Schedule 7 - Pension compensation provisions

Part of Pensions Bill – in a Public Bill Committee at 10:15 am on 30 March 2004.

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Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions 10:15, 30 March 2004

I am grateful to my hon. Friends and other Members for raising these issues. In many respects I have found this a rather encouraging debate because, although the provisions are subject to the will of Parliament, the Committee is beginning to take it for granted that one day soon there will be a pension protection fund. Having established the fund, we can then discuss details. I do not mean to be dismissive—I mean that we can discuss important characteristics of the fund. I am reminded of debates about what the level of the minimum wage should be. At least we now have a minimum wage. No doubt, we shall hear many suggestions this morning and in later debates as to how the PPF could supposedly be improved, including suggestions from some people who opposed the original proposition and some who would never have thought of it. In many ways, that is progress.

When devising the PPF policy, we needed to balance a number of competing factors, such as how best to ensure that individuals received in a fair and transparent manner compensation close to the pension that they were expecting, thus protecting their expected living standards, while minimising costs on employers and limiting both the potential for abuse and unwanted behavioural consequences—the concern about moral hazard, to which I will return. The balancing act is not easy, but the solution that is advanced in the Bill is broadly the right one. I say ''broadly'' because no one can argue with 100 per cent. conviction about the odd percentage point.

A key feature is that the measure will provide the reassurance to some 10 million members or more of pension schemes that they can continue paying into their company scheme safe in the knowledge that they are likely to have a secure retirement, even if their company goes bust. Let us not lose sight of that or the fact that although we can argue about figures of 100 per cent., 95 per cent. or 90 per cent., if we had proposed 100 per cent. some lobbies would have suggested 110 per cent., hence the nature of these debates. We can argue about this, but let us always remember that in discussing the virtues of 90 per cent. or 100 per cent., we are confronting the current reality that some people are facing a figure of 20, 30 or 40 per cent. when their company goes insolvent, hence the importance of the protection fund.