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Pensions Bill

moved Amendment No. 129A: 129A: After Clause 88, insert the following new Clause— ““Override of scheme rules (1) The Secretary of State may by regulations provide that the rules of an occupational pension scheme shall be modified so that they reflect— (a) changes to the revaluation of accrued benefits introduced by section 88, and (b) limits on annual increases in occupational pensions for category Y pensions allowed by section 51 of the Pensions Act 1995 (c. 26) (annual increase in rate of pensions). (2) Regulations may not be made under this section unless a draft of the statutory instrument containing the regulations has been laid before, and approved by a resolution of each House of Parliament.”” The noble Baroness said: This amendment introduces a statutory override in respect of the indexation capping rules, both in the 2004 Pensions Act as well as in Clause 88 of the Bill. For today, this is a probing amendment, but I would not like the Minister to think that I do not raise this as a very serious issue. The statutory override was examined in the deregulatory review undertaken by Messrs Lewin and Sweeney, which reported last summer, and many are disappointed that the Government have not dealt with the issue. Employer organisations such as the CBI and the Engineering Employers’ Federation, together with the National Association of Pension Funds, welcome Clause 88, as do we. It allows the indexation of accrued benefits attributable to pensionable service after this Bill is brought into effect to be capped at 2.5 per cent. Those groups similarly welcomed the changes made by the 2004 Act which capped increases for pensions in payment. A cap on increases to benefits, whether in payment or deferred, can have a big impact on the cost to employers. In particular, we are mindful that the inflation genie has now been let out of the bottle, hence the issue of a cap becomes very real and important. The trouble is that having a statutory permission to cap at 2.5 per cent is not the same as being able to achieve it. Some pension schemes have rules which make it very difficult to implement the changes. Some paid-up schemes administered through insurance companies do not have an employer with which to negotiate. In most cases, employers face having to negotiate changes in their trust deeds and rules. Many employers have found it difficult to implement the 2004 Act changes without making improvements in other scheme benefits. That, of course, negates the purpose of the whole exercise. It is deregulation without meaning. There are different ways of achieving a statutory override. My Amendment No. 129A is possibly the most radical solution as it allows the Secretary of State to provide a statutory override of scheme rules so that the changes in Clause 88 and also the changes in the 2004 Act can be implemented directly in scheme rules by regulations. In each case the changes are being made from particular dates and have no retrospective effect. Obviously, my amendment goes along with the scheme of introducing the indexation capping. The Engineering Employers’ Federation supports that approach. An alternative, recommended in the Sweeney and Lewin report, is a narrower override focused on eliminating technical problems about changes to rules but still based on agreement between the trustees and the employer. That would clearly be better than nothing. I hope that the Minister will see that allowing indexation caps in legislation is not the same as employers achieving them. At a stroke, the Government could help employers to achieve the changes and in so doing provide a small but important lifeline for defined benefit schemes. Clause 88 will not help the preservation of defined benefit schemes unless it can be implemented in short order. This is in the gift of the Government and I hope that the Minister will indicate that the Government are prepared to support this or some other form of statutory override. I beg to move.