HYBRID OCCUPATIONAL PENSION SCHEMES

HC Deb 04 July 1995 vol 263 cc146-7

`.—(1) In spite of anything in sections 9 and 12 of the Pension Schemes Act 1993 (requirements for certification and determination of basis on which scheme is contracted-out), the Secretary of State may by regulations provide, where the pensions provided by an occupational pension scheme include both—

1. (a) such pensions that, if the scheme provided only those pensions, it would satisfy section 9(2) of that Act, and
2. (b) such other pensions that, if the scheme provided only those other pensions, it would satisfy section 9(3) of that Act, for Part III of that Act to have effect as if the scheme were two separate schemes providing, respectively, the pensions referred to in paragraphs (a) and (b)

(2) Regulations made by the Secretary of State may, in connection with any provision made by virtue of subsection (1), make such modifications of the following Acts, and the instruments made or having effect as if made under them, as appear to the Secretary of State desirable: the Social Security Contributions and Benefits Act 1992, the Pension Schemes Act 1993 and Part I of this Ace'.—[Mr. Arbuthnot.]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for Social Security (Mr. James Arbuthnot)

I beg to move, That the clause be read a Second time.

Madam Speaker

With this, it will be convenient to discuss also Government amendments Nos. 82 and 83.

Mr. Arbuthnot

New clause 22 will allow occupational pension schemes to contract out on the basis that they hold contracted-out benefits accrued on both a defined benefit and defined contribution basis. My hon. Friend the Member for Beaconsfield (Mr. Smith) tabled an amendment in Committee on this issue. I undertook to consider it with other representations, notably from the occupational pensions joint working group, which has raised related issues.

The new clause and amendments that I have tabled will increase the flexibility for hybrid occupational pension schemes to contract out, and meet in full the concerns expressed by my hon. Friend and the occupational pensions joint working group. I commend them to the House.

Mr. Adam Ingram (East Kilbride)

I wish to point out that it is a strangely worded new clause. It starts out with the phrase: In spite of anything in sections 9 and 12". That seems to me to be unparliamentary language. I should have thought that something more appropriate could have been put in its place. But that is not the point that I wish to make.

In Committee, when the issue was considered, the Minister said: Were we to make a change to the current arrangements, we should need to be sure that we could safeguard the position of individuals. For example, we should almost certainly need to introduce new rules to ensure that the value of accrued GMP rights could not be eroded under any of the proposed new arrangements. It would be necessary to consider, in the light of those new rules, whether the change still seemed desirable."—[Official Report, Standing Committee D, 15 June 1995; c. 666.] I simply ask the Minister to give an assurance that that matter has been taken into account and that the guarantee will apply—that there will be no loss to accrued guaranteed minimum pension rights.

I also raise a point on the contracting out arrangements that will apply to differing schemes. Would it not be appropriate to give a guarantee that the better arrangements should apply in those circumstances, because, where two different schemes are in operation, the less favourable arrangement could apply, which would affect the individuals? It would be helpful if the Minister could explain further the underlying purposes behind the new clause, and deal with the concerns that he himself raised in Committee.

Mr. Arbuthnot

We did consider those points, and we are confident that the protection that the hon. Gentleman has asked for is there.

The point of the new clause is to provide a helpful flexibility, so that both defined contribution basis schemes and defined benefits schemes can be included within the same scheme. It is not always possible to say which of those would necessarily be better, because they have very different characteristics and benefits available at the end.

So the answer to the first point is yes, but on the second point, it would not really be possible to do that.

Question put and agreed to.

Clause read a Second time, and added to the Bill.