Pensions Bill

I am sure that that is right. At the moment, FAS is paid to all at 65, except the terminally ill and survivors, who can receive payments earlier. Perhaps I might respond to the specific point that my noble friend made about the Pension Protection Fund. I shall also make a general point about that at the end. I am grateful to him for highlighting this situation. His amendment seeks to allow peopleto obtain their compensation from the Pension Protection Fund early—I understand that he wants that to cover the FAS, too—without that compensation being actuarially reduced to take account of early payment. I appreciate the difficult choices faced by people who, as a result of ill health, cannot support themselves fully through work and who, if their pension scheme had not suffered an insolvency event, might have been able to retire earlier on a higher pension. However, it is important to understand why compensation is actuarially reduced when it is taken early. The basis of the PPF is that, at the point of insolvency, every member of a scheme has a level of compensation to which they are entitled. That level can then be adjusted in various ways to take account of early payment or inflation. This adjustment ensures that members of a scheme receive the same level of compensation overall, whether they take their compensation early or wait until the normal pension age. This ensures fairness. It also ensures that the PPF remains affordable and that members of the PPF can plan for the future. Similar considerations obviously apply to the FAS. I appreciate that many pension schemes offer a variety of different options for people who retire early due to ill health. However, the PPF is not a pension scheme, nor is the FAS. The Government deliberately created the PPF as a compensation scheme that would provide a better level of income overall than did schemes that were underfunded when they were wound up. Without the PPF, people who are taken ill or seriously disabled might have no pension at all to look forward to. We have taken care to ensure fairness and to avoid the trap of complexity that would result from creating a PPF that mirrored all the rules of every pension scheme. This means that we havemade no special provision for people to receive compensation early specifically on the grounds of ill health. Instead, we have provided for people to apply for early compensation, subject to the adjustment, without having to explain why they wish to receive it. If we were to do as the amendment suggests, we would need to provide a mechanism for the PPF to determine when someone was suffering from severe ill health. Such matters are not always easy to determine. The current basis of calculating early compensation ensures certainty about the level of payment and about the affordability of the scheme. Although I have sympathy for those who may find it difficult to continue working until their normal pension age and who wish to take their compensation early without reduction, the amendment would create difficulty. Having heard what my noble friend said, and given that we need to be clear about how the PPF and the FAS work side by side on this, I am happy to take the amendment away and see whether we can help in some way.