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Pensions Bill

The financial assistance scheme has to use annuity rates in a number of different circumstances where the amount of annuity which the trustees could have purchased for an individual at the end of wind-up is not known. For instance, where a member has taken part of their pension as a lump sum while the scheme is still winding up, annuity factors are used to produce a notional annuity which can then be used to calculate the amount of top-up payable to that member by the FAS. The annuity factors used by the FAS can affect the amount of assistance paid. Because of this, we recognise that it is important that those factors are generally in line with market conditions. While the amendment would not create a definite obligation on the Government to put these annuity factors into regulations, it would perhaps give an indication that Parliament expected the annuity factors to be set out in regulations rather than elsewhere. If we did so, Parliament would then have to debate any future changes to those factors. I never underestimate the knowledge and intelligence of Members of this House in particular, and of those in the other place, but I question whether our time is best spent considering pages and pages of annuity factors. Members of the Committee will remember that the Government have recently completed a review of the annuity factors which have been in use since 2005. The Government Actuary’s Department produced draft factors based on work by PricewaterhouseCoopers in relation to the financial model for the FAS that we commissioned from the Government Actuary’s Department in 2007. These draft factors generally increased the amount of assistance paid. We consulted on them, and the factors were put into place only once we had considered the responses to that consultation. Furthermore, laying regulations each time the factors need changing would slow down the process of reflecting these changes in FAS member payments. It is partly for this reason that, generally, such technical information is not put into legislation. For example, the various actuarial factors used by the Pension Protection Fund for similar purposes are also not in regulations. I do not think that this amendment would help people in any way, but nor would it really hinder, apart from perhaps delaying future changes which may be beneficial to members. The noble Lord touched on indexation in relation to annuity factors. The factors produce a notional annuity that takes no account of indexation. It is acknowledged that this produces a higher notional amount, and so lower top-up assistance, than if indexation were built in. A deliberate decision was made that this was the most appropriate approach, since annuities that are bought for deferred members of FAS qualifying schemes during wind-up would not generally contain indexation. However, we will continue to consider this point in the context of delivering the complete package of FAS reforms, when FAS payments will be indexed in respect of assistance derived from post-April 1997 service. I hope that that deals with the noble Lord’s queries and that he will feel able to withdraw the amendment.