Pensions Bill gets its second reading in the House
On Tuesday this week the Pensions Bill got its ‘second reading’ in the House of Commons. This all sounds pretty official and everything, but it doesn’t really amount to much. The real debates on the detail (or lack of it) will now follow as the Bill goes through the so-called Committee Stage of its progress towards altering the laws of the land. The real nitty-gritty gets underway in a few weeks time, in fact, after the Budget speech, and that’s when we’ll see all the bits and pieces we’re interested in being discussed.
But, in the meantime, I have to say I enjoyed reading the Hansard report of the ‘debate’ on the second reading and, just in case you may too, I’ve arranged for edited highlights to be attached here for your amusement:
Pensions Bill Second Reading:
House of Commons – Tuesday 2nd March 2004
Edited Highlights (prepared by the Jackson Consultancy)
Andrew Smith MP: “[The Pension Protection Fund] is essentially an insurance scheme and no insurance scheme can protect you against events that have already happened… The Bill contains proposals to improve pension protection, make schemes easier to run and help encourage people to plan properly for their retirement.”
Rt Hon Andrew Smith MP, the Work and Pensions Secretary, opened the Second Reading of the Pensions Bill. With the protesters in Parliament Square chanting in the background, Smith rejected calls for the new Pension Protection Fund to be extended to workers who had already lost out when their firms went bust. He introduced an amendment so that employers would be made to consult employees over any changes to a pension scheme. Inflexible funding rules would be replaced by a system allowing firms to create a formula that would allow the best performers to take a longer-term view of investment, he said. The Bill would also reduce the level of inflation protection that is required to be built-in from 5% to 2.5%. Smith then went on to discuss in detail how people would also be allowed to take their state pensions late in order to get higher payments or a lump sum later.
David Willetts MP: “You are almost alone in believing that the spread of means-testing is a desirable or long-term approach to state pension provision.”
In response to Smith, the Shadow Work and Pensions Secretary David Willetts MP said his party backed the principle of pension insurance but said that his party found the Bill “most unsatisfactory.” Willetts argued that one of the main problems with the legislation was that it did not tackle the problem of those people already affected by company pension wind-ups. He added that the proposals would also make it less likely that employees would be willing to serve as trustees of their pension schemes.
Frank Field MP – the former Minister for Welfare Reform once famously charged with “thinking the unthinkable” – welcomed the Pensions Bill. However he asked Ministers to look at a long-term strategy for savings and pension provision. Confidence in the system was being undermined he said, and therefore many people felt that it was not in their best interests to save. He also recommended that workers who had already lost out in pension scheme wind-ups should be compensated out of taxes or unclaimed assets, and not by future generations.
Steve Webb MP: “This Bill is a missed opportunity. It was a real chance to simplify things. In fact it has made things far more complicated."
Steve Webb MP, the Liberal Democrat Pensions Spokesperson – said that the Pension Protection Fund was a “messy hybrid.” He urged Andrew Smith to calculate precisely how it would be a lender of last resort. He also backed the call to compensate those who had already lost out through pension scheme wind-ups, and he expressed some support for the idea of this compensation being drawn from unclaimed assets.
So, nothing new there really, and no surprise announcements for us to worry about either. Just another step in the ‘onwards and upwards’ progress towards pension simplification…...
4 March 2004
This document is based on the Hansard report of the debate on the second reading of the draft Pensions Bill published on 12 February 2004. This is draft legislation and may be subject to change.