---

Pensions Act 2004 (PPF Payments and FAS Payments) (Consequential Provisions) Order 2006

My Lords, I am grateful to both noble Lords who have contributed to this short discussion. The PPF has been heavily debated in both Houses from the passage of the Pensions Act 2004 until more recently in July 2005, when we debated regulations on ombudsman provisions and fraud compensation requirements before they came into force. I am sure that all noble Lords will join me in supporting the aims of the PPF, to provide support to members who would otherwise lose out if the employer became insolvent and there were insufficient funds in the pension scheme. I note the comments made by the noble Lord, Lord Oakeshott, on this matter. First, I thank noble Lords for welcoming the two orders. The order does not seek to take PPF compensation into account for payments of maternity allowance or state pensions themselves, but refers to adult dependency increase in relation to these benefits. We consider these amendments are necessary, as PPF compensation can be accessed from the age of 50. While we accept that the current number affected is not large, it is important to ensure consistency of treatment of PPF recipients, with the treatment of people in cases where payments of an occupational pension are made. In addition, we believe that the number of PPF compensation recipients will increase. Since the national insurance scheme started in 1948, the availability of an increase of benefit in respect of a spouse has been subject to an earnings rule. The purpose of that is to provide a simple test of the extent to which the spouse is financially dependent on the benefit customer. Earnings include pensions paid by employers and from personal pensions, and will include PPF payments. It is conceivable that a claim can be made for an adult dependency increase in maternity allowance for a spouse who receives PPF payments, given that compensation can be payable from the age of 50. Dependency increases for state pensions cease to be payable when the spouse’s earnings exceed a certain limit. The limits are £56.20 per week for 2005–06 if a married couple live together and £49.15 per week when a married couple live apart. Incapacity benefit takes 50 per cent of occupational pension above £85 per week into account. Incapacity benefit will apply the same rules to PPF payments. However, if PPF payments are payable to a survivor, the entire payment, as with occupational pension, is disregarded. Similarly, state pension credit takes occupational pension income fully into account and will mirror that approach for PPF payments, having already done so for FAS payments. If a member has only two years’ service when the PPF assume responsibility for their scheme, their PPF payment may be quite small. Although a member has the option to swap this payment for a lump sum, they may wish to receive compensation as a regular income. The member may also be entitled to state pension credit; this order will enable their PPF payment to be treated in the same way as the occupational pension income would have been treated. A question was asked by the noble Lord about the pension compensation cap order. This relates to the Pension Protection Fund. FAS applies to these schemes which begin winding up between 1 January 1997 and 5 April 2005. PPF applies to those schemes whose sponsoring employers have an insolvency event on or after 6 April 2005. This order increases the Pension Protection Fund compensation cap, set last year in line with average earnings, in accordance with the requirements of the Pensions Act 2004. We believe that the compensation cap will both provide the necessary cost control and encourage members below normal pension age to maintain a vested interest in ensuring that their scheme remains solvent and out of PPF. The noble Lord, Lord Oakeshott, said that when he last heard, FAS payments were being made to 13 people; he may be pleased to hear that we are currently making FAS payments to 15 people. We can only make payments to members of schemes who have provided us with the data we need to assess eligibility and calculate payments; to date, only two schemes have provided suitable data. We are confident that the number of payments will increase in February. We continue to work with schemes to get the information we need to make more payments. As usable data comes in, I expect the number of payments to rise significantly. It is vital that schemes supply data on their members without delay. The noble Lord, Lord Skelmersdale, asked whether the PPF would continue to be paid when the member works in another job; the answer is yes. The noble Lord, Lord Oakeshott, asked whether the provision £400 million is enough. The Government have always said that the FAS will not give everyone all of what they want. The primary objective is to provide significant help to those who have lost the most and need help most urgently. As with all our spending plans, funding for the FAS will need to be reviewed in the next spending review, along with other spending priorities. These orders provide for the equal treatment of compensation payments in relation to state benefits, and ensure that the reduced level of compensation is maintained, in line with increases in average earnings. Again, I commend these orders to the House. On Question, Motion agreed to.