| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Baroness Dean of Thornton-le-Fylde: I accept that last point entirely, because there is no protection there at present. That is why I said that, overall, I very much welcome the clause. But I cannot help but draw on my experience, which is that it is not a terribly good employer who merely matches the employees' pension contributions. A good employer normally provides one-and-a-half to twice as much. I am not sure how many fall in the category where the employee's contribution is the same that of the employer. However, I beg leave to withdraw the amendment.
14 Sept 2004 : Column GC387
Amendment, by leave, withdrawn.
[Amendments Nos. 305 to 306 not moved.]
Lord Higgins moved Amendment No. 306A:
"(a) such contributions in respect of such period or periods as may be prescribed;
(b) such contributions where the transferee employer must match the employee's contributions up to a maximum of 3%"
The noble Lord said: As has already been discussed, the Bill will effectively extend the TUPE regulations by making a pension provision a benefit that must be included in the new employer's contract of employment where employees are members, or eligible to become members, of the occupational scheme with their previous employer. The relevant contributions will be defined in regulations and will specify that the transferee must match the employee's contribution, up to a maximum of 6 per cent. My understanding is that the CBI is not in favour of extending TUPE to cover occupational pensions because in its view that is unnecessary. Pensions are already taken into account in the private sector with flexible packages that reflect employee and employer priorities. The measure would certainly make transfers considerably more time consuming and complex to administer and in the CBI's view that would impede corporate activity by creating uncertainty, imposing burdens and so on.
There is no doubt at all that the pension provision side of any negotiation which takes place about changing ownership of an operation is now regarded as far more important—there have been a number of headline cases on this—than was previously the case. As I understand it, it is already widespread practice within the private sector for transferees to offer pension provision to those affected by a TUPE transfer. That may well be a sensible thing to do. If you transfer the operation from one employer to another and do not operate in the way that I have described, clearly the morale of the workforce is likely to be adversely affected. Problems exist in that area. Sometimes a deal is done with regard to other benefits and so on. The negotiations may be complicated. I have been involved in such matters.
The extension of TUPE to cover occupational pensions would also make transfers more time consuming and complex. The inclusion of pensions within TUPE is likely to give rise to a number of legal and technical issues as well. That creates uncertainty in the middle of what may be a very knife-edge decision. As I said earlier, it may be a question of whether the operation concerned continues at all. We have to balance all those considerations and take into account the risk that an employee loses his or her job altogether as opposed to finding that his pension is not as favourable as previously.
If the Government are going ahead with this proposal—I well understand why they think that they should—it is important that the extension of TUPE to occupational pensions is accomplished in a way that is
14 Sept 2004 : Column GC388
workable and does not undermine the way in which transfers would normally operate by imposing excessive costs. Simplicity is an important aspect that we need to take into account. The CBI has said that the system should provide a safety net rather than prescribe what it considers to be good practice legislation. There is a dispute about whether the relevant figure should be 6 per cent, as in the Bill as it stands, or 3 per cent, as set out in the amendment.
Overall, this is a question of balance. The Government are moving in the direction of improving the situation somewhat as regards pension provision in transfer situations, although, for reasons that we have just debated, they are not going so far as giving the same benefits effectively. As I say, this is a question of balance. We need to consider very carefully whether the Government or those involved commercially in these operations are following the right course. These operations are often very difficult, time consuming and complex and turn on a knife edge. If the pension transfers are not agreed, the whole thing may break down, perhaps to the disadvantage of the economy as a whole and everything else. We need to strike a balance here. I shall be interested to hear the Minister's reaction to this amendment. I beg to move.
The Chairman of Committees (Lord Brabazon of Tara): I should point out that if this amendment is agreed to, I shall not be able to call Amendments Nos. 307 or 307A.
