Scottish Parliamentary Pensions Bill: Stage 1
The next item of business is a debate on motion S3M-2594, in the name of Alasdair Morgan, on behalf of the Scottish Parliamentary Pension Scheme Committee, on the Scottish Parliamentary Pensions Bill.
I am pleased to open the stage 1 debate on the Scottish Parliamentary Pensions Bill. Yet again, I can hardly accuse members of being self-interested, given the attendance for the debate.
This is the latest stage in a lengthy and detailed piece of work to introduce a highly technical but necessary bill to bring the Scottish parliamentary pension scheme and grants scheme up to date. Members will recall, although it was not the most glittering parliamentary occasion, that the Parliament debated in June the Scottish Parliamentary Pension Scheme Committee's report on its inquiry into the existing grants and pension schemes. That report recommended that a bill should be introduced to amend the schemes, and the Parliament agreed that it should reflect the committee's findings. We are here today to debate the general principles of the bill that was introduced. I am sure that members have studied the bill, which reflects the committee's recommendations.
The committee bill process is slightly different from the process for other bills. First, the Parliament scrutinises the committee's report on the proposal. It has done that. The Parliament then reaches agreement on the committee's findings before moving on to the stage 1 debate. Under the process, unlike with other bills, the committee is not required to make a further report on the general principles of the bill at stage 1.
I dare say that members have noted the level of detail in the bill. Although some of it represents a simple transfer of—albeit complex—material from the provisions of the existing pension and grants schemes, the bill also proposes a number of substantial changes to the schemes, which I will describe in some detail.
First, we looked at the role of the Scottish Parliamentary Corporate Body, which manages and administers the pension scheme. We noted that the SPCB is responsible for funding the pension scheme through contributions from its budget while, at the same time, it holds a fiduciary duty to act in the best interests of scheme members. The committee considered, and the SPCB agreed, that there is a potential conflict of interest—or at least the perception of such a conflict—in those two roles, given that one is on behalf of the SPCB's budget and the other is on behalf of scheme members. Part B of the bill therefore establishes a system of new trustees who will manage the pension fund. Part B covers their functions, their appointment and their duties as trustees.
I am afraid to say that, in times to come, the details of those complex rules will require further amendment to reflect at the very least changes in pension law, which seem to come along frequently. It is therefore desirable to create the ability to amend the pension and grants rules without the need for primary legislation and without going through the procedure that we have gone through and which has led to today's debate. Section 3 therefore provides for future rule amendments to be made by resolution of the Parliament. The Standards, Procedures and Public Appointments Committee has been invited to examine the detail of how that can be handled and what parliamentary rule changes will be necessary to bring it about.
The bill allows members to accrue pension benefits in future at either one fortieth or one fiftieth of salary per year of service. The additional cost of the one-fortieth accrual is to be met fully by an increase in the contribution rate of those MSPs who choose that option, which will amount to a change from 5 to 11 per cent of salary. It is worth stressing that the advice of the independent Government actuary has been followed in the setting of the amount of that additional rate.
The bill sets out new rules on early retirement and ill-health retirement. The committee considered that the table that is used to calculate early retirement benefits, which is based on both age and length of service, could be seen as discriminatory, or at the very least inequitable, in its treatment of age. The bill therefore proposes to replace the table with a simple reduction of pension for each year that a member is short of the normal retirement age when they take early retirement, using a set percentage that is actuarially neutral for the scheme, so there is no additional cost to the taxpayer.
The bill establishes a new twin-tier approach to ill-health retirement. For severe ill-health pensions—when a member's health prevents him or her from performing the duties of any occupation, rather than only the duties of an MSP or office holder—a full enhanced pension becomes payable immediately on retirement. A lesser ill-health retirement pension will be available for those who are assessed as unable to perform their duties as an MSP but who could carry out employment of a different nature. In such a case, pension entitlement accrued to date will be payable immediately.
