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Pensions Bill

I thank the noble Baroness for the opportunity to discuss the principle of having an imprisonment option for those convicted of the new offence under Clause 40 and to speak to the government amendments. Where an employer wilfully fails to enrol or re-enrol jobholders into a qualifying pension scheme, those workers are losing out on the opportunity to save in a workplace pension with the advantage of an employer contribution. Given these serious consequences, the ultimate sanction for such non-compliance should be criminal prosecution. I stress that criminal prosecution will not be undertaken lightly. The regulator will have discretion over whether it is appropriate to bring about a criminal prosecution, and will generally use it only as a last resort. However, creating this offence will send a clear message to all employers that such behaviour will not be tolerated. We have proposed three amendments to clarify the provisions relating to this offence to ensure that prosecutions can be brought against a wide range of employers. The first amendment, Amendment No. 97A, is a minor technical amendment to the drafting of the limit for fines applicable on summary conviction. Consistent with the way in which penalties are expressed in other legislation, the amendment refers to a fine not exceeding the ““statutory maximum””, rather than to ““level 5 on the standard scale””. The second amendment, Amendment No. 97B, is a new clause designed to make responsible individuals in bodies corporate criminally liable for wilful breaches of the enrolment role. That deals directly with one of the points made by the noble Baroness about employers, if individuals, being sent to prison. Companies cannot be sent to prison, and the amendment extends the provision to people who as individuals in body corporates are responsible for wilful breaches of enrolment duties. In a similar vein, the third amendment, Amendment No. 97C, is a new clause that will allow for the prosecution of employers who are set up as partnerships. It allows penalties to be paid from a partnership’s business funds and individual partners to be prosecuted. I am bound to say that this is a standard measure that brings the Bill into line with other legislation, such as the Gangmasters (Licensing) Act 2004. This is not unique. Together, this package of amendments ensures that the criminal offence provides a transparent and workable sanction of last resort. On Amendments Nos. 96 and 97, as I said earlier our compliance policy has been developed as a three-stage strategy: first, to educate and inform employers of their duties; secondly, to enable them to simplify and comply easily with their duties; finally, to enforce them. There are therefore a number of opportunities for employers to meet their duties, and the criminal sanction is very much the back-stop of our enforcement strategy. It is in line with the regulator’s existing powers in the Pensions Act 2004, which includes the option of imprisonment for offences such as the intentional alteration or destruction of documents. Other regulatory regimes, such as those set out in the Companies Act 2006 and the Health and Safety at Work etc. Act 1974, also have the option of imprisonment. The noble Baroness recognised that. She asked how many times these sorts of provisions have been used and individuals imprisoned. I do not have the data for the past 10 years, but they have been used to prosecute individuals for health and safety offences, and individuals have been imprisoned. I will try to get the data for which the noble Baroness asked. Although our expectation is that the sanction will be rarely used, it is none the less an important deterrent. The new duties placed on employers are designed to ensure that millions of workers will have access to good-quality pensions savings, some for the first time. Failure to fulfil these duties therefore seriously jeopardises the retirement income prospects of these individuals. We need employers to take their responsibilities seriously. Given that the regulator will have powers to impose fairly large civil penalties, it is reasonable to suppose that employers who are unresponsive to these financial penalties may be similarly unresponsive to a fine imposed by a court. We therefore believe that it is right that an employer who ““wilfully fails to comply”” ultimately faces the possibility of imprisonment. I reiterate that our expectation is that the criminal sanction will be used rarely and only in the most serious of cases. The noble Baroness pressed me to put on the record my understanding of what ““wilfully fails to comply”” means. I am cautious about doing so, because I do not want to put on the record an off-the-cuff comment that might be seen as a point of interpretation. However, if someone wilfully fails to comply, it has the components of deliberately seeking not to comply and possibly persistently not complying. This is not a new term. It is around in legislation, and I am sure that there is an appropriate precedent as to how it should be interpreted. My note says that I hope this provides the noble Baroness with reassurance, and I ask her to withdraw the amendment. I suspect that it will not, but in any event I will move the government amendments in due course.