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There will be other issues, such as those relating to divorce. When one partner wishes to transition with a gender recognition certificate, the couple cannot legally

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remain married. They must divorce and become civil partners. That could create winners and losers. The noble Lord, Lord Boswell, is right to say that what he aspires to achieve in the amendment should not be done in a way that is detrimental to the entitlement of anyone affected. I commend the noble Lord for addressing the sense of unfairness to a small group of individuals, and I join him in urging the Minister to address it.

Lord Freud: My Lords, the amendment seeks to provide a remedy for a group of older transsexual people who have missed out on full state pension rights because the Gender Recognition Act does not allow for retrospective legal recognition of a person's acquired gender. This is a very complicated area, as my noble friend Lord Boswell pointed out. He spared us some of the detail when he introduced the amendment, but I should take a little time to outline the issue and give him the up-to-date information on the current position.

A transsexual person is someone who desires to live their life permanently in the opposite sex to that which they were assigned at birth; although "assigned" might be the wrong word. This desire often stems from a medical condition called gender dysphoria. The Gender Recognition Act, effective from April 2005, allows transsexual people, through the granting of certificates, to gain recognition of their acquired gender for all legal purposes. It covers only people who have suffered from gender dysphoria.

It is a general principle of our legal system that the laws relating to legal status should have only prospective effect. This ensures legal certainty and clarity. There was no reason to depart from this principle when the Gender Recognition Act was introduced, as my noble friend will be fully aware. Although the Act established future rights, a question remained over the past.

The position on the equal treatment rights of transsexual people for periods before 2005 was tested in the domestic and European courts. In 2006, the European Court of Justice held that it was discriminatory not to have had a means of recognising a person's acquired gender, for social security purposes, prior to the introduction of the Gender Recognition Act. However, importantly, the court left it up to the UK Government to set the conditions for granting equal treatment for periods prior to the introduction of the Gender Recognition Act in 2005. The European Court clearly considered that it provided adequate cover for periods after that date.

Perhaps I may give my noble friend more up-to-date figures than those he might have. Records held by HMRC suggest that around 750 people in the UK are likely to gain from the European Court ruling, compared with the figure of 50 that he imagined. Under that ruling, where a person is successful in their equal treatment claim, we would need to make increased state payments on the basis that they had foregone all entitlement from the age of 60 or the date of surgery, if that was later. The costs of making such payments would amount to somewhere between £9 million and £38 million over the lifetime of the award. One can recognise the level of uncertainty surrounding that wide spread.

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7 pm

That is by no means the end of the story. Since the European Court ruling, we have had a series of decisions in domestic courts intended to clarify what will be acceptable conditions for establishing legal recognition of a person's acquired gender in respect of past periods. I accept that the constantly shifting legal position has not been helpful to those affected by the Court's decisions-nor, I might add, has it been helpful to the department. I am sympathetic to the spirit of my noble friend Lord Boswell's amendment here.

Amendment 56 would cover equal treatment for periods both before and after the introduction of the Gender Recognition Act. The intention, as I understand it, is that it would apply to someone on condition, first, that they had been living in their acquired gender in the two years before April 2005; or, secondly, that they had obtained a full gender recognition certificate in the two years after that date. However, under the terms of the Gender Recognition Act, a person must end any pre-existing marriage before they can be granted a full gender recognition certificate. As a result, the marital status of those who met the first condition would have no bearing on their equal treatment rights, but a marriage bar would be applied to those able to fulfil only the second condition.

Amendment 56 would therefore go further than is required to provide equal treatment rights in respect of periods prior to the Gender Recognition Act coming into force. My noble friend's amendment would capture all those who met either of the two conditions contained in it, with no regard given to the age at which such a person had transitioned. Those who transitioned later in life-say at age 70-would be eligible for arrears in state pension for ages 60 to 65, even though they had been living in their birth gender at the time. By "transitioned" I mean the point in time from which a person can be said to have met the minimum conditions required to gain equal treatment rights. In terms of my noble friend Lord Boswell's amendment, this would be where they had been living in their acquired gender for two years prior to the introduction of the Gender Recognition Act, or where they obtained a full gender recognition certificate within two years of the introduction of the Act.

