Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill

Natalie Elphicke Excerpts

2nd reading
Friday 26th November 2021 Commons Chamber

[Mrs Natalie Elphicke (Dover) (Con)]

I warmly thank the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) for bringing this issue to our attention today through the excellent proposals in her Bill, and for her clear explanation of this very technical matter, its impact on people and why it matters—particularly to women in the workplace, but also to others who do not experience equity and fairness. Her remarks brought to life the fact that equal pay must also mean equal pensions, and that complexity in this matter must be no excuse for not ending up with the right result for people who are due their pensions.

There have been huge changes in pensions over recent decades—certainly in almost every year of my working life—and it is welcome that compulsory pensions are now part of employment rights. However, because of those changes and people’s changing work practices, which mean that they may be in and out of several pension schemes within their working life, there needs to be even greater focus on securing the best possible protection for any changes to pension calculations before they become due. Buy-in and buy-out schemes and other pensions management processes feature more and more as companies experience increasing pressure on their own accounts, and over their accountability for the management of pensions.

I have a constituent who has an occupational pension, and he has heroically battled with referrals to the pensions ombudsman and the FCA for many years over a matter relating to the conversion of a minimum pension floor. The pension had two elements: a minimum guaranteed pension floor and an assessed projected income, in the usual way of pensions. I recall when my constituent first showed me his original pension statement, which said, in absolutely clear and unequivocal words, that the pension would not be less than a specified amount per year. Separately, the same statement expressed the projected value of the pension. Somewhat surprisingly, in my view, the Pensions Regulator has found that, in essence, because that pension statement did not use the word “guarantee”, the words “the pension will not be less than x” did not represent a guaranteed pension amount. I ask the hon. Lady and my hon. Friend the Minister to look again at the definition of guaranteed minimum pensions, particularly in schemes established before the Pension Schemes Act 1993.

I also made a referral to the FCA about mis-selling, and it said that it did not have responsibility for pension buy-out arrangements. It seems to me that we have made great strides in stopping small-print explanations—such that anyone who looked at the small print would have realised that even if the statement said they would get a certain amount, that might change—and mis-selling in many areas of financial services. There seems, however, still to be a gap in pensions protection that leaves individuals such as my constituent rightly angry and disappointed. There can be nothing plainer, it seems to me, than a formal statement saying “You will receive x a year”. That is not a qualified statement, and we must not let people get away with the small print.

My constituent was absolutely right to feel angry and disappointed in this case, but it highlights a wider issue of equity and fairness in relation to conversions from one scheme to another, and other pension changes. There must be no possibility of discrimination when it comes to converting such schemes, and greater safeguards are vital in this regard. It is not allowed to dock pay for work already done or to cut holiday or other entitlements, and stronger protection may be required for pension rights. The fact that these accrue in the future does not make them any less important than what people are paid today.

I recognise that company schemes are set up over a long period of time, and many set up a long time ago now need to be dealt with differently. Where they are problematic for companies, some may find themselves unable to operate without making substantial changes to assessing how the pensions are dealt with. Recent changes to the calculation and treatment of future pension obligations in company accounts have created additional and specific responsibilities, but also severe and significant pressures. I hope that the Minister and the hon. Member for Rutherglen and Hamilton West will agree that any such changes to pension rights must have at their heart equity and fairness. It is part of the basic corporate responsibility that we should and do expect of companies operating all such schemes.