Clause 8 - Amendments to do with Part 1

Pension Schemes Bill – in a Public Bill Committee at 10:30 am on 28th October 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 10:30 am, 28th October 2014

I beg to move amendment 6, in clause 8, page 4, line 23, leave out “that use expressions defined by this Part” and insert “to do with Parts 1 and 3”.

The amendment changes the words used to describe Schedule 1 to the Bill. This is necessary given other material that is being inserted into Schedule 1.

Photo of Linda Riordan Linda Riordan Labour, Halifax

With this it will be convenient to discuss the following:

Government amendments 29, 30 and 31 to 36.

Government motions to transfer clause 8, schedule 1 and clauses 9 to 18.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I am grateful for the Committee’s perseverance. Having skipped at a high level through the broad sweeping uplands of this legislation, we are now down—if I may mix my metaphors—in the bowels of the legislation, and I apologise for a rather lengthy trip. As before, to understand Government amendments 6, 29, 30, 31, 36 and the motions to transfer, it is necessary to explain the purpose of clause 8.

Clause 8 simply says that there is a schedule and everything interesting is in the schedule. Schedule 1 makes amendments to existing legislation necessary as a result of provisions in the Bill. A lot of schedule 1 is going through lots of other legislation and making sure that the references are compatible and consistent with what we are doing.

The changes to existing legislation in schedule 1 are necessary to ensure that the Bill and existing legislation work together. They ensure that the provisions made by this Bill and the new scheme categories are taken into account and work coherently with existing pensions legislation. In particular, schedule 1 replaces existing references to money purchase schemes. I make the distinction between money purchase schemes and money purchase benefits. We are not getting rid of the concept of money purchase benefits, but we are getting rid of the concept of money purchase schemes, because we now have three new categories of pension scheme. If we retain the term “money purchase scheme” there would be an overlap across the new DC and DA scheme definitions. It is therefore important that we clearly identify what requirements bite and in what places. Essentially, schedule 1 is a tidying up of the consequences of bringing in the new definitions.

Many of these changes do not alter the meaning. References in existing legislation to a money purchase scheme are generally replaced by references to

“a scheme under which all the benefits that may be provided are money purchase benefits”.

This does not change the effect of the legislation; the changes are technical to avoid confusion over scheme categorisation. In other cases, the new scheme categories are substituted for existing definition. To reiterate: the term “money purchase benefit” retains its existing, current meaning.

Some changes, however, have an impact on the effect of existing legislation. First, regarding the duty on the Secretary of State to pay unpaid contributions to schemes in the event of employer insolvency, the current provision is expanded to apply to collective benefits and DC schemes which provide a scheme pension to ensure equivalent and appropriate application of existing policy to the new landscape.

Secondly, on indexation, the schedule applies the exemption from indexation to DC schemes and thereby explicitly incorporates collective benefits and scheme pensions from a DC scheme to update the references and ensure that the requirement is applied appropriately in the new environment. This has no practical effect on current schemes.

Thirdly, on freezing orders, schedule 1 extends the provision to cover schemes where all the benefits are money purchase benefits and where there is also a third-party promise to ensure equivalent protection for all promised benefits under the provision.

Fourthly, on automatic enrolment, schedule 1 amends current references to scheme types to refer instead to the new scheme categories to ensure that the legislation is consistent in its use of the terms. We are basically ensuring that the new set of definitions fits into the existing legislative framework and continues our policy intent as appropriate.

Clause 8 needs to be amended to describe its purpose correctly following the restructuring of the Bill to make it work better. We need to restructure in light of the various amendments that we are making and, as part of that, we are moving provisions currently in schedule 4 so that they sit alongside other amendments to existing legislation currently in schedule 1. Amendment 29 changes the description of schedule 1 in clause 8 as a result. Amendments 30, 33 and 36 insert definitions of terms used in the Bill into existing legislation and are purely technical. Amendments 31 and 35 make clear how the new scheme categories work in relation to the new scheme categories and collective benefits. Amendment 35 and the first part of amendment 31 makes changes to existing legislation to make it clear how the new categories in part 1 of the Bill will apply. They make it clear how existing provisions apply under the new categories for wind-up, employer debt, contribution notices for the avoidance of employer debt, financial support directions and so on. In other words, we have had to sit down and think about what the new definitions imply for all the familiar things in the pensions world, such as what happens when an employer becomes insolvent, in order to get everything updated. Amendments 32 and 34 import text from schedule 4 that is being removed by amendment 40.

Although all that is rather technical, the general point is that we are trying to restructure the Bill into a more logical order, to put things in schedule 1 that belong there and to ensure that previous references to money purchase schemes are removed, but that we retain the concept of money purchase benefits. The amendments make the Bill more rational and clause 8, which enables schedule 1, will help to ensure that the Bill sits well with existing pensions legislation.

Amendment 6 agreed to.

Clause 8, as amended, ordered to stand part of the Bill.

Ordered,

That clause 8 be transferred to the end of line 6 on page 15. —(Steve Webb.)

The Bill needs restructuring in light of the proposed Government amendments. There are a number of motions to transfer provisions around. Collectively they are designed to move Part 2 of the Bill to after Part 3 and to move clause 8 and Schedule 1 to the end of what is currently Part 2.