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Baroness Hollis of Heigham moved Amendments Nos. 157 to 160.
"(9) The Board may
(a) for the purposes of subsection (2), obtain its own valuation of the assets of the scheme as at the reconsideration time (within the meaning of section 149), and
(b) for the purposes of subsection (2)(b), obtain its own valuation of the liabilities of the scheme as at that time;
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and where it does so, subsections (8A)(b), (9) and (10) of section 149 apply in relation to the valuation as they apply in relation to the scheme accounts (within the meaning of that section).
(10) Regulations under subsection (4) of section 141, and guidance under subsection (5) of that section, apply for the purposes of this section in relation to the estimated costs within subsection (2)(c) as they apply for the purposes of section 141 in relation to protected liabilities within section 129(1)(c)."
On Question, amendments agreed to.
Clause 152 [Requirement to wind up schemes with sufficient assets to meet protected liabilities]:
Baroness Hollis of Heigham moved Amendments Nos. 161 and 162:
Page 116, line 42, leave out "provision may be made by order" and insert "the appropriate authority may by order make provision"
"( ) In subsection (14) "the appropriate authority", in relation to a scheme, means such Minister of the Crown or government department as may be designated by the Treasury as having responsibility for the particular scheme."
On Question, amendments agreed to.
Clause 156 [Duty to assume responsibility for closed schemes]:
Baroness Hollis of Heigham moved Amendments Nos. 163 to 166:
"(3A) Subject to subsection (5), subsection (2A) of section 141 applies for those purposes as it applies for the purposes mentioned in subsection (2) of that section (and the definitions contained in paragraphs (b) and (d) of subsection (9) of that section apply accordingly)."
Page 119, line 41, after "(9)" insert "(b) and (d)"
Page 120, line 1, leave out from first "of" to "applies" in line 2 and insert "sections 141 and 143 by virtue of subsection (3A) or (4)
(a) subsections (2A), (4A) and (9)(b) and (d) of section 141 apply as if the references to "the relevant time" were references to that term as defined in subsection (7) below, and
(b) subsection (2) of section 143"
On Question, amendments agreed to.
Clause 160 [The pension compensation provisions]:
Baroness Hollis of Heigham moved Amendment No. 167:
Page 122, line 33, leave out from "of" to end of line 34 and insert ", and the provisions made by virtue of, this section, sections 138 to 140, 159(2)(c), 162 and 166 and Schedule 7."
The noble Baroness said: My Lords, in moving Amendment No. 167, I shall speak also to Amendments Nos. 168 and 205, which affect an area of future proofing.
Schemes are now moving away from traditional benefit schemes and exploring ways in which they can share the risk with employees and yet still offer an attractive pension scheme. As a result, we are seeing new scheme designs, and these amendments will allow us to respond to them. This small group of government amendments to Clause 160, "The pension compensation provisions", and Schedule 7, "Pension compensation provisions", enables us to deal with defined benefit
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schemes which are transferred to the PPF but have differing characteristicsfor example, cash balance schemes.
Cash balance schemes are eligible schemes for the purpose of Clause 124 but have slightly different characteristics. As your Lordships will know, under a cash balance scheme members are entitled to a pension based on their having a cash sum available at retirement which is typically expressed as a percentage of salary for each year of service and with some guaranteed revaluation. Subject to any allowance for a tax-free lump sum, this cash sum is then converted to a pension by securing an annuity either with an insurance provider or within the plan, possibly on guaranteed terms. So, although the pension is defined in relation to a cash sumlike a normal money-purchase schemethe cash sum itself is guaranteed; in other words, all investment risk remains with the employer.
While it has always been our intentionand I am sure your Lordships will endorse thisthat these schemes would be covered by the PPF, as a result of their complexity we need to amend Clause 160 and Schedule 7 to enable payment of compensation to cash balance scheme members. This allows the provisions specified in Schedule 7 to be tailored by regulations to work satisfactorily in such cases which are not the normfor example, the paragraphs relating to postponed and deferred members would need some modification in their references to "protected pension rates". This avoids overcomplicating those provisions by including the modifications on the face of the Bill.
I hope your Lordships will agree that these amendments are vital to ensure that the members referred to are paid the appropriate amount of compensation because the board of the PPF has assumed liability and responsibility for their scheme. I therefore ask your Lordships to accept the amendments. They are totally benign and seek to ensure that people are not inadvertently left out of protection as schemes increase the variety of ways of offering pensions beyond the conventional polarity between DB and DC schemes. I beg to move.
Lord Higgins: My Lords, perish the thought that anything in this legislation is complicated. If the noble Baroness says that we shall have to go further on this group of amendments because the matter is complicated, then it must be totally incomprehensible.
Be that as it may, she has referred to statutory instruments and so on, and in earlier debates she has helpfully said that she will provide us with the relevant statutory instruments. She has always been extremely helpful in previous legislation by seeking to publish regulations in draft form so that we could consider them before we finally let the Bill pass. Perhaps she will at some stage in the proceedings give an indication of what progress she has made in that respect and whether she canahead of Third Reading, at any rate, and some
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little time before thatprovide the regulations that she considers most crucial and which we both most need to know about before we let the Bill go through.
Lord Oakeshott of Seagrove Bay: My Lords, I am happy to accept the Minister's assurance that these government amendments are benignalthough it does raise a question about what the other government amendments are like. However, we certainly accept the benign assurance.
Baroness Hollis of Heigham: My Lords, to my pleasure, apparently the draft regulations are ready now. I shall ensure that noble Lords receive them tomorrow.
On Question, amendment agreed to.
Baroness Hollis of Heigham moved Amendment No. 168:
On Question, amendment agreed to.
Baroness Farrington of Ribbleton: My Lords, I beg to move that further consideration on Report be now adjourned. In moving this Motion I suggest that the Report stage begin again not before 2.15 p.m.
Moved accordingly, and, on Question, Motion agreed to.
Lord Evans of Temple Guiting rose to move, That the draft order laid before the House on 11 October be approved [30th Report from the Joint Committee].
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