Pensions Bill

moved Amendment No. 12: 12: After Clause 14, insert the following new Clause— ““Review and alteration of reduced rates of contribution (1) Section 42 of the Pension Schemes Act 1993 (c. 48) is amended as follows. (2) In subsection (1)— (a) in paragraph (a), at the end of sub-paragraph (ii) insert ““together with his recommendation as to whether there should be an alteration in either or both of those percentages and if so what alteration is required””; (b) omit paragraph (b). (3) For subsection (3) substitute— ““(3) If the Secretary of State lays a report under subsection (1) in which the Government Actuary or the Deputy Government Actuary recommends that there should be an alteration in either or both of the percentages mentioned in section 41(1A) and (1B), the Secretary of State shall prepare and lay before each House of Parliament with the report the draft of an order making that alteration; and if the draft is approved by resolution of each House the Secretary of State shall make the order in the form of the draft.””.”” The noble Baroness said: My Lords, the amendment would insert a new clause after Clause 14. It would amend Section 42 of the Pension Schemes Act 1993 and remove the Government’s power to over-ride the recommendation of the Government Actuary when setting the level of the contracted-out rebate for defined benefit schemes. At present, the Government Actuary has to provide a report on the cost of providing actuarially equivalent benefits when schemes are contracted out. Since the Government Actuary is the Government’s expert on actuarial equivalence, that is not surprising. What is surprising is the fact that the Government can then ignore the Government Actuary’s advice: they can choose not to change the rebate or reduce it at will. If the Government decide that there should be no change, that is an end to the matter. Parliament has no say whatever. If they decide to make a change, they have to make an order subject to the affirmative procedure, which, as we know, means a little bit of parliamentary procedure but not very much. The Minister will be aware that the previous quinquennial review resulted in an order last year that ignored the Government Actuary’s advice. The Government Actuary said that the rebate should be increased from 5.1 per cent to 5.8 per cent, but the Government instead increased it to only 5.3 per cent. At the time, the Minister tried to argue two things. The first was that it was cost neutral, which it plainly was not, because the cost to employers of providing the relevant pension benefits in effect went up. If the Government will not pay the actuarial price for transferring liabilities, it is clear that employers will have to make up the difference. Secondly, the Minister ran the argument that, as the Government were considering the results of the review of the Pensions Commission, it was not right to implement the Government Actuary’s advice. We found that quite confusing, but it is now clear that they have stopped considering the Pensions Commission’s report and have separately decided not to review the contracted-out rebate at an interval shorter than the five-year maximum. We can therefore comprehensively ignore that second argument. The real reason for the Government’s decision has been admitted only very recently. When we debated the amendment in Committee on 4 June, the Minister said that the Government did not want to remove, "““Ministers’ ability to determine the level of the rebate … having regard to the prevailing and anticipated fiscal situation””.—[Official Report, 4/6/07; col. 1014.]" We always suspected that, but it is now official. If the Chancellor’s coffers look a bit empty, he can have another go at destabilising the funding of private sector pensions. It is a mini-version of the ACT raid and, like that raid, it goes on year after year. This is not good government. If we want companies to take responsibility for good occupational pensions, the rules of the game have to be clear and fair. Fairness dictates that if employers assume some of the responsibility of the state for a part of an individual’s pension, the companies should be adequately compensated. That is what actuarial equivalence is all about. Employers take long-term decisions about pension provision and its funding and they should not be messed about by the Government’s short-term funding decisions. My amendment would install the presumption that the expert advice of the Government Actuary is to be followed. I beg to move.