However, there are good reasons why retrospective legislation is to be embarked on with great caution, and only in exceptional circumstances. It inevitably results in the complicated business of attempting to reconstruct past entitlements based on the historic circumstances of potential beneficiaries. In attempting to legislate for the past, my noble friend has encountered the same conundrum faced by us all, as he admitted in his fascinating opening speech: where does one draw the starting line? Amendment 56 would not cover all those too old to benefit from the introduction of the Gender Recognition Act. Those who started their transition after April 2003 and those who, for whatever reason, obtained a full gender recognition certificate after 2007, fall outside its scope.

I fear that there is no perfect solution to be found. My noble friend suggested that in his remarks. Wherever one draws the line-this is implicit in setting conditions-there will always be those who fall on the wrong side

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of it. My noble friend has created a solution for one group, but at the cost of creating another group who would not see their expectations met. So, although, as I said, I sympathise with the intention behind my noble friend's amendment, I fear that it overlooks the fact that other, equally deserving groups can be identified who have missed out as a result of rule changes. That is the nature of the thin end of the wedge that he warned about, and the nature of policy evolution. For example, many women now in their 70s and 80s draw only the small married women's pension because they were too old to benefit from the various pension reforms since the 1970s that were designed to improve women's pension outcomes by, for example, providing cover for periods spent out of the labour market raising children. Had they been younger, they would be enjoying a significantly higher pension entitlement-double or more.

In my view, Amendment 56 is unnecessary. The European Court ruling provides a remedy for those who meet domestic conditions that have been set by the Court of Appeal. To go further than what is required of us under European law, as my noble friend's amendment does, would in effect gold-plate the European Court's ruling. In order to meet our obligations under European law, the department is setting up a specialist team to determine equal treatment claims in line with the Court of Appeal ruling.

I know that one of my noble friend's purposes in raising this issue was to get a full update on the current situation, and I hope that I have provided that, as well as some encouragement that many transsexuals in this position will see an improvement as a result of this process. As a result of the efforts of the team that we are assembling to sort out the matter, I therefore urge my noble friend to withdraw his amendment.

Lord Boswell of Aynho: My Lords, I am grateful to the Minister for his response, the detail that he has been able to bring to the current situation, his explanation of some of the difficulties that go even further than those that I had anticipated or scoped, and his sensitivity in dealing with the matter. I do not think that anyone would have expected a knock-down, one-off answer today, but we have had some encouragement on the commitment to having a specialist team to deal with the issue of equal treatment. I give a personal commitment to provide any assistance that the Minister might want on this, because I am happy to continue my interest in this area in any way that would be useful to a resolution. None of us wants serial legislation to clear up each case. It would be better to get an agreed understanding, and the Minister has perhaps given us the basis for that. I am grateful to him and I beg leave to withdraw the amendment.

Amendment 56 withdrawn.

Amendment 57

Moved by Lord Boswell of Aynho

57: After Clause 26, insert the following new Clause-

"Objectives of the Pensions Regulator

(1) Section 5 of the Pensions Act 2004 (regulator's objectives) is amended as follows.

(2) At the end of subsection (1), insert-

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"(e) to promote the provision of good pensions and to ensure their health and longevity.""

Lord Boswell of Aynho: My Lords, I will be even briefer on this amendment, having regard to the hour and the common wish to finish.

This amendment arose as the result of an approach that I received from the National Association of Pension Funds. The intention of the new clause would be to put what I might call a forward gear into the work of the Pensions Regulator. As I have explained to the Committee in the past, I have quite a lot of people in my family with a background in education. My wife for one would always say, "Emphasise the positive, don't go around looking at the negative". That is a good maxim for this Committee.

