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Baroness Turner of Camden moved Amendment No. 47:


Page 30, line 2, after ("transferred") insert ("such that each year of service in the Authority pension scheme gives rise to at least one year of service in the pension scheme to which the amounts are transferred").

The noble Baroness said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 51, 52, 53, 57, 58 and 59. The intention of the amendments is to give year-for-year transfer benefits from the authority pension scheme to the new one. Without the amendments, it is up to the Secretary of State or the authority to decide how transfer values to the new pension schemes are calculated.

It is possible that the Government would consult the Government Actuary, but the unions representing the employees are not all that happy about that. Their fears have already been made plain at previous stages of the Bill when it was discussed in the other place. Therefore a simple, easily understood formula is required, and this is the formula suggested. In view of what has been said on the previous amendments, I am afraid the Government are not likely to take kindly to Amendments Nos. 57 and 58.

The intention of those amendments is to compel a new scheme to provide like-for-like benefits, apart from injury and redundancy benefits which we understand cannot be part of a tax-exempt scheme. Without the amendments, the Secretary of State or the authority could trade off between the terms of the old and the new pension schemes and other terms and conditions of employment.

I understand that the Government position—I had some hint of it on the previous amendment—is that new pension schemes should be able to offer a different mix of benefits, but again that mix of benefits could result in the loss of index linking. As I have already said, the unions and the employees whom they represent would view that with a great deal of concern.

I understand that the Government may be relying on advice from the Government Actuary's Department, but the GAD bases its advice and its assumptions on the idea that inflation may never rise above 5 per cent. per annum. We all hope that it will not, but it may well do in the future. Therefore the employees concerned would

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value an index-linking arrangement without a ceiling of 5 per cent. per annum. I know that 5 per cent. is common in private sector schemes, but that has not been the case with public sector schemes. For those reasons we want to maintain the ability to have complete coverage for the future. I beg to move.

Lord Fraser of Carmyllie: When I spoke earlier to Amendment No. 16, to which the noble Lord, Lord Thomson, spoke, I made a number of observations relating to redundancy benefits. This is not his fault; it is entirely mine. When I said to him that the amendments did not add anything to the protection already available under the TUPE regulations, I was in fact referring to Amendments Nos. 14 and 15 which were not moved but which he may recall were part of the same group. Rather than write to the noble Lord and others later, it might be helpful if I were to clarify the position.

Under the Bill, employees will benefit from the protection given by TUPE. Their consent, or that of the trade union acting on their behalf, would be required before changes in the contractual redundancy terms could be made. I hope that that brief clarification is helpful.

Despite the fact that the amendment was moved briskly by the noble Baroness, perhaps I may take a moment or two to explain our position on pensions. That may save us time and allow for some consideration of the Government's position before we return to the matter on Report.

As I said previously, every privatisation and related set of pension provisions is different, but that is not to go back on what I have just said about the Railways Act. The provisions have to be tailored to the particular circumstances applying. We have sought to tailor the pension provisions in the Bill to the particular circumstances of AEA Technology.

Some public sector companies already had funded pension schemes which were in the private sector mould and so could be transferred and continued on privatisation. In some cases whole industries were being moved from the public to the private sector and the specialised nature of the work of those employees was likely to lead to movement between many new employers emerging from a single public-sector organisation.

In those circumstances it was not unreasonable that some additional protection was given to employees to ensure that their pension rights could continue to accrue on the same basis while they remained in that industry. However, protection of that kind has been very much the exception rather than the rule. In other privatisations—for example, the privatisation of the Property Services Agency —there were no specific pensions provisions at all because they were not considered to be either appropriate or necessary.

The United Kingdom Atomic Energy Authority pension schemes cannot be directly converted into private sector tax exempt occupational pension schemes. It would, therefore, not be possible to replicate the authority schemes in the private sector. At the risk of repeating myself, the approach that we have taken is to

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ensure that those employees transferring who participate in an authority scheme will be able to join another pension scheme, either a new or an existing scheme, operated by their new employer. The Bill provides the protection that it must be no less favourable overall than the authority scheme.

