rules. There should be no deleterious effect.

Lord Higgins: I may have misunderstood an important point. Is the assessment period always followed by the board taking the matter over? If not, what happens if the assessment takes place and it is decided that the scheme is not eligible? Have people been out of pocket in the mean time because they have not received the full amount?

I still do not understand how the trustees will know what would be payable under the PPF. I am not clear why they should be subject to penalties if they do not know.

Baroness Hollis of Heigham: The penalties are associated with not taking reasonable steps—in other words, if there has been some inappropriate or bad-faith behaviour, which is not unheard of in the pension world. However, the noble Lord is right about the technical difficulties for trustees. That is why we will be producing technical support to deal with such issues.

Basically, our expectation—if that is the right word—is that, of the schemes that go into the assessment period, some 75 per cent or 85 per cent may end up in the PPF. That is a working assumption. I hope that we are wrong—I hope that more will stay outside the PPF—but that is the assumption we make.

At the point at which schemes go into the PPF, obviously the level of benefits determined by the priority order will apply. That is 100 per cent for existing pensioners—exactly the same as they currently receive—and 90 per cent for deferred pensioners who are not yet drawing their pensions. If, however, a scheme is among the 10, 15 or 20 per cent that do not go into the PPF, the benefits that have accrued to the working member, but which have not
 
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been paid to him because he is not yet a pensioner, will be wound back to the point before the assessment period. So any theoretical or notional shortfall will be made good and the individual will continue as though the assessment period had never happened in terms of his level of benefits.

Lord Higgins: I am still not clear about the penalties. What we are saying is that there will be trustees who, instead of paying out the amount of payment to beneficiaries which should have been, might have been or would have been payable under the PPF, pay out the wrong amount—probably more than the PPF would like them to. However, if it is a genuine mistake, to clobber them with civil penalties would be rather worrying.

I am concerned that fewer and fewer people will take on the job of trustee as a result of the Bill. I am seriously concerned about the situation. Like the noble Baroness, Lady Turner, I am not in favour of professional trustees; we need as many volunteers as possible. But they are incurring bigger and bigger risks. They may inadvertently pay out too much in an assessment period—even when they may not end up with the PPF at all—and suddenly find themselves clobbered.

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