Justice and Security (Northern Ireland) Act 2007 (Extension of duration of non-jury trial provisions) Order 2017

Debate between Lord Bourne of Aberystwyth and Lord McAvoy

Tuesday 18th July 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, under this order, trials without a jury can take place in Northern Ireland for a further two years from 1 August 2017. Without this order, the current provisions will lapse on 31 July 2017. Although this is the fifth such extension of these provisions, I hope to leave noble Lords in no doubt as to the continued necessity of such provisions for another two years.

Noble Lords will be aware of the lethal threat posed by terrorists in Northern Ireland. Dissident republican terrorist groups continue to plan and mount attacks with the principal aim of killing or maiming those who serve the public in all communities so bravely. Police officers, prison officers and members of the Armed Forces are the main focus of these attacks, but the terrorists’ continued use of explosive devices and other weaponry continues to cause death and injury. Individuals linked to paramilitary organisations also continue to undermine peace and the rule of law in Northern Ireland through the use of violence and intimidation in both republican and loyalist communities.

I assure noble Lords that the Government wish to end the exceptional system of non-jury trials as soon as it is no longer necessary. But this should happen only when the circumstances allow, otherwise we risk allowing violence and intimidation to undermine the criminal justice process in Northern Ireland. Regrettably, although many attacks have been disrupted, the security situation today remains much the same as it was in 2015. The threat from terrorism in Northern Ireland is assessed to be severe. This year alone, four national security attacks have occurred in Northern Ireland, including the wounding of a police officer serving his community. It would be remiss of the Government to dispose of these provisions now given this threat and the impact it may have on the delivery of criminal justice in Northern Ireland, or simply because there are those who think we have had these provisions for long enough.

In the past two years, attacks by dissident republicans and loyalist paramilitaries have put countless innocent lives in danger. Noble Lords will recall the despicable incident on the Crumlin Road in Belfast in January this year, where two police officers who were serving their community came under attack from dissident republicans, leaving one officer badly injured. The forecourt of a busy filling station was sprayed with automatic gunfire, demonstrating the utter disregard these groups show for human life and the harm that they pose to ordinary members of the public. Sadly, this was not an isolated incident: there were four confirmed national security attacks in 2016, and there have been four so far this year, underlining the persistence of the threat we face.

The presence of dissident republicans and paramilitaries in Northern Ireland means that violence and intimidation remain a concern for the wider community. Figures released by the Police Service of Northern Ireland show that there has been an increased number of security-related deaths over the past three years, as well as an increasing trend in the number of paramilitary-style assaults since 2012-13. Threats towards police and public bodies also demonstrate the continued attempts at the intimidation of individuals and communities in Northern Ireland. In 2016-17, there were 137 arrests and 19 charges related to terrorism. Many attacks have been thwarted and disrupted, which is evidence that the work of the PSNI and its partners is having an impact, though the security situation remains serious.

Non-jury trial provisions are available in exceptional circumstances in Northern Ireland where a risk to the administration of justice is suspected; for example, jury tampering, whereby intimidation, violence or the threat of violence against members of a jury could result in a perverse conviction or acquittal. The Director of Public Prosecutions may issue a certificate that allows a non-jury trial to be held in relation to any trial on indictment of a defendant, and anyone tried with that defendant, if it meets a defined test which falls within one of the following four conditions: first, the defendant is, or is an associate of, a member of a proscribed organisation, or has at any time been a member of an organisation when it was a proscribed organisation, whose activities are connected with the affairs of Northern Ireland; secondly, the offence was committed on behalf of a proscribed organisation, or that a proscribed organisation was involved with or assisted in the carrying out of the offence; thirdly, an attempt was made to prejudice the investigation or prosecution by, or on behalf of, a proscribed organisation, or that a proscribed organisation was otherwise involved with or assisted in that attempt; or fourthly, the offence was committed, to any extent—directly or indirectly—as a result of, in connection with or in response to religious or political hostility. A case that falls within one of the four conditions will not automatically be tried without a jury, because the DPP must also be satisfied there is a risk that the administration of justice might be impaired if a jury trial were to be held.

Let me be clear: this is not a Diplock court system. There is a clear distinction between this system and the pre-2007 Diplock court arrangements. The Diplock system saw a presumption that all scheduled offences were tried by a judge alone. Today in Northern Ireland there is a clear presumption that a jury trial will take place in all cases—the presumption is reversed.

In line with commitments previously made in Parliament in 2015, prior to the July 2017 expiry date the Secretary of State held a full public consultation on whether or not non-jury trial provisions should be extended. The consultation concluded in February this year, and received a total of 10 responses from a range of interested individuals and groups in Northern Ireland. The Secretary of State has also received relevant briefings from security officials in order to understand the underlying threat picture in Northern Ireland. In the light of all the evidence and views before him, the Secretary of State has decided to renew non-jury trial provisions for a further two years and to keep them under regular independent review. As an extra and new measure of assurance, the independent reviewer of the Justice and Security (Northern Ireland) Act 2007 will review the non-jury trial system as part of his annual review cycle, the results of which will be made available to the public in his published report.

