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Clause 51: Scheme orders: general

139.     Clause 51 sets out the general provisions which must, or may, be in the Order. The Order must provide for the trustee corporation, under clause 57, to be a trustee when the scheme comes into force.

140.     The Order may:

  • allow for any provision of the TA 2000 to apply as if the Order and Rules were a trust instrument. This is to ensure that all existing UK trust law can also apply to the scheme established under clause 50;

  • give the trustees the power to make Rules. This would allow trustees the flexibility to make changes to help run the scheme effectively.

  • limit the trustees' power to make Rules in prescribed circumstances and conditions. This is because there may be circumstances where the Secretary of State needs to retain the power to make the Rules to ensure that matters of wider public policy are heeded.

  • provide for protection of the trustees against liability arising from the maladministration of the scheme.

Clause 52: Consultation of members and employers

141.     Clause 52 requires that the Order compel the trustees of the scheme to make arrangements for consulting the scheme members and participating employers about the ongoing operation, development and amendment of the scheme. These arrangements must include the establishment of members' and employers' panels to represent the interests of members of the scheme and participating employers.

142.     The trustees will have decisions to make about the operation of the scheme. These will include decisions on how the scheme should be developed and whether it should be amended. The trustees will have to consult the scheme members and employers about these decisions. To help with the consultation, the trustees will have to create panels which represent the members and employers. The make-up and duties of these panels will be explained in the Order. The members' panel could be allowed to appoint members of the trustee corporation. The panel could use those appointments to help ensure that their interests are represented. (This would be in the spirit of the provisions for member nominated trustees in the PA 2004.)

143.     The Order will also be able to allow for reasonable expenses to be paid to panel members from scheme funds.

144.     A scheme created under clause 50 could cover a very wide and diverse range of employers and employees, so it would be very difficult for the trustees to keep in touch with all their opinions. The members' and employers' panels will act as representative bodies to keep the trustees informed and provide feedback about how the scheme is working. The trustees will consult both panels before any changes are made to the scheme.

Clause 53: Contribution limits

145.     This clause requires the Secretary of State to set out in the Order the maximum amount a member of the scheme established under clause 50 can contribute (including the employer contribution and tax relief) in a tax year. The power will enable the Secretary of State to include in the Order things like:

  • what a contribution is;

  • when a contribution is to be treated as made;

  • how contributions are treated where the maximum is exceeded;

  • the value of any amount to be repaid in respect of excess contributions (whether the same or more or less than the contribution, because of investment or otherwise), and;

  • who makes the refund payments and to whom.

146.     This clause allows the Secretary of State to set out what contributions count towards the limit and that if excess contributions are made, they can be accepted but refunds will need to be made. The clause means that no member can make more than a set amount of contributions.

147.     The clause also allows the Secretary of State to set out under this clause more than one contribution limit. The Order could allow, for example, a lump sum contribution limit over the member's lifetime.

148.     The clause also enables the Secretary of State to remove the requirement to have a contribution limit in the scheme established under clause 50.

Clause 54: Procedure for scheme orders

149.     Clause 54 imposes the procedure for consulting on and acquiring consent for the scheme Order. Under clause 104 the Order will be made by statutory instrument under the affirmative resolution procedure, which means that it must be debated and approved by Parliament, both Houses, before it can come into effect. When the trustee is in place, subsequent changes to the Order may be made by the Secretary of State only if he has the consent of the trustee. Trustees must consult member and employer panels before giving consent.

150.     Examples of what could be included in the Order are: the structure of members' charges; access to the scheme for the self employed; the way that members will be able to access their savings; the provision of payments to members' and employers' panel members; a default fund for members who do not wish to choose where their contributions are invested.

Clause 55: Procedure for rules

151.     Clause 55 sets out the procedure for publication and consultation on the scheme Rules.

152.     A draft of the proposed Rules must be published and comments invited. The Secretary of State or trustees must consider any comments received and publish a summary of the comments, together with a response. If the Rules are made, they must be published in a way designed to bring them to the attention of interested parties.

153.     The trustees will have to consult the members' and employers' panels before making any Rules or giving their consent to changes to the Rules proposed by the Secretary of State. Where the Secretary of State makes a change to the Rules he must obtain the consent of the trustees.

154.     The effect of this clause is that, although the Rules will not be subject to a formal parliamentary procedure, they will be open to debate by interested parties.

Clause 56: Application of enactments

155.     Clause 56 sets out how the scheme should be treated within current legislation to ensure that the scheme is established and can run as intended.

