Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2012
Debate between Baroness Drake and Lord De Mauley
Lord De Mauley
My Lords, if I may continue from where I was interrupted, I was about to say that, finally, police officers do not have employers for automatic enrolment because the police are officeholders. The Pensions Act 2008 brought police officers and police cadets into automatic enrolment by deeming them to be employed by the relevant police authority. However, police officers seconded to the Scottish Crime and Drug Enforcement Agency or the Scottish Police Services Authority had no such employment relationship because, despite its name, the Scottish Police Services Authority is not technically a police authority as defined in the legislation. These regulations correct that and extend the definition of worker for automatic enrolment to these two groups of police officers. I commend these instruments to the Committee.
Baroness Drake
My Lords, as I was strolling to this Committee this afternoon, a noble friend stopped me and asked where I was off to. When I advised him that I was off to deal with some statutory instruments, he said to me, “I hope you sit quietly and say very little, as we do in the Commons”. I gulped quietly as I held in my hand my 10 minutes of detailed script. I did not know whether to feel admonished or what. I told myself that our role is to scrutinise, so I hope that noble Lords will bear with me and allow me to go through the issues that I want to raise and ask questions on.
As the Minister has said, these regulations set out the alternative quality requirements. I acknowledge the amendment made by the Government to Section 12 of the Pensions Act 2011, and I accept that considerable work and thought have gone into drafting these regulations. Nevertheless, I remain anxious because, as the Minister has said, the main purpose of the alternative quality requirement test is to give an easement to good employers with good DC pension schemes to encourage them to retain those schemes. This makes good sense and one would not want to undermine the continuation of good existing provision. That sits full-square with the public policy intentions. However, the alternative quality requirements—and this is what makes me anxious—should not enable bad employers to leverage self-certification to avoid their responsibilities.
On the form of certificate showing that the alternative quality requirements are satisfied, the requirements, particularly the facility to use the alternative test for part of the scheme or only for some jobholders, give rise to the potential to leverage the regulation to reduce auto-enrolment costs, for example where high and low earners are grouped together and/or where non-basic pay makes up a very significant proportion of earnings.
I welcome the requirement in the regulations on employers to provide information of both the names and the roles of the relevant jobholders where the certificate relates to only some of the jobholders, because they should assist in identifying bad behaviour, particularly as the Secretary of State has a responsibility to review the strength of the alternative certification test. I would welcome the Minister confirming that the findings from the Secretary of State’s review of the alternative certification requirements will be published prior to the wider 2017 review of the pension reforms as a whole.
I also ask the Minister about trust-based scheme with trustees and rules. Will the trustees bear any responsibility on the matter of whether the employer’s scheme or part of the scheme can satisfy the alternative quality requirements? If the answer is yes, will that also apply to trustees of multi-employer schemes and master trusts?
As for the renewal of the certificate, the employer has to assess on renewal whether during the past or future certification periods, the quality requirements were or will be met. Where an element was not met—in the past tense—the employer must consider what action needs to be taken to ensure that does not happen in the future. That requirement is welcome for future certification periods, but my question to the Minister is this: if it is revealed that a jobholder who should have been auto-enrolled was not auto-enrolled, or where some one receives an employer contribution lower than it should have been under the relevant quality requirements, will there be a legal requirement on an employer to notify the jobholder and to make good their employer contribution?
On the alternative requirements themselves for money purchase schemes and likewise for other schemes, I remain concerned that the first and second tests provide for pensionable earnings to be equal only to basic pay. For good employers, where basic pay makes up a significant proportion of earnings, a minimum of 4 per cent of employer contribution is clearly going to be a good base load. However, where basic pay forms a significantly lower proportion of their earnings, I remain concerned about abuse, particularly when that is taken with the explicit acceptance that there can be a 10 per cent shortfall in contributions for those who lose out.
I welcome the fact that a scheme is not to be treated as meeting the relevant quality requirements where the regulator is of the view that there are no reasonable grounds to do so and the regulator can issue compliance notices on employers where there is a shortfall in contribution payments or a failure to meet an alternative test. When the regulator issues a compliance notice on an employer, and a relevant jobholder during the certification period has since ceased to be employed, will the employer still have to make good any shortfall in respect of that now ex-employee or ex-jobholder?
