I beg to move, That the Bill be now read the Third time.
I am pleased that the Bill’s passage through the House has been relatively smooth, so I thank the Government and indeed the Opposition for their support. Although the Bill’s scope is narrow, it will provide
financial assurance to those who have received the devastating diagnosis of a terminal illness and who have also seen the sponsors of their pension schemes become insolvent. The Bill will do that by amending the definition of the words “terminally ill”.
When someone receives the awful news that they may have only months to live, it is only right that financial problems should be the least of their worries. The loss of their rightful pension payments should not mean that they must live out their remaining time constrained by their financial circumstances. The Bill aims to address that problem directly.
For wider context, the Bill focuses on the Pension Protection Fund and the financial assistance scheme. The Pension Protection Fund, established by the Pensions Act 2004, pays compensation to individuals when the sponsors of their defined-benefit schemes—usually their employers—become insolvent and lack the necessary assets to pay those pensions to the level that the Pension Protection Fund ordinarily would. That is for cases when such insolvency takes place on or after 6 April 2005. The financial assistance scheme applies to individuals whose pension schemes were unable to meet their pensions liabilities in full when those schemes started to wind up between 1 January 1997 and 5 April 2005. The Bill concerns the compensation payments made to people diagnosed with a terminal illness from those schemes.
The Pension Protection Fund provides a one-off lump sum payment to those who receive such a diagnosis, while the financial assistance scheme will begin to make payments to someone at any age. The issue that the Bill seeks to address is the definition of a terminal illness.
The Pension Protection Fund and the financial assistance scheme both use the same legal definition of terminal illness, which that is that
“a person is ‘terminally ill’ at any time if at that time the person suffers from a progressive disease and the person’s death in consequence of that disease can reasonably be expected within 6 months.”
The same definition was used by the Department for Work and Pensions for the purpose of calculating benefits, but that was reformed in the Social Security (Special Rules for End of Life) Act 2022, where the six-month period included in the definition of “terminally ill” was extended to 12 months. The change in definition for these two pension schemes seems only logical. That would keep the definition consistent with making social security payments.
It is difficult to say how many people will benefit from the Bill, and in reality we do not really want people to benefit as that would mean that the sponsors of their pension funds have become insolvent, which we do not want to see. However, where that is the case, this legislation will benefit terminally ill people.
The Bill’s scope is technically limited to the Pension Protection Fund and the financial assistance scheme, but I hope it will encourage any workplace pension that does not have provision for terminal illness, where the member has a life expectancy of 12 months or less, to consider putting such a scheme into place. Depending on the scheme’s rules, many private pension schemes can already make what are called serious ill health payments under tax law, if the member has up to one year to live. The change will be well worth making.
The heartbreaking job of giving a terminal illness diagnosis falls to health professionals. Modern medicine, surgery, palliative care and the general care provided by our incredible NHS staff make that judgment even more difficult. It is therefore right to extend the definition of terminally ill from the narrow band of six months to the more accommodating threshold of 12 months. That is fairer not only to the ill person but to those who have to make the difficult judgment, especially when those health professionals know that a person’s pension payments may rest on that.
As we just heard, the Bill extends throughout the United Kingdom, and comes into force in England, Scotland and Wales four months after Royal Assent, and likewise in the case of Northern Ireland. I commend it to the House.
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