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Postal Services Bill [HL]

My Lords, as my noble friend Lord Clarke has explained, this group of amendments is also focused on the member protection set out in Part 2. Amendment 50 would remove subsections (4) and (5) and it may be helpful if I recap the purpose of these subsections and their importance in relation to Part 2 of the Bill. Subsection (4) 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. It is clearly important that the Government act lawfully in setting up the new government scheme. 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. We expect any such issues covered by subsection (4) 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 should say to my noble friend that it is nothing more sinister than just making sure at a technical level. It would not be until all the fine detail was worked through technically that one would know that there was proper compliance. The purpose of subsection (5) is to make 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, not under a trust deed. Nor is it designed to constrain the future operation of the ongoing Royal Mail plan, which is a matter for the company and RMPP trustees going forward and is already governed by existing pensions legislation. Removing subsection (5) would constrain how the new government scheme could 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 a funded scheme. Accordingly, I ask my noble friend not to press that amendment. Amendment 51 relates to Clause 19(6), which restricts the Secretary of State’s ability to make changes to the new public service scheme. Under the proposed amendment, this restriction would be amended and this would seriously compromise the member protection measures included in Part 2. The proposed amendment applies the provision to the RMPP rather than to the new scheme. As I covered in the last group of proposed amendments, there are already a number of restrictions on the Secretary of State’s ability to make changes to the RMPP. Amendments made to the RMPP other than under Part 2—that is, amendments made using the scheme amendment power—will continue to be subject to restrictions in the scheme rules and in pensions legislation more generally, in particular in Section 67 of the Pensions Act 1995. In summary, subsection (6) is a critical element of the member protection set out in Clause 19 and specifically limits the powers of the Secretary of State in relation to the new scheme. Given this and the constraints already in place on any changes to the RMPP, either under Part 2 of the Bill or by the sponsoring employer going forward, I would ask my noble friend to withdraw the amendment. It might be helpful to put on the record an example of where the tax issues might impact on the considerations that we need to undertake. Under the Finance Act 2004, certain payments provided for under pension schemes became unauthorised payments and subject to tax penalties. These included, for example, the payment of more than 25 per cent of a member’s pension benefit as a cash lump sum and paying a pension to a member before age 55. However, the Finance Act 2004 contained transitional relief provisions giving trustees the discretion to continue to make such payments to or in respect of members to whom those provisions apply as at 6 April 2006. The transitional relief period continues until April 2011, at which point such payments will become unauthorised payments if made to members. Therefore, by virtue of the exercise of the power under Clause 22 of the Bill, the Finance Act 2004 will apply to the new scheme. However, as the new scheme was not in existence on 6 April 2006, the transitional relief provisions will not apply to it. If payments such as those set out above are mirrored under the new scheme, they will be unauthorised payments and disadvantageous tax consequences will apply for members. It may therefore be necessary for the new scheme benefits to differ slightly from those under the RMPP to the extent necessary to avoid being unauthorised payments and subject to a tax penalty. This is one of the specific reasons why Clause 19(4) is considered necessary. I put that on the record as a concrete example of the kind of situation it is intended to cover.