Clause 27 — Requirement to wind up scheme in specified circumstances

Part of Nature – in the House of Commons am 12:55 pm ar 24 Chwefror 2015.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 12:55, 24 Chwefror 2015

I believe that the Bill is in a better state as a result of the two groups of Lords amendments that we shall discuss today. Many of them are Government amendments, designed to tidy things up or deal with errors, and some reflect their lordships’ desire for the affirmative procedure to be used in the case of certain statutory instruments. The amendments are largely technical, but I shall of course be happy to deal with them in more detail if the House wishes me to do so.

Lords amendments 1 to 9, 49, and 59 to 65 deal with defined ambition and collectives. The Bill contains key reforms to private pensions; encouraging and enabling “defined ambition” or “shared risk” pension schemes and “collective benefits”. In the following amendments, their lordships sought to refine or build on the legislation since it had left the Commons.

Lords amendments 1, 2, 3 and 6 introduce minor changes to ensure drafting consistency. Clause 27 provides for regulations to require a scheme providing collective benefits to wind up the whole or part of the scheme, while clause 37 provides for regulations to impose a duty on managers of non-trust-based schemes to act in the best interests of the members when making certain decisions. Both clauses refer to different types of obligation that may apply in relation to the scheme, including those that are part of the scheme—that is, provisions of the scheme—and those contained in legislation that applies to the scheme. The amendments provide for descriptive consistency in the clauses in relation to those different types of obligation.

Lords amendments 4 and 5 clarify “publication of documents” provisions. Powers in part 2 of the Bill may require trustees or managers of schemes providing collective benefits to have policies in relation to a number of matters, including the factors used to calculate member benefits, the calculation of transfer values, and steps to deal with a deficit or surplus in relation to the target. Clause 32 allows regulations made under part 2, which require trustees or managers to prepare or obtain any document, to include requirements relating to the publication of those documents and the sending of copies to a specified person. Specified persons could include members and regulators.

The publication of various policies is a key feature of the regime that we are seeking to introduce in order to ensure that it is clear how members’ assets and benefits will be managed or calculated by the scheme. It ensures that there will be transparency in regard to the way in which how collective benefit assets are treated in certain circumstances, because there is a less direct relationship than there is in a money purchase benefit when it comes to a member’s entitlement in relation to contributions. We also have regulation-making powers to make certain requirements in relation to the policy. An amendment was required to put it beyond doubt that the provisions of clause 32 also apply to the policies specifically. The amendment ensures there is no possibility of a scheme’s “having” a policy that we cannot require to be published or sent to a specified person.

Lords amendment 7 puts the meaning of the amendment made by clause 45 beyond doubt. The change to section 67A of the Pensions Act in the clause makes any modification to an occupational pension scheme that would replace a member’s accrued rights with a right to a collective benefit a “protected modification”. Protected modifications can be made only if the member consents. Lords amendment 7 makes it clear that the provision applies only when the existing accrued right is not a right to a collective benefit.

Lords amendments 8, 9, 59, 60 address an omission in the current legislation. While the changes made by the Bill were being checked, omissions in the Pensions Act 2014 came to light. The amendments that were needed all relate to overriding legislation. When legislation overrides conflicting provision in the scheme rules, there are circumstances in which that legislation needs to be treated as if it were part of the scheme rules. The amendments ensure that overriding requirements made under regulations provided for by schedules 17 and 18 to the Pensions Act will be treated as part of the scheme rules for the purposes of the Pensions Act 2004, in the case of Lords amendments 64 and 65, and subsisting rights provisions in the 1995 Act, in the case of Lords amendments 8 and 9. The amendments provide for consistency and clarity in the way in which the overriding provisions are dealt with.

Amendment 49 changes the parliamentary procedure that applies to certain regulations under part 2 of the Bill. Part 2 defines the concept of collective benefits and makes provision for regulation-making powers in relation to them. Regulations made under clause 8(3)(b) and clauses 9 to 11 and 21 determine important aspects of the arrangements for “collective benefits”. These powers cover matters such as the exclusion of benefits from the definition of collective benefits, the setting of targets in relation to benefits, the factors to be used in the determination of benefits, and the policy for dealing with a deficit and surplus in relation to the target.

The effect of amendment 49 is that the regulation-making powers in clause 8(3)(b) and clauses 9 to 11 and 21 will be subject to the affirmative procedure the first time they are used, and will be subject to the negative procedure for subsequent uses. This amendment relates to recommendations made by the Delegated Powers and Regulatory Reform Committee about the powers for how collective benefits are defined, and how schemes that provide those benefits will operate.

Amendment 61 makes a minor correction, replacing a stray reference to “hybrid schemes” that was missed when the Bill was introduced, while amendments 62 to 65 amend the amendments to section 99 of the Pensions Act 2008. Section 99 lists the definitions used. Currently two separate provisions in paragraph 50 of schedule 2 relate to the definition of “defined benefits scheme”. One adds a new definition drawn from part 1 of this Bill; the other is intended to remove the existing definition. Lords Amendments 62, 64 and 65 replace two provisions with a single provision that substitutes the old definition with the new one. Lords amendment 63 also adds a definition of “collective benefit” to section 99.

Amendments 44 and 56 relate to public service pension schemes. New information suggests the pension schemes for the Secret Intelligence Service and the Security Service were misclassified when the Public Service Pensions Act 2013 was originally drafted. When the Act was drafted it was thought that agencies schemes were “public body schemes”, which must close and reform by 2018. The agencies have since been working to reform by April 2016, but we now believe the agencies may be “existing schemes” as defined in the Act. This would mean they have to close and put in place a new scheme by 1 April 2015, like the other main schemes such as for teachers. At this late stage it is not possible to put a new scheme in place by 2015. Without the amendment, the agencies’ staff could be left without lawful pension provision after 2015. Amendment 44 introduces a new clause after clause 77 that prevents this by ensuring the agencies schemes are not included as “existing schemes” in the Act. It ensures reform of the agencies schemes can proceed to the expected timetable of 2016. Amendment 56 to clause 84 enables the new clause to come into force on Royal Assent.

Amendments 57 and 58 provide general amendments to part 6 of the Bill, to include reference to the Bill in the definition of “pensions legislation” in the Pensions Act 2004, and they come into force from 6 April 2015.

Amendment 117 relates to pension schemes for fee-paid judges. This amendment is required to fulfil the recommendation of the Delegated Powers and Regulatory Reform Committee report proposal that regulations made under the new section 18A of the Judicial Pensions and Retirements Act 1993 should be subject to the affirmative resolution procedure.

These amendments are welcome, and as far as I can see are largely technical, and I commend them to the House.