Clause 177 - Backdating the winding up of eligible schemes

Pensions Bill – in a Public Bill Committee at 3:00 pm on 20th April 2004.

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Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions 3:00 pm, 20th April 2004

I beg to move amendment No. 501, in

clause 177, page 112, line 41, at end insert—

'(1A) Subsection (2) also applies where—

(a) the trustees or managers of an eligible scheme—

(i) make an application to the Board under subsection (1) of section 101, or

(ii) receive a notice from the Board under subsection (5)(a) of that section, and

(b) the winding up of the scheme begins—

(i) at or after the time the application is made or notice is received, but

(ii) not later than the issuing of a notice in relation to the scheme under section 102(2) or (3).'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss Government amendments Nos. 502 and 503.

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

These are minor drafting amendments to clause 177. They ensure that it applies to schemes for which an application or notification has been made to the PPF under clause 101. This would apply to schemes where there is no insolvency event under clause 95—for example, some public sector schemes without a Crown guarantee, or schemes with a foreign sponsoring employer.

Clause 177 provides for the backdating of the winding up of eligible schemes in certain

circumstances. The clause applies where a qualifying insolvency event under clause 95 has occurred in relation to the sponsoring employer of an eligible scheme or an application or notification has been made in respect of an eligible scheme under clause 101 and the scheme is thus subject to a PPF assessment period. The power is designed to apply in a few specific circumstances.

As provided for in subsection (2)(a), the clause applies where the regulator makes an order under section 11(3)(a) of the Pensions Act 1995 directing the winding up of the scheme during the assessment period. Although clause 107 prevents scheme wind-up during the assessment period, it does not prevent the pensions regulator from making an order directing the wind-up of the scheme. That is because there are circumstances where it would be in the interests of both the PPF and scheme members to wind up a scheme during the assessment period. Winding up the scheme may enable the debt owed by the employer to be recovered earlier by the PPF in its capacity as creditor of the debt. Should the PPF then cease to be involved with such a scheme, the winding up of the scheme is backdated to the date of the qualifying insolvency event. That ensures that the priority order on winding up applies from the beginning of the assessment period.

Subsection (2)(b) is designed to deal with cases in which a qualifying insolvency event has occurred in relation to the employer but the board refuses to take over a scheme as a result of the moral hazard provisions in clauses 115 and 116. Such schemes were not eligible for PPF compensation and thus should not have come into the assessment period in the first place. The effect of a scheme coming into an assessment period was to prevent it from starting to wind up, when it otherwise would have done so. The clause provides that if a scheme winds up after the PPF has ceased to be involved with it, the trustees can backdate the winding up to the date of the qualifying insolvency event.

Clause 177 does not cover schemes required, under clause 119, to wind up because their assets are sufficient to buy out the protected liabilities—broadly speaking, the PPF level of benefits—because similar provision to backdate wind-up is made in clause 177(6). I hope that hon. Members find that elucidation helpful; I know that they have been following every word. I commend the amendments to the Committee.

Amendment agreed to.

Amendments made: No. 502, in

clause 177, page 113, line 2, leave out 'that qualifying insolvency event' and insert

'the event within subsection (1)(a) or, as the case may be, (2)(a)'.

No. 503, in

clause 177, page 113, line 8, at end insert—

'( ) Subsection (4) of section 100 applies for the purposes of subsection (1A) of this section as it applies for the purposes of subsection (1) of that section.'.—[Mr. Pond.]

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

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I cannot possibly fault the Under-Secretary's erudition on the amendments; that is why I did not speak on them. However, I have a query on the scheme mentioned in clause 177. Will the business of backdating the winding up of eligible schemes contribute in any way to the pressures on the PPF in its early stages? We heard anecdotal evidence in earlier debates about any number of schemes that are staggering on, waiting to fall into the welcoming arms of the PPF when it starts operating. Does the Minister think that the provisions will increase the pressures, or will they make a difference in only a tiny proportion of cases, and, in a relatively short time, in respect of only a few schemes? I am sure that the Department will have made projections. Or are the provisions a loophole that people who are waiting and hoping to take advantage of the PPF can operate to their advantage?

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

We are carefully attuned to possible loopholes, so I can give the hon. Gentleman a reassurance that that is not the case. The power is designed to apply in a very few specific circumstances, which I outlined when speaking to the amendments. Schemes will not be able to come under the PPF unless the insolvency event happens after A-day and winding up occurs after A-day. I hope that that gives the hon. Gentleman the reassurance that he requires.

Question put and agreed to.

Clause 177, as amended, ordered to stand part of the Bill.