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Postal Services Bill [HL]

I will again do all I can to try to make sure that on the record we give the assurances that I believe are embedded in the legislation. We will do all we can, both in these proceedings and, if necessary, at meetings outside to lift some of the fog that my noble friend may feel is still present around these proceedings. I say to my noble friend Lord Hoyle that protection is very much at the heart of what we are proposing in Part 2. Amendments 73 and 74 concern subsection (1) of Clause 21. As we have discussed, subsection (1) requires that the ratio of assets to liabilities in the RMPP is no worse immediately after the transfer of assets and liabilities than immediately before it. The restriction applies to all sections of the RMPP, including the new sections for Post Office employees and Royal Mail Group employees. This represents an important legal safeguard for the trustees and for members with accrued rights remaining in the RMPP. Amendment 73—I accept it is a probing amendment—removes subsection (1) and would remove this protection. It could allow the Secretary of State to leave the RMPP in a relatively worse funding position than at present. Not only could this be detrimental to the members of the RMPP, it would also present a barrier to partnership because of the additional risk that it would impose on any potential partner in Royal Mail Group. Therefore, the Government cannot accept the amendment. Amendment 74 aims to require that a transfer of assets to Government may only be made if the RMPP is left fully funded on a buyout basis. That is the most cautious basis for funding pension liabilities, often used to assess the cost of winding up a pension scheme. It would require that following a transfer of assets and liabilities, sufficient assets are left in the RMPP to fund the purchase of insurance company annuities covering all members’ benefits that remain with the RMPP. Amendment 76 is consequential on Amendment 74 and clarifies that this does not imply an intention for the scheme to be wound up. I certainly accept that. In dealing with these amendments, we should bear in mind that both the Royal Mail pension plan and its sponsoring employers will be, as we discussed a moment ago, in a significantly improved position by virtue of the measures in the Bill. It would be perverse to argue in this context that the trustees somehow need full funding on a buyout basis to protect members going forward. Nor is it desirable to specify a particular funding basis for the purposes of Clause 21. The Government have stated their intention that when transferring assets and liabilities from the Royal Mail pension plan, sufficient assets will be left to cover its liabilities. In calculating those liabilities, the Government will work with the trustees to find an appropriate valuation basis that delivers value for money without putting members’ accrued benefits at risk. The details of the valuation will be set out in secondary legislation. Let me repeat, as I think it addresses the point the noble Lord, Lord De Mauley, raised directly, that the Government intend to leave the RMPP with sufficient assets to cover its liabilities. That will require state aid approval. It is not appropriate, therefore, to include a requirement to that effect in the Bill. Although the Government are confident that it will be possible for state aid approval to be obtained, they cannot pre-judge the Commission’s detailed decision or rule out the possibility of modification to the proposals. That is why the Bill is not written in those terms, but the protection is written in there as I have just outlined. Funding on a buyout basis could involve a large cost to Government and the taxpayer but provide members with little extra protection. It would also—I think my noble friend Lord Clarke identified this—provide an incentive for the company to wind up the scheme, which the Government have no intention of doing. I can confirm in relation to Amendment 76 that, as we discussed earlier, there is no express power in the RMPP rules for the scheme to be wound up. There are, as I have said, state aid implications. The pension proposals, including the value of assets left with the Royal Mail pension plan, will require state aid approval. That is why it is not appropriate to include a requirement on the funding basis in the Bill. Given the difficulties I have mentioned, I hope that the noble Lord, Lord De Mauley, and my noble friend Lord Clarke will not press the amendments, and that I have provided the assurance that I think they are seeking. If I have not, I am very happy to have another go and put something further on the record if that would help.