---

Postal Services Bill [HL]

These amendments give rise to a number of issues concerning the detail of the Government’s proposals. The first issues that I will clarify are the envisaged arrangements for the transfer of assets under Clause 20, and in particular subsection (1) of that clause, which contains provisions for where the assets will be transferred. The Government intend any gilts and cash transferred to go to the Treasury and the Consolidated Fund respectively. The other assets will go to a fund established by the Secretary of State and will be sold over a number of years, with proceeds going to the Consolidated Fund. I emphasise that the fund established under Clause 20 is solely for the purpose of holding assets transferred from the RMPP prior to their disposal. In respect of the qualifying accrued rights transferred to the Government, the pensions due to members will be paid by the new public service scheme and funded from taxation. The new scheme will not operate on a funded basis. I will touch on issues related to a funded model. It has been suggested that it would be better for the new scheme to operate on a funded basis, rather than for the Government to assume direct liability for the payment of benefits. We have examined this carefully. Our analysis, set out in the impact assessment, demonstrates that the funded model would involve investment risks that could add billions of pounds to the final cost to the taxpayer. For example, if investment returns were 1 per cent lower than forecast by the trustees at the last full valuation of the scheme, an additional £6 billion would be added to size of the funding deficit falling to the Government—a doubling of the deficit’s size. The funded option would also be the most expensive to run, not least in terms of investment management costs, where the Government’s proposed approach would in the long term result in significant savings when compared to the £30 million currently paid by the scheme each year. The general question of investment risk is not just an issue for the Government. Noble Lords will be aware that the issue of the appropriate level of investment risk is also a matter of debate for company-sponsored defined-benefit schemes. For them, the question is one for trustees and sponsoring employers. In respect of the RMPP liabilities, it is entirely legitimate for the Government to take the view that they should not bear investment risk. This conclusion underpins other public service schemes; that is why it applies here. I turn to the detail of the amendments. As I explained, the intention is that any gilts and cash transferred would go to the Treasury and the Consolidated Fund respectively, with other assets going to a fund established by the Secretary of State and to be sold over a number of years. The option under Clause 20(1)(a) for a transfer of the assets to the Secretary of State would allow for the transfer of any cash to the Secretary of State, who would then pay it into the Consolidated Fund. It is also a contingency measure, should the fund envisaged under Clause 20(1)(c) not have been established by the time the transfer of assets is required to take place. The question of the destination of the assets transferred under Clause 20 is therefore not a matter of policy choice between the options under subsection (1) of that clause, but a question of the particular characteristics of the assets and the constraints they impose on how the assets can be held. In practical terms, this means that at least two options under Clause 20(1) will be required. It is not an either/or choice, as implied by the amendment. That would frustrate what I understand to be the purpose of Amendment 49, and make it unworkable. Nevertheless, I should briefly set out the Government’s position on the substantive issues arising from the detailed proposals. The first concerns whether the general requirements under pensions legislation will apply to the new public service scheme. The effect of the provision under subsection (4) of Clause 16 is that the scheme will be capable of being treated as an occupational pension scheme, as we have discussed, for the purposes of the relevant legislation. Such treatment would put the new scheme in an analogous position to other public service schemes, which are occupational pension schemes. For "pay as you go" schemes, clearly certain requirements, such as those relating to investment that would apply to occupational schemes established on a trust-based, funded model, would not be relevant. But other requirements, such as those relating to the provision of information to members and dispute resolution procedures and those where the Government expect them to apply to the new public service scheme created under Clause 16, will be relevant. The second substantive issue raised by Amendment 49 is the administration of the new scheme. Subsection (7) provides for that to be delegated by the Secretary of State. The Government are in discussion with the trustees on the future administration arrangements for the new scheme and on how these might best be co-ordinated with those of the company-backed scheme with which members are familiar. As the process of consultation with the trustees has not yet been concluded, no final decision has been made on administrative options, but these could include, for example, initially contracting administration of the new scheme directly to the existing RMPP administrators. In this respect, the Government are well aware of the importance of close co-ordination with the arrangements for the existing scheme and for continuity for scheme members. They are also aware of the importance of a responsible administration of the scheme that is effective in responding to members’ queries. The proposal in Amendment 49 to impose a particular administrative structure would, in the Government’s view, be unhelpful in achieving these outcomes. It would raise additional questions regarding co-ordination with the existing RMPP administration. By forcing a transition away from the existing structure, the amendment would increase risks to members. I hope that I have dealt with the points raised by the amendments. I should stress that the fund envisaged by Clause 20 is not a funded pension scheme; it is simply a mechanism by which the assets that would be transferred to the Government under these arrangements are held, managed and disposed of in due course, and the proceeds will go into the Consolidated Fund. In light of my explanation on the issues raised by the amendments, I hope that my noble friend will consider withdrawing his amendment.