Schedule 1

Part of Pensions Bill – in a Public Bill Committee at 11:00 am on 5th February 2008.

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Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions 11:00 am, 5th February 2008

The hon. Gentleman tempts me to start opining a view on the options on which PADA is consulting, in respect of the charging structure. It would be quite wrong to do that when the consultation is just getting underway and it is a matter for PADA anyway, not for me. He is right to say that there would be difficulties in opting for just a joining fee approach, but that is pointed out in the consultation document. It is a potential shortfall that PADA identifies. The purpose of the consultation is to run out all of the options for a charging structure, with a view to coming to a conclusion about what is the best charging structure. Each option that it looks at has plusses and minuses to it; it must reach a view, in the light of responses that come into the consultation, about what the appropriate charging structure is to achieve the ideal outcomes that we want. It will engage in precisely the sort of debate that he has just raised.

The precise costs of setting up and running the scheme will not be fully known until the authority is much further down the track in negotiating the contracts for services underpinning the delivery of the scheme. However, we anticipate that, based on data and latest research among employers and individuals, the scheme could have up to 7 million active members. I am confident that the scheme can be delivered in a way that ensures that there is no unfair subsidy from Government and that meets our intention for the scheme to be self-financing in the long term and to deliver at no cost to the taxpayer.

Amendment No. 65 would require the authority to publish a report on the potential impact on the financial position of the scheme under various revenue scenarios, within 12 months of Royal Assent. Amendments Nos. 68 and 69 would place a similar requirement on the trustee corporation and suggest the corporation seek independent actuarial advice. The authority will continue analysing all those factors in developing an optimal funding solution and will consider how it may be adapted under various revenue scenarios. That includes a rigorous analysis of the assumptions and associated risks around take-up, persistency and contributions and how they impact on the financial position of the scheme. Specific provisions  in the Bill are not needed to ensure that that work is done. Indeed, it has to be done.

I see no benefit in adding to the already comprehensive regime of financial accountability between non-departmental bodies and their sponsoring Departments. As non-departmental bodies, both the authority and the trustee corporation will be required to publish annual reports and accounts to Parliament. The trustee corporation will also have an overriding duty to act in members’ best interests, including the prudent financial management of the personal accounts scheme. There will therefore be transparency in the scheme’s financial position. Any revenue received would be shown in the accounts of the scheme or the authority, whether it has come from membership charges or other sources including, of course, the Government—if that were required.

I hope that our debates have put members of the Committee in no doubt about the Government’s intention that the personal account scheme will not be given unfair public subsidy. They are right to raise concerns about the extent to which the number of future members and their level of contributions might impact on the financial strategy for the scheme, but I assure them that we are confident that the scheme will be viable within the parameters that have set publicly. Its financial position will be made transparent through existing reporting and accounting requirements that apply to both the trustee corporation and the delivery authority. Given those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.