As to the definitions in the regulations, the definition of basic pay lists all those payments and allowances that can be disregarded. The assumption in the drafting is that these additional payments are paid in addition to basic pay, so it is straightforward to disregard them. Sometimes such allowances are given in substitution of basic pay, so if you have salary substitution, basic pay is forgone in exchange. The employer meets the cost of an expenditure, resulting in savings in NI and tax, often for both parties. The use of salary substitution has grown exponentially and we see it being applied to such varied items as pension contributions, the provision of cars, computers, bicycles, and childcare vouchers, to name a few. In such situations it would not be unusual for an employer to have pay records that track two basic pay entitlements for a jobholder: one that applies post-salary substitution; and one that applies when salary substitution ceases or when pay rises are awarded. Will the Minister say whether consideration has been given to how the definition of basic pay will apply in certification requirements when an employer uses salary substitution?
With regard to giving a certificate and its retention and disclosure, the regulations—clearly a good thing—allow for a relevant jobholder or a recognised independent trade union to request and receive a copy of that certificate within six years after the end of the certification period. Does the relevant jobholder have to be a jobholder at the time of making the request, or is it sufficient to have been a relevant jobholder during the certification period? If a request is made during the certification period, must that request also be met by the employer? I welcome the decision to extend the coverage of the new employer duty to seafarers and offshore workers. I read the impact assessment in detail, which sets out clearly the complexities that had to be dealt with and how the regulations have sought to address those. I am very pleased that that decision was made.
I take this opportunity to refer to the Automatic Enrolment (Miscellaneous Amendments) Regulations 2012. It is a negative instrument but it addresses the important matter of the schedule of information to be provided in a notice from the employer to defer automatic enrolment to the end of a waiting period and in respect of the automatic enrolment information provisions generally. As all of us who believe passionately in pensions recognise, automatic enrolment turns inertia into a positive, and anything that undermines that beneficial inertia will undermine persistency of savings. How the opt-out procedures operate in practice will be pretty key to the success of the reforms and participation rates. It is clear, which I can see from my own experience, that good employers will take the opportunity of auto-enrolment to review positively their pensions proposition for the new generation of employees. There is clearly plenty of evidence there.
Subtleties in the employer behavioural response to regulation, particularly negative behaviour, always surprises policy-makers. They always miss some key behavioural responses. Jobholders in high-turnover occupations will be particularly vulnerable to the subtlety of employer responses to these regulations. For example, nothing in the regulations prevents employers giving several reminders of the opt-out dates to jobholders during the waiting period, and clearly the implicit intent is to increase opt-out rates. The impact assessment helpfully refers to the DWP’s intention to issue a template for generic and tailored information to be provided by employers. If the information provided to jobholders is significantly different from the template, will that be considered a breach of the regulations?
Lord De Mauley
My Lords, as is always the case with pension reform, it has been a more than interesting and lively debate. The comments of noble Lords have been insightful and helpful and I thank them for those.
These reforms are designed to transform the culture of saving for retirement in our country. Automatic enrolment is a bold start, but we have also begun looking at how to improve transfers to deal with small pension pots, a point raised by my noble friend Lord Boswell, and the industry is looking at issues around the transparency of charges. Both these issues were debated in your Lordships’ House during the passage of the Pensions Bill. On transfers and small pots, our consultation closes next week and we will publish a response in the summer. The Pensions Regulator has also recently published a document on what a good direct contributions scheme looks like in order to help employers to select an automatic enrolment scheme.
I will now do my best to wade through the large number of important questions asked by noble Lords. I will start with a question raised quite late in the day by the noble Lord, Lord McKenzie, because it sets the tone of the debate. It concerned the 10 per cent of jobholders who might lose out. Employers who are aiming to meet the minimum requirements under the law are unlikely by definition to use self-certification. Those using it will tend to be those seeking to run a scheme that is at least as generous as, and probably more generous than, a statutory minimum scheme for at least 90 per cent of their workers. We are talking about employers who see the provision of pensions as an important benefit for their workers. We want to allow such employers some latitude, or we may end up losing these more generous benefits for many workers. Therefore, because members will be in a comparatively generous scheme, the risk that they will lose out to a significant extent will be small.
