Draft Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the Committee has considered the draft Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018.
It is an honour to serve under your chairmanship for the first time, Mr Wilson.
The regulations were laid before the House on 18 December 2017, and they deliver a commitment that was made to the House on 15 September 2016 to introduce a cap for long service in the Pension Protection Fund and the financial assistance scheme.
The Government have listened carefully to stakeholders, and a stakeholder consultation took place between last September and October on the draft regulations, which apply to those with long service in a single pension scheme.
The Committee will agree that it was right for the Blair Government to create the Pension Protection Fund and the financial assistance scheme. All successive Governments have supported both schemes, which ensure that individuals who have saved for their retirement during their working lives receive assistance if their pension scheme winds up underfunded.
The regulations increase the maximum amount that an individual can receive from the financial assistance scheme if the individual has long service in an eligible pension scheme. Those who are disproportionately affected by the cap on the amount of assistance payable to an individual member because they have long service in a single scheme will have their maximum cap amount increased. The cap is currently £34,229 at age 65, and reduced if a member opts to receive their assistance early. The cap helps to limit the costs of the FAS, which is funded by the taxpayer.
Individuals accrue high pensions for two reasons. Some will have been high earners, in which case they have generally had opportunities to secure alternative savings for retirement, but others will have worked for the same employer for a long time and consequently may have little or no other private pension savings to offset the shortfall between the capped assistance and what they had expected from the pension scheme had it not failed.
This legislative change will benefit the second group by ensuring that an individual’s long service in a single scheme is not disproportionately affected by the cap. The maximum amount of assistance that is currently paid to an individual will be increased by 3%, funded by the taxpayer, for each full year of pensionable service above 20 years, subject to a new maximum of double the standard FAS cap amount. In those circumstances, I commend the regulations to the Committee.
Guy Opperman
I am grateful for the hon. Gentleman’s questions. Let me address them briefly in reverse.
On Port Talbot, the reality is that members of the British Steel pension scheme who do not opt to enter the BSPS2 opt-out will go into the Pension Protection Fund, so they will not be affected by the financial assistance scheme.
On data, the hon. Gentleman raises a fair and legitimate point that has concerned successive Governments. I know that he is a massive supporter, as I am, of the pensions dashboard, an effort from the Government and from all organisations that run pension schemes to make data accessible on a uniform platform. We have launched that initiative and the Department for Work and Pensions is taking it forward. I will happily set out more detail in writing on that point and others, but to put it bluntly, we all agree that data needs to be improved and made accessible in a single portal. We will report to the House before the end of this term with the results of the DWP feasibility study on the dashboard. We hope to take it forward in 2019.
On the assessment of the losses to members from the closure of the FAS, 10 years’ notice of the closure was given—that was widely publicised in 2016. The hon. Gentleman also raised the impact on social security benefits of failure to seek access to the FAS. I reassure him that since it is the responsibility of the scheme trustees to apply to the FAS and there is no requirement for individual members to do so, it is extremely unlikely that failure to apply to the FAS would have an impact on a member’s social security benefits.
I accept entirely that there may be some outstanding matters on which I will need to double-check that I have responded to the hon. Gentleman, and I shall do so in writing. I believe that the regulations strike the correct balance between securing meaningful income in retirement for members compensated by the financial assistance scheme and managing the cost to the taxpayer. They show that we have decided to act to fix a long-standing problem with a scheme that has long been supported—and rightly so—by successive Governments.
Question put and agreed to.