Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Gregg McClymont
No one can doubt the attention that Community has paid to making that case for its members, who suffered great detriment as a result of the collapse of these pension schemes.
I know from the discussions that I have had that there was a strong sense that there would be further action, given the promises made by the parties that are now in government. Actually, given the current situation, the previous Government’s substantial intervention stands as the signal contribution from the state to alleviating the detriment suffered by members of those schemes. Since 2010, there has been no advance on the agreement reached under the previous Government. Of course, that agreement has virtues—up to 90% is a lot more than nothing. It is a big difference.
Community and Unite have acknowledged to me that the previous Government’s intervention made a substantial difference. Of course it did. Those who lost their pensions now receive up to 90% and a cap at approximately £29,300—I cannot remember the precise number; I think it is £29,348. That is a significant advance, but those people had a strong feeling that they would get more if there was a change of Government; perhaps that speaks to the differences between opposition and government. None the less, promises were made, and those who made them should account for why they have not been fulfilled.
The Minister for Disabled People (Mr Mark Harper)
I am listening carefully to the hon. Gentleman. He may be getting to this, so he will have to forgive me if I am jumping the gun. Given the tone of what he is saying, is he making a commitment on behalf of the Opposition to make a significant financial improvement to what is on the table?
Gregg McClymont
That is the difference between what a responsible Opposition do and what appears to have happened before 2010.
Gregg McClymont
The Minister says it is just words, but the words that those campaigning for the parties that are now in government used have not materialised into any action. The difference between the Government parties and Labour is not only that the previous Government actually acted, but that we are a responsible Opposition and we will not promise things that we do not intend to deliver.
The Minister for Disabled People (Mr Mark Harper)
It is a great pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute to my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) for securing the debate.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)referred to my right hon. Friend the Minister for Pensions. I should be clear that my right hon. Friend, like the shadow Minister, was scheduled to be in a Committee considering regulations for an hour and a half, so he prudently ensured that a Minister was available from the Department to answer this debate. Due to the fact that the regulations were clearly excellent and that the Opposition had very few questions and did not challenge them, the Committee unexpectedly finished early. However, the Pensions Minister had secured my cover for this debate, which is why I am here and he is not. I am sorry that that is so disappointing to the shadow Minister.
I thank those Members who have contributed to the debate, as well as other Members and those outside the House who worked to establish the financial assistance scheme in the first place. The scheme ensures that people who were members of schemes that went into wind-up prior to the introduction of the Pension Protection Fund will get some financial help, which they otherwise would not.
It is also worth saying—the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East acknowledged this point—that I understand the views of all the pensioners who have been affected, but the fact is that the pension schemes that were wound up without sufficient funds in them to pay those pensions mean that those pensions effectively do not exist and have been lost. Without the financial assistance scheme, there would not be the funds to pay those pensioners either in part or at all, so they would be in a far worse situation. What we are discussing is the amount of help people can expect from the Government, and of course, there is no Government money; what we are talking about is the amount of money that taxpayers more generally are prepared to make available.
My hon. Friend the Member for Sittingbourne and Sheppey made the point about what people could expect. My understanding is that the financial assistance scheme has always promised that people would get 90% of their expected pension accrued at the point of winding-up, subject to a cap. That is obviously not the same as the amount that someone who had continued their working life would have expected had the scheme been fully funded. My understanding is that that is not what the Government ever promised. When the previous Government set up the financial assistance scheme, they promised 90% of what would have been accrued at the point of wind-up, and I think that is what has been delivered.
My hon. Friend referred to the cap, whereby when someone was entitled to a higher pension, the FAS caps the amount of assistance paid. That cap was put in place to target the payments on the lowest-paid pensioners. The cap was £26,000 for anyone who began to be paid before April 2007. It is increased annually and is now £33,454, and the amount paid depends on the level of cap in place when the payments begin. For example, a person whose payments began in 2012-13 would have a cap of £31,873, which is more than twice the average occupational pension in the UK in the same period.
When the changes to the PPF cap legislation were made, the Minister for Pensions said that he was considering whether a similar change could be made to the financial assistance scheme. He continues to keep the matter under review and is having discussions with his Treasury colleagues about whether that is doable and affordable. No doubt he will keep the House fully informed on the progress of those discussions.
