Pensions Bill

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Mr. Waterson: I have not tabled any amendments to clause 4 because it is fairly straightforward; it mechanistically moves functions from OPRA to the new regulator. Nevertheless, an important issue that is exercising the thoughts of organisations such as the National Association of Pension Funds is how those functions should be carried out.

With your usual attention to detail, Mr. Griffiths, you will have noticed that I tabled new clause 4, which relates to the exercise of the regulator's functions. No doubt, if the new clause had not had a star next to it, we would have debated it today. As we will not do so, and because I think that it is inconvenient to wait until the end of the Committee stage, I beg your indulgence in allowing me to draw on some of the principles behind it in discussing how clause 4 will operate.

In a moment, we will discuss clause 5, which deals with the regulator's objectives. We wanted to propose some additional objectives. There is significant

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concern about how the functions will be carried out. The NAPF makes it clear that it is worried about

    ''the potential lack of transparency, proportionality and accountability in the way in which the . . . Regulator carries out''

those functions. It draws a parallel from the Financial Services and Markets Act 2000, and it believes that, as I have set out in new clause 4, in carrying out those functions the regulator should have regard to three things. First, it should have regard to the need to use its resources efficiently and effectively. I do not think that anyone could quarrel with that. Secondly, it should have regard to the principle that any burden or restriction imposed should be proportionate to the benefits thereof. There are other examples of that principle in amendments that we will discuss later. Thirdly, there is a need to be open and transparent at all times, and to consult those with an interest when developing policies, procedures and practices.

2.45 pm

Those aims are all pretty unexceptionable; I cannot imagine that anyone debating the Bill would disagree with them. We would prefer them to be set out in the Bill, and we may return to that issue on Report. The point about use of resources is pretty clear. The need to be open and transparent and to consult those with an interest is obvious, because if the regulator is to be a success, it will clearly need to carry the whole sector with it.

I shall focus for a moment on the third principle that I mentioned: the need for any burden or restriction that is imposed to be proportionate to the benefits. One could say that that is part of the philosophy behind the new regulator, because one of the criticisms of the old regulator was that it took a kind of scattergun approach. It tried to cover an awful lot of schemes and was often dealing with relatively minor or trivial issues. As I understand it, the aim of the new regulator it is to focus firepower on the areas where it will make a significant difference. To that extent, the principle ought to chime in with the Government's stated intentions.

Whatever burdens are being imposed, either through the regulator or the pension protection fund—we will come to that later—it is important that they should be proportionate; there should be a real benefit to be shown as a result of the burdens imposed. There should be a real lead in terms of consulting the pensions industry, pension schemes and their representatives to ensure that those burdens are not disproportionate and produce the benefits that are claimed for them.

Functions are one thing and objectives are another, but there is a significant argument for some guidance on how the regulator carries out those functions, and even if it is not set out in the Bill, it should be set out elsewhere.

Malcolm Wicks: I am pleased to say that I agree with every word the hon. Gentleman said. The regulator is about efficiency, effectiveness, proportionality and transparency. Of course, there will need to be some regulation of company pension schemes and other schemes that are running well, but we want to focus our firepower on those that are not

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doing so. As ever, it will be important that when the regulator is established, it is referred to the views of members of this Committee and of the House on that subject; I am sure that it will accept them. It is also my understanding—my colleague the Under-Secretary will be speaking to the relevant clauses later—that a prime purpose of the non-executive committee is to ensure that the regulator undertakes his or her functions in that manner.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5

Regulator's objectives

Mr. Waterson: I beg to move amendment No. 153, in

    clause 5, page 3, line 8, at end insert—

    '(e) to promote occupational pension provision by minimising regulatory burdens applying to well run schemes and their sponsoring employers.'.

The Chairman: With this it will be convenient to discuss the following:

Amendment No. 154, in

    clause 5, page 3, line 8, at end insert—

    '(f) in conjunction with the Pension Protection Fund Board to take all reasonable steps to maintain the cost of the levy on occupational pension schemes to the minimum compatible with the Regulator's other duties under this Act.'.

Government amendment No. 9.

