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Postal Services Bill [HL]

My Lords, the Government are proposing this amendment in response to an amendment tabled by my noble friend Lord Clarke of Hampstead during discussions of the Bill in Committee. It clarifies on the face of the Bill the proposed treatment of benefits built up within the Royal Mail pension plan through additional voluntary contributions or AVCs. As I explained during that earlier debate, members of the scheme can at present make additional contributions in order to increase their provision for retirement. They can do this either through contributions for the purchase of "added years" of reckonable service, which are invested with the Royal Mail pension plan’s main assets, or by investing in a range of pooled investment vehicles as part of a "money purchase" arrangement, separately from the main assets of the scheme. The amendment reflects the Government’s policy intention as I set out in responding to my noble friend’s earlier amendment. Where AVCs have been paid prior to the qualifying time for the purchase of added years, it is right that the additional service already bought before the qualifying time should transfer to government with the other qualifying accrued rights. That is because the purchase of "added years" relates closely to the defined benefit provisions in the main scheme, and carries many of the same risks in terms of longevity and investment returns. In contrast, the investments related to money purchase benefits do not have these same characteristics. The assets falling into this category—which totalled £84 million in respect of additional voluntary contributions as at March 2008—are held separately from the main assets of the scheme. The intention, reflected in the amendment, is that they should not be included within the scope of the qualifying accrued rights to be transferred to the new public service scheme, and should therefore remain with the Royal Mail pension plan, as is the case at present. In addition to money purchase AVC-type arrangements within the RMPP, there is a small number of other categories of money purchase benefit that may apply to a limited number of members. These include transfers in from other schemes, where these include benefits provided on a money purchase basis, and special employer contributions for certain members of the scheme. In these cases, the Government consider that such money purchase benefits should be treated consistently, according to the principles I have set out in relation to AVCs. This is why the amendment refers to money purchase benefits in general. For members entitled to money purchase benefits, this amendment means that the responsibility for paying those benefits will continue to rest with the administrators of the Royal Mail Pension Plan, as at present. Given that the Government are already planning for the close co-ordination of the administration of the new public service scheme with that of the Royal Mail Pension Plan, we are satisfied that the effect of the change should be as seamless as possible for members. I stress that members’ total benefits, comprising both payments in relation to their core defined benefit entitlements, and money purchase benefits, will not be adversely affected by this amendment, and will continue to be covered by the protection set out in Clause 19. I hope that this explanation is helpful in setting out the purpose of the amendment. I would like to thank my noble friend Lord Clarke for raising the issue originally. I beg to move. Amendment 32 agreed.