Clause 115 - Schemes which become eligible schemes

Pensions Bill – in a Public Bill Committee at 3:45 pm on 25th March 2004.

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

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The clause is one of those shell clauses that do not really give much away about what they mean. Inevitably, it begins, ''Regulations may provide . . . '' It is hardly worth my breath to ask, but I assume that there are no draft regulations in the offing, and we cannot see what will be in them. It would be helpful if the Minister could walk us through what might be in the regulations, when they appear.

As I understand the clause, the board has to satisfy itself that what was otherwise an eligible scheme

''was not such a scheme throughout such period as may be prescribed''.

Again, it is a bit difficult to comment until we get some idea of what kind of period we are talking about. The clause goes on to say that

''the Board must refuse to assume responsibility''.

I am lost as to what kind of situation the clause is trying to deal with, and it would be helpful if the Minister could talk us through the thinking behind it.

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

Draft regulations are not yet available. I wish to explain the overall purpose behind the clause, which, as the hon. Gentleman says, is to protect the PPF from abuse by schemes that manipulate their structure in order to become eligible for PPF compensation, when they were not eligible, and thus subject to the requirement to pay the levy, in a prescribed period preceding the assessment date. The clause is essential to stop abuse by schemes and to protect businesses from subsidising such schemes through the pension protection levies.

Without the clause, the PPF could be required to pay compensation to any scheme that manipulated itself so as to become eligible to benefit from the PPF.

The hon. Gentleman asked for examples, such as schemes that convert benefits from money purchase schemes into final salary schemes. The provision sets out that regulations may prescribe the period that the board can refuse to assume responsibility for a scheme in respect of changes made to its structure.

The intention is that a scheme will be required to have been an eligible scheme, and thus to have paid the levy, for three years in order to be taken over by the PPF. When a scheme has been established for less than three years, in order to be taken over by the PPF it will have to have been an eligible scheme from the date of entitlement to the date of the insolvency event, or clause 101 application or notification.

The clause requires the board to issue a withdrawal notice ending its involvement with a scheme to the regulator, trustees and managers of the scheme and any insolvency practitioner acting in relation to the employer when it is required to refuse to assume responsibility for a scheme. It is crucial that the PPF is able to protect itself against moral hazard, so that the fund will be sustainable in the long term, and that responsible levy-paying employers do not subsidise those who would seek to manipulate the PPF rules.

In answer to the specific questions raised by the hon. Gentleman, I can say that the three-year period will not be specified in primary legislation, so that the PPF board will have the flexibility to protect itself against moral hazard. Specific periods are not usually specified in primary legislation, so as to ensure that it is not too restrictive.

Question put and agreed to.

Clause 115 ordered to stand part of the Bill.

Clause 116 ordered to stand part of the Bill.