Clause 57: Trustee corporation

156.     Clause 57 establishes the trustee corporation who will be responsible for the scheme. The name of the corporation will be determined later by the Secretary of State by statutory instrument. This allows flexibility with the timing to allow for research to ensure that the names are those most appropriate for both the scheme and the trustee corporation.

157.     This clause also prevents the corporation from being considered as a Crown servant or agent. The corporation therefore does not benefit from such status, immunity or privilege, nor can its property be considered as belonging to the Crown. This clause introduces Schedule 1 which details the provisions relating to members and trustees, proceedings and money of the trustee corporation.

Schedule 1: The trustee corporation

158.     Schedule 1 sets out rules concerning the governance of the trustee corporation as established in clause 57.

159.     Part 1 details the rules relating to the appointment, conduct, remuneration and staffing of the corporation.

160.     The chair and members of the corporation will initially be selected by the Secretary of State and from then on by the corporation. The Order (see clause 50) may provide for the corporation to be subject to existing rules for member nominated trustees. The trustee corporation must aim to have no fewer than nine and no more than fifteen members.

161.     The Secretary of State and the corporation should satisfy themselves on appointment, and on an ongoing basis, that no member of the corporation has a conflict of interest - as defined in paragraphs 2(5) and (6).

162.     Paragraphs 3, 4 and 5 set out the reasons why a member may be disqualified or removed from the corporation. Members will be disqualified if they are already prohibited or suspended from being a trustee under existing legislation - unless, in specific circumstances, the Pensions Regulator waives the existing suspension or disqualification.

163.     A member cannot be appointed for a period of more than four years and, although he/she may be reappointed at the end of this period, cannot be reappointed more than once. Therefore, the maximum period anyone will be able to serve as a member will be eight years. This is within the maximum period for a public appointment as set out in the Office of the Commissioner for Public Appointments (OCPA) guidance. Members may resign by giving written notice to the Chair and the Chair by giving such notice to the Secretary of State.

164.     The corporation may pay remuneration and allowances and gratuities to members and, where there are special circumstances as determined by the Secretary of State, compensation to a person who ceases to hold office as a member or chair.

165.     Paragraph 8 allows the corporation to employ staff and to determine terms and conditions, including remuneration, of their employment. It must also pay pensions and allowances, as well as provide such pension schemes, as it determines.

166.     Part 2 of the schedule concerns the day-to-day proceedings of the trustee corporation, including that of its committees.

167.     The corporation may establish committees to discharge its functions or to provide advice in order to do so. Committees may include those who are not members or employees of the corporation and they may be paid remuneration and expenses but they must not form the entire committee. This ensures that the corporation can obtain specific skills or expertise but will always have member interest in the committee. Such committees may establish sub-committees whose members must be members of the committee that established it.

168.     The corporation is normally allowed to regulate its own procedure and that of its committees and sub-committees and/or allow committees and sub-committees to regulate their own procedure. Procedures must be published.

169.     Paragraph 13 sets out procedure for declaring an interest in any matter to be discussed at a meeting of the corporation or its committees. Such declarations must be recorded in the minutes. Interests can be disregarded if certain specified conditions are met.

170.     The corporation can delegate any of its functions to members, employees and committees, unless anything in the Order or Rules does not allow that function to be delegated.

171.     The validity of proceedings of the corporation will be protected where there is a vacancy among members or defect in an appointment.

172.     Paragraph 16 specifies that a member, or someone authorised by the corporation, must sign to authenticate the corporation's seal. The seal is the instrument which allows the corporation to sign certain documents and will be attached to documents to show that the corporation agrees to them.

173.     Paragraph 17 requires the corporation to prepare a report which includes the corporation's proceedings during the year and anything relating to the financial position or other matter that the Secretary of State requires. Such reports must be sent to the Secretary of State as soon as possible following the end of the financial year and must be laid before Parliament.

174.     Part 3 sets out the corporation's procedures relating to the receipt of money and accounting.

175.     It also allows the Secretary of State to provide financial assistance to the trustee corporation, for example, through a grant or loan which may be subject to conditions. It also allows the corporation to charge for its services.

176.     As a non-departmental public body (NDPB) the corporation, like all other NDPBs, must keep proper accounts and prepare an annual statement for each financial year which must be audited by The Comptroller and Auditor General (the head of the National Audit Office) and the statement and Auditor's report must be laid before Parliament by the Secretary of State.

177.     Part 4 amends current legislation which needs to refer to the trustee corporation on disqualification, records and freedom of information and equality to ensure that the corporation conforms to these provisions. For example, a member may not be a member of the House of Commons or the Northern Ireland Assembly. It also lists the meanings of a number of terms used in this schedule.