We must recognise that Northern Ireland is a unique situation, and the non-jury trial provisions in the 2007 Act continue to be an important factor in supporting the effective delivery of the criminal justice process in a very small number of criminal cases. Certain jury trials in Northern Ireland would not be safe from disruption by those involved in paramilitary activity, many of whom make their presence known in Northern Ireland’s close-knit communities, or indeed in the public galleries of the courtrooms.

So far in 2017, the DPP has issued just four certificates for non-jury trials. During 2016, 19 certificates were issued and one was refused. The DPP acts with independence, exercising his discretion in deciding whether to issue a certificate. Noble Lords will also be interested to know that in 2016, just 0.7% of all Crown Court cases in Northern Ireland were conducted without a jury. The figure so far in 2017 is 0.5%. These figures reflect the small but consistent need for non-jury trial provisions.

Noble Lords can rest assured that the Secretary of State has not taken the decision to seek to renew the non-jury trial system lightly. We strongly believe, however, that the system is, on balance, a proportionate and necessary measure in the light of the unique risks facing the criminal justice process in Northern Ireland. The Government’s move to keep the provisions under annual independent review establishes a further safeguard, which I am sure noble Lords will welcome, thus ensuring the system remains fair and effective so that we keep it in place for only as long as is necessary and appropriate. I commend the order to the House.

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for his clear exposition of what is involved in this order. I am sure the House knows exactly what is at stake. I reiterate at the outset that this is reluctant legislation. We do not want to have to renew it, and neither do the Government. We welcome their assurance that they wish to end this exceptional system in Northern Ireland as soon as it is no longer necessary.

Your Lordships’ House is familiar with the security situation in Northern Ireland. It has been a little over a year since the death of Prison Officer Adrian Ismay after he was injured in a dissident republican bomb attack in Belfast. As the Minister said, in January this year two serving police officers were attacked in a public place with automatic gunfire. Dissident republicans and violent members of paramilitary groups seek to maim, kill and intimidate communities and with it disrupt peace and the rule of law in Northern Ireland. We pay tribute to those police officers, prison officers and members of the Armed Forces who serve the communities and are the main focus of these attacks. These threats affect all communities and, recklessly and without care, put the wider public at risk.

We are assured that decisions on the use of these provisions are taken with appropriate vigilance, with only a very small number of cases having these precautions applied to them. I understand that so far this year they make up 0.5% of Crown Court cases in Northern Ireland; last year, there were 19 relevant cases. I warmly welcome the commitment that the independent reviewer of the 2007 Act will be asked to review the non-jury trial provisions as part of the annual review cycle. This is a positive move which increases oversight of these exceptional measures.

The order unfortunately remains necessary due to the particular realities of the security situation and criminal justice in Northern Ireland. A huge amount of progress has been made, but we have further to travel. It is incredibly important, and remains our hope, that a full, devolved and inclusive Government will be returned in Northern Ireland as soon as possible. Today, for the reasons given, we have no hesitation in supporting the time-limited extension of this order.

Pension Schemes Bill

Debate between Lord Bourne of Aberystwyth and Lord McAvoy

Tuesday 27th January 2015 Lords Chamber

[Lord Bourne of Aberystwyth (Con)]

My Lords, I first thank the noble Lord, Lord McAvoy, for his contribution. I will do my best to answer his points and those of my noble friend Lord German.

I welcome the opportunity to debate this amendment again, having discussed it at length in Committee. It is fair to say—as the noble Lord said in opening—that, in philosophical terms, there are differences between the Government and the Opposition on this issue. However, we certainly want the freedoms that the new system contained in the Pension Schemes Bill offers. To that extent, we are united. However, we are certainly coming at it from different angles.

The noble Lord, Lord Bradley, suggested in Committee that all workplace pension schemes should be run by trustees and have a legal duty to prioritise members’ interests. In the same debate the noble Baroness, Lady Drake, made a broader case for extending a fiduciary duty to all who have the discretion to manage other people’s money. The Government share the concerns of the noble Lord and the noble Baroness that pension schemes should be well run. As I said in Committee, the Government are committed to ensuring that all workplace pension schemes are well governed, with members’ interests at the heart of everything they do. That is why, in March last year, we set out our proposals for strengthening the governance of occupational pension schemes that are money purchase schemes, and to the money purchase benefits provided by other schemes, in the Command Paper, Better Workplace Pensions: Further Measures for Savers. I should add that the majority of stakeholders supported these proposals by saying that they represented a positive change, intended to drive the right behaviours.

As noble Lords will be aware, in that publication last October we put these proposals on a sure footing by consulting on draft regulations to place minimum governance standards on, broadly, all occupational pension schemes which are money purchase or have money purchase elements to them. That consultation has now ended; we will shortly be publishing the Government’s response and laying the final draft regulations before Parliament, to come into force this April. For workplace personal pension schemes, the FCA has also completed its consultation on draft rules for independent governance committees, which were referred to by my noble friend Lord German and which will ensure oversight of these schemes in members’ interests from April 2015, and aims to publish its policy statement by early February of this year. That probably answers my noble friend’s point: these committees are essentially supervisory rather than day-to-day, which would be the role of trustees.

