Public Service Pensions Bill

Lord Naseby Excerpts

Monday 21st January 2013 Lords Chamber

Moved by

[Lord Naseby]

146: Clause 31, page 16, line 8, leave out from beginning to end of line 39 and insert—
“(1) Schedule 6 to the Constitutional Reform and Governance Act 2010 (parliamentary and other pensions) is amended as follows.
(2) In paragraph 19, for sub-paragraph (3) substitute—
“(3) Sub-paragraph (2) does not apply if either—
(a) the trustees of the Fund consent to the new scheme making the provision, and the person making the new scheme is satisfied that the consent requirement is met, or(b) the provision provides for a person’s normal pension age or deferred pension age to change in consequence of a change in state pension age in respect of service after the provision comes into force, but not affecting that person’s right (including a contingent right) or entitlement to or in respect of a pension or future pension payable from the Fund which has accrued in respect of service where that age does not change in consequence of a change in state pension age.”(3) In paragraph 19, at the end insert—
“(8) In this paragraph—
(a) “normal pension age”, in relation to a person and a scheme, means the earliest age at which a person with relevant service is entitled to receive benefits (without actuarial adjustment) on leaving that service (and disregarding any special provision as to early payment of benefits on the grounds of ill-health or otherwise),(b) “deferred pension age”, in relation to a person and a scheme, means the earliest age at which a person with relevant service is entitled to receive benefits under the scheme (without actuarial adjustment) after leaving that service at a time before normal pension age (and disregarding any special provision as to early payment of benefits on the grounds of ill-health or otherwise), and(c) “state pension age”, in relation to a person, means the person’s pensionable age as specified from time to time in Schedule 4 to the Pensions Act 1995.””

[Lord Naseby]

My Lords, in moving the amendment, I must declare an interest as a trustee of the Parliamentary Contributory Pension Fund and as its only active pensioner within the membership of the fund.

The amendment relates to Clause 31—Parliamentary and other pension schemes: pension age. The clause amends Schedule 6 to the Constitutional Reform and Governance Act 2010, to which I shall hereafter refer as CRAG, by inserting a new paragraph 29A, “Pension age”, into that schedule. It is an enabling measure, not a requirement, as was made clear in the Commons. It enables IPSA, in relation to MPs and the officeholders within its remit, and the Minister for the Civil Service, in relation to the ministerial scheme, to introduce for future benefits a provision whereby “normal pension age” within these schemes will rise automatically with changes in the state pension age.

The PCPF trustees take no issue with the measure itself. As statutory consultees under CRAG, it will be for the trustees another day to debate with IPSA/the MCS the detail as to how such a provision may be implemented for the future. However, we are concerned that the drafting creates ambiguity in the legislation governing the PCPF such that it potentially undermines existing protections afforded to PCPF members in a way that we doubt Parliament intends.

It is important to understand the background. The legislative framework of the PCPF was overhauled by CRAG and is governed by that Act. There was extensive debate at the time of the passage of CRAG about the need to ensure that the accrued rights of PCPF members were appropriately protected in legislation. That was particularly important given that the setting of MPs’ future pension provision was by that Act being transferred to an independent body in IPSA. The legislation appropriately prescribed the boundaries of its powers.

Those boundaries, set out in Schedule 6 to CRAG, were described as follows:

“My aim is to ensure that the statutory safeguards afforded to members of other occupational pension schemes broadly apply to the parliamentary scheme. As with statutory protection for pension schemes elsewhere, amendment 74”—

the government amendment—

“would put a double lock on any provision adversely changing accrued pension rights. It would first be necessary for the trustees to consent to the scheme making such provision and, secondly, each member would have to give his or her informed consent to any changes to accrued rights”.—[Official Report, Commons, 2/3/10; col. 854.]

The details of those boundaries can be found in paragraph 19, “Protection of accrued rights” and paragraph 20, “Meaning of accrued right”, in Schedule 6 to CRAG. These provide, at paragraph 19(2), that:

“The new scheme must not make any provision in relation to an accrued right which puts (or might put) a person in a worse position than the person would have been in apart from the provision”.

Paragraph 20(2) says that the term “accrued right” means,

“a right (including a contingent right) or entitlement to or in respect of a pension or future pension payable out of the Fund”—

the PCPF—

“which has accrued in respect of service before the provision comes into force”.

The protection does not apply if the PCPF trustees consent to the making of the provision and informed individual member consent requirements are met.

