Draft Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018

Jack Dromey Excerpts

Tuesday 30th January 2018 General Committees

[Jack Dromey (Birmingham, Erdington) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Wilson.

The regulations are welcome and we support them, but we want to ask some questions. The Minister is right that they represent a continuity of policy. We may have substantial disagreements about pension policy, but the regulations represent a continuity of policy under successive Governments.

The regulations will increase assistance payments for members of the financial assistance scheme who have been disproportionately affected by the cap on the amount of assistance payable to an individual member under the scheme. They will make changes to legislation to increase the current financial assistance scheme cap for those with long service in a single eligible pension scheme.

It is estimated that 290 FAS members will benefit from the introduction of the regulations over the lifetime of the financial assistance scheme. Although that is not many people, it is a significant proportion of the 500 people estimated to be affected by the cap.

On 6 April 2017, provisions for a long service cap were implemented in the Pension Protection Fund, and the regulations introduce a similar long service cap into the financial assistance scheme. The Pension Protection Fund provides compensation for pension scheme members whose employer became insolvent on or after 6 April 2005.

From its commencement, the financial assistance scheme was criticised for providing less generous support than the Pension Protection Fund. However, successive Governments have made significant improvements to the scheme, and that is welcome.

I want to ask some questions that arise out of engagement with stakeholders on the one hand and discussions in the other place on the other. The dialogue around the proposals has been generally constructive.

First, it was announced that from 2016 the financial assistance scheme would be closed to new applications. That decision keeps the scheme open some 10 years longer than was originally planned, but have the Government made any assessment of how many individuals will lose out as a result and how much the Government will save? Failure to access the scheme may be laid at the door of trustees or scheme administrators, but any loss will be suffered by members. Is that fair? Will failure to seek access to the scheme cause any restriction to access to social security benefits?

Another issue that arises is whether the regulations should define pensionable service. Such a definition would help to avoid confusion in cases in which service is under another scheme and is to be disallowed. The Government say that they are content to rely on information from trustees about pensionable service, based on the definition contained in individual scheme rules. However, one bugbear of the scheme, at least initially, was the poor quality of data held by various schemes. What is the current situation in that regard? What confidence is there across the board that scheme data are now more robust? In how many cases and on what points has the scheme manager had to issue guidance to individual schemes?

We note that no impact assessment has been offered for the regulations, although reference is made to the impact assessment for the Pensions Act 2014. Will the Minister tell us why no such assessment has been prepared, particularly given that after asset transfers and recovery, the scheme’s net costs are met by the public purse? Since the regulations will apply to Wales as well as to the rest of Britain, may I ask whether they have any relevance to the controversial issue of steelworkers at the Tata-owned Port Talbot works?