In respect of the governance of collective benefits, I can reassure noble Lords that we have a number of provisions in Part 2 that enable us to make requirements in regulations about some of the key aspects of running a scheme offering collective benefits. These are specifically tailored to such schemes and reflect key differences in the rights that members have in collective benefits, compared to money purchase benefits. We may also make regulations under a power in Part 3 to require certain decisions in respect of collective benefits, and in relation to defined ambition schemes, to be made in the best interests of members to ensure appropriate safeguarding of members’ interests. This reflects the different nature of the decisions being made on behalf of members in these types of pensions, compared to money purchase pensions.

I will refer now to another point made by the noble Lord, Lord Bradley, in Committee. He proposed that a trust-based approach is preferable to a contract-based one. I emphasise again that we must not assume that trust-based schemes are always better governed than contract-based workplace pension schemes. There is no evidence that one governance structure necessarily delivers better outcomes than the others. As I said in Committee, we consider that scale, good governance and charge levels are among the key determinants of member outcomes, not whether a scheme is contract or trust-based. But as I also emphasised, while we are interested in scale inasmuch as it may help schemes to improve quality and lower charges, it is not an aim in itself and bigger does not always mean better. The governance of contract-based schemes has grown significantly stronger in recent years, led by the FCA with the Treating Customers Fairly principles, which have formalised firms’ responsibilities to their customers.

The introduction of independent governance committees with a duty to act in members’ interests, from April 2015, will further strengthen the governance of contract-based schemes. Also from April of this year, the Government and the FCA are intending to introduce measures so that certain savers in, broadly, all occupational and contract-based schemes providing money purchase benefits which are used for automatic enrolment will not be subject to high or inappropriate charges. The positioning in the Bill of this amendment limits the powers to schemes with collective benefits. However, it is not clear whether this is the intention behind the amendment.

We would not want to single out collective schemes here and, as I have mentioned, there are powers in Part 3 covering the interests of members of collective schemes. If the noble Lord, Lord McAvoy, intended the amendment to apply to all schemes, I am not sure whether it would achieve this. As I explained in Committee, if this amendment were exercised across all schemes, it would require independent trustees to be recruited for tens of thousands of pension schemes. I believe that this answers a point raised by my noble friend Lord German. Data from the Pensions Regulator show that there are at least 47,680 private workplace schemes alone, although I accept that not all those will need to recruit independent trustees. My noble friend Lord German put a powerful case for not passing this amendment, as it is not clear whether it is intended to cover just collective benefit schemes or schemes more widely. Clearly, there will be a cost associated with it.

[Lord McAvoy]

I thank the Minister for giving way. The Minister has raised some objections that are less extreme than those of the noble Lord, Lord German—so there is a difference in fairness here. Our new Clause 13 was initially a response to the problem of having so many trustees. Let us not forget this direct quote from my honourable friend Gregg McClymont:

“Our new clause 13 would initiate a response to that problem, but let us not forget that of the 200,000 pension schemes in the UK the vast majority are group personal pensions under the management of four or five—no more than half a dozen—insurance companies. A governance board properly constituted of trustees attached to each one of those major insurance companies would deal with the vast majority of pension schemes in the UK. That is a very important point”.—[Official Report, Commons, Pension Schemes Bill Committee, 4/11/14; col. 324.]

[Lord Bourne of Aberystwyth]

I am grateful to the noble Lord opposite for that intervention, but the case remains there is clearly going to be a cost associated with this. This is an objection to it, but the prime objection is that we do not accept the principle that contract-based schemes need such a fundamental change. Though different in essence from the fiduciary nature of trustees’ duties and trust schemes, there are of course obligations placed on contract-based schemes, as I have tried to set out.

We all agree that good governance of pension schemes is essential. This is why the Government’s proposed new governance standards, applying across broadly all workplace pension schemes in respect of money purchase benefits will further protect members by ensuring that schemes are run in their interests. It is also why this Bill makes provision for targeted regulation-making powers in respect to the running and good governance of collective benefits and certain decisions in defined ambition schemes and in relation to collective benefits.

I accordingly and respectfully ask the noble Lord to withdraw this amendment.

[Lord McAvoy]

My Lords, maybe I am paranoid or maybe I just have a suspicious mind or maybe my mother knew what she was doing when she called me “Thomas”, but I do not believe that it is entirely coincidental that what someone called the Welsh mafia are in operation here, with certain facts—in inverted commas—being produced. Cost has been mentioned by the noble Lord, Lord German, and the Minister. Can anyone in this House give an exact figure for the cost to the members of pension schemes where there has not been proper fiduciary guarantees of independent governance? Can anyone give me a quote? Plenty of folk can quote instances where money has been lost through pension funds. I do not think that the principle that we are putting forward here is as unreasonable as has been portrayed, particularly by the noble Lord, Lord German. We will return to scale at a later stage. In the mean time, we will try to find an estimate of how much has been lost to ordinary members of pension schemes through a lack of governance.

In the mean time, however, I beg leave to withdraw the amendment.

