Clause 147 - De-registration

Finance Bill – in a Public Bill Committee at 11:15 am on 8th June 2004.

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Question proposed, That the clause stand part of the Bill.

Photo of George Osborne George Osborne Conservative, Tatton

Before we nod through the process of de-registration, we should just get the Government to explain one or two things. After all, we are talking about a draconian power to de-register a scheme, not least because there is an immediate 40 per cent. tax charge on the value of the fund once de-registration takes place.

I have one specific question and then I will make a broader point. As I understand it, under the current system if a scheme loses approval it also loses the last six years of tax privilege. Is that the same in this proposal? Would the six years of tax privilege be lost? That is not spelled out.

On the broader point, a 40 per cent. tax charge on a scheme will obviously have a huge impact on members. What if those members are the innocent victims of fraud or incompetence by the scheme administrators and trustees? They will have had the value of their fund dramatically reduced by the Inland Revenue. Indeed, they will probably already, by definition, have been the victims of huge unauthorised payments of 25 per cent. or more coming out of what they thought was their pension fund. What will be

done to protect members in such cases? How does the de-registration process work with the parts of the Pensions Bill that are concerned with the pensions regulator, who can step in and freeze a pension scheme and start administering it on behalf of members? How does the process relate to the role of the pension protection fund? When would a scheme be de-registered but not referred to the pensions regulator? Those are confusing issues. Indeed, if the pensions regulator is trying to save a scheme and to resuscitate it, it will not helped by the fact that on day one the Inland Revenue has grabbed 40 per cent. of the scheme's value. Perhaps the Financial Secretary will say something about those questions.

The grounds for de-registering are in the next clause, but if you allow me, Sir John, I will touch on the matter now, because it is part of the same point. Most of the grounds for it are serious, but there is also a power to de-register a scheme where information is required, the scheme fails to provide it and that failure is ''significant''. One of the definitions of ''significant'' relates simply to the quantity of information provided, not its quality. In other words, it might not relate to substantive information that a scheme failed to provide, but a large amount of information. Will the Minister clarify that the Inland Revenue will make a quality judgment on that, and that if it is significant information that the scheme is failing to provide and it has had lots of warnings, that is when de-registration kicks in?

The principal point that I wanted to know about was the way in which the rights of members will be protected where, through no fault of their own, fraud has occurred or huge unauthorised payments have taken place, and they see the value of their scheme disappear.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.