Clause 143 - Calculation, collection and recovery of levies

Pensions Bill – in a Public Bill Committee at 2:45 pm on 1st April 2004.

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Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 2:45 pm, 1st April 2004

I beg to move amendment No. 279, in

clause 143, page 88, line 21, at end insert—

'( ) The trustees or managers of the scheme may charge a sum at least equivalent to the non-risked based amount of the levy to all scheme members.'.

This is a probing amendment, but it raises some interesting issues that I look forward to seeing the Minister resolving. ''Levy'' refers to the administrative levy, if that is the right terminology. I thought long and hard about whether I should table the amendment at all. One of the deciding factors was the thought that the proposal might have been among the Government's intentions in the first place. However, it is not clear from the Bill whether employers will have the ability to share the costs of the levy with all scheme members. That does not happen in the USA, as I understand it, so we would be breaking new ground.

The CBI and the Engineering Employers Federation both support the proposal. The latter says:

''Employers should be able to recover part of the PPF levy from pension scheme members'',

as that would encourage employers to keep schemes open or even start new ones. The federation also says:

''As members are the ultimate beneficiaries of these insurance arrangements, it is only reasonable that employers should be able to share the cost of financing the PPF by recovering at least part of the levy from members.''

That view is echoed by the CBI, which also thinks that there should at least be the facility, where appropriate, to pass those charges on to scheme members, whether active, deferred or pensioner. However, I gather that there are sometimes practical problems, on which the Minister may have more information, in obtaining lists of names, addresses and so on.

Strangely, chapter 3.2.2 of the Bill's regulatory impact assessment, which the Government have kindly provided, says that

''employers will be able to recoup the costs of the part of the levy assessed by reference to scheme factors from members, if they choose to do so.''

That was not part of my initial understanding, but there it is in black and white. It therefore seems that, without trumpeting it, the Government are on the same wavelength as the employers' organisations to which I have referred.

Although the amendment is a probing amendment, I am interested in the Minister's views on the regulatory impact assessment and the preferences of the employers' organisations.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

The clause sets out the calculation, collection and recovery of the initial, pension protection and risk-based protection levies. The amendment seeks to provide scheme trustees and managers with the power to recoup the cost of the scheme of the initial and pension protection levy from scheme members. Because that would impact on the calculation of future pension entitlements, the amendment could result in a reduction in the level of income for current pensioner members or reduce the amount of pension accrued for active and deferred members. In addition to the impact on future pension entitlements, and any potential PPF compensation, the amendment would also be difficult to administer, particularly where there is no pension in payment. Furthermore, the amendment does not restrict the amount that can be recouped from an individual scheme member, which could result in members paying towards the risk-based element of the pension protection levies.

On reflection, the hon. Gentleman might agree that that would be unfair, because members do not have any say in how the scheme invests, or indeed in the financial state of the scheme. That also may have an effect on the behaviour of scheme trustees, who could pass on the whole cost of the pension protection levies to their members, thus preventing any increase in costs to the scheme, while continuing to undertake a risky investment strategy.

I hope that not least on account of those rather practical, important matters, the hon. Gentleman might consider withdrawing his amendment.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

First, I was not clear whether the Minister was dealing with the point in the regulatory impact assessment about whether the Bill as it stands

allows some recovery of costs. I hope that he will be able to deal with that in a moment.

Secondly, I should like to speak about a new issue relating to the same point, on which it may be appropriate for the Minister to have another bite at the cherry. In the run up to the Bill I was approached by Marconi, which is one example of a specific type of company to which this situation would apply in spades: a company that is smaller than it was, but with large legacy liabilities. Let me say immediately that Marconi supports the PPF, and its pension fund is healthy. However, it is, to use its own word, a bit ''lopsided'', because it has just 3,327 active members, but because of its history it has 69,000 deferred and pension members—a ratio of over 20:1. It estimates that the average PPF levy will amount to 1 per cent. of all active member contributions. In addition to the general point that I made in opening the debate on the amendment, there is a more specific category of companies that, for historical reasons, will be particularly affected by the levy, and for which there is an even stronger argument to be able to pass on at least some of the cost.

I should be interested to hear from the Minister. Perhaps he would like to write to me about this specific, narrow issue. I hope that now he has the answer on the RIA point.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

I have reflected on this issue, and I recommend reflection—the hon. Gentleman smiles, but he might try some. There is not a great matter of principle involved. In principle, there is no reason for saying that it should never be thought that scheme members should consider contributing to the levy. Some of the issues are more practical, particularly in respect of existing pensioners, who have got used to a level of pension. Would it be appropriate—perhaps because of the difficulties that a company has got into long after they have retired—to say that they should pay a not insignificant levy?

There are practical matters of that kind to consider. Employers currently have the ability to recover costs from active members, perhaps by reducing wages, not increasing wages to a level to which they may have risen, or increasing employees' contributions, should they choose to do so. That is best left to employers and employees to consider. If I have missed some points on the RIA, I had better write to the hon. Gentleman.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

This is one and the same point. The Minister is accepting that as the Bill stands, my amendment is probably unnecessary, because it already seems, as the RIA says, that employers could pass some of the costs to scheme members. In a sense, my amendment falls. Is that so?

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

I think that I had better write to the hon. Gentleman on that important point; I am sorry that I do not have the whole answer. It seems to me that, just in terms of the ability to look at wage increases and periodic discussions about the level of the employee's contribution, it is possible for a company to pass on the cost of the levy to the members, should that be thought wise in any company. The Government should not prescribe

that; it is a matter for negotiation between the two sides.

If the hon. Gentleman forgives me, I will leave my response to his point on the regulatory impact assessment to a letter.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The killer reason for withdrawing the amendment would have been the Minister confirming my suspicion that it does not add anything to the Bill. However, he is going to write to me about it, and that puts me in a predicament. I suppose I had better withdraw it and see what happens. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 390, in

clause 143, page 88, line 28, leave out 'the Board's' and insert

', on the Board's behalf, its'.—[Malcolm Wicks.]

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions 3:00 pm, 1st April 2004

I beg to move amendment No. 500, in

clause 143, page 88, line 30, after 'year,' insert 'except in prescribed circumstances,'.

The amendment provides for regulations to set out exceptions relating to the payment of part-year levies. Subsection (5) provides for part payment of the initial levy and pension protection levies when a scheme is not an eligible scheme for the whole of the financial year. Payment of part-year levies would be required when, for instance, a new scheme is set up and becomes an eligible scheme part way through the year. The new scheme would be charged the initial levy or pension protection levies from the date it became an eligible scheme. The amendment is sensible, and technical.

Amendment agreed to.

Clause 143, as amended, ordered to stand part of the Bill.