The noble Baroness, Lady Drake, asked a lot of pertinent questions. They were fairly technical and I want to make sure that I address the right question in each case, so I may write on a number of them. I will attempt to answer as many of them as I can. She asked about the publication of the assessment certifying that the conditions of the 90 per cent test are still being met. That will be published in 2017. She asked whether, if an individual has a shortfall, the employer will be required to make it up. If the employer has miscertified when he should not have done so, the Pensions Regulator will have powers to end the certificate and require the employer to make up the shortfall.
The noble Baroness asked about waiting periods and re-enrolment. An employer cannot use a waiting period in relation to re-enrolment so the problem of multiple waiting periods will not apply. She asked about the use of self-certification for certain groups of jobholders and suggested that the system could lead to abuse. What I might term “good” employers told us that they needed flexibility in how they applied the certification test. We will monitor the use of certification as part of the evaluation of the reforms. If we find that employers are abusing certification, we will have the power to change the scheme and ultimately repeal it by order if necessary.
The noble Baroness, Lady Drake, and my noble friend Lord Boswell asked about the issue of salary sacrifice. The definition of “earnings” in the Pensions Act 2008 is,
“earnings payable to the person”.
If an individual chooses to sacrifice part of his or her salary, it is no longer “payable” and therefore not part of earnings, so the employer contribution would be payable only on the residual earnings. I will consider the point made by my noble friend Lord Boswell.
The noble Baroness, Lady Drake, asked about employer behaviour and increases in the opt-out rate—effectively, not following the template. The statutory requirement is to provide the prescribed information. There is no statutory restriction on providing additional information, but putting pressure on a worker to opt out is unlawful. Employers will need to be careful that they do not overstep the pressure test, even implicitly, by applying pressure to their workers.
My noble friend Lord German asked about the issue of “ordinarily working” in the context of seafarers. There are several factors a court is likely to consider in deciding where a seafarer is based and therefore whether they are ordinarily working in the United Kingdom. Where they join and leave the ship is just one of them. Other factors can be taken into account, such as the terms of their contracts. Offshore workers are deemed to be ordinarily working in the United Kingdom if they are working on the UK continental shelf or working on the UK part of a cross-boundary field. For offshore workers, the start and end of a journey does not matter.
My noble friend Lord German also asked about powers to cap charges. The Government have taken powers to place restrictions on charges in pension schemes. However, charges are not currently high in default schemes. They are typically in the range of 0.4 to 0.6 per cent. The industry is responding and a code of practice on transparency of charges is planned. We do not propose to regulate without evidence that it is necessary, but we will if there is evidence of a problem.
Baroness Drake
I am not sure when the Minister is going to finish and do not want to miss the opportunity to—
Baroness Drake
I was rather disconcerted when I discovered the implications of the interrelationships between earnings payable and how that applies under the salary substitution. A good employer simply has a shadow basic pay and pays pension contributions on that. I have not had an opportunity to go through whether there is a relevant hook in the schedule information, but the Minister should consider how this issue is brought to the attention of employees as they may simply not be aware of the implications for their pension contribution rights of taking on excessive amounts of salary contribution on a cumulative basis. The Minister did answer my question about employers having to make good the shortfall. I am particularly interested in whether they have to make the shortfall good where that employee has left and how they would do that. I am happy to have that in writing.
Lord De Mauley
My Lords, I understand both the questions. I am grateful for the noble Baroness’s acceptance that I should write because I need to consider the questions carefully before I answer them.
My noble friend Lord Boswell asked about a worker returning overseas with a small pot. The waiting period of three months will allow for workers such as summer workers, who work for a relatively short period, such that the issue does not arise. However, the problem of what I might call stranded pots is a real one. The Minister for Pensions is currently considering this for United Kingdom workers and I will pass my noble friend’s comments about overseas workers on to him so that he can take it into account in his deliberations.
