I beg to move amendment No. 18, in
clause 19, page 11, line 38, leave out 'and 107' and insert ', 107 and 177'.
We are making rapid progress. This clause deals with the regulator's powers to wind up occupational pension schemes, and the amendment addresses a drafting omission. It adds a cross-reference to clause 177. That has the effect of making the regulator's power to wind up a pension scheme subject to the provision on backdating the wind-up. That would apply when the scheme was subject to a pension protection fund assessment. It would also apply when the scheme was subject to such an assessment but the assessment had ceased because the PPF board had withdrawn it and refused to accept responsibility for the scheme because of that, or when the sponsoring employer had abused PPF rules.
Amendment agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
As I understand it, this part of the Bill envisages, in very specific circumstances, some retrospectivity in terms of wind-ups, for example in the case of schemes in wind-up before the Bill comes into force. If I am wrong about that, I should be grateful for an explanation as to why I am wrong. However, if I am right, is there a point of principle that can be read across, in terms of the estimated 60,000 people who lost out on their pension rights before today? We do not know how many more will be put in that unfortunate situation by April next year.
As the issue arises naturally under clause 19, I should also like to ask where we are on the priority order. The Government have moved to bring in full fund wind-ups, which is welcome, but we were promised, soon or very soon, some changes on the priority order. I suppose that it is possible to deal with that under the Bill, or perhaps simply via a statutory instrument, but could the Minister say, if that is to be done through a statutory instrument, when that is likely to be debated in the House? If the changes will be made by amendments to the Bill, when are those amendments likely to be tabled?
The explanatory note on this clause is a good deal shorter than the clause itself, and simply suggests that the regulator can wind up the scheme
''in order to minimise the value of claims on the PPF.''
What worries me about that is the implication that what the regulator will be interested in is the potential burden on the PPF, and not necessarily the interests of the scheme members. I am suggesting that those two may be in conflict. Clearly, allowing a scheme to continue unwound-up may have different consequences from winding it up at a particular point, depending, as the hon. Member for Eastbourne said, on the rules for priority order on wind-up, but also on what would happen to the assets if they were retained in a non-wound-up fund, as compared with being transferred to the PPF.
In other words, I am trying to establish in my mind the motivation for the regulator's action. It says in the explanatory notes that it is to look after the PPF's interests. Are those synonymous with the interests of the scheme members? I am slightly worried as to whether they are. When schemes are wound up, we must bear in mind the cost and the time that it takes to wind up. We have all come across instances—obviously, Allied Steel and Wire is one—in which those doing the winding up charge exorbitant amounts for dealing with media inquiries or whatever. The costs of the wind-up come out of the fund, as a result of which the scheme members suffer. The wind-up can also be protracted.
Clause 19 gives the regulator power to wind up a scheme. Does it do it in-house and, thus, on a not-for-profit basis as quickly as possible or does it commission commercial independent trustees to wind up the scheme? If so, can those independent trustees make a mint as certain independent trustees have done? I am worried about the welfare of the scheme members. Will they be ripped off by the people winding up? Will they suffer because the primary concern of the clause is the welfare of the PPF? Will that ever be in conflict with the interests of the scheme members?
May I, too, seek clarification about clause 19? I make particular reference to the process of winding up when initiated by the pensions regulator and wish to reinforce the points made by the hon. Member for Northavon. In the case of Allied Steel and Wire and many other instances, the workers were horrified to find that, when the pension scheme was in wind-up, if they wrote to the independent trustee charged with winding up the pension scheme with queries about their pension, the pension fund was charged for replying to their inquiries. That abuse is inherent in the current system. Will the clause remove it? It should effectively nationalise the winding-up service of occupational pensions. There will then not be a scam between a small number of experts who control such matters and make huge sums out of winding-up schemes. In smaller schemes, they often eat up a large proportion of the assets in the pension fund, which is already insufficient to meet its liabilities. Any reassurances that the Minister can give will be welcomed by workers who have suffered and consider that they have been ripped off.
The purpose of the clause is to allow the regulator to wind up a scheme during the
assessment period. No winding up of a scheme may commence during an assessment period, which is set out explicitly under clause 107, to prevent the scheme from commencing wind-up due to automatic triggers in the scheme rules or by a resolution of the employer or trustees. However, if the scheme is wound up, that may be more beneficial for the members, for example, when the scheme is funded sufficiently to buy out pension benefits at 100 per cent., but non-pensioner members at only 95 per cent. To protect that funding level, the regulator may wind up the scheme.
If the scheme were allowed to continue, the funding level might decrease further, resulting in the non-pension members receiving 90 per cent. benefits under the new pension protection fund. The purpose of the clause is to allow the regulator to make a judgment in the interests of scheme members. I am sure that members of the Committee will support that position.
As for the priority order regulations, the hon. Member for Eastbourne will have to be a little more patient, but we shall soon be reporting to Parliament on progress. Despite his question, our proposal is not very much linked to the important issue of ASW and other workers in respect of retrospection. That is a different matter. The hon. Member for Northavon asked who would carry out the wind-up. Officially, the regulator would take such action. At this stage, the regulator does not exist so I cannot talk in detail about exactly which people inside or outside would be responsible for the winding up. It is an important question and is based on more than detail; nevertheless it is not something that we can state with great clarity at present. However, if I am wrong about that and I can let the hon. Gentleman have more information, I shall be happy to do so.
I am grateful for that, and I have no desire to protract this discussion, but can the Minister confirm that his intention is that this will be run on a non-profit basis—that no one will profit from the winding-up of these schemes?
This is certainly not meant to be a profit-making exercise, but I am not sure that I can give the hon. Gentleman that undertaking in a strict sense, because people will no doubt be employed to do this work and salaries and/or fees will be paid. Therefore, I cannot give a blanket assurance, but the principle is right that this is part of a public service for scheme members and we do not want to turn it into a profit-making exercise, in the pejorative sense of that phrase.
I will not respond in detail today to what is troubling my hon. Friend the Member for Cardiff, West, but we have all been concerned in the past that in moments of distress, when people are facing near destitution in terms of their pension rights, some people—clearly totally wrongly—profited. We need to remedy that in different ways so that it does not happen in future.
Question put and agreed to.
Clause 19, as amended, ordered to stand part of the Bill.
Further consideration adjourned.—[Margaret Moran.]
Adjourned accordingly at sixteen minutes past Five o'clock till Thursday 11 March at half-past Nine o'clock.