HC Deb 07 June 2004 vol 422 cc10-4
6. Mr. David Amess (Southend, West) (Con)

If he will make a statement on the decision to offer compensation to those members of occupational pension schemes who will not be covered by the proposed pension protection fund. [177316]

The Secretary of State for Work and Pensions (Mr. Andrew Smith)

I dare say that the hon. Gentleman is aware that the Government have amended the Pensions Bill to introduce a financial assistance scheme for those workers who lost out on their defined-benefit occupational pensions prior to the introduction of the pension protection fund. Further details of the scheme, including who will be eligible and the level of assistance to be provided, will be developed through consultation with stakeholders such as pension scheme trustees, trades unions and business representatives

Mr. Amess

Is not the Secretary of State disappointed by the reaction to his announcement in Southend, West and throughout the country? Does he recognise that his announcement does not address the serious scale of the problem? Will he use the unclaimed assets in banks and building societies so that the general public, who have been so badly affected, can receive a decent amount of money?

Mr. Smith

In terms of reaction, Derek Simpson of Amicus said: This is great news for our members whose pensions were cruelly snatched away when their companies went bust. Digby Jones of the Confederation of British Industry said: We are delighted that government has responded to calls for action … The amounts the government is suggesting are not enormous but the impact on the lives of those individuals affected will be huge. That is as positive as reaction can get.

Mr. Frank Field (Birkenhead) (Lab)

May I welcome the Government's announcement of a lifeboat operation? May I press the Secretary of State further, however, on the distinction that some Ministers are making between those who have lost their pensions because of an involuntary wind-up through bankruptcy and those who have lost all or part of their pensions because their firm has voluntarily wound up a pension scheme? For those involved, the loss of a pension, for whatever cause, has exactly the same effect. What is the Secretary of State's thinking on whether those who have lost all or part of their pensions because a scheme has been voluntarily wound up will be treated equally to the others?

Mr. Smith

I accept the force of my right hon. Friend's concern, but he will be aware, as others are, that as we have considered these important issues in recent months, I have been careful on each and every occasion to say that where a boundary is drawn around those eligible for assistance, that boundary is bound to be difficult and some people are bound to fall on the wrong side of it. The thrust of the campaign expressing concerns was about insolvent wind-ups, as has been reflected in the statements made by me and my ministerial colleagues. We have made it clear that as we bring the scheme forward and engage with stakeholders and expert groups in defining eligibility conditions, we shall listen to everyone who has representations to make.

Mr. Steve Webb (Northavon) (LD)

I welcome the Government's movement on this issue, but does the Secretary of State accept that a hardship fund is not enough? Many workers were not warned that their pensions would be at risk if their employer became insolvent. Indeed, it is worse than that: Government literature from the Financial Services Authority and from the Minister's Department said that pensions from companies were guaranteed. If workers had known that their pensions would be at risk if their employer became insolvent, they could, close to retirement, have got the money out to save their pensions, especially if their employer looked risky. But no one told them so.

Does the Minister accept that if a personal pension salesman did not tell people about the risks, he would be done for mis-selling? Are not the Government guilty of mis-selling occupational pensions?

Mr. Smith

Again, I accept the strong feelings of injustice and anger that members of these schemes will have expressed, and which the hon. Gentleman's remarks partly reflect. However, I have to say that there is not a legal liability here, so talk of compensation in the terms expressed by the hon. Gentleman is not appropriate. I felt—as did hon. Members on both sides of the House—that, because of these workers' plight, it was right to do something about it. That is why we announced the scheme and why we pledged £400 million, plus such help as could be obtained from the industry. It is not an insignificant sum and it will make a real difference to those affected. The hon. Gentleman should be warmer in his welcome for it.

John Robertson (Glasgow, Anniesland) (Lab)

My right hon. Friend should be congratulated on the work that he did with the PPF and on supplying the £400 million. However, the criteria governing who does and who does not receive the money have to be simple and clear. Does he agree with that?

