Clause 1 - Conversion of guaranteed minimum pensions

Part of Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill – in a Public Bill Committee am 9:45 am ar 2 Chwefror 2022.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions 9:45, 2 Chwefror 2022

It is a pleasure to serve under your chairmanship, Mr Efford. I thank the hon. Member for Rutherglen and Hamilton West for the hard work she has put in to bring this private Member’s Bill to this stage. Introducing a private Member’s Bill is never easy. It is sometimes arcane and convoluted, but her Bill is genuinely making a fundamental difference to this country and to many of our constituents, and it applies across this country.

As I indicated on Second Reading—colleagues should take it as read that I repeat the entirety of my long speech on Second Reading, albeit I will not do so today—this is a small, discrete but very important piece of legislation and the Government definitely support it. The hon. Member for Rutherglen and Hamilton West outlined the details of the Bill, but I will briefly touch on a couple of key points that I hope will answer some of the points raised by the hon. Member for Reading East.

Clause 1 ensures that occupational pension schemes in England, Wales and Scotland have greater clarity about how to convert GMPs into other scheme benefits, which gives an opportunity to equalise their members’ pensions to correct for the unequal effect of GMPs. Colleagues will understand that Parliament moves quite slowly in some respects, but this problem dates back to 1978 and the last days of the Callaghan Government, so our resolving it is overdue. Clause 2 would achieve the same for occupational pension schemes in Northern Ireland.

Correcting for the unequal effects of GMP is necessary, fair and right. It is important that pension schemes that choose to equalise as part of a conversion exercise are able to do so as easily as possible and are confident that the requirements they are complying with are robust and unambiguous. That is what the Bill delivers.

Clause 1 makes it clear that the conversion legislation can be applied to a person who is a survivor at the time of the conversion and ensures the legislation refers consistently to this group. It also provides the means to set conditions on the survivor benefits provided by the scheme following conversion of a member’s GMP. Those changes are important because survivor benefits provide a crucial source of income to widows, widowers and survivors in civil partnerships. For many people, the knowledge that their surviving spouse or civil partner will receive a portion of their pension is highly reassuring.

Let me be very clear: we will consult on those matters. There will be a full consultation among industry to which, obviously, opposition parties and all parts of industry can make representations; there will then follow regulations, which will be debated in this House.

Clause 1 also makes important changes to the existing legislation requiring the scheme’s sponsoring employers to consent before guaranteed minimum pensions are converted to other scheme benefits. As the hon. Member for Rutherglen and Hamilton West outlined, the current legislation creates difficulties for some schemes—self-evidently so when, with the passage of time, an employer has ceased to exist. That is a significant problem. It will therefore help schemes if the legislation is amended, and we do so very much as a result of representation from schemes. Clause 1 therefore removes the requirement for the employer to consent to GMP conversion, and replaces it with a requirement for each relevant person to consent. That, with respect, is unquestionably the right way forward.

Finally, clause 1 also removes the need for pension schemes to inform HMRC when they carry out a conversion exercise. That is because the new state pension does not contain any kind of provision for contracting out, and HMRC no longer has any use for or interest in this information—indeed, it has been asking schemes not to send it in. The clause is, with respect, an excellent example of the simplification and reduction of needless bureaucracy in action—bureaucracy that otherwise would fall upon scheme members and HMRC, which is funded by taxpayers.

Clause 2 closely mirrors clause 1 to amend the law of Northern Ireland. I am devasted that the hon. Member for Strangford is not here to intervene on me, but I have raised this with him in the past and he is very supportive of the measures. It is certainly the case that these necessary changes should be made in one fell swoop across the United Kingdom. I am pleased to confirm that on 24 January the Northern Ireland Assembly passed a motion to consent to the inclusion of the provisions for Northern Ireland in the Bill.

The Bill is an excellent step towards helping pension schemes to confidently correct for the unequal effects of guaranteed minimum pensions. I suggest that the hon. Member for Rutherglen and Hamilton East has received support for her Bill in this House because it is clearly necessary.

The hon. Member for Reading East raised a number of particular points, and I will write to him with more detail. On gender inequality, he will understand that the Turner commission was set up under the Labour Government by Tony Blair specifically to address fundamental gender inequality. It resulted in the cross-party success story that is automatic enrolment, which has seen female private pensions saving go from approximately 35% in 2012 to well over 80% in 2019-20. The specific provisions on RAS—relief at source—are a matter for the Treasury, which I understand is consulting on and looking at them on an ongoing basis.

I repeat that these matters will all be consulted on in the appropriate way, and that there will be regulations that will be debated by the House in the usual way. It is unquestionably the case that this will be treated like a normal Act of Parliament, with all due representations.

I thank colleagues for the collaborative way in which they have addressed a long-standing problem that is technical but necessary to resolve, and that impacts so many of our constituents up and down the country.

Finally, I was asked whether the Bill means some people will lose money. The specific answer to that is no: no one will see their pension rights reduced when their pension is corrected for the effects of the rules around GMP. Pension schemes will correct for the effects of GMP rules only by increasing people’s pensions to the higher amount.

With that, I thank the hon. Member for Rutherglen and Hamilton West. I look forward to following the Bill through its remaining parliamentary stages in the other place and back in this place.