Pension Schemes Bill

Debate between Lord Bourne of Aberystwyth and Lord McAvoy

Monday 12th January 2015 Lords Chamber

[Lord Bourne of Aberystwyth (Con)]

My Lords, I now turn to a further group of amendments which make minor changes to the clauses dealing with draw-down of pension benefits.

The first set of amendments follows amendments made in Committee in the other place to what is now the Taxation of Pensions Act. The Taxation of Pensions Act will allow for payment of death benefits to nominees and successors of members in relation to money purchase arrangements. The Act makes provision for a nominees’ draw-down pension and a successors’ draw-down pension. These amendments make the changes to this Bill to reflect the introduction of these new types of draw-down pension. They amend Clauses 55 and 56 so that these types of pension are treated in the same way as a dependants’ draw-down pension. They also insert definitions of a nominees’ draw-down pension and a successors’ draw-down pension into Clause 74. Amendments to Clauses 60 and 61 do the same for Northern Ireland. The second set of amendments makes small changes to Clauses 72 to 74, which deal with the definition of terms used in Part 4 of the Bill. As I said, these amendments make minor changes. I hope that noble Lords will agree, and I commend these amendments to the House. I beg to move.

[Lord McAvoy]

My Lords, I thank the noble Lord for his succinct exposition of the amendments. These are more in line with the phrase “minor and technical”. Nevertheless, I still make the point that there has been a barrage of amendments. We will study these carefully and, if necessary, do something on Report. I just make the point that we will be scrutinising them carefully.

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[Lord Bourne of Aberystwyth]

My Lords, this group of amendments makes a number of small consequential amendments, all designed to ensure that the transfer provisions work as intended. The amendments are somewhat technical and I hope your Lordships will bear with me while I set out in a little more detail what they do.

Amendments 54, 63 and 64 are consequential on Clauses 55 to 57, which make provision in relation to drawdown. Clause 55 contains a provision that overrides scheme rules to the extent that there is any conflict. Clauses 56 and 57 also contain provisions allowing regulations made under them to override scheme rules to the extent that there is a conflict. The amendments make provision to insert a reference to Clauses 55 to 57 into the list of relevant legislative provisions for the purposes of the scheme rules definition in Sections 100B and 101AI of the Pension Schemes Act 1993—in relation to transfer—Section 67A of the Pensions Act 1995—in relation to members’ subsisting rights—and for the purposes of the Pensions Act 2004. Amendments 62, 67, 71 and 73 further ensure that the definitions of scheme rules in the 1993 and 2004 Acts also apply for personal pension schemes, taking account of any provisions that override these rules. These provisions are needed to ensure that the new overrides are taken into account in the existing legislation and so that it is clear what is meant by scheme rules where a provision has been overridden. Amendments 58, 63, 64, 77, 82 and 86 make provision for corresponding changes to Northern Ireland legislation.

I now turn to Amendments 59, 70 and 72. These make amendments to Schedule 4 to update existing cross-references to the transfer rights contained in the Judicial Pensions Act 1981, the Judicial Pensions and Retirement Act 1993, the Pensions Act 1995 and the Scottish Parliamentary Pensions Act 2009, so that they point to Chapters 1 and 2 of new Part 4ZA of the Pensions Schemes Act 1993. This will ensure that transfer provisions continue to operate as intended in conjunction with this Bill in relation to these pension schemes. This schedule also introduces identical provisions for Northern Ireland legislation in Amendments 76 and 87.

Amendments 60, 61, 68, 69, 75, 76, 78, 79, 83 and 84 amend Schedule 4 to make a number of minor and consequential changes to various sections of the Pensions Schemes Act 1993 and its Northern Ireland equivalent to ensure that the precise wording of the these sections operates as intended, now that a member’s statutory right to transfer will apply at benefit category level.

Finally in this group, Amendments 65 and 66 make small drafting amendments to new Section 100C of the Pension Schemes Act 1993 to put the meaning of “normal pension age” beyond doubt, with corresponding amendments for the Northern Ireland equivalent through Amendments 80 and 81. The amendments make minor and technical changes to the Bill which are important to ensuring that the legislation operates correctly. I beg to move.

[Lord McAvoy]

My Lords, I make the point about minor and technical amendments again. We will study them carefully, although with less suspicion than those in other categories. However, I will just say that Amendment 54 takes up a full page on the Marshalled List of amendments. Again, it reinforces the image of things being hurried or missed out when an amendment of that length has to be moved. Having said that, we accept it as a minor and technical amendment.

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[Lord Bourne of Aberystwyth]

My Lords, Clause 80 provides a power to enable the Secretary of State or the Treasury to make consequential changes needed to any primary or secondary legislation, whenever made. Clause 81 makes provision for the regulation-making powers that have been set out in the Bill and the procedure for exercising those powers.

The amendments to Clauses 80 and 81 are technical and enable the regulation-making powers contained in the two clauses to be extended to the Department for Social Development in Northern Ireland in relation to Northern Ireland legislation. This will allow the Secretary of State for the Department for Social Development in Northern Ireland, who is responsible for social security benefits and pensions in Northern Ireland, to make consequential amendments to provisions in Northern Ireland legislation, where appropriate. In line with the provisions for Great Britain, including Scotland, where the powers are used to amend primary legislation, they are subject to confirmatory procedure, which is equivalent to the affirmative resolution procedure in this House. These changes and other provisions in the Bill allow the Northern Ireland authorities to maintain parity with pensions legislation in Great Britain. Clause 84 sets out when the different parts of the Bill will come into force.

