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Pensions Bill

My Lords, we are dealing with amendments relating to the statutory defence. It is important that the defence is operable for employers and other parties who could be subject to contribution notices, but does not prevent the regulator acting where that is appropriate. Certainty about the meaning of the defence is central to achieving that. The noble Baroness’s amendment would create uncertainty about the meaning of the definitions. Who would judge whether detriment was likely? Uncertainty would not be welcomed by employers who might well feel the need to go to court for certainty, and that would place an impractical burden on the regulator. The requirement in condition A is that, "““before becoming a party to the act or failure, P gave due consideration to the extent to which the act or failure might detrimentally affect in a material way the likelihood of accrued scheme benefits being received””." That is a reasonable and appropriate test to make. If one is introducing the concept of ““likely detrimentally to affect in a material way””, does that not effectively introduce a third-party judgment to the process? That would not be right. The amendment of the noble Lord, Lord Lucas, raises important issues and I can see that there is a serious question about the level of due diligence. I hope my earlier explanation of the Government’s intention behind the defence has satisfied him on that issue. His amendment would permit a defence on condition A on the basis of a person’s conclusions, regardless of whether they had actually made the inquiries, and done the other acts, that a reasonably diligent person would have made or done in the circumstances. That may produce cost efficiencies for the party, but it would create significant risks for members’ benefits and the PPF if those conclusions turned out to be incorrect. It would also send an inappropriate message to the market about the importance of due diligence. For those reasons, I hope the amendments will be withdrawn. On the issue of dividends, these are not within the circumstances set out in the draft code and would be outside the test for the contribution notice.