Constitutional Reform and Governance Bill

The trustees are extremely grateful to the Justice Secretary, who has worked with us tirelessly of late to try to reach agreement on these extremely complex matters. It is important that we do not miss any issues, and that everything is properly understood. The trustees—and, ultimately, pensioners—will face unwelcome and unfair unintended consequences unless we get this right. The trustees have a long track record of trying to act very sensibly—in the interests not only of Members but of taxpayers—in administering the scheme in the past. We have made a number of changes that have resulted in significant savings for the taxpayer. I can now say that the Bill is much improved; I am confident that there will be good will from IPSA if any matters remain unresolved. There are some instances, however, where the trustees felt it right to bring forward amendments at this stage because of the importance of the issues for members of the scheme and the trustees and because of the need for understanding of matters that need to be shared. What I have to say about the Bill should be seen in the context of the fundamental shift that is going to take place, as recommended by Kelly, when future benefits for Members of this House are to be set by IPSA. That is what will happen and as it goes forward, the trustees will be consulted—but only consulted—on any future scheme. Because of the complexity of pensions, however, and the fact that current and former members have accrued rights within the pension scheme that should be protected, the role of the trustees is important for the administration and the management of the scheme in the future. I hope that the trustees will be helpful to IPSA in dealing with the most complex areas. The trustees have tabled a number of amendments. After discussion with the Secretary of State, we have been quite happy to amend some of them in a minor way. Amendment 91—amendment 92 is related—states that the parliamentary contributory fund is a "trust scheme". We put that in for the reason that we have always understood, as I think has everybody, that it is a trust scheme, so we felt that it would be sensible to show it on the face of the Bill. The Secretary of State has said that he does not think it absolutely necessary because he has confirmed in this place that it is a trust scheme—I am sure that I am not misrepresenting him on that—so we will not press these amendments. In amendments (a) and (b) to amendment 64, we have put forward some technical amendments to the method of selection of members. Originally, we were in a position of having to go out to every single Member—deferred members, retired members and sitting members—and organise a huge ballot, which would have been extremely complex and rather difficult to achieve. It might not have achieved the selection of people with sufficient skills and knowledge to act within the trustee scheme. We are grateful that the Government will accept our amendment, which provides a good deal more flexibility and will work for the benefit of the scheme as a whole. It will, of course, be consistent with section 241(2)(b) of the Pensions Act 2004. Whatever we do about our own schemes in this place, it is important that we comply with the requirements that we impose on everyone else in the nation; it would be wrong if that were not so. Under amendment (b), the Treasury would have to consent to the use of PCPF assets to remunerate trustees. There again, we think it must be right that if IPSA is to provide remuneration or allowances for trustees out of the fund's assets or for spending on other matters that may arise, it must be right to protect the taxpayer by making that particular area subject to the Treasury's consent. I am quite sure that IPSA would not expect anything else. Amendment 90 deals with""the indemnification of the trustees (and former trustees) of the Fund"." As was said earlier, it would be impossible to find anyone willing to serve as a trustee if they did not have an indemnity; indeed, they would be stark raving mad if they did the job without having it. The indemnity will come from the funds. We are grateful that the Secretary of State has agreed to this. Currently, the 1993 regulations provide each trustee and former trustee with an indemnity from the fund's assets, except where prohibited by legislation or in cases of dishonesty, bad faith or recklessness—one hopes that none of those ever arises in the future. Although we should be confident that IPSA would not want to remove this indemnity, it is none the less inappropriate for IPSA alone to have the power to do so without the consent of the trustees. Amendments 94 and 95 require trustee consent to aspects of proposed IPSA and Minister for the Civil Service benefit powers. Amendment 94 would leave out""the provision specified in paragraph 24(2)"" of schedule 7 and would insert the stated words in sub-paragraphs (i), (ii) and (iii). I am sorry that these are rather complex amendments and apologise if they are difficult to follow. Amendment 95 would insert""except the provisions specified in paragraphs 21(1) and 26 unless with the consent of the trustees"." I welcome the Justice Secretary's agreement that paragraph 21(1) of schedule 7, which empowers IPSA or the MCS in relation to the Ministers' scheme to provide""for the application of assets… in or towards the provision of pensions to be paid otherwise than out of the Fund"." There again, we think that if that happens, it should be subject to the trustees' consent, as it is not appropriate to exercise those powers without the consent of the trustees, who have a duty to safeguard the interests of all the PCPF's members. It is a historic power that has not been used and the safeguard of trustees' consent is necessary. Paragraph 26 of schedule 7 empowers IPSA or the Minister for the Civil Service in relation to the Ministers' scheme to make""Provision conferring functions under the scheme on persons specified in or determined under the scheme"," and I welcome again the Secretary of State's agreement to the amendment. Its purpose is to ensure that all the functions currently exercised by the trustees in conjunction with the relevant experts cannot be changed without the consent of the trustees. Commutation factors are relevant, for example. Although they are nominally brought in by the trustees, they are derived from work done by the Government Actuary's Department, which will periodically clarify what the commutation factors should be in line with changes in the market. We did not feel it appropriate for the trustees themselves to dictate that; it should be done through the use of some independent expert. It is the same with provisions for ill health retirement. Again, the trustees do not determine whether someone is sufficiently ill to merit it. We go to an outside medical opinion, and whether or not someone is entitled to the ill health retirement will derive from whatever that opinion might be. We think that that is a sensible regime, which we imagine IPSA will wish to continue. I am losing my place here. Amendment 95 is, of course, consequential on amendment 94. Amendment 93 deals with accrued rights protection. We must be sure that the protection of accrued rights for members who have paid in—for many years in many cases—are suitably robust. The amendment would thus insert after "puts", the phrase "(or might put)". We are pleased that the Secretary of State has agreed to that amendment. It will make the accrued rights protection consistent with section 67A(4) of the Pensions Act 1995, which applies to a modification that would or might affect subsisting rights. We tabled amendment (a) to Government amendment 74 to ensure that accrued rights would apply to all benefits, not just pensions, because we were aware that some benefits under the scheme were not really pensions. Payment to a widow on the death of a Member, for instance, would not constitute a pension, but would fall within the jurisdiction of the present scheme. We have received assurances that the current drafting of the Bill does not limit accrued rights protection to pensions generally, but includes benefits more widely.