Pensions Bill

moved AmendmentNo. 46: 46: Clause 14, page 18, line 37, at end insert— ““(8) Subsection (9) applies where— (a) a person has been in receipt of a guaranteed minimum pension and a Category A or Category B retirement pension, (b) the guaranteed minimum pension has been increased in accordance with section 15(1) of the Pension Schemes Act 1993 (c.48) or the Category A or Category B retirement pension has been increased in accordance with paragraph 5 of Schedule 5 to the SSCBA (increase of pension where commencement of guaranteed minimum pension postponed), (c) the pension scheme under which the guaranteed minimum pension is paid is subject to GMP conversion (within the meaning of section 24A of the Pension Schemes Act 1993 (c.48) inserted by subsection (3) above), and (d) an order under section 150(2) of the Administration Act would have applied to the person in respect of the increase mentioned in paragraph (b) above but for the scheme having been subject to GMP conversion. (9) The person’s Category A or Category B retirement pension shall be increased by the amount by which it would have increased as a result of the order. (10) In section 186 of the Pension Schemes Act 1993 (c.48) (parliamentary control of orders and regulations)— (a) before subsection (3)(a) insert— ““(a) regulations made under section 24B(5), or””, (b) renumber the existing paragraphs of subsection (3), and (c) in subsection (4) for ““(a) or (c)”” substitute ““(b) or (d)””.”” The noble Lord said: The amendment is toClause 14, the provision allowing contracted-out defined benefit occupational pension schemes to convert their liability for a guaranteed minimum pension—the GMP—into normal scheme benefits, by way of actuarial equivalence. The amendment covers two different issues, and I shall cover the simpler matter first. Subsection (10) requires regulations made under new Section 24B(5) to be subject to the affirmative procedure. Under Clause 14, a scheme may offer any structure of benefits in exchange for the GMP, but it must continue to provide a survivor benefit for a widow, widower and surviving civil partner. This requirement is in proposed new Section 24B(5), which also allows for secondary legislation to lay down the circumstances under which a survivor benefit has to be paid. It is our intention to replicate, as far asis sensible, the current requirements on GMP inheritance. It was intended that this secondary legislation would be made under the negative resolution procedure. However, in its report on the Bill, the Delegated Powers and Regulatory Reform Committee has said that it believes that the secondary legislation on this matter should be made by the affirmative procedure. We are pleased to accept the committee’s suggestion, which the amendment implements. Subsections (8) and (9) cover a rather more complicated issue. They are needed to prevent some people losing money as a result of the conversion of their guaranteed minimum pensions under Clause 14. This is a technical area and, despite the hour, I hope that the Committee will bear with me as I explain. Where a person defers taking his guaranteed minimum pension, it is increased. These increases are known as increments and the scheme concerned has partially to index these increments. Once the GMP is in payment, it has to be increased to offer some protection against inflation. A similar provision is made on the state additional pension, payable during the GMP period of 1978 to 1997 SERPS. However, with respect to SERPS, the increments are fully, rather than partially, indexed. To prevent someone who was contracted out from being treated less favourably than a person who was contracted in, the difference between the partial indexation on the GMP increments paid by the scheme and the full indexation paid to a person contracted in to SERPS is paid as an increase to the individual’s state retirement pension. I would like to introduce Members of the Committee to the PUCODI; it sounds like something from ““Call My Bluff””, but it is the payable uprated contracted-out deduction increment. Having explained the background, I can now inform the Committee of the purpose of the amendment. Where a scheme member is in receipt of GMP increments, and the scheme decides to convert his GMP, actuarial equivalence will ensure that he is given the value of those increments as well as the value of the future indexation payable by the scheme. However, without subsections (8) and (9) in the amendment, the individual will lose entitlement to future increases to his PUCODI—the payment from DWP. This is because entitlement to a PUCODI is based on the payment of a GMP and, on conversion, the GMP disappears. These subsections will prevent someone in receipt of a GMP increment from losing future increases to his PUCODI if his scheme decides to convert his GMP into scheme benefits. I am conscious that this has been a somewhat long explanation at this time of night for such a short amendment, but I hope that the Committee will see the benefit. I beg to move.