The Occupational Pensioners' Alliance (OPA) welcomes aspects of this Bill. The new Regulator and its increased powers will be valuable and we also welcome the introduction of the Pension Protection Fund (PPF).

We are pleased to note the forward movement in the direction of simplification and particularly the statement in Explanatory Note 57 that Working and Saving for Retirement : Action on Occupational Pensions (Cm 5835) "focused increasingly on the need for member protection".

However the Bill is very complex; it amends at least four different Acts (Pension Schemes Act 1993, Pension Act 1995, Welfare Reform and Pensions Act 1999 and the Child Support, Pensions and Social Security Act 2001). We feel strongly that the Government must do more to simplify the legislation surrounding pensions provision. The current process offers little hope of empowering pension scheme members fully to understand their options.

In addition there are a number of core issues within the Bill on which we have serious concerns.

 Protected but not informed
The Bill will ensure that pension scheme members will be protected financially if their schemes run into difficulty. However, the OPA is concerned that the Bill falls significantly short of enforcing an ongoing process of communication with scheme members on the status of their pension scheme. Throughout the Bill reference is made to providing information to the Regulator, and to the trustees or managers of the scheme. The OPA would suggest that the members should be acknowledged to a greater degree in the dissemination of scheme information.

Given the Government's stated aims of raising consumer awareness with regards to their pension schemes, and its commitment to a "choice" agenda, the OPA believes the Bill must ensure that every reasonable opportunity is taken to inform the members about the status of their scheme.

There is no mention of anyone other than employers, managers and Trustees to be informed of any actuarial valuation of the scheme. The OPA believes that adopting an attitude of transparency and openness to pension scheme members would pay dividends for the Government. We suggest that this is an opportunity for the Government to recognise pensioner organisations as bodies to receive information on behalf of the pensioner members.

Overall there is no mention of the need to inform members when difficulties arise in their schemes and when the Pension Regulator or PPF get involved. Clearly the workforce is very likely to know of problems with an employer, but some members may not. The Bill should place a duty on someone to inform members of the scheme when the processes described in Parts 1 and 2 are started. We will be suggesting a number of amendments, at Committee Stage, to strengthen the Bill in this regard.

Member Nominated Trustees - A backward step
We are particularly unhappy about the proposals in Section 196 - 198 on Member Trustees. As drafted in the Bill, the role of pensioners in the running of their schemes will be even more marginalized than it is now. Whereas we welcome the requirement to have a minimum of one third Member Trustees, the practical upshot of Sections 196 (2) - 197 (2) will mean that pensioners can be ignored in the nomination and election processes. There is only a duty for "active members" to be consulted. The OPA believes strongly that representation via the Trustees is essential for good and fair scheme management and we call, in the strongest possible terms, for the Government to re-examine its position on this issue.

The Green Paper 'Simplicity, Security and Choice: Working and Saving for Retirement' set out two options for progress on reforming members' representation through their trustees. The first option was a 'do nothing' approach designed to invoke best practice to ensure that schemes complied. The second option, supported by the OPA, was for legislation to define rules around the election, or selection of MNTs. We now find, in the Bill, that the proposed legislation will disenfranchise existing pensioners from the governance processes within their schemes, allowing only active members (members contributing to the scheme) to participate. The OPA believes that this is intolerable particularly for pensioner members of closed schemes where the pensioners vastly outnumber the active members , and contrary to the Government's stated aims of inclusiveness and communication with all scheme members, be they retired or contributing.

The OPA will be pressing the Government to amend this Section of the Bill with urgency.

The OPA hopes you will feel able to speak at Second Reading in support of our position, and we will contact you in due course to discuss possible amendments.

Addendum
Further to the above briefing another issue has arisen which is of great concern
to members of pensioner organisations. I hope very much that you will be
able to raise this issue at second reading.

The Government has been keen to point out that pensioners will receive "100%
compensation" from the PPF. However, we understand that this is only for
the current pension in payment at the date of insolvency and does not
include any future pension increases through indexation that many pensioners
might have been expecting from their pension scheme. For those pensioners
who retired before 6th April 1997, the PPF will not grant any increases to
pensions in payment. In practice this could mean the PPF protects only
around 70-80% of the value of the total pension promise.

The Government's own research paper on the Pension Bill, published on 23rd
February makes this point clear:

"PPF pensions in payment will be indexed in line with the Retail Price
Index (RPI) capped at 2.5%, but only in respect of rights built up since
April 1997 (which is when the statutory obligation to index occupational
pensions in payment was introduced). Deferred PPF pension rights will be
revalued in line with the RPI capped at 5%." [Page 36]

This will be an unacceptable position for many pensioner scheme members who
will lose a significant proportion of their revenue based on this
calculation. In particular the older pensioners will be hit very hard
indeed.

I do hope you will be able to refer to this problem at Second Reading. The
OPA will be in touch with possible amendments on this issue prior to
Committee Stage.

For further information please contact:

Roger Turner

Executive Officer, Occupational Pensioners' Alliance
Tel: 01582 663 880
Fax: 01582 475 775
Email: rogerturner@opalliance.org.uk