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Pensions Bill

The noble Lord is right that we have touched on good faith in our previous discussions and I understand the concerns to which he has referred. I fully understand, and agree with, the need to provide protection to those who act competently and with good intentions to protect members’ benefits. However, I do not agree that a good faith test is necessarily the best way in which to provide this protection. It may be helpful if I begin by outlining why I hold that view. At first sight, a good faith test seems inherently reasonable and attractive. It appears perfectly fair that a contribution notice should not be issued against somebody who is seeking to do the right thing. However, the issues can be more complicated. The concern is that the legal application of good faith serves to set such a high evidential burden that it can be circumvented by those at whom regulation is targeted. It places the regulator in a position in which it would have to prove bad faith, which in law comes close to dishonesty. By its nature, such activity and intent is something that would be kept well disguised, with little evidential proof for the regulator to identify. In addition to constructing a high hurdle, good faith also provides for a very wide and general protection. The effect of this generality is to safeguard both those who should be protected and those whose activities are rightly the target of the regulator. Furthermore, there is a risk that applying a good faith test as set out in the amendment would exclude the possibility that the regulator could issue a contribution notice if there was detriment to a pension scheme as a result of incompetence and recklessness. The Government consulted on adding the effect of an act being materially detrimental to scheme benefits. The consultation document sets out a number of safeguards for using these grounds, such as listing the circumstances under which this alternative approach would be used and a test of material detriment. A good faith test would preclude any test based on material detriment. That said, the proposed removal of the good faith test in situations where a party’s actions have prevented a debt from becoming due has generated considerable comment in the consultation exercise and a number of alternative approaches have been put forward. I shall take away the points made by the noble Lord in our earlier debates and consider them alongside the consultation responses, to ensure that the approach that we put forward in draft regulations in due course is both effective and proportionate. I hope that that will enable to noble Lord to withdraw his amendment.