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Pensions Bill

I am grateful to all noble Lords who have spoken. It has been a useful opportunity to discuss genuine issues and concerns. I wish to speak specifically in response to the three further amendments tabled by the noble Baroness and the noble Lord, Lord Lucas. The purpose of the first of these amendments, Amendment No. 130EX, is to group together contribution notices, financial support directions and restoration orders under a single heading. I appreciate the intention as regards drafting efficiencies. However, the amendment is not necessary for the intended operation of the legislation. Regarding Amendment No. 130EY, one of the Pensions Regulator’s objectives when it was set up in 2005 was to protect the benefits of members of work-based pension schemes and to protect the PPF. As part of this objective the regulator needs to ensure that employers do not sidestep their pension obligations and it has a number of powers available to enable it to do so. In considering whether, without regulations, there is a material risk to the security of members’ benefits or to the PPF, the Secretary of State will have to form a judgment after getting the views of the Pensions Regulator and of other stakeholders. It would clearly not be appropriate to exercise the power if it did not reduce the existing material risks or, indeed, if it created serious new risks. I should like to reassure noble Lords that it is not our intention that by introducing provisions we materially increase such risks. The Government’s new clause proposed in Amendment No. 130EW includes safeguards to the power to amend provisions, including the requirement to consult the regulator and other key stakeholders. This will ensure scrutiny by relevant parties who will be alert to, and will actively seek to prevent, material increases in such risks. The consultation process should identify any unintended consequences that could increase such risks. The noble Lord’s amendment touches on the wider issue of ensuring an appropriate level of regulation. I agree that it is essential that we strive to achieve the difficult balance required to put in place regulations to enable the regulator to meet its statutory objectives but avoid undue burdens on sponsors of defined benefit schemes. It has been a fundamental principle that the regulator should act reasonably and on a risk-based approach. We now have a number of years’ operational experience that demonstrate the efficacy of that approach. I should like to reassure the noble Lord that it is not the Government’s intention to use the new power to change this fundamental approach, but simply to ensure flexibility in the face of an increasingly sophisticated and fast-moving market. My view is that the safeguards that we have put into our amendment, together with the history of practice so far, offer reassurances of the intent of the Government and demonstrate the efficacy of the fundamental approach of the regulator. I hope that he will not press the amendment. The third of this series of amendments, Amendment No. 130FK, in the name of the noble Baroness, Lady Noakes, would do two things: it would require the Secretary of State to lay a regulatory impact assessment before Parliament in respect of these powers and, secondly, it would require its approval by both Houses. In the consultation document, we said that the overwhelming majority of pension schemes would not be affected by these changes and that they would have a negligible impact on the private and voluntary sectors. However, the consultation document confirmed that a full impact assessment would be produced if the assumption in the document of a negligible effect on business was incorrect. Some of the responses to the consultation indicated that they do not agree with this government assumption but we have had no specific examples or data to support this argument. We would expect stakeholders to provide specific examples of what does not need to be referred for regulator clearance now but what they consider would need clearance under the new regime. This would allow us fully to assess the impacts. Many of the organisations and pensions professionals that responded have offered to discuss their thoughts further with the department. I expect us to take up the offers in a number of cases as we work on the detail of the regulations throughout the summer. It will also provide an opportunity to discuss with them their concerns about an impact assessment—those concerns were expressed by noble Lords this evening—and I am sure that we will receive valuable input. I turn to the second point in the amendment. Normally, impact assessments do not need parliamentary approval. The regulations made under this power will be affirmative, providing Parliament with an opportunity to consider and debate further. As I have said, we intend to have further discussion with stakeholders on the detail of the regulations. To be clear, I include as stakeholders noble Lords who participated in these exchanges. If the case for an impact assessment is made out, we will attach one to the Explanatory Memorandum to the regulations. However, I do not think that it is necessary for there to be an express commitment in this Bill for parliamentary approval. I hope that noble Lords agree that it would tie up parliamentary time unnecessarily, delay enactment of legislation and go well beyond the proportionate levels of scrutiny that usually apply. I therefore hope that the noble Baroness will not press the amendment. I want to pick up on some of the specific points that have been raised. The noble Baroness said that there was no proposal for a wide power in the consultation. With respect, I disagree; it is pretty explicit in paragraph 1.38 of the consultation document. She also said that it was not targeted on buyout. We do not think that a simple prohibition on new buyout models will work. The BVCA and lawyers have offered to attempt draft legislation but, frankly, nothing has yet been received. The noble Baroness also said that there was no consultation consensus. In consultation discussions, parties had varied views. The BVCA did not want any action but the CBI and NAPF share the Government’s concerns about new business models. The noble Baroness asked whether we would withdraw the amendment. Given the rate that we are moving at, I do not think that we will move it tonight. However, that is not the way in which we want to go. We want to engage on the draft regulations. That is the appropriate way forward. The noble Baroness also suggested that the amendments are stopping deals. I am bound to say that we have no evidence of increased clearance applications to the regulator, which could provide certainty to parties if they want that. That is a well tried and tested route. The noble Lord, Lord Lucas, said that we would have to deal with the effects of this 10 years after the event. Clearly, that is not the case; there is a six-year time limit on contribution notices in any event. There is no intention to extend this—