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Postal Services Bill [HL]

Part 2 of the Bill sets out the Government’s proposals to address the deficit in the Royal Mail pension plan to facilitate a strategic partnership. As a result of this support, Royal Mail would be in a much better position to act as a sponsoring employer for the RMPP. In addition, the use of a clear cut-off date, which is intended to be 16 December 2008, allows the Government to provide certainty for members on the effect of the Government’s proposals, and to define and limit the liabilities for which the Government, and ultimately the taxpayer, will take responsibility. On our previous day in Committee on Part 2, we covered the extensive protections for members that are at the core of the Government’s proposals. These protections are set out in Clause 19 and it may be helpful if I briefly go over them. The first layer of protection in subsection (2) limits the Secretary of State’s key powers in Clause 16 to establish a new scheme or to transfer rights to a new scheme, in Clause 17 to divide the RMPP into sections, or in Clause 18 to amend the RMPP. The Secretary of State must ensure that in exercising these powers he does not negatively impact the pension position of members of the Royal Mail pension plan. The second layer of protection for members is in subsection (6). This limits the Government’s ability to amend the new public service scheme to protect the accrued benefits of members that have been transferred across from the RMPP. As set out in our policy document, the RMPP will be in a much improved funding position as a result of the Government’s proposals in Part 2. In addition, existing pension legislation provides a number of protections for members of an occupational pension plan that will also apply to the RMPP in the future. These include: the statutory priority order for the distribution of assets, as set out in Section 73 of the Pensions Act 1995; the statutory debt, which is calculated on a buyout basis, which falls on an employer under Section 75 of the Pensions Act 1995 if a winding-up is triggered; and the creation of the Pensions Regulator and the Pension Protection Fund in the Pensions Act 2004. Under this amendment, if the company and trustees decide to wind up the scheme, the Government would have the power to make regulations to secure that no member is placed in a worse position. However—I think that this is the point that the noble Lord, Lord De Mauley, raised—there is no reason to conclude that by achieving a properly funded RMPP, which is the right size for the business, it will lead to the winding up of the scheme. That is especially the case given the recent reforms to the RMPP which began to take effect from April 2008. These reforms, which included the closure of the scheme to new members, were designed to improve the affordability of the RMPP going forward. Under the RMPP’s scheme rules, the company has no express power—I repeat, no express power—to wind up the scheme and would need the agreement of the RMPP trustees to amend the rules to do so. This agreement would also be required for any modification to the basis of accrual of benefits by members. Indeed, removing the cost of paying off the historic deficit should in fact significantly increase the viability of the scheme, not the reverse. The proposed amendment would also give the Government power to take steps to preserve the pensions rights for members who transfer employers in certain circumstances, so that they would retain the right to belong to the RMPP or to a scheme that provides the same benefits as the RMPP. This goes well beyond what the Government have set out in their policy statement and could provide members with a new right that they do not currently have. In summary, the proposed amendment would give power to the Government to constrain the future pension arrangements made by the Royal Mail Group Ltd. We believe that decisions on future pensions provisions are rightfully an operational matter for the Royal Mail board and therefore we do not think that this amendment is appropriate. My noble friend prayed in aid precedents; namely, the electricity scheme and the rail industry scheme. In relation to the latter, the protection provided to employees of the rail industry privatisation related to circumstances which I suggest are very different. In that case, the historic BR pension scheme was abolished and replaced with a new industry-wide scheme. In addition, employees were transferred from British Rail to a new employer—one of the newly created private sector rail companies. Neither of those changes applies here. The Government do not propose any changes to the RMPP and Royal Mail will continue to be the sponsoring employer of the scheme, together with Post Office Ltd. Both will remain under public ownership—Post Office Ltd will remain in 100 per cent public ownership—as enshrined in Part 1. I hope that that provides reassurance to my noble friend and that we have made it clear that the Government are underwriting the accrued rights, as well as scaling down the scheme for RMPP going forward, which should make it much more viable. I should stress again that the sponsoring company, which I would suggest could not be overly influenced by a minority partner in any event, does not have the power to wind up the scheme. It could do so only if changes were introduced into the arrangements, which would require the agreement of the RMPP trustees, as well as RMG. I should remind my noble friend that the trustee board has an equal number of company-nominated and member-nominated trustees, plus an independent chairman. The trustee board is not controlled by RMG. I hope that that provides sufficient assurance to my noble friend to enable him to withdraw the amendment. The noble Lord, Lord De Mauley, asked whether there were any circumstances in which a company might act in such a way as effectively to transfer the employment arrangements for an individual and therefore take them out of the scheme. Technically, that could happen at the moment, although there is no increased risk from the proposed arrangements. Clearly, if an employer sought to do that there would be substantial issues around employer relationships.