The phrase "no less favourable" means that the benefits overall must be at least equivalent to the benefits in the authority scheme, although, as the noble Baroness indicated, the mix of those benefits may be different. For example, if a pension in the new scheme was based on one-sixtieth of pensionable final pay for each year of service rather than one-eightieth, as in the authority schemes, that could be a significant improvement. There would then need to be a reduction in other benefits to compensate for that improvement.

The Government Actuary, who has wide experience in these matters, would be asked to verify that the new scheme met the requirements of the schedule; that is, taken as a whole, that it was no less favourable than the authority scheme. The Government Actuary is completely independent and impartial in these matters. In coming to his view, he would make the criteria that he had used available so that interested parties could scrutinise them for themselves. I do believe that the actuary is independent, but should there be any suspicion that he is not, I believe that that assurance is most important.

The amendments proposed would restrict the ability of the vendor to decide that a new scheme was comparable when the provisions of the scheme were taken as a whole. Leaving aside redundancy and injury benefits, they would effectively require each and every other benefit to be at least as good as at present. That is not possible. As I have already indicated, there are some features of the authority schemes which cannot be reproduced in a tax exempt occupational pension scheme. While they include certain redundancy and injury benefits as reflected in the noble Baroness's amendments, they are not the only examples of the point. There are other benefits in the authority schemes which mean that if the amendments were accepted the new scheme could not be a tax exempt scheme.

I am not sure that employees would thank the noble Baroness if they had to pay tax on their own and their employers' pension contributions and also on lump sum benefits paid from the scheme. That might be the effect of the amendments and represents one very good reason why they are unacceptable.

I have a number of further detailed points to make, but I believe that I have probably spelled out sufficiently our reservations on the amendments. Clearly, the noble Baroness will want to reflect on what I have said. Indeed, I expect that she will want to return to the matter at a later stage. However, for present purposes I hope that I have given sufficient explanation on at least some of the amendments and certainly of the fundamental basis upon which exception has to be taken to them by the Government.

Baroness Turner of Camden: I am obliged to the Minister for the statement that he made in response to the amendments. We shall certainly read very carefully

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what he has said in Hansard when we get the opportunity. However, there are one or two points which I should like to raise with the noble and learned Lord and I wonder whether now is the appropriate time.

Can the Minister tell us whether the Government have sought the views of the trustees in relation to their propositions? The noble and learned Lord mentioned that the mix of benefits would be different. Of course, we realised that fact and that is one of the reasons why we tabled the amendments. We did not know what the mix would be and we felt that it could conceivably prove to be not as popular with the staff as the present arrangements.

The Minister said that there would be a sixtieth instead of an eightieth scheme, with the public sector being in eightieths, and that that would be of benefit. But, on the other hand, I would remind the noble and learned Lord that, if it is a standard one-eightieth scheme in the public sector, that is usually because there is an opportunity to have a lump sum commutation which goes with the eightieths but which amounts to sixtieths when it really comes to it. Therefore, we would not expect to have any adjustments made, so to speak, to pay for sixtieths. Presumably the lump sum would disappear because one-eightieths would be replaced by sixtieths. Can the Minister confirm, as we are in Committee, that there will be negotiations with the unions with regard to the terms of these schemes? It is important that there should be an opportunity to negotiate on the new mix which is proposed as regards the employees. Have the trustees expressed a view and have the Government asked for that view?

9.15 p.m.

Lord Fraser of Carmyllie: So far as I am aware, the trustees have not been consulted. First of all, I am advised that there are no trustees under the authority scheme. But the more fundamental point is that before anyone could offer up a judgment we would have to see what is being proposed. As I have indicated, the Government Actuary in his independent position is probably best placed to do that. Of course if there are any changes there would be an opportunity for some discussion and negotiation on them. What it is important that we establish within this Bill is that there will not be a significant diminution of the rights of employees as they move from one pension scheme to another.


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