Pensions Bill

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Mr. Waterson: The NAPF is worried that clause 184(6)(b) will lead to actuaries being more cautious and risk averse, which is difficult to conceive of. None the less, they can apparently be even more cautious and risk averse than they already are in their view of what can be expected, with the consequence that trustees will increasingly decide to pursue risk-minimising, rather than return-seeking, investment strategies. In other words, they will pursue a course rather like defensive medicine—a defensive investment strategy. The NAPF thinks that that could cause the cost of funding schemes to increase, with a significant impact on the cost to scheme sponsors. It expressed the hope that the regulations, when they appear, will do their best to discourage such an outcome. I should be grateful if the Under-Secretary could reassure me and the NAPF about that.

2.45 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond): Under the new provisions, the trustees will make the key funding decisions about the scheme. They will have to seek the employer's agreement and obtain actuarial advice. It will be for the trustees to decide the degree of risk appropriate for the circumstances of the scheme when they decide what method and assumptions within the prescribed framework will be used for the calculation of the technical provisions. The actuaries will be required to certify that any schedule of contributions is consistent with the statement of funding principles, which sets out the methods and assumptions to be used. The actuaries will be required to state whether in their opinion, and on the basis of the actuarial assumption chosen by the trustees, the scheme's funding position will be met or restored during the period covered by the schedule of contribution.

It is difficult in such circumstances to know why the clause should make actuaries, who, as the hon. Member for Eastbourne (Mr. Waterson) suggests, are usually a fairly loose-willed group of people who can be a bit zany, more risk averse than they would otherwise be. The clause ensures that the trustees have to make the decisions based on actuarial advice. On that basis, actuaries can put forward the advice that they think is appropriate, which is neither risk averse

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nor riskier than would otherwise be the case. For that reason, we cannot understand why clause 184 would have the effect that has been described.

Question put and agreed to.

Clause 184, as amended, ordered to stand part of the Bill.

Clause 185

Failure to make payments

Amendment made: No. 335, in

    clause 185, page 117, line 20, leave out

    'in writing as soon as reasonably practicable'

    and insert

    'and to the members within a reasonable period'.—[Mr. Pond.]

Mr. Pond: I beg to move amendment No. 336, in

    clause 185, page 117, line 21, leave out subsection (3).

The Chairman: With this it will be convenient to discuss Government amendment No. 337.

Mr. Pond: These are tidying up and drafting amendments, so I doubt whether the Committee will dwell on them for too long. Government amendment No. 336 removes the requirement on actuaries and auditors to notify the regulator when they become aware of a failure to pay contributions in accordance with the schedule of contributions. Government amendment No. 337 removes the penalties for non-compliance with that reporting obligation. The two amendments remove duplicate provisions, as the reporting duties for actuaries and auditors are contained in clause 45, which is entitled ''Duty to report breaches of the law''. On that basis, I hope that the Committee will not have difficulty in accepting the amendment.

Amendment agreed to.

Amendment made: No. 337, in

    clause 185, page 117, line 33, leave out paragraph (b).—[Mr. Pond.]

Clause 185, as amended, ordered to stand part of the Bill.

Clause 186

Matters requiring agreement of the employer

Mr. Pond: I beg to move amendment No. 338, in

    clause 186, page 118, line 12, after first 'the' insert 'active'.

The Chairman: With this it will be convenient to discuss Government amendments Nos. 339 and 341.

Mr. Pond: The amendments deal with the modification requirements under subsection (3). Government amendment No. 338 amends subsection (3)(b) so that only the active members of the scheme must be notified when the trustees or managers have exercised their power to modify the scheme with regard to the future accrual of benefits. Last Thursday, we discussed the Bill's approach to active, pensioner and deferred members. We put undue emphasis on active members, so I want to underline that, under the provisions, deferred and pension members will not be affected by a change to the future accrual of benefits.

Government amendment No. 339 requires members to be notified within one month of the modification

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taking effect, not within one month of the decision being made. The change makes it clear that modification is not dependent on the notification having taken place and gives the trustees a longer period for notification beginning on a clearly defined date.

Government amendment No. 341 is a technical amendment to subsection (5), which extends the regulator's powers to impose sanctions in circumstances in which the trustees or managers fail to take all reasonable steps to comply with the notification requirements.

