HC Deb 18 May 2004 vol 421 cc947-51
John Robertson

I beg to move amendment No. 53, in page 152, leave out lines 43 to 46 and insert 'is certified by the actuary to be broadly comparable to the occupational pension scheme referred to in section 228(1)(c).'.

Madam Deputy Speaker

With this it will be convenient to discuss the following amendments: No. 54, in page 153, line 13, at end insert— ' "actuary" means the actuary appointed by the trustees of the scheme referred to in section 228(1)(c), pursuant to section 47 of the Pensions Act 1995;'.

No. 55, in page 153, line 24, at end insert 'but in the case of contributions payable by the employer shall not be less than the contributions paid by employers into the scheme referred to in section 228(1)(c) and in the case of contributions payable by members shall not be more than the contributions paid by members into the scheme referred to in section 228(1)(c).'.

John Robertson

I begin by offering some criticism of today's debate. We have spent many an hour discussing Government business, yet only 1 hour 50 minutes on amendments tabled by the Opposition and Labour Back Benchers. I know that you look after Back Benchers, Madam Deputy Speaker, and I should point out that we have not had a fair crack of the whip today.

Clause 229 implements the Government's commitment to extending the protection afforded by the Transfer of Undertakings (Protection of Employment) Regulations 1981. The original regulations were drafted in accordance with what was then understood to be the requirements of the acquired rights directive, and they excluded pensions from the requirement to carry over terms and conditions of employment.

The Government's declared objective is very much to be welcomed, but in the event the specific proposals have failed to provide adequate protection for the great majority of members of occupational pension schemes. The Government appear to have more regard for the need for business flexibility than for genuine and worthwhile protection of employees on the transfer of an undertaking.

Clause 229 specifies the pension provision that the transferee or receiving employers must make for employees in TUPE transfers where the conditions in clause 203 apply. Specifically, the employer must offer either an occupational pension scheme or a stakeholder pension scheme. Occupational pension schemes that are not on a money purchase basis—typically, final pay schemes—must satisfy either the reference scheme test for contracting-out purposes or an alternative standard to be prescribed in regulations.

In the case of the money purchase scheme, occupational scheme or stakeholder scheme, the receiving employer must make relevant contributions, which are to be defined in regulations. The explanatory notes say that that means that the regulations will specify that the receiving employer must match the employee's contributions up to a maximum of 6 per cent.

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Clause 229 also allows for variation by agreement between the transferee employer and the employee of a contractual term that imposes the requirements. There are many problems for defined benefit scheme members and for money purchase scheme members. I would like to provide much more detail, but I appreciate that other hon. Members want to raise other matters. TUPE is, however, very important and the amendments propose an alternative approach.

The Government's approach is fundamentally flawed, in my opinion, in trying to set a common standard that all receiving employers have to meet, while also trying to avoid placing a burden on some employers. The two standards have been set at levels that mean, inevitably, that the majority of occupational pension scheme members will lose out. What is needed, instead, is a simple requirement that the receiving employer should provide benefits that are broadly compatible with, or of broadly equal value to, the benefits provided by the original scheme. It may be argued that the like-for-like requirement is impracticable, but the public sector has successfully operated requirements of a broadly compatible sort for a number of years, and there seems no good reason why the same should not be extended to the private sector.

An important aspect of the system operated in the public sector is set out in the Cabinet Office document, "Staff Transfers in the Public Sector—Statement of Practice". For any anoraks, there is a websitewww.cabinet-office.gov.uk/civilservice/2000/tupe/stafftransfers.pdf and, in case anyone did not get that, it will be inHansard tomorrow: buy your copy at the local Vote Office. A comparison is made of benefits and member contributions and it is made clear that that is the correct approach. In my opinion, though, it is ignored in the Bill. I ask the Minister to reflect on the amendments and to understand that if something is good enough for the civil service, it is good enough for the private service.

Mr. Tynan

I want to be brief in order to leave the Minister plenty of time to answer on the important issue of TUPE. We moved a probing amendment in Committee, but I want to go back to 1981 when the transfer of undertakings provisions took effect. One of the major concerns then was the fact that pensions were not included. It came to fruition when we had private finance initiative projects, and the contracting-out of cleaning services, particularly for hospitals, meant that the poorest paid people had lost their pension scheme. Considerable pressure was exerted by Unison at the time to try to reach some accord on how to move forward and cure that anomaly. To the Government's credit, they recognised the need to protect the poorest paid people in the NHS. The public sector, which we are talking about now, had the poorest people. Fair enough. As my hon. Friend the Member for Glasgow, Anniesland (John Robertson) said, if something is good enough for the public sector, why should it not apply to the private sector? As I said, we recognised that the lowest paid workers were suffering the most. Under those circumstances, why should the same not apply to the private sector?

