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Session 1999-2000
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Delegated Legislation Committee Debates

Draft Occupational and Personal Pension Schemes (Penalties) Regulations 2000

Sixth Standing Committee on Delegated Legislation

Wednesday 8 March 2000

[Mr. Andrew Welsh in the Chair]

Draft Occupational and Personal Pension Schemes (Penalties) Regulations 2000

4.30 pm

The Minister of State, Department of Social Security (Mr. Jeff Rooker): I beg to move,

    That the Committee has considered the draft Occupational and Personal Pension Schemes (Penalties) Regulations 2000.

The regulations are a technical adjustment of the pension regulations, and deal with other supplementary matters: they are not of major significance. They are designed to give the Occupational Pensions Regulatory Authority power to impose a civil sanction on trustees who fail to produce audited accounts on time or who fail to provide the registrar of occupational personal pensions with required information. OPRA currently has power only to impose a criminal penalty, which is why the affirmative procedure is being used.

There has been a good deal of consultation and the changes were flagged up in a Green Paper published in December 1998. OPRA could operate more quickly and effectively if it had the power to impose civil penalties, as it would not always have to resort to criminal penalties, which are extremely onerous, as they must be enforced under the Police and Criminal Evidence Act 1984. Operating under that Act is not onerous in itself, but a great deal of paperwork is involved.

Criminal sanctions should be used only in open-and-shut cases of fraudulent activity. That is not applicable to the regulations. We want OPRA to be able to impose penalties when employers make late payments of contributions to occupational schemes and trustees fail to obtain audited accounts within seven months of the scheme ending.

There have been few prosecutions since OPRA came into being. Indeed, it approved for prosecution only 17 late contribution cases and did not approve any cases involving late-audited accounts. Although several thousand cases are late, the nuclear option has not been considered a practical proposition. Indeed, OPRA has received 18,500 reports of late-paid contributions since it started work and 6,000 reports of late-audited accounts.

We want to knock people into line, as looking after pensions is a big responsibility. We want to ensure that accounts are lodged timeously. It is worth putting on the record that the new penalties are in line with those applying to other breaches of the Pensions Act 1995. The penalty for failing to obtain audited accounts will not exceed £5,000 for individuals and £50,000 in other cases. The penalty for failing to provide the registrar with information will not exceed £1,000 for individuals and £10,000 in other cases.

Those matters were thoroughly discussed and consulted on with the industry and representatives of pension schemes.

4.33 pm

Mrs. Jacqui Lait (Beckenham): Some of us have a feeling of déjà vu, having sat on the Committee considering the Child Support, Pensions and Social Security Bill for the past seven weeks. Indeed, we may have thought that we had been released. I promise not to detain Committee members for seven weeks, nor indeed seven hours. Indeed, with a little luck, we may be here for only a few minutes.

I am familiar with the matter covered by the regulations, as I sat on the Committee considering the Pensions Act when I was parliamentary private secretary to my right hon. Friend the Member for Richmond, Yorks (Mr. Hague). I also served on the Committee considering the Bill that became the Welfare Reform and Pensions Act 1999. Indeed, we discussed the principle of the matter in relation to section 9 of that Act.

We must remember why criminal sanctions were thought appropriate. The 1995 Act stemmed from legitimate fears that there would be more criminal thieving of pensions funds following the Maxwell case. My hon. Friend the Member for Sutton Coldfield (Sir Norman Fowler) said that the fraudulent actions of Robert Maxwell lay behind the introduction of such legislation. He said that the Act was certainly about the deliberate and dishonest action that Robert Maxwell took to defraud the Daily Mirror pensioners, and was concerned about preventing members of other occupational schemes from being so threatened and defrauded.

There is still a need to reassure pensioners. This morning, a representative from Pearl Assurance took me through some interesting research on pensions that had been carried out with focus groups. The company specialises in dealing with low and moderate earners. The message that I hear time and again about a barrier to investing in pension schemes is the word ``Maxwell''. I should be grateful if the Minister could assure me that pensioners and consumer organisations, such as the Consumers Association, Help the Aged and Age Concern are happy about the change from criminal to civil offences. While the right hon. Gentleman said that he had consulted the pension industry, in particular, about such matters, he did not refer to consumers, although I am sure that many responded to the Green Paper.

In discussions on section 9 of the Welfare Reform and Pensions Act 1999, my hon. Friend the Member for Grantham and Stamford (Mr. Quentin Davies) said that the burdens of proof for a civil case and a criminal case were different. The draft regulations refer to the penalties changing from the criminal to the civil offences. I sure that I am being far too finicky, but, by definition, if something becomes a civil case, the burden of proof automatically becomes a civil burden of proof. I should again like to receive an assurance from the Minister about that. If the right hon. Gentleman can give me such a response, we would not oppose the order as we did not oppose section 12 of the Welfare Reform and Pensions Act 1999.

Mr. Rooker: On the second point, we are not replacing criminal penalties with civil penalties, but giving OPRA the power to use civil penalties. Criminal penalties will still exist for fraud cases, such as the Maxwell case. The man was a crook. He sold off the House of Commons wine cellar when he was chairman of the catering committee in the 1960s.

We received only 20 responses to the consultation paper, all of which were content with it. Consumer organisations were consulted, but we did not receive responses from them. The Government consult like mad. I never realised that that happened in such a way. When I was a Minister at the Ministry for Agriculture, Fisheries and Food, we considered non-response as non-opposition—acquiescence, if I can describe it like that. That is a legitimate route to take. Moreover, consumer organisations sometimes say that they are not resourced properly enough to respond to the massive amount of Government consultation documents.

The regulations are not a diminution of such processes. The evidence required is different. OPRA is subject to judicial review. It cannot act willy-nilly. It must act reasonably. It has a range of penalties at its disposal and when it starts using such a power, the figures that I gave will drop dramatically. It has not used the criminal penalties extensively.

It is a serious matter to use the criminal penalties and there is no evidence that fraud has gone unchecked. OPRA has been vigorous in that regard. We need to knock people into line and will bring it about. It is true that there is less evidence but the procedures are different; the way in which OPRA is open to challenge is different, with a civil as opposed to a criminal penalty.

Mr. Tony Lloyd (Manchester, Central): The Trades Union Congress is much in favour of the change and, as an organisation that is clearly concerned about the pension rights and protection of employees, its voice is significant. As the Minister said, the Trades Union Congress believes that the measure will make OPRA more effective in being able to chase up those who do not submit their accounts in time. It is for that reason rather than because it thinks it is a less effective sanction, that the TUC supports the change to a civil procedure.

Mr. Rooker: I hope that I have answered the two main points raised by the hon. Member for Beckenham (Mrs. Lait).

The Chairman: I thank all Committee members for their attendance and brevity.

Question put and agreed to.


    That the Committee has considered the draft Occupational and Personal Pension Schemes (Penalties) Regulations 2000.

The Committee rose at nineteen minutes to Five o'clock. {**vert_rule**}

The following Members attended the Committee:
Welsh, Mr. Andrew (Chairman)
Brinton, Mrs.
Burden, Mr.
Ellman, Mrs.
Follett, Barbara
Hughes, Mr. Kevin
Lait, Mrs.
Lloyd, Mr. Tony
Randall, Mr.
Rooker, Mr.
Sarwar, Mr.
Wright, Mr. Anthony D.


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