My Lords, we have discussed protected persons status previously in relation to the statutory override provisions, but it might be helpful in the context of this debate briefly to restate the position.
The status of “protected persons” was created when rail and other public sector industries were privatised, and new pension schemes were created to ensure that ongoing pension provision was made. Protected persons status gave members of certain schemes protection against their new employers providing pension benefits that were less favourable than those offered prior to privatisation.
However, there was never any intention by the Government for protected persons status to protect pension benefits already accrued in the event of a future employer insolvency. The amendment would oblige the Government to provide the full pension of those members of the railway pension scheme who have “protected persons” status in the event of their employer becoming insolvent. This would also apply to benefits accrued after privatisation.
There is, of course, a need to protect members of schemes where the sponsoring employer is insolvent. Since the Railways Act 1993, successive Governments have created a stronger pension-protection regime. This regime crucially includes measures that increase the security of members when their occupational scheme is underfunded and the sponsoring employer of the scheme becomes insolvent. It is that regime which is intended to provide protection to members of defined-benefit schemes. The status given to protected persons, on the other hand, was focused on ensuring that their pension benefits after privatisation were at least as favourable as those before. When it comes to protection in the case of employer insolvency, it is right that members of the railways pension scheme are treated the same as other members of occupational schemes in a similar position.
The railways pension scheme is a multi-employer sectionalised scheme. The different sections of the scheme are covered by the full provisions of the pension protection regime. The sections have to meet the funding requirements, debt requirements and compensation arrangements. They are covered by the Pension Protection Fund and pay the pension protection levy. This means that the scheme has been making specific payments to provide its members with protection in the event of any of the sponsoring employers becoming insolvent.
I am aware of the situation of the members of the Jarvis sections in the scheme. Of course, we have enormous sympathy for them and for any individual who is placed in the stressful and depressing situation not only of losing their job but of potentially seeing a limitation on their benefit entitlements. It is right that the full range of protection requirement rules should apply to the sponsoring employers of the railways pension scheme.
If this amendment were made, the Government would be responsible for covering a scheme’s liabilities if the employer became insolvent. Sponsoring employers would therefore not have to worry about the liabilities of certain members. The noble Lord, Lord Dubs, rightly referred to moral sensibilities, which of course we have, but there is also the danger of moral hazard if the Government were to stand in that way. Finally, the amendment is retrospective, which would mean that insolvencies that have already occurred would have to be unpicked and arrangements that had already been made would have to be revisited.
This seems like a fairly negative response but of course legislation has been passed in the intervening period. I pay tribute to the then Government for introducing the statutory system of protection for scheme members and the levy, which Jarvis contributed to prior to its insolvency. In that sense, Jarvis members enjoy a higher level of protection even now as a result of the Pension Protection Fund. I understand the sensitivity of the issue and I do not underestimate the distress that has been felt by those members and their families, but this is not something that the Government feel able to accept and I ask the noble Lord to consider withdrawing his amendment.