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Pensions Bill

I shall speak to Amendments Nos. 130ZZEA and 130ZZEB, which are amendments to government Amendment No. 130ZZE in this group. This is getting ridiculous. I thank the Minister for introducing his amendments and for circulating the note which was euphemistically headed ““simplification of state second pension””. As he has demonstrated in his opening remarks, this is anything but simple. I learnt more from reading the note than I ever need to know about S2P. I cannot pretend to understand the precise technical impact of all the amendments in this group, but if the department’s note is an accurate reflection of what is planned, then we are broadly content with what the Minister is proposing. However, there is one exception, which is dealt with by my amendments. I was alerted to this by the reference to actuarial equivalence in the department’s note. When I found out that it was in connection with contracting out—in this case the contracted-out deduction—I was put on full alert because the Government are not to be trusted in this territory. Paragraph 21 of the department’s note on these amendments refers to the way in which the contracted-out deduction will be arrived at. It states: "““The current intention is for the Government Actuary’s Department to consult on the proposed assumptions in the Summer of 2011 to ensure that consolidation can be based on the most up to date information on life expectancy, earnings and earnings growth. These assumptions will be used for the consolidation calculation””." That seems entirely rational, and we support it. However, it is not what the legislation contained in these amendments says. Instead, proposed new Section 46A of the 1993 pensions Act, as inserted by Amendment No. 130ZZE, says nothing about consultation. Subsection (5) says only that the Secretary of State ““may”” require the Government Actuary to prepare a report; the Secretary of State is not required to involve the Government Actuary. Subsection (7) says, in effect, that even if the Government have got a report from the Government Actuary, they are under no obligation to take it into account when issuing the regulations for determining actuarial equivalence. The Committee may feel that this is just a technical issue, but very similar provisions on actuarial equivalence already exist in relation to the contracted-out rebates which are set on a quinquennial basis. I know that the Minister recalls our previous discussions on this, and I am sure that the noble Lord, Lord Oakeshott, will remember the debates we had on the order setting out the contracted-out rebate in 2006 after the last quinquennial review. At that time the Government Actuary reported, after consultation, that the rebate should be set at 5.8 per cent, although many of the consultees argued for a higher figure, some for higher than 8 per cent. The Government then plucked the figure of 5.3 per cent from thin air, citing something that was not found in the legislation or indeed in these amendments. They called it ““sustainable affordability””—that is to say, if the Treasury says it cannot afford it, the Government will ignore actuarial equivalents determined by the Government Actuary’s Department. The legislation, which is drawn in very similar terms to the amendments before us, did not stop the Government from acting in that way at the last quinquennial review, as the noble Lord, Lord Oakeshott, will recall. The government amendments give them carte blanche to carry on operating in exactly the same way, and possibly even to invent new bits of doctrine to sit alongside ““sustainable affordability”” and not do the right thing. My amendments are modest. They would ensure that the Government of the day, when coming to these difficult and complex decisions, would be guided by what was right for the rights-holders when their rights were being consolidated, not what was convenient for the Treasury. I would replace the word ““may”” with the word ““must”” in subsections (5) and (7) of new Section 46A. Will the Minister comment on the processes that will be used to assure the calculations on a quality basis when the single additional pension amount is arrived at? The department’s note makes it abundantly clear that no ordinary mortal could check the calculations attributable to his particular circumstances. Those calculations will fix an entitlement for all time for post-2020 retirees. Would the department, for example, use specially commissioned audits of the calculations? The ordinary audit of the National Insurance Fund will not give assurance of the granular level of the individual’s own rights and entitlements, and it is at that level that we need confirmation to exist. We have seen too many government systems collapse in the face of complexity and fail to deliver what they need to. Child maintenance is a prime example, but anyone who has tried to check a contribution record extracted from NIRS2 will find that that is not a simple process either. The calculations that are involved in gathering these various entitlements and deductions are even more complicated, which is why I particularly want the Minister to reflect on the assurance processes that will ensure that individuals get that to which they are entitled once the actuarial rules have been set.