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Lord Hodgson of Astley Abbotts: My Lords, I am grateful to my noble friend Lord Astor and the noble Lord, Lord Redesdale, for their support. I was not clear whether the noble Baroness was trying to use the fact that the Pensions Regulator was not to be established until 5 April next year as a fig leaf for the reason why it could not be included in this Bill. She started down that track and then her speaking notes veered away from it. Instead she followed the line that we had received assurances on the Floor of the House and in Grand Committee. I shall have a look at what Alan Pickering had to say—given that he is clearly a man of importance and relevance to this debate—and of course at what the noble Baroness had to say, and see where that takes us regarding Third Reading next week. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 9 and 10 not moved.]

Lord Astor of Hever moved Amendment No. 11:

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(1) The Armed Forces Pay Review Body ("the AFPRB") shall undertake quinquennial reviews to monitor and consult on the provisions of the armed forces pension and compensation schemes established under this Act.
(2) For the purposes of subsection (1), the AFPRB must employ specialist pension advisors.
(3) For the purposes of subsection (1), the AFPRB may take into account—
(a) any representations made to them on the workings of the schemes or on legacy issues;
(b) any other information which they think necessary.
(4) The conclusions of the review published by the AFPRB shall be submitted to the Secretary of State and laid by him before Parliament.
(5) The Secretary of State may, at his discretion, vary or accept any of the recommendations made by the AFPRB.
(6) For the purposes of subsection (5), the Secretary of State shall make a written statement to Parliament setting out—
(a) the recommendation,
(b) the AFPRB's reasons for making the recommendation,
(c) the Secretary of State's decision in relation to the recommendation, and
(d) the reason for his decision.
(7) A legacy issue shall be defined as an historical anomaly in provisions of armed forces pension schemes causing inequitable treatment of certain clearly defined groups."

The noble Lord said: My Lords, the amendment focuses on the role of the AFPRB in validating the new pension and compensation scheme established under the Bill. We had substantial debate in Committee on this matter. It was clear that noble Lords appreciated the concession in another place from the Government that the AFPRB should be given the remit of validating the scheme. We have been lucky enough to have in our midst the noble Baroness, Lady Dean, who has an unparalleled knowledge of the working and expertise of that excellent body. However, I share with the noble Baroness some concerns about the extent of the new remit for the AFPRB. For this reason, I have brought back a redrafted version of our Amendment No. 26.

First, it would reassure many of us if the role of the AFPRB in the pension scheme were explicitly placed on the face of the Bill. Our amendment would do just that. We would like more detail on how the AFPRB will assume its new role. For that reason, our amendment insists that the AFPRB employs specialist pensions advisers as set out in subsection (2). This is a vital provision. Other pension schemes have trustees. We cannot have trustees, so we are told, because there is no trust. Yet we feel there is a clear need for oversight—for governance, as it were—to make sure that the schemes are in line with best practice and meet the needs of our servicemen and women. This could be provided only by those who have extensive knowledge of the intricacies of the pension industry. Currently, the AFPRB has no such expert.

I have listened to the Minister's arguments and appreciate that it might not be appropriate for the AFPRB to oversee the old pension scheme as well. However, we believe that there is a need for the AFPRB to be open to representations from all who have comments on the workings of the schemes, including legacy issues.
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I know that the Government are constrained by their own self-imposed cost neutrality straitjacket at the moment, but a future government might not be. If there were to be some spare money available, a consultation review of the AFPRB would be extremely useful in pointing out which legacy issues could perhaps be addressed. Above all, our amendment strives to guarantee that the AFPRB has qualified experts available to take on its new role of validating a pension scheme and that there is a transparent process in terms of its consultation and interaction with the Secretary of State if any proposal or recommendations are made. In this way, the AFPRB can be a vital safeguard for ensuring that our servicemen and women are adequately cared for and protected in terms of their pension rights and needs. I beg to move.

Lord Hodgson of Astley Abbotts: My Lords, I support the amendment. I regard it as highly desirable, even essential, that if the Armed Forces Pay Review Body is to be charged with overseeing the Armed Forces' pensions generally, a formal framework should be established within which it can carry out its duties.