The noble Lord, Lord McKenzie, asked about the automatic enrolment rates for next year. The amounts for the automatic enrolment earnings trigger and the qualifying earnings band are subject to annual review. We have consulted on proposed thresholds for next year and are considering the responses. We aim to publish the response and announce the rates for 2012-13 soon, which is coded language that I think the noble Lord will understand.
The noble Lord also asked about the legal process to access the tribunals for offshore workers. I am going to have to write on that as I am on access to tax relief on personal pensions. He asked about the profile of the 10 per cent who may lose out from certification. I think I have covered that already but should add that we have examined the matter to ensure that our measures are not discriminatory. I suspect that when I am writing afterwards I might discuss that issue in some more detail.
I will, of course, look at the record to see whether there is anything else that has not been addressed. As I said, these provisions put in place necessary pieces of the automatic enrolment framework which will enable employers to comply with the new duties. This will protect existing, good-quality schemes while also providing ongoing protection for job-holders enrolled in them. We are also ensuring that these reforms bring on board individuals who are ordinarily working in the United Kingdom, regardless of whether their work is on land or at sea. I commend these instruments to the Committee.
Welfare Reform Bill
Debate between Baroness Drake and Lord De Mauley(12 years, 5 months ago)
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Lord De Mauley
I understand what the noble Baroness wants and I am grateful to her for allowing me to write.
Baroness Drake
If there is an intention to put much more emphasis into making the reconsideration stage effective and efficient, is the department intending to commission an independent audit of that and to publish the findings so that people can have confidence in the effectiveness of the changes at the reconsideration stage?
Lord De Mauley
It will not be an independent process but it will be monitored closely in the department.
Postal Services Bill
Debate between Baroness Drake and Lord De Mauley(13 years ago)
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Baroness Drake
My Lords, in moving Amendment 56, I will also speak to Amendment 57.
I thank the noble Lord, Lord De Mauley, for his courteous and helpful letter that addressed several issues relating to the Royal Mail pension plan raised by the noble Viscount, Lord Eccles, my noble friend Lord Young and myself. I welcome the assurances that: the Government are developing a joint communication plan with the trustees so that members are provided with information on the benefits that will transfer to the new public service scheme ahead of that transfer; active members will receive a seamless service from the new public service scheme and the Royal Mail scheme, including the provision of combined benefits statements; benefits which transfer from the Royal Mail scheme to the new public scheme will be replicated exactly; the governance arrangements for the new public service scheme will be the subject of consultation with the trustees and members’ representatives; and the Government must consult the trustees on the use of powers set out in Clause 17. I welcome that and the Minister’s confirmation that I am correct in my understandings.
However, there remains a matter of continuing concern. The Bill gives the Secretary of State considerable powers to make amendments to the Royal Mail pension plan, including the smaller Royal Mail pension plan—I call it “Mark II”—that is post transfer of assets and liabilities to the new public service scheme. These powers include the ability to transfer assets between the Royal Mail scheme and the new public service scheme, to which accrued pension rights will be transferred, and to divide the Royal Mail scheme into different sections, to allocate assets between the different sections and to determine which company or companies is a participating employer in any given section—this in preparation for the sale, retention and restructuring of different parts of the business. I am concerned that the Bill does not allow for some balancing mechanism of protection for scheme members when the Secretary of State exercises those powers. These amendments seek to address that.
I accept that, on the setting up of the new public service scheme, the Bill limits the assets that the Secretary of State can transfer out of the Royal Mail scheme such that the ratio of assets to liabilities in the Royal Mail scheme is no worse immediately after the transfer of those assets than it was immediately before. However, the valuation of those liabilities and assets is to be done in a manner determined by the Secretary of State. There is no explicit role for the Royal Mail scheme trustees, acting on the advice of their scheme actuary, to exercise a judgment on whether the assets remaining in the Royal Mail scheme are adequate in terms of value or appropriate in terms of the types of assets retained or transferred. Similarly, under Clause 17, when the Secretary of State exercises his or her power to divide the Royal Mail pension plan into sections and to allocate assets and liabilities between those sections, there is again no explicit role for the trustees acting on the advice of the scheme actuary.
