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Pensions Bill

This has been a helpful place to start our deliberations today. The noble Lord, Lord Hunt, said that whatever we do we should not stifle innovation. I very much agree. Of course, innovation can bring with it uncertainty—unknowns—which is why my noble friend Lady Hollis is absolutely right to say that we need some headroom in our regulatory armoury to cope with it. I say to the noble Lord, Lord Hunt, that I do not feel under any pressure from within the department to rush into legislation. We have the time to take this forward in the way that he and every noble Lord who spoke suggested. If there is a difference between us today, it is that we want to start with the building block of the government amendment, recognising that it needs to be built on, rather than withdrawing it and coming back with something afresh. That is how we wish to proceed, especially because we do not want the message to get out to those who, we know, do not want these changes to regulatory power that there is a process by which they can prevent them. I know that that is not the position of the overwhelming majority of stakeholders, but we know there are some out there, especially in the venture capital world, who do not want these powers. That is absolutely clear and we must be careful not to give any succour to them. Frankly, it would be nice if we could conclude the Committee stage this side of the Recess, just because it might make the summer holidays a little more bearable. The important thing is that we spend the time that we need to get this right. If we do spill over, I am sure that the Whips will be on to me, but we need to get this right. I still hope that, with the time that we have available, we can conclude, but it is not entirely within my hands. The noble Lord, Lord Lucas, talked about super-creditors and whether we are changing the status of pension funds. I do not think that anything in the Government’s proposals would suggest that that is the case. I accept entirely the need to build reassurance in respect of those issues. The noble Lord used the phrase, ““a great backwash retrospectively””. I know that he is concerned about retrospection. We will come to an amendment on which I hope that I can give him further reassurance. My noble friend Lady Hollis is right. The current flexible clearance system has worked well. Before my time and before I was engaged in this legislation, there were fears about it. I am grateful for her support and for her input on the lessons of history. It comes back to innovation. There are new forms of pension activity out there, which are difficult prospectively to define in a way that means that we do not need to have some discretion in our powers. The noble Lord, Lord Oakeshott, berated my colleague the Minister for Pensions. In defence of my honourable friend, I should explain that he was concerned that we might lose the government amendment, not because there was no recognition that we needed and were keen to work together over the next few months to build on it, but because of the impression that it might create. We need to be firm about that. I believe that he tried to reach the noble Lord. Ultimately, we hope that we have been able to communicate in a satisfactory way. The noble Lord, Lord Oakeshott, is right. We are trying to get to the same place, although we might have a little bit of a spat about the journey and how we reach that place. However, this is important and comes back to consensus. At the end of the day, it will be quite difficult, with all the engagement that we will have, to write something as specific as some Members of the Committee want. If we have to have discretion in powers at the margins, it is important for people to understand why. They can gain that understanding from engagement with us as stakeholders or as legislators. There is a clear commitment to liaise with the Committee to make sure that noble Lords have a chance for input into the process before we return on Report. The noble Baroness, Lady Noakes, said that no account had been taken of consultation. With respect, I do not believe that that is the situation. The legislative approach was to enable consultation responses to be considered in drafting regulations. As I have said previously, the consultation document indicated that we would bring forward a broad enabling power. The thrust of one point was whether companies are unsaleable if they have DB schemes. We do not believe that to be the case. Clearances are still available. Just this or last week a significant legal firm wrote in Pensions Week that it certainly is not advising against investing in firms with DB schemes. We need to ensure that, as part of the objectives of the Pensions Regulator, employers do not sidestep their pension obligations and that the regulator has a number of powers to enable it to deal with that. 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 other stakeholders. It clearly would 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 reassure noble Lords that it is not our intention, by introducing these provisions, to increase such risks. The Government’s new clause includes safeguards covering the power to amend provisions, including the requirement to consult the regulator and other key stakeholders. We will be dealing with an amendment that specifically broadens the range of people whom we are required to consult. We have sympathy with that. It 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 these risks. The noble Baroness’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, by enabling the regulator to meet statutory objectives while avoiding placing undue burdens on the sponsors of defined benefit schemes. It has been a fundamental principle that the regulator should act reasonably and take a risk-based approach. We now have a number of years’ operational experience, which serves to demonstrate the efficacy of that approach. I reassure the noble Baroness that it is not the Government’s intention to use the new power to change this fundamental approach; we simply intend to ensure flexibility in the face of an increasingly sophisticated and fast-moving market. The noble Lord, Lord Lucas, talked about making pension schemes higher priority creditors. We do not believe that these proposals would increase the priority of pension schemes, which must be treated fairly alongside creditors of equal priority. I am sure that we agree on that. Ros Altmann has pointed out that some organisations are thought to make money out of the jettisoning of pension obligations. I am sure that noble Lords across the Committee consider that behaviour unacceptable. The noble Baroness touched on the burdens of clearance. This is voluntary. TPR has published detailed guidance on when and where it is appropriate. The regulator has always, where reasonable, met the commercial needs of applicants within their deadlines. I suggest that clearance is generally a small additional cost in the global cost of a transaction and that it is part of standard due diligence. I hope to persuade the noble Baroness not to press her amendment. I think, from all the contributions and indeed from our discussions on Monday, that we are on the same page. We need to stay there and move ahead together to end up in a good place.