One point made by my hon. Friend the Member for Sittingbourne and Sheppey and others was about indexing what was accrued before 1997. The FAS reflects the statutory requirement on all schemes, which is to index post-April 1997 accruals in line with the consumer prices index, capped at 2.5%. My hon. Friend did not think that was in line with the PPF, but in fact it is. The PPF has the same indexation post-April 1997, which is CPI, capped at 2.5%. The PPF also pays 90% of the expected pension, so the FAS is in line with the PPF. It would be difficult to argue that the FAS, largely funded by the taxpayer, should be more generous by paying to index pre-1997 accruals than the PPF, which is partly funded from a levy on pension schemes.
If we did index the pre-1997 accruals, that would not be inexpensive. It was estimated in 2010 that providing indexation on all assistance to all FAS recipients in line with the retail prices index, as it was then done, capped at 2.5%, would cost an extra £845 million of taxpayers’ money. That would be the net present value. If we accept that the money available is limited, a choice has to be made. We could provide more generous indexation, which would benefit those pensioners who live longer, but the cost of doing that is that we would pay a smaller percentage of pensions at the beginning. I think the scheme has made the right judgment.
I want to cover one point on the cost. I listened carefully to my hon. Friend and I have heard the point before about the value of the assets of schemes transferred into the FAS being broadly similar to the cost of the scheme. That is not right. In December 2007, the Government announced a significant extension to the FAS. That was funded by a combination of the money transferred in from schemes that were not wound up, which was an estimated £1.7 billion, and an increase in the taxpayer contribution, taking the total taxpayer contribution to the FAS to £12.5 billion. The net sum from the taxpayer to stand behind this pension promise was nearly £11 billion. I think that is very significant.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is right to say that the promise was made by the previous Government, but of course this is an ongoing commitment, which is being met and stood behind by the present Government. It is an ongoing commitment for taxpayers today and it is a very significant cost. It clearly is not covered by all the assets being transferred in, because if all the assets being transferred in matched the cost of delivering the promise, there would of course be no need for a financial assistance scheme in the first place. The whole point is that the assets in the pension schemes do not, for all sorts of reasons, fund the promises that were made.
On the issue of funding, I listened very carefully to the hon. Gentleman, who seemed to be giving the impression that the Opposition were going to do something significant. I simply wanted to probe him on that and be clear that he was not making any financial commitments. I am not aware that my party made any financial commitments that we have gone back on. Indeed, the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who is no longer in his place, referred to Equitable Life. I will be brief on this, Mr Hollobone, because I am getting slightly off the subject of the debate, but as the point was made, let me say that my party did make some commitments on Equitable Life—I followed that very closely, because I have constituents who were affected—and we have delivered on what we promised to do for Equitable Life annuity holders. I have had lots of correspondence with Ministers and with my constituents, and we absolutely have delivered on that, so I do not quite know what point the hon. Gentleman was making.
I was not sure, either, where the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was going with the promises that my party makes. I was listening carefully and I did not hear any specific promise that we were alleged to have gone back on. We have stood behind the very significant commitment that the previous Government made, which is an ongoing commitment, and we have done that in the context of inheriting a very difficult financial situation—in the words of the former Chief Secretary to the Treasury, there was no money left.
This is a significant commitment. It was the right commitment for the previous Government to make, and this Government have honoured the commitment even in the very difficult financial circumstances that we inherited. We are right to have done so, but it does mean—this is where I agree with the hon. Gentleman —it is difficult to justify putting even more taxpayers’ money into a scheme to do the things that my hon. Friend the Member for Sittingbourne and Sheppey and his constituents want. I completely understand that, but we have to recognise that other taxpayers would have to foot the bill.
Gordon Henderson
I accept everything that my hon. Friend the Minister has said, but does he not accept that there is a principle involved? The principle is very clear: the Government of the day misled people into believing that their occupational pension would be safe and was safe to invest in. That is what the parliamentary ombudsman, the High Court and the Court of Appeal decided—that those pensioners had been misled—and therefore it is morally wrong for any Government, of whatever complexion, to use finance as a reason for not giving those people justice.