Amendments tabled by my noble friend Lord Young in Committee sought to address this concern by strengthening the consultation rights of the trustees and involving the Pensions Regulator in any assessment of the transfer of assets and liabilities, particularly between the new sections of the Royal Mail pension scheme. Having reflected on that debate in Committee, I recognise that the Government would probably not want to give the Pensions Regulator the power to impose any methods, assumptions or penalties on the Secretary of State when transferring assets between schemes or sections of the Royal Mail pension plan. Similarly, the Government may well be reluctant to give the Royal Mail scheme trustees a potential power of veto on the transfer of pension assets, which could impact on the sale process itself. None the less, the concern remains that the Secretary of State retains considerable powers when it comes to determining the adequacy and appropriateness of the actual assets transferred.
The issues that we are dealing with here are fundamentally actuarial, ensuring that the assets of the Royal Mail pension plan and its sections are adequate and appropriate in terms of matching assets to liabilities. If these decisions have to be justifiable as a matter of actuarial opinion and the actuary concerned cannot be the Royal Mail scheme actuary acting for the trustees, the best candidate for the job in my view is the Government’s own actuary, GAD.
Amendment 56 to Clause 17 would address transfer of assets between the newly created sections of the Royal Mail scheme and Amendment 57 to Clause 21 would address assets transferred from the Royal Mail pension scheme to the public service scheme. The amendments would require the Secretary of State to obtain a certificate from the government actuary stating that in his opinion, in the first instance, the allocation of assets between the different sections is appropriate, having regard to the liabilities and obligations of each section and, in the second instance, the selection of assets transferred and the assets remaining in the Royal Mail scheme is appropriate, having regard to the liabilities and the obligations of the Royal Mail scheme and the new public service scheme established under Clause 16. In my view, requiring such a certificate from the government actuary would provide a form of protection to the scheme, its trustees and its members when the Secretary of State exercises his powers under Clauses 17 and 21.
The Secretary of State has very wide powers to allocate assets and liabilities and materially alter the strength of an employer covenant backing any of the new sections of the Royal Mail pension plan. These must be seen in the context that, under Clause 8, the Secretary of State has powers to transfer property rights and liabilities between the holding company and other companies that are wholly owned by the Crown, which may occur prior to, and be in preparation for, sale or mutualisation. These powers in Clause 8 could be exercised so as to have the effect of materially weakening the employer covenant supporting any section of the remaining smaller Royal Mail pension plan. To give an example, the Secretary of State could create a separate section of the Royal Mail scheme for Post Office Ltd under Clause 17 and determine which assets and liabilities are allocated to it. The Secretary of State also has the power to decide which assets and property rights are held by Post Office Ltd as a company under Clause 8. When these are taken together, they are considerable powers and reinforce the need for a protection mechanism for scheme members. I believe that certification from the Government’s actuary will provide, before assets and liabilities between schemes and sections are transferred, that degree of protection. I beg to move.
Lord De Mauley
My Lords, I thank the noble Baroness, Lady Drake, for giving us another opportunity to discuss the vital provisions in the Bill on the RMPP. Amendment 56 relates to the selection of assets left with individual sections of the RMPP created under Clause 17. That clause allows the Secretary of State by order to divide the RMPP into sections. The Government intend that this power will be used to create a separate section in the RMPP for Post Office Ltd. This is necessary as Post Office Ltd will be separated from Royal Mail, because it is not part of the sale under Part 1 of the Bill. Amendment 57 relates to Clause 21 and the selection of assets left with the RMPP as a whole once the deficit is transferred to the Government.
Part 2 of the Bill will allow the Government to take over the historic deficit in the Royal Mail pension plan. We intend to do this by transferring approximately £35.9 billion of liabilities and £27.5 billion of assets from the RMPP to the Government. This means that Royal Mail will be left with an appropriately sized pension plan to manage.
We intend that only liabilities relating to the salary link—that is, real growth in salaries for active members—and ongoing pension accruals will be left with the RMPP. We estimate that the salary link portion will amount to approximately £1.5 billion of liabilities remaining with the RMPP at the point at which the Government implement the measures in Part 2. Subject to state aid clearance, we intend to fund fully the liabilities remaining with the RMPP at the point of transfer, which would mean the RMPP also retaining £1.5 billion of assets.