I trust that the Committee will feel able to accept the amendments.

Amendment agreed to.

Amendments made: No. 339, in

    clause 186, page 118, line 12, leave out 'decision being taken' and insert 'modification taking effect'.

No. 340, in

    clause 186, page 118, line 15, leave out

    'as soon as reasonably practicable'

    and insert 'within a reasonable period'.

No. 341, in

    clause 186, page 118, line 17, after 'subsection (1)', insert ', (3)'.—[Mr. Pond.]

Question proposed, That the clause, as amended, stand part of the Bill.

Mr. Waterson: I want to make a couple of points. I apologise that they did not materialise in the form of amendments, but that was because of the breathtaking, breakneck speed at which we considered earlier parts of the Bill. Again, they involve issues raised by the NAPF that merit the Committee's consideration.

On clause 186(1), the NAPF welcomes the provision requiring trustees to gain the employer's agreement on key funding issues. That makes sense. On clause 186(2), it would like to replace the expression

    ''the future accrual of benefits''

with the phrase ''anything that does not affect accrued rights''. It takes the view that that would be clearer and more helpful to schemes. I do not know whether officials could examine that proposal, and I do not expect the Under-Secretary to have an instant response.

Beyond that, we have no comments to make except on subsection (4), but I think that they will arise more naturally in respect of the powers of the regulator that are set out in clause 188(2). I will therefore leave those further points for the moment.

Mr. Pond: Funnily enough, I did have an instant reaction. It was to disagree with the hon. Gentleman's proposal that we should insert the wording ''accrued rights'', because it is open to interpretation. The term ''future accrual of benefits'' means benefits that accrue after the date of the modification. The wording was carefully chosen. I hope that the Committee will accept

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that it was chosen for a purpose and accept the clause as it stands.

Question put and agreed to.

Clause 186, as amended, ordered to stand part of the Bill.

Clause 187

Matters on which advice of actuary

must be obtained

Mr. Pond: I beg to move amendment No. 342, in

    clause 187, page 118, line 27, after 'preparing', insert 'or revising'.

The Chairman: With this it will be convenient to discuss Government amendments Nos. 343 and 344.

Mr. Pond: Clause 187(1) sets out matters on which trustees or managers must obtain the actuary's advice. Government amendments Nos. 342 and 343 insert into that list the requirement to obtain the advice before ''revising'' as well preparing a recovery plan and before

    ''modifying the scheme as regards the future accrual of benefits''.

The intention is that trustees and managers should seek advice from the scheme actuary before making any of the key decisions on the funding of their schemes.

Government amendment No. 344 inserts into the clause a subsection (4) that provides for the regulator to penalise a trustee or manager who fails to ''take all reasonable steps'' to comply with the requirements to obtain advice from the scheme actuary. That provision is consistent with the approach taken elsewhere in this part of the Bill where duties are placed on trustees and managers. I hope that the Committee will accept the amendments.

Amendment agreed to.

Amendments made: No. 343, in

    clause 187, page 118, line 28, at end insert—

    '(e) modifying the scheme as regards the future accrual of benefits under section 186(2).'.

No. 344, in

    clause 187, page 118, line 35, at end insert—

    '(4) Where subsection (1) is not complied with section 10 of the Pensions Act 1995 (civil penalties) applies to a trustee or manager who has failed to take all reasonable steps to secure compliance.'.—[Mr. Pond.]

Clause 187, as amended, ordered to stand part of the Bill.

Clause 188

Powers of the Regulator

Amendments made: No. 345, in

    clause 188, page 119, line 13, leave out paragraph (e) and insert—

    '(e) that the trustees or managers—

    (i) have failed to prepare a schedule of contributions when required to do so under section 184,

    (ii) have prepared a schedule of contributions that does not comply with the requirements of that section or any prescribed requirements, or

    (iii) have failed to review and revise a schedule of contributions as required by subsection (3) of that section.'.

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No. 346, in

    clause 188, page 119, line 35, at end insert

    'specifying—

    (i) the rates of contributions payable towards the scheme by or on behalf of the employer and the active members of the scheme, and

    (ii) the dates on or before which such contributions are to be paid.'.—[Malcolm Wicks.]

Question proposed, That the clause, as amended, stand part of the Bill.

 
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