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Session 2007 - 08 Publications on the internet General Committee Debates Pensions Bill |
Pensions Bill |
The Committee consisted of the following Members:Mark Hutton, Committee
Clerk
† attended the
Committee
Public Bill CommitteeTuesday 29 January 2008(Afternoon)[ Janet Anderson in the Chair]Pensions BillClause 25Miscellaneous
Question
proposed, That the clause stand part of the
Bill.
4.00
pm
Andrew
Selous (South-West Bedfordshire) (Con): Thank you very
much, Mrs. Anderson. I have not had the opportunity of
welcoming you to the Chair in the amending part of our deliberations. I
would like to give my apologies for the morning session. I had a
hospital appointment that I have had to cancel on a number of previous
occasions.
I just
have one brief question for the Minister on clause 25 in relation to
subsection (4) and paragraph 71 of the Explanatory Notes. Could he
please outline what type of schemes this subsection has in mind when it
says that those schemes will not be eligible for auto-enrolment by
virtue of the power given to trustees to modify a
scheme?
The
Minister for Pensions Reform (Mr. Mike
O'Brien):
The purpose of clause 25 is to enable trustees
to modify an occupational pension scheme that otherwise meets the
quality criteria but does not allow for automatic enrolment. This power
would be used where there are limited powers of amendment within the
scheme. It would provide trustees with a power to change the scheme
rules to allow automatic enrolment, as some schemes currently just do
not allow it. Changes can only be made with the consent of the
employer.
It is
important that both the trustees and the employer agree on the matter
and that the trustees must consider the interests of existing members
in this decision. The employer, who meets the administrative costs and
balance of any defined benefit funding requirements, must consider any
additional costs arising from automatic enrolment. This is a limited
power, as it only provides an override for rule changes necessary to
facilitate automatic enrolment and can only be made with the employer's
agreement, in circumstances where at the moment scheme rules do not
allow it.
The
regulations will provide that the subsection does not apply to
occupational pension schemes within a certain description, so they will
identify the nature of the particular schemes this will apply to. All
this will be set out in more detail in those regulations. We want to
ensure we are able to discuss with various trustees’
organisations and business groups which types of schemes we will need to
cover when the regulations are
introduced.
Question
put and agreed
to.
Clause 25
ordered to stand part of the
Bill.
Clause 26Deduction
of
Contributions
Amendments
made: No. 126, in clause 26, page 11,
line 2, leave out ‘jobholder’ and insert
‘person’.
No.
127, in
clause 26, page 11, line 2, leave
out third ‘a’ and insert ‘an occupational
pension’.
No.
128, in clause
26, page 11, line 3, leave out
‘or 6(3)’ and insert
‘, 6(3) or [Workers without qualifying
earnings](2)’.
No.
129, in
clause 26, page 11, line 3, leave
out ‘jobholder’s’ and insert
‘person’s’.
No.
130, in
clause 26, page 11, line 4, leave
out ‘jobholder’s’ and insert
‘person’s’.—[Mr.
O'Brien.]
Clause
26, as amended, ordered to stand part of the
Bill.
Clause 27Effect
of Failure to
Comply
Amendments
made: No. 131, in clause 27, page 11,
line 15, after ‘9’ insert ‘and
[Workers without qualifying
earnings]’.
No.
132, in
clause 27, page 11, line 15, at
end add—
‘( ) In relation to
section [Workers without qualifying earnings] this Chapter applies as
if references to a jobholder included references to a worker to whom
that section applies.’.—[Mr.
O'Brien.]
Question
proposed
, That the clause, as amended, stand part of the
Bill.
Andrew
Selous:
Could the Minister kindly explain to the Committee
why the explanatory notes say
that
“no private right
of action for breach of statutory
duty”
may arise against
an employer? I am curious as to why that private right of action is
deliberately struck out by clause 27, when on the face of it, it would
seem a reasonable step for an aggrieved party to
take.
Mr.
O'Brien:
The reason is that we want the Pensions Regulator
to be able to take these steps. The clause makes clear that failure to
comply with the employers’ duties in chapter 1 will not give
rise to an individual right to pursue a case for breach of statutory
duty. Otherwise individuals would have to take individual action in the
courts. Our preference is that the Pensions Regulator will take on the
role of enforcing employer compliance with the new duties, alongside
its responsibility for regulating the new personal accounts
scheme.
