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Lord Higgins: My Lords, this does not concern MIG or MFR, but rather GMP, which refers to occupational pensions contracted out of SERPS. I may be quite mistaken. Perhaps I should give the noble Baroness a moment to think about the matter. I shall declare an interest, as I have done on many previous occasions, as the chairman of an occupational pension scheme. I am puzzled by what the noble Baroness has just said.
Baroness Hollis of Heigham: My Lords, my understanding is that this is always taken together with the uprating statement and forms a part of the general debate. However, if the noble Lord wishes to raise any particular points, I shall do my best to answer them. If I am unable to do so, I shall write to him.
Lord Higgins: My Lords, we may be totally at loggerheads on this. I believe that this order is quite different from the other order. A few moments ago we were discussing the government uprating of state pensions and benefits of one kind or another. This order is not concerned with the uprating of government pensions, but rather concerns the uprating imposed by the Government on schemes which operated before 1997. These are occupational schemes and the order concerns the extent to which the occupational pension has to pay an increase and thus is only tenuously related to what the Government are doing. Indeed, the rates are quite different as well.
Lord Higgins: My Lords, the Minister may be right in saying that this is the way in which this matter has been debated previously, but it seems to me that somewhat different issues are raised here. Perhaps I may put this question to her: who will pay for this increase?
Baroness Hollis of Heigham: My Lords, my understanding is that this will ensure that the core of an occupational scheme will contain a guaranteed minimum no less than a specified amount; effectively, it will be brought into line with the RPI. In that sense, it would depend on whether it was a money purchase scheme, but these would normally apply to a scheme which was a defined salary benefit. That means that there is a minimum standard of pension which it must meet in order to be eligible for the opted-out rebates from a private scheme, SERPS or any other scheme.
I do not see what is the issue here. Each year, guaranteed pensions better than SERPS must be uprated to reflect the standard of living, otherwise they would deteriorate in value. That is what the uprating order achieves: it ensures the core such that the national insurance rebates fund that guaranteed minimum core so that the occupational scheme is a valid and appropriate scheme. It is raised so that it does not lose its value. For that reason, it is uprated across the board. I am not sure what the noble Lord seeks to press me on here.
Lord Higgins: My Lords, I understand what the noble Baroness and the noble Earl have said; namely, that on previous occasions this has been taken together with the previous order. That may be the tradition. Nonetheless, it is somewhat different, in as much as the previous order is concerned with government pensions. In effect, as the noble Baroness pointed out in our previous debate, it comes out of the national
Perhaps the noble Baroness would answer only the simple question I put to her. We can then let it go at that and consider the matter later. Who will pay the 3 per cent? Let us deal only with that simple question.
Baroness Hollis of Heigham: My Lords, if I am wrong on this then I shall write to the noble Lord, but my understanding is it is a question of whether a pension is backed by the pension promise. If it is backed by the pension promise--which is what a defined final salary scheme would constitute--then clearly the employer must pay. If it is a money purchase scheme, then that is the responsibility of the individual to ensure that his scheme is adequate. What this order does is interlock the level of national insurance rebates and the grounds on which they may be recyclable into the schemes, into personal pensions and occupational pensions, and obviously this interacts with SERPS. Where the commitment to delivering the pension promise lies will depend on the type of scheme, whether it is money purchase or final salary. If it is a defined salary scheme it will ultimately lie with the employer. When I last looked at this, more than half of all occupational pension schemes were in surplus--in many of them they were enjoying a holiday--and this would not be difficult to achieve.
Lord Higgins: My Lords, I intervene briefly. We can take the matter no further today. As the noble Baroness said, it depends on the extent to which a particular scheme is in surplus. That, in turn, has been radically affected by the change which has been made in corporation tax. But let us leave it there and pursue it, if necessary, by way of oral questions or whatever.
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