My Lords, the Government are determined to ensure that the entitlements of occupational pension scheme members are protected from the actions of unscrupulous employers. We published the Green Paper, Security and Sustainability in Defined Benefit Pension Schemes, in February this year, and consulted on changes to pension protection legislation, including those set out in the manifesto. I am pleased to tell noble Lords that the Department for Work and Pensions is today announcing plans to launch a White Paper on the future of defined benefit final salary pension schemes in the near future.
My Lords, I thank the Minister for that reply. We agree with the importance of sustaining confidence in the pension system, particularly DB schemes, and ensuring that the pension promises of employers are honoured. We look forward to seeing the White Paper in due course, whenever that might be. But, given the experience of U-turns on the triple lock and the lack of reference to the issue in the Queen’s Speech, we are entitled to check the status of what was promised to the electorate, especially as it is branded as a component of the strong and stable leadership and said to be protection from “irresponsible bosses”—not usual Tory language, but we know who they mean. Can the Minister confirm that it is government policy—which would have our support—to introduce for the Pensions Regulator a notification scheme for certain mergers and acquisitions; powers to block certain takeovers; punitive fines for those wilfully under-resourcing schemes; and powers to restrict dividends of irresponsible employers? Can she also say what changes the Government consider necessary to the powers of a pension protection fund?
My Lords, as the noble Lord will know, the Green Paper covered four key areas: funding and investment, employer contributions and affordability, member protection, and consolidation of schemes. It looked to examine and build on the discussion already taking place on what, if anything, should be done to ensure that the system remains sustainable while ensuring that members’ benefits are protected. It is really important to say that issues such as powers to block certain mergers and acquisitions should be thought through extremely carefully, not least because we want to ensure that any changes to the powers of the regulator do not trigger unintended consequences and act as an impediment to business and growth.
I want to be absolutely straightforward about this with noble Lords. We are reviewing the implications of the judgment in detail and will respond appropriately in due course. The Government affirm their commitment to same-sex marriage and are proud of the achievement of the coalition Government, who delivered the 2013 legislation. The Government are committed to equality, and that is why legislation was introduced whereby pensions are built up equally for all legal partnerships.
My Lords, the main problem for defined benefit schemes is the rate of interest at which accounting standards require them to discount their future liabilities. This gives rise to arithmetic which shows a substantial deficit that is not likely to happen. I believe that a White Paper is coming, but can the Government get a move on and address this issue? It is causing problems where they do not really exist.
Surprisingly, the section of the Conservative manifesto on protecting private pensions did not mention George Osborne’s policy of enabling people to cash in their pensions, which was introduced without very much consultation. Today’s FT says that this change is not,
“a palpable fiasco, but the early signs do not look promising”.
So what are the Government doing to protect people from being duped—or was this simply a short-term measure to raise tax revenue?
My Lords, I too read the article in the Financial Times this morning. The truth is that these pension freedoms are proving very popular. However, they raise important issues around the operation of the market and how we support consumers, so we will be working with the Financial Conduct Authority on the next steps to address this issue.
My Lords, the mention by my noble friend Lord McKenzie of irresponsible employers reminded me of Sir Philip Green. Can the Minister bring us up to date on the position of the BHS pensioners and what the Government are doing to help them?
My Lords, the financial settlement regarding BHS is valued in total at £363 million, and £343 million has already been placed in a fully independent escrow account to fund a new scheme. The settlement with Sir Philip Green for the British Home Stores scheme is the largest of its kind the Pensions Regulator has reached to date. Indeed, in total, the Pensions Regulator has secured more than £1 billion for pension schemes through the use of settlement in avoidance cases. Existing members of the scheme now have three options: transfer to the proposed new pension scheme, opt for a lump sum payment, if eligible, or remain in their current scheme, which is expected eventually to transfer to the Pension Protection Fund. However, the new scheme will be a fully independent trust with independent governance and trustees. Neither Sir Philip Green nor the Arcadia Group will be involved in the management of the scheme. In the highly unlikely event that the new scheme fails, members can rely on the Pension Protection Fund.
My Lords, would my noble friend care to agree with me that the Pension Protection Fund is performing a vital function very well? Its investment policies and levy management have achieved a significant funding surplus and tens of thousands of workers are receiving most of their promised pensions, whereas in the pre-PPF days, they would have lost the entire amount.
I thank my noble friend very much for her question. She is completely right. With regard to the British Home Stores financial settlement, the lump sum payment option will be available to members with small pots of up to £18,000 in value. Those who choose not to take a lump sum and opt to transfer to the new scheme will be entitled to the same benefit structure as all other members. The new scheme will also be eligible for the Pension Protection Fund.