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Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007

The Grand Committee—this very large Grand Committee—will be grateful to the Minister for introducing the order, which gives effect to yet more changes to the FAS announced during the Budget in March this year. Towards the end of his comments, the Minister told us of the grateful recipients of FAS money. We can all understand that, but we must remember that the Government set up FAS in the first place in response to a threatened rebellion from their Back Benchers in another place, who knew then that a large number of pensioners had been misadvised over many years to invest in a pension, only to find that their pension fund was bankrupt and that they would get nothing. Added to that—I cannot resist saying this, and I am sure the Minister expects it—was the Prime Minister's first Budget, which removed £5 billion a year from the pension savings of all pensioners. In the spirit that is supposed to surround Christmas, I am well aware that the Government have never recognised that figure. I accept that. However, can the Minister put his hand on his heart and tell me that the removal of ACT made no difference whatsoever to those likely to be in the FAS or any others saving for a pension? To change the subject slightly, the Minister will know to what I am referring when I say that, unlike some of his ministerial colleagues, it takes only a very little gentle bullying from me for him to respond to my questions. I hope that he will give me an early Christmas present by answering that question. When we were discussing what became the Pensions Act 2004, it was believed that about 66,000 people had lost all or most of their pensions. The Government inserted a new clause in that Act to cover members of qualifying defined benefit occupational pensions schemes which started to wind up between 1 January 1997 and 5 April 2005. All this, and the scheme as it has developed, is very well explained in the Explanatory Memorandum, so I will not weary the Committee with it. However, I would make the point that only £400 million was originally set aside to pay the pensions in question, which would amount to only 80 per cent of the core pension, or £12,000, whichever was the higher. The term ““core pension”” was invented by the Government. It amounts to about 60 per cent of the money value of the expected pension. Since this has reduced to 80 per cent the net result is around half the expected final pension. Even if the money had been sufficient to achieve this, which it soon proved not to be, the amount of pension an individual would receive was to be far short of what they could expect had their scheme not wound up, and hence not fall within the remit of the financial assistance scheme. Over and above this, no payment would be made if the amount due was less than £10 a week—I assume for rather shaky administrative reasons. Why are they shaky? It is because state benefits often pay out less than £10 a week. One thing that this order does is remove this de minimis amount, which begs a question. Of the current recipients—I believe that the Minister gave the figure of 3,540—how many get £10 or less a week? While we are at it, I know that in February this year, payments were being made to only 950 people, so I congratulate the staff of the FAS on acting on information received from trustees at last in a prompt and proper manner. I cannot help wondering whether doing away with the de minimis amount altogether is entirely sensible. The sum of £10 will make a significant difference to the income of many of the pensioners involved, with which I am sure that the Minister would agree, but would 50p or £1? I recall that everyone has complained about—but no one has done anything about—the 25p a week allowance for state pension recipients more than 80 years old. I am awaiting the Government’s announcement on this, although I might die before I get it. Be that as it may, my party said at the time that the original £400 million over 20 years was not nearly enough. When a couple of years later it came to light that the number of potentially eligible payments under the FAS was more like 125,000, we were proved right. All parties, not least the pensioners’ action committee, continued to press the Government for more, and the Government produced more—surprise, surprise. They said that £1.9 billion more, to be precise, would be found, bringing the total in the pot to £2.3 billion in cash terms over 60 years. Even though the time limits of eligibility were increased from being within three years of pension age to 15 years, this was still not seen as enough. This was incorporated in last year’s FAS order. Over the past two years pressure has continued to grow. In his last Budget, the Chancellor announced yet another increase in the FAS pot; another £5.7 billion over the new 60-year life of the scheme. These figures are my appreciation, because I cannot work out whether it has become a cumulative amount or whether there is another method of calculation. I am sure that the Minister, having a background as an accountant, will be able to answer me on that. Whatever the amount is—I expect, with a bit of luck, that we will get the answer soon—this total pot would be spent on giving all qualifying members a maximum of 80 per cent of their core expected pension or £26,000 a year indexed, as we have just heard, to today’s cash value. This is very curious terminology. People do not expect the core, but they will get it none the less. Even after the Budget announcement, we have seen angry, naked pensioners demonstrating about this. As the Minister knows, they want 90 per cent of their pension, so that it would equate with pensions paid out under the Pension Protection Fund where there is no core pension arrangement. The Budget announcement, and now this order, constitute a ratcheting up of the FAS pot. The £400 million to be spent over 20 years does not stand up in comparison with £1.9 billion over 60 years, both in cash terms. None the less it is not much—averaging out at just over £31.5 million a year at today’s prices. During our discussions on this year’s Pensions Bill, Ministers conceded that yet more money could be found by means of the better use of assets of the failed schemes, and if that transpired, the Government would match these amounts pound for pound. They set up, as the noble Lord said, the Young review to investigate. The Minister has commented on the press reports in the past 10 days or so. I am delighted to find out that within the next four or five days—anyway, by close of play on Tuesday, I assume—the Young report will be published, and we will see what truth there was in the press that a row has been going on over the matching of the funding. Lastly, I have to go back to the ““core”” and ““expected”” pension because the Explanatory Notes both confuse and conflict the two terms. I should be grateful to have definitions for both terms on the record. Having said all that, I welcome the order, as do tens of thousands of pensioners, but I must warn the Minister that he will be brought to the Dispatch Box again, no doubt kicking and screaming, to produce an even fairer version of the FAS. For how long will we have this annual ritual?