Clause 184 - Schedule of contributions

Pensions Bill – in a Public Bill Committee at 2:30 pm on 23rd March 2004.

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Amendments made: No. 327, in

clause 184, page 116, line 25, after 'reviewed', insert

', and if necessary revised,'.

No. 328, in

clause 184, page 116, line 29, leave out subsection (5) and insert—

'(5) The schedule of contributions must be certified by the actuary and—

(a) the duty to prepare or revise the schedule is not fulfilled, and

(b) the schedule shall not come into force,

until it has been so certified.'.

No. 329, in

clause 184, page 116, line 36, leave out 'prescribed date' and insert

'effective date of the last actuarial valuation'.

No. 330, in

clause 184, page 116, line 40, leave out 'prescribed date' and insert

'effective date of the last actuarial valuation'.

No. 331, in

clause 184, page 116, line 43, leave out 'prescribed date' and insert

'effective date of the last actuarial valuation'.

No. 332, in

clause 184, page 116, line 45, leave out

'as soon as reasonably practicable'

and insert

'within a reasonable period after it is prepared or, as the case may be, revised'.

No. 333, in

clause 184, page 117, line 6, leave out

'as soon as reasonably practicable'

and insert

'within a reasonable period after the end of the period within which the schedule is required to be prepared or, as the case may be, revised'.

No. 334, in

clause 184, page 117, line 10, leave out 'and (3)' and insert ', (3) and (5)'.—[Mr. Pond.]

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

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 2:45 pm, 23rd March 2004

The NAPF is worried that clause 184(6)(b) will lead to actuaries being more cautious and risk averse, which is difficult to conceive of. None the less, they can apparently be even more cautious and risk averse than they already are in their view of what can be expected, with the consequence that trustees will increasingly decide to pursue risk-minimising, rather than return-seeking, investment strategies. In other words, they will pursue a course rather like defensive medicine—a defensive investment strategy. The NAPF thinks that that could cause the cost of funding schemes to increase, with a significant impact on the cost to scheme sponsors. It expressed the hope that the regulations, when they appear, will do their best to discourage such an outcome. I should be grateful if the Under-Secretary could reassure me and the NAPF about that.

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions

Under the new provisions, the trustees will make the key funding decisions about the scheme. They will have to seek the employer's agreement and obtain actuarial advice. It will be for the trustees to decide the degree of risk appropriate for the circumstances of the scheme when they decide what method and assumptions within the prescribed framework will be used for the calculation of the technical provisions. The actuaries will be required to certify that any schedule of contributions is consistent with the statement of funding principles, which sets out the methods and assumptions to be used. The actuaries will be required to state whether in their opinion, and on the basis of the actuarial assumption chosen by the trustees, the scheme's funding position will be met or restored during the period covered by the schedule of contribution.

It is difficult in such circumstances to know why the clause should make actuaries, who, as the hon. Member for Eastbourne (Mr. Waterson) suggests, are usually a fairly loose-willed group of people who can be a bit zany, more risk averse than they would otherwise be. The clause ensures that the trustees have to make the decisions based on actuarial advice. On that basis, actuaries can put forward the advice that they think is appropriate, which is neither risk averse

nor riskier than would otherwise be the case. For that reason, we cannot understand why clause 184 would have the effect that has been described.

Question put and agreed to.

Clause 184, as amended, ordered to stand part of the Bill.