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Pensions Bill

I start by thanking my noble friend Lady Turner for tabling this helpful amendment, whose intention I agree with. I am also pleased to note the support of the noble Lord, Lord Oakeshott. Clause 33 deals with the power of the Pensions Regulator to issue unpaid contributions notices to employers. This amendment would give the regulator the power, when issuing such a notice, to require the employer to pay interest on the arrears of contributions. When pension contributions are not paid on time, the scheme trustees lose the chance to invest the money on the workers’ behalf and there is a risk that as a result an individual’s pension pot may be smaller over time. When this matter was discussed in the other place, we accepted the need for some compensatory payment that would put the worker into the position in which they would have been had the contributions been paid on time. We announced our intention to introduce an amendment to require employers to pay interest on late-paid contributions. Clearly it would be difficult, if not impossible, to assess completely accurately the loss of investment value to an individual worker, given the numbers of people involved and the different investment strategies and portfolios of individual schemes and investment managers and so on. However, it would be relatively straightforward to require an employer to calculate and pay interest on the arrears of contributions. Such payments would both recompense workers for the lost investment opportunity and give employers an incentive to pay contributions on time. The Pensions Regulator’s powers to calculate and, where necessary, estimate the amount of unpaid contributions are set out in Clause 34. While I completely agree with the intention behind my noble friend’s amendment, we think that the ability to require interest to be paid would best appear in Clause 34, which is why we have tabled the government amendment. This will take the form of a power to require interest to be paid. The amendment would give the Pensions Regulator the power, when it issues such a notice, to require the employer to pay interest on the arrears of contributions should certain conditions apply. These conditions, along with the rate of interest and other technical details, will be prescribed in secondary legislation. This will allow for further discussion with the regulator and stakeholder consultation on the detail of how the provision will operate. I hope that I have assured my noble friend that I agree with the principle that she has raised and I thank her for doing so. Given my assurances that the government amendment will deliver the same intention, I respectfully ask her to withdraw her amendment.