|Previous Section||Back to Table of Contents||Lords Hansard Home Page|
(3) The second condition is that an authorised retirement income fund provider must set an annual maximum withdrawal allowance for each member, based on an assessment of each members life expectancy, and a members withdrawals from the fund in any one year must not exceed that allowance.
(4) The third condition is that, in setting annual maximum withdrawal allowances, an authorised provider must ensure that no members total future annual income falls below the minimum retirement income level, as set under section (Minimum retirement income) of the Pensions Act 2007, except in the circumstances provided for in the sixth condition.
(5) The fourth condition is that an authorised provider must set an annual minimum withdrawal allowance so that each members total income is at least equivalent to the minimum retirement income level, except in the circumstances provided for in the sixth condition.
(6) The fifth condition is that where a member chooses not to declare his total annual income to the authorised provider he must withdraw funds equivalent to the level of the minimum retirement income level or his annual maximum withdrawal allowance, whichever is the lower.
(7) The sixth condition is that, where there are insufficient funds to enable the annual minimum withdrawal allowance to be set so that a members total income is at least equivalent to the minimum retirement income level, the allowance should be set at the highest level consistent with the assessment of the members life expectancy.
(8) The seventh condition is that the maximum and minimum withdrawal allowances must be set at the same level where a members total annual income, including his maximum withdrawal allowance, is lower than the minimum retirement income level.
The noble Lord said: We turn now to a different but equally pressing and disastrous subject. I shall speak also to Amendments Nos. 69 to 76, and to Amendment No. 79, tabled by the noble Lord, Lord Oakeshott. There is no doubt that the Government have gone from bad to worse on the subject of pensions, as proven by all our debates over a number of years. From their reaction to the original mis-selling of occupational pensions to how they have handled the thousands of people who have lost their retirement income as a result, the Government have rejected expert advice and seem to be going out of their way to pay compensation in the most grudging manner possible.
Noble Lords will remember that the Parliamentary Ombudsman published a thorough and impartial study of the reasons behind the schemes collapse and included a number of balanced recommendations for what the Government could be expected to do to remedy the mistakes that she found they had made. Her report showed that there was incontrovertible maladministration by this Government in their handling of occupational pensions. Government leaflets and press statements all refused to make clear the inadequacy of the minimum funding requirement but instead were vague, incomplete or misleading. She specified occasions where the Government were shown to have known this and where they failed to inform the public, continuing to encourage pensioners to invest their salaries into schemes in which they were unable to afford to provide what they were promising.
To add insult to injury, it is apparent that one of the factors that weakened the minimum funding requirement was the Chancellors decision to abolish the system of tax credits given to those pension schemes. I am sure we will hear, once again, how rising longevity and a weakened stock market were also to blameand, of course, they werebut can the Minister really assure the Committee, as he tried to the other day, that he believes that a raid of £5 billion a year had a negligible effect? If he can, my response is that not only the ombudsman but DWP and Treasury officials do not agree with him. It is now clear that, like an amateur magicians attempt at the Indian rope trick, the Chancellors figures simply do not stand up. The Governments promises were found to be hollow, the pension schemes funding was found to be inadequate and thousands of pensioners are now without their retirement income.
The Parliamentary Ombudsman could not have been a more suitable, better qualified or more appropriate person to judge the unfortunate situation that these pensioners found themselves in, yet despite the evidence and expertise to back her up, the Government have persisted in mud-slinging and depreciation of her findings. They have been taken to court by a group of pensioners, have lost and have still not accepted the reports findings. Instead, we are witnessing the unedifying sight of endless appeals, rising costs and never-ending delays, while hope slowly dwindles that the Government will finally accept publicly what everyone knows and what the ombudsman has so clearly laid out.
The Government have consistently fought tooth and nail against setting up an adequate compensation scheme for those who have lost out. It was only in the face of enormous cross-party opposition that they set up the financial assistance scheme in the first place and, again, they have recently been forced to introduce a new clause to improve on that scheme. This new clause is still not enough. It pays out only 80 per cent of what the department calls the core pension, which, by the Governments own admission, amounts to only 60 per cent of a persons expected pension. That is paid only from 65, ignoring the originally agreed pension age of the scheme and any other benefits, such as taking a lump sum, which may have been promised.
So far, the FAS is compensating less than 10 per cent of those who are eligiblethat is, those who lost their pensions through their schemes being underfunded when their employers went bankrupt and who are over state pension age. I expect the Minister to reassure us that, now the set-up is complete and the computer is up and running, more payments will be made and the administrative costs will fall to a less shocking proportion of the total costs.