Lord Oakeshott of Seagrove Bay: We do not support this amendment. This seems to me a classic case of CBI schizophrenia. The CBI is very good on the general policy and saying how we should take pensions much more seriously. It makes many good general points, but when it comes to the nitty gritty detail I am afraid that it is too mean. It is not prepared to carry through the logic of what it is saying, if that would cost any of its members. The 3 per cent limit is too mean, and we do not support it.
Baroness Hollis of Heigham: The noble Lord asked what I like to think was a rhetorical question—did the Government believe that they had got the balance right? Of course they do. We have certainly got it clear today: on the one hand my noble friend Lady Dean is asking us to ensure that the pension in a scheme of a transferee employer should be at least as good as the scheme from which the employee is transferring. We believe in some cases that that may be too high and onerous a responsibility.
Then, in moving his amendment, the noble Lord argued for 3 per cent. I suspect that the 3 per cent figure arose because of some sort of mental alignment with the information and advice rules. Certainly 3 per cent, even matched, would not float most recipients into an adequate standard of living—and certainly not a replacement income based on a private pension of more than about 30 to 40 per cent. That is unacceptable.
I have gone over the figures. We believe that the 6 per cent plus 6 per cent together with the implications of the contracted-out NI rebates or the alternative
14 Sept 2004 : Column GC389
second state pension will together give employees a retirement income of around 70 per cent of their earnings in retirement, depending on the assumptions made about growth while, at the same time, reflecting the average contribution made now by employers to DC schemes. Let us remember that the majority of employees remain in DB schemes because those schemes tend to be the large ones.
We believe that we have the balance right; we are reflecting not best practice but average practice in the industry, which allows us at the same time to protect the position of employees. As the noble Lord might have expected when he asked whether the Government had got it right, we believe that we have. When he moved his amendment, I did not think that he argued the CBI case; he put himself at some distance from it and merely made it out that that was what the CBI argued. I take his hesitant endorsement of the CBI's position to be tacit support for that of the Government, and that as a result he will be able to withdraw his amendment.
Lord Higgins: The Minister is of course wrong about that, just as she is wrong in saying that the Government have always got it right. It is the "always" that is the crucial word; I have never yet heard her say that the Government have got it wrong—or at least I cannot recall an instance, although there may have been one or two.
Baroness Hollis of Heigham: When we were talking about internal controls under the previous amendment, which the noble Lord, Lord Skelmersdale, moved on behalf of his noble friend Lord Lucas, I accepted that on reflection we were getting conflicting advice on the matter. It may be that the advice that I originally gave to the Committee was wrong, incomplete, inaccurate and conflicting, and I said that we wanted to reconsider the matter to say whether we wanted to come out with a clearer position.
Lord Higgins: There is one thing that I am quite clear about: that the Minister has not got it right on the balance of saying whether the Government are right or wrong. Be that as it may, this is a very important issue, and we need to weigh the arguments.
We should not underestimate the argument that I made in response to the noble Baroness, Lady Dean, under the previous amendment, and which I made just now. The argument is perfectly valid; if the process is made too complicated or the cost of the transfer is too great, operations that might otherwise have been viable may turn out not to be. Any company thinking of transferring a subsidiary to another owner or of transferring it in a buy-out situation is effectively in the first place, to some extent, considering whether it wants to continue with it at all. If the company decides that it is not worth transferring the subsidiary because it is too difficult or complicated or would cost too much, it might simply close it down. It is important that we do all we can to preserve pensioners' rights, but there is no point in doing that if they are unemployed as a result of being too enthusiastic on this point.
14 Sept 2004 : Column GC390
Arguments have been put forward by both sides—the noble Baroness, Lady Dean, on one side and the CBI on the other. We have hit a balance. It is important to take into account the other points that I made towards the end of my remarks. If the Government are going to go ahead, they must consider closely some of the technical problems that arise in these circumstances. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 307 and 307A not moved.]
Clause 248 [Consultation by employers: occupational pension schemes]:
On Question, Whether Clause 248 shall stand part of the Bill?
| Next Section | Back to Table of Contents | Lords Hansard Home Page |