Clause 166 - Authorised surplus payment

Part of 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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Photo of George Osborne George Osborne Conservative, Tatton 10:45 am, 15th June 2004

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.