When the financial assistance scheme was set up, it had a budget of £400 million, which was meant to cover 15,000 pensioners. It was then extended to 40,000 pensioners and a few more billion pounds were put in. The scheme was then further extended to cover everyone and more money was put in. There are today some 125,000 pensioners. We on this side of the Committee have always said that £400 million was nothing like enough money. The Chancellor has finally, to a limited extent, agreed by setting aside £8 billion over the lifetime of the FAS. I accept that this money is of a quite different order of magnitude from the £400 million originally proposed in 2004, which, although finite, might have to last another 30 or more years. The £8 billion is meant to cover the lifetime of the scheme; it is, though, a headline figure. Will the Minister confirm that its net present value is quite a bit less, £1.9 billion on my calculations? Will he also tell us how much this represents on an annual basis; in other words, the cash flow from the Treasury? Will it still only cover 60 per cent of expected pensions; in other words, 80 per cent of core pensions? I know the Minister has the words core pensions graven on his heart, rather like Mary, Queen of Scots.
As a perfect example of how the Government have handled this issue from the start, they have now unwillingly accepted, as reported at col. 320 of Commons Hansard, that pensioners whose employers are still solvent, but whose pension schemes have been closed without sufficient funds, should be covered; that is, the FAS will eventually cover members of schemes that began winding up between 1 January 1997 and 5 April 2005 when a compromise agreement is in place and when enforcing the debt against the employer would have forced that employer into insolvency. It is thought that there are another 8,000 members of some 15 schemes in this particular limbo, yet we are being told that the necessary secondary legislation will be published by the end of the year. That is not anything like quickly enough for the thousands who are waiting for it, the thousands who are impoverished and may be sick or disabled. We owe it to them to pay over this money as quickly as is humanly possible.
Some of those people, however, will not survive. Another example of unhelpful government action is that of survivor pensions. Will the Minister confirm that these amount to 50 per cent of the core pension; in other words, only 30 per cent of their partners expected pension had they not died?
The amendment covers the arrangements of the Pension Protection Scheme. PPS survivors get a much fairer 45 per cent. The Government appear to believe that Clause 18 and its extra money will be enough to satisfy the pensioners, some of whom are demonstrating outside this Chamber. It quite clearly is not. First, there is still to be a cap, though a more generous one, on the amount paid out. Currently that is 80 per cent of core pensions. Why was 80 per cent chosen? Why not the 90 per cent payable under the Pension Protection Fund, which the 2004 Act sensibly set up? Over and above that, why make provision for the dissolution of the management of the FAS and move it over to the Pensions Agency? What is wrong with rolling it into the Pension Protection Fund, which is already doing a similar, though insurance-based, job? Why set up an inquiry to ascertain whether there are other sources of non-government funding available when we all know that money exists in the Unclaimed Assets Register, to which insurance firms and others belong?
We all know that the Government will, in the end, do more for FAS pensioners. The Minister will doubtless question that, but I remind him that when the will and the law are there, the money is always found. This years statutory uprating of benefits cost the taxpayer £3.5 billion. I invite your Lordships to set that against the annual payment to the FAS.
It is against that background that the noble Lord, Lord Oakeshott, and I have set down this group of amendments. Amendment No. 68 is a paving amendment to amalgamate the management of the FAS with that of the Pension Protection Fund. Amendment No. 69 expands the FAS to apply to employees whose pension schemes have failed, even though their employer has remained solvent. That is what the Government are going to do, but rather quickera lot quicker, in fact.
Amendment No. 70 is the longest and most important of the group, which all together would set up a pension protection lifeboat fund. The fund would have several objectives: not only would it be run by the Pension Protection Fund, but it would make supplementary payments to eligible pensioners from their normal retirement age under their pension scheme, with no compulsory annuitising. That would be paid for in the first instance as loans by the Secretary of State and repaid under Amendments Nos. 70 to 74, which would set up an unclaimed assets recovery fund, the functions of which would be to ascertain whether non-governmental assets were available and then transfer them to the lifeboat fund. We already know that such assets exist in the insurance and pensions world, because at least one firm has admitted as much. We also already know that unclaimed assets of banks, which would have been suitable for the lifeboat fund, are being investigated by the Chancellor, and it is likely that he will use them for other purposes, not least for charities. Other sources, such as unclaimed premium bond prizes, could be included at the discretion of the Secretary of State. The lifeboat fund is to repay any assets that are subsequently claimed back by the missing owners.
In reply to the Statement about the Governments response to the ombudsmans report, I made the point that no Government could be expected to write a blank cheque. However, this is a source of non-government income for these pensioners at the right time because it will become available far more quickly than income under the Governments plan of investigating assets and then legislating for their use in a future pensions Bill. These pensioners need money as soon as possible and cannot be expected to wait a moment longer than is necessary. I beg to move.
Lord Oakeshott of Seagrove Bay: I am delighted to stand shoulder to shoulder with the Conservatives on this amendment, and I am equally delighted to see them show as much vigour on behalf of some of the poorest and most destitute people in our society as they showed on the previous amendment for a rather richer group.
