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Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2008

rose to move, That the draft regulations laid before the House on 18 June be approved. The noble Lord said: My Lords, noble Lords will recall that the Financial Assistance Scheme, or FAS, offers help to certain people whose defined benefit occupational pension schemes have not provided them with the pension that they were expecting. The draft regulations before us contain further changes to bring about the reforms to the FAS that we announced last December. Noble Lords will recall considering regulations to bring in some of the changes in May and those are now being implemented. In those regulations, we included measures which would raise the assistance level from 80 to 90 per cent, and begin payments from an individual’s normal retirement age rather than age 65. I am pleased to say that increased FAS payments at 90 per cent began to be made on 21 June and we have made 1,257 top-up payments at the 90 per cent level as at the end of June. In the draft regulations now before the House, we include some significant measures which could not be included in the previous set because the policy needed more time in development and consideration. On the early payments for those members unable to work due to ill health, the draft regulations provide for ill-health payments for members of FAS qualifying schemes, where the FAS scheme manager is satisfied that those members are not able to work due to ill health and are likely to continue to be unable to do so until their normal retirement age. The ill-health payments can be made from five years before the member’s normal retirement age, so that, for example, where the NRA is 62, eligibility would begin from age 57. We continue to discuss with stakeholders issues around the ill-health provision, but it is important that we get this enhancement to the FAS in place as soon as we can in order to get help to those affected. On extending the FAS to members of schemes which wound up underfunded with a solvent employer, the draft regulations also include provisions to make members of certain pension schemes with solvent employers eligible for FAS. Our intention here is to enable pension schemes that started winding up with a solvent employer after 1 January 1997 but before the employer was required to meet the full buy-out cost to qualify for the FAS. The Government would expect trustees to recover any debt they can from the employer before turning to the FAS for assistance. Given this, the regulations require the employer to have paid any debt to the scheme at the start of winding up, or to have had no debt to pay on wind-up. Following the consultation, we have included a provision to allow the FAS scheme manager discretion to treat the debt as having been paid where an appropriate portion was paid. Our intention here is to provide for schemes where, for example, the employer paid a significant majority of the debt owed but where the trustees did not consider it worth while to pursue the remaining debt to be included. We think that it is right to expect schemes first to pursue any debt owed by the employer before coming to the FAS for assistance. But where trustees have taken reasonable steps to secure the recovery of the debt, this gives the FAS scheme manager appropriate flexibility to include such schemes. As for whether the Pension Protection Fund will be more closely involved in developing the new FAS arrangements, I mentioned that further regulations will be necessary to bring in the remainder of the changes to the FAS announced in December. One of those remaining changes concerns the transfer of assets from FAS qualifying schemes to the Government. In order for that process to be as efficient as possible, these draft regulations contain provisions for the PPF to provide advice, and to be involved in the process of managing schemes through the wind-up process and on to a stage where they are in a position to hand over their assets. I hope noble Lords will agree that the expertise that the PPF has built up since its inception will be invaluable in this task. Given that the FAS will take in the assets of pension schemes that have not annuitised, we have included a measure in these draft regulations that allows the FAS scheme manager to direct pension scheme trustees in order to protect the value of the scheme assets. This is similar to an existing PPF power. We have also included measures to speed up the process of making initial FAS payments—that is, payments made before the final FAS payment position is known—by removing the need for trustees to apply for them. The draft regulations retain the FAS scheme manager’s discretion to make initial payments but without the need for a request from the trustees to trigger consideration. We are also reducing the period allowed in existing regulations for trustees to supply scheme data from six months to three months. In addition, they would introduce appropriate timescales for producing information concerning the new ill-health payments. Finally, the regulations include removing the option to apply for reinstatement into the state additional pension for those eligible for FAS. This will mean that any person qualifying for FAS will no longer meet the conditions for reinstatement into the state additional pension. The aim is to simplify matters by removing a step that not only delays the winding-up process but also offers uncertain outcomes for members. We are replacing this uncertainty with a guaranteed amount. Where someone has, before the commencement of the provisions, been offered the opportunity to be reinstated by their scheme, they will still be able to select this option. I hope we can agree that the Government have so far made good on the promises made in the December announcement, with more than 1,200 people already being paid assistance to 90 per cent of the pension that they were expecting. With this second set of regulations we are maintaining the momentum to deliver key elements of the reforms to the benefit of many pension scheme members. Later this year, we intend to consult on further draft regulations to deliver the full package of changes. In addition, to support the changes we intend to make through regulations, we have tabled amendments to primary legislation through the current Pensions Bill. In my view, these draft regulations are compatible with the European Convention on Human Rights. I therefore commend them to the Committee. Moved, That the draft regulations laid before the House on 18 June be approved. 23rd report from the Joint Committee on Statutory Instruments.—(Lord McKenzie of Luton.)