Clause
45Objectives
of the
Regulator Question
proposed, That the clause stand part of the
Bill.
Danny
Alexander: The consideration of this
clause gives us an opportunity to ask for the Minister’s
reflections on a point relating to the objectives of the Pensions
Regulator. Obviously, the regulator’s involvement with personal
accounts has been widely welcomed, not just in this Committee and the
House, but by stakeholder groups. The clause inserts a new objective
for the Pensions Regulator to maximise compliance with the duties set
out in chapter 1 of the Bill, which makes a great deal of sense. The
Pensions Regulator has a very high reputation. It has been seen to
carry out its present functions very successfully, and those whom it
regulates have a great deal of confidence in it.
The only
misgiving of any sort that has been expressed to me—by industry
groups, for example—relates to the role of the regulator with
regard to its new objective. Will the new objective in any way distract
from the regulator’s existing objectives? Clearly, Liberal
Democrat Members would not want that to be the case—nor, I am
sure, would the Minister. The Pensions Regulator should be able to
carry out its existing functions and objectives unimpeded by the new
objective.
Will the
Minister assure me that appropriate additional resources will be made
available to the regulator to enable it to carry out the duties that it
will have under the new objective in such a way that it will not have
to wind down or squeeze its existing functions to make
more resources available to carry out the duties described in the Bill?
I hope that I know what the Minister will say, but it is important that
such questions are answered on record to ensure that confidence is
maintained. Mr.
O'Brien: The hon. Gentleman makes extremely good points
and I share his concern. We need to provide reassurance to the pensions
industry that the excellent work done by the Pensions Regulator, in the
role that it has adopted up to now of giving greater confidence
regarding pensions, will continue unabated, and that the new work that
it will take on to ensure that automatic enrolment is carried out will
be properly done in addition to its current work, rather than
distracting from that. It would be tragic if there were any serious
distraction from that important existing role. I have had meetings with
the regulator’s senior management, who are confident that they
will be able to carry out their new duties and maintain the quality of
work that they have done up to now in protecting and overseeing the
pensions system as a whole. The objective of the new changes to which
the hon. Gentleman refers is to give a number of different obligations
to the regulator. Basically, the changes are designed to ensure that
employers comply with their new duties. The key duties are
automatically enrolling eligible qualifying jobholders into a
qualifying pension scheme; informing the regulator about how they
satisfy that duty; and paying pension contributions to the
schemes. The work
that the regulator will do on such matters should not be unduly
onerous—it will basically be collecting and managing
data—but there should be intervention when there is a failure to
comply with the requirements of the Bill. The Pensions Regulator will
discuss such issues as resources with us in the coming months. I am not
going to write any blank cheques, but I have given assurances that I do
not want the Pensions Regulator to be distracted from its current role.
I want to ensure that the regulator has the appropriate resources to
enable it to perform its new role, without causing any difficulty in
the old role. I am
grateful to the hon. Gentleman for enabling me to give such resources.
I share his concerns and objectives and hope that we will be able to
create the new role for the regulator in a way that means that there is
just as much confidence in that new role as has been gained in the old
one. Question put
and agreed
to. Clause 45
ordered to stand part of the
Bill. Clauses
46 to 48 ordered to stand part of the
Bill.
Clause
49Restrictions
on agreements to limit operation of this
Part
Mr.
O'Brien: I beg to move amendment No. 156, in
clause 49, page 22, line 34, at
end insert— ‘( ) The fact
that an agreement is to any extent void under subsection (1) does not
entitle the employer to recover any property transferred, or the value
of any benefit conferred, as an inducement to enter into, or otherwise
in connection with, the
agreement.’.
The
Chairman: With this it will be convenient to discuss new
clause 1— Offence of offering financial
inducements— ‘An
offence is committed if an employer offers financial inducements to opt
out of an automatic enrolment
scheme.’.
Mr.
