Clause 149 - Board's powers to make fraud compensation transfer payments

Pensions Bill – in a Public Bill Committee at 3:15 pm on 1st April 2004.

Alert me about debates like this

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

Photo of George Osborne George Osborne Shadow Minister (Treasury)

As I understand it, the clause gives the power to transfer payments from the fraud compensation fund to the pension protection fund—to move funds from one fund to the other—once it has been established that fraud has taken place. That applies where the PPF has assumed responsibility for a scheme before there has been an application for fraud compensation. Because we are setting up the PPF, there will now be cases that the PPF takes responsibility for and it will subsequently discover that fraud has taken place and will wish to transfer money.

The Minister gave a perfectly reasonable explanation of why there were two separate funds. As a result, there will also be two separate levies, which are set out in clause 151. The levies are paid for slightly differently. The fraud levy is an irregular levy, in the sense that it is levied only when it is necessary; the normal PPF levy is much more regular. Also, as the Minister has said already, different groups of people will pay them. The fraud levy will be payable by a much broader group of people. Therefore, a scheme may already have received compensation from the PPF fund, which has presumably come out of the normal levy, but money can also be transferred from the fraud fund, which is raised from a special levy. Will the people who have paid the normal levy to pay for that sum get a reduction, or their money back? If not, they will be paying twice for the same scheme. The levy may have to be increased. Let us suppose that we had a big fraud case, and the levy rose to cover the subsequently discovered fraud; money would then be taken from the fraud fund into the normal PPF fund and a special fraud levy could also be levied. Some schemes will end up having to pay twice. Will they get some of their money back?

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

There is an issue of practicality. If fraud has been discovered after a scheme has entered what my hon. Friend the Minister for Pensions called the warm embrace of the PPF, the scheme cannot benefit from a fraud compensation payment, as would be the case for schemes outside. Normally, payment would be added to the overall funds of the scheme, but at the point of entry to the PPF the scheme ceases to exist in its own right and becomes part of the PPF compensation arrangements.

A transfer payment will be consistent with the principle that all assets and rights of a scheme should be transferred to the PPF upon entry. In a sense, that is a deferred element of those rights and assets. The transfer payment would be made from the fraud compensation fund into the pension protection fund and would reflect the full value of the loss suffered to scheme assets. As for whether there would be a reimbursement to scheme members of part of their fraud levy, I must disappoint the hon. Gentleman and say that that is not our intention.

Clause 149 is very much a belt-and-braces clause. We do not expect there to be many circumstances in which the fraud is discovered after a scheme has entered the PPF. Therefore, even if we were to seek to make a reimbursement of the levies already paid, the cost of the calculation would probably far outweigh any amount that we could transfer back to scheme

members as a result. I hope that the Committee accepts the clause.

Question put and agreed to.

Clause 149 ordered to stand part of the Bill.