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Postal Services Bill [HL]

This group of amendments is focused on the protection that members of the RMPP are afforded in Part 2 of the Bill. It is an important group, if somewhat extensive. I assure the Committee that member protection is at the core of the Government’s proposals. In responding to the points raised it would be helpful if I were to give an overview of Clause 19 and the protection that it provides for scheme members. I shall then go on to address the specific amendments. Clause 19 limits the Secretary of State’s powers under Part 2 in two ways to protect members of the Royal Mail pension plan from being detrimentally affected by the Government’s proposals. The first layer of protection is in subsection (2), which limits the Secretary of State’s key powers to establish a new scheme or transfer rights to a new scheme under Clause 16, to divide the RMPP into different sections under Clause 17, or to amend the RMPP under Clause 18. The Secretary of State must ensure that in exercising these key powers he does not negatively affect the pension position of members of the RMPP. The test in subsection (2) is designed to ensure that a member’s relevant pension provision is no worse immediately after the exercise of the power than immediately before. The relevant pension provision, which is protected, is defined in subsection (3), which includes pensions already in payment to RMPP members and their dependants as well as benefits that will become payable when the member leaves service, retires or dies. It will include benefits payable in the event of a contingency, such as ill health, early retirement or following the exercise of discretion. Because the RMPP is set up under trust, while the new scheme will be a statutory arrangement we expect that it may require some differences in the way that benefits are determined or provided. For example, decisions about the scheme will be taken by the Secretary of State or persons to whom he delegates the scheme administration, rather than by trustees. However, we intend that the value of members’ accrued benefits will be no different. The Secretary of State cannot exercise his powers to establish a new scheme, transfer benefits to the new scheme or make changes to the RMPP in a way that decreases the value of members' benefits. Let me be clear: the test does not restrict the powers of Royal Mail or the trustees in relation to the ongoing operation of the Royal Mail pension plan. The second layer of protection for members is in subsection (6). It limits the Government’s ability to amend the new public service scheme, in order to protect the accrued benefits of members transferred across from the RMPP. The new scheme can be amended in a way that would or might adversely affect accrued rights only if prescribed steps are taken to obtain the consent of members, or if the scheme is amended "in the prescribed way". That was the point pressed by the noble Lord, Lord Skelmersdale. That provision is intended to protect members in a similar way to the protection that they currently have under Section 67 of the Pensions Act 1995. It is not appropriate to apply Section 67 directly to the new government scheme—that is the import of one of the amendments tabled by my noble friend Lord Clarke—because it is not a trust-based scheme. However, like Section 67, subsection (6) prohibits amendments unless they either meet consent requirements or are of another description prescribed in secondary legislation. As the noble Lord, Lord Skelmersdale, recognised, subsection (6) is based on Section 3(1) of the Armed Forces (Pensions and Compensation Act) 2004, which is intended to provide similar protection to that under Section 67 for members of the Armed Forces pension scheme—a non-trust-based scheme similar in structure to the new government scheme for Royal Mail employees. The method for obtaining consent from members of the new government scheme to amendments that might affect their accrued rights will be spelled out in more detail in secondary legislation. However, I can say that our intention is to follow a similar approach to the consent requirements that already apply to changes made to the RMPP, as provided for under Section 67 of the Pensions Act 1995. Clause 19(6)(b) reflects the fact that certain prescribed amendments may be made to occupational pension schemes under Sections 67 and 68 of the Pensions Act 1995. It would enable existing prescribed circumstances under those sections to apply to the new scheme. That power may also be needed to ensure that the rules of the new scheme properly reflect members’ actual entitlements under the RMPP and that any technical discrepancies can be resolved. In future, it may be appropriate as unforeseen circumstances arise to prescribe other exceptions for pension schemes under Sections 67 or 68. If that happens, there may be a need to enable similar changes to be made to the new public service scheme. The new scheme should not be in a fundamentally different position from occupational pension schemes, but instead should be able to make changes that trustees and employers are permitted to make. Turning to the detail of the amendments, as I mentioned earlier, the first layer of protection for members, in subsection (2), is designed to ensure that a member’s pension provision is no worse immediately after the exercise of the power than it was immediately before. A second layer of protection for members is contained in subsection (6). It limits the Government’s ability to amend the new public service scheme, in order to protect the accrued benefits of members transferred across from the RMPP. The Government recognise the importance of protecting members’ benefits when the initial transfer to the new scheme takes place. That is why the initial use of government powers under Clause 16 requires the Secretary of State to ensure that relevant pension provision for members of the RMPP is in all material respects at least as good immediately after the transfer as it was immediately before. In other words, the Government cannot exercise the power to transfer qualifying accrued rights to the new scheme in a way that reduces members’ pension entitlements. Amendment 64B would require an appropriate qualified actuary to certify that the test set out in subsection (2) had been met. In assessing whether that test is met—in other words, the members are in a position at least as good in all material respects—the Secretary of State will take appropriate expert advice, as required, which is likely to include both actuarial advice and legal advice. However, certification from an actuary would not be appropriate because, immediately following the establishment of the new public scheme, the members’ total benefits would in all material respects be the same as immediately before the change. Our intention is to write the rules of the new scheme and adjust the rules of the RMPP so that, immediately after the transfer out of liabilities, in aggregate they provide the same benefit to which members are currently entitled from the RMPP. I think that that was the particular assurance that my noble friend Lord Clarke was seeking.