Schedule
4
Abolition
of contracting-out for defined contribution pension
schemes
Amendment
made: No. 59, in schedule 4, page 43, line 11, leave out
‘(identification and valuation of
protected rights)’
and
insert
‘(persons who may
establish scheme)’.—[James
Purnell.]
Schedule
4, as amended, agreed
to.
Clause
16
Dispute
resolution
arrangements
Mr.
Waterson: I beg to move amendment No. 89, in
clause 16, page 19, line 36, at
end insert—
‘(4B) Upon
becoming aware of a matter of dispute, the specified person, or
trustees or managers if appropriate, should acknowledge receipt and
advise the person or persons with an interest in the scheme, in
writing, of the existence of the Pensions Advisory Service and the
assistance it can provide in relation to the dispute
resolution.’.
Before
dealing with the meat of the amendment, perhaps I may make a general
point. Although the basic provisions in clause 16 for dispute
resolution arrangements make for fascinating reading, as far as I can
determine they are pretty uncontroversial. Outside bodies seem
perfectly happy with them, so who am I to say any different?
The only
amendment that we have tabled is at the behest of the Pensions Advisory
Service, which erupted on to the scene at the end of last week with
this wording. The Minister may be able to tell me something different,
but it seems to me that PAS is making an eminently sensible,
workmanlike and practicable suggestion. For those members of the
Committee who are not aware of PAS, it is an independent organisation,
but it is funded by grant in aid from the Department for Work and
Pensions. Speaking as a constituency MP, I believe that it does
excellent work in trying to resolve a lot of complaints, problems and
concerns that individuals have about pensions issues. Indeed, in its
briefing note PAS
says:
“In the
period April 2005 to March 2006...88% of the
complaints”—
that
is 88% of the complaints referred to them—“were
resolved” and no further action was required by any other body.
That is extremely impressive; it presumably makes matters much less
stressful for the individuals involved, and presumably also saves a
great deal of money.
According to PAS, the proposed
amendment would allow pension schemes to adopt a one-stage
IDRP—for the uninitiated, that is an internal dispute resolution
procedure—and if schemes take that route, members may not become
aware of the existence of PAS until after the completion of the IDRP.
PAS says:
“It
is our experience that the resolution of disputes is more effectively
done before completion of the IDRP, and often before the procedure has
been invoked. We are therefore concerned that the unintended
consequence of the amendment as it currently reads would be an increase
in unresolved disputes which in turn would increase the level of
submissions to the relevant ombudsman services.”
It goes on to discuss its independence and
its standing within the industry, in terms of its contribution to
dispute resolution.
PAS goes on to say that the
management of complaints
“would be made more efficient if a
requirement were introduced that all written complaints had to be
acknowledged.”
That
sounds axiomatic, but perhaps it is not. The PAS also
said:
“We would
suggest the earlier involvement of TPAS in situations of disputes would
have the effect of reducing the number of cases which require the
formal deliberations of the IDRP and reduce the number of applications
to the Pensions
Ombudsman.”
That seemed
perfectly sensible, so I tabled the amendment with alacrity. On every
Bill Committee that I have ever served on, one Opposition amendment has
always been accepted and this amendment, like the golden rivet in a
ship, might be
it.
Mr.
Laws:
I promised brevity on the previous clause and that
is what I shall deliver now. We also support the amendment, but the
hon. Gentleman got in there first—he obviously reads his e-mails
more rapidly than I do. He put the case extremely well. We support the
amendment, and hope that he is right that the Under-Secretary will
accept it and that it will be one of those home runs that we have on
every
Bill.
The
Parliamentary Under-Secretary of State for Work and Pensions
(Mr. James Plaskitt):
I thank the hon. Member
for Eastbourne for the amendment and for speaking with such alacrity in
support of it.
Before
I deal with the amendment it might help to say a few words about the
purpose of the clause. The clause amends the provisions relating to the
resolution of disputes. Occupational pension schemes are currently
required to operate a formal two-stage process for dealing with
disputes between individuals and trustees. However, the process is
rather prescriptive and is bound by rigid time limits. Although the
process works well in many larger schemes, we wanted to give schemes
the opportunity to adopt something simpler and more flexible. The
change that we propose also follows recommendations that came from the
Pickering report.
