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Baroness Hollis of Heigham: But the whole point is that the noble Lord—I think the noble Lord was here when he said this, but he may not have been—used the opportunity to make an opening statement about the state of the FAS and said that the Government should behave differently and so on. He produced a series of questions and a series of reservations and a series of objections to the way in which the Government were handling it before we got back to the amendment. That is what I was seeking to address in the hope—perhaps forlorn—that it would enable us not to repeat the same arguments on the subsequent amendments. But that may not be the case. Perhaps I may now go on to the noble Lord's amendment.
Lord Oakeshott of Seagrove Bay: I want to make some points which would have arisen in response to
the questions asked by the noble Baroness. I thought I would move my amendment specifically on that point and bring up some of the other issues later. This is a very simple and very clear question. It is to be hoped that we can lay it to rest.
Baroness Hollis of Heigham: Yes. But, as I say, the noble Lord, Lord Higgins, perfectly properly, was using the first of a series of amendments on this clause to state his position, rather than doing so as part of a clause stand part debate. We have done so elsewhere in the Grand Committee and I think it is perfectly reasonable. That is why I responded in the way I did.
As to the noble Lord's amendment, I can put on record that the Government will not use this Bill to impose a statutory levy or charge on private business to fund the financial assistance scheme. Neither does Clause 274 enable us to introduce a levy by secondary legislation even should we wish to—and I have made it clear that we will not.
These amendments are defective and would have a more damaging effect; they would rule out the possibility—I am not saying other than that—of voluntary funds. I have given a very clear statement of the Government's position on this. I have made it clear that we will not be doing it under primary legislation; and we cannot do it—nor would we wish to—under regulations. I hope that as a result of that explanation the noble Lord will feel able to withdraw his amendment.
Lord Higgins: There have been a number of statements by the Government which suggest that, in one way or another, they expect the private sector to contribute.
Baroness Hollis of Heigham: No. We would welcome the private sector contributing. I was being pressed about whether there would be any powers for the Government to impose a levy—a compulsory contribution—on the industry. We are saying "no".
Lord Oakeshott of Seagrove Bay: I welcome the noble Baroness's assurance. I am sure that she is also saying that any contributions would be entirely voluntary.
Baroness Hollis of Heigham: That is exactly it.
Lord Oakeshott of Seagrove Bay: On that basis, I am happy to accept the undertaking. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 316A not moved.]
Lord Higgins moved Amendment No. 317:
- Page 207, line 27, at end insert—
The noble Lord said: Amendment No. 317 deals with an interesting point. As I understand it, the payments which would be made here could possibly be argued to cover the GMP, which would anyway be financed. Therefore, to that extent, the cost of the
Baroness Hollis of Heigham: The amendment seeks to prevent any payment from the financial assistance scheme being used to cover any part of any guaranteed minimum pension that cannot be met by the scheme. I wonder whether we have a meeting of minds on how it currently operates.
The guaranteed minimum pension is part of the system of contracting out. As the Committee will know, between 1978 and 1997, in order to take advantage of reduced national insurance contributions, an employer had to ensure the rules of his pension scheme would provide to each member a pension at least as good as a statutory minimum; i.e. the GMP. Many schemes actually provide a pension that is better than the minimum and the GMP then acts as an underpin; a floor below which pensions cannot fall.
It was intended that at retirement the individual would receive a pension that was at least as good as the GMP and that GMP would be deducted from their entitlement to the state earnings related pension scheme—SERPS—to take account of the lower national insurance contributions.
Of course, such a guarantee from the employer is predicated on the pension scheme remaining in existence. If a scheme winds up, whether the guarantee can be made good depends on the level of funds in the scheme.
If the scheme cannot afford to secure the full GMP, it is permitted to secure a reduced amount. However—and this may be where the misunderstanding possibly occurs—the state does not step in and cover the balance of the GMP; nor does it, as a matter of course, restore state scheme rights. On the contrary, the full GMP is still deducted from the SERPS entitlement. That is because the individual, having paid a reduced level of NI, has not paid for his full SERPS.
Therefore a person who has a GMP entitlement of £50 a week, although his scheme can only secure £10, will still have his SERPS reduced by the full £50. He keeps the £10 and therefore loses the £40. In this context, a provision such as that proposed by the noble Lord could actually add to the detriment of the individual. As it is generally lower-paid workers who have very little scheme benefits over and above the GMP, this amendment would effectively skew the proposed assistance towards the higher paid. If the noble Lord is saying that the financial assistance scheme should be used to compensate and make good the fall in the GMP, which has already been paid for once by the reduced NI contributions, that would disadvantage those who are better off. That is not what
Lord Higgins: We need to consider very carefully the technical point the noble Baroness has just made. My reason for tabling the amendment was to some extent prompted by an article by Teresa Hunter in the Sunday Telegraph. It may be helpful if I quote exactly what it says. It states:
Baroness Hollis of Heigham: I think that there is a misunderstanding.
Lord Higgins: Fine. Just let me finish. I was anxious to establish that there was no question of that being met by payments out of the £400 million. But has there in fact been such a delay in the 59 schemes that have collapsed? If so, why have they not been paid?
Baroness Hollis of Heigham: The Sunday Telegraph is not my usual reading and I have not read that article. I get the cuttings. I shall follow the matter up and write to the noble Lord about the particular article if he wishes. Certainly, I want to make clear that there is no second state contribution by virtue of topping up any shortfall in GMPs, which cannot be secured by the distribution of the employer's assets, because they have already been paid for once through reduced NI contributions in opting out of SERPS.
Lord Higgins: It would certainly be helpful if the noble Baroness could write to me on what is obviously a technical point. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
"( ) Such payments must not be made to cover the cost of guaranteed minimum pensions."6.30 p.m.
"Members of occupational schemes that are contracted out of the second state pension (formerly known as Serps) qualify for a guaranteed minimum pension (GMP) from the state if the scheme fails to pay out.
"Malcolm Wicks, the pensions minister, has admitted that victims of the 59 collapsed schemes that have so far requested payment have yet to receive a penny of their entitlement.
"He was forced to admit to the delays in a written answer to a question tabled by David Willetts",
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