Pensions Bill

Part of the debate – in the House of Lords at 5:06 pm on 27 October 2008.

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Photo of Lord McKenzie of Luton Lord McKenzie of Luton Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions) (also in the Department for Communities and Local Government) 5:06, 27 October 2008

My Lords, before I explain Amendments Nos. 71 and 72, it might help the House if I briefly remind noble Lords of the Government's proposals with regard to additional state pension simplification. Under our proposals, people retiring from 2020 will have all their accruals of the different forms of additional state pension up to 2012 rolled up into a single consolidated cash value. This will greatly simplify the way such pensions are calculated.

Broadly speaking, for individuals contracted out of SERPS—the additional state pension between 1978 and 1997—a contracted-out deduction needs to be applied to the consolidated amount. The contracted-out deduction, which can currently vary in relation to the additional state pension, both before and after retirement, will need to be fixed using the principles of actuarial equivalence. This new deduction will be calculated so that it has the same overall actuarial value as the contracted-out deduction under the current rules. The new deduction can then be taken from the consolidated SERPS pension.

I turn to Amendments No. 71 and 72. In Committee, following amendments tabled by the noble Baroness, Lady Noakes, I agreed to consider whether it should be mandatory for the Government to commission a report from the Government Actuary's Department on determining actuarial equivalence. It has always been the Government's intention to commission such a report from the Government Actuary's Department. The amendments I have tabled will make that mandatory. I have also considered whether it should be mandatory for regulations to be made based on that report. While it is absolutely right that the Government should fully consider the impartial Government Actuary's report, the final decision on whether regulations are made with reference to that report should be a government decision. To do otherwise would, in effect, go against an important principle of legislative competence, which is that it is for the elected Government of the day to propose legislation and for Parliament to approve it. However, to ensure openness, our amendments commit the Secretary of State to lay the Government Actuary's report before Parliament. Regulations setting out how actuarial equivalence will be achieved will be subject to debate in both Houses. Furthermore, should the Secretary of State not be minded to follow the recommendations in the Government Actuary's report, we are proposing that a report must be laid before Parliament explaining why. I hope that I have been able to reassure the noble Baroness that we have taken on board the key concerns that she raised in Committee and that she will understand why we have not been able to agree absolutely 100 per cent. I beg to move.