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Scottish Parliamentary Pensions Act 2009 (Consequential Modifications) Order 2009

Volume 711: debated on Wednesday 24 June 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Scottish Parliamentary Pensions Act 2009 (Consequential Modifications) Order 2009.

Relevant Document: 16th Report from the Joint Committee on Statutory Instruments.

If I may, I propose to provide your Lordships with a detailed explanation of the largely technical amendments which this order seeks to achieve.

I do not think that any speech of mine has ever been described as riveting, but I am certainly clear that not many speeches on pensions made by anyone in this world have been described as riveting, unless perhaps delivered to the Institute of Actuaries. Accordingly, I apologise in advance for the thousand or so words that I am going to deliver, and I hope only that I can deliver them all in the order in which they are on the paper and resist my normal temptation, which is to speak too quickly.

The order is made under Section 104 of the Scotland Act 1998, which allows for necessary or expedient changes to UK legislation in consequence of an Act of the Scottish Parliament. It is made in consequence of the Scottish Parliamentary Pensions Act 2009, which sets out updated arrangements for paying the pensions of Members of the Scottish Parliament and related officeholders. Those officeholders are the Presiding Officer and Deputy Presiding Officer of the Scottish Parliament and Scottish Ministers, including the First Minister and junior Scottish Ministers.

The purpose of the Scottish Parliamentary Pensions Act 2009 is to place the arrangements for paying the pensions of MSPs and related officeholders on to a more permanent statutory footing, largely replacing transitional arrangements made at the time of devolution. The Act sets out new rules for the Scottish parliamentary pension scheme that largely take account of developments in UK pensions, tax and equalities legislation.

The order makes minor amendments to ensure that from 1 September 2009, when the Scottish Parliamentary Pensions Act 2009 comes into full force, aspects of reserved pensions legislation continue to apply appropriately to the existing pension schemes for MSPs and related officeholders, further to changes brought about by the Act once this is fully commenced from 1 September this year.

Prior to the Scottish Parliamentary Pensions Act 2009, the pension schemes for MSPs and related officeholders were the subject of a transitional order—the Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish Parliamentary Pension Scheme) Order—made under the Scotland Act 1998. It was always intended that the Scottish Parliament would legislate to put the pension schemes of MSPs and related officeholders on to a more permanent statutory footing. Section 81(3) of the Scotland Act 1998 envisages the Scottish Parliament legislating to replace the transitional arrangements made at the time of devolution. In addition, there have been a number of changes to UK legislation in the reserved areas of the regulation of occupational pensions, tax and equalities which necessitated amendment to the transitional order.

Although Section 81 of the Scotland Act 1998 permits the Scottish Parliament to make provision for the pensions of MSPs and related officeholders by resolution, an Act of the Scottish Parliament was needed in this case to bring about the necessary changes to the transitional order. The Scottish Parliamentary Pensions Act 2009 continues the Scottish parliamentary pension scheme, subject to new rules set out in Schedule 1 to that Act. These new rules contain provisions for both MSPs and officeholders. The separate unfunded scheme for First Ministers and Presiding Officers set out in the transitional order is continued but is closed to new members, who will be covered by the new rules of the Scottish parliamentary pension scheme.

The two amendments in the Section 104 order are of a technical nature. They are required to ensure that certain reserved regulatory controls continue to apply appropriately to the Scottish parliamentary pension scheme and the existing First Minister and Presiding Officer pension scheme, once the Scottish Parliamentary Pensions Act 2009 is fully in place. The first amendment is to Section 11(7) of the Pensions Act 1995 and ensures that the Pensions Regulator continues, in limited circumstances, to have the power to adapt, amend or repeal the legislation that contains the rules of the Scottish parliamentary pension scheme and the First Minister and the Presiding Officer pension scheme.

The second amendment is to Section 249A(3) of the Pensions Act 2004, which requires the trustees or managers of occupational pension schemes to establish and operate internal controls. Section 249A(3) sets out various types of schemes that are exempt from that obligation. That includes schemes which are established under an enactment and are guaranteed by a public authority, and the Scottish parliamentary pension scheme, as currently constituted, falls within this exemption. Further to the Scottish Parliamentary Pensions Act 2009, the Scottish parliamentary pension scheme will not be covered by that exemption as it will not be a scheme guaranteed by a public authority. Therefore an amendment adding the Scottish parliamentary pension scheme into the list of exempt schemes at Section 249A(3) is required. The First Minister and Presiding Officer pension scheme does not require an equivalent amendment, as it is a pay-as-you-go scheme and as such is already exempt under Section 249A(3)(b).

Noble Lords may also wish to note that, in addition to this order, it is proposed that two sets of regulations will be made by UK Ministers, further to the Scottish Parliamentary Pensions Act 2009. The Department for Work and Pensions is currently consulting on drafts of these regulations and will take forward the Occupational Pension Scheme (Scottish Parliamentary Pensions Act 2009) Regulations and the Occupational Pension Scheme (Public Service Pension Schemes) Regulations. The latter of these two sets of regulations will be made jointly by the Department for Work and Pensions and HM Treasury.

The Scottish Parliamentary Pensions Act 2009 was the product of a committee Bill brought forward by the Scottish Parliament. It is intended that the newly appointed fund trustees of the Scottish parliamentary contributory pension fund will issue guidance to the members of the Scottish parliamentary pension scheme on the new scheme rules, which are effective from 1 September 2009.

This order demonstrates the Government’s commitment to working with the Scottish Parliament to make the devolution settlement work. I hope noble Lords will agree that this order is a sensible use of the powers in the Scotland Act and that the practical result is something to be welcomed. I commend the order to the Committee.

