Pensions (Special Rules for End of Life) Bill

Greg Knight Excerpts

Committee stage
Wednesday 24th April 2024 Public Bill Committees

[Mr Laurence Robertson (Tewkesbury) (Con)]

It is a pleasure to serve under your chairmanship, Dame Siobhain. I thank you, the Minister and all Committee members for attending. I also thank the Department for Work and Pensions legislative team, who have been a great asset and a source of useful assistance throughout the process. I thank the Opposition for their support and my hard-working staff for their efforts.

As I said on Second Reading, the Bill is small and narrow in focus, consisting of just the three clauses. It seeks to amend existing legislation that covers the definition of terminal illness for the Pension Protection Fund and the financial assistance scheme, which is currently a life expectancy of only six months. We seek to increase that definition to 12 months. The extension would allow people with a terminal illness to receive terminal illness payments when they are likely to have 12 months or less to live. Such payments are a one-off lump sum from the PPF scheme or an early payment from the FAS.

I am sure we would all agree that when someone receives the devastating news that they have a terminal illness, they should receive any and all financial help possible during their final days. The constant advances in medical science—treatments, drugs and palliative care—make this Bill that much more important, because things are rather difficult to predict. This extends to the pension schemes as well. Most private pension schemes already provide cover in the form of serious ill health payments.

As will be explained, the Government passed legislation two years ago to ensure the same outcome for individuals receiving certain social security benefits such as universal credit, employment and support allowance, and personal independence payments. I came to understand, however, that two aspects of pensions legislation lacked updated coverage. That legislation relates to the Pension Protection Fund and the financial assistance scheme—the focus of the Bill—which retained the six-months definition. The Bill seeks to rectify that.

In case any right hon. or hon. Members present in Committee were not at the Second Reading debate, I shall explain briefly what exactly the PPF and the FAS are. The Pension Protection Fund was established by the Pensions Act 2004. It pays compensation to individuals when the sponsors of their defined-benefit pension schemes—usually their employers—become insolvent and lack the necessary assets to pay pensions to the level that the Pensions Protection Fund would ordinarily pay. That applies for insolvencies that take place on or after 6 April 2005. The financial assistance scheme applies to individuals whose pension schemes were unable to meet their pensions liabilities in full when those schemes started to wind up between 1 January 1997 and 5 April 2005.

Currently, the PPF can make a one-off lump sum payment to someone who has not yet drawn their PPF compensation but is terminally ill. The FAS makes similar provision by allowing the early payment of financial assistance. Both the PPF legislation and the FAS regulations use the same definition of terminal illness. As I alluded to earlier, the Bill will bring the Pension Protection Fund and the financial assistance scheme in line with the Department for Work and Pensions’ definition of terminal illness, which, following the Social Security (Special Rules for End of Life) Act 2022, was likewise extended up to 12 months when calculating certain benefits. Therefore, the Bill seeks to harmonise the legislative definition of terminal illness such that following its commencement all legislation will use the extended 12-month definition.

I repeat that I hope that by harmonising the legislative definition we can encourage all pension providers that do not already have provision for considering serious ill-health payments when the member has a life expectancy of 12 months or less to consider putting that in place or updating or extending their scheme rules. Yes, the Bill has a narrow scope, but it might act as a prompt and as encouragement to other pension providers.

The Bill is legally tight, consisting of just three clauses. Clause 1 amends the current definition of “terminally ill”, normally referred to as “end of life”, from six months to 12 months in all relevant legislation; clause 2 covers the territorial extent and commencement of the Bill; and clause 3 establishes the short title of the Act: the Pensions (Special Rules for End of Life) Act 2024.

[Sir Greg Knight (East Yorkshire) (Con)]

Is my hon. Friend entirely happy with the wording of clause 2(4)? Has he had an undertaking from the Minister that the Government will bring the Bill into force as soon as possible? I ask because I was lucky enough to take the through Parliament Parking (Code of Practice) Act 2019, which had a similar clause. Some five years later, we are still waiting for the Government to introduce the parking code of practice, which is outrageous. If my hon. Friend has not had an undertaking from the Minister, does he think he should obtain one?

[Mr Robertson]

I am grateful to my right hon. Friend for reminding me that the Bill’s introduction depends on the Minister taking action. It was not this Minister who spoke on Second Reading but one of his colleagues, and we did receive an assurance that the legislation would be in place as soon as possible. As I understand it, we need to make sure that the situation in Northern Ireland is brought together with our legislation, because it is a devolved matter. I will come on to that in a minute. The Minister on Second Reading assured me that it would be brought in as soon as possible; I do not know exactly when that will be, but I am sure that the Minister will confirm it today. If he does not confirm it as strongly as we would like, maybe we can intervene on him, but I am satisfied that, given the Government’s support for the Bill, they will seek to introduce it as soon as all the ducks are in a row—that is how I can best describe it. But my right hon. Friend’s point is very important.

The Bill’s territorial extent is slightly complicated, given that aspects of the Pension Protection Fund are covered by devolved legislation in Northern Ireland, as seen in clause 1(3) and (4) and clause 2(2). However, officials are working with the devolved legislature on that matter, and as I understand it our colleagues in Northern Ireland are keen to see the alteration happen as soon as possible.