The Government have given a commitment that from April 2015 people will be able to access their pension savings flexibly. These amendments ensure that the regulation-making powers in Part 4 come into force on Royal Assent so that the relevant regulations can come into effect on 6 April 2015 in line with the commitment given. The amendments also ensure that amendments made to include reference to the Bill in the definition of pensions legislation in the Pensions Act 2004 come into force from 6 April 2015. I beg to move.

[Lord McAvoy]

My Lords, I thank the Minister for his exposition. Somebody must have told him about my Irish grandparents. That is the other side of my Celtic tradition. We accept that these are minor and technical amendments and have no objections to them, with the usual proviso.

Pension Schemes Bill

Debate between Lord Bourne of Aberystwyth and Lord McAvoy

Wednesday 7th January 2015 Lords Chamber

[Lord McAvoy (Lab)]

My Lords, I shall speak to Amendments 5 and 6. They follow recommendations made by the Delegated Powers and Regulatory Reform Committee, which suggested that, on first use, the affirmative rather than the negative resolution process should be used. We agree. Despite the Government’s claim in the delegated powers memorandum that Clause 10 does not require affirmative resolution as the amendments would be “technical” and “procedural”, it would be good to hear further detail about the circumstances in which it could be used. Does the Minister see the power as a backstop that can be relied on in the event that a scheme manager is not considered to be acting in the best interests of the scheme members or has taken a decision that is likely to disadvantage them?

Clauses 10 and 11 are part of a larger group of clauses introduced on Report in the other place. As a result, on that and other points it is up to this Committee to ensure adequate scrutiny and ensure that there are no flaws in the drafting. In debating the provision, the Minister in another place said:

“We cannot do an impact assessment because we have not yet written the regulations”.—[Official Report, Commons, 25/11/14; col. 805.]

That is a slightly unsatisfactory way to legislate. Likewise, in explaining why so many amendments were produced late on, the Minister relied on the need to alter the Bill dramatically following the introduction of pension freedoms in Budget 2014. The fact that that was not anticipated suggests that something was left to be desired when it came to joined-up government thinking. We want parliamentary debate and scrutiny of the regulations published under the clauses following the conclusion of the Government’s consultation. On that basis, I beg to move.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord McAvoy, for introducing the amendment. First, I confirm that the Government agree with the recommendations of the Delegated Powers and Regulatory Reform Committee. We will be tabling amendments on Report to make the powers in Clauses 10 and 11 subject to the affirmative procedure the first time that they are used. Regulations made under Clause 10 will require trustees or managers to set out and follow their policy for how the collective pool will provide collective benefits to individual members.

There is another high-level requirement on which we may wish to regulate for which we have set out powers in Clause 10, and that is the matter of how each benefit is determined. The effect of regulations under Clause 24, which we will come to later, will be that trustees or managers must use the funds held for the provision of collective benefits—less any specified scheme expenses—to provide collective benefits. How the amount paid to a member is determined is the issue to be addressed. We expect the scheme to set out the rules as to how it will operate. The way that the scheme manages certain matters will need to be clear.

Regulations made under Clause 10 will therefore require trustees or managers to set out and follow their policy for how the collective pool will provide collective benefits to members. That is because, although with a collective benefit there is no certainty about what a member will receive, we want to ensure that decisions about how benefits are calculated are transparent. Transparency is of the essence. That is not to determine benefit design but to recognise that with a collective benefit there may be redistribution of assets between members, smoothing of returns and so on, and we want that to be an open process.

The specific clause, however, focuses on policies applied to determine each benefit. Regulations made under the clause may set out matters that the trustees or managers must take into account, or principles they must follow, in formulating the policy. We might want to use this power, for example, to require that trustees or managers have regard to the level of contributions paid to the scheme by members. Although the level of contributions towards collective benefits made by an individual member is not the only factor that will determine what the level or amount of that member’s benefits will be once they come into payment, it is important that there is some link between the level of contributions made by or on behalf of the member and the level or amount of benefit that the member receives from the scheme. That is how we hope to address that point.

As with the other requirements for scheme policies outlined in Part 2, the regulations made under the clause may also require the trustees or managers to consult about the policy and make provision about the content of the policy and about reviewing and revising the policy. I hope that I have explained how the powers in Clause 10 will help to ensure consistency in how the scheme will operate and give clarity to members and prospective members about how their share of the collective pool will be calculated.

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[Lord McAvoy]

It is probably just a bit run down, but there we are. I am grateful to the Minister for that very full explanation. However, his response struck a chord in me and a note of concern when he indicated that he did not want the word “must” but rather wanted “may” after consultation with the industry. Assuming that they were asked whether the word should be “must” or “may”, they would say “may”, would they not? So there is a bit of concern that the Government have perhaps listened too much.

[Lord Bourne of Aberystwyth]

I am grateful to the Minister for giving way. As I indicated, the consultation is not just with the industry; it will also be with consumers, pensioner groups and so on. It is not limited to the industry.