We
legislated in the Pensions Act 2004 to enable schemes to simplify their
dispute resolution arrangements, by allowing them to adopt either a one
or a two stage-procedure. However, the measure was not commenced,
because doubts were raised by pension schemes and their advisers about
the extent to which the provisions would allow trustees to delegate
decisions on disputes. It is common practice for trustee boards to
delegate such decisions, often to a dedicated sub-committee, and that
is perfectly reasonable and sensible. We therefore decided that it
would be sensible to put the matter beyond doubt at the earliest
opportunity. That is the main purpose of the clause. The clause makes
it clear that a decision on a dispute does not need to be made by the
full trustee board. The decision must, however, be made by one or more
of the trustees and cannot be delegated outside the
trustee
body. That is a small but sensible provision that will enable schemes to
adopt simpler and cheaper dispute resolution arrangements, if they
prefer to do so. I
agree that the Pensions Advisory Service does valuable work. I also
know that the assistance and support that it provides is greatly
appreciated. The hon. Gentleman is quite right to refer to the 88 per
cent. success rate in resolutions and the 68,000 referrals that were
made to the service last year. Under the current two-stage
arrangements, the scheme member will be told about the Pensions
Advisory Service with the decision on the first stage. The member will
then have the opportunity to talk to the service before the matter is
reconsidered by the trustees.
The current requirement is
based in secondary legislation. It is neither necessary nor appropriate
to deal with the issue in such detail in the Bill. As I have said, the
main purpose of the changes set out in the clause is to make things
simpler and easier for schemes to implement, and to make the
legislation less prescriptive. Requiring every scheme to acknowledge
every application in writing, as the amendment proposes, might be
counter to that aim. It may be that a dispute arising from a
misunderstanding or miscommunication can be resolved quickly and easily
and that an acknowledgment would serve no useful purpose. I am also
conscious that in December we published a simplification plan in which
we committed to reducing the burden proposed by existing regulations as
well as to minimising burdens flowing from any new regulations. In
considering any new regulatory requirement, we have to measure it
against the aims and targets set out in the Department’s
simplification plan and consider it in the light of our current
deregulatory review.
We will consider the issue
carefully; I assure the Committee that we will give serious thought to
how best to ensure that people are made aware of the services offered
by the Pensions Advisory Service without imposing an unnecessary
regulatory or administrative burden on schemes. I should add that if
the clause comes into law, the secondary legislation will need to be
amended. We shall consult at that point, which would be the more
appropriate time to consider any basis of referral to the Pensions
Advisory Service.
With
those assurances, I have to tell the hon. Gentleman that this amendment
is not his golden rivet. I ask him to withdraw
it.
Mr.
Waterson:
Perhaps I shall get lucky later. I am grateful
to the Minister for that patient—indeed,
painstaking—explanation of the provisions. I was not wholly
wedded to putting the issue into the Bill, although I had a hankering
to point out to my grandchildren that I had been the architect of
section 16(4)(b) of the Pensions Act 2007. However, I am afraid that
that is not to be. The Minister has assured us that the issue will be
considered and consulted on in secondary legislation, and I am more
than happy that that should be the case. I am delighted that the
Minister is also impressed by the effectiveness and efficiency of the
Pensions Advisory Service. I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
16 ordered to stand part of the Bill.
Clause
17
Removal
of Secretary of State’s role in approving actuarial
guidance
Question
proposed, That the clause stand part of the
Bill.
Mr.
Waterson:
I shall not detain the Committee long,
Mr. Gale. Somebody once said of President Calvin Coolidge
that he looked at someone as if they had been a side dish that he had
not ordered. That thought went through my mind as I saw your face,
Mr. Gale, so I shall try to keep my contribution
short.
