Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010

My Lords, I, too, thank the Minister for explaining this extremely complex order. I, too, note that the regulations are the last in a long list of changes and amendments that have been made to the Financial Assistance Scheme since it was established by the Pensions Act 2004. Their purpose, as I understand it, is to bring in the rest of the legislation that makes the FAS more generous in its payouts than was originally intended. As the Minister said, the main provision is for the transfer of defined benefit assets to the Secretary of State from about 450 qualifying schemes that have not yet completed wind-up, using the same kind of provisions that are used to transfer assets in PPF qualifying schemes to the PPF board. We welcome these changes, which boost the level of support that people will receive under the FAS and bring it into line with PPF levels. We also welcome the Government's commitment, following their consultation on these regulations, to ensure that the FAS scheme manager provides details of members’ asset shares, together with a forecast of assistance and lump sum entitlement to individuals shortly after their scheme assets transfer to government, with forecasts of assistance annually thereafter. It is important that scheme members finding themselves in this position are given an idea of the levels of assistance they are likely to receive to help them plan for their retirement. One of the main concerns of the Pensions Action Group members and other FAS recipients is the level of compensation that they are likely to receive. The then Minister, Peter Hain, said in a statement in another place in December 2007: """All scheme members will be guaranteed 90 per cent. of their accrued pension at the date of commencement of wind-up, revalued to their retirement date".—[Official Report, Commons, 17/12/07; col. 100WS.]" That is a point that the noble Lord, Lord Freud, just mentioned. In addition, Mike O'Brien, as Pensions Minister during the Pensions Bill in 2007-08, said that, ""we guaranteed to provide a higher level of assistance, which was broadly comparable to the compensation paid by the Pension Protection Fund".—[Official Report, Commons, Pensions Bill Committee, 19/2/08; col. 508.]" However, it is clear that most people affected do not get anything like 90 per cent; so should the Government's language not reflect this in order to avoid raising people's hopes? The impact assessment says that, ""costs that a trustee incurs in providing information are likely to be recovered by the trustee from the pension scheme assets prior to their transfer to government"," which means that, ""members’ asset shares may be reduced, however in many cases this will be offset for the member by an increase in FAS assistance (to a maximum of 90% level, subject to the FAS cap)"." Concerns were raised in the consultation that in such small schemes the costs of preparing the assets for a transfer may erode funds to such an extent that there would be no additional value to be gained by transferring the assets. The impact assessment says that the Government do not hold detailed information on the numbers that might be affected. Will the Government monitor this issue, specifically to ensure that some people do not end up with smaller payouts under the new system? I have just two more areas of concern. The first is about tax-free lump-sum payments, which will be limited to those who have accrued scheme benefits in their own right and have an asset share allocated to them that was "higher than nil". It is available only if they were not being paid a pension already before the scheme assets were transferred to government and would be offered only when assistance first started to be paid. This lump sum would be a maximum of 25 per cent of the capital value of the pension and lump sum received, in line with the general tax rules for taking a tax-free lump sum from a private pension pot on retirement and converting the rest into an annuity. HMRC is to bring forward regulations to provide tax relief along these lines. However, this sum would be limited to the amount of the individual’s asset share. Most people responding to this question in the consultation thought that the FAS should allow for a lump sum to be taken at 25 per cent of the payment due, regardless of the individual’s asset share. The general feeling was that it was unfair to treat individuals differently based on the level of funding in their scheme. The Government decided to make no changes in this area, in spite of the strong feeling of the consultees. Will the Minister say why? Have estimates been made of how much of the cost would be brought forward if this were to be implemented? After all, the tax-free lump sum on retirement is very popular, particularly to pay off mortgages. Finally, will the Minister elaborate on the report from the Joint Committee on Statutory Instruments on these regulations? The committee was unpersuaded by the department’s assertion that these arrangements fall clearly within the options set out by the Minister during the debates. I should be very grateful for a reply on that point.