[Lord McAvoy]

I am grateful for that clarification, but I still think that, although obviously I do not know how much weight was given to the industry’s point of view, the fact that the Minister kept some opinions in reserve and indicated that the Government would act at some point in future to change that suggests that there just might be something there. With that clarification, though, especially the clarification that the Government would be prepared to look at this again in the light of experience and circumstances, I beg leave to withdraw the amendment.

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[Lord McAvoy]

My Lords, Clause 25 gives the Secretary of State the power to require the trustees or managers of a pension scheme to have a policy concerning the cash equivalent of a pension within a collective scheme. It also requires the trustees or managers to consult on the matters and principles they need to follow when calculating and verifying the cash equivalent of a pension in a CDC scheme. This amendment would require the regulations issued under this section to be subject to the affirmative procedure. This clause was also a part of a very large group of amendments which the Government introduced at Report in the other place.

There remains a tension at the heart of this Bill. The Government have been forced—I do not think there is anything wrong in that—into making so many amendments in large part because of the introduction of freedoms and flexibility in the Budget of 2014. We support those freedoms as long as they can be introduced without harming middle and low earners and do not end up leaving people reliant on the state. But really, more should have been done to work out the effect that these policies would have on how the others would operate. As we have already shown, a large part of the benefit from a CDC scheme can lie in the intergenerational risk sharing that it makes possible. This is how the schemes operate elsewhere. However, if a large proportion of people opt out at 55 by choosing to get a product that enables them to access their money straight away, then that risk-sharing element ceases to be there to the same degree.

This raises the possibility of having knock-on effects on the probabilities of achieving certain targets within the scheme. My concern here is that further work needs to be done on the interaction between the changes in the Taxation of Pensions Bill—which being a money Bill has passed through its remaining stages here—and the changes in this Bill to enable collective schemes and risk sharing. A good start would be to require the affirmative procedure to be used for the regulations on cash equivalents. I therefore ask the Minister to respond to that point in as much detail as possible so that we can grasp the thinking behind the Government’s proposals. I beg to move.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord for moving this amendment. Clause 25 contains a power to require in regulations that trustees or managers of schemes providing collective benefits must have, and follow, a policy for calculating and verifying the cash equivalents of a member’s collective benefits. Cash equivalents may be needed when a member transfers to another scheme or for the purpose of sharing a pension on divorce, for example. Clause 25 allows for regulations to be made requiring the trustees or managers of a scheme offering collective benefits to set up and follow a policy for the calculation and verification of cash equivalents for collective benefits. The regulations can, among other things, require the trustees or managers to consult about the policy, require that the policy is consistent with regulations about calculating transfer values and other relevant legislation, make provision about the content of the policy, set out matters that have to be taken into account when putting the policy together, and make provision about reviewing and revising the policy.

Delegating to secondary legislation will allow the department to consult on the views of the pension industry, in the wider sense of involving pension groups as well, to ensure that the provisions set out in regulations will capture potential future varieties of collective benefits. The regulations will need to include a fair amount of technical detail, and some of the requirements will be largely procedural in nature. We therefore consider that the negative resolution procedure is the most appropriate form of parliamentary scrutiny here. In the process of parliamentary scrutiny there needs to be a balance between legislative scrutiny and the need to produce secondary legislation in a responsive and speedy way when needed. The requirement for the affirmative procedure in every case as required by this amendment would make it harder to deliver and maintain the regulations that the industry and members need, and would not in our view be an appropriate use of parliamentary time.

It is significant that the 12th report of the Delegated Powers and Regulatory Reform Committee, which considered the Bill, did not make recommendations as regards Clause 25. I am not convinced that the arguments made elsewhere by the Delegated Powers and Regulatory Reform Committee—which we have largely, although admittedly not totally, accepted—apply in the same way here. The committee was rightly concerned about regulations that have shaped collective benefits. Regulations about policies on calculating cash equivalents are not about shaping collective benefits but about how to put a cash equivalent value on a collective benefit when a member asks for a transfer or, as I said, on such an issue as divorce. Those are important matters, but they are largely technical and procedural, and we believe that they are more appropriate for the negative procedure. On that basis, I hope I have dealt with the issues raised by the noble Lord, and I respectfully ask him to withdraw his amendment.

[Lord McAvoy]

My Lords, once again I thank the Minister for a very full exposition of what was envisaged in the Government’s approach to that. We have at least raised a cautionary note, which the Minister has responded to, and there is not much point in pursuing it further. I beg leave to withdraw the amendment.

Pension Schemes Bill

Debate between Lord Bourne of Aberystwyth and Lord McAvoy

Wednesday 7th January 2015 Lords Chamber

[Lord McAvoy (Lab)]

My Lords, we have tabled a clause stand part debate to scrutinise the rationale behind Clause 44 and the likely cost savings estimated by the department. First, can the Minister provide a few examples—or even one example—of how the process for selecting trustees under Section 7 of the 1995 Act operates? It is my understanding that following the removal of the requirement to operate a register, the regulator will appoint trustees for a scheme that has suffered an insolvency through a flexible procurement panel. What is the typical cost of recruiting in this way rather than through a register of trustees and how does this compare to the cost of maintaining that register?

