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Session 2007 - 08
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General Committee Debates
Pensions Bill

Pensions Bill

The Committee consisted of the following Members:

Chairmen: Sir Nicholas Winterton , Janet Anderson
Ainger, Nick (Carmarthen, West and South Pembrokeshire) (Lab)
Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
Banks, Gordon (Ochil and South Perthshire) (Lab)
Borrow, Mr. David S. (South Ribble) (Lab)
Butler, Ms Dawn (Brent, South) (Lab)
Cunningham, Mr. Jim (Coventry, South) (Lab)
David, Mr. Wayne (Caerphilly) (Lab)
Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)
Greenway, Mr. John (Ryedale) (Con)
Jackson, Mr. Stewart (Peterborough) (Con)
Keen, Alan (Feltham and Heston) (Lab/Co-op)
Kirkbride, Miss Julie (Bromsgrove) (Con)
O'Brien, Mr. Mike (Minister for Pensions Reform)
Plaskitt, Mr. James (Parliamentary Under-Secretary of State for Work and Pensions)
Rowen, Paul (Rochdale) (LD)
Selous, Andrew (South-West Bedfordshire) (Con)
Waterson, Mr. Nigel (Eastbourne) (Con)
Mark Hutton, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 29 January 2008


[ Janet Anderson in the Chair]

Pensions Bill

Clause 25

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 26

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 ‘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 27

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.
Clause 27, as amended, ordered to stand part of the Bill.

Clause 28

Compliance notices
Andrew Selous: I beg to move amendment No. 143, in clause 28, page 11, line 23, leave out ‘may’ and insert ‘must’.
The Chairman: With this it will be convenient to discuss amendment
No. 144, in clause 28, page 11, line 32, leave out ‘may’ and insert ‘must’.
Andrew Selous: I rise to speak to the two amendments, in my name and that of my hon. Friends.
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.
Andrew Selous: I beg to move amendment No. 24, in clause 30, page 13, line 2, at end add—
‘(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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