Pensions in Parliament
It’s been another one of those funny few weeks pension-wise in the Mother of all Parliaments and I’ve picked out a few things you might be interested in. Someone must be! I mean, I can’t be the only one can I?
First off, a bit of an odd statement by the Pensions Minister, Malcolm Wicks, on the subject of insolvent employers and how the proposed Pension Protection Fund (PPF) will work. This was a Ministerial Statement made on Monday 8th November:
“We are aware that trustees of schemes whose sponsoring employers are currently in financial difficulty are uncertain as to whether they would be able to be considered for PPF compensation once the PPF is launched next year.
The Government is now able to state that eligible schemes, whose sponsoring employer has already entered insolvency proceedings may still be able to receive PPF compensation. The scheme will still have to satisfy other PPF eligibility criteria - in particular, the sponsoring employer will need to have an insolvency event after the introduction of the PPF and the pension scheme must not have commenced wind up prior to that date.
The Pensions Bill provides a power that could be used to exclude schemes that have an insolvency event before the PPF is launched. We wish to make it clear that we have no plans to use this power.”
That last line kind of hit me on first reading. Like, why provide such a power in the Bill in the first place if the idea is not to use it? Even I think that’s odd. Still, onwards and upwards…
You’ll be pleased to know, I know, that the Pensions Bill has just finished its Report Stage in the Lords and the Third Reading looks like it’s going to be next Monday, the 15th November, or to put it another way, just in time for the whole thing to get wrapped up by the Queen’s Speech the week after. Phew!
But things haven’t been that smooth back in their Lordships’ House, not by a long chalk. They’re still going on about the lack of detail contained in important parts of the Bill and the fact that so much is being left to be dealt with by regulation. In effect the Bill being voted on in the Commons is very vague and lacking in detail in places, so much so that it is difficult to see how anyone can vote on it either way.
This certainly seems to be the case with the Financial Assistance Scheme (FAS), which is supposed to be up and running early in 2005. The FAS is a sort of pre-prototype Pension Protection Fund (PPF) and is designed to give some limited financial assistance to people whose pension schemes have gone belly-up, but miss out on protection because it’s happened just before the PPF gets set up.
The Lords’ debate got quite heated on one or two specific amendments that some are trying to make to the Bill to ensure that only Government money is used to pay for the Financial Assistance Scheme. There is a worry that the combination of a lack of detail in the Bill and the implications in some statements made by Government Ministers may mean that some of the cost could be met from private industry, presumably in the same way solvent schemes will be required to support the PPF with an annual levy.
One of the statements highlighted in the debate was made by Andrew Smith, the then Minister of State for Work and Pensions, who said on 14th May this year:
“The Government will therefore make available £400 million of public money … with the possibility of further contributions from industry...”
And another, this time by Malcolm Wicks, the current Pensions Minister, on 19th May:
“It is open to industry to offer further support. We hope that that support will be forthcoming.”
The purpose of the amendments the Lords are trying to get through is that they see the cost of the FAS as the Government’s responsibility which should have no financial costs to outside interests. This is important, I think, as the cost of the FAS itself is open to a fair bit of debate. The £400 million set aside is not viewed as anything like enough by many commentators and even that figure is a bit overstated as it is only to be made available over a 20 year period. Its true value seems more like £250 million in today’s terms. But I don’t want to go over old ground on the adequacy thing, there’s a BeeLine on that already – it’s called ‘Financial Assistance Scheme Blues’ and you can click here to read it if you like.
Similarly if you want to pick up on the debate on the FAS and the proposed amendments you can follow the links here to the appropriate pages in Hansard. It’s all good stuff and I know many of you get a kick out of reading the debates. I knew you’d end up like me eventually.
This is the start of the section on the amendments.
And these are links to the start of each of the three sections of the debate - there were lengthy interruptions for Government statements so this’ll stop you having to trawl through the dross to get to the good bits.
Well, I can’t be fairer than that. It keeps you up to speed with where we are as we approach the publication date of the Pensions Act in the next week or two. It’s all getting exciting now isn’t it? I mean we only get full-blown Pension Acts every ten years or so, it’s not as if they come along all the time. The last one was in 1995 and although this one looks like it’s missing the point by a country mile just like that one did, at least we can get on with it and start looking forward to the next one in 2014 or something…..
10 November 2004
This document is based on Scottish Life's understanding of the Pensions Bill. This is draft legislation and may be subject to change.
Any research and analysis included has been provided by us for our own purposes and the results of it are being made available only incidentally.