Clause 215 - Exemption from statutary revaluation requirement

Pensions Bill – in a Public Bill Committee at 5:00 pm on 18th March 2004.

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

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I want to raise a narrow but important point. It is not all my own work, but it is about the equalisation of GMPs. I am reliably informed that the general view of the European law requirement is that the total benefit for men and women for service from 17 May 1990 should be equal, rather than that each individual component of the benefit should be equal. The GMP legislation causes a problem by requiring schemes to treat a member's GMP differently from any additional benefits to which they may be entitled.

Again, if I had received the information in time, I would have tabled an amendment to clarify what the clause seeks to achieve. An amendment would have allowed schemes to elect to revalue the whole of a member's benefit for service from May 1990 in a consistent way. The revalued benefit would have had to be no less than the statutory GMP, which may be different for men and women. However, the anti-franking requirements would not apply as they effectively force schemes to provide different benefits for men and women.

Members of the Association of Pension Lawyers legislative and parliamentary sub-committee have told me that they cannot work out what the clause intends to achieve. That view also extends to section 84 of the Pension Schemes Act 1993. People who know a lot more than I do about such matters want clarification about the purpose of the clause. It seems to be related to anti-franking, but no one seems quite sure.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

It would clearly be helpful if I explain, albeit briefly, the purpose of the clause. It reinstates a provision that was originally in the Pension Schemes Act 1993, but which was repealed as an unforeseen consequence of the Pensions Act 1995. Occupational pension schemes are required to revalue the accrued rights of members who leave before normal pension age, thus protecting the value of pension rights left in the scheme. The way in which they must be revalued will normally depend on whether the benefits are salary-related, linked solely to a period of service or on a money purchase basis.

Legislation sets out different ways of revaluing pensions. Until April 1997—an important period of our history—one method saw the scheme maintain the value of the whole pension by reference to the rise in the general level of prices. That required the approval of the occupational pensions board, which gave it on a general rather than scheme-specific basis. A result was that legislation that enabled schemes to use the RPI was inadvertently removed when the functions of the occupational pensions board were brought to an end by the 1995 Act. The clause therefore amends the re-evaluation requirements in section 84 of the Pension Schemes Act 1993. It enables schemes to continue to satisfy the statutory revaluation requirements by revaluing the total pension or other benefits fully in line with the RPI.

I am advised that the clause has nothing to do with issues of group equalisation of GMPs. They are included in any re-evaluation of deferred pensions. I am sure that what I have said is absolutely crystal clear.

Mr. Waterson rose—

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions 5:15 pm, 18th March 2004

I will give way, but I was about to say that, if that is not crystal clear, I will of course write to the hon. Gentleman.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I just want to be clear that the Minister is using the same definition of GMP as the rest of us are. Could he remind the Committee what GMP stands for?

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

Guaranteed minimum pension.

Question put and agreed to.

Clause 215 ordered to stand part of the Bill.

Clauses 216 and 217 ordered to stand part of the Bill.