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Pensions Bill

moved Amendment No. 110BA: 110BA: Clause 58, page 30, line 5, at end insert— ““( ) A scheme established under this section shall not be subject to the requirements to obtain audited accounts and an auditor’s statement about contributions under regulations made pursuant to section 41 of the Pensions Act 1995 (c. 26).”” The noble Baroness said: I shall speak also to Amendment No. 110DA. These amendments concern the audit arrangements for the new personal accounts pension scheme. They have been suggested by the Institute of Chartered Accountants in England and Wales, an organisation with which the Minister and I are both familiar. The problem that the amendments seek to address is that the legislation relevant to trust-based occupational pension schemes has an audit requirement by virtue of Section 41 of the Pensions Act 1995 which is impractical to operate without amendment for personal accounts. The current audit rules require a pension scheme auditor to state whether in his opinion contributions have been paid in all material respects with the payment schedule. This encompasses both accuracy of payment and timeliness but is very difficult, not to say impossible, to achieve and is certainly costly in terms of audit fees for complex pension schemes with many employers involved, as this will be. This is not a new problem; it arose in connection with stakeholder accounts. Eventually, some sort of compromise was reached so that the audit report was replaced by a report by reporting accountants—which, as the Minister will be aware, is not the same thing as an audit—on the trustees’ statement in relation to controls. The amendments are designed to get to the same point for personal accounts. Amendment No. 1l0BA removes the need for an auditor’s statement about contributions under Section 41 of the 1995 Act. Amendment No. 110DA specifies what will be in its place; namely, a trustee’s statement about systems and controls and then a reporting accountant’s report on the design and operation of those systems. This was debated in another place and the Minister there made some sympathetic noises but these did not go so far as to accept the concerns expressed by the Institute of Chartered Accountants in England and Wales. Hence; we have been asked to table these amendments again in your Lordships’ House. In another place the Minister appeared to accept that auditors will find it difficult to give a clean audit opinion on contributions where the contributions are paid by a myriad of employers, many of them very small. But the Minister clearly did not grasp that in seeking what he called ““proper accounting”” and accounts which are not ““unduly qualified””—I do not know what either of those terms means—there is only one realistic option, which is a systems-based approach. We are back to the best being the enemy of the good and to the DWP’s granular approach to implementation. I hope that the Minister’s own background and experience will allow him to see that a conventional audit report as envisaged for single employer schemes simply does not translate into something like the personal accounts scheme. ““Audit”” is the wrong concept or, alternatively, it is one which is both over-engineered and destined to end in mechanical failure. I would not regard it as right to leave this issue to regulations. It took a long time for the accounting profession to sort out the issue in connection with stakeholder pensions and it would not be right for us to let personal accounts go ahead without proper reporting arrangements in place. There is a manifest problem in trying to retrofit the personal accounts concept into the existing law for trust-based schemes. We should recognise that now and on the face of the Bill. I beg to move.