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Lord Mackay of Ardbrecknish: My Lords, I did say Amendment No. 273. The noble Baroness is quite right. Clearly, she is listening. I was performing a little test to see whether everyone was listening. I should not have said Amendment No. 273. I should have said Amendment No. 237. This will probably not be the first time I get my numbers mixed up—and a great number there are.

I was talking about hybrid schemes. The new clause inserted by the amendment is a positive response to points raised during consultation and which arose in the other place. It will allow considerable scope for prescribing conditions in regulations to allow us to consider the consequential amendments which may be needed to make this work properly. This is a wide-ranging regulation-making power and we have

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therefore concluded that any regulations made under it should be exercised by the affirmative resolution procedure. Amendment No. 237 achieves that.

Amendments Nos. 338, 341, 354 to 359, 361 to 369, 372, 373, 385, 392 to 397 and 399 to 401 are designed to simplify the legislation. That may not at first sight appear to be apparent. However, they concern the legislation relating to determining and reviewing procedures covering contracted out matters. They will allow the contributions agency to deal with administrative matters such as the issue, variation and withdrawal of contracting out certificates. Our intention is broadly to mirror in regulations the arrangements currently followed by the Occupational Pensions Board. Other areas where there may be disputes, such as the questions about whether an employment is or should be treated as contracted out, will follow the established procedures which are set out in Section 17 of the Social Security Administration Act 1992. We believe that this will provide a more streamlined and logical structure to the legislation covering determination and reviews.

I have attempted to give a very brief but magical mystery tour along the motorway of contracting out. There are some byways which I have not gone down. But if some noble Lords wish me to go down a byway, I shall do my best to deal with any points that arise. Perhaps I may say a word for clarification. Amendment No. 273 is not in this group. I should have said Amendment No. 237. I beg to move.

Moved, That the House do agree with the Commons in their Amendments Nos. 205 to 228.—(Lord Mackay of Ardbrecknish.)

On Question, Motion agreed to.


COMMONS AMENDMENTS
229Clause 130, page 87, line 20, after 'rights' insert '(a)'.
230Page 87, line 22, after 'which' insert '(i)'.
231Page 87, line 22, at end insert:
'(ii) satisfies such conditions as may be prescribed, and
(b) at the end of the interim period, in such of the ways permitted by the following subsections as the rules of the scheme may specify." '.
232Page 87, line 27, leave out '(1A)' and insert '(1A) (a)'.
233After Clause 132, insert the following clause:

Extension of interim arrangements to occupational pension schemes

'. Regulations made by the Secretary of State may provide that sections 130 to 132 shall have effect, subject to prescribed modifications, in relation to protected rights under an occupational pension scheme as they have effect in relation to protected rights under a personal pension scheme.'.

Lord Mackay of Ardbrecknish: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 229 to 233. This time I am happy to tell the House that I have no other amendments to speak to in this group.

This group of amendments deal with flexible annuities. Amendments Nos. 229 to 232 are about interim arrangements which will allow people to withdraw income from their personal pension fund

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before committing it to buying an annuity. They deal with situations where someone dies without leaving a widow or widower during the period when they are withdrawing income in this way or where a widow or widower dies. The Association of British Insurers has alerted us to the fact that the Bill does not deal adequately with these situations. We intend that the residual fund of protected rights should pass to the estate of the deceased. These amendments will provide the power to make regulations so that we can set these arrangements out in more detail.

The new clause inserted into the Bill by Amendment No. 233 builds on the arrangements in the Bill to permit income withdrawal from protected rights in a personal pension. These are the rights built up from contracted out national insurance contribution rebates. The purpose of the new clause is to pave the way for regulations which will allow members of contracted out money purchase occupational pension schemes to enjoy a similar facility at some point in the future.

There has been a wide welcome for flexible annuities. A number of people in the pensions world and elsewhere have asked why the arrangements do not also extend to money purchase occupational pension schemes. That point was made by the noble Lord, Lord Haskel, on 21st February. I explained then that there was a very different tax regime for occupational schemes but that we were prepared to consider ideas for introducing more flexibility. We have listened carefully to the debate. We recognise the strength of the argument for treating money purchase occupational schemes in a similar way to personal pensions. The Inland Revenue is even now working on this. Discussions on the detailed arrangements for money purchase occupational pension schemes are being held with the occupational pensions scheme joint working group. We shall then consult about the precise arrangements for dealing with protected rights. This will include when any new arrangements should start. So the powers in this new clause will allow us to bring forward regulations to extend flexible annuities to money purchase occupational schemes. I beg to move.

Moved, That the House do agree with the Commons in their Amendments Nos. 229 to 233.—(Lord Mackay of Ardbrecknish.)

On Question, Motion agreed to.


COMMONS AMENDMENTS
234After Clause 132, insert the following clause:

Discharge of protected rights on winding up: insurance policies

'.—(1) After section 32 of the Pension Schemes Act 1993 there is inserted—
"Discharge of protected rights on winding up: insurance policies.