At the moment, as the NAPF reasonably reminds us, the Pensions Regulator has three basic statutory objectives, all of which are, at least to some extent, slightly passive, although I do not mean that they are improper: first, to protect the benefits of members of work-based pension schemes, which is hugely important; secondly, to promote the good administration of work-based pension schemes, which is also important, although administration is something that serves rather than being the main driver of the event; and, thirdly, to reduce the risk of situations arising that might lead to claims for compensation from the Pension Protection Fund. At the moment there is an interest in preventing that getting out of hand; we have discussed the levy and the burden on pension funds and, indirectly, on contributors of all kinds. No one is arguing that those objectives are wrong, but the NAPF's concern, which I warm to, is that the last obligation-trying to avoid benefit run-off-is beginning to dominate the regulator's activities. The overall work of the regulator is insufficiently focused on the continuation of good-quality workplace pensions. It is in the interests of the NAPF and of everyone across the Committee that that should be sustained.

What is proposed here is a simple provision that would give us a positive forward gear to promote the provision of good pensions and to ensure their health and longevity. Nobody here would dissent from that. Arguably, large parts of the Bill, particularly in relation to the NEST scheme, are focused on it, and it would be helpful to have the Minister's response in due course. He will recognise a probing amendment when he sees one. I am not committed to the exact wording, nor to the vehicle involved: but I hope that somehow we will be able to signal that the focus should be on supporting, sustaining and maintaining the positive, rather than on simply cleaning up the mess where things go wrong.

I will take one final shot. Perhaps the Minister would report on any elements of deregulation or decluttering of the business obligation that he has undertaken within the spirit of BIS's one-in, one-out approach. That would be helpful. I beg to move.

Lord McKenzie of Luton: My Lords, I will be brief. I understand the thrust of the amendment. However, I have some concerns, mainly over the wording. To place on the regulator an objective to ensure the health

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and longevity of good pensions is stretching a point. The regulator is focused on workplace pensions. As written, "pensions" could range over a raft of different situations, including contract-based ones as well as DB ones.

From my experience, I challenge the assertion that the regulator is overly focused on protecting the PPF. Perhaps it is easy to forget the circumstances of 2004, when DB schemes were dropping out of the system like flies. The regulator's role then made a real difference. I recall also that over the past 18 months to two years there have been constant challenges to the regulator on the grounds that requirements under recovery plans were too severe. The regulator responded in a very effective way, being clear about what flexibility there was in the system but also recognising that what was important to DB schemes was the employer covenant. Unlike insurance-based contractor arrangements, these entities are capitalised and support the provision of annuities or whatever else through that structure. For DB schemes, it is the undertaking of the employer and sponsor that is the driver. Therefore, the regulator's role in holding them to account is good.

No one would object to anyone's role in promoting the provision of good pensions. However, in this case I would not impose the obligation to ensure their health and longevity, because these will depend on a whole raft of things, not least the commercial situation of the sponsor and what their future may be. The regulator has played an important role, and I will be interested to hear if the Minister has any proposals to change their current remit and focus.

Lord Freud:My Lords, we have reached the last amendment in Committee on the Pensions Bill with a little nostalgia-and perhaps with relief for some. I will deal with my noble friend Lord Boswell's amendment on the objectives of the Pensions Regulator, and will start by providing some background. Many noble Lords will be aware that Parliament legislated, through the Pensions Act 2004, to establish an independent, risk-based Pensions Regulator whose job was to regulate work-based pension schemes based in the UK. The Act gave the Pensions Regulator his main statutory objectives. These include protecting the benefits of members of work-based pension schemes and limiting calls on the Pension Protection Fund. Noble Lords may be interested to know that, in its 2007 report on the Pensions Regulator's progress in establishing a regulatory approach, the National Audit Office found that the objectives provided a sound framework for pensions regulation.

Some of us may also be aware that the NAPF, in its 2010 report Vision for Pensions, recommended that the regulator's activities should be reoriented. They proposed that this should be done by giving the regulator a new objective, to promote good pension provision and to ensure their health and longevity. My noble friend is well aware of the interests of the NAPF in this area, given the nature of this amendment.

