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Deferred Pensions

: I begin by congratulating my hon. Friend the Member for Middlesbrough, South and East Cleveland (Dr. Kumar) on securing this debate on an important topic of concern to many people in his constituency who are former employees of the company to which he refers. Similar issues face many other people who are former employees of other companies and members of other schemes. I pay tribute to my hon. Friend for the work that he has done and the eloquent case that he has made on behalf of his constituents. I have had many meetings with hon. Members whose constituents have been affected by the wind-up of underfunded pension schemes. I have great sympathy for all those who have lost part or, in some cases, all of their expected pensions in such a way. It is a devastating experience for anybody to endure. The USM Texon pension scheme and the impact of the company's insolvency on employees in the shoe-making industry has been eloquently described this afternoon by my hon. Friend. I want to address, as far as I am able, the pension issues that he raised. First, he raised concerns about the activities surrounding the USM Texon pension scheme, the behaviour of the employer and some of the financial transactions. Other Members have raised similar concerns about the events in that company. I am advised that both the Occupational Pensions Regulatory Authority, the predecessor to the pensions regulator, and the pensions regulator considered the case and came to the conclusion that the activities surrounding the pension scheme did not break pensions legislation. That is rather a narrow test, of course, but the regulator can take action only if the law has been broken. The Pensions Act 2004 greatly strengthened legislation in that area, but without a breach of legislation or regulations, the regulator is not in a position to act. The pensions ombudsman is still considering cases arising from the scheme. In particular, a scheme member has complained that the trustees failed to produce a transfer value statement when asked to do so and the pensions ombudsman expects to reach preliminary conclusions on the case quite soon. The outcome of the complaint will have a bearing on a number of other complaints that the ombudsman has received in connection with the scheme about bulk transfer issues, and will be of interest to those who have raised their concerns with my hon. Friend. I gather that there have also been complaints to the Department of Trade and Industry companies investigation branch, but, since the complaints relate mainly to pensions, it was concluded that they should be taken up elsewhere. I do not think that the DTI can investigate complaints made only by shareholders; in this case, Members have made complaints. With investigations that are underway at the moment, the work of the pensions ombudsman is most relevant to the case that we are considering. My hon. Friend had a good deal to say about the financial assistance scheme, introduced through the Pensions Act 2004. I am grateful to him for recognising that, for some people, the FAS provides valuable help. Neither the Government nor the taxpayer has a liability in such cases, but we have set up the scheme to help members of underfunded pension schemes who were fewer than three years away from the scheme's normal retirement age on 14 May 2004 and whose scheme had commenced winding up between 1 January 1997 and 5 April 2005—a contained group, as my hon. Friend rightly said—while being sponsored by a principal employer who had experienced insolvency prior to a given date. Hon. Members will know that protection in cases where insolvencies occurred after 5 April 2005 will be provided by the pension protection fund. However, that cannot be the case for insolvencies that occurred before the fund was created and before the PPF levy supporting the fund was raised. The FAS operational unit opened on 1 September 2004. Work has began on a collecting scheme and member data so that decisions can be made about whether schemes and individuals qualify for FAS. Once that information has been provided, decisions can be made and assistance paid to affected scheme members. The first qualifying schemes were announced on 25 October 2005. So far, 146 schemes have qualified. The first qualifying members, who happen to be members of the ASW Cardiff pension scheme, are now receiving initial payments from the FAS. Those initial payments—they are 60 per cent. of the expected pension—are payable until the scheme completes wind-up; at that point, full FAS payments of 80 per cent. of the expected pension will commence, together with any arrears due. Work continues on processing data for other schemes, so that we can issue payments to more of those affected as soon as possible. Scheme trustees have until the end of the notification period on 28 February—the end of next month—to notify the operational unit that they wish their pension schemes to be considered for the FAS. I urge any trustees who have not yet made such a notification already to do so soon. The USM Texon pension scheme was on the indicative list of schemes potentially eligible for the FAS that was published last February. The trustees have now made a formal application to the scheme. The scheme notification has been accepted, and the operational unit is considering whether the scheme qualifies. That will involve obtaining additional information from the trustees—namely, the date of the employer's insolvency and the name of the principal employer. That minor information has