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Postal Services Bill [HL]

Yes, indeed. I touched on that point in part, and I will come to it again in due course. At the same time as establishing the new public service scheme, we intend to amend the RMPP rules so that the benefits that are provided are reduced by the benefits that will now be payable from the new public scheme. The change for members with benefits in both the new scheme and the RMPP is that total benefits will be provided from two different schemes, and the type and level of benefits that will be payable in different circumstances will not be changed by the exercise of these powers. An actuarial certificate will be appropriate only when comparing two schemes with different terms and benefits, and as there is no intention of making the benefits more generous in some circumstances or less generous in others, certification by an actuary is not necessary or appropriate in this case. Once the qualifying accrued rights have been transferred, the new scheme should have the flexibility to make amendments to meet changing circumstances on the same basis as currently applies to the RMPP and to other occupational pension schemes. That is why future amendments to the new scheme are permitted, subject to restrictions to amendments that would or might adversely affect qualifying accrued rights. This is comparable to the protection that members currently have under Section 67 of the Pensions Act 1995. As I mentioned earlier, it is not appropriate to apply Section 67 directly, because the new scheme 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. We want the government scheme to be able to reflect unforeseen developments in the future, and the new scheme should not be in a fundamentally different position from that of occupational pension schemes. Instead, it should be able to make changes that trustees and employers are permitted to make. Amendments 62A and 69 would prevent the Government from being able to react to future circumstances, and therefore cannot be accepted. However, I hope that this more detailed explanation of how Clause 19 operates has reassured noble Lords that protecting members is a key objective for the Government in Part 2. That is why I ask noble Lords to consider not pressing their amendments. On Amendment 63, I hope that I have assured my noble friend Lord Clarke of the significant protection for members of the RMPP that is already set out in the Bill. The amendment would not give members any additional protection. Furthermore, it could prevent any changes being made to the new public service scheme, even where such changes might be for the benefit of members. As a result, the Government cannot support the amendment. On Amendment 64A, the test in Clause 19(2) applies to each person who is or has been a member of the RMPP. It therefore covers current and former members of the RMPP, including deceased members. Clause 19(2) protects the relevant pension provision of each person who is or has been a member of the RMPP. In other words, it protects benefits that are payable in respect of a deceased member of the RMPP as well as of a member who is still alive. It is therefore the Government’s view that Clause 19(2) already applies to protect the benefits payable to a dependant of a deceased member of the RMPP. The noble Lord, Lord Skelmersdale, was seeking reassurance on that. As the Bill already extends the protection set out in Clause 19 to dependants, I would ask the noble Lord to withdraw his amendment. Amendment 65, in the name of my noble friend Lord Clarke, proposes a more detailed definition of the "relevant pensions provision". I reassure my noble friend that the definition of "relevant pensions provision" as set out in subsection (3) would in practice cover all the benefits set out in his amendment. The definition in subsection (3) includes the payment of pensions and other benefits to which members are entitled, such as ill health benefits. I also assure my noble friend that the definition of "relevant pensions provision" also covers the link between accrued benefits and final salary. I have already explained the Government’s intention to amend the rules of the RMPP so that, immediately following the transfer out of liabilities to the new public scheme, any disparity in benefit entitlement arising in relation to the link with final salary will be met from the continuing company-backed scheme. We do not want to risk narrowing the definition of relevant pensions provision set out in the Bill. As a result the Government are not able to support this amendment. The noble Lords, Lord Skelmersdale and Lord De Mauley, and my noble friend Lord Clarke have proposed an amendment which would remove subsection (4). This subsection makes it clear that Clause 19 does not require the Secretary of State to include any provisions in the new government scheme which would be incompatible with any obligations under UK or EU law, such as tax requirements or EU anti-discrimination requirements. Clearly it is important that the Government act lawfully in setting up the new government scheme, but as we work through the detailed drafting of the secondary legislation setting up the new scheme it is possible that some provisions may not be strictly compatible with, for example, the requirements for registration of a new scheme for tax purposes under the Finance Act 2004. In order to reassure my noble friend, I should stress that we expect any such issues to be of a technical nature rather than to have an impact on members’ benefits. Nevertheless, we will need to maintain sufficient flexibility to ensure that the new scheme complies with UK and EU legislation. I would therefore ask noble Lords not to press this amendment. Amendment 67, proposed by my noble friend Lord Clarke, relates to Clause 19(5). Subsection (5) makes it clear that although Clause 19 is designed to protect the accrued rights of members, it is not intended to require the new government scheme to be set up or run in any particular way. For example, the new government scheme will be set up under legislation and not under trust deed. Any decisions that would be made by the Royal Mail Group under the rules of the RMPP would be made by the Secretary of State or the administrator to whom the Secretary of State delegates responsibility under the new scheme. Nor is it designed to constrain the future operation of the ongoing Royal Mail plan, which is a matter for the company and for RMPP trustees going forward, and is already governed by existing pensions legislation. Amendment 67 would constrain how the new government scheme would be set up and operated. As a result, this would limit the Government’s ability to balance their objectives of protecting the universal postal service, protecting members of the pension scheme and protecting the interests of taxpayers, for example, from the investment risk in the funded scheme. As a result, I would again ask noble Lords not to press the amendment. I note that my noble friend Lord Clarke has proposed an amendment to delete subsection (2). I understand that this is intended to be considered as part of a broader package of amendments. I hope that the comments I have already made on Clause 19 will assure him that we are offering significant protection to members as part of this Bill. Similarly, in Amendment 68, he has proposed the deletion of subsections (6) and (7), which would delete protection for members from amendments being made to the new public scheme that would or might adversely affect accrued rights. This is an important safeguard for members which reflects the existing safeguards that, as I said, apply to them as members of the RMPP. It is not appropriate to apply the test proposed in Amendment 63, which would require benefits to stay the same in the new scheme going forward. This would even preclude changes being made that would be beneficial to members, for example to reflect future changes in law. Amendment 40, in the name of my noble friend Lord Clarke, appears to reinforce the effect of the amendments discussed in relation to Clause 19. I hope that I have dealt with that. The amendment risks adding real uncertainty about the fundamental basis on which members’ benefits will be calculated. I therefore do not believe that it can be recommended. I am conscious that this has been a fairly detailed explanation on a whole raft of complex amendments which touch in particular on the provisions of Section 67, which pensions lawyers tell me is the most impenetrable part of pensions legislation. I hope that putting those issues on the record has enabled noble Lords to decide not to press their amendments. The noble Lord, Lord Skelmersdale, referred to FRS 17 and local government pension schemes. The new scheme that we are discussing would not be a funded scheme, for reasons that I think the noble Lord is aware of. He referred to the size of the deficit that we are dealing with. We have made clear in the RIA that the deficit has been calculated based upon the March 2008 criteria, which has been projected forward to March 2010. We have also said that those figures would be updated when the next evaluation is due for, I think, March 2009. The noble Lord also asked what would happen if state aid is not forthcoming. My noble friend the Secretary of State has made clear the linkage of these propositions. If the provisions in the Bill cannot be taken forward then the next evaluation would have to be undertaken and the trustees would need to engage with the sponsoring employer in setting out a recovery plan consistent with the regulator’s directions and guidance on these issues. That would clearly be a challenging prospect but I hope that it is not one that we would face. I also hope that that has answered all the queries raised.