7.15 pm

This Government are committed to the provision of good pensions; indeed, there is a coalition agreement to simplify rules and regulations, to help reinvigorate

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private sector pension schemes. Our pension reforms will increase the numbers of people saving in workplace pensions. The implementation of NEST, a policy that we have in common with the last Government, will mean that all employers and the self-employed have access to a suitable, low-cost pension scheme. The Government are also pursuing a range of activities, working closely with the NAPF, the CBI and our other stakeholders, to ensure that the regulatory regime around pensions provision is fit for a post-automatic-enrolment world.

While we share the aims of what this amendment is trying to achieve, the Government are already pursuing a programme of work to support and encourage good pension provision. This amendment would significantly change the role of the regulator by giving it a broader public policy role that is different from its regulatory responsibilities. The real question here is whether the regulator is the right body to do that, or should this improvement happen elsewhere?

It is not clear how an expanded objective like this might change the way in which the regulator performs its current role. If the regulator had this sixth objective, it would add to the level of complexity required in its approach to the use of its powers, such as scheme funding, without necessarily improving the health of schemes. My view is that that would be an undesirable distraction. Under the current legislation, decisions to exercise powers require the regulator to balance its objectives with the need to act reasonably, given its status as a public authority. In addition, the regulator promotes the good administration of pension schemes. This means that the regulator already has to have regard to considerations such as the health of the scheme when making decisions. This amendment would complicate regulatory activity and is therefore unnecessary.

As the law stands, the regulator is not only bound by public law standards of reasonableness when making decisions but must take into account particular factors specified by Parliament when considering using such powers. The review of the Pensions Regulator that the Better Regulation Executive and the National Audit Office conducted in 2009 concluded that:

"It has been highly responsive in reacting to changing economic circumstances, and in considering the specific circumstances of particular pension schemes when reaching regulatory decisions".

That is a point that the noble Lord, Lord McKenzie, has just made. The regulator has made clear that funding should be based on prudent assumptions, while emphasising the principles of reasonable affordability and flexibility in agreeing deficit recovery plans. That is the balance that the regulator needs to strike in order to best secure scheme members benefits for the long term, and to enable employers to play their part in the economic recovery.

There is no priority ranking in the regulator's objectives. The regulator must balance its objective to protect the Pension Protection Fund with its objective to protect members' benefits and, indeed, the other objectives. However, it is in no one's interests for defined benefit schemes to be poorly funded-certainly not for members, and not for the Pension Protection Fund or those responsible for paying the pension protection levy.

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My noble friend asked me to update the Committee on what simplified rules there may be to help business in this process. The Government have been working with the CBI and others to see whether there is scope for further flexibility in legislation to make it easier for companies to restructure, while protecting members' pensions. Our aim is that any new regulations in this area would come into effect in October 2011.

The Government have made a clear commitment to, and have a comprehensive plan of action for, reinvigorating private pension saving. I hope that I have provided my noble friend with sufficient reassurance on this and have sufficiently illustrated the potential problems of the proposed amendment-in their direction, if not in their exact composition. I beg my noble friend to withdraw it.

Lord Boswell of Aynho: I am grateful to my noble friend for the way in which he has answered this question. I have been around for a year or two and have seen a ministerial brief or two. I am not entirely surprised, although mildly disappointed, at the nature of his comments. We understand the difficulties, including the substantive one of confusing people or in any way

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removing the focus on the important background work of securing a properly funded and safe pensions industry. I am glad on his behalf that the Minister has assumed for himself the role of the forward gear, because he is the best possible bully pulpit for all this. The essence of this should be collaboration and discussion between representatives of the industry, employers, staff and the department to facilitate a good outcome.

In conclusion, this has been the first Committee that I have attended in this place. I am grateful to my noble friend for his responses, but in the same breath I apply that gratitude to noble Lords opposite, including the noble Lord, Lord McKenzie of Luton, and others. I have found this procedure enlightening and positive, and on the whole it has done some good. I am grateful specifically for my noble friend's response, and beg leave to withdraw the amendment.

Amendment 57 withdrawn.

Clauses 27 to 29 agreed.

Bill reported with amendments.

Committee adjourned at 7.22 pm.

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