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Orders of the Day
Pensions Bill
Madam Deputy Speaker (Sylvia Heal): I inform the House that privilege is involved in a large number of Lords amendments to the Pensions Bill. A full list is available in the No Lobby. If the House agrees to the amendments, I shall arrange for the necessary entry to be made in the Journal.
Regulator's functions
2.12 pm
The Minister for Pensions (Malcolm Wicks): I beg to move, That this House agrees with the Lords in the said amendment.
Madam Deputy Speaker: With this we may discuss Lords amendments Nos. 2 to 19, 24, 25, 27 to 29, 33 to 94, 324 to 329, 358, 481 to 498 and 577.
Malcolm Wicks: Before I launch into the first of these very large groups of amendments, it might be helpful if I take this opportunity to remind the House about some of the key points of the Pensions Bill. It is nearly six months since we last saw the Bill at the end of May. Since then, there has been the best part of 70 hours of debate in the other place, which has dealt with more than 1,200 amendments, just over half of which are before us today. The other place likes to describe itself as the revising chamber, but, as will be seen later, we do not always agree with its revisions. In this case, however, its contributions have improved the Bill since we last saw it here.
Most of the amendments were tabled by the Government. I make no apology for that, but I want to make it absolutely clear that it is because we have listened not only to Opposition spokesmen—on occasion—but to Back Benchers on both sides of both Houses. We are also indebted to outside organisations that have continued to take an interest by providing briefings, suggesting amendments and participating in continued consultation over the provisions in the Bill.
As I have explained on several occasions, all other things being equal it might have been useful to present the Bill as a draft Bill to allow us to consider some of the technical details. However, all other things are not equal. We are being urged to protect people's pensions—indeed, urged by some to make the pension protection fund retrospective—and we could not afford to delay because of the issues that are at stake.
The Bill is a good and rounded piece of legislation. It introduces a regulator with teeth who, among other things, will now be able to deal with those who have developed so-called pension liberation scams; provides protection for those who might otherwise lose their defined benefit pensions through no fault of their own if
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their employer becomes insolvent; and provides an important measure of help for those where that situation has already occurred.
Over the summer, we worked with organisations involved in helping ailing companies, led by the British Venture Capital Association, to enable us to improve and clarify the provisions relating to moral hazard. Some of the amendments reflect and respond to their concerns. Furthermore, the Bill now reflects other commitments that were taken forward from this House, including representation for pensioner organisations in the nomination of trustees and the removal of statutory limited price indexation for defined contribution schemes.
2.15 pm
I am conscious of the limited time that we have available today for further debate, Madam Deputy Speaker, and I know that Members will be disappointed if they are unable to catch your eye during the rest of the afternoon. I therefore commit in advance to keeping my remarks as short as I can when agreeing to amendments in order to allow more time for others to speak.
Let me turn without further comment to the first group of amendments, which deals with part 1 of the Bill and the provisions relating to the regulator.
Mr. Steve Webb (Northavon) (LD): The Minister mentioned the ending of limited price indexation for defined contribution schemes. If I am correct, that will be discussed in the hour or so that we have to talk about annuities under a separate group of amendments. Almost certainly, therefore, there will be no debate whatever about these changes. Does the Minister think that that is acceptable?
Malcolm Wicks: It would always be nice to have plenty of time to discuss pensions. I hope that there will be an opportunity to discuss those matters, but we have made our position clear and a vote has been taken on the programme motion.
Several amendments were made to part 1 to enhance the powers of the regulator. We have given the regulator specific powers to tackle the illegal practice of what some call pension liberation but what should, in my judgment, more appropriately be called pension robbery. As hon. Members are aware, pension liberation schemes purport to offer to convert the accrued rights of members of legitimate schemes into an immediate tax-free lump sum. The organisers of these schemes—I should perhaps say scams—target people who urgently need cash and usually charge high commission, ranging from 20 to 30 per cent. of the individual's total fund. An individual could also end up paying as much as 40 per cent. tax on the total amount. Moreover, their provision for retirement is severely reduced, sometimes to nothing.
Clauses 19 to 22 give the regulator the power to apply to the court for an order that the so-called "liberated" moneys, or property representing those moneys, are transferred back to a pension scheme, put into an annuity or insurance policy or given back to the member concerned. Prior to going to court, the regulator will also have the power to make a restraining order over liberators' bank accounts that contain liberated funds. These are important new powers that will enable the regulator to deal with this nefarious practice.
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There has been particular interest in the moral hazard clauses, which were first introduced in Standing Committee. Clauses 44 to 58 are intended to deal with the moral hazard that employers may deliberately manipulate their affairs so as to leave the pension protection fund to pick up the tab for their underfunded pension scheme. Such practice would both put members' benefits at risk and increase the levy costs of well-run schemes.
Several concerns were expressed about the scope and effect of the moral hazard clauses. During the debates in the other place, my right hon. Friend Baroness Hollis offered further to consult the industry over the summer to review their impact and to try to find practical ways of allaying concerns about the measures. As a result, several amendments were made. A key message was the requirement for the regulator to provide a clearance procedure. That has been agreed and is reflected in clauses 43 and 47.
Other headline amendments to the moral hazard clauses include: a time limit of six years for which the regulator can consider acts or failures to act before issuing a contribution notice; the exclusion of insolvency practitioners, if acting in good faith, from the scope of contribution notices and financial support directions; and the exclusion of the majority of individuals from the scope of financial support directions. Also, new clause 58 has been added to the Bill to define partnerships and limited liability partnerships for the purposes of the moral hazard clauses.
There is one further significant change to the moral hazard provisions. Much concern was expressed in the House and in the other place about the regulator's power to issue contribution notices or restoration orders in relation to acts occurring after 11 June 2003, corresponding with the date of the announcement in the House by my right hon. Friend the Secretary of State. The Government continue to believe that the limited retrospection proposed is proportionate as a matter of law.
Sir John Butterfill (Bournemouth, West) (Con): Can the Minister explain precisely what he means by insolvency practitioners "when acting in good faith"? Insolvency practitioners have only one duty, which is to get the maximum amount of money for the creditors. What does the expression "when acting in good faith" mean in that context?
Malcolm Wicks: We assume that insolvency practitioners do act in good faith, given their task. When they do so, they will be excluded from any moral hazard procedures. There is the concern that it might be possible for some practitioners not to act in good faith, perhaps in connivance with others, but if I can provide any further advice on the question later, I will.
I was saying that the Government believe that the proposed limited retrospection is proportionate as a matter of law, but we accept that there may be some who would seek to challenge it, resulting in the regulator being tied up in court for a number of years, unable to act to protect members or the pension protection fund and benefiting only lawyers. For that reason, amendments Nos. 38 and 71 limit the retrospective effect
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of both contribution notices and restoration orders to acts or deliberate failures to act, and to transactions at an undervalue that took place on or after 27 April 2004, the date on which the moral hazard clauses were introduced in Committee.
The amendments to the moral hazard clauses will ensure that the regulator will retain effective anti-avoidance powers, while removing many of the concerns raised about the potential scope and effect of the original clauses. It has also been necessary to make a number of minor, consequential and technical amendments to part 1 of the Bill to reflect its evolvement, ensure consistency and tighten the drafting.
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