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Pensions Bill [HL]

My Lords, I am pleased to be returning to the topic of certification and even more so to be moving a government amendment that I believe will address the concerns of the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake. I understand those concerns to be twofold: first, on the scope of the Secretary of State’s powers and, secondly, on the risk of unscrupulous employers manipulating the certification test. The aims of this amendment are: first, to strengthen the regulatory framework in which the alternative certification model will operate by imposing tougher preconditions before regulations can be introduced; and, secondly, to introduce an ongoing requirement for the Secretary of State to keep the test under review. At the outset, before publishing any regulations, the Secretary of State must be confident that at least 90 per cent of jobholders will receive the same level of contributions under the certification test that they would have received if their scheme had satisfied the relevant quality requirement. This is more demanding than the previous requirement, which referred to, "““a majority of the individual relevant jobholders””." In addition, the Secretary of State must periodically review the evidence base of the test. This is expected to involve analysing the dataset from the Annual Survey of Hours and Earnings, known as ASHE. These are the data that underpinned the development of the certification model and other relevant data on the rate of pension contributions required by schemes. This is tougher than the previous test, which relied on a snapshot of the data at the point of publishing regulations. If, as a result of review, we detect undesirable trends in pay and reward packages that suggest that more individuals than expected are receiving lower than minimum contributions, the Secretary of State can intervene to strengthen or repeal the test. After the publication of the regulations, the review will take place first in 2017 and subsequently at least every three years. The review will form part of our ongoing evaluation strategy. Its publication will be considered in the context of the evaluation of the reforms. The noble Lord, Lord McKenzie, will note that we have pared back the Secretary of State’s power as far as we reasonably can, based on the available evidence. In view of this, I hope that the noble Lord will be reassured that the Secretary of State’s powers are proportionate to the task in hand. For clarity, I should add that the requirements fall to the Secretary of State and not to employers using the test. The reconfigured regulation-making power aligns more closely with our dataset from the annual survey from ASHE, which we believe to be robust, representative and reliable. Thus, the Secretary of State will be able to deliver the certification model welcomed by employers and key stakeholders at the same time as affording scheme members the appropriate level of protection. A supplementary delegated powers memorandum has been sent to the Delegated Powers and Regulatory Reform Committee to reflect the tighter constraints on the Secretary of State’s regulation-making power. I say in conclusion that we have ended up with the outcome broadly envisaged by the amendments that the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake, tabled on Report. I thank both noble Lords for the expertise that they brought to bear on the issue. The Bill has been improved by their intervention and I am grateful for it. I beg to move.