As explained, the Bill focuses on only the Pension Protection Fund and the financial assistance scheme. Thus, clause 1 and its subsequent subsections seek to amend relevant legislation and provisions connected to the Pension Protection Fund and the financial assistance scheme. Specifically, subsections (1) and (2) amend the definition of terminal illness by changing the period of life expectancy from the current six months to 12 months, in respect of Pension Protection Fund compensation.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Work and Pensions (Paul Maynard)]

It is a pleasure to serve under your chairship, Dame Siobhain. I thank my hon. Friend the Member for Tewkesbury for bringing forward this legislation; I should also thank my right hon. Friend the Member for Suffolk Coastal, the former Secretary of State for Work and Pensions, for paving the way.

This may seem a small and discrete piece of legislation, but it is very important. As my hon. Friend the Member for Tewkesbury explained, the Bill extends the definition of terminal illness for compensation payments made under both the Pension Protection Fund and the Financial Assistance Scheme. Members will be able to claim their compensation on the grounds of terminal illness if a medical professional confirms that they have less than 12 months to live, rather than the current six months. That will enable eligible members to receive the vital support of payments at an earlier point in their illness. The change restores the original policy intent of alignment between the social security special rules provisions and both the PPF and FAS. It will also bring those two schemes into line with the tax definition of “serious ill health”, which allows private pension schemes to make payments where the member has less than 12 months to live.

I will try to cover some of the issues raised today and on Second Reading. There was a particular concern on Second Reading as to whether people whose schemes were not in the PPF or FAS would have a similar opportunity. Although I cannot provide definitive numbers—I do not believe they actually exist—for serious ill health payments, one of the leading independent trustee firms, Dalriada, has confirmed that:

“Trustees may only make such payments in accordance with the provisions of their scheme’s trust deed and rules. In practice, most scheme rules do allow for such payments.”

Officials have also contacted the Association of Pension Lawyers, which collectively acts for many schemes of all sizes. It has confirmed that, in the experience of its members, most occupational pension schemes will have an option of a serious ill health lump sum payable on a discretionary basis.

We have also heard questions today, and as we did on Second Reading, about who would be making the decisions on terminal illness, and the range of those illnesses. I can confirm that those decisions will be made by healthcare professionals, such as clinicians and medical practitioners, who have had direct oversight of the individual concerned. Although there is no definitive list of what constitutes a terminal illness, I imagine that the provisions would certainly include illnesses such as advanced cancer, dementia, motor neurone disease, and other neurological diseases, such as Parkinson’s. However, in my view the definition does not exclude any particular range of conditions, because one’s lived experience of a condition is not determined by the label that we hang around our necks. I find that I have been saying that for 48 years of my life, frankly. We do not determine someone’s lived experience just by the name of their particular condition.

My hon. Friend the Minister for Employment was also asked on Second Reading whether fixed time limits were the right way to go, and whether there would be adequate training for clinicians and communication to make people aware of the changes. The Department engaged widely on time limits ahead of the Social Security (Special Rules for End of Life) Act 2022, and chose the 12-month approach specifically to align with the NHS definition of “end of life”, and to link up with existing initiatives for clinicians that encourage the identification of people in their final year of life. This Bill simply aligns the definition used for the PPF and the FAS with that used more widely by the DWP and the NHS.

As part of the preparations made ahead of the 2022 Act, the Department engaged extensively with senior clinicians from key medical organisations and hospices, as well as representatives from multiple charities and networks of welfare advisers. DWP bulletins were sent out by the British Medical Association, the Royal College of General Practitioners, the Royal College of Physicians, the Association for Palliative Medicine, Hospice UK and NHS England networks across the country. The Department also initiated plans to create a learning module for clinicians to raise awareness among the clinical community of the financial support available for those who are nearing the end of life. That learning module went live in February.

Assurances were also sought that the definition of a terminal illness would be consistent across the DWP. I can provide that assurance today. As the Minister for Employment said on Second Reading, this Bill builds on the previous legislation—which we have just heard about—which changed the special rules for social security benefits. The scope of that legislation limited the changes that we could make to social security benefits administered by the DWP, as they involved the fast-tracking of benefit claims. This final change brings payments made by the PPF and FAS into alignment with those changes.

As I mentioned a little earlier, this Bill aligns the PPF and FAS definition with the tax rules for serious ill health. That will ensure that the payments made by the PPF do not trigger unauthorised payment tax charges on either the PPF or the individual to whom the payments are made. If the definition was to be amended beyond 12 months, as some have suggested, members could have faced significant tax charges on their payments, which I am sure no one wishes to see happen.

I have noted the comments today from my right hon. Friends the Members for East Yorkshire and for Suffolk Coastal about the commencement of the provisions in the Bill. I can confirm today that the intention is for that to happen as soon as practicable after Royal Assent. I see no reason for delay or obfuscation. We have all agreed today that this is a vital piece of legislation that will benefit many of the most vulnerable in our society at the time they need help most, so I have no intention at all of delaying it.

[Sir Greg Knight]

I am most grateful to the Minister for what he has just said. Can he confirm that that is an undertaking that he has given, and that it is unequivocal?