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Lord Skelmersdale: My Lords, well, perhaps the chestnut was not quite as old as I suggested. I found
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that explanation somewhat easier to understand than the Minister's original explanation. She certainly did not make it clear to me then—whether I was listening comprehensively, and have read since in the alternative sense of the word, I do not know. But she has now said that the aim of the amendment is already achieved under Section 111A of the 1993 Act. On that basis, I am totally satisfied and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 271 [Resolution of disputes]:
Baroness Turner of Camden moved Amendment No. 253:
"( ) Where an application for the resolution of a pension dispute is made in accordance with the dispute resolution arrangements, the trustees or managers must—
(a) take the decision required on the matters in dispute within a reasonable period of the receipt of the application by them,
(b) notify the applicant of the decision within a reasonable period of its having been taken, and
(c) notify the applicant that the Pensions Advisory Service is available to assist in connection with any difficulty which remains unresolved and the address at which it may be contacted."
The noble Baroness said: My Lords, I start by declaring my interest. For many years, I have been a member of the board of OPAS, the Occupational Pensions Advisory Service—the "Pensions Advisory Service" referred to in the amendment.
OPAS is an unusual and, in my view, thoroughly praiseworthy service. It was founded years ago by a retired civil servant (who, when I knew her, was secretary to the Occupational Pensions Board) and her partner, who was the pensions adviser to BALPA, the airline pilots' association. The idea was that people who were, or had recently been, professionals in the pensions industry should be recruited on a nationwide basis to provide advice to individuals with pension problems and to do so for free.
Over the years, a network of advisers was established from professionally qualified people who wanted to give something back to the community. The service gradually attained prominence. A small full-time administrative staff was appointed; it attained acceptability by successive governments; and funding for its administrative centre was secured. That was provided, first, by the Occupational Pensions Board and later by OPRA. The Government will continue the funding under the new arrangements—not via the regulator but directly from the DWP, which has promised to maintain the independent role so valued by the service.
It is acknowledged that the service is a very good one, that it is professionally administered and that the advice, which, as I said, is free, is of considerable help to many people. It also acts as a sifting mechanism for the ombudsman service. The Minister has assured me that the Government continue to value what is done.
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The service recently celebrated its 21st birthday. It has 525 advisers nationwide. It runs a telephone helpline at its Belgrave Road offices and, in the past year, the number of calls totalled 52,000. It also now advises on stakeholder and state pension problems, and so it has dropped "Occupational" from its title and will now simply call itself the Pensions Advisory Service. It has done a remarkable job in recruiting professionally qualified people, who give their services to others free. We simply pay expenses.
At the last board meeting that I attended, other board members wanted to have the organisation named in the new Bill. In view of what the Minister has already told me, it seemed a good idea to set out in an amendment precisely what is done and to notify applicants of the way in which the Pensions Advisory Service can be contacted. I hope that the amendment will be sympathetically received. I beg to move.
Lord Hoyle: My Lords, I support my noble friend. She has outlined in great detail the quality of the work done by the Pensions Advisory Service, and I shall not go over that again. It is very important that that work continues and this is one way of bringing it to people's attention. Therefore, I agree with my noble friend and hope that the amendment receives sympathetic consideration from the Minister.
Baroness Hollis of Heigham: My Lords, I shall be very brief. I join my noble friend in paying tribute to the Pensions Advisory Service. The service is available for any scheme member to use at any point. However, we accept that it is important to remind members of the Pensions Advisory Service when they are going through a dispute. Therefore, we make it clear in regulations that trustees and managers are required to notify applicants that the Pensions Advisory Service is available to advise and help with any disputes. I hope that, with that assurance, my noble friend will feel able to withdraw her amendment.
Baroness Turner of Camden: My Lords, I am sad that it is not accepted that my proposal should be included in the Bill because I think that it would have been useful to have done so. However, I do not intend to press the matter at present and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 276 [Annual increase in rate of certain occupational pensions]:
Baroness Turner of Camden moved Amendment No. 254:
The noble Baroness said: My Lords, in moving Amendment No. 254, I could speak also to Amendments Nos. 255 and 256 because the issue that I wish to raise is the same in all three. This matter was raised and discussed to some degree in Committee. At that stage, I notified my intention to raise it on Report because I was not happy with the response received.
