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Mr. Flight: At the time that stakeholder contributions
were invited and received last November, the LISA
proposal was not an option; it came later.
Mr. Timms: The measures represent the results of the
full consultation on the proposals that were published in
November 1997. The Green Paper, "A new contract for
welfare: PARTNERSHIP IN PENSIONS," made a clear
and full reference to the fact that the Treasury would issue
a consultation paper I refer the hon. Gentleman to
paragraphs 38 and 39 on page 55. That is what has
happened. The Treasury consultation document, which
was issued and launched jointly by the Chancellor and my
right hon. Friend the Secretary of State, makes it clear
that no primary legislation is required to implement its
contents; only secondary legislation is required. That is
why the Bill contains nothing on that point. In response
to the point made by the hon. Member for Gainsborough,
I am confident that ample time will be available to
consider all the measures in the Bill. At a relatively early
stage of our deliberations we shall consider the measures
on pension splitting on divorce. I want to speak briefly
about that in a moment.
Mr. Pickles: The Minister made a point about
regulations in relation to the LISA and the stakeholder.
Will he give the Committee an indication of the timing of
those regulations? Will we have an opportunity to see
some of the regulations in conjunction with the Bill, so
that we can understand their implementation?
Mr. Timms: We envisage that a series of consultation
documents will be issued. Some of those will be issued
before all stages of the Bill are complete, but the pattern
that we are following is similar to that which was
followed in previous pensions legislation. The framework
in the Bill alone will allow the Committee to reach firm
conclusions.
Mr. Pickles: Are there any consultations or draft
regulations that the Committee might be able to see in
relation to early clauses? If so, our deliberations would be
speeded up.
Mr. Timms: No, it would not be appropriate to do so.
Consultation documents will be issued before the summer
and draft regulations will be published according to the
normal process, which is similar to that which was
followed in relation to the Pensions Act 1995.
On pension splitting divorce, I want to make one point
to correct a misapprehension that could result from a
remark made by the hon. Member for Grantham and
Stamford. The Bill will not make pension sharing
automatic; neither will the beneficiary gain a half share of
the pension the hon. Gentleman gave the example of a
friend. Each case will be agreed by the parties or the
courts, on the merits of the individual case. The Bill will
make that possible in a way that did not exist in the past,
which is an important step forward. The key points are
fairness and allowing pensions to be treated in the same
way as other assets.
The Bill moves the welfare system in a radically
different direction. We are changing the old passive
system, which had many of the flaws that the hon.
Gentleman had started to talk about
Mr. Leigh: Before the Minister completes his
peroration he has been kind enough to mention my
point will he make one easy commitment? It would only
be necessary for the Government to move a guillote if
hon. Members were filibustering. It would be out of order
for hon. Members to do so, however, and it would not
therefore happen. Opposition Members are not going to
filibuster anyway. Will the Minister make a commitment
that a guillotine motion will not be introduced before we
reach the issue of pension splitting on divorce? I am sure
that he can make such a commitment with great ease.
Mr. Timms: If hon. Members look at the order of
consideration motion, they will see that we will quickly
reach the pension splitting on divorce measures, and I
have no doubt that we will deal with them fully.
The Bill represents a radical change of direction for the
welfare system. We inherited a passive system, which led
to a number of the problems to which Opposition
Members have rightly drawn attention. We want an active
system, which is what the Bill will achieve. I look forward
to our deliberations over the coming weeks, in accordance
with the sittings motion.
Mr. Quentin Davies: I had not intended to catch your
eye at all, Mr. Malins. I will not speak for long, but in the
light of the Minister's remarks I must make one point,
which goes to the heart of our proceedings. I hope that
we have a straightforward and honest debate and that we
discuss in turn the important points that arise. If the
Government find themselves in difficulty, I hope that they
will not try to extricate themselves by sleight of hand. My
criticism of the Government for not taking children into
account in the provisions on pension-splitting is serous
and valid. The Government were embarrassed about that,
so the Minister rose to his feet and said that they are
mentioned in another part of the Bill, but he was thinking
of the mobility allowance, which is a different matter.
Children are not mentioned in the pension splitting
provisions and we shall try to ensure that they are. We do
not want the Government to shilly-shally.
What the Minister said about the consultation exercise
was more of the same and worse. I am aware that the
Government produced a document in November 1997, but
it was a list of questions, not legislative proposals. It
contained no framework and it was not a consultation
paper because there were no proposals on which to
consult The Government did not know what they were
doing at that stage, so they sent out a list of questions and
received all sorts of answers. They then took a very long
time over a year to produce the Green Paper. That was
the document on which there was consultation and which
carried a deadline of 31 March. It was the document on
which people were set to work in the hope that they would
be able to influence the proposals that the Government
were making for the first time. The Treasury then
produced the LISA proposals a month or so ago, which
were not anticipated in the original Green Paper.
