Pension Protection Fund (Risk-based Pension Protection Levy) Regulations 2006

Taking these regulations, which mitigate the amount that pension funds may have to pay to the PPF in respect of their risk, is rather like putting the cart before the horse. I noted that even the Minister drifted into commenting on an order we are about to do in a few minutes. But he must not get me wrong. We on this side of the Committee are delighted to see these regulations, as we argued for the early setting-up of the risk-based levy throughout our debates on the then Pensions Bill. I am glad to hear that it was widely consulted on, because there were concerns with some small schemes that a scheme-based levy and the risk-based levy would swallow up the entire income of the pension fund. This would clearly be a nonsense and would ultimately mean that final salary schemes would have to be altered to defined benefit schemes, and defined benefit schemes would have to be downgraded. On that point, I observed an article in today’s Financial Times, ““Broker forces pension changes””. I wonder how and if the broker in question—Marsh, the UK’s largest insurance broker—is able to get away with it. It has apparently:"““ordered its staff to sign new contracts that no longer entitle them to participate in a final salary defined benefit pension scheme, or risk losing their jobs””." That is ominous, to say the least. The problem for today’s regulations, as I see it, is that they are likely to apply almost entirely to large companies. The alternative methods of funding pension deficits, which will go to reducing the levy, will seldom be available to small companies, particularly struggling ones. This will become particularly important as many small firms do not pass the test of time, and go to the wall. Their pension schemes will thus come under the ambit of the PPF to administer. Thus it is all very well for the auditor to say, ““If you reduce your pension scheme deficit, or carry some sort of guarantee, you will reduce the levy””. In any case, by how much? What is the relationship between decreasing the deficit and decreasing the levy? Will it be 1:1, or some other proportion? That is what firms need to know. I might add that the Government have put these firms into a Catch-22 position. How are firms to choose between investment and filling the hole in their pension schemes? This measure encourages the latter and discourages the former. Is this really what the Government intend? What do the Government expect the effect on the GDP to be? We all depend on its growth to increase investment in the public services. If these regulations are to damage that, we will all be the losers. Although we approve of the risk-based levy and the regulations, we have worries which I hope the Minister will be able to alleviate.