We heard the Government's previous response that there was no need for this as service personnel were properly represented by the chain of command. Indeed, the noble Baroness used the phrase "chain of command" again today. I am afraid that this just will not wash. It is asking too much of a serving officer or an NCO to put forward and espouse what may be unpopular issues and views raised by junior colleagues. People may be putting their career on the line by doing so.

Without going back over ground we covered during the previous debate, there is a read-across to the private sector. As a trustee of a private sector pension fund, I would not accept that the only line of approach to me and my fellow trustees is through the line management of the company concerned. The dangers of doing so are obvious: the management shut or close off reasonable views put forward by more junior members of staff. That is why in the private sector there are employee member trustees, and it is quite right that there should be. If we cannot have employee member trustees, that is a role the AFPRB must fulfil and it needs explicit powers to do so effectively.

Finally, in Committee, the Minister and I discussed whether there were trustees for the Civil Service pension fund and he said that there were not. Of course he was right in fact but not entirely right in spirit. There is a joint consultative committee for the Civil Service pension scheme made up of unions and management. They are not trustees, but they are a consultative committee. I think that this is just what the amendment is seeking to parallel and I therefore hope that the Government will see that an important precedent already exists and that they will support it.

Lord Craig of Radley: My Lords, I support the amendment and I spoke to a similar amendment previously. However, during Second Reading I asked
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a question to which I did not receive an answer. The Armed Forces Pay Review Body is concerned with one star personnel and below, but I was not clear about how its remit would run for more senior officers.

Lord Bach: My Lords, I am grateful to noble Lords who have spoken to the amendment. It seeks to place the Armed Forces Pay Review Body's role in primary legislation and, frankly, to extend it beyond the remit announced on 30 April by my honourable friend the Veterans Minister, Mr Caplin. Noble Lords will recall the terms of that announcement.

Working alongside its current remit on pay, the AFPRB will undertake regular reviews of Armed Forces pension arrangements, comparing the pensions scheme arrangements with practice elsewhere in the economy and considering the extent to which they meet the recruitment and retention needs of the Armed Forces. It will publish its observations in an annual report and the Government will respond publicly.

Since Grand Committee, the Veterans Minister has written to Professor Greenaway, the AFPRB chairman, to seek to agree the detail of the external validation remit work. This follows discussions between my officials and the Office of Manpower Economics. The chairman will discuss the letter with other members of the AFPRB at its next meeting towards the end of the month. It would not be appropriate therefore to give further details today. However, it is reasonable to say that the work will cover the new pensions schemes and any variants, such as those for the full-time reserve service, together with the new early departure payment scheme. I am equally clear that the arrangements should not cover legacy issues for the AFPS, affecting those in receipt of pensions.

The concern of the review body is remuneration in the context of recruitment and retention of those currently serving. It operates through a system of comparability. Pension benefits of veterans are not a matter of recruitment and retention and it is difficult to see how they could be the subject of comparability with the terms paid to others who are currently employed in the UK economy. Any change to legacy issues must be a matter for political decision.

In terms of timing, we would expect that as currently planned the AFPRB would value pensions for its 2006 report in the context of that year's pay recommendations. We have proposed that this valuation should be confined to the current AFPS benefit, given that the membership of a new scheme will be small at that date. We will be at a very early stage in our implementation of the scheme. If something dramatic happens in the pensions field, however, provision is available to bring forward the review by agreement.

The next scheduled valuation would be for the 2011 report. We have proposed that unless there is evidence to suggest an earlier review, the first AFPRB validation of the AFPS should also be undertaken in 2010 for publication in 2011. The body's findings and observations on the scheme will be published in a
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supplement to the annual report, along with any associated reports commissioned by the body as part of its work. This will be in line with normal practice.

I see no need to include the review body's role in primary legislation. It has undertaken its role with respect to pay entirely satisfactorily for many years on the basis of a non-statutory remit. Other review bodies also operate on a non-statutory remit and I see no reason to depart from this arrangement for pensions. Indeed, it would be strange to have a different approach for the one review body. For those reasons, I must resist the amendment.

There was a question from the noble and gallant Lord to which I completely forgot to reply. When the AFPRB conducts its visits relating to remuneration, it speaks to service personnel of all ages and ranks and has free access to them. The Armed Forces are encouraged to share their views and concerns. Does that deal with the point that the noble and gallant Lord was making?

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