The Government did not allow the consultation period
to expire before introducing the Bill. They cannot get
away from the fact that the Green Paper had a consultation
period and a deadline, and the Government have breached
both. I had asked the National Association of Pension
Funds for comments on the Bill and it stated in a letter
dated 24 February:
"As you are aware, the NAPF is still in the process of
drawing up its response to the Green Paper. It is unlikely
that we shall submit our response until shortly before the
31 March deadline".
So much for the idea of the NAPF being happy with the
present situation or being able to formulate their proposals
to the consultation exercise before the Bill was
introduced.
Question put and agreed to.
Resolved,
That, during proceedings on the Welfare Reform and Pensions
Bill, the Committee do meet on Tuesdays at half-past Ten o'clock
and at half-past Four o'clock except on Tuesday 9 March when the
Committee will meet at half-past Ten o'clock only, and on
Thursdays at Ten o'clock and at half-past Two o'clock.
The Chairman: I remind hon. Members that there are
financial resolutions in connection with the Bill and
copies are available in the Room.
I also remind hon. Members that adequate notice should
be given of amendments. As a rule, my co-Chairman and
I do not intend to call starred amendments, including
starred amendments that may be reached during an
afternoon sitting of the Committee.
Resolved,
That the Bill be considered in the following order, namely:
Clauses 1 to 5, Schedule 1, Clauses 6 to 14, Schedule 2,
Clause 15, Schedule 3, Clauses 16 and 17, Schedule 4, Clauses 18
to 27 Schedule 5, Clauses 28 to 42, Schedule 6, Clauses 43 to 47,
Clause 50, Clause 48, Schedule 7, Clause 49, Clause 60, Clause 58,
Clause 51 to 57, Clauses 61 to 68, Clause 71, New Clauses, New
Schedules, Clause 59, Schedule 8, Clause 69, Schedule 9,
Clause 70, Clause 72, Schedule 10, Clauses 73 to 75. [Mr. Timms.]
Clause 1
"Meaning of stakeholder pension scheme"
Mr. Quentin Davies: I beg to move, amendment
No. 1, in page 1, leave out lines 7 to 11 and insert
`(a) A pension scheme is a stakeholder scheme for the purposes
of this Part if it fulfils all the conditions of this section.'
The Chairman: With this it will be convenient to take
amendment No. 7, in Clause 2, page 2, leave out lines 31
to 33.
Mr. Davies: Clause 1 establishes the concept of
stakeholder pensions. The Government are in considerable
confusion. The Department of Social Security has an
attachment to the idea of a stakeholder pension, which
it states explicitly in its consultation document will be
established by means of a trust. That is clear and there is
no suggestion in the consultation document that any other
formula or structure will be introduced and there is no
statement that the Treasury will bring forward a
non-trust-based alternative pension view. The DSS is
committed to the idea of a trust. We believe that trusts
form a valuable part of English law and have played a
valuable part in our pensions industry and its history.
This country's substantial pension provision about £800
billion which is largely managed by trusts, is extremely
well managed, on the whole, on behalf of its beneficiaries.
Of course, there have been some nasty scandals for
example, the Maxwell scandal. The previous Government
rightly responded by strengthening the protection for
those pension assets that exist under trust law.
I would have thought that there was common ground
between the Opposition and the Government on that
matter, but I do not know whether the Government have
thought through the issues sufficiently to have a clear
view on many of them. However, that is certainly the
ground on which the Conservative party has stood and
will continue to stand. Nothing in the amendment should
be interpreted as casting aspersions on the validity of the
trust system and its appropriateness for many sorts of
pension vehicles, or on the excellent work done by unpaid
trustees throughout the country, who sit on the boards of
the many pension schemes. I pay tribute to their work, as
I have had the privilege of meeting many of them in my
present capacity as Opposition spokesman on the subject.
12.30 pm
However, is it sensible to ensure that all stakeholder
pensions are set up in the form of trusts? The Green Paper
stated that that would be the case, but the Government do
not really know. They have suggested that there should
be a trust. However, clause 1(2) states:
"The first condition is that the scheme is established under a
trust"
but it goes on
"or in such other way as may be prescribed."
If the Government continue to want all stakeholder
schemes to be set up under a trust they stated that in
the Green Paper presumably only the first few words of
subsection (2) will be appropriate. However, if they
think as we do and as the Treasury and other
Government Departments appear to do that other
vehicles may be equally appropriate, why mention a trust
anyway? It seems otiose and potentially deceptive to do
so.
We established this morning that, unfortunately, the
Government's attitude to welfare reform means that the
number of people in whose interests it is to be involved
in a stakeholder scheme is steadily reducing. However,
we should make it as easy and cheap as possible for those
people to become involved in such schemes. We want to
move into the new regime with a minimum of disruption.
