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Pensions Bill

Perhaps I may try to describe what ““broadly equivalent”” might mean. We use the term to ensure that the widest-possible range of scheme types can be directed to the test scheme standard, because the test scheme does not replicate the benefit structure of all defined benefit schemes. We need to be able to gauge the standard of any scheme in the most appropriate manner to ensure that the wider reform’s objective will be met. Nor do we want to interfere with the benefit structures by requiring them to align with the test scheme. By requiring that pensions are broadly equivalent, we enable schemes offering pensions on a different basis—for example, on a career-average basis—to be compared with the test scheme. Therefore, the regulations and guidance that will follow under Clauses 21 and 22 will set out how an employer should assess whether they meet the broad equivalence test. This is exactly the approach used under the reference scheme test for contracting out for the same reasons. I do not understand why the noble Lord is so vexed by this. We know of no defined benefit scheme that we expect to fail the test, but the noble Lord will understand that a whole range of different benefits and calculations is provided in defined benefit schemes—they are not all the same. Therefore, guidance that helps employers in assessing whether any individual scheme meets the test will be needed. I do not see why the noble Lord is so concerned about that. These are highly technical issues. Sometimes an actuary will need to be involved. As I think I said, we broadly expect this test to be looked at once up front and then for employers to keep an eye on any changes occurring to the scheme, but it is fundamentally a one-off calculation. We are not aware of any defined benefit scheme that would fail that test. It seems to me a pretty straightforward issue. I shall seek to reinforce the point for the noble Lord. If we are looking at defined contribution schemes, we are looking at inputs on an individual basis, as we discussed earlier. When we are evaluating defined benefit schemes, we are broadly looking at outcomes for those schemes and trying to evaluate whether those outcomes are equivalent to what the test scheme would produce. It is a different approach because of the different nature of defined benefit and defined contribution schemes. I hope that that is sufficient for the noble Lord. It is not really a case of saying that we do not know and will have to fill in these things in due course. Of course, the detailed rules will need to be worked out and new detailed rules will undoubtedly need to be introduced if new defined benefit schemes come along. The whole purpose of this is to help employers to be clearer about how they make their judgment on whether the scheme satisfies the standard.