The poorest people often have major problems with their pension provision, although some problems were resolved when the TUPE regulations applicable to private sector employees were transferred to employees in the public sector in the early 1990s. I hope that my hon. Friend the Minister for Pensions will look at the question of TUPE very closely. He gave some commitments in Standing Committee, but it is important for us to get on the record the Government's position on this matter. I hope that the amendment receives a positive response.

Malcolm Wicks

Clauses 228 and 229 introduce a minimum level of pension protection where a business transfer occurs and the so-called TUPE regulations apply. This new requirement means that, for the first time, transferee employers will have to offer transferred employees a minimum standard of pension provision, where employees had access to an occupational pension scheme with employer contributions pre-transfer.

I understand the argument made by my two hon. Friends the Members for Glasgow, Anniesland (John Robertson) and for Hamilton, South (Mr. Tynan), but I hope that the considerable progress being made with the Bill will be acknowledged.

Clause 229 sets out the types of pension provision that a transferee employer will be contractually bound to make available to transferred employees when a relevant transfer takes place. These are an occupational salary-related scheme of a requisite standard, an occupational money purchase pension scheme, or a stakeholder pension scheme. Where the transferee employer opts to provide a salary-related occupational pension, it must meet either the reference scheme test or a similar alternative standard that will be prescribed in regulations. Where the new employer opts to provide a money purchase occupational pension scheme or a stakeholder pension, he will be required to match employees' contributions up to 6 per cent, although either party may contribute more at their own discretion.

Amendments Nos. 53 and 54 would require that, rather than meeting those statutory standards, the scheme offered should be broadly comparable to the previous employer's scheme. The comparability would have to be certified by the actuary of the previous scheme, regardless of whether or not that scheme was salary related. Amendment No. 55 stipulates that the contribution to be paid by the new employer should be no less than that paid by the old employer, and that contributions payable by the employee should be no more than were paid into the old scheme.

First, I should like to deal with the question of comparing different types of scheme. Extensive consultation took place on our proposals, and on earlier proposals from the Department of Trade and Industry, for pension provision following a business transfer. Those consultations, helped to identify the genuine obstacles in comparing different pension schemes. There are real difficulties for actuaries in attempting comparisons of contribution levels in money purchase and salary-related occupational pension schemes.

In salary-related schemes, the level of employer contributions at any point in time will depend on a number of factors, including the funding position and the age profile of the overall membership. In short, there is no straightforward read-across from what an employer could cont Mute to a salary-related scheme to what an employer should contribute to a money purchase, occupational or stakeholder scheme.

Our approach—a simple, stand-alone requirement on all employers—means that there is no incentive on the transferor employer to reduce the level of pension contributions to make the business more attractive to potential purchasers.

A requirement to provide a broadly comparable scheme of the same type could prevent a transferee employer from placing transferred employees into the existing pension scheme, and oblige that employer to run two or more schemes in parallel. That is precisely the sort of extra, multiple requirement that encourages employers to pull out of pension provision altogether. We should remember that the new legislation to protect employees involved ill business transfers cannot, and is not intended to, prevent the employer from making changes to the pension scheme in the future.

In Committee, my hon. Friend the Member for Cardiff, West (Mr. Brennan) asked why we do not provide full protection for the value of the pension scheme after a transfer. The reason is that we want to avoid an approach that could require transferee employers to have to set up and fund an occupational final salary scheme from scratch. That could act to prevent employers from buying businesses, or parts of businesses, where the employees had occupational pension provision.

That would not be in anyone's interest: transfers can often save businesses, where the alternative for employees is redundancy. Nor is it sensible to increase costs so much that employers are encouraged to withdraw pension provision. The approach in the clause sets a simple minimum standard and allows employers to determine whether and how they go beyond the statutory standard, depending on their needs and priorities. For the first time, it will ensure that employees benefit from a statutory level of pension protection after transfer and stop transfers being used as an excuse to scrap pension contributions.

I appreciate the arguments that my colleagues have made. We need to keep the new arrangements under review, and I promise that the Government will do that. This is a social advance and I hope that that will be recognised. Therefore, I ask my hon. Friend to consider withdrawing his amendment.

John Robertson

I thank my hon. Friend the Minister for his answers. While he may not have convinced me completely, he has convinced me enough not to cause him any undue hassle at this time or night. However, I hope that those in the other place are taking note of what has been said here today. There is much more mileage in this argument. TUPE is far more important than the 10 or 15 minutes that we have given it in this Report stage, and I hope that those in the other place have listened to what has been said and will take on board the points that I have made. With that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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