Pensions Bill

moved Amendment No. 68: 68: After Clause 18, insert the following new Clause— ““Financial assistance scheme: scheme manager (1) The Financial Assistance Scheme Regulations 2005(S.I. 2005/1986) are amended as follows. (2) In regulation 5(1) for ““Secretary of State”” substitute ““Board of the Pension Protection Fund (““the Board””)””. (3) In regulation 5(2)(a) omit the words from ““Secretary of State”” to the end of that paragraph and insert ““the Board””. (4) In regulation 5, sub-paragraph (2)(b) is omitted.”” The noble Lord said: We turn now to a different but equally pressing and disastrous subject. I shall speak also to Amendments Nos. 69 to 76, and to Amendment No. 79, tabled by the noble Lord, Lord Oakeshott. There is no doubt that the Government have gone from bad to worse on the subject of pensions, as proven by all our debates over a number of years. From their reaction to the original mis-selling of occupational pensions to how they have handled the thousands of people who have lost their retirement income as a result, the Government have rejected expert advice and seem to be going out of their way to pay compensation in the most grudging manner possible. Noble Lords will remember that the Parliamentary Ombudsman published a thorough and impartial study of the reasons behind the scheme’s collapse and included a number of balanced recommendations for what the Government could be expected to do to remedy the mistakes that she found they had made. Her report showed that there was incontrovertible maladministration by this Government in their handling of occupational pensions. Government leaflets and press statements all refused to make clear the inadequacy of the minimum funding requirement but instead were ““vague, incomplete or misleading””. She specified occasions where the Government were shown to have known this and where they failedto inform the public, continuing to encourage pensioners to invest their salaries into schemes in which they were unable to afford to provide what they were promising. To add insult to injury, it is apparent that one of the factors that weakened the minimum funding requirement was the Chancellor’s decision to abolish the system of tax credits given to those pension schemes. I am sure we will hear, once again, how rising longevity and a weakened stock market were also to blame—and, of course, they were—but can the Minister really assure the Committee, as he tried to the other day, that he believes that a raid of£5 billion a year had a negligible effect? If he can, my response is that not only the ombudsman but DWP and Treasury officials do not agree with him. It is now clear that, like an amateur magician’s attempt at the Indian rope trick, the Chancellor’s figures simply do not stand up. The Government’s promises were found to be hollow, the pension scheme’s funding was found to be inadequate and thousands of pensioners are now without their retirement income. The Parliamentary Ombudsman could not have been a more suitable, better qualified or more appropriate person to judge the unfortunate situation that these pensioners found themselves in, yet despite the evidence and expertise to back her up, the Government have persisted in mud-slinging and depreciation of her findings. They have been taken to court by a group of pensioners, have lost and have still not accepted the report’s findings. Instead, we are witnessing the unedifying sight of endless appeals, rising costs and never-ending delays, while hope slowly dwindles that the Government will finally accept publicly what everyone knows and what the ombudsman has so clearly laid out. The Government have consistently fought tooth and nail against setting up an adequate compensation scheme for those who have lost out. It was only in the face of enormous cross-party opposition that they set up the financial assistance scheme in the first place and, again, they have recently been forced to introduce a new clause to improve on that scheme. This new clause is still not enough. It pays out only80 per cent of what the department calls the ““core pension””, which, by the Government’s own admission, amounts to only 60 per cent of a person’s expected pension. That is paid only from 65, ignoring the originally agreed pension age of the scheme and any other benefits, such as taking a lump sum, which may have been promised. So far, the FAS is compensating less than 10 per cent of those who are eligible—that is, those wholost their pensions through their schemes being underfunded when their employers went bankrupt and who are over state pension age. I expect the Minister to reassure us that, now the set-up is complete and the computer is up and running, more payments will be made and the administrative costs will fall to a less shocking proportion of the total costs. When the financial assistance scheme was set up, it had a budget of £400 million, which was meantto cover 15,000 pensioners. It was then extended to 40,000 pensioners and a few more billion pounds were put in. The scheme was then further extended to cover everyone and more money was put in. There are today some 125,000 pensioners. We on this side of the Committee have always said that £400 million was nothing like enough money. The Chancellor has finally, to a limited extent, agreed by setting aside£8 billion over the lifetime of the FAS. I accept that this money is of a quite different order of magnitude from the £400 million originally proposed in 2004, which, although finite, might