In response to United Kingdom legislation, the bill stipulates that participating membership of the pension scheme will no longer be available to those who are aged 75 and over. The bill also reflects UK divorce law by allowing an ex-spouse, who is entitled to what is called a pension credit, to either join the scheme in their own right or transfer their calculated benefits from the scheme—to some other scheme, I presume. In addition, the bill allows the pension scheme to include provision for civil partners and unmarried partners upon the death of an MSP. In all three of those measures, we have taken great steps towards equality in the scheme.
The existing pension arrangements for the First Minister and Presiding Officer will be closed to any new incumbents of those offices. Instead, the bill provides that the pensions of a new First Minister and Presiding Officer should be the same as those of all other office holders, such as the Scottish ministers, under the new scheme rules.
No new contracts for additional voluntary contributions will be established, since those are commercially and easily available on the open market, but the system of buying added years contributions will continue. Again, that provision comes at no extra cost to the pension fund.
The committee had a remit to consider the grants that are payable to members on leaving office. The bill proposes to amend the current provisions on resettlement and ill-health grants by replacing the existing complex calculation tables for those grants with a simple calculation: one month's salary for each continuous year of service as an MSP will be payable, with a minimum payment set at six months' salary. The MSP resettlement grant will continue to be paid only to those who stand down at an election, whether voluntarily or otherwise.
For office holders, a sum of 25 per cent of the office holder part of the salary is payable. The bill also sets out new grant arrangements for the First Minister and the Presiding Officer, which will be calculated in a similar manner to that for MSP grants for resettlement or ill health.
The Finance Committee considered and reported on the financial memorandum to the bill and the Subordinate Legislation Committee considered the resolution power that is contained in section 3. To interpret their reports, both committees gave the bill a clean bill of health and I thank the members of those committees for the time that they took to consider it.
I thank my fellow committee members, the clerks and the legal advisers, who supported the committee and enabled the introduction of the bill that is before us. No one should underestimate the work that the clerks and the legal advisers had to put in, such as all the drafting work that was involved in introducing this complex bill.
I am confident that the bill as introduced meets the demands of providing an up-to-date scheme that reflects current pension and tax law and which balances equitably a range of benefits for members with the cost to public funds. It also provides a solid structure to administer and, if necessary, change the scheme in the future.
I move,
That the Parliament agrees to the general principles of the Scottish Parliamentary Pensions Bill.
I call Gil Paterson.
Thank you, Presiding Officer. I see you looking at me intently. You are probably thinking about my age and wondering whether I should declare an interest on that basis, so perhaps I should do so.
I thank the members of the committee, and Alasdair Morgan in particular, for their work and congratulate them on their important recommendations on the bill.
My experience tells me that when we consider such measures, it is like being in a goldfish bowl. There is perhaps the perception that we are looking after ourselves. In this case, I do not subscribe to that argument. The responsibility was given to members of the Parliament and they have carried out their duties extremely well.
I will focus on a number of the recommendations that the committee made, which I believe add a degree of fairness to the bill. One such recommendation relates to rule 57 in schedule 1, which is on the rights of unmarried partners—I was an unmarried partner at one point. I endorse fully the committee's recommendation that a provision be made for unmarried partners' pensions in the new scheme. This Parliament has a proud tradition of fighting for equality and I believe that the part of the committee's report on unmarried partners continues that. Unmarried partners have the responsibilities that married partners have, such as children or a mortgage. The provision will address that issue. I firmly believe that the ordinary person on the street would support that heartily.
I support and draw to the Parliament's attention rule 46, which is on increasing the minimum retirement age from 50 to 55. By doing that, we are bringing the legislation in line with UK pension law; that will be welcomed throughout the chamber.
When we discuss pensions, we are always looking into the future. Under the current pension system rules, a surviving spouse or civil partner would lose the pension should they remarry or cohabit. I am happy to support the committee's recommendation in paragraph 158 of its report, which states that that rule should be removed and that
"spouses' and civil partners' pensions should continue for life."