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Under present law, all benefits earned after April 1997 must be increased at a minimum by the lower rate of inflation or 5 per cent a year when they come into payment. The Bill will reduce the figure of 5 per cent to 2.5 per cent. In DB schemes, I gather that it will take effect only where there is a change in the rule to take advantage of it. This has been justified as being a suitable response to lower inflation, offering a saving to employers, and it would appear to be compensation for the cost arising from the PPF levy.
The issue was debated in Committee but we failed to convince the Minister that what we were saying was fair and reasonable. The amendment seeks to maintain the status quo. In principle, it is desirable that pensions should hold their value over what can be a long period of retirement. Women, who tend to live longer than men, will suffer potentially disproportionately if this change goes through.
There is absolutely no guarantee that inflation will remain at its present low level, although we all hope that it does. It has been said that the proposal to reduce the inflation guarantee will help employers in the industry who are wary of the present proposed levy, but why should older pensioners have their pensions threatened with a fall in value in order to meet these concerns? I said in Committee that I could not accept the reasoning behind the Government's opposition to the proposal to retain the 5 per cent cap and I am therefore returning to the argument on Report. I beg to move.
Lord Hoyle: My Lords, I support my noble friend's amendment. It is important that consideration is given to the status quo because inflation may not stay where it is. We all hope that it will remain low, and in that our Government have been highly successful, but who knows what will happen in the future? This is an attempt to protect pensioners and we ask only that the status quo be maintained. I hope that the amendment receives favourable consideration.
Lord Higgins: My Lords, during the course of the Bill, I have been astonished by the number of avid readers of Hansard who appear to be interested in our debates. The same cannot always be said of the press. However, given the amendment moved by the noble Baroness, Lady Turner, I should clarify my position.
In Committee, I argued strongly with the noble Baroness that the Government's proposals, as part of their "package" for getting those in the industry to agree to the Bill, were that the rate of indexation for inflation protection, which turns up here and in other parts of the Bill, should be reduced from 5 per cent to 2.5 per cent. My argument was that the trouble with the deal was that those who would gain from the Bill were not those who would suffer if inflation took off and they were protected only to the extent of 2.5 per cent rather than 5 per cent. That argument is still valid.
However, I have since examined the issue in greater depth and the problem is that it is part of a package. The Pickering report strongly argues that in any event there is a case for reducing the rate from 5 to 2.5 per
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cent, but the fact that it is mixed up in this Bill is, to say the least, confusing. However, his arguments are strong in one respect.
I share the views of the noble Lord, Lord Hoyle, on future inflation. The Chancellor is borrowing enormous sums of money and one of two things will happen. He either funds the borrowing fully, which can be done only at significantly higher interest rates, or he does not. In that case, the money supply—an unfashionable subject—increases and so does inflation. We are potentially in a dangerous inflationary situation or one in which interest rates rise very fast.
Against that background, it is worrying, but I also carried out further consultations and the argument from some in the industry was that the potential cost of this amendment to schemes, certainly if inflation takes off, could be very great indeed—perhaps even greater than the levy. I have received some representations saying that. Consequently, there is a real problem here as regards the burdens imposed on pension schemes and the balance between them.
As the noble Baroness has raised this amendment, I thought it right to make my own position clear. On balance, I am persuaded that it is right to go to 2.5despite the fact that that may have very serious effects on pensioners. On the other hand, there is advantage in the scheme. The unfortunate point is that the Government have not presented this argument on its merits, but have mixed it up in a package which implies some sort of deal. As I say, I thought it right to make my own position clear. I am persuaded, contrary to some of my own arguments in Committee, that probably this is not the right amendment to accept. I thought an explanation was due from me, lest those who read the first debate wondered why on earth I was silent now.
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