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2 Feb 2009 : Column 542
48: Clause 58, page 29, line 42, at end insert—
“(8) A requirement under subsection (6) or (7) is to be complied with only in so far as is compatible with—
(a) pursuit of the special resolution objectives, and
(b) compliance with the code of practice under section 5.”
49: Clause 71, page 37, line 13, at end insert—
“( ) An order or instrument may not modify the accrued pension rights of any member of a pension scheme.”
Baroness Noakes: My Lords, the amendment adds a new subsection to Clause 71, which deals with pensions. The powers in the clause are very widely drawn and in Committee I sought to find out just how wide the powers are. I posed a number of questions to the Minister, such as whether the clause would allow the Treasury to turn a defined benefits scheme into a defined contributions scheme, and whether any changes could be made to accrued rights.
The Minister said that the power was there to allow a pension scheme to be transferred or split up to facilitate a transfer on sale. He said that,
- “this provision would not amend accrued rights. It does not do that and does not create the possibility of doing it, nor have we any intention of doing it”.
That seemed pretty clear. But the Minister continued:
“It applies both to the group position and to individuals”.—[Official Report, 20/1/09; col. 1574.]
It is the position of individuals and their accrued rights which are specifically protected by my Amendment 49.
Clause 71(3) states that an order or instrument may,
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and subsection (4) states that:
“Provision by virtue of this section may (but need not) alter the terms of a pension scheme”.
Members’ rights in a pension scheme are contained in the terms of the scheme. Members’ rights are the liabilities of a pension scheme. I do not know how the Government could have drafted a power to interfere in those rights more clearly if they had wanted to. The Minister has said that they did not, but this flies in the face of any ordinary interpretation of the Bill.
I have tabled my amendment to seek further clarification on this. I completely support the clause to the extent that it allows the Treasury to negotiate around the complexities of pension schemes where there are changes of ownership and structure. I can just about cope with the power being used to alter the rights in relation to future accrual, but I am completely opposed to a power to alter the accrued rights of individuals, which is what my amendment would protect and what the clause seems to be aimed at being capable of doing. I beg to move.
Lord Davies of Oldham: My Lords, we debated this issue substantially in Committee and I appreciate the noble Baroness’s concern. This is an important issue. I had hoped that I had allayed that concern with the government response on that occasion, but obviously that is not the case. I made it clear, and the noble Baroness reflected that fairly, that it was not the intention of the authorities to make provision in a transfer instrument or order which had the effect of interfering with—and by this, I mean diminishing—a person’s accrued pension entitlements. At that time the noble Baroness asked why, if this was the intention of the authorities, provision to that effect was not made in the Bill. I understand that she has returned to the issue because I resisted then.
Clause 71 is important. It may be necessary to make provision in a transfer instrument or order in respect of a pension scheme for the purposes of effecting the transfer. For example, if a failing bank is part of a group of companies, then all group employees may participate in the group’s pension scheme. In this situation, if a deposit-taker is transferred from the group, it is likely to be necessary for the employees of the bank to be transferred to a separate pension scheme. The relevant authority may make provision to transfer the employees from the group pension scheme and establish a new scheme, or transfer the employees into the transferee’s pension scheme for all future service benefits.
Provision may be made, therefore, in the transfer instrument or order to enable the transfer of the scheme, or, for example, it may enable creation of a new scheme. This would be the case in normal commercial transactions, such as takeovers or de-mergers. Following this, consequential changes to pension schemes may be necessary. This may include consequential provisions relating to accrued rights. For example, we may need to specify who will continue to fund the scheme following the transfer. Where a partial transfer has been affected, we may need to specify apportionment of the contribution rates to the scheme between the transferor and transferee.
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8 pm
I suspect that the noble Baroness does not intend to wreck all the schemes but that is the Government’s view of the effect of the amendment and it is why we cling so strongly to the clause. It is not intended that Clause 71 will be exercised to reduce accrued rights. I made that very clear in Committee and I am happy to reassert it. There is absolutely no question of using this clause to carry out a raid on people’s pension schemes. That would be counter to the special resolution objectives, and it would infringe convention rights and would therefore be prohibited by this Bill and European legislation.
I shall explain this point further. The authorities must act proportionately in exercising the powers under Part 1 of the Bill. They must balance broader public policy interests with those of private individuals, including individuals’ convention rights. For example, Article 1 of Protocol 1 of the European convention specifies that a person is entitled to the peaceful enjoyment of his possessions, and this includes economic interests such as an entitlement to a pension. This is a qualified right—that is, the authorities may interfere in that right if that interference is lawful and justified in the public interest. However, the authorities will, as in the case of any other exercise of powers under Part 1, only take steps necessary for the purposes of the resolution.