We want to
ensure that the route to a remedy for an individual whose employer has
been non-compliant is through enforcement by the Pensions Regulator
rather than through that kind of individual action. That would ensure
both more effective enforcement and, importantly, clarity for employers
who might otherwise
fear that they could face action simultaneously on two fronts. Clause 27
clarifies that and also confirms that nothing in chapters 1 and 2
affects any other individual right to take legal action. Other
individual rights to take legal action—concerning employment
contracts for example—will remain and will be dealt with
separately. The clause is therefore crucial in setting out who has the
right to enforce employers’ duties. The answer is that the
regulator has that
right.
Clause 27,
as amended, ordered to stand part of the
Bill.
Clause 28Compliance
notices
Andrew
Selous:
I beg to move amendment No. 143, in
clause 28, page 11, line 23, leave
out ‘may’ and insert
‘must’.
No. 144,
in
clause 28, page 11, line 32, leave
out ‘may’ and insert
‘must’.
I am curious
as to why what will be in a compliance notice is not specified because,
having looked at clause 28(3), it seems that all four paragraphs (a),
(b), (c) and (d) should be in a compliance notice. Such a notice would
tell the employer by when a remedial action must be taken, what must be
done, how it must be sorted out, and what would happen to him if he
failed to comply with the notice. Those four components strike me as
important and if a compliance notice were to be served on an employer
they would want all those parts there so that they knew what to do and
by why, and what would happen otherwise. I am querying the word
“may”; there is a case for compliance notices being
issued in a set format, covering all the points of information that I
have run
through.
Mr.
O'Brien:
That is a question I asked too; it seems
reasonable for those various parts of a compliance notice to be
included. The answer I got was, “Yes, but what happens if the
Pensions Regulator already knows that information? Why would one want
the compliance notice to contain a request for information that was
already in the hands of the Pensions Regulator?” So that is the
answer.
There is
merit in having a clear, standard form; we do not want lots of
variations in forms and so I will consider the amendments. I am more in
sympathy with amendment No. 143 than with No. 144 because it may be
clear in clause 28(4) what steps the regulator thinks appropriate,
perhaps just compliance in terms of making repayments. It is a
reasonable assumption that we will want to have a standard form. The
best approach is probably that we would want all the points in almost
all notices, but that a minor element of discretion might be
better—with “may”—in order to not have
notices being more complicated for employers than they need to be. If,
for example, we had a standard
notice and there were various options as to what an employer might be
required to do; we could end up with a complicated notice if it had to
make a whole list of requests. Particularly if the employer is a small
business person and has not had to deal with the Pensions Regulator
before, he could get a long list that it looks like he has to comply
with, but actually he has done some of those things. He may not have
the best of records, he may not know that he has done some of those
things, so he may be put to more inconvenience than he needs to
be.
There is some
benefit in a bit of discretion here—using “may”
rather than “must”—but I do not feel strongly. I
can see an argument for inserting “must”. It depends on
how far the Opposition wish to push this. I am fairly relaxed, but if
the hon. Gentleman thinks “must” is necessary, I will
reflect on that. However, for the reasons described—to help
small businesses—it is probably better to give a level of
discretion and not to be too prescriptive. We will consult. I think
that most notices will contain all the information, but in practice
having an element of discretion, which we can deal with by regulation
for particular forms, may well be
beneficial.
The only
additional argument in favour of “may” rather than
“must” is that “may”, because it gives
discretion, means that a legal challenge against the precise wording of
the compliance notice might be more difficult. If the statute says that
a notice “must” say all those things,
including
“requiring the
employer to inform the Regulator, within a specified period, how the
employer has complied or is complying with the
notice”,
then an
employer may be able to challenge on a legal basis, because
“must” is in there and, therefore, things must be done in
a certain way. The courts would probably end up having to interpret
what that “must” is all about. Having “may”
will give some discretion to the Pensions Regulator to have a form that
is fairly standard, but if the regulator made a small error in wording
or was not as fulsome as a difficult employer might want, then a legal
challenge would be more
difficult.
For those
reasons and on balance, we are probably better off with
“may”, but I do not feel that strongly about it. I can
see from the hon. Gentleman’s face that he does not feel
particularly strongly either. Let us leave it the way that it
is.
