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"(3A) The pensioner's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."

On Question, amendment agreed to.

[Amendment No. 175 not moved.]

Baroness Hollis of Heigham moved Amendment No. 176:

On Question, amendment agreed to.

[Amendments Nos. 177 and 178 not moved.]

Baroness Hollis of Heigham moved Amendment No. 179:


"(3A) The postponed pensioner's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."

On Question, amendment agreed to.

[Amendments Nos. 180 and 181 not moved.]

Baroness Hollis of Heigham moved Amendment No. 182:

On Question, amendment agreed to.
 
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[Amendments Nos. 183 and 184 not moved.]

Baroness Hollis of Heigham moved Amendment No. 185:


"(3A) The active member's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."

On Question, amendment agreed to.

[Amendment No. 186 not moved.]

Baroness Hollis of Heigham moved Amendment No. 187:

On Question, amendment agreed to.

[Amendments Nos. 188 to 191 not moved.]

Baroness Hollis of Heigham moved Amendments Nos. 192 and 193:


"(3A) The active member's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
Page 304, line 20, at beginning insert "Subject to sub-paragraph (3A),"

On Question, amendments agreed to.

[Amendments Nos. 194 to 197 not moved.]

Baroness Hollis of Heigham moved Amendments Nos. 198 and 199:


"(3A) The deferred member's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
Page 307, line 18, leave out from "of" to end of line 22 and insert "—
(a) partners of prescribed descriptions of persons of prescribed descriptions who were members of the scheme immediately before the assessment date;
(b) dependants of prescribed descriptions of persons of prescribed descriptions who—
(i) were members of the scheme, or had rights to benefits payable under the scheme rules in respect of a member, immediately before the assessment date,
(ii) became entitled to benefits under the scheme rules in respect of a member on or after the assessment date but before the time the trustees or managers of the scheme received a transfer notice under section 158, or
(iii) have become entitled to compensation under paragraph 22 (survivors who do not meet conditions for scheme benefits at assessment date), in relation to the scheme."

On Question, amendments agreed to.
 
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[Amendments Nos. 200 to 204 not moved.]

Baroness Hollis of Heigham moved Amendment No. 205:

"Power to modify Schedule in its application to certain schemes


32A Where the scheme is a prescribed scheme or a scheme of a prescribed description, this Schedule applies with such modifications as may be prescribed."

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendment No. 206:

The noble Baroness said: My Lords, this amendment is necessary as a result of the change to the definition of occupational pension scheme made by Clause 237 and the consequential change that was made to the definition of employer in Clause 316.

Clause 237, which replaces the definition of occupational pension scheme in Section 1 of the Pension Schemes Act 1993, was made as a consequence of changes in the Finance Act. The old definition included the phrase, "categories of employment", which was replaced with "service in employments of a description". The word "description" refers to the description in the scheme rules. As a consequence of this, the definition of employer in Clause 316 was also altered to refer, in the case of occupational pension schemes, to the employer as "the employer of persons in the description of employment to which the scheme in question relates". This had also previously referred to "persons in the description or category of employment". With that lucid explanation of the amendment, I am sure that your Lordships will be happy to accept the amendment, which realigns the vocabulary.

On Question, amendment agreed to.

Clause 170 [Relationship with fraud compensation regime]:

Baroness Hollis of Heigham moved Amendment No. 207:

On Question, amendment agreed to.

Clause 172 [Initial levy]:

Lord Higgins moved Amendment No. 208:

The noble Lord said: My Lords, we come to a series of important amendments regarding the levy. It may be helpful if I say a few words by way of introduction. We have discussed this matter in Grand Committee. A number of the issues have become more clearly defined. It is important when looking at the Bill as a whole always to bear in mind that its effect, while beneficial in many respects, is nonetheless likely to encourage—if that is the right word—companies to abandon final salary schemes to avoid the levy or certainly not to encourage any company from setting up a final salary scheme, given that the company would then become liable to the levy. So, the burden of the levy, its timing and its nature are crucial to the
 
4 Nov 2004 : Column 484
 
whole scheme. The greater the extent to which the levy is more onerous than it ought to be or the longer it is in an unsatisfactory state, the greater will be the deterrents to which I just referred. Therefore, it is important that the House should get the thing right.

We consider the issue against the background of what can only be described as the tragic decline in the number of final salary schemes. It is due to factors including the fact that people live longer and what one might call the scandalous changes that the Chancellor of the Exchequer has made in advance corporation tax. A heavy burden has been imposed on companies as a result of those and other changes, combined with the fall in the stock market, the lowering of annuity rates, and so on. The Bill is necessary to deal with companies that have decided, one way or another, that their schemes cannot continue to function.

I turn to the specific question of the levy. The first amendment is concerned with timing. Others are concerned with the nature of the levy with regard to the extent that it should be risk-based, and so on. In Clause 172, the Government seek to set out the provisions with regard to the initial levy. That levy will be on a flat-rate basis. It will not take account either of the standing or solvency of the company whose scheme we are considering or the extent to which the scheme is underfunded. In that period, the levy will be on a flat-rate basis. We strongly believe that the scheme should be changed to a risk basis. In some ways, we would like it to start off on a risk basis.

There are considerations with regard to assessing the risk, but we do not accept some of the arguments that have been put forward that assessing the solvency of a company can be done using the available information on a broad-brush basis. Initially, it must be a broad-brush basis.

Secondly, we do not accept the argument that the question of the solvency of the scheme, and so on, is determined by the fact that pension schemes normally have a triennial valuation. I have been through that process. Not infrequently, companies will have an interim evaluation, not of every comma and dot but sufficient to enable a reasonable assessment of the position of the scheme.

The Bill says that the initial period will begin,

We do not know how long it will be before that happens, although we hope that it will happen as soon as possible. The clause then says that the period will end on,

We suggest that the date should be 12 months after the date when the regulations begin the initial period. It is a tightening of the timescale, but we believe that it is appropriate for all the reasons that I mentioned.

Once the Bill becomes law, we must get on with the matter and ensure that we move to a risk basis and away from a flat-rate basis at the earliest possible moment. I beg to move.
 
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2.45 p.m.


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