Of course, the authorities will also have regard to the special resolution objectives. Objective 5 provides that the authorities must avoid interfering with property rights in contravention of a convention right. We will have regard to that in considering making provision in respect of a pension scheme.
As such, we do not think that the amendment is necessary or appropriate, but Clause 71 certainly is. The clause gives us the scope to make the consequential amendments to pension schemes that may be necessary. It is also suitably limited by the special resolution objectives and the European convention so that action cannot reasonably be taken to diminish accrued rights. That is why I was so emphatic on this point in Committee.
I hope that the noble Baroness will appreciate that we have examined this matter with the greatest thoroughness. She has raised a very important issue concerning the special resolution procedure, but the Government believe that Clause 71 meets all objectives, including those of ensuring that individuals’ pension rights cannot be diminished. With that assurance, I hope that she will feel able to withdraw her amendment.
Lord Northbrook: My Lords, I have listened carefully to the Minister’s discussion about the need for consequential provisions for accrued rights to be accounted for, but could there not be some wording to the effect that the accrued rights themselves will not be affected? That would cover the contingency that might be needed.
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Lord Davies of Oldham: My Lords, I hear the noble Lord’s further point on that, but he will appreciate how closely we have looked at accrued rights in order to ensure that Clause 71 does what we intend it to do for the special resolution procedure. However, I shall take his point away and look at it further. I recognise the justified anxieties and concerns of all Members of this House, which were particularly expressed by the noble Baroness and other noble Lords in Committee and by the noble Lord, Lord Northbrook, in his comment a few moments ago. I will look at this further, but I hope the noble Lord will appreciate how tested the objectives and guarantees in Clause 71 are.
Baroness Noakes: My Lords, I thank the Minister for setting out the Government’s view of Clause 71 in such detail. I also thank him for agreeing, following the intervention of my noble friend Lord Northbrook, to take the point away and look at it again. I am sure that the Minister is aware that I had no intention of wrecking the clause with the amendment I moved. It was designed to reflect unease that we had not reflected the difference between what we need to do to effect a normal commercial transaction—I completely support the need to do that, as I said in Committee—and giving an ability to change the rights of employees. I am sure there is that possibility in the Bill. Against that, there is the Government’s clear statement of intent, repeated again today. It is important, although such a statement would not have any bearing on the interpretation of the clause if the clause were clear, which it is.
While it is helpful to have the Minister’s statement of intent, I am not sure it affects the legal construction, which is why it would be helpful if the Minister would look to see whether any reassurance to employees with accrued rights or pensioners could be placed in the Bill so that we are not simply having to rely on the interpretation of convention rights. While the convention is an overarching set of rules that apply to everything, it is also helpful to reflect the important issues that arise from convention rights in the legislation we pass in this House, so that we are clear in the way that we approach it. I look to the Minister to see if he can do anything by Third Reading. I beg leave to withdraw the amendment.
Lord Myners: My Lords, the Government’s amendments to Clause 74 respond to the concerns expressed in Committee about the parliamentary scrutiny of secondary legislation. The purpose of Clause 74 is
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The regulations to do this would be made under the draft affirmative procedure, but the clause also contains a power to make orders to amend the list of taxes in relation to which regulations could be made. The Government considered that it was appropriate for the order-making power to be subject to the negative procedure, as there would be an opportunity for full debate, under the affirmative procedure, on the substantive provisions when the regulations were made. However, the Delegated Powers and Regulatory Reform Committee has indicated that, had it been a matter that concerned both Houses, it would have recommended that the affirmative procedure should be used for the order-making power.
The Government take the views of the committee very seriously and, while this is really a matter for another place to consider, we have also reflected further on this matter in the light of the debate in Committee in this House. As a result, we have decided to switch the order-making power to the affirmative procedure. I therefore hope that the noble Baroness, Lady Noakes, will not move Amendment 52.
Baroness Noakes: My Lords, I am delighted that the Minister has adopted my Amendment 53 and has produced his own version of my Amendment 52, which I am pleased to say I shall not press. Rather, I shall support the Government’s amendments. We are pleased that they have implemented the recommendations of the Delegated Powers Committee.
Consideration on Report adjourned.
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