When I first looked at the clause, I thought that it was very techie and that we did not need to say anything about it. All it seemed to do was to clarify the technical issues surrounding the powers of the Pensions Regulator under the Occupational Pension Schemes (Scheme Funding) Regulations 2005.
One of the things that drives the regulator is the principle that the methods and assumptions used by pension fund trustees are chosen prudently. For example, if they assumed that their members would live to the age of 36, that would clearly be a bit imprudent. All of this—surprise, surprise—emanates from the European occupational pensions directive of 2003. So far, so good. The clause, as I read it, does what it says on the tin and clarifies that the regulator can use their powers under section 231(2) of the 2004 Act, where the sole ground of concern is that the actuarial methods or assumptions do not appear to be prudent. However, what gives that topical salience is the flurry of press comment in the past few days about the changes in assumptions on longevity figures being proposed by the regulator. I gather that those changes are now out for consultation until May sometime. No doubt the Minister will be able to tell us a bit more about that. Potentially, those changes could have a dramatic effect on pension scheme deficits. I have seen one estimate that adds an extra £75 billion to the burden on existing schemes. Sometime this week, we will get on to risk sharing and how we can encourage various schemes to stay in business, as it were. The need for those measures is given extra urgency by these proposals.
One might say that it will cost £75 billion extra simply to reflect the fact that, for example, under the PPF’s current assumption a man will live to 87.9 years on average, which is up from 86.8 in its 2006 report and accounts. The figure being bandied around at the moment by the Pensions Regulator is 89. That is very encouraging if you are a man and, presumably, no doubt, even more encouraging if you are a woman—[Interruption.] I should tell my hon. Friend the Member for Bromsgrove, who makes a comment from a sedentary position, that the gap between the sexes is narrowing quite rapidly, although I will not speculate why that is so. Those figures raise some important issues that go way beyond the technical issue in the clause.
Regulators have been worried that schemes have been understating or underestimating the rate at which life expectancy continues to increase. I have read some statistics, which will no doubt perk up Committee members who may not have volunteered to sit on the Committee, that say that for every hour they spend here, their life expectancy increases by a quarter of an hour. That is quite dramatic.