Pensions Bill
5:30 pm
Baroness Hollis of Heigham (Parliamentary Under-Secretary, Department for Work and Pensions; Labour)
My Lords, I said on Report that I appreciated the intention behind the amendment then brought forward by the noble Lords, Lord Higgins and Lord Skelmersdale. It would make explicit on the face of the Bill that the financial assistance scheme would cover schemes winding up between May 2004 and the start of the PPF. However, I argued that it would not be right to announce a decision now on the inclusion of these schemes before we have had an opportunity to assess their circumstances further, and until moral hazard risks are minimised.
This was and remains a finely balanced judgment. The recent statement on PPF eligibility clarified that schemes sponsored by employers currently involved in insolvency proceedings may under certain circumstances still qualify for PPF compensation—referring back to an earlier debate on Amendment No. 39 and the government amendments grouped under Amendment No. 40—if they do not start to wind up until after the introduction of the PPF. That was why I argued that in our written statement we sought to clarify the situation rather than change the starting points of each of the two schemes.
The statement on the PPF has been made to help trustees make informed decisions, particularly when considering compromise agreements or revised contribution schedules tabled by employers. It provides clarification, for example, that when an employer is in administration and has tabled a one-off compromise agreement, a scheme may receive PPF compensation if the trustees reject that agreement and then do not start wind-up until the PPF is introduced. This is subject to the employer having a further insolvency event after the introduction of the PPF.
This has always been the policy of the PPF, but the recent statement has removed any uncertainty for trustees and employers, in particular the commitment not to use the power in Clause 128(3)(c). We are committed to ensuring that trustees are able to make informed decisions about the future of their pension schemes, particularly in those cases where the sponsoring employers are currently in financial difficulty.
In the light of this, and in the light of the views expressed by noble Lords on Report, we have now taken a decision which I hope will be welcome to the noble Lord, Lord Higgins. It will meet the concerns he raised in Committee, on Report and again today at Third Reading. We have taken the decision that the balance of the argument is now in favour of making the position clearer in respect of schemes which have started to wind up after May 2004 or which will start to wind up between now and the start of the PPF.
As my colleague the Minister of State for Work and Pensions said on Friday, this amendment is,
"good news for hard hit individuals in those schemes that have found themselves in difficulty".
At this point I should like to give a brief description of the technical effect of the government amendment, if that is what the noble Lord, Lord Higgins, would wish. It may help the noble Lord to judge whether we have met his concerns. Amendment No. 68 is an amendment to the definition of a "qualifying pension scheme" under Clause 287. The definition of a "qualifying pension scheme" currently provides, among other things, that such a scheme must have begun winding up during such period "as may be prescribed". Under the amendment, I propose that this part of the definition is changed.
Under the amendment, for a pension scheme to qualify under the financial assistance scheme it must have begun winding up during the prescribed period ending immediately before the day appointed under Clause 127(2). This too requires some explanation. Clause 127(2) provides that a scheme is not eligible for the PPF if it is being wound up immediately before the day appointed by the Secretary of State. The amendment would mean that in order to qualify for the FAS, a scheme must have begun winding up during a prescribed period which ends before this date, which we hope will be in April 2005. Any scheme which begins winding up before that date may be eligible for assistance from the FAS, subject to other FAS eligibility conditions being satisfied. Moreover, any scheme which begins winding up after this date may be eligible for consideration by the PPF. So before the date, consideration by FAS, and after, consideration by the PPF, subject in both cases to the usual rules about eligibility—whether the employers are solvent or insolvent, wind-up capacity and so forth.
To recap, our proposed amendment meets our commitment to provide assistance to those hardest hit by their pension schemes winding up underfunded. As noble Lords have recognised, it would be wrong to leave such members and the trustees of their schemes facing uncertainty because of the date on which their scheme starts to wind up. So I hope that I have met in full the concerns of the noble Lord and that, as a result, he will feel able to withdraw his own amendments and to accept the government amendment.