Paul
Rowen (Rochdale) (LD): I think that the Minister puts the
point well. Yes, there are advantages either way, but in the context of
what we are trying to do, “may” is probably the right way
to go. To me, what we are trying to achieve is covered by subsection
(2), which states clearly that when the compliance notice is issued the
employer must respond. Given that, what might be in the compliance
notice should be left to the discretion of the Pensions
Regulator.
Andrew
Selous:
I am pleased to see that the Minister asked the
same question of his officials that I asked myself when looking at the
clause last week. I take the Minister’s point that the Pensions
Regulator would know what he knew, but that does not quite answer the
question that the employer would know what the employer had to
do.
4.15
pm
The
Minister’s best answer, which I accept, was about legal
challenge. I realise that, when lawyers get involved, they can get
pernickety, and if the compliance notice is not in the exact format
specified it could cause complications. I was toying with the idea of
pressing this to a vote, given the semi-encouragement the Minister was
giving me. I was wondering whether the Minister would have marched his
troops behind me if I called a division on this matter, because he was
being so emollient about it. However, on the issue of legal challenge,
he has persuaded me.
Most importantly, I was
particularly reassured by what he said about the intention that a
compliance notice would, in general, be a fairly standard document
which would tell the employer what he needed to know, what he had to
do, by when he had to do it, and what would happen if he or she did not
comply. Having been reassured, I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Amendment
made: No. 133, in clause 28, page 12,
line 2, after ‘8’ insert
‘and [Workers without qualifying
earnings]’.—[Mr.
O'Brien.]
Clause
28, as amended, ordered to stand part of the Bill.
Clause
29
ordered to stand part of the Bill.
‘(g) require the
employer to pay interest in respect of any period for which
contributions remain
unpaid.’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 96, in clause 31, page 13,
line 17, at end
insert—
‘(d) if the
contributions are not paid within one year of the due date a
requirement to pay interest of inflation or 5%, whichever is lower, on
unpaid relevant
contributions.’.
Andrew
Selous:
Amendment No. 24 is fairly straightforward, in
that it seeks to put the jobholder back in the position he or she would
have been in if contributions had been made at the correct time by the
employer in the first place. Obviously, there is a time value to money.
Having a contribution today is more valuable than having that
contribution in a month or three months’ time. By adding (g) to
the end of the list of requirements in subsection (5), we seek to
ensure that late contributions have the same financial value to the
jobholder as contributions made at the correct time. The omission of
that provision strikes me as slightly surprising in relation to clause
30. No doubt the Minister will shortly tell me there was a very good
reason for it being left
out.
I see where the
hon. Member for Rochdale is coming from with amendment No. 96, which I
know he will speak shortly. Confusingly, it relates to clause 31,
although we are also speaking to clause 30. I think he has the same
objective that I do, which is to put the jobholder back in the position
that he or she would have been in had the contributions been made on
time. I would just query the figure of 5 per cent. in
amendment No. 96, because it is of course possible that interest rates
could be significantly higher, and putting a figure in the Bill may not
put the jobholder back in the position he or she would have been in,
depending on financial circumstances at the
time.
Paul
Rowen:
I agree with the hon. Gentleman’s last
point. I do not thing we got that right in our drafting. I hope,
however, that the Minister will accept the principle that both these
amendments relate to, which was left out of the Bill. If he is not
prepared to accept these, will he assure us that something along these
lines will go in the Bill? The details can be worked out and put in
regulations, but I think most people would be very satisfied with a
clause that ensures that there is some protection where there is late
payment or non-payment, and that employers understand that. Within the
context of the compliance regime that has developed here, which is
light-touch, insisting on interest for late payment would be a
light-touch way of making it in the employer’s interest to make
sure that payments were made on
time.
Mr.
O'Brien:
Some good points have been made and I accept the
gravamen of what both hon. Gentlemen have said. On the basis of what
has been said the Government will look at the issue and draft an
amendment, probably to clause 31, giving the Pensions Regulator the
power to request interest to be paid where appropriate and to make
regulations to set out the rate and over what period the interest will
be charged. It is a good point; that power was not there and when we
looked at it we realised that it should be. We would like the
parliamentary draftsmen to set out appropriate wording, but in
principle I am with the thrust of what both hon. Gentlemen wish to see
in the
Bill.
Andrew
Selous:
We can chalk that up as a little success. We are
of course with the Government in wanting the Bill to be successful
because the issues are important. With the reassurance that the
Minister kindly gave, that he will seek to amend perhaps
clause 31, I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
30 ordered to stand part of the
Bill
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