In Committee in the other place the Minister discussed the Government’s Red Tape Challenge, specifically the desire to remove £2 million-worth of regulation on businesses for every £1 million introduced. He also said that the savings that will be made by the Pensions Regulator will be passed on to pension schemes and then on to savers. We are therefore understandably keen to get an estimate of the windfall that awaits pension savers once this clause is passed. What is the saving for pension schemes and can the Minister say whether he can guarantee that this is passed to contributors?

The clause stand part debate is intended to probe these details. I hope the Minister will be able to help in this way.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord for his contribution to the debate. Clause 44 fulfils a government commitment which he outlined under the Red Tape Challenge to remove statutory requirements which are felt to be superfluous. This is such an example. He rightly set out that there is already an existing power for the Pensions Regulator to appoint trustees where he can appoint a trustee without reference to the register. Therefore, it would not seem to present a problem that the register goes. I will come back to that issue.

I will clarify a point made by the noble Lord. The Minister who made the commitment about savings was the Pensions Minister in another place. I am sure that if he said it we can underline the commitment. It is not a statement that I or a Minister in the Lords made, but I am aware that any savings from this will be reinvested and we will confirm that in writing to the noble Lord. I understand that to be the position.

I am happy to reassure the House that the regulator is committed to ensuring that any process to replace the register would provide the same level of assurance to members and schemes that an independent trustee appointed to a scheme is fit for the task. That, after all, is the paramount issue. The selection criteria would remain rigorous and transparent. The criteria and processes being published on the regulator’s website, along with the procedures for appointing and removing trustees, would be guaranteed. We will ensure that appointments will continue to deliver the best candidate for the job, given the specific circumstances of the scheme in question.

I think there is little doubt that this register is superfluous and that there is the ability for the Pensions Regulator to draw on an existing pool of trustees without the need for the register. As the noble Lord, Lord McAvoy has highlighted, savings will be reinvested and I will confirm that in writing to him. On that basis, I ask that the clause should stand part of the Bill.

Pensions Act 2014 (Consequential Amendments) (Units of Additional Pension) Order 2014

Debate between Lord Bourne of Aberystwyth and Lord McAvoy

Wednesday 19th November 2014 Grand Committee

[Lord Bourne of Aberystwyth (Con)]

My Lords, as both the Social Security Class 3A Contributions (Units of Additional Pension) Regulations 2014 and the Pensions Act 2014 (Consequential Amendments) (Units of Additional Pension) Order 2014, as they are snappily called, deal with class 3A contributions, it seems sensible that they should be debated together. I can confirm that in my view these statutory instruments are compatible with the European Convention on Human Rights.

I shall begin with the regulations. The Pensions Act 2014 introduced a new class of voluntary national insurance contributions called class 3A. These new voluntary contributions are aimed at existing pensioners and people who reach state pension age before the introduction of new state pension on 6 April 2016, and who have an entitlement to a UK state pension. It will allow them to make class 3A contributions in return for units of additional state pension, which will increase their weekly state pension. We have called this scheme as a whole “state pension top-up”.

The regulations set out the pricing of class 3A contributions. They specify the contribution rates for class 3A and the maximum number of units of additional state pension that a person may obtain. The contribution rate for state pension top-up will be set at the specific amount that each age group will need to pay in order to obtain £1 per week of additional state pension. For example, it would cost a 65 year-old £890 to gain £1 per week of additional state pension, whereas for a 70 year-old the cost would be £779.

The scheme will be open for 18 months between 12 October 2015 and 5 April 2017. It is the intention that the scheme will open on the same day in both Great Britain and Northern Ireland. However, the scheme will not be commenced in Northern Ireland until the legislation necessary to set the amount that a person will receive in return for their contribution is in place. That is because this is a devolved issue, but we anticipate that that legislation will be in place. The intention is that the extra amount of additional state pension will be subject to an overall cap of £25 a week. As the extra pension obtained will be additional state pension, it will be uprated by the consumer prices index and be inheritable in the same way as SERPS. People will also be able to defer it, in line with existing rules.

These affirmative regulations have been made jointly, as HMRC will handle applications and collect payments for Class 3A contributions while the Department for Work and Pensions will administer and pay the extra amount of additional state pension. The intention is to deliver these changes as far as possible within the existing national insurance and benefit framework so as to keep administrative costs to a minimum.

We believe that state pension top-up will be particularly helpful for groups who have little or no additional state pension—for example, women and the self-employed whose social and economic contributions were not captured in SERPS and not fully reflected in the state second pension. We have conducted two online polls to gauge interest in state pension top-up. On the basis of the first poll, which we conducted in June of last year, we estimated that around 140,000 people would take up the scheme. The second poll was carried out in February of this year and suggested interest in state pension top-up had increased to an estimated 265,000 people who would take up the scheme. We gave more detail in the second poll, which demonstrates the power of advertising. This scheme will provide people with an opportunity to boost their state pension income in a secure, inflation-proof way, with the added advantage that it provides survivor benefits. However, people will need to consider whether state pension top-up is the best option for them.