32A.—(1) Where an occupational pension scheme is being wound up and such conditions as may be prescribed are satisfied, effect may be given to the protected rights of a member of the scheme (in spite of section 28) by—
(a) taking out an appropriate policy of insurance, or a number of such policies, under which the member is the beneficiary, or

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(b) assuring the benefits of a policy of insurance, or a number of such policies, to the member, where the policy assured is an appropriate policy.
(2) A policy of insurance is appropriate for the purposes of this section if—
(a) the insurance company with which it is or was taken out or entered into—
(i) is, or was at the time when the policy was taken out or (as the case may be) the benefit of it was assured, carrying on ordinary long-term insurance business (within the meaning of the Insurance Companies Act 1982) in the United Kingdom or any other member State, and
(ii) satisfies, or at that time satisfied, prescribed requirements, and
(b) it may not be assigned or surrendered except on conditions which satisfy such requirements as may be prescribed, and
(c) it contains or is endorsed with terms whose effect is that the amount secured by it may not be commuted except on conditions which satisfy such requirements as may be prescribed, and
(d) it satisfies such other requirements as may be prescribed".
(2) At the end of section 28 of that Act, as amended by this Act, (ways of giving effect to protected rights) there is inserted—
"(9) This section is subject to section 32A".'.
235After Clause 132, page 90, line 4, leave out 'the' and insert 'an'.


236After Clause 133, insert the following clause:—

Earner employed in more than one employment

'.—(1) Paragraph 1 of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (Class 1 contributions where earner in more than one employment) is amended as follows.
(2) For sub-paragraph (3) there is substituted—
"(3) The amount of the primary Class 1 contribution shall be the aggregate of the amounts determined under the following paragraphs (applying earlier paragraphs before later ones)—
(a) if the aggregated earnings are paid to or for the benefit of an earner in respect of whom minimum contributions are payable under section 43(1) of the Pension Schemes Act 1993 (contributions to personal pension schemes), the amount obtained by applying the rate of primary Class 1 contributions that would apply if all the aggregated earnings were attributable to employments which are not contracted-out to such part of the aggregated earnings so attributable as does not exceed the current upper earnings limit (referred to in this paragraph as "the APPS earnings"),
(b) if some of the aggregated earnings are attributable to COMPS service, the amount obtained by applying the rate of primary Class 1 contributions that would apply if all the aggregated earnings were attributable to COMPS service—
(i) to such part of the aggregated earnings attributable to COMPS service as does not exceed the current upper earnings limit, or

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(ii) if paragraph (a) applies, to such part of the earnings attributable to COMPS service as, when added to the APPS earnings, does not exceed the current upper earnings limit,
(c) if some of the aggregated earnings are attributable to COSRS service, the amount obtained by applying the rate of primary Class 1 contributions that would apply if all the aggregated earnings were attributable to COSRS service—
(i) to such part of the aggregated earnings attributable to COSRS service as does not exceed the current upper earnings limit, or
(ii) if paragraph (a) or (b) applies, to such part of the earnings attributable to COSRS service as, when added to the APPS earnings or the part attributable to COMPS service (or both), does not exceed the current upper earnings limit,
(d) the amount obtained by applying the rate of primary Class 1 contributions that would apply if all the aggregated earnings were attributable to employments which are not contracted-out to such part of the aggregated earnings as, when added to the part or parts attributable to COMPS or COSRS service, does not exceed the current upper earnings limit".
(3) For sub-paragraph (6) there is substituted—
"(6) The amount of the secondary Class 1 contribution shall be the aggregate of the amounts determined under the following paragraphs (applying earlier paragraphs before later ones)—
(a) if the aggregated earnings are paid to or for the benefit of an earner in respect of whom minimum contributions are payable under section 43(1) of the Pension Schemes Act 1993, the amount obtained by applying the rate of secondary Class 1 contributions that would apply if all the aggregated earnings were attributable to employments which are not contracted-out to the APPS earnings,
(b) if some of the aggregated earnings are attributable to COMPS service, the amount obtained by applying the rate of secondary Class 1 contributions that would apply if all the aggregated earnings were attributable to COMPS service to the part of the aggregated earnings attributable to such service,
(c) if some of the aggregated earnings are attributable to COSRS service, the amount obtained by applying the rate of secondary Class 1 contributions that would apply if all the aggregated earnings were attributable to COSRS service to the part of the aggregated earnings attributable to such service,
(d) the amount obtained by applying the rate of secondary Class 1 contributions that would apply if all the aggregated earnings were attributable to employments which are not contracted-out to the remainder of the aggregated earnings".
(4) At the end of that paragraph there is added—
"(9) In this paragraph—
"COMPS service" means service in employment in respect of which minimum payments are made to a money purchase contracted-out scheme,

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"COSRS service" means service in employment which qualifies the earner for a pension provided by a salary related contracted-out scheme".
(5) Until the principal appointed day, that paragraph, as amended by this section, shall have effect as if—
(a) for sub-paragraph (3) (b) there were substituted—
"(b) if some of the aggregated earnings are attributable to service in contracted-out employment, the amount obtained by applying the rate of primary Class 1 contributions that would apply if all the aggregated earnings were attributable to such service—
(i) to such part of the aggregated earnings attributable to such service as does not exceed the current upper earnings limit, or
(ii) if paragraph (a) applies, to such part of the earnings attributable to such service as, when added to the APPS earnings, does not exceed the current upper earnings limit",
(b) sub-paragraph (3) (c) were omitted,
(c) in sub-paragraph (3) (d), for "COMPS or COSRS service" there were substituted "service in contracted-out employment",
(d) for sub-paragraph (6) (b) there were substituted—
"(b) if some of the aggregated earnings are attributable to service in contracted-out employment, the amount obtained by applying the rate of secondary Class 1 contributions that would apply if all the aggregated earnings were attributable to such service to the part of the aggregated earnings attributable to such service",
(e) sub-paragraph (6) (c) were omitted, and
(f) in sub-paragraph (9) the definitions of "COMPS service" and "COSRS service" were omitted.'.


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