I thank the Minister for doing such an exemplary job of taking us through the inner workings of the modification of this order. The routine being followed is an example of proper forethought by the parliamentary draftsmen of the Scotland Act in foreseeing areas where a split responsibility might cause problems. That is one reason why we have gone through this amazing jungle of sections that apply.

Did I understand the Minister to say that the present scheme under which the Presiding Officer and the First Minister receive their pensions is somehow being brought to a close, and that they will then be incorporated under the provisions that will be in place when this order is brought in? If that scheme is brought to a close, do we have any idea what the current liability is under it, or is it a continuing liability that will simply be built on by the new scheme when it comes in?

I am grateful to the Minister for giving us at least the title for the further two sets of proposed regulations. I do not know if anything more can be said to explain what they might contain—I took it from what he said that perhaps the Department for Work and Pensions is not quite sure what they will contain at the moment—but any indication about that might be useful, as well as about which procedure this is intended to follow. Schedule 7 to the Scotland Act has a wonderful array of procedures that can be followed when bringing in different parts of legislation under the devolution Act. Section 12(1) says that some can be passed under the authority of an Order in Council or on the authority of a Minister of the Crown. Is either of those options a path that the Government will be following on this measure?

These Benches also thank the Minister for introducing the order. I think it is the first time, either in Committee or in the House, that I have seen a bench of officials that is entirely female, which is very nice. I look forward to the day when we have not only a bench of officials that is entirely female but a female Minister as well.

We broadly support this measure. However, I heard the noble Lord say that there is a separate unfunded pension scheme for Scottish Ministers, which is indeed the case here down south in the United Kingdom. I am not as familiar as I should be with the scheme for MSPs. Is there a separate funded scheme and, if so, what is the contribution that their employers—the Scottish taxpayer—make to the Scottish parliamentary pension scheme as a percentage of Members’ salaries?

I thank noble Lords for their contributions. The only question I will not attempt to answer—it may have been an observation from the noble Lord—concerns the officials behind me. I think it comes fairly close to being sexist as a remark and is not one that I know my partner would appreciate, were it said about her. Comments about a Minister are matters of judgment and I am sure that in that sense he is perfectly correct.

I shall attempt to deal with the questions in the order that they were asked. Why is the existing First Minister pension scheme now being closed? The Scottish parliamentary pension scheme committee concluded that the existing First Minister and Presiding Officer pension schemes should be closed to future members and that future holders of these offices should be subject to the same pension arrangements as those applicable to Scottish Ministers. This is consistent with the pension arrangements for similar officeholders in the Welsh Assembly and recommendations by the SSRB in its triennial review of parliamentary pay and pensions published in January 2008. Under the 2009 Act, the new rules of the Scottish parliamentary pension scheme make specific provision for a category of officeholder members of the scheme. These officeholders include persons who in future will hold the offices of Presiding Officer, Deputy Presiding Officer, Scottish Minister and junior Scottish Minister.

Reference was made to the cost implications of the changes brought about by the Act. The Government Actuary’s Department has costed the revised parliamentary scheme in Scotland against the existing scheme. This review showed that the expected cost of the scheme under the new rules will not be materially different from that under the existing rules. The precise point of the question concerned the closure of the existing First Minister and Presiding Officer schemes to future officeholders. It is expected that this will result in a net saving in relation to the pension arrangements for these offices of about £850,000 every four years.

As regards what is meant by unfunded schemes, the existing scheme is non-contributory. Pension payments under that scheme are paid from the Scottish Consolidated Fund on a pay-as-you-go basis. That scheme will be closed to new entrants from 1 September, leaving only those pensions in payment, or those due to existing officeholders, to be met under the scheme. There is provision in the new pension scheme rules for the Scottish parliamentary pension scheme for future holders of the offices to be officeholder members in the scheme. As such, they will make contributions under the new scheme rules.

Reference was also made to taking forward the regulations. I suggest that will be done by the Department for Work and Pensions, although I cannot be precise about that. The point of the consultation is to find out the best way forward. Of the two sets one will be taken forward by the DWP and the other by the Treasury. They will make a number of consequential amendments to secondary legislation to ensure that the existing Scottish parliamentary pension scheme and First Minister and Presiding Officer pension schemes continue to be treated as public service pension schemes further to the changes to them brought about by the 2009 Act. It will be when those regulations are drawn up that the question of the parliamentary procedure to be adopted will be determined.

If the noble Lord seriously thinks that what I said was sexist, frankly that is just political correctness gone mad. It was a positive encouragement. I am bound to say, since he takes that ridiculous attitude, that the flow of paper coming from his officials showed quite clearly that they knew far more about what was going on than he did. Perhaps I am being unfair, but that is a ridiculous reaction and I hope that, on reflection, he withdraws it.

I do not expect the noble Lord necessarily to know now, but I ask him to undertake to write to me about what the employer—that is, the Scottish taxpayer—contribution is expected to be when the new scheme comes in. The cost of public sector pensions is a matter of great public interest and I hope that he will take his responses a bit more seriously and undertake to write to me with that information.

I thank the noble Lord. I am more than happy to withdraw any imputation in the light of his comments. The question of whether one is being polite across this or any other Chamber is in the eyes and ears of the beholder and observer. I will certainly take his point on board and will write to him in due course.

On the question of the winding up of the scheme for the First Minister and Presiding Officer, will the Scottish Executive have to hold funds against liability under that scheme separately from those of the ongoing scheme?

Motion agreed.