New
Clause
23
Appointment
of trustees
(1) In section 7
of the Pensions Act 1995 (c. 26) (appointment of trustees), in
subsection (3)
(a) for
necessary, in the first place where it occurs,
substitute
reasonable;
(b)
omit or at the end of paragraph
(b);
(c) at the end insert
, or
(d) otherwise to
protect the interests of the generality of the members of the
scheme.
(2) In
paragraph 9(b) of Schedule 2 to the Pensions Act 2004 (c. 35)
(reserved regulatory functions), for or (c) substitute
, (c) or (d)..[Mr. Mike
O'Brien.]
Brought
up, read the First and Second time, and added to the
Bill.
New
Clause
24
Prohibited
recruitment conduct
(1) An
employer contravenes this section if any statement made or question
asked by or on behalf of the employer for the purposes of recruitment
indicates (expressly or impliedly) that an application for employment
with the employer may be determined by reference to whether or not an
applicant might opt out of automatic
enrolment.
(2) The reference in
subsection (1) to a statement made or a question asked for the purposes
of recruitment is a reference to one made or asked in the course of any
of the following
(a)
inviting applications for
employment;
(b) requesting
information from an applicant, referee or other person in connection
with an application for
employment;
(c) providing
information about
employment;
(d) proposing terms
or conditions of
employment.
(3) The reference
in subsection (1) to an applicant opting out of automatic enrolment is
a reference to the applicant, if becoming at any time in the course of
the employment a jobholder to whom section 3 or 5
applies
(a) giving
notice in accordance with section 7 in relation to arrangements made by
the employer under the relevant section,
or
(b) where the employer makes
arrangements under regulations under section 3(5) or 5(5), declining to
become an active member of the scheme to which the arrangements
relate.
(4) In this section and
sections [Compliance notices] and [Penalty notices],
employer means the prospective employer in relation to
any employment.[Mr.
O'Brien.]
Brought
up, and read the First
time.
Mr.
O'Brien:
I beg to move, That the clause be read a Second
time.
The
Chairman:
With this it will be convenient to discuss the
following:
Government
new clause 25Compliance notices.
Government new clause
26Penalty
notices.
Government
new clause 27Review of notices and references to Pensions
Regulator
Tribunal.
Mr.
O'Brien:
Can I indicate to the hon. Member for
Eastbourneif he does not listen I will call him the
hon. Member for Bournemouth againthat I am grateful for
the conversations we have been able to have in recent days about some
of the issues relating to employers and the offering of financial
inducements to workers in order not to participate in pension schemes?
I am taking forward some of the discussions we have had in a separate
context. Dealing with this particular set of new clauses, I have taken
the view that I would not move to criminalise employers, but it is
important that we look at ways to ensure that employers do not offer
their workers financial inducements to opt out of automatic enrolment
schemes.
The hon.
Member for Inverness, Nairn, Badenoch and Strathspey spoke recently
about the possibility of employers seeking to avoid recruiting those
who would choose to remain enrolled, and I subsequently wrote to the
Committee on this issue, setting out our reasons for favouring a
pre-employment prohibition over an individual right. These amendments
seek to introduce such a prohibition, addressing the risk that some
employers might try to avoid their new employer duties up front, by not
recruiting anyone who wishes to remain opted into a pension
scheme.
They could do
this, for example, by overtly advertising on this basis or by asking
questions in an application form. They could also ask at interview
about the applicants current scheme membership status and
whether they would opt out of a pension scheme if they were offered the
job. They could make a job offer which stipulated or implied that there
was a condition on the applicant agreeing to opt out of a pension
scheme. Although clause 49 would make any such provision in an
agreement void in itself, they could still make that offer.
We do not expect that there
will be any significant number of employers who are going to be
involved in this sort of disreputable behaviour, but we want to ensure
that we do not have a loophole here, and we are determined not to allow
employers to sift out, in effect, applicants who would wish to join or
remain in pension schemes. For employers, this prohibition would be
contravened if they made any statement or asked any question that
expressly or implicitly indicated that a job application might be
determined by reference to whether an applicant might opt out of
automatic enrolment. The Pensions Regulator would be tasked with
enforcing this prohibition, and would have the power to issue
compliance notices and impose other financial penalties where breaches
were shown to have occurred. As with other penalties for
non-compliance, these will be set out in regulations, although we
intend that they should be set at the same levelthat is, a
proposed maximum of £50,000. For the individual, a
pre-employment prohibition would mean that they could complain to the
regulator if they had evidence that the employer had contravened the
prohibition by indicating that the job would only be available on the
condition that they opted out of membership.
We feel that an individual
would be much more likely to make a complaint to the regulator than to
have to
bring a case directly to an employment tribunal or against a prospective
employer, which is what would happen with a pre-employment right. There
is a further advantage, in that the regulator would be able to consider
the implications for multiple complaints received against the same
employer. We will continue to discuss with the regulator the detail of
how this prohibition can be effectively enforced as part of its
risk-based approach to compliance. We will continue to consider the
vital issue of the communications strategy which will need to ensure
that both employers and individuals get the information they need to
understand the implications of this
measure.
6.30
pm
The new clauses
would provide an effective deterrent to the small number of employers
who might seek or attempt to avoid their employers duties by
trying to get people to opt out of automatic enrolment or opt out of
the pension scheme as a condition of employment. We would, in effect,
be protecting those good employers who seek to ensure that they are in
a position to provide proper tension schemes for their employers. This
is about creating a level playing field for all employers, without
creating a specific right that individuals would be unlikely to
defend.
6.30
pm
Andrew
Selous:
I am grateful to the Minister for setting out his
stall on new clauses 24, 25, 26 and 27. We understand the need for
those new clauses and will not be voting against them. They are good as
far as they go and I buy into the argument about a level playing field
for employers, which is important in an area with increased employer
costs. We must support good employers and ensure that rogue employers
cannot undercut them, which in tight market conditions can be critical
and can lead to the survival or otherwise of a business, as Committee
members with business experience will
testify.
I
have a couple of points to make on new clause 24. I was contacted
recently by someone who was a trustee of a pension scheme. He has
clearly been following our proceedings carefully over the
internetI do not think that he has attended the
Committeeand was aware of new clause 1, which my hon. Friend
the Member for Eastbourne and I, and other hon. Friends tabled earlier
on. Although we cannot debate that new clause now, Sir Nicholas, it
said that an offence would be committed if an employer offered
financial inducements to opt out of an automatic enrolment scheme. The
gentleman whom I have mentioned was pleased with new clause 1 and
thought that it might have led to the Ministers tabling new
clause 24.
The point
has been made to me
that
once an individual
is in the employers employment, the latter will be completely
free to subvert the automatic enrolment process by offering threats or
inducements in relation to possible variations of the contract of
employment or alterations