We want a system that is not exclusive, but inclusive and
that is not limiting but incremental. In other words, we
want a system that will preserve the perfectly good
pension provisions, pension instruments and pension
vehicles that exist and that will encourage people to make
further contributions to them. However, were an
alternative vehicle to be more appropriate or more
attractive, for which there is no current provision, we
would not only be open-minded but enthusiastic about the
introduction of such provisions, and we would readily
work with the Government on that matter.
The first part of the amendment deals with the right of
the trustees of a personal pension scheme to adjust that
scheme so as to ensure that it qualifies as a stakeholder
pension. The Bill is ambiguous as to what qualifies as a
stakeholder pension. A subsequent amendment deals with
whether one could still be prevented from holding a
stakeholder pension, whatever one did, because the
Occupational Pensions Regulator Authority had refused to
register the pension holder. However, that is covered by
a subsequent amendment and I shall not dwell on it now.
We have tabled the amendment because we believe
that, where existing pension vehicles serve their purpose,
they should continue and should be subsumed in the new
regime. People should not be discouraged from continuing
to contribute to them least of all should such pensions
be ruled out as an appropriate stakeholder scheme. Our
approach, which is different from the Government's, is
permissive rather than restrictive, particularly in regard to
vehicles that have proved their worth in the past.
Amendment No. 7 deals with the continuation of
occupational pension schemes. Amendment No. 1 deals
with personal pension schemes. In the regime that we
believe would be appropriate I see no reason why the
Government should object to it and I hope that they are
listening with a genuinely open mind employers would
have an obligation to make a stakeholder facility available
to their employees: that is to say, they will make available
information and a payroll deduction facility for pension
provision. In a later amendment we seek a reduction, so
that not all employers but only those employing more than
10 people would have that obligation. For reasons that I
shall subsequently explain, we believe that it would not
be appropriate for all employers.
However, employers who have an obligation could
allow employees to choose any appropriate vehicle and to
set up the payroll deduction facility in response to that
vehicle. Where the employee has a personal pension
facility, perhaps because the employer does not offer an
occupational pension or because the employee brought it
from a previous employment or previous period of
self-employment, it may be against his interests to have
to abandon it and take up another personal pension or
invest in another vehicle. It could be disruptive and
expensive, because he may already have paid set-up
charges that he was hoping would be amortised over his
future working life. The charges will be spread over fewer
years if he has to move out of that personal pension
scheme and into something else.
Therefore, we want to encourage the qualification of
personal pension schemes as stakeholder pensions rather
than exclude them a priori, as I fear will be the effect of
the Bill. One can never be certain what the effect of a Bill
will be when it includes so much provision for so many
regulations, which the Government have not told us about
in advance. They have now said that they will not tell us
about them.
Throughout our proceedings, if I make a good case
against a provision in the Bill, Labour Members will be
able to stand up and say either that I am wrong for reasons
X, Y and Z or, "The hon. Member is perfectly right, but
the Government were proposing changes anyway. That is
why we provided ourselves with this open-ended
regulatory power." We shall play that game in every
debate. I mention it now so that it will not come as a
surprise to us if that is the response.
If we ignore the open-ended regulatory power, the Bill
will exclude personal pensions, which would be extremely
unreasonable and undesirable for individuals. We want
people to have as wide a choice as possible. Where
personal pensions are the most appropriate choice, we
want the pension holder to be able to continue with it.
The Minister of State may have two legitimate objections
to that. He may say that, in some cases, the personal
pension is not the best choice, that there is something
better: it may be cheaper to move into a LISA. He is
unlikely to say that, because the LISA is the Treasury's
baby. I doubt whether we shall hear anything nice about
LISAs during our debates. The Minister of State will say
that his own trust-based, stakeholder pensions are the best
choice. Where it is sensible to make a change, we are the
first to say that the employee should be able to make it
and that the change should be facilitated. Indeed, we have
tabled amendments dealing with the cost of making such
transfers. The presumption is that, where a person has a
good pension scheme, it may not be sensible to change.
There may be cost implications of changing, which would
be negative, or the policy holder may be happy with the
scheme and its fund management. He may say, "I don't
want to be taken away from this fund management. It is
doing rather well for me."
I anticipate that the objection will be that a personal
pension is not appropriate. That is fine because our
amendments would open choices to enable people to do
what is in their best interest. I also anticipate the objection
that in certain circumstances a personal pension scheme
would not qualify as a stakeholder pension because it
would be inappropriate. There is no point in taking up our
time by considering various theoretical examples, such as
what would happen if a scheme were run by Mr. Maxwell.
The second half of the amendment provides for that. It
says:
"The Occupational Pensions Regulatory Authority shall have the
power to make rules to specify on what terms and under which
conditions the power under subsection (1AA) may be exercised.
The amendment does not provide carte blanche
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