Clause 166 - Authorised surplus payment

Finance Bill (except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39) – in a Public Bill Committee at 10:45 am on 15th June 2004.

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

Photo of George Osborne George Osborne Conservative, Tatton

This will be another brief stand part debate. This clause about surplus payments from schemes to employers consists of only one sentence, but it signifies a major change in the law. It says that the rules under which such payments can be made will be ''prescribed by regulations.'' I have not actually seen the regulations; perhaps they were sent to me but got lost in the mound of paper on my desk to do with this Bill, in which case I apologise.

The change in the clause is significant because, under the current regime, the Inland Revenue actually requires schemes to reduce an excessive surplus. New clauses that were chucked into the Pensions Bill late in the day at Report stage said that the Department for Work and Pensions will make regulations to preclude employers' receiving payments from a defined benefit scheme unless the scheme is funded to a sufficient level to afford a full buy-out; that is, unless annuities and deferred annuities to secure the rights of all members and beneficiaries could be purchased. There are also to be new rules for defined contribution schemes. In other words, the Inland Revenue will no longer be required to approve scheme payments to employers, provided such payments come within the rules.

I merely ask the Financial Secretary how much consultation there was with the industry about the new rules. Because of the way in which they were introduced in the Pensions Bill, there was no consultation at all with the industry, but there is a great deal of concern about them. Indeed, it is worth asking the Government how the rules will interact with the new EU directive on pensions. We are now all familiar with EU matters. It is good to see the fourth party of British politics alongside me. [Interruption.] No, I think the results put you behind UKIP.

The EU directive on pensions requires schemes at all times to hold sufficient assets to pay out all benefits promised to members. The National Association of Pension Funds suggests that that could cost British pension schemes, which operate on a more flexible approach and are protected from the day-to-day ups and downs of the stock market, up to £300 billion a year. I raise that point under this clause, which is about surplus payments, and I would be interested to hear what the Financial Secretary has to say.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. First, I did not want to interrupt the hon. Gentleman, but of course nobody is

behind me. Secondly, I remind the Committee that this is a very narrow clause indeed.

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury

Thank you for your guidance, Mr. McWilliam. I hope to keep my remarks to the point.

The hon. Member for Tatton has no need to apologise for not finding something among the papers on his desk. In fact, it is up to me to apologise to the Committee for not yet having been able to produce draft regulations. However, he often accuses us of lack of joined-up government and not working closely enough with the DWP. On this occasion, my Department is working very closely with the DWP so that, when we do publish the draft regulations describing an authorised surplus payment, they will as far as possible mirror the description given in the regulations accompanying the Pensions Bill. I know that he is familiar with the debate on that issue and that he follows such issues closely.

I hope that the issue will be picked up in the debate on the Pensions Bill, as I think that that is the right place for it. I promise that, if it is not debated sufficiently during the Pensions Bill, I will ask my hon. Friend the Minister for Pensions to discuss it with the hon. Gentleman or to write to him setting out the views of the Department for Work and Pensions.

While I apologise that it has not been possible to let members of the Committee see draft regulations under the clause, I reassure them that they will be published and consulted on well in advance of the implementation date, which is, as they should be well aware, 6 April 2006. That is well in time for the introduction of the simplified regime. I commend the clause to the Committee.

Question put and agreed to.

Clause 166 ordered to stand part of the Bill.

Clause 167 ordered to stand part of the Bill.