Mr Harper
Following on from that point, I think, having read through the detail of the case, that what my hon. Friend says is exactly why a financial assistance scheme was set up in the first place, and very significant amounts of taxpayers’ money were put into it. As I said, the total commitment from the taxpayer is now about £12.5 billion and about £1.7 billion has come in from the schemes that were not wound up. That is a very significant commitment from the taxpayer in order to provide protection for pensioners who are not getting support from pension schemes because those schemes were not adequately funded to meet the promises that had been made.
My hon. Friend said that a number of pensioners in the schemes covered by the FAS have died over time and that in some way reduces the cost. It does not, because the calculation of the total cost will have taken into account the age profile of the pensioners and the expected number of deaths—that is the rather brutal science in which actuaries are involved. That factor will have been taken into account in the costings, so no extra money arises from the fact that some pensioners in schemes covered by the FAS are, sadly, no longer with us.
My hon. Friend made a point about workers who became pensioners before the FAS was first announced, in May 2004. As is normal with all Government schemes, assistance payments are not backdated to before the announcement date, so anyone who became a pensioner before May 2004 gets assistance from that date only. The same applies to the PPF: it does not pay compensation for any period before it was introduced.
I listened carefully to my hon. Friend’s point about overpayments. Because a scheme does not know at the beginning of the winding-up process the exact value of the assets it has and what each member is entitled to, it pays interim pensions—its best guess of what the member will get when the scheme does wind up. At the end of the winding-up, the scheme balances its payments, paying less in the future if a person has been overpaid during the winding-up period. Where possible, the FAS balances overpayments and underpayments once it has the full data, which is the same as the approach taken by schemes. During the winding-up period, the FAS tops up any interim pension to 90% of the expected pension, based on data provided by the scheme. I understand that it used to be 80%, but in response to representations from the various groups, the then Government raised the limit to 90%. That narrows the margin for error, so if there is an error in the data provided by the scheme, that increases the chances of having to recover an overpayment.
The reason why the overpayments are not simply written off is because the FAS is largely funded by the taxpayer. The Department uses the guidance “Managing public money”, which is issued by the Treasury. That is the same guidance used when, for example, the Government overpay benefits and have to recover them. The FAS does what the schemes would do to recover overpayments: it turns the amount that has been overpaid into a notional annuity and deducts it from the assistance due, so that over the individual’s lifetime, they will receive the correct amount.
I listened carefully to my hon. Friend, and I think he said that one of his constituents did not receive good communication from the FAS about the fact that they had been overpaid and that the overpayment would be recovered. I am sure that my hon. Friend will correct me if I am wrong. If that is the case, there is no excuse for poor communication. If I have correctly understood that that came as a surprise, it would be helpful if he wrote to the Minister for Pensions, if he has not done so already, so that we can look into that breakdown of communication.
Gordon Henderson
May I clarify that point? My constituent’s complaint was that he is aware of other people in similar situations whom the PPF contacted to negotiate a repayment plan to ensure that it recovered the money over time, but he was not given that opportunity. I have already written to the PPF to ask why it did not negotiate, and why it immediately stopped his pension entirely. That was his point; he was not given an opportunity to negotiate and say, “Right, I will pay off x amount per month.”
Mr Harper
I am grateful to my hon. Friend for that clarification. He has already written to the scheme, so I will draw his comments to the attention of the Minister for Pensions. It may be helpful for the Minister to look at the case and perhaps write to my hon. Friend about it, because it is difficult to go into the specifics of an individual case in an Adjournment debate.
My hon. Friend rightly raised the subject in his role as Member of Parliament for his constituents. He acknowledged in his speech the assistance he has received from those in his constituency who have campaigned on the matter. I recognise that he and those whom he represents are probably disappointed by what I have had to say. However, I hope he understands that, given the very significant contribution that taxpayers rightly continue to make to the financial assistance scheme, there is a limit to the amount of support that taxpayers can give. I fear that it will not, therefore, be possible to deliver the things that he has requested, given the circumstances that we still face in the public finances because we are dealing with the legacy that we inherited from the previous Government.
Mr Philip Hollobone (in the Chair)
I thank all hon. Members who took part in that important debate for covering all the issues pithily and succinctly. The next debate is not due to start until 11 o’clock, so I will suspend the sitting until that time. However, if the participants arrive a few minutes early, we will start when they arrive. The sitting is, therefore, suspended until about 11 o’clock.