That provision should be removed because it is an anomaly; I am glad that it has been picked up. Most pensions and insurance policies of which I am aware continue for life and do not stop at a given time.
I turn to part O of schedule 1. As well as looking to the future, we must look to the past. Many people are or have been unable to put money into their pension fund for several reasons, such as family obligations or financial constraints—or perhaps they were a bit young and did not think too much about pensions. By introducing added years, we will allow individuals to make up for lost time at their own cost and at no cost to the taxpayer. That is why I fully endorse the intention behind part O, which is that members should be allowed to purchase extra years of service to add to their actual reckonable service.
I thank everyone who has been involved in the committee's work. I fully endorse the bill and recommend that Parliament should support it.
I support Alasdair Morgan's motion. I have little to add to his comprehensive coverage of the issues, but I will emphasise points that he and Gil Paterson made.
As Gil Paterson said, in many ways it is unfortunate that MSPs must debate and legislate for their own pension arrangements. That is often misunderstood in public as a desire to do so. For me and many others, that is not the case. I have no particular desire to deal with such matters, but we have an obligation in law to do so, which we must address.
Some might argue that we have a choice and that we should simply not have a pension scheme. That might accord with many people's view of our worth, but that would not be realistic or proper. Every organisation, trade and profession must plan for the people who work in it to retire. In our profession, retirement can happen unexpectedly. Often, it is not a choice but is dictated by circumstances that are largely outwith our control. For many politicians, retirement is dictated not by age or by length of service, but by other factors.
I have read out in the Parliament before a quotation from a House of Commons report on pensions that bears repeating:
"Few voters or even newspapers ever realise that the average length of service for a Member of Parliament is about 8 years. Sooner or later the guillotine falls. Either the voters feel like a change and sack them, or their local parties deselect them. Or their constituency boundaries change … What happens to the losers then? Nobody knows."
Actually, we know from our experience in this place that several of our former colleagues have struggled to find alternative work. While they were in Parliament, their original profession developed in various ways, which meant that they were left behind, so they found it difficult to re-enter that profession or other professions. We have a duty to ensure that provisions meet the distinct circumstances of our profession when our number is up, so to speak.
As Alasdair Morgan said, our pension provisions are rooted in the Westminster scheme. Since the Scottish Parliament was created, various changes that have been made to the provision at Westminster and in the National Assembly for Wales and to the law require us to examine and update our scheme. The Parliament has come adrift from the schemes in Westminster and in Wales, which provide the comparators for our scheme. Unless we make the changes that the bill proposes by 2011, we will be adrift of the legal requirements that we are obliged to meet.
It is worth repeating that the changes that the bill will make follow the unanimous findings of a committee of Parliament. It is also worth noting that there has been comparatively little commentary on or disagreement with the proposals in or beyond this place.
We should remember that the scheme that is available to members is contributory. The proposal that is before Parliament to offer an option of enhanced benefits by changing accrual rates must be funded entirely by members. The changes are designed in part to recognise the circumstances of parliamentarians and will be paid for fully by parliamentarians, at no cost to the public purse. Indeed, the changes overall are cost neutral to the whole scheme. Government actuaries have painstakingly checked that.
I turn to the set of proposals that Alasdair Morgan outlined in his speech, namely the committee's desire as set out in its report, and now reflected in the bill, to separate the role of the Scottish Parliamentary Corporate Body from that of the pension fund. Alasdair Morgan spoke about the potential for conflict of interest and the need to separate the roles by way of the establishment of trustees. That sensible proposal brings the scheme into line with many other pension schemes. The role of a pension scheme trustee is onerous and a lot of training will be required. We should enter into discussions on that new role with our eyes fully open with regard to what we are asking the trustees to do.
The proposals that have been put before the Parliament seek to find the right balance between the interests and needs of MSPs and those of the public purse. Although, at one level, they are modest improvements, on another level, they are necessary revisions to the law. I hope that members will support the general principles of the bill at decision time.
