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Pensions Bill

I am grateful to the noble Baroness for giving me the opportunity to speak to Clause 48. It provides the Pensions Regulator with an additional statutory objective to maximise compliance with the new duties arising under Chapter 1 of Part 1. As previously discussed, we have tabled Amendment No. 103C to extend that objective so that it also covers the regulator’s enforcement roles in relation to the prohibited recruitment conduct in Clause 49, and the proposed prohibition on inducements at Amendment No. 106A. Clause 48 amends Part 1 of the Pensions Act 2004 to ensure that the new compliance functions of the Pensions Regulator are covered by its statutory objectives. The additional objective will define and communicate the regulator’s compliance role. It will ensure that the compliance approach is transparent and accountable by setting out clearly the goal of the new compliance powers that this Bill grants the regulator. It will also place the compliance regime on an equal footing with the regulator’s other work, creating a firm foundation for its effective delivery. We do not want to disrupt the regulator’s vital and successful regulatory role or its current objectives, which include protecting the benefits of members of all work-based pension schemes. That protection will extend to members of the personal accounts scheme. The regulator’s new compliance functions will therefore supplement its existing functions, rather than replace them. We will work closely with the regulator to minimise the impact of this work on its current role. The noble Baroness asked precisely how the regulator will exercise its new powers. Like her, we are confident that the majority of employers will comply with their new duties, but need an efficient and effective compliance regime underpinning the reforms. The compliance regime that will be enforced by the Pensions Regulator will be crucial to the overall success of these pension reforms. As I indicated earlier today, we are proposing a three-stage compliance regime comprising educating, enabling and enforcing. The initial focus is on educating and enabling employers to meet their new duties. This Bill sets out a framework of powers that enable the regulator to take proportionate, graduated compliance action where those initial steps fail. Action to combat non-compliance will start with statutory notices, moving to fixed penalties and then escalating penalties if non-compliance persists. This provides a flexible sanctioning toolkit in line with the recommendations of the Macrory review. We have also built on analysis of other regulatory regimes. The noble Baroness asked whether all employers would be required to register. The answer is yes, they would. Clearly, information will come from HMRC about the range of employers out there, but there will be a requirement for all employers to register. She talked about small employers who will not have heard of the Pensions Regulator and she asked what we will do to help them comply. It will be the Government’s role to oversee the delivery of consistent and coherent information to support the introduction of the reforms, and this will help to raise awareness among all employers that the Pensions Regulator will educate and enable employers in order to help them to meet their new employer duties. The intention is to provide tailored messages to specific segments of the employer population so that, for example, small employers receive messages that are appropriate to them. Employers will have the opportunity to explain their circumstances and obtain support at every stage. Only where there is persistent or serious non-compliance will proportionate penalties be applied. The noble Baroness asked about the funding arrangements and the costs of this. As noble Lords will be aware, at present the Pensions Regulator is generally funded by a levy on pension schemes, and the general levy funds the activities of the pensions ombudsman and the pensions advisory service as well as the Pensions Regulator. The levy is used to pay for a range of activities, including ensuring that schemes are competently administered, that pensions deficits are reduced in a timely way and that members’ benefits are not compromised as a result of transactions such as company takeover and financing. However, we fully recognise that the Bill significantly extends the regulator’s current role and responsibilities. Moreover, this role is central to the success of the reforms by helping employers to understand what they need to do to meet the new duties as well as by offering protection to individuals. I am therefore happy to place on record that the Government are committed to supporting the Pensions Regulator to deliver the compliance regime. Set-up costs for the compliance regime will be funded by the Government by way of a separate grant in aid funding stream, subject to parliamentary scrutiny. As noble Lords will be aware, grant in aid can be used for the exercise of the regulator’s functions and to fund the set up of the compliance regime because the regulator’s functions are being extended by the Bill. Expenditure and funding for the establishment of the compliance regime will be kept completely separate from the Pensions Regulator’s expenditure funded by the general levy and will be accounted for separately. As part of its regular stewardship of the pensions regulator, the department will monitor both funding streams to ensure that they are put to their intended use only. We are exploring further how ongoing compliance costs will be funded, and we will take that work forward with the relevant government departments and the regulator in conjunction with the development of the compliance regime. There is clearly much detail to be worked out, but I hope I have set out the parameters and the arrangements under which the Pensions Regulator will operate. The compliance regime is based on the recommendations of the Macrory review, which underpins the graduated light-touch approach that I have outlined. I hope that that deals with the queries of the noble Baroness. If not, I am sure she will ask again.