Objectives 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 Ministers reflections on a point relating to the objectives of the Pensions Regulator. Obviously, the regulators 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 meby industry groups, for examplerelates to the role of the regulator with regard to its new objective. Will the new objective in any way distract from the regulators existing objectives? Clearly, Liberal Democrat Members would not want that to be the casenor, 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
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 regulators 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 onerousit will basically be collecting and managing databut 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.
Restrictions on agreements to limit operation of this Part
( ) 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 1Offence 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 employers duties or a workers 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 provethere 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 concernedhopefully a small minoritythere 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, Heres £100,or £500 or £1,000, who knows what the figure might be?this isnt a good deal for you and theres a lot of administration for me; its a silly Government scheme. Why dont you take the money now? Youll 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 enrolone could not blame them.
On a serious point, my genuine worryI am surprised that it is not shared by the Minister or, indeed, all members of the Committeeis that there will be some employees, who perhaps do not pay great attention to our proceedings or watch the news that carefully, who
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 TUCs 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 regulators 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 Ministers response.
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. Gentlemans intention to press this new clause to a vote. No doubt he will consider that having heard the Ministers 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 employees 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, Lets 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
Andrew Selous: I just want to challenge the Ministers 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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