Clause 58: Functions

178.     Clause 58 sets out that the trustee corporation will act as a trustee of the scheme and carry out any other functions within the legislation or scheme rules. The corporation will also be under a duty to carry out these functions in any way it considers appropriate to ensure efficiency and cost-effectiveness.

179.     This clause also provides the corporation with a broad power which will allow it to do anything necessary to enable it to carry out its functions. For example, this will allow the corporation to enter into agreements. It also allows the corporation to borrow and invest money, but only with consent from the Secretary of State.

Clause 59: Application of enactments

180.     Clause 59 allows the Secretary of State, by regulation, to apply existing law which applies to trustees of pension schemes and directors of trustee companies to the trustee corporation created in clause 57. This is to ensure that existing UK trust and pensions law is applied without it being necessary to repeat it. The Secretary of State may also amend existing law as it applies to trustees and directors or corporate trustees.

Clause 60: Interpretation of Chapter

181.     Clause 60 sets out the meanings of members' and employers' panels, and trustees for this part of the Bill.

Chapter 5: Personal Accounts Delivery Authority

Clause 61: Functions of the Authority

182.     This clause makes provision for a broadening of the Personal Accounts Delivery Authority's functions. It provides that section 21 of the PA 2007, which sets out the initial functions of the Authority, shall cease to have effect. It allows for the Authority not only to advise and prepare but also to take forward the implementation work to establish the scheme set up in Chapter 4 and to work with the Pensions Regulator to create the infrastructure to enable employers to register and comply with their new duties.

183.     Specifically, it requires the Authority to give any assistance or advice on the establishment and operation of the scheme that the Secretary of State may call upon, or any advice that the Authority considers it appropriate to provide. Similarly, it also requires the Authority to provide any assistance or advice on the arrangements to enable employers to comply with their new duties (in Chapter 1) that the Secretary of State or the Pensions Regulator may require, or any advice that the Authority considers it appropriate to provide.

184.     The clause provides the Authority with an ancillary power which will allow it to do anything necessary to enable it to carry out its functions or in connection with those functions. For example, this will allow the Authority to enter into formal negotiations and to finalise contracts, and to borrow money to allow it to carry out its functions.

Clause 62: Principles

185.     This clause requires the Authority to consider a number of guiding principles when carrying out its functions. Where appropriate, the Authority may reflect these principles in its advice and in the assistance it provides. The main effect of these principles is that the Authority will consider how to encourage those people with moderate to low incomes, who are not currently saving for a pension, to make provision for their retirement.

186.     All the principles are of equal importance and relate to the manner in which the Authority will discharge its functions. The principles are not the only matters which the Authority will have to consider, neither will the principles necessarily be determinative of the choices the Authority makes, but they are matters to which the Authority will have express regard.

187.     The clause also requires the Authority to do anything it considers appropriate to engage in discussion with relevant stakeholders about its functions and how it discharges its functions.

Clause 63: Directions and Guidance

188.      This clause allows the Secretary of State to give directions and guidance to the Authority on anything to do with the discharge of its functions. In turn, the Authority is required to consider any guidance and comply with any direction. If the Secretary of State gives a direction it must be made in writing. The Secretary of State will publish any direction issued under this section.

Clause 64: Finance

189.     This clause replaces Paragraph 18 of Schedule 6 to PA 2007, to extend the ways in which the Secretary of State may give financial assistance to the Authority. It allows the Secretary of State to provide finance to the Authority in connection with its functions, for example, through grant or loan. Any of the finance may be subject to conditions.

Clause 65: Disclosure of information by the Pensions Regulator

190.     Clause 65 amends existing legislation (section 84 of the PA 2004) to enable the Pensions Regulator to disclose restricted information to the Personal Accounts Delivery Authority to enable it to provide assistance or advice to the Regulator.

Clause 66: Non-executive committee

191.     Clause 66 supplements Schedule 6 to the PA 2007, requiring the Authority to set up a non-executive committee. It also sets out the functions that are to be carried out by such a committee.

192.     It inserts a new paragraph 8A into Part 2 of Schedule 6 to the PA 2007 which provides that there is to be a non-executive committee consisting of the chairman and other non-executive members of the Authority. The functions of the committee will include subsequent appointments (nominations) and terms and conditions (remuneration) of the chief executive and executive members of the Authority. It also provides that the non-executive committee is responsible for monitoring the Authority's internal financial controls.

193.     The non-executive committee must prepare a report on the discharge of their functions for inclusion in the annual report of the Authority.

