Pensions Bill

My Lords, with these amendments we turn to funding, an issue that was debated at length in Committee. The purpose behind Amendment No. 59 appears to be to restrict financial assistance to the trustee corporation to assistance on commercial terms, while Amendment No. 64 seeks to place a similar restriction on the funding of PADA unless the Secretary of State provides a report explaining his reasons for providing financial assistance on non-commercial terms. Amendment No. 60 would require the trustee corporation to charge for all its functions. Let me begin by reassuring the noble Baroness that the Government have no intention of unfairly advantaging the personal accounts scheme either through the way they fund the Personal Accounts Delivery Authority or if they provide funding to the trustee corporation. The principle that personal accounts should complement not replace existing provision is one that has run throughout the development of our reforms and one that we will continue to follow as we develop the scheme’s funding strategy. At the same time, it should be recognised that we are asking the scheme to operate under restrictions that do not apply to other schemes in the market. In particular the scheme will have a public service obligation—I disagree with the position taken by the noble Baroness on that—to admit anyone eligible to join irrespective of whether the costs of taking them on will be covered by the revenues they bring into the scheme. It will have a public service obligation because it will have to accept any employer who wants to use it to fulfil their auto-enrolment duty by using the personal accounts scheme and it will have to accept any qualifying employee. Unlike any other scheme that can turn business away, the personal accounts scheme cannot do so, regardless of its commercial viability. The scheme will also be focused specifically on the employers of low to medium earners not provided for by the existing market because they are considered to be uneconomic. In the long term we believe that the scale of the scheme means that it will be able to manage these commercial disadvantages while delivering low charges to members and being self-financing. But before it has achieved that scale, these requirements will make it more challenging to bridge the mismatch that will inevitably occur between costs and revenues in the scheme’s early years. Ultimately, this could mean that the scheme has to offer a short-term level of charges that undermines our aims to provide low-cost pension provision and to build the scale that it needs to be viable in the longer term. To prevent this, it is reasonable for the Government to consider whether it could be in the public interest to compensate the scheme and its members for the burdens of the real commercial disadvantages, to which I have referred, to be placed upon it. But let me be very clear that this is not a statement of intent; no decisions have yet been taken on the best way to fund the establishment of personal accounts. Such decisions cannot be taken until near the end of the commercial process when we will better understand its costs. For this reason it is essential that we retain flexibility on how the scheme should be funded. However, I hope the House will be reassured that if the Government felt funding on a non-commercial basis was necessary, they would have to show that this was consistent with European state aid rules. This means that our approach would be rigorously tested by the European Commission to ensure that any funding was both necessary and provided the scheme with no unfair advantage. So not only do we not want to unfairly subsidise the scheme, it would be unlawful for us to do so. In addition, if the Government were to provide state aid it would be a matter of public record that the Commission had approved the aid, along with its reasons for why there was no unfair subsidy or anti-competitive element in our approach. Amendment No. 59 would also prevent the Government giving grants to the trustee corporation. In its role as an NDPB, the trustee corporation may be asked to provide advice or information to the Secretary of State to ensure that we and Parliament can assess the success of our public policy aims. A similar burden is not placed on other occupational pension schemes. As this activity would not directly benefit members, it would be unfair for the trustee corporation to pass these costs on to members through the personal accounts charging regime. We would not, therefore, want to fetter our ability to make grants when appropriate. Amendment No. 60 uses ““shall”” rather than ““may”” in relation to whether the trustee corporation will level charges. The trustee corporation is intended to be independent from government when acting as the sole trustee of the personal accounts scheme. It is therefore right that it should retain some discretion over these matters so long as it operates within the parameters that we have set publicly, including that it be self-financing, and receives no unfair advantage through the way it is funded. However, a permissive power is all that is needed for the trustee corporation to meet these requirements. I recognise the noble Baroness’s legitimate interest in the issues of unfair subsidy, charging and parliamentary scrutiny, and I know we will have a debate at our next sitting around the issue of costs generally for the scheme. However, I hope I have been able to reassure her—I fear I have not—that we do not want and would not be able to provide an unfair subsidy. Therefore, as the noble Lord, Lord Oakeshott, said, these proposals are unduly and unfairly restrictive.