As it happens, I prepared a note over lunch in anticipation of that question. Government amendments Nos. 320 to 323 amend the requirements in clause 182 relating to the actuary's certification of the scheme's technical provisions. Government amendment No. 320 to subsection (2)(a) clarifies the fact that the certificate must state that the calculation of the technical provisions has been made in accordance with regulations made under clause 179. Clause 179 provides for regulations to specify ''alternative . . . methods and assumptions'' and to specify that
''it is for the trustees or managers to determine which methods and assumptions are to be used''
in accordance with prescribed principles.
Government amendments Nos. 321 and 322, which apply to subsection (2), remove the requirement that the calculation must be consistent with any prescribed guidance. We agree with the professional body for scheme actuaries, the Faculty and Institute of Actuaries, that there is no need for additional prescribed guidance, as the requirement will be set out in the regulations. Government amendment No. 323 removes the power in subsection (3) to prescribe further requirements, as it is considered that the requirements of subsection (2) are sufficient.
Amendment agreed to.
Amendments made: No. 321, in
clause 182, page 115, line 23, leave out from beginning to ', and'.
No. 322, in
clause 182, page 115, leave out lines 25 to 27.
No. 323, in
clause 182, page 115, line 28, leave out subsection (3).
No. 324, in
clause 182, page 115, line 31, leave out
'as soon as is reasonably practicable'
'within a reasonable period after the end of the period within which the valuation must be received by the trustees or managers'.——[Malcolm Wicks.]
Question proposed, That the clause, as amended, stand part of the Bill.
I am grateful to the Minister for that explanation. I am sure that it is because of my slowness on the uptake that I required an explanation of the amendments. It seems that they simply shrink the amount of prescription allowed under the clause. As I said, it is difficult to get one's head around what is likely to emerge, simply because there is to be so much prescription in subsequent regulations. I hope that we will see those regulations one day.
I wonder whether the Minister saw a report a few days ago saying that Standard and Poor's, the ratings agency, is launching a service to identify the likelihood of a company pension scheme remaining in deficit when a company goes bust. I will tell him a little bit more about that, in case he has not heard the reports. To assist any official who might be scribbling a note on this issue, I would like to know to what extent such certification can be sub-contracted. Many of the certifications, recovery reports, actuarial reports, funding principles and other things required will create a significant burden, particularly for smaller schemes. Clearly, they do not pose a problem for those running the Marks and Spencer or British Airways pension scheme. However, there is at least the possibility of a private sector solution.
According to the report, Standard and Poor's, which is reputable and long-standing in its field, as the Minister will know, has spent two years developing a service that uses complex models to measure the likelihood of large companies defaulting on debt obligations, and it applies that to their current situation. Apparently, its reports will have three strands, which to some extent reflect what is in the Bill. The first strand assesses the financial strength of the company, and the solvency of its pension scheme and the adequacy of the contributions being made to it. The second strand looks at whether the investments made by the scheme are likely to meet its requirements. The third strand assesses institutional asset managers.
The bad news is that S&P will award companies up to five stars, depending on the strength of their pension schemes, although given the relative lack of success of star schemes—or at least those run by the Government—we might perhaps persuade it to make the stars rosettes or spanners or something else. S&P says that its rating system will enable trustees to communicate the company's findings easily to employees. There is some merit in that, and I am sure that the Minister would agree that the public sector does not have a monopoly on wisdom in these matters. Although I am not suggesting that he should
give me a definitive answer now, perhaps I may ask him to consider whether certification and compliance with some of the technical provisions could be met with arrangements such as those in the S&P scheme. Malcolm Wicks: I saw S&P's proposals in outline, although I have not studied them in detail. In response to one of the hon. Gentleman's points, our current approach is a private sector solution. We are not asking the Government Actuary's Department to do this work. I am happy to consider the implications of what he proposes. However, the scheme is responsible for itself, subject to the provisions that we are discussing the powers of the regulator, and so on. I would not want anything to take away responsibility from the trustees for the governance of their own scheme or from the scheme actuary, for example, but I shall look further into his question.
Question put and agreed to.
Clause 182, as amended, ordered to stand part of the Bill.