Mr. Smith

I thank my hon. Friend for his welcome and kind remarks. Yes, I agree that we must make it as simple and clear as possible, though bitter experience teaches us that little in the field of occupational pensions is quite as simple or straightforward as we would like. In terms of the way forward, we have clearly set out how we intend to proceed. We are already engaging key partners—both stakeholders and expert groups—in consultation on the scheme's development. By the end of this month we will lay a report on the scope of the problem before the House. By the end of November, we will start consulting on regulations. We are working towards the legislation being in place for spring next year, so we are moving as quickly as we can.

Mr. David Willetts (Havant) (Con)

Can the Secretary of State assure the House that any payments that victims of pension wind-ups receive from the Government's compensation scheme will not lead to a reduction in means-tested benefits?

Mr. Smith

I am not going to give a blanket assurance on that, but our aim is certainly to try to ensure that people will not be worse off as a consequence of having received this help than they would otherwise have been.

Mr. Willetts

May I press the Secretary of State a little more on that? As we know from a figure that he gave to the House when answering one of my questions in a debate, 60,000 people are affected. We have heard about a scheme that provides £20 million a year—about £400 million in total. That amounts to about £7,000 per person affected, which might be worth £350 a year—a very small sum compared with the size of the losses that many constituents of Members on both sides of the House are facing. It would add insult to injury if those people were then told that they would have reductions in their means-tested benefits because of the Government's assistance. I very much hope that. the Secretary of State will consider the matter further and give the House an assurance that there will not be a loss of means-tested benefits.

Mr. Smith

Of course we will be looking very carefully into all those aspects and their impact on individuals. I would not want to accept—and I would not want the record to show that I had implicitly accepted—the basis of the hon. Gentleman's calculations, by which I mean neither the average amount nor the means by which he arrived at it. The precise means by which help will be provided—and, indeed, any additional contributions—will depend on the definition of eligibility for the scheme.

If the hon. Gentleman thought for a moment about the interaction with the pension credit system, he would realise that if people had the occupational pension that they had previously expected, it might well have taken them out of eligibility for assistance from the pension credit. In those circumstances, and to the extent that that credit is replaced, it would be illogical—and, indeed, unfair to those who were not in the scheme—if no account were taken of it.

Mr. George Foulkes (Carrick. Cumnock and Doon Valley) (Lab/Co-op)

Is my right hon. Friend aware that I am astonished at the churlishness of the Tories, and especially the hon. Member for Southend, West (Mr. Amess) in his attack on my right hon. Friend? My constituents believe that he and the Minister of State did an excellent job arguing for the scheme, obtaining the £400 million and getting the Prime Minister to intervene. Can my right hon. Friend give us the further assurance that my right hon. Friend the Member for Birkenhead (Mr. Field) was seeking—that in implementing the scheme, he w ill be as flexible as possible and will ensure that no one is excluded on a technicality?

Mr. Smith

As I said, we will certainly be looking very carefully at the views that have been expressed. There is no point in misleading people on that. However a scheme is defined, and whatever the eligibility conditions, there are bound to be some people who will be disappointed. That has been in the nature of things since the beginning. It is important, as I have said all along, that we can look people straight in the eye and that they know that we have been straight with them. As to the churlishness of the Conservatives, I am never surprised at how churlish they are, any more than I am surprised by the loyalty and enthusiasm of my right hon. Friend, which is greatly appreciated.

Andrew Selous (South-West Bedfordshire) (Con)

Will the Secretary of State now answer the excellent question asked by my hon. Friend the Member for Southend, West (Mr. Amess) about the unclaimed assets fund? The right hon. Gentleman is aware that people will receive only between £350 and £500 a year. Why cannot a claim be made on the unclaimed assets fund to help those 60,000 people?

Mr. Smith

There is no unclaimed assets fund on which to make a claim. If there were, and if funds were available to help with the scheme, it would be very welcome.

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