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Pensions Bill

moved Amendment No. 130ZZN: 130ZZN: After Clause 90, insert the following new Clause— ““Contracting-out: abolition of all protected rights (1) As from the contracting-out abolition date, pension schemes are not required to make special provision in relation to the protected rights of members. (2) Accordingly— (a) the provisions of the Pension Schemes Act 1993 (c. 48) (““the 1993 Act””) within subsection (3) cease to have effect as from that date, and (b) sections 25A, 27A and 32A of the 1993 Act (as inserted by paragraphs 9, 10 and 12 of Schedule 4 to the Pensions Act 2007 (c. 22)) are not to have any effect as from that date (in spite of section 15(4) of that Act of 2007). (3) The provisions of the 1993 Act within this subsection are— (a) section 10 (protected rights and money purchase benefits), (b) section 26 (persons who may establish scheme), (c) section 27 (identification and valuation of protected rights), (d) section 30 (securing of liability for protected rights), (e) section 32 (suspension or forfeiture), and (f) section 33A (appropriate schemes: ““blowing the whistle””). (4) In this section— ““the contracting-out abolition date”” means the day appointed under section 30 of the Pensions Act 2007 (c. 22) for the coming into force of section 15(1) of that Act (abolition of contracting-out for defined contribution pension schemes), and ““protected rights”” has the same meaning as in the 1993 Act (see section 10 of that Act).”” The noble Lord said: I shall speak also to government Amendments Nos. 139ZC, and 139E. The new clause and associated amendments are concerned with the changes we are making to the arrangements for contracting out of the additional state pension. In particular, they deal with the use of protected rights. These are contracted-out rights held in a defined contribution pension scheme. The Pensions Act 2007 already contains provisions to abolish contracting out on a defined contribution basis, and we expect that change to take place in 2012. The Act also contains provisions to remove most of the rules concerning the use of protected rights already accrued at the point of abolition. The exception is the rule on survivor benefit. Currently, protected rights have to provide for a survivor benefit if a scheme member is married or a civil partner at the time the annuity is purchased. Following detailed consideration of the survivor benefit rule and the open market option review, we have decided to remove this rule too. That is what the new clause and associated amendments will achieve. The main changes are being made on the face of the Bill; however, we are also expanding a power in the Bill so we can make the necessary consequential amendments and ensure a smooth transition to the new arrangements. Removing the survivor benefit rule means that once contracting-out on a defined contribution basis ceases, there will be no requirements for how past protected rights might be used. This will mean greater clarity for individuals, who will be free to choose an annuity that is appropriate for their circumstances. At the moment, people have to buy an annuity that provides a survivor’s benefit, even if that is not in their best interests; for example, if their spouse has a good pension in their own right. The change provides a big simplification for schemes, which will no longer have to track protected rights and apply separate rules to them. It is in line with the Government’s objective of reducing administrative burdens on employers and pension providers. I hope that this explains our approach. I beg to move.