I thank Alasdair Morgan for his excellent explanation of these detailed issues and for his work to date on the bill. I look forward to working on the committee stage of the bill. I know how disappointed Alasdair Morgan is to be debarred from so doing.
The Liberal Democrats view the matter as a parliamentary issue; our members will have a free vote at decision time. As such, I speak in the debate as an individual and not as a party representative.
As we are all acutely aware, any discussions of members' salaries, expenses or pensions are placed under detailed scrutiny. That is particularly the case at a time when the global economic crisis places an onus on each one of us, particularly those who are in public office, to ensure that every penny is well spent. Although the very mention of MSPs' pensions normally causes controversy, I hope that the bill will be welcomed as an attempt to tidy up some of the anomalies in the existing transitional scheme.
As we heard in the debate, particularly from Alasdair Morgan, the bill tidies up the potential conflict of interest that arises from the corporate body being responsible for funding and administering the scheme. It also deals with legislative changes since the establishment of the scheme in 1999 and introduces flexibility for scheme members. All the changes are to be welcomed: they are measured, balanced and appropriate ways in which to take forward the matter.
I urge members to support the general principles of the bill at decision time. In doing so, we will continue to take forward the Scottish Parliament's strong tradition of dealing with such issues in an open, transparent and—above all—fair manner.
I thank members for their contributions to the debate.
I must disappoint Nicol Stephen, albeit slightly. Although I no longer serve on the bill committee, I anticipate appearing before it. If any amendments are lodged, I will speak on them. Indeed, given that one or two minor amendments of a technical nature require to be lodged to tidy up the bill, I look forward to moving them at committee at the appropriate stage.
I thank Gil Paterson for his speech, in which he addressed some of the changes that are proposed in the bill. As he rightly said, the provision for unmarried partners is a necessary change. Clearly, there will always be some difficulty in agreeing on the definition. There will always be controversy on what does—and what does not—constitute an unmarried partner. I hope that those members who have had time to study the definition in the bill consider it to be appropriate for the age in which we live. I also hope that the majority of those who think they are entitled to make a claim under the provision think, as I do, that the provision is fair.
Gil Paterson mentioned the partner's pension provision, which currently sees the removal of pension from a partner who subsequently remarries. I hope that all members agree that ceasing that provision is a fair position for us to take. The current position is not only old-fashioned but mean-spirited.
Peter Peacock made some valid points. One was about the difficulties that many ex-MSPs face when they leave the Parliament by retiring early through no desire of their own—perhaps, as the member suggested, through the desire of the electorate or their party colleagues. Mr Peacock made the point that such members do not receive much sympathy outwith the chamber. The proposed early retirement provisions, which will allow members to retire after age 55 regardless of their length of service—under the existing scheme, they must have at least 15 years' service to be eligible—are welcome, especially as they will place no extra cost on the public purse. I cannot stress that point often enough.
The initial impetus for the bill was not that we thought that we should improve the pension scheme so that it was of more benefit to us, but legislation—in the main, UK legislation. The Finance Act 2004, the Pensions Act 2004 and various other acts have changed the requirements that pension schemes must meet. If our current scheme continued past 2011, we would be acting outwith the law. Because of the way in which the Scottish Parliament and its pension scheme are set up, the necessary changes could not have been brought about without the introduction of the bill that is before us. If passed, the bill will allow changes that are necessitated by future legislation to be made in a much simpler manner, without taking up so much parliamentary time.
Today we have before us an up-to-date, modern, accessible scheme that is fully compliant with legislation and which reflects the best practice that is available to pension schemes. The proposed changes come at no additional cost to the taxpayer; overall, there will be a large saving to the public purse, largely because of the changes that have been made to the pension arrangements for the First Minister and the Presiding Officer. Optional improvements are available to members, if members want them and are prepared to pay the cost.
I invite members to agree to the motion tonight. I almost said "in the lobbies"—I must get out of that habit. I ask members to press their buttons in support of the general principles of the bill.