O'Brien: We want to deter employers from encouraging
workers to opt out of pension scheme membership. Clause 49 ensures that
any agreement, including those involving inducements, that aims to
limit an employer’s duties or a worker’s rights under the
legislation is void. Workers will remain free to opt back into
qualifying pension scheme membership and to disregard any agreement to
the contrary. Employers that refuse to accept workers into the scheme
could receive penalties for failure to enrol. As a result of the
Government amendment, they would not be able to claw back any
inducements that they had
given. We believe that
that approach, backed by an effective communications strategy so that
both employers and workers are well informed about their rights and
responsibilities, is the best way forward. We do not think that making
it a criminal offence to offer inducements is the most effective way of
deterring employers. In practice, the intention of the employer in such
circumstances could be difficult to prove—there is some concern
about the mens rea
there. I hope that the
Committee will be able to accept Government amendment No. 156. I will
not be able to accept new clause 1, but I hope that the changes made by
the amendment will reassure hon.
Members.
Andrew
Selous: We certainly support the Government amendment. An
employer should not be able to take back from employees any money given
to them to encourage, persuade or bribe them to opt out of
auto-enrolment. The measure is a sensible addition to clause
49. I want to debate
further with the Minister the question of employers offering financial
inducements to their employees to opt out of auto-enrolment. It seems
that as far as some employers are concerned—hopefully a small
minority—there will be a clear financial incentive to pay money
to employees so that they do not automatically enrol, given that the
employers would save the 3 per cent. that would otherwise be added to
their payroll costs year on year. They might say to an employee,
“Here’s £100,”—or £500 or
£1,000, who knows what the figure might be?—“this
isn’t a good deal for you and there’s a lot of
administration for me; it’s a silly Government scheme. Why
don’t you take the money now? You’ll be better off and it
will save me the hassle.” Under clause 49, such an agreement
would not stand, because the employee would be able to keep the money
and then chose to enrol in the scheme automatically. The TUC
representative who gave us evidence was pleased about that and said
that there might be some smart employees who would take the money and
automatically enrol—one could not blame
them. On
a serious point, my genuine worry—I am surprised that it is not
shared by the Minister or, indeed, all members of the
Committee—is that there will be some employees, who perhaps do
not pay great attention to our proceedings or watch the news that
carefully, who
will take what is effectively a bribe from their employer to stay out of
the scheme without realising that they have lost out on what could be
an important and meaningful pension provision. Given that the Minister
wants to discourage employers from doing that, I am surprised that he
does not want to make it an offence for an employer to do something
that is against the intention of all three parties represented on the
Committee. If such action were an offence, that would be a further
deterrent to employers and would, therefore, be a small but useful
contribution to the Committee’s
objectives. Will the
Minister elaborate on what exactly will happen, in terms of missed
contributions, when such a deal between and employer and an employee is
uncovered? In particular, will there be an onus on the employer to make
good on the contributions that should have been paid? We have had a
useful debate on the role of the Pensions Regulator. The TUC’s
briefing asked whether the Pensions Regulator will look out for
employers who have atypically high numbers of staff who have opted out.
Will it be part of the regulator’s role to survey employers and
spot unusual patterns of opt-outs that suggest that such financial
inducement or bribes might be involved? Such inducements would be in
the employers’ financial interest but not, in the vast majority
of cases, in the interest of the employees, although that is not to say
anything against the debate that we will have shortly on means-testing.
New clause 1 would provide an extra deterrent to stop employers from
doing something that we all agree is wrong. I will be interested to
hear the Minister’s
response. 10
am
Danny
Alexander: I agree with much of what the hon. Gentleman
said. Government amendment No. 156 makes a lot of sense in that it
seeks to close a loophole that would have allowed employers to claim
back any inducements that may have been offered to employees to get
them to opt out of a pension scheme. It is absolutely right that an
employee should not have to repay any such fee as it is the employer
who would have broken the law and should therefore take the
consequences. I wish
also to speak in support of new clause 1, which adds something useful
to the Bill by creating this offence. It would add something to the
range of powers in the Bill, and knowing that this additional matter
was there would add to the sense that any employer considering such a
step would have about its gravity. I do not know whether it is the hon.
Gentleman’s intention to press this new clause to a vote. No
doubt he will consider that having heard the Minister’s
response, which I will certainly be interested to hear.