This has been a shameful story. The noble Lord, Lord Skelmersdale, identified very well some of the financial aspects of this problem, and I shall return to them; but there is also an issue of principle about democracy and how the Government have brushed aside repeated rulings from independent bodies and requests to think again. We have had a ruling from the European Court of Justice, a very serious and well argued ruling from the High Court, a thorough, well argued and comprehensive report from the ombudsman and a report, which went into considerable detail, from the Public Administration Committee of the House of Commons. Those bodies are four important pillars of democratic society in our country and in the European Union, of which we form part, and in each case the Governments attitude has been simply disgraceful. They have not accepted that anyone apart from them can rule on these issues, particularly when we are talking about a charge of maladministration. No one is suggesting that the Government are wholly responsible for these problemsfar from it. However, it is arrogance of the highest order to suggest that they have no responsibility and that their view should prevailalmost saying that the ombudsman, in particular, has no standingincluding the things that have come out recently about the defence that the Government are trying to put in the High Court against the ombudsmans case. That is where this Chamber of Parliament comes in. There is a wider issue: when the Government ignore these reports and rulings, we can say that they should and must think again. The issue is wider than the injustice and real hardship that these 125,000 pensioners have faced.
The Government have been forced kicking and screaming to improve, slowly, this miserable little scheme. During the passage of the previous Pensions Bill, we repeatedly pressed them to explain how the scheme was going to work, but we were given nothing. These Benches repeatedly suggested that it would be better to combine the scheme with the Pension Protection Fund, and the history of delay and incompetence in beginning to pay people because of having to set up a completely separate organisation has vindicated us. So far, about £3.6 million has been paid out to 1,200 people, an average of £28.80 for each of the 125,000 people who have lost their pensions; that is simply pathetic. Even today, at Prime Ministers Questions, we had the slipperythat is probably the fairest way of putting itpretence that people under the present arrangements will get 80 per cent of their core pension, the specious phrase that the Government have invented.
I was asked on television at lunchtime why we were so worried about the difference between the 80 per cent of pension that people will get under the FAS and the 90 per cent they will get under the Pension Protection Fund. We are worried because the difference is much greater than that. Under the FAS, people will not get 80 per cent of their genuine expected pension; there is no inflation-linking; the scheme starts from the age of 65, whatever the scheme pension age was; there is no tax-free lump sum; there is no ill-health benefit; and widows benefits are far worse.
If separate proof is wanted about how much worse the FAS is than the Pension Protection Fund, even under the present arrangement the estimate of the net present cost of giving PPF benefit as opposed to FAS benefit is £2.5 billion as against £1.9 billion. The FAS benefits are something like one-third less, so the figure of 80 per cent that the Government are bandying about is deeply dishonest.
We never would have got even this far in improving the financial assistance scheme had it not been for a roll of honour of campaigners for justice for these people, led by the indefatigable Dr Ros Altmann and the Pensions Action Group. The media have also been exceptionally effective. I pick out in particular Liam Halligan of Channel 4 and the Sunday Telegraph and Patience Wheatcroft of the Sunday Telegraph. There is no doubt that public pressure has played a great part in getting the Government to move even this far.
The key point for Liberal Democrats is that the PPF benefits should be guaranteed and the pensioners who have suffered for so long should know that they are going to get them. We talked in our manifesto at the 2005 election of more than 60,000 workers who were affected; that shows how little information there was and how much the figure has increased. We said then:
We were prepared to make a manifesto commitment; that has been our position all along. We would have preferred a straight commitment of that typewe believe that it is affordable. Obviously, we have to co-operate to achieve justice for the 125,000 people. On the basis that the amendments which were very nearly passed, with cross-party support, in the Commons are the only ones that will command support on the Conservative Benches and our own, we are supporting them. We very much hope that they will be agreed to today by a thumping majority which will make the Government think againlong, hard and often, if necessary.
The High Court, the European Court of Justice, the ombudsman and the Public Administration Committee have stripped away, one by one, the Governments threadbare defences against a charge of maladministration. Now Britains new Prime MinisterGordon Brown has been behind this all alonghas no more clothes left with which to hide his meanness to these pensioners.
Lord Howarth of Newport: One would have to be stony-hearted not to be moved by the letters we have received and the deeply unhappy individual cases of which we are aware. But I want to be so insensitive as to raise a number of questions of principle and of practice and to ask my noble friend, when he comes to wind up, to comment on them.
What do the Government consider is the place of the principle of caveat emptor in pensions policy? Clearly, the Opposition do not think that it has a place. But is it not the case that we are looking at the consequence of business failures, of mismanagement of private funds by trustees? Is it not also the case that these unhappy and unfortunate pensioners would have contracted out of SERPS? Where is the line to be drawn between personal and private responsibility and the responsibility of the state? We know that it is the states bedrock duty to provide social security so that people do not have to eke out an old age in destitution, but on what principle do we judge what more the state ought to do?
Can any reasonable person have supposed that the state was always going to underwrite the whole of the private pensions system? I think not. Clearly, literature was produced by the department which, unfortunately, gave people the impression that that might be the case. But will my noble friend tell the Committee on whose watch that literature was produced? Who were the Government and the Pensions Minister who let it out? What was the cost of that error, and what is the price tag on the ombudsmans recommendation and the High Courts ruling? How many schools and hospitals could have been paid for with that money?
|Next Section||Back to Table of Contents||Lords Hansard Home Page|