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Pensions Bill

Again, I appreciate the concern of Members of the Committee that I should make clear our intentions under these proposals. It is not the Government’s intention that a transaction whereby a person purchases assets or securities at fair value would normally trigger the regulator’s use of its anti-avoidance powers, provided that as part of the transaction the pension scheme was properly considered and adequately addressed. The fact that a person had purchased assets or securities at fair value would not alone necessarily provide the assurances needed. That would be only the first step in ensuring capital was available to mitigate the risks to the scheme; it does not of itself get the capital to the scheme. Earlier, the noble Lord quoted my comments from Monday. Normal arm’s-length, fair value transactions should swap an asset for cash or another asset and therefore have nil effect on scheme security; that is, there would be no detriment, no type A event, as defined by the regulator’s guidance. However, the noble Lord’s amendment would turn this on its head and make it a defence. The regulator is not in the business of arguing about whether something is fair value; that is a different area of law. The regulator would look at the effect on the scheme. Current guidance from the regulator states that normal commercial transactions, at arm’s length and fair value, would not be caught by the legislation, and corporates should be able to go about normal business. I assure the noble Lord that normal, arm’s-length, fair value transactions that swap an asset for cash or another asset and have, or are likely to have, no materially detrimental effect on scheme security, are not a target of the regulator’s activity. However, I draw attention to the fundamental issue of the mitigation of material risks to the security of scheme members’ benefits, to the Pension Protection Fund and to those responsible employers who pay the Pension Protection Fund’s levy. Current powers enable the regulator to take action where, for example, business and asset sales from the employer or the wider employer group are realised, particularly where the transaction is not at arm’s length or fair value, or the sale proceeds are not retained; or where part of the operating business is sold at fair value for the assets, but all the pension scheme liabilities are transferred to a weaker covenant with the sold part of the company. Therefore, in a situation where companies from a group are sold, the regulator’s powers currently are—and need to remain—such that they permit action if pensions liabilities were avoided through the sale. The noble Lord’s amendment would change this and make fair value a defence. I do not think that that was the intent. This would place the regulator in the inappropriate position of arguing about whether something was fair value or not. The regulator’s proper focus should be on the effect on the scheme. I hope that I have clarified the issue.