I am coming to that. I understand that the hon. Gentleman wants to know the evidence base, and I will come to it in detail in a moment. I wanted to reassure him on the broader context. One thing on which we all agree is that good quality occupational pension provision has to be encouraged. Traditionally, in our country, such provision has tended to be made up of defined-benefit, often final salary, schemes. However, due to a combination of factors such as high life expectancy and lower investment returns, the cost to sponsoring employers of running defined-benefit schemes has increased significantly over recent years. Mainly as a result of these cost pressures, we have seen a decline in the number of schemes which are open to current and new employees.

While the Government have no power to control many of the underlying cost factors, what we can do is review legislation which affects occupational pension schemes, and seek wherever possible to minimise the cost burdens arising from such provision. If a member leaves an occupational scheme before reaching pensionable age, the pension rights which have been left behind in the scheme—the deferred rights—can be undermined by inflation if no revaluation increases are provided by the scheme over the period of deferral. That is why schemes are required to award a minimum level of  revaluation on such rights. When in the 1980s the statutory revaluation requirement was introduced for deferred pensions, it was recognised that it would be counter-productive and wrong to impose a potentially unlimited cost burden on schemes.

The balance of member protection and scheme affordability was set by requiring schemes to revalue deferred pension rights by the rate of inflation over the period of deferral, or by 5 per cent. per annum, whichever is less. When the 5 per cent. cap was set, inflation was running at a significantly higher level than it is now. In fact, over the previous five years, it had averaged almost 9 per cent. In other words, the balance was struck such that there was no expectation that schemes would have to protect deferred pensions fully against inflation. Due, however, to the sustained reduction in inflation in recent years, that is now the effect of the 5 per cent. cap. The similar cap which applies to the limited price indexation requirement on pensions in payment has already been reduced to 2.5 per cent. per annum, and bringing the revaluation cap into line with this figure was one of the proposals considered as part of the recent deregulatory review of private pensions. We think that it is sensible to include this reform in a package of measures to help employers to continue to provide occupational pension schemes for their work forces.

In judging that a reduction in the revaluation cap is now appropriate, the Government are clear that pension rights that have already accrued—this point was made by the hon. Member for Eastbourne—should not in any be affected by the introduction of the lower 2.5 per cent. cap. We have drafted the legislation carefully to make sure that that is absolutely clear.

The Committee will have noted that schedule 2 makes equivalent changes to the provisions of the Pension Protection Fund, so that the shape of PPF compensation continues to reflect the statutory requirements of the pension scheme. It would be perverse for a compensation scheme to offer better benefits than those that a person would have expected from their own pension scheme.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey asked for specific evidence. Let me share with him the extent of support for this measure, the endorsements that it has received and the reasons why it has been endorsed. For example, this clause is specifically endorsed by the National Association of Pension Funds, the Association of British Insurers, the Engineering Employers Federation and the Co-op Group.

In endorsing the clause, the EEF said that the reduction in the cap would

“make it more likely that those schemes that have been closed to new members will decide to remain open for future accruals to existing members”.

I think that the hon. Member for Inverness, Nairn, Badenoch and Strathspey would like to see that happen and there is evidence, from those in the field, that that would be the effect.

The CBI also gave us a little more insight in this area. If the hon. Member for Inverness, Nairn, Badenoch and Strathspey does not mind, I will share with him the full extent of their support for the measure, because what the CBI said is interesting in the context of the way that the hon. Gentleman spoke. The CBI told us:

“Firms have faced an escalating burden of cost in running DB schemes over the past decade, resulting from longer lives and higher regulatory costs. Where appropriate, it is right to reduce these burdens to improve scheme health. The proposals to amend the limited price indexation (LPI) cap to 2.5% for deferred members...is therefore welcome. As this is a forward-looking measure, scheme members will know from the outset what rate of revaluation their savings will have and will not be “unfairly” re-valued. Reduction to 2.5% is also appropriate to delivering the original intention of the legislation - limited price indexation - in the current the economic climate.”

I hope that the hon. Member for Inverness, Nairn, Badenoch and Strathspey will accept those arguments. This is a measure that reflects today’s lower inflation environment and it is part of a package of wider deregulatory measures. We hope and believe that it will help employers to maintain defined benefit occupational pension provision into the future. Therefore, I hope that the hon. Gentleman will support this clause.