have to last another30 or more years. The £8 billion is meant to cover the lifetime of the scheme; it is, though, a headline figure. Will the Minister confirm that its net present value is quite a bit less, £1.9 billion on my calculations? Will he also tell us how much this represents on an annual basis; in other words, the cash flow from the Treasury? Will it still only cover 60 per cent of expected pensions; in other words, 80 per cent of core pensions? I know the Minister has the words ““core pensions”” graven on his heart, rather like Mary Queen of Scots. As a perfect example of how the Government have handled this issue from the start, they have now unwillingly accepted, as reported at col. 320 of Commons Hansard, that pensioners whose employers are still solvent, but whose pension schemes have been closed without sufficient funds, should be covered; that is, the FAS will eventually cover members of schemes that began winding up between 1 January 1997 and 5 April 2005 when a compromise agreement is in place and when enforcing the debt against the employer would have forced that employer into insolvency. It is thought that there are another 8,000 members of some 15 schemes in this particular limbo, yet we are being told that the necessary secondary legislation will be published by the end of the year. That is not anything like quickly enough for the thousands who are waiting for it, the thousands who are impoverished and may be sick or disabled. We owe it to them to pay over this money as quickly as is humanly possible. Some of those people, however, will not survive. Another example of unhelpful government action is that of survivor pensions. Will the Minister confirm that these amount to 50 per cent of the core pension; in other words, only 30 per cent of their partner’s expected pension had they not died? The amendment covers the arrangements of the Pension Protection Scheme. PPS survivors get a much fairer 45 per cent. The Government appear to believe that Clause 18 and its extra money will be enoughto satisfy the pensioners, some of whom are demonstrating outside this Chamber. It quite clearly is not. First, there is still to be a cap, though a more generous one, on the amount paid out. Currently that is 80 per cent of core pensions. Why was 80 per cent chosen? Why not the 90 per cent payable under the Pension Protection Fund, which the 2004 Act sensibly set up? Over and above that, why make provision for the dissolution of the management of the FAS and move it over to the Pensions Agency? What is wrong with rolling it into the Pension Protection Fund, which is already doing a similar, though insurance-based, job? Why set up an inquiry to ascertain whether there are other sources of non-government funding available when we all know that money exists in the Unclaimed Assets Register, to which insurance firms and others belong? We all know that the Government will, in theend, do more for FAS pensioners. The Minister will doubtless question that, but I remind him that when the will and the law are there, the money is always found. This year’s statutory uprating of benefits cost the taxpayer £3.5 billion. I invite your Lordships to set that against the annual payment to the FAS. It is against that background that the noble Lord, Lord Oakeshott, and I have set down this group of amendments. Amendment No. 68 is a paving amendment to amalgamate the management of the FAS with that of the Pension Protection Fund. Amendment No. 69 expands the FAS to apply to employees whose pension schemes have failed, even though their employer has remained solvent. That is what the Government are going to do, but rather quicker—a lot quicker, in fact. Amendment No. 70 is the longest and most important of the group, which all together would set up a pension protection lifeboat fund. The fund would have several objectives: not only would it be run by the Pension Protection Fund, but it would make supplementary payments to eligible pensioners from their normal retirement age under their pension scheme, with no compulsory annuitising. That would be paid for in the first instance as loans by the Secretary of State and repaid under Amendments Nos. 70 to 74, which would set up an unclaimed assets recovery fund, the functions of which would be to ascertain whether non-governmental assets were available and then transfer them to the lifeboat fund. We already know that such assets exist in the insurance and pensions world, because at least one firm has admitted as much. We also already know that unclaimed assets of banks, which would have been suitable for the lifeboat fund, are being investigated by the Chancellor, and it is likely thathe will use them for other purposes, not least for charities. Other sources, such as unclaimed premium bond prizes, could be included at the discretion of the Secretary of State. The lifeboat fund is to repay any assets that are subsequently claimed back by the missing owners. In reply to the Statement about the Government’s response to the ombudsman’s report, I made the point that no Government could be expected to write a blank cheque. However, this is a source of non-government income for these pensioners at the right time because it will become available far more quickly than income under the Government’s plan of investigating assets and then legislating for their use in a future pensions Bill. These pensioners need money as soon as possible and cannot be expected to wait a moment longer than is necessary. I beg to move.