Clause 17 and
schedule 5 are designed to remove the requirement that the Secretary of
State should approve actuarial guidance in certain cases. The current
arrangement, set out neatly on page 82 of the regulatory impact
assessment, is that when calculating pensions liabilities all actuaries
are supposed to use agreed guidelines, to ensure consistency. For
reasons beyond my comprehension, those are called either
“guidance notes” or a “technical
memorandum”.
Various bits
of primary legislation require the Secretary of State to approve three
of those guidance notes—although there are seven altogether; I
do not know who approves the other four—and the one technical
memorandum. I understand that the Institute of Actuaries in England and
Wales and the Faculty of Actuaries in Scotland, which combine the roles
of regulator and professional body, have always prepared those
documents. Owing to their dual role and what might have been described
or perceived as a conflict of interest, they were required to obtain
the Secretary of State’s approval. That was said to be to
maintain the public’s confidence, although I cannot imagine for
the life of me that many members of the public are even aware that the
things exist, let alone who prepares
them.
2.15
pm
In its 2005
report, the Morris review concluded that the Financial Reporting
Council should establish a new regime to set actuarial standards and
oversee the regulation of the profession. The Government have accepted
the recommendation, and in turn the FRC has set up the Board for
Actuarial Standards—oh to be a fly on the wall at its meetings!
That is no doubt a relief to the Faculty of Actuaries and the Institute
of Actuaries, which continue to have an important role as the
professional bodies for their
profession.
I
understand that on 6 April this year the board will take over
responsibility for the guidance notes and technical memorandums. At
that stage, the FRC and the BAS become the UK’s independent
regulator for corporate reporting and governance, and there is no
longer a need for the Secretary of State to have a role. I am sure that
that will come as a great relief to him, as he already has quite enough
on his plate—the pensions crisis, the failure to tackle reform,
the failing Child Support Agency. I could go
on.
In
a nutshell, the proposal seems to be uncontroversial and therefore we
support it. Indeed, I am emboldened in that view by a Library note
which tells me that the equivalent provisions in the Companies (Audit,
Investigations and Community Enterprise) Act 2004 did not even merit
discussion during its Committee stage.
Mr.
Plaskitt:
I shall now demonstrate that I share in the hon.
Gentleman’s enthusiasm for the clause. I begin by cautioning him
about praying in aid the late President Calvin Coolidge. He should
remember that when that President died—in 1923, I
believe—his death was reported to a dinner party, and the
response was, “How could they
tell?”
Mr.
Waterson:
Dorothy Parker said
that.
Mr.
Plaskitt:
Indeed,
yes.
As
the hon. Gentleman said, clause 17 and schedule 5 remove the Secretary
of State’s role in approving actuarial guidance. This arises
from one of the recommendations of the Morris review of the actuarial
profession. Clause 17 introduces schedule 5, which amends nine
references in legislation. It removes the requirement for the Secretary
of State to approve prescribed actuarial guidance notes and, in other
cases, it removes the power to make regulations to prescribe that the
Secretary of State approve such guidance. The references can be found
in the Bankruptcy (Scotland) Act 1985, the Insolvency Act 1986, the
Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act
2004.
Actuarial
guidance is currently produced by the Institute of Actuaries in England
and the Faculty of Actuaries in Scotland. It ensures that all actuaries
calculate pension liabilities on a consistent basis. The Faculty and
Institute of Actuaries is also the professional body for actuaries. In
order to ensure that there is no conflict of interest between those
roles, legislation requires certain actuarial guidance to be approved
by the Secretary of State. However, following the Morris review, the
actuarial profession is now subject to independent oversight by the
Financial Reporting Council, which is the independent regulator for
corporate reporting and
governance.
The FRC
will establish the Board for Actuarial Standards to set technical
standards for actuaries and to oversee the prescribed actuarial
guidance. The Faculty and Institute of Actuaries remains the
professional body for actuaries. It is therefore no longer necessary or
appropriate for the Secretary of State to approve actuarial guidance. I
commend clause 17 and schedule 5 to the
Committee.
Question
put and agreed to.
Clause 17 ordered to stand
part of the Bill.
Schedule 5 agreed
to.
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