MINOR AND CONSEQUENTIAL AMENDMENTS (Hansard, 23 July 1986)

§ Mr. Major
I beg to move, That this House doth agree with the Lords in the said amendment.

§ Mr. Deputy Speaker
With this it will be convenient to consider the following Lords amendments: No. 136, in page 135, line 30, leave out (1)(a) (contracted-out rates of benefit) and insert (contracted-out rates of benefit)— (a) in subsection (1)(a). No. 137, in page 135, line 33, at end insert— (b) in subsection (2)—

(i) after the words "this section" there shall be inserted the words "and sections 16(2B), 28(7A) and 59(1A) of the principal Act"; and

(ii) at the end there shall be added the words "or if as a result of a transfer payment or transfer under regulations made by virtue of section 38 below he is no longer entitled to guaranteed minimum pensions under the scheme by which the transfer payment or transfer is made and has not as a result of the transfer payment or transfer becomes entitled to guaranteed minimum pensions under the scheme to which the transfer payment or transfer is made.""

No. 138, in page 136, line 11, leave out paragraph 17 and insert— 17. The following subsection shall be substituted for section 38(1) (transfer of accrued rights)— (1) Regulations may prescribe circumstances in which and conditions subject to which—

(a) there may be made by one occupational pension scheme to another or by an occupational pension scheme to a personal pension scheme a transfer of or a transfer payment in respect of—

(i) an earner's accrued rights to guaranteed minimum pensions under a contracted-out scheme;

(ii) an earner's accrued rights to pensions under an occupational pension scheme which is not contracted-out, to the extent that those rights derive from his accrued rights to guaranteed minimum pensions under a contracted-out scheme; or
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(iii) the liability for the payment of guaranteed minimum pensions to or in respect of any person who has become entitled to them;

(b) there may be made to an occupational pension scheme or a personal pension scheme a transfer of or a transfer payment in respect of an earner's accrued rights to guaranteed minimum pensions which are appropriately secured for the purposes of section 52C below."

No. 139, in page 138, line 17, leave out paragraph 25 and insert— 25.—(1) Section 52C (cases where scheme's liability is discharged) shall have effect and shall be deemed always to have had effect as if the following subsections were substituted for subsections (1) to (3)— (1) A transaction to which this section applies discharges the trustees or managers of an occupational pension scheme from their liability to provide for or in respect of any person either the requisite benefits or short service benefit or any alternative to short service benefit—

(a) if it is carried out not earlier than the time when that person's pensionable service terminates; and

(b) if and to the extent that it results in—

(i) the requisite benefits; or

(ii) short service benefit or an alternative to short service benefit, for or in respect of that person being appropriately secured; and

(c) in a case where the transaction takes place on or after 1st January 1986, if and to the extent that the requirements set out in anyone of paragraphs (a), (b) and (c) of subsection (5) below are satisfied.

(2) This section applies to the following transactions—

(a) the taking out or the transfer of the benefit of a policy of insurance or a number of such policies;

(b) the entry into or the transfer of the benefit of an annuity contract or a number of such contracts.".

(2) Subsection (5) of that section shall have effect and shall be deemed always to have had effect as if "(1)" were substituted for "(2)(b)". (3) In relation to transactions which take place after the commencement of section 8 above section 52C(1) of the Social Security Pensions Act 1975 shall have effect with the substitution of the words "guaranteed minimum pensions" for the words "the requisite benefits", in both places where they occur. 25A.—(1) Subsection (1) of section 52D (supplementary provisions) shall have effect and shall be deemed always to have had effect— (a) as if the following paragraph were substituted for paragraph (b)— ( ) "(b) either—

(i)) the transaction wholly or partly securing them was carried out before 1st January 1986 and discharged the trustees or managers of the scheme as mentioned in subsection (1) of that section; or

(ii) it is carried out on or after that date without any of the requirements specified in subsection (5)(a) to (c) of that section being satisfied in relation to it and the scheme has been wound up;"; and

(b) as if for the words from "entitled" to "which" there were substituted the words "only entitled to such part (if any) of his or her guaranteed minimum pension as". (2) In that subsection after the words "purposes or there shall be inserted the words "sections 16(2B), 28(7A) and 59(1A) of the principal Act and". 25B. The following definition shall be inserted after the definition of "occupational pension scheme" in section 66(1)— "personal pension scheme" has the meaning assigned to it by section 80(1) of the Social Security Act 1986;".

§ Mr. Major
Although these amendments are technical, they are important for the smooth operation of the legislation in practice.
Amendment No. 135 gives authority to extend the existing powers of the Occupational Pensions Board to modify the rules of an occupational pension scheme. That would be used where those rules would otherwise prevent the scheme from complying with a statutory requirement or exercising an option available under the law — for example, one of the permitted options for reducing surplus funds as proposed under the Finance Bill.
Amendments Nos. 136, 137 and 138 substitute a revised version of section 38(1) in the Social Security Pensions Act 1975. This provides for the regulations about transfers of guaranteed minimum pensions. A central feature of the new pension arrangements will be that contracted-out rights will be capable of maximum transferability, when an employee changes his job or alters his pension arrangements. We have made it clear that existing schemes will not be required to provide transfer values of rights built up before the new arrangements begin to people who opt out of the scheme while continuing in the job. But where the right to a transfer value is available, we do not want to put unnecessary restrictions on what can be done with any GMP element which it may include. Where the individual wants to — but not of course otherwise—it seems reasonable that he should be allowed to apply the value of the GMP to buying "protected rights" in a personal pension or money purchase contracted-out scheme. These amendments enable regulations to be made about that. The details will be included in the consultative proposals which we will be issuing later this year.
Amendment No. 139 has been made in response to requests from the pensions practitioners. It clarifies that section 52C of the Social Security Pensions Act 1975 provides a discharge for scheme trustees even in cases where the benefits secured by an insurance policy or annuity contract arc not identical to those which would have been provided by the scheme. The revised provision will have effect from the date that section 52C was operative— 1 January 1986 — so that pension schemes can have confidence in the legal soundness of their arrangements to date.

§ Mr. Kirkwood
I wish to speak briefly to amendment No. 139. If my understanding is wrong, perhaps the Minister will put me right this evening or perhaps, more appropriately, drop me a note about it.
As I understand the amendment, we have introduced into paragraph 26 of schedule 10 a retrospective amendment to section 52C of the Social Security Act 1985. That was one of several amendments in a package taken in another place. It included amendments to the regulations which are designed to remove the present difficulty for scheme trustees and insurance companies in implementing the buying-out requirements under the Act. I understand and appreciate that.
However, although the amendment is fully retrospective to 1 January 1986, the Department is not taking power to make retrospective the related amendments to the regulations. If that is true, and if my understanding is correct, the present impasse on buying-out will not be dealt with. It will continue until all the amendments are effective. I suggest that paragraph 26 of schedule 10 should be looked at again with a view to an extension to provide that regulations made within six months of the 396 commencement date of this paragraph under the powers in section 52C or paragraphs 13 and 20 of schedule 1A to the Social Security Pensions Act 1975 should also be retrospective to 1 January 1986. That would enable buying-out to proceed without any further delay once the proposed content of the amending regulations is known.

§ Mr. Major
The hon. Gentleman raises an interesting and intriguing point to which I am sure there is a satisfactory answer. I shall raise precisely that interesting and intriguing point over the next day or so and write to the hon. Gentleman with a definitive reply.