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Pensions Bill [HL]

My Lords, we have reached the last amendment in Committee on the Pensions Bill with a little nostalgia—and perhaps with relief for some. I will deal with my noble friend Lord Boswell’s amendment on the objectives of the Pensions Regulator, and will start by providing some background. Many noble Lords will be aware that Parliament legislated, through the Pensions Act 2004, to establish an independent, risk-based Pensions Regulator whose job was to regulate work-based pension schemes based in the UK. The Act gave the Pensions Regulator his main statutory objectives. These include protecting the benefits of members of work-based pension schemes and limiting calls on the Pension Protection Fund. Noble Lords may be interested to know that, in its 2007 report on the Pensions Regulator’s progress in establishing a regulatory approach, the National Audit Office found that the objectives provided a sound framework for pensions regulation. Some of us may also be aware that the NAPF, in its 2010 report Vision for Pensions, recommended that the regulator’s activities should be reoriented. They proposed that this should be done by giving the regulator a new objective, to promote good pension provision and to ensure their health and longevity. My noble friend is well aware of the interests of the NAPF in this area, given the nature of this amendment. This Government are committed to the provision of good pensions; indeed, there is a coalition agreement to simplify rules and regulations, to help reinvigorate private sector pension schemes. Our pension reforms will increase the numbers of people saving in workplace pensions. The implementation of NEST, a policy that we have in common with the last Government, will mean that all employers and the self-employed have access to a suitable, low-cost pension scheme. The Government are also pursuing a range of activities, working closely with the NAPF, the CBI and our other stakeholders, to ensure that the regulatory regime around pensions provision is fit for a post-automatic-enrolment world. While we share the aims of what this amendment is trying to achieve, the Government are already pursuing a programme of work to support and encourage good pension provision. This amendment would significantly change the role of the regulator by giving it a broader public policy role that is different from its regulatory responsibilities. The real question here is whether the regulator is the right body to do that, or should this improvement happen elsewhere? It is not clear how an expanded objective like this might change the way in which the regulator performs its current role. If the regulator had this sixth objective, it would add to the level of complexity required in its approach to the use of its powers, such as scheme funding, without necessarily improving the health of schemes. My view is that that would be an undesirable distraction. Under the current legislation, decisions to exercise powers require the regulator to balance its objectives with the need to act reasonably, given its status as a public authority. In addition, the regulator promotes the good administration of pension schemes. This means that the regulator already has to have regard to considerations such as the health of the scheme when making decisions. This amendment would complicate regulatory activity and is therefore unnecessary. As the law stands, the regulator is not only bound by public law standards of reasonableness when making decisions but must take into account particular factors specified by Parliament when considering using such powers. The review of the Pensions Regulator that the Better Regulation Executive and the National Audit Office conducted in 2009 concluded that: "““It has been highly responsive in reacting to changing economic circumstances, and in considering the specific circumstances of particular pension schemes when reaching regulatory decisions””." That is a point that the noble Lord, Lord McKenzie, has just made. The regulator has made clear that funding should be based on prudent assumptions, while emphasising the principles of reasonable affordability and flexibility in agreeing deficit recovery plans. That is the balance that the regulator needs to strike in order to best secure scheme members benefits for the long term, and to enable employers to play their part in the economic recovery. There is no priority ranking in the regulator’s objectives. The regulator must balance its objective to protect the Pension Protection Fund with its objective to protect members’ benefits and, indeed, the other objectives. However, it is in no one’s interests for defined benefit schemes to be poorly funded—certainly not for members, and not for the Pension Protection Fund or those responsible for paying the pension protection levy. My noble friend asked me to update the Committee on what simplified rules there may be to help business in this process. The Government have been working with the CBI and others to see whether there is scope for further flexibility in legislation to make it easier for companies to restructure, while protecting members’ pensions. Our aim is that any new regulations in this area would come into effect in October 2011. The Government have made a clear commitment to, and have a comprehensive plan of action for, reinvigorating private pension saving. I hope that I have provided my noble friend with sufficient reassurance on this and have sufficiently illustrated the potential problems of the proposed amendment—in their direction, if not in their exact composition. I beg my noble friend to withdraw it.