In dealing with both amendments, I want to provide some reassurance on the process that will be followed to transfer assets from the RMPP to the Government. Before any assets are transferred, a valuation of the RMPP will indeed be undertaken by the Government Actuary. That valuation will follow standard actuarial principles and reflect the assumptions agreed between the trustees and Royal Mail for the March 2009 triennial valuation. The output of that valuation will be an up-to-date view of the value of the assets and liabilities in the plan. As a result, there will be no benefit in value for the RMPP, or a section of it, in selecting one type of asset rather than another. As noble Lords have highlighted in their proposed amendments, however, it is important that careful consideration be given to the type of assets that are left with the RMPP and to how those assets might be allocated between the Royal Mail section and the Post Office Ltd section of the plan.
We fully recognise that the assets to be left with the RMPP, and the individual sections, should reflect the future investment strategy of the trustees, and that it should be the trustees, in consultation with the respective employers, who set that strategy, rather than the Government. Jane Newell, the chair of the RMPP trustees, stated during her evidence to the Public Bill Committee in the other place that she would look to engage with us on the selection of assets to be left with the RMPP. I assure noble Lords that officials, with advice from the Government Actuary’s Department, have indeed been engaging with the trustees of the RMPP and are making good progress. Indeed, the Government are obliged under Clause 24 to consult the trustees before any orders are made under Part 2 of the Bill.
It is also important to bear in mind that the trustees would be free to sell any assets left by the Government and to change their investment strategy as they see fit. Of course, given the costs that this would involve, it is in everyone’s interest that we continue to work with the trustees to reach a satisfactory agreement on this issue.
I understand that concerns have been raised—the noble Lord, Lord Young, and I have corresponded on this—that the Government may seek to make changes to the RMPP by way of the powers in Part 2, even after the pensions changes that I have described have been implemented. I am happy to make clear that the Government intend to use these powers on a one-off basis only, and have no intention of making any substantive changes to the RMPP under Clauses 17 or 18 after the implementation of the pensions solution.
Postal Services Bill
Debate between Baroness Drake and Lord De Mauley(13 years, 1 month ago)
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Lord De Mauley
My Lords, my noble friend makes an extremely important point. The terminology is confusing but I think that he is talking about the RMPP scheme, the old liabilities and assets having been transferred out into what is rather confusingly called the new scheme. Therefore, he is concerned about the ongoing liabilities in the RMPP scheme. I will write to him, but I can tell him that £1.5 billion of funding will be left in the new scheme specifically to cover what is known as the salary link. However, I had better expand on that in writing, if I may.
Baroness Drake
My Lords, I hope that I may respond to some of the points made in the debate, particularly to the comments made by the Minister. Before I deal specifically with my own Amendment 24EB, I wish to comment on Amendment 24EC, which was spoken to by my noble friend Lord Young, as this addresses the Secretary of State exercising powers under Clause 17. As far as I can see, there is no explicit requirement on the Secretary of State to consult the trustees when exercising powers under Clause 17. Clause 17 gives the Secretary of State considerable powers. He can divide up the Royal Mail pension plan—not the new scheme but the Royal Mail pension plan—into different sections and allocate assets and liabilities between them, and he can allow different companies to participate in that scheme. The Secretary of State also has the power to determine what assets go on to the balance sheets of companies in preparing for privatisation or in a post-privatisation world.
These matters are of great importance to the trustees of the Royal Mail pension plan, which is left with accruing liabilities, or existing liabilities, that are not transferred to the new scheme. They will be very interested in the strength of the employer covenant backing any section so created, and what it does to the security of the members left in a particular section so created. In the occupational pension world, if you weaken the employer covenant to a particular section, that is a notifiable event—it is not something that you can breeze over. It is what the regulator exists for, which I suspect is why my noble friend raised the issue of the Pensions Regulator.