Our concern, as PCPF trustees, is that the clause as drafted risks going beyond the narrow scope to which the Government referred. It is important that this does not happen because the structure of the clause means that it disapplies the accrued rights protection in CRAG and the so-called “double lock” enshrined in CRAG would not exist at all. At its most simple, the difficulty with the clause is that it will import language into CRAG that is inconsistent with the drafting that is there already. With inconsistency comes ambiguity and that risks undermining the double lock that currently exists. The clause fails, for instance, to speak of the removal of the protection as applying only in respect of service after it comes into force, this being the critical aspect of the existing CRAG protection.

I have two questions for my noble friend on the Front Bench. First, what comfort can he provide that the carve-out will not undermine the existing CRAG protections other than to introduce an enabling provision to allow IPSA or the MCS, as appropriate, to tie future service benefits to an NPA that uprates in line with changes to SPA? Secondly, can he confirm that the wording in Clause 31,

“(as well as other benefits)”,

does not extend the application of the carve-out to any benefits other than relevant accrued benefits? I realise that the second question has some technical dimension to it, to which I shall briefly refer. It arises from the wording currently in Clause 31 by way of proposed new paragraph 29A(1) to Schedule 6 of CRAG. It provides that the carve-out from accrued rights protections, to enable the introduction of an NPA that uprates automatically with changes to SPA, is limited. It will apply only to “relevant accrued benefits”. Defined at the proposed new paragraph 29A(3)(d) to Schedule 6 to CRAG, they are benefits accrued after the coming into force of that SPA link—that is, future service benefits. However, the Bill refers to the carve-out applying to,

“relevant accrued benefits (as well as other benefits)”.

The concern is that the additional words in parenthesis could be read as suggesting that the carve-out applies to all benefits, not just to “relevant accrued benefits”.

Having proposed this quite complicated amendment, I hope that nevertheless the Minister will be able to clarify the position and indeed give comfort to me and the other trustees. I beg to move.

[Lord Stewartby]

My Lords, I support my noble friend, who has explained this technical area very skilfully. Like him, I have to declare an interest as a member of the parliamentary fund and I was a trustee for several years. The great advantage of that is that one does not come to the details of this sort of provision completely unsighted. However, it is a very complicated Bill. As the noble Lord, Lord Eatwell, mentioned, it contains a lot of areas of uncertainty. The same point about ambiguity in drafting was made by my noble friend Lord Naseby. All I want to do is help support the case made by my noble friend and underline every point at which accrued rights are involved. That is a very sensitive area. When the Bill is finally tidied up, special efforts must be made to ensure that accrued rights are dealt with as if they were sacrosanct. I believe they are, but that must be what happens in practice. With those few words, I support my noble friend and hope that the Committee will be sympathetic to the case he put so clearly.

[Lord Newby]

My Lords, the noble Lords, Lord Naseby and Lord Stewartby, are concerned that Clause 31 as currently drafted creates ambiguity and could have a wider interpretation than is intended. I will seek to put their minds at rest and in doing so answer the two questions raised by the noble Lord, Lord Naseby.

I hope I can reassure the noble Lord that the clause as drafted does not provide for a wide power to amend accrued rights under the relevant schemes. The power provided for in the clause is actually very narrow and the disregard for the accrued rights protections in CRAG applies only to this very narrow provision. The power simply allows those responsible for the schemes to amend them to create a link between normal pension age under the scheme and state pension age, which would apply to benefits accrued from the point the amendment takes place. That is to say, once that link is in place any increase in state pension age will increase the normal pension age, but only for those benefits accrued after the creation of the link. That is the key point. The clause does not allow for changes to the indexation arrangements for deferred members, sweeping changes to the death in service benefits or removal of the final salary link. All these areas will continue to have the same level of protection under Schedule 6 as now.

I believe that the phrase,

“(as well as other benefits)”,

in the clause is of considerable concern, as the noble Lord, Lord Naseby, said. I should like to put on the record the Government’s view that this phrase does not open the door to a wider interpretation of the benefits that could be subject to the state pension age link as a consequence of this clause. It is important to include this phrase, so it is clear that the clause does not reduce the power the scheme already had to change the normal pension age for benefits that accrue after the change. However, it is also clear from the current drafting of the clause that the only accrued benefits that come within the new power are “relevant” accrued benefits, as defined in new paragraph 29A(3)(d). I hope therefore that the noble Lord will find sufficient comfort in what I have said to be able to withdraw his amendment.

[Lord Naseby]

I am most grateful to my noble friend for listening to the propositions and concerns that we had. I think his answers were very helpful. Certainly, I would like to study his reply very carefully after Committee stage, and if necessary return on Report, but I hope that will not be necessary. At this stage, I beg leave to withdraw the amendment.

Amendment 146 withdrawn.