Baroness Sherlock (Lab)

My Lords, in moving Amendment 116 I will speak also to government Amendments 117, 118 and 119. These are all minor and technical amendments. Amendment 116 to Clause 49, concerning guided retirement, makes a technical change needed to ensure that the legislation functions as intended. The amendment provides greater clarity that deferred members—those no longer actively contributing to the scheme but who are not yet drawing their pension benefits—are considered eligible members. This ensures that the framework covers the broad range of individuals for whom it was designed and reduces the risk of misinterpretation. The amendment does not change the policy; it simply provides the clarity needed for effective implementation, consistent with the policy intent. Government Amendments 117, 118 and 119 will help to ensure that well-funded superfunds will not be forced to wind up when they still provide a high level of security to their members. Under the superfund supervisory framework that will be established through the Bill, a breach of the technical provisions threshold may result in the capital buffer being released to the scheme’s trustees, whereas a breach of the protected liabilities threshold may result in the superfund winding up. In drafting this policy, we anticipated the upside-down situation which can arise within a superfund in certain circumstances when the protected liabilities threshold is breached before the technical provisions threshold. We have therefore taken powers in Clause 85(4) to determine that a breach of a threshold may not take place in specified circumstances. However, further engagement with industry and changing market conditions have indicated that the previously little-known occurrence in which these thresholds swap could be more common in future. Therefore, we need to build more flexibility into the forthcoming regulatory framework. As I said in Committee, it is important that we recognise that higher benefit levels in the PPF are good news for members of all schemes supported by the PPF. The protected threshold has an important purpose: to ensure that members are protected in the rare instances where superfunds are deemed to be failing. Retaining the threshold will help the Pensions Regulator monitor the risk of a superfund failure. However, we recognise that forcing a superfund to wind up in instances where its technical provisions are lower than its protected liabilities would not be in members’ best interests if the scheme were otherwise able to meet its liabilities. These amendments therefore seek to create further flexibility to ensure that superfunds are both secure for members and commercially viable. Other approaches may risk tying superfunds to absolute requirements before experience, insight and evidence can clarify the appropriate approach to take. We need to consult fully on superfunds’ funding thresholds, which will be set out in regulations, with a particular focus on this very issue. I hope the House can accept these amendments. I beg to move.