194.     The non-executive committee may establish sub-committees, which must include at least one non-executive member of the Authority and may include people who are not members of the Authority, although it must not include anyone who is an executive or an employee of the Authority. The non-executive committee and its sub-committees can regulate their own proceedings.

Clause 67: Winding up of the Authority

195.     This clause amends section 23 of the PA 2007 which allows the Secretary of State to wind up and dissolve the Authority by order. It removes the conditions set out in subsections (2) to (4) of section 23 of the 2007 Act which only allow the Secretary of State to dissolve the Authority on abandonment or modification of proposals relating to the scheme that may be established under clause 50.

196.     This clause also extends the provision for transfer of the Authority's property, rights and liabilities. The extension allows such a transfer to be made to any person designated by the Secretary of State.

197.     This clause also amends subsection (7) of section 23 of the PA 2007 to provide that in the event of the dissolution of the Authority, an order under section 23 can remove what will be redundant provisions from the Act.

Chapter 6: Stakeholder pension schemes

Clause 68: Stakeholder pension schemes

198.     Clause 68 amends the WRPA 1999 to remove the statutory duty on employers to have a designated stakeholder pension scheme and almost all of the detailed related provisions (consultation, information etc). A transitional provision is retained for employees, to recognise that, in making their decision to contribute to a stakeholder pension scheme, employees did so knowing that their contributions would be deducted and paid by the employer.

199.     Subsection (4) inserts three new subsections after section 3(1) of the WRPA 1999. These define the employees who are relevant employees for the purpose of the transitional payroll deduction requirement provided for in section 3(5) of that Act, as amended by this clause. Relevant employees are those who are making regular contributions into their stakeholder pension at the point when the legislation is commenced. The transitional requirement will continue to apply for the subsequent period during which regular contributions continue to be paid or until the employee leaves the employer's employment.

200.     Subsection (5) revokes the requirements placed on employers by section 3(2), (3) and (4) of the WRPA 1999. From the date these changes come into effect, employers who, in the absence of appropriate alternative pension arrangements, are currently required to designate at least one designated stakeholder pension scheme, will no longer have such a duty. The subsection also revokes a number of specific provisions which form part of the employer-designation duty.

201.     Subsection (6) amends section 3(5) of WRPA 1999 (the "payroll deduction" requirement) so that it applies in respect of "relevant employees" as defined in subsection (4). The effect is to retain, as a transitional provision, the requirement on employers to deduct contributions from an employee's remuneration and to pay them to the stakeholder pension scheme when asked to do so by the employee.

202.     The amended section 3(5) retains the current power to prescribe exceptions and qualifications to the payroll deduction requirement, and to prescribe the person to whom contributions may be paid.

203.     Subsection (7) inserts new section 3(5A) into the WRPA 1999, which provides that the transitional payroll deduction requirement applies only when the request to make these deductions was prior to this section of the Act coming into force. If an employee varies that request, the requirement will still apply as long as the employee has not ceased to be a relevant employee.

204.     Subsection (8) revokes section 3(6) of the WRPA 1999, which requires an employer to withdraw designation should the designated scheme cease to be a registered stakeholder pension scheme.

205.     Subsection (9) makes a consequential amendment to section 3(7) of the WRPA 1999.

206.     Subsection (10) amends the provisions in section 3(8) of the WRPA 1999 dealing with an employer's duty to make enquiries or judgements about a stakeholder pension scheme to which section 3 of the WRPA Act applies, as a consequence of the removal of the employer designation requirement and the retention of a transitional payroll deduction requirement.

207.     Subsections (11) and (12) amend section 3(9) of the WRPA 1999. A new definition, "relevant date" is inserted, which means the date when the legislation comes into force. The definition of "qualifying scheme" is removed as it is no longer relevant; and the definition of "relevant employees" is omitted because it is replaced by the provisions to be inserted by subsection (4).

208.     Subsections (13) and (14) make consequential amendments to sections 6 and 8 of the WRPA 1999 as a result of the removal of the employer-designation requirement.

Chapter 7: Interpretation

Clause 69: "Employee", "worker" and related expressions

209.     This clause defines the terms "employee", "worker" and other related expressions for Part 1 of this Bill.

Clause 70: Agency workers

210.     This clause identifies that agency workers, who would not otherwise fall within the definition of "worker", are considered as workers for the purposes of the employer duty (automatic enrolment, automatic re-enrolment and opting in). The relevant "employer" for agency workers for the purposes of the employer duty will be either the agent or principal responsible for paying the worker, or if that cannot be determined, whichever one actually pays the worker.

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Prepared: 6 December 2007