House of Commons
|Session 2007 - 08|
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General Committee Debates
The Committee consisted of the following Members:
Mark Hutton, Committee Clerk
attended the Committee
Public Bill Committee
Tuesday 29 January 2008
[ Janet Anderson in the Chair]
Question proposed, That the clause stand part of the Bill.
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
Question put and agreed to.
Clause 25 ordered to stand part of the Bill.
Deduction 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 jobholders and insert persons.
No. 130, in clause 26, page 11, line 4, leave out jobholders and insert persons.[Mr. O'Brien.]
Clause 26, as amended, ordered to stand part of the Bill.
Effect 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
Clause 27, as amended, ordered to stand part of the Bill.
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 betterwith mayin order to not have notices being more complicated for employers than they need to be. If, for example, we had a standard
There is some benefit in a bit of discretion hereusing may rather than mustbut 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 describedto help small businessesit 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. Gentlemans 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 Ministers 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.
The Ministers 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
Paul Rowen: I agree with the hon. Gentlemans 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 employers 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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