Mr. Waterson: I shall speak first to amendment No. 154, because it leads on fairly naturally from the point that I was just making. Looking at the specifics, the amendment's aim is

    ''to maintain the cost of the levy on occupational pension schemes to the minimum compatible with the Regulator's other duties under this Act.''

The amendment is not an attempt to water down what the regulator does in appropriate cases. It arises from points made to me by the National Association of Pension Funds, which is concerned that the regulator should not get carried away in a rush of understandable enthusiasm, and should always bear in mind that it is there to regulate an industry in which the vast majority of pension schemes are run competently and honestly. Any excessive burdens will make matters worse, not better.

Along with amendment No. 153, amendment No. 154 goes to the heart of what the Bill is about. Before I leave amendment No. 154, I should say that of course we will in due course have lengthy and probably seemingly endless debates about the pension protection fund, the level of the levies and the element of risk built into them, including the initial levy and so on. We have all those discussions to look forward to. However, it is vital that we do not lose sight of the aim of protecting and maintaining the occupational final salary schemes that already exist and are surviving, as well as of encouraging new ones to open. We should at least aim to see that existing schemes do not close to new members.

Amendment No. 153 would insert an additional provision

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    ''to promote occupational pension provision by minimising regulatory burdens applying to well run schemes and their sponsoring employers.''

I suspect that the Minister will agree with every word that I am saying. The stated objective is to have a light-touch regulatory regime in respect of the well-run, properly organised schemes, and for the regulator to reserve its attentions and enhanced powers for schemes that are in difficulties, for whatever reason. The resources must be used in that way as a step forward from the existing regulator. We really must press the Minister on the aim of the Bill.

When the Minister made his winding-up speech on Second Reading, I put to him the comments of the Government's pensions tsar, Mr. Adair Turner, who seems to take the view that of the 9 million or 10 million people currently in occupational final salary schemes, there will in 20 years' time be as few as 1.5 million workers in such schemes. If that is true, all the Bill will do when it becomes an Act is preside over a continuing trend of decline and closure. We all know that a large number of schemes have already closed to new members. On the basis of the most recent NAPF figures, which I am sure have been overtaken by events, a new worker joining a new company today will have less than a one-in-five chance of finding a final salary scheme that is open and that they may join. That trend continues.

Although I might be reading too much into the Minister's reply to my intervention on Second Reading, it appeared that he was saying that the Bill was about protecting the status quo and protecting those who are already in schemes, and those who will remain in them, to ensure that they get what they are entitled to. That is a laudable aim. However, we need to press the Government hard—[Interruption.]

The Chairman: Order. I do not know where that noise is coming from, but it has continued for a bit too long. Can we make sure that it does not happen again? Or perhaps the Member involved would like to take the machine out of the Room and step on it.

Mr. Waterson: Thank you, Mr. Griffiths. It is difficult to make a point against this barrage of electronic noise. I am not very technologically advanced, but in my experience most of these things have an off button, if only it can be found.

I was making an important point, to which we should return again and again, about whether there are two aims for the Government, and whether the second aim, which we would support wholeheartedly, is to encourage employers not only to keep these schemes open to new members, but to open new ones. There was a barrage of media interest and excitement the other day when Electricité de France opened a new final salary scheme.

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond): It was open already.

Mr. Waterson: In response to the Under-Secretary's sedentary comment, I can say that the scheme got such publicity because it was so unheard of. It was like a

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Bateman cartoon: the man who opened a new final salary scheme. I understand that it is perhaps more a matter of two existing schemes being put together. However, in any event, all credit to EDF for opening one.

We Conservatives would love to see many more such schemes opened, but we do not think that the Bill will encourage that. We have progressed through the various burdens, costs, levies, regulations, codes of good practice and everything else—the layer upon layer of red tape that is to be imposed on schemes. We believe that employers will be even less likely to keep the schemes open or to open new ones. I am using the amendments not only on their own merits, but to press the Minister on whether, as I thought his remarks on Second Reading suggested, his aim is to preserve the situation—to put it in the deep freeze and protect the people already in the schemes—or whether there is a forward-looking aim to encourage the schemes to remain open or to encourage new ones to open. That is a key question for the Committee. Otherwise, we will spend a large chunk of our time just nailing the lid down on the coffin.

 
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