Hypothetically, if I were an employee of Post Office Ltd and I had accruing rights in the remaining Royal Mail pension scheme, I would want my trustees to be very alert to what assets were left on the balance sheet of Post Office Ltd, because they are the assets—the covenant—that are backing the future benefits or the benefits that are remaining in the Royal Mail pension plan. These are real issues for the trustees. This will remain an occupational pension scheme because, as I thought, the Minister has not said that Crown guarantee carries on in the Royal Mail pension plan.
I do not think that we have clarity about how the Secretary of State can exercise his power under Clause 16 to split up the Royal Mail pension plan and how at the same time the trustees can exercise their power to protect the employees so that their position as creditors or the strength of the employer covenant is not weakened and the members left in a less favourable position.
On Amendment 24EB, I fully recognise that the proposals in the Bill allow for the deficit to be taken over by the Government; that will clearly give a lot of people in the scheme peace of mind. I welcome the Minister’s comment that members’ protection is of great importance. I think I welcome his statement that there will be a comprehensive communication exercise before, during and after the transfer, which is clearly very positive and on the record. However, we still need clarity about what will happen before the transfer. What communication will there be then? If the Government could clarify that, in writing or in some other way, that might deal with the issue.
The Minister referred to the Royal Mail pension plan trustees having statutory obligations to provide information to pension scheme members, and that is absolutely true. However, we have a complex situation in that there is almost a Secretary of State override to impose certain powers or requirements on the Royal Mail pension scheme. The trustees cannot account for that—they cannot explain that. The Government might choose them as the conduit to do that, but they cannot make those decisions or answer the questions that arise because of powers exercised by the Secretary of State.
I anticipated that the inefficiency of double communication might be raised, but I am not persuaded that that is an argument for not allowing people the maximum information prior to transfer. That is the reason for civil servants and Royal Mail pension plan trustees coming up with an efficient communication plan; it is not really a reason for not giving full and proper information prior to transfer.
It would be helpful to obtain greater clarity about the information that would be provided. However, I recognise that the noble Lord was seeking to improve the assurances given on the importance of protecting members’ information.
Lord De Mauley
Before the noble Baroness withdraws her amendment, I am happy to provide some clarification on the points she raised. She asked about the Secretary of State being obliged to consult, and I mentioned Clause 17. I apologise if I was not clear enough. The Government’s position is that under the general provisions in Clause 24 the Secretary of State must consult the trustees on the powers set out in Clause 17. I hope that that is helpful.
The noble Baroness also asked about the Crown guarantee. Perhaps I should clarify the Government’s position, which is that an unfunded public sector scheme is a better option, because providing a Crown guarantee would expose the Government, and therefore taxpayers, to significant risks—for example, investment risk—that are not under government control. With a guarantee, it would not be clear as to what liabilities the Government would be taking on, because although they would assume responsibility for the deficit, the Royal Mail trustees would continue to exercise control over investment policy and discretionary powers in relation to benefits to members. Our proposal to establish a new unfunded scheme is consistent with the majority of existing public service pension schemes. The pay-as-you-go model provides members of the Royal Mail pension plan with certainty that their benefits will be paid, while minimising the taxpayers’ exposure to investment risk and future volatility in the scheme’s funding position.
I should say in answer to the noble Baroness’s second broad point that officials have already started to work very closely with the trustees to implement Part 2, including over asset allocation. These discussions are critical in helping the Government to implement the pension solution.
Baroness Drake
I thank the Minister for those further clarifications. They are helpful, although they trigger one or two queries. Any further clarity that can be provided in writing would certainly be helpful. I interpreted what the Minister said as the Government putting on record that if they seek to exercise their powers under Clause 17, they will consult the trustees. That is helpful.
My point about the Crown guarantee was that after the transfer of liabilities or accrued rights to the new pension scheme, there remains a Royal Mail pension scheme with either liabilities or accruing liabilities, and it will remain an occupational pension scheme. I sought to clarify whether the Secretary of State would not exercise any powers over that remaining pension scheme in a way that undermined the protections afforded to the Royal Mail pension scheme under the normal range of occupational regulations. That was a key point.
The Minister’s clarifications have been helpful. Ambiguities remain and I am sure that they will be the subject of further discussion. Any clarity that can be given to my noble friend Lord Young on what happens before the transfer would be helpful. I beg leave to withdraw the amendment.