Occupational Pension Schemes (Hansard, 3 April 1996)

§ Mr. Denham
To ask the Secretary of State for Social Security what priority is to be given under the transitional arrangements applicable to the wind-up of occupational pension schemes which have insufficient assets to meet liabilities in full to(a) refunds of contributions to active members with fewer than two years' pensionable service and (b) increases to pensioners of pensions in payment guaranteed under scheme rules. [23162]

§ Mr. Heald
Draft regulations containing our proposals for the transitional arrangements which will operate for 10 years from April 1997 were issued for consultation on 22 January 1996. The consultation period ended on 4 March. We are considering the comments that we received.
The priority order of liabilities set out in the draft regulations under the transitional arrangements are: (a) any liability attributable to the payment of voluntary contributions; (b) any liability for pensions, excluding increases, where entitlement to payment has arisen; (c) (i) any liability for accrued contracted-out rights in the scheme, which will be the whole of any accrual after April 1997 in a contracted-out scheme, excluding increases and any contribution equivalent premium to buy rights back into the state scheme; or (ii) the return of contributions to members with less than two years pensionable service where that period of service has not given the member any accrued rights under the scheme; (d) any liability for increases to pensions referred to in paragraph (b); (e) any liability for increases to pensions referred to in paragraph (c); (f) any liability for non-contracted out accrued rights together with any increases.

§ Mr. Denham
To ask the Secretary of State for Social Security (1) by what date his Department will make available to(a) employers and (b) occupational pension scheme administrators, the documentation required to be completed in relation to the contracting arrangements under the Pensions Act 1995; [23157]
(2) what advice his Department has issued as to the date by which employers should decide what (a) their future pensions arrangements and (b) their future contracting-out status should be to enable them to comply with the conditions of the new contracting-out provision. [23164]

§ Mr. Heald
The administration of national insurance is the responsibility of Mrs. Faith Boardman, the chief executive of the Contributions Agency. She will write to the hon. Member.
Letter from George Bertram to Mr. John Denham, dated 2 April 1996: As the Chief Executive of the Contributions Agency is away from the office on annual leave. I have responsibility for answering questions about operational matters relating to the Agency and the National Insurance (NI) scheme in her absence. 348W I have been asked to reply to your questions relating to the advice and documentation arrangements for employers and occupational pension scheme administrators under the Pensions Act 1995. In view of the nature of the questions I have combined the response. Guidance on the contracting-out arrangements for employers and occupational pension schemes is currently being prepared and consultation with the pensions industry will commence shortly. The guidance will be available by Autumn 1996 and will include examples of the documentation to be used. New contracting-out arrangements for Contracted-Out Salary Related Schemes come into effect from April 1997, although there will be a transitional period to enable employers to complete the re-election exercise. The Agency will shortly issue information to schemes about the general handling and timetable. Employers' future pension arrangements are a matter for them, they will however need to ensure they take decisions on their contracting-out status in time to comply with this. I hope you will find this reply helpful.

§ Mr. Denham
To ask the Secretary of State for Social Security what evidence he has that there are sufficient designers of pensions information systems software to enable contracted-out schemes to design and test their own software between the date at which his Department makes the detail of such an information system available to employers and occupational scheme administrators and the date of coming into force of the contracting-out provisions of the Pensions Act 1995. [23163]

§ Mr. Heald
The Department of Social Security has consulted pensions interests extensively throughout the process of developing the proposals contained in the Pensions Act 1995 and associated secondary legislation, so the broad structure of the new system is already well-known. The main regulations which impact on scheme administration will be laid before Parliament in the next few weeks; those on the new flexibilities for mixed benefit schemes will follow soon after. The Contributions Agency will shortly release draft guidance on the contracting-out arrangements from 6 April 1997, with the final guidance to be issued in the autumn. The guidance will include specimen forms.
We believe that this gives all concerned enough time to make the arrangements needed for contracting out from April 1997.

