Amendment made: No. 467, in
clause 121, page 76, line 24, at end insert—
'(2A) Where the Board makes a determination for the purposes of subsection (2), it must issue a determination notice and give a copy of that notice to—
(a) the trustees or managers of the scheme, and
(b) the Regulator.
(2B) In subsection (2A) ''determination notice'' means a notice which is in the prescribed form and contains such information about the determination as may be prescribed.'.—[Mr. Pond.]
Question proposed, That the clause, as amended, stand part of the Bill.
I hope that my point of order will produce some response from the ministerial team.
During a busy weekend in the pensions press, it emerged that there was an apparent loophole in this part of the Bill. There are two schools of thought. The first is that the loophole was unintentional, the consequence of an oversight by the Department for
Work and Pensions. The more colourful theory is that the loophole is a clever way of dealing with the points that I, the hon. Member for Cardiff, West (Kevin Brennan) and others have made about compensating those who have already lost out because of problems with their pension schemes.
Senior pension lawyers who specialise in such matters say that the way in which this part of the Bill is drafted could trigger the collapse of hundreds of schemes within days of the launch of the pension protection fund, and that
''Any trustees of company pension schemes where the employer had already collapsed might be delaying the liquidation of the scheme until members could qualify for payments from the PPF''.
Mr. Robin Ellison of the solicitors' firm, Pinsents, said:
''It will be very interesting to see just how many schemes collapse within the first three days. We expect to see a rush of collapses. What we don't know is how many. I suspect it will be in the low hundreds.''
Oh, so that is all right then. He went on to say that trustees might have no option but to
''keep the funds running. If you're a trustee and you begin wind-up between now and next April, you could be accused of being in breach of trust.''
Mr. Giles Orton of Eversheds said that he could not believe that Government officials were not
''fully aware, right at the start, of the significance of wording the Bill in this way. Access to the PPF depends not on the date that a company goes into receivership or liquidation but the date the pension starts wind-up. This is a crucial difference.''
The lawyers point out that some employers would go to great lengths to buy time and avoid damage being done to their reputation of being seen to walk away from a pension scheme. They believe that some people, particularly overseas owners of ailing United Kingdom subsidiaries, might also be waiting for the launch of the PPF to put the scheme into liquidation. Another way round such a problem is apparently management buy-outs. According to Mr. Orton, the management are told, ''We will bung you a reward to keep it going as long as you can. By the time the inevitable happens, the PPF will be up and running.'' It buys them time.
Last week, it was the actuaries who fired a torpedo at this ailing ship; today, it is the pension lawyers. I would be fascinated to hear what Ministers have to say about the latest large problem that has opened up in their Bill.
What a delight it is, Mr. Cran, that you are seeing us through our proceedings on this wonderful spring morning.
I shall first deal with the specific point made by the hon. Member for Eastbourne (Mr. Waterson) about the apparent loophole that he thinks has been discovered by the weekend press. I reassure the Committee that there is no loophole. The key is that wind-up must occur after April 2005; insolvencies that take place before that date will not qualify. Indeed, the Committee passed an amendment to clause 99 last week to that effect, so I hope that the hon. Gentleman is reassured.
I remind the Committee that, towards the end of last week, we were discussing the entry rules to the PPF, assessment periods and so on—I am sure that hon. Members will have thought of nothing else over the weekend. They will remember vividly that clause 120, which we debated on Thursday, provided for schemes to apply for reconsideration if the PPF has determined that schemes have sufficient assets to buy out the PPF level of benefits, and therefore imposes a requirement to wind up outside the PPF.
Applications for reconsideration must be submitted by the trustees or managers of the scheme. Such applications must, first, contain a quotation for one or more annuities from one or more insurers willing to accept payment in respect of the members that would provide benefits to those members; and, secondly, a written auditor's valuation of the assets, excluding assets relating to money purchase benefits under the scheme.
Clause 121 provides that if the protected benefits quotation and asset valuation submitted by a scheme during the reconsideration period confirms that the scheme is not able to buy out benefits for members that are at least equal to the level of the protected liabilities, the board must take the scheme into the PPF. The board may obtain its own valuation of the assets of the scheme as at the reconsideration date. That valuation will have the same effect as an auditor's valuation. Audited scheme accounts, for the purposes of the clause, means accounts audited by the scheme's auditor, and obtained by the trustees or managers of the scheme in accordance with section 41 of the Pensions Act 1995.
The clause is crucial in enabling the board to assume responsibility for a scheme, following a decision by it having received an application for a reconsideration.
Question put and agreed to.
Clause 121, as amended, ordered to stand part of the Bill.