Baroness Sherlock (Lab)

My Lords, I shall speak also to the other government amendments in this group. I start with the context for these amendments. The AWE pension scheme is a trust-based defined benefit—DB—pension scheme for employees and former employees of AWE plc, the Atomic Weapons Establishment. Since 2021, AWE plc has been wholly owned by the Ministry of Defence, and the pension scheme is backed by a Crown guarantee. The new clauses will allow the Government to defund the existing scheme and establish a new central government pension scheme for its members. They apply only to the DB pension scheme; AWE’s DC contract-based scheme is not affected. The assets held by the scheme will be sold and proceeds transferred to the Treasury. This measure was announced by the Chancellor in her 2025 Budget, but the principle was announced by the previous Government in a Written Ministerial Statement on 6 July 2022. The new scheme will be a public pension scheme. This is in accordance with wider government policy that when a financial risk sits wholly with government, as it does here, it should not hold assets to cover that liability. The taxpayer is already exposed to the risks, and the liability can be managed more efficiently in the round along with other unfunded liabilities met out of general taxation. This measure will help to ensure that liabilities are funded in the most efficient way while ensuring the long-term security of members’ benefits. This will also support the Government’s fiscal strategy by reducing near-term borrowing, as it will reduce the amount to be raised in debt markets. I assure the House that the amendments in this group explicitly protect the accrued rights of all members at the point of transfer. The new public scheme must make provision that is, in all material respects, at least as good as that under the AWE pension scheme. This includes any rights to discretionary benefits that may exist under that scheme at the point of transfer. The new statutory scheme will be based on the existing rules, and the discretions exercised under the existing rules by the trustee, AWE plc and, indeed, by the Secretary of State for Defence will be codified into the rules of the new statutory scheme. The rules of the new scheme will be drafted in consultation with the trustee of the present scheme. The Government will work with the trustees and future administrator of the scheme to ensure transparency and clarity at the point of transfer. AWE will also work with the current trustee and the future administration to ensure members receive all the information they need at that time. The new clauses in Amendments 145 and 146 provide that the new scheme should be established by regulations and set out the kind of provision that may be made by these regulations and any amending regulations. Although they are fairly standard for public schemes, I assure the House that the Government have considered carefully how they may be relevant to this scheme. The new clause in Amendment 148 ensures that scheme rules cannot be amended unless prescribed procedures have been followed. In most cases, the requirement is to consult. However, if the proposed amendment might adversely affect members’ rights, the regulations must prescribe additional procedures to protect the interests of members, including obtaining the consent of interested persons or their representatives. This will include the employer, the members and their representatives. AWE has already engaged with both its recognised trade unions—Unite and Prospect—and will continue to have regular contact with the unions about future changes. The new clause in Amendment 149 will enable the Government to direct the disposal of the assets currently held by the pension scheme for the benefit of the Exchequer. We expect the bulk of the assets to be sold before the new scheme is established. Regulations under this clause must ensure that trustees’ liabilities following the sale of assets will be met by public funds, thus ensuring that pensions in payment and any other trustee expenses will not be affected. Regulations under this clause will also ensure that the trustee and AWE plc are protected against any liability that might otherwise arise because they have complied with the Government’s direction to sell assets. This clause includes a Henry VIII power to disapply or modify specified statutory provisions. To be clear, these powers can be used only in relation to regulations made under this clause and are intended to enable protection for the trustee. For example, we expect that we will need to disapply the scheme funding regime in relation to the scheme once the sale of assets begins. The new clause in Amendment 150 will allow the Treasury to amend tax legislation to ensure that the transfer of the AWE pension scheme to a new public scheme will be tax-neutral, meaning no additional or unexpected tax liabilities will arise for those affected by the changes. The Treasury will use these powers to modify the application of relevant tax law where it is needed, following the precedent set when the Royal Mail pension scheme was defunded. Indeed, this clause is based closely on that legislation. The new clause in Amendment 151 provides a legal gateway to permit the sharing of information between named parties to facilitate the establishment and administration of the new scheme. It also gives the Government the power to make regulations requiring individuals or organisations to provide the information needed to establish and administer the new public scheme and transfer the accrued rights. This should not be needed, as the Government are collaborating with the relevant parties. The provision will be required only in the unlikely case that a party does not provide the necessary information upon request. The proposed new clause in Amendment 152 ensures proper consultation and parliamentary scrutiny for regulations made under this part of the Bill, particularly those affecting the establishment and operation of the new public pension scheme and the transfer of assets. The Government are required to consult the trustee of the AWE pension scheme before making regulations to establish the new public scheme, to transfer accrued rights, or to transfer assets and liabilities. That will ensure that the interests of scheme members will be fully considered before these regulations are made. In addition, any regulations that could adversely affect existing rights that have retrospective effect or that set financial penalties are subject to the affirmative procedure. That will ensure that significant changes are subject to parliamentary approval and scrutiny. Other regulations under this part of the Bill are subject to the negative procedure, although I note that the taxation regulations are subject only to annulment in pursuance of a resolution in the other place, as is usual for such legislation. I beg to move.