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Pensions Bill

moved Amendment No. 72: 72: Clause 23, page 10, line 25, leave out from beginning to ““has”” and insert ““A hybrid scheme that”” The noble Lord said: I shall speak to the other amendments in the group. Government Amendments Nos. 72, 73 and 74 are intended to clarify the way in which hybrid schemes will qualify. Hybrid schemes are an integral part of the pension landscape. They exist in a variety of forms, some providing the better of a defined benefits or money purchase pension and some combining elements of both. Clause 23 sets out the quality requirements for UK hybrid pension schemes, which is meeting the money purchase or the defined benefit quality requirements, or in some cases, both of those tests in relation to parts of a hybrid scheme. We want to encourage employers to retain existing high quality pension provision. We know that hybrid schemes can offer employers a way of sharing the balance of risk in pension provision with their employees. We therefore need to ensure that the quality requirements can be applied to a range of schemes and in a way that minimises the burdens on business. Government Amendments Nos. 73 and 74 will achieve this by ensuring that Clause 23 is workable for a wide variety of hybrid schemes. They enable regulations to modify the quality requirements to accommodate better schemes, such as combination hybrid and cash balance schemes. Amendment No. 72 simply tidies up the drafting of the clause by ensuring that it is consistent with similar provision in the employer duty chapter. The final government amendment in this group is to Clause 86. Clause 86 defines terms for the purposes of Part 1 of the Bill, including definitions of the occupational pension schemes to which the quality requirements in Clauses 19 to 23 apply. Amendment No. 121 refines the definition of a hybrid scheme as a scheme that is neither a money purchase scheme nor a defined benefit scheme. This refined definition should assist employers in identifying whether their scheme falls into that category and so provides a clearer indication that they should follow the rules under Clause 23 in assessing whether the scheme meets the quality requirement. This is a minor and technical but necessary amendment. We believe that these amendments to the qualifying requirements for hybrid schemes strike the right balance between safeguarding private pension saving and minimising the burdens of business. The noble Lord, Lord Skelmersdale, has tabled an amendment that would require the Secretary of State to direct employers to the appropriate test for their hybrid scheme by rules made in regulations. Our intention is that rules will direct employers and their advisers to the appropriate test. We are keen to minimise burdens on business. Employers will often set up hybrid pension arrangements that are tailored to suit their workforce. This means that there is a wide range of hybrids and the landscape is ever-changing. We need the quality requirements to respond flexibly to hybrid schemes as they develop, to provide employers with certainty on whether their scheme meets the right quality standard, and to safeguard the interests of members who will be saving in these schemes. Primary legislation sets out the fundamentals, giving employers certainty about what test a qualifying hybrid scheme will have to meet. Regulations will enable the test to be modified for certain types of hybrid and rules will direct employers to the appropriate test and set out its detailed application. Rules provide for greater flexibility and enable us to respond to future innovations in pension provision quickly and flexibly. The noble Lord’s amendment, by requiring regulations, would remove that flexibility. I beg to move.