I should also point out that existing class 3 voluntary national insurance contributions, which allow people to cover gaps in their contribution record for basic state pension, will remain unaffected by this measure. The DWP and HMRC will put in place administrative arrangements to ensure that individuals applying to make new class 3A contributions are made aware that they should also check their eligibility to make class 3 contributions. I should stress that class 3A contributions will be actuarially fair and, as a result, will cost more than the heavily discounted class 3 national insurance contributions. As an example of this, in 2014-15 a person paying £723 in class 3 contributions would obtain £3.77 per week in basic state pension. On this basis a person can effectively recoup their money within four years of reaching state pension age. A different approach was required, and has been taken, for class 3A contributions to ensure that the arrangements do not become a burden for today’s national insurance contributors—hence our decision to base class 3A on actuarially fair rates, as advised by the Government Actuary. In keeping with this, the cost will be adjusted to reflect the age of the pensioner at the time they make class 3A contributions, as I pointed out in my earlier example.

I now turn to the order. We did not want people to take up class 3A contributions only to have their newly acquired additional pension clawed back by rules designed for other parts of additional pension policy. To this end, the order amends primary legislation to ensure that a person’s state pension or disablement pension entitlement is not reduced by obtaining or inheriting units of additional pension acquired from class 3A contributions. The order also applies the existing rules on inherited SERPS to the newly acquired additional state pension. This means that people will be able to inherit the class 3A top-up in the same way as they can inherit SERPS—up to 100% if the deceased spouse or civil partner reached state pension age before October 2002, tapering down to 50% minimum if they reached state pension age since October 2010.

In closing, I reiterate that state pension top-up is an entirely voluntary scheme. It will provide people with a one-off opportunity to boost their state pension with a secure, index-linked income for life, ahead of the introduction of the new state pension. I reiterate that it is actuarially fair. I would also like to take this opportunity to thank the Secondary Legislation Scrutiny Committee for its earlier consideration and analysis of these regulations and order. We have taken on board its comments in relation to the Northern Ireland situation. I seek your approval of the regulations and order, and commend them to the Committee.

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for his very full exposition of the regulations. I welcome him to what I think is his first appearance as a DWP Minister. He is very welcome to join this club of aficionados. I am sure that his colleague, the noble Lord, Lord Freud, has given him a fair idea of what to expect.

These regulations are broadly uncontroversial and there is no difficulty in accepting them, but I thought that while I was here I would ask some questions that arise. We welcome the fact that the Government have undertaken more research, as we asked for collectively in Committee on the Bill. However, the noble Lord, Lord Freud, said that the Government would,

“look to consider qualitative research to find out what sort of barriers there may be to taking up class 3A contributions”.—[Official Report, 13/1/14; col. GC19.]

It is not clear to me—or, I think, to others—how the research undertaken is qualitative in this sense. It seems to follow the previous research and to gauge only the level of interest. If the Government have undertaken that qualitative research, would the Minister share its results and tell us what he thinks the barriers are to people taking up class 3A NICs?

There is also the question that was raised in Committee by my noble friend Lord Browne of Ladyton about winners and losers. The only factor that will be taken into account in pricing a class 3A contribution will be age. No account will be taken of any regional or occupational differences in life expectancy. Have the Government done any work on the likely distributional effects of the scheme? Given that the scheme is actuarially fair in pricing, and the proposal is that over time the policy will be broadly cost-neutral, as far as the Government have said, if some people are getting a good deal, is it the case that others must be losing out? Presumably, those who lose out will be those with shorter than average lives, but have the Government done more work on this? Who do they think the winners and losers will be?

In addition, we also asked in Committee—I know that the Minister was not involved but I assure him that we did so—for a proper estimate of the number of people who may take up the offer, based on the latest research. The Government now estimate that around 265,000 people may take it up. The Minister does not need to answer because he has indicated that that is the case.

Will advice be provided—and if so, what kind—to ensure that people can make an informed decision on whether making class 3A contributions is the best option for them? There are significant considerations for individuals, such as their life expectancy, that may be significantly affected by where they live in the United Kingdom, by whether they are married or in a civil partnership or likely to be so, and by any other income or savings they may have.

When the Bill was in another place, the then Minister said that the Government would,

“put in place administrative arrangements to ensure that individuals who apply to pay class 3A contributions are made aware that they should first check their eligibility to pay class 3 contributions”.—[Official Report, Commons, 17/3/14; col. 578.]

How in practice will that be put in place? In its recent briefing, the Pensions Advisory Service said that this is complex and many people will not know whether it is worth paying voluntary NICs until the DWP can provide a single-tier pension statement. Can the Minister give us a response to that?

I know that there are a number of questions here but pensions are quite important to a lot of people, and it is essential that we take the opportunity in this House to clarify things. The Government have mentioned a cooling-off period of 90 elapsed days during which people can change their mind. How have the Government arrived at that number, and how will that interact with the guidance—or the lack of it?

I appreciate that I have put a number of questions whose answers might be complex and detailed. While I hope the Minister is in a position to answer them today, it is certainly acceptable to receive a reply in writing.