Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill

John Lamont Excerpts

2nd reading
Friday 26th November 2021 Commons Chamber

[Margaret Ferrier]

The hon. Member is spot on; the change is well overdue. I will come to that, and I am sure that the Minister will answer that point too. I think the pension schemes have found some difficulties; as I say, I will come to that.

It is important to be clear that no one will have money taken away from them as a result of the Bill when pensions are equalised. If it turns out that someone is entitled to more guaranteed minimum pension than they would be entitled to if they were the opposite sex, nothing happens; that advantage is not taken away. The Bill seeks only to increase pension income for those already losing out because of their sex due to the nuances of having a guaranteed minimum pension. It is also important to be clear that this is not about giving anyone extra pension that they are not entitled to; it is simply about making sure that no one loses out on pension income as a result of their sex.

If one person has a smaller guaranteed minimum pension than another purely because the first person is male and the second female, their overall pension entitlement needs to be corrected. However, correcting people’s pensions in this way is proving a very slow process, as the hon. Member for Gedling (Tom Randall) said. The Department for Work and Pensions, working with the pensions industry, tried to cut through the complexity by offering a methodology, set out in guidance, for pension schemes to use. The methodology involved converting the guaranteed minimum pension into what I will call normal scheme benefits, using existing legislation already on the statute book.

The industry agrees that this is a sensible approach, but has pointed out that the legislation supporting the conversion process contains some uncertainties that it believes will expose it to legal risk and potential accusations of not equalising correctly. For example, the way survivor benefits are treated in the conversion legislation needs to be clarified. The industry has pointed out that legal requirements for survivor benefits when guaranteed minimum pensions are converted are not sufficiently clear. Survivor benefits are the benefits paid out to a scheme member’s widow, widower or surviving civil partner when the member passes away, and are therefore extremely important.

Equalising someone’s pension to take account of the differences that arise because they had a guaranteed minimum pension is, as I have said, very important, but schemes need clarity and legal certainty before they are able to proceed with this essential process. That is what the measures in my Bill seek to provide. Similarly, before converting guaranteed minimum pensions, pension schemes are required to get the consent of the sponsoring employer that finds the scheme. That sounds entirely reasonable, since after all the sponsoring employer has invested a lot of money in the scheme to ensure that its employees have a decent retirement income.

Unfortunately, that is not as straightforward as we might expect because the current legislation does not cover all situations, such as where the original sponsoring employer is no longer in business. As a result of this lack of clarity in the legislation, some pension schemes have held off equalising for these effects of guaranteed minimum pensions. This Bill will help with that by rectifying those uncertainties and clarifying the legislation that schemes will use if they follow the methodology set out in the Department for Work and Pensions guidance.

I should make it clear to the House at this point that the Bill does not impose any new costs or requirements on occupational pension schemes or their sponsoring employers. Affected occupational schemes have known that they need to equalise pensions for the effect of guaranteed minimum pension for many years and should have been planning accordingly. The Bill will simply help pension schemes to do exactly what they need to do to stop people losing out.

I have engaged with representatives from the pensions industry, who welcome the provisions. The industry has long lobbied for the clarifications in this Bill to be made. I should hope that all here recognise the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman) sitting opposite me today; I am delighted to say that the Government have decided to support my Bill. It is good to be working with the Government to make things easier for pension schemes.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

I congratulate the hon. Lady on bringing forward this Bill. She is speaking extremely well on a very technical area of pensions law. On the devolution point, she will know that Stormont has agreed to deal with the same issue, which is devolved to Stormont, through this Bill. Does she agree that that is a good example of where this Parliament and the devolved Parliaments can work together to achieve a desired positive outcome?

[Margaret Ferrier]

I thank the hon. Member; I am not sure I agree wholeheartedly with all his intervention, but the Bill extends to England, Wales and Scotland, and Northern Ireland, as he mentioned, has asked to be covered by it as well. This particular Bill extends to the whole UK and I am happy that it includes Scotland as well, unlike the Bill of the right hon. Member for North Somerset, which only covers England. As I said, it is good to be working with the Government to make things easier for pension schemes in fulfilling their obligations to their members and to ensure that benefits are paid correctly to members of occupational pension schemes.

I will not take up a lot of time, because the hon. Member for Meriden (Saqib Bhatti) is looking to give his Bill a Second Reading as well. But before I finish, there are quite a number of people on the DWP team who I would like to thank as they have helped me considerably: Narinder Clarke, Anna Smith-Spark, Gareth Thomas, Katy Marcus, Maria Burgess and David Brown. Of course I also thank my parliamentary assistant Kim Glendenning, who has helped me considerably in pulling all this together, the Pensions and Lifetime Savings Association and the Minister.