§ Mr. Denham
To ask the Secretary of State for Social Security if, following the commencement of the contracting-out provisions of the Pensions Act 1995, he will immediately withdraw a contracting-out certificate if it comes to his notice that(a) a contracted-out occupational scheme exceeds the limits on employer-related investments as a result of an increase in the value of the equity of the sponsoring employer as a result of a takeover bid, (b) that a contracted-out occupational pension scheme has inadvertently breached the conditions for contracting out or (c) that an occupational scheme used for contracting out exceeds the limit of employer-related investments as a result of a transaction between the sponsoring company and the company in whose equity the occupational scheme has invested. [23165]
349W

§ Mr. Heald
From April 1997, contracting-out occupational pension schemes will be asked to provide an assurance, periodically, that the scheme complies with any prescribed restrictions on employer related investment.
The Contributions Agency, acting on behalf of the Secretary of State, will have the power to cancel a contracting-out certificate where any condition relating to the issue of that certificate is no longer satisfied. It is intended that there will be liaison between CA and the Occupational Pensions Regulatory Authority, once either agency becomes aware of a scheme that has breached any restriction in employer related investment. The purpose of this liaison will be to provide both bodies with the information necessary to carry out their tasks and to ensure a co-ordinated and consistent approach in any necessary investigation and/or action.

Table A: Claimants earning less than £80 a week

£ million

Benefit 1990–91 1991–92 1992–93 1993–94 1994–95

Family credit¹ 147 161 333 485 577

Disability working allowance¹ ³— ³— ³— 3 5

Housing benefit² 193 217 288 329 388

Community charge benefit² 105 46 44 ³— ³—

Council tax benefit² ³— ³— ³— 66 75

Total 445 424 665 883 1,045

Notes:
³Represents periods before benefits were introduced/after they were replaced.
1. All figures are rounded to the nearest million and therefore may not sum.
Sources:
¹1996 departmental report.
²Estimates derived from the 1 per cent. Housing Benefit Management System sample annual inquiry.

Table B: Claimants earning £80 to £120 a week

£ million

Benefit 1990–91 1991–92 1992–93 1993–94 1994–95

Family credit¹ 148 174 230 276 314

Disability working allowances¹ ³— ³— ³— 1 2

Housing benefit² 44 57 69 74 85

Community charge benefit² 30 13 12 ³— ³—

Council tax benefit² ³— ³— ³— 10 10

Total 222 244 311 361 411

Notes:
³Represents periods before benefits were introduced/after they were replaced.
1. All figures are rounded to the nearest million and therefore may not sum.
Sources:
¹1996 departmental report.
²Estimates derived from the 1 per cent. Housing Benefit Management System sample annual inquiry.

Table C: Claimants earning £120 to £160 a week

£million

Benefit 1990–91 1991–92 1992–93 1993–94 1994–95

Family credit¹ 77 106 132 154 181

Disability working allowance¹ ³— ³— ³— 1 1

Housing benefit² 12 24 37 39 43

Community charge benefit² 16 6 7 ³— ³—

Council tax benefit² ³— ³— ³— 4 4

Total 105 136 176 198 229

Notes:
³Represents periods before benefits were introduced/after they were replaced.
1. All figures are rounded to the nearest million and therefore may not sum.
Sources:
¹1996 departmental report.
² Estimates derived from the 1 per cent. Housing Benefit Management System sample annual inquiry.

Table A: Claimants earning less than £80 a week
£ million
Benefit	1990–91	1991–92	1992–93	1993–94	1994–95
Family credit¹	147	161	333	485	577
Disability working allowance¹	³—	³—	³—	3	5
Housing benefit²	193	217	288	329	388
Community charge benefit²	105	46	44	³—	³—
Council tax benefit²	³—	³—	³—	66	75
Total	445	424	665	883	1,045

Table B: Claimants earning £80 to £120 a week
£ million
Benefit	1990–91	1991–92	1992–93	1993–94	1994–95
Family credit¹	148	174	230	276	314
Disability working allowances¹	³—	³—	³—	1	2
Housing benefit²	44	57	69	74	85
Community charge benefit²	30	13	12	³—	³—
Council tax benefit²	³—	³—	³—	10	10
Total	222	244	311	361	411

Table C: Claimants earning £120 to £160 a week
£million
Benefit	1990–91	1991–92	1992–93	1993–94	1994–95
Family credit¹	77	106	132	154	181
Disability working allowance¹	³—	³—	³—	1	1
Housing benefit²	12	24	37	39	43
Community charge benefit²	16	6	7	³—	³—
Council tax benefit²	³—	³—	³—	4	4
Total	105	136	176	198	229