Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2006

My Lords, I am grateful to the Minister for explaining the regulations, which are beneficial to some—but only some—of the 125,000 people who, through no fault of their own, had no or little defined benefit occupational pension because their employers’ scheme was underfunded when the latter became insolvent or no longer existed over the seven years before the Pension Protection Fund was set up. Noble Lords will remember that the financial assistance scheme was not originally in the 2004 Pensions Bill. I must confess that neither I nor the Minister led on that legislation although I did play a minor part. The Bill set up the Pension Protection Fund, but, after intense pressure from the Opposition and their own Back-Benchers, the Government gave in and created a very limited scheme which was to cost £400 million over 20 years. The trustees of the schemes were given a very limited time to apply; namely, between 1 September 2005 and 28 February 2006. Beneficiaries were to get financial assistance only if they were within three years of their normal retirement date. We described that as inadequate at the time and it seems that now the Government have finally agreed with us. To be fair, and I try to be fair on these occasions, the Government said at the time that they would review the scheme after three years. However, the scheme began operations—badly, as I shall explain—only in September last year. My first question is therefore: what brought on the earlier review, resulting in the regulations? Was it the Parliamentary Ombudsman’s report on occupational pensions of March 2006, when she criticised the scheme? If so,the regulations are a very partial response. The Government still refuse to do anything about the real substance of her report, which was on the overzealous encouragement that the Government gave to pension schemes. She determined that it amounted to mis-selling. In July this year, the scheme faced further criticism for its inadequacy by the PAC, even though a month before, the noble Lord’s colleague, the Minister for Pensions, had commissioned a review of the scheme. Almost at the same time as the PAC’s report, the Minister revealed the findings of his administrative review, which cited a number of problems and recommended that it be governed from within the Pension Service. The Government have always said that it should operate separately from the Pension Protection Fund. So can the Minister say how and by whom it is administered? Or perhaps the question should be, ““will be administered””, especially as under the current scenario £7 million has already been wasted in setting it up, £1.25 million of which was on administrative staff. Some, too, has been given to the 550 successful claimants, but how much? The last figure I have obtained, which I find very difficult to believe, is just under £2 million, which seems far too high for so few recipients. Even if that figure is correct, what was the other £3.75 million spent on? Was it on yet another IT failure? As I said, about 125,000 people have lost some or part of their pension. However, as the Minister has just said, even this newly extended scheme is expected to benefit only 45,000 people, and even for them the prognosis is not good. So far, a mere 550 qualifying members have received any money, although under the current scheme about 7,800 people are or will be eligible to receive payments, as the Minister for Pensions explained in another place only a few months ago. In June, he expected that by now 5,000 people would have at least some money. Have they? I am sure that the Minister will be able to elucidate on that when he winds up. To sum up, on 22 October, an article in the Sunday Telegraph stated: "““The Financial Assistance Scheme is a shameful example of political spin. It is based on false figures and has offered the tens of thousands of people who have lost their final-salary pensions little more than false promises and false hopes””." The situation gets worse. In their response to the ombudsman’s report, the Government said of the financial assistance scheme: "““Eligibility has now been extended to people within fifteen years of their scheme pension age””." At that point, surely it had not. That is what these regulations do. The response continued: "““This involves tapers from 80 per cent of expected””—" I highlight ““expected””— "““pension for those within seven years of their pension age, 65 per cent if between seven and eleven years, and fifty per cent for those between twelve and fifteen years””," as, indeed, the Minister has just told us. At the same time, the Government appear to have invented a new concept in pensions—that of a ““core pension””, referred to in paragraph 7.11 of the Explanatory Notes. What is this? Is it higher or lower than expected pension benefits? To make all this even more complicated, the maximum any recipient can expect is 80 per cent of what they thought they would get—and even that is capped at £12,000. It is so complicated that, at this late hour, I would not be able to take in a verbal explanation. The Minister is probably relieved at my saying that but I would be grateful if he would provide me with a written explanation. However, as I said, these regulations are beneficial to some of the 125,000 unfortunate people involved in this mess—which has hardly been helped by the Government taking £5 billion a year out of the stock market over the past 10 years. Be that as it may, we welcome several things about these regulations. The first is the fact that an employer’s overseas insolvency event should potentially be a qualifying insolvency. Secondly, we welcome the extension of the survivor’s eligibility rules. It is certainly right that if a person’s dependants were entitled to a pension under his employer’s scheme when he died, that should be allowed under the FAS as well. I have already mentioned the complications around the extension of liability. Although I agree with the policy, I eagerly await the Minister’s response to my dilemma. Interim pensions, too, must be the correct approach. Finally, I observed that in introducing these regulations in another place yesterday, the Minister began his remarks by wanting to express ““yet again”” his sympathy for all those who have lost out on their pensions through no fault of their own. What I have never heard from any Minister anywhere is any hint of apology for their part in the worsening situation of pensions in this country. In 10 years under this Government we have moved from the very top of the international league to the bottom, making defined benefit schemes rarer than hens’ teeth. It is not a record to be proud of.