only just been requested, so it is not yet possible to confirm that the USM Texon pension scheme will be eligible for the FAS. I am therefore not able to state which members will qualify for assistance. However, I hope that the matter will be resolved within the next month or so. My hon. Friend felt that the £400 million provided for the FAS is not adequate, and that more money should be made available to extend assistance to more people. He said that most former employees of USM Texon—at least those in his constituency—are too young. They were more than three years from their scheme pension age in May 2004. Our priority when designing the structure of the FAS was to get help quickly to those who faced the most urgent difficulties. We took the view—I think that my hon. Friend will agree that we were right—that those were the people closest to or already at retirement age, who would be least able to make alternative provisions to replace their lost pensions. However, as with any cash limited scheme, some people will fall outside the qualifying criteria. My hon. Friend said that if we were to extend the period from the current three years of scheme pension age to 10 or 12 years it would be very helpful to his constituents. I understand that. As he knows, my right hon. Friend the Chancellor told the Labour party conference in September 2004 that the Government will be reviewing the funding of the scheme, alongside the Government's other spending priorities, in the next spending review. In the meantime, however, funding is fixed for the current spending review period, up to and including 2007–08. Should it be decided to provide additional funding, my hon. Friend wondered when it would start. It would take effect from the beginning of the financial year 2008–09. He was also concerned about how long it would take. That answer is a little more encouraging: an announcement will be made in the summer of 2007, so the information will be available rather earlier than he feared it might be. Ahead of that review, however, our plans will cover only those who fall within the criteria that I have set out. I cannot offer my hon. Friend any prospect of extending eligibility ahead of the review. Those who were more than three years from their scheme pension age in 2004 will not yet be at their scheme pension age, so they are not yet in a position to need help. I can understand people wanting to know the outcome of the review as soon as possible, but I can give no expectation of it happening before the summer of 2007. The position of people outside the current scope of the scheme will be considered as part of the review, alongside the other spending priorities that the Government need to address. I appreciate that such uncertainty will be difficult for many, but Government funding is already allocated, and no additional source of funds is available. My hon. Friend made some suggestions for obtaining additional funding for the FAS. He suggested using unclaimed assets from banks and other financial institutions or receipts from advance corporation tax to increase scheme funds. On the use of unclaimed assets, my right hon. Friend the Chancellor explained last month in the pre-Budget report that an agreement had been made with banks and building societies that such assets would be used to improve youth and community facilities. Before the election, I was the Minister at the Treasury dealing with that issue. I therefore know that many proposals have been promulgated in various quarters on how to use those unclaimed assets. However, there is much less certainty about how much money is available. Some of the figures that I have seen are significantly greater than the reality is likely to prove. I caution my hon. Friend against seeing funding from that source as being a likely solution. The Government's view is that if owners and their assets cannot be reunited, the money should be reinvested in the community, particularly in disadvantaged communities, and that that should be done in a sustainable way through a co-ordinated delivery mechanism, with a focus on services that are responsive to the needs of young people; they should also be used to deal with financial education and financial exclusion. That seems logical, given that difficulties with financial literacy and financial education may have led to the assets being mislaid. The removal of payable tax credits for advance corporation tax—they were effectively a subsidy for the payment of dividends rather than money to be reinvested in the business—has not led to an availability of uncommitted funds. It was part of a package of measures, which included a reduction in the rate of corporation tax. I know that my hon. Friend has been a strong advocate of increasing investment in manufacturing in order to boost the productive capabilities of the economy; and that package was helpful from that point of view. I note that, at the last election, none of the political parties argued for reinstating those credits. Indeed, as I said earlier, the resources secured from that source have been committed elsewhere. I pay tribute to my hon. Friend for his campaigning and for the committed work that he has carried out on behalf of those of his constituents who have been so hard hit by the collapse of the firm and the pension scheme. We made good progress in setting up the FAS, which ensured that the first payments were made on schedule before Christmas. I know that my hon. Friend and many others are eagerly awaiting the review of the FAS; the outcome is due in the summer of 2007. Question put and agreed to.