There is a
further issue which Government amendment No. 156 attempts to address,
and that is the issue of inducements being offered prior to someone
accepting a contract of employment. That is quite a difficult area,
which I tried to capture in amendment No. 98, which was quite naturally
not selected for debate, but where I think there is a genuine question.
This clause, for example, relates to something being written into an
employee’s contract which obliges them to opt out of the
personal account, on the basis of which they accept some additional
financial emolument. Clearly, it is quite possible that such a
transaction would be proposed by an employer before the person had
accepted the job.
The
prospective employee turns up for interview, has the interview, and
then the employer says, “I have offered you the job, but I would
like you to sign this contract”. The potential employee sees the
contract and says, “Hold on. This is not right. I am not going
to sign away my right to a personal account. It is an offence under the
Act”. No doubt there will have been a very full publicity
campaign so that potential employees will be aware of their rights. The
employer then says, “Sorry, I have changed my mind, I am not
going to offer you this job. I will look for somebody else”.
Clearly, the employer would be in breach of the Act. Government
amendment No. 156, if anything, tightens up that restriction. I am
concerned about the position of someone who is not yet an employee.
They may have been denied the option to take a job for which they are
eminently qualified on the basis of an unwillingness to move forward in
the illegal way that the employer has
proposed.
I note that both the TUC and
the Engineering Employers Federation are also concerned about this
issue, albeit a blanket pre-employment right might be too broad, not
least because it would potentially allow people to go to an employment
tribunal and claim that this was the reason, even though it was not.
None the less, it would be useful if, in the context of amendment No.
156 and new clause 1, the Minister would reassure the Committee on this
point, and perhaps look further at whether the provisions he is trying
to make with amendment No. 156 could be further strengthened to take
account of the concern I have
raised.
Mr.
O'Brien: I share the concerns of the
hon. Member for South-West Bedfordshire and the hon. Member for
Inverness, Nairn, Badenoch and Strathspey; Inverness and points beyond.
Actually, there are no points beyond, are there? Points around. Our
view is that we are better off dealing with this stage of the problem,
at least, in employment contractual terms, rather than by criminalising
the employer. It is, perhaps, an odd situation when a Labour Government
are saying, “Let’s not criminalise the employers”,
and the Conservatives are saying we should. We have looked at this with
a lot of care. The way we have set about this will provide a
significant degree of protection. If there is, of course, an employer
who continues despite warnings and despite the intervention of the
regulator, the TPR, saying to the employer you have got to start now
properly enrolling people, complying with your obligations, fulfilling
the purposes of this legislation, then there would be a criminal
sanction if the employer continued to be in breach.
At the particular point at
which inducements are offered at the start of the employment, our view
is that this can be dealt with by a series of employment-related
penalties that have a financial consequence for the employer but do not
result in them in ending up in criminal courts. That is basically the
way in which we want to deal with
it. I
hear what the hon. Member for South-West Bedfordshire says. He is right
to identify the issue of inducements as a very serious one. He is
right, as is the hon. Member for Inverness, Nairn, Badenoch and
Strathspey, to indicate that the TUC, the EEF and other organisations
are concerned about this area. I
think we are best dealing with it in the employment relationship but I
am listening with care to what Members opposite are
saying. Andrew
Selous: I just want to challenge the Minister’s
logic. He said that the regulator would be able to go to the employer
and say that people are not auto-enrolled but the employer can at that
point say, “My employees have taken themselves out. They said
they do not want to be auto-enrolled.” As for this private bung
of £500,000 or whatever it was, the employer has probably said
to the employee, “You keep this quiet, my lad. We do not want
this getting out, do we? You have a nice extra bit in your pay packet,
a couple of fivers in a brown envelope late one Friday evening.”
How is anyone going to know? I understand what the Minister is saying
but I think there is a slight flaw in his
logic.
I do not want to criminalise
any employers but from a competitive point of view, speaking as someone
very pro-business, I want a level playing field. I want decent
employers not to be undermined. Remember, we are talking about 3 per
cent. of payroll costs, which could be quite significant. I would argue
that the Minister is being slightly anti-competitive because he could
be allowing this practice which he said he does not want. My point is
that he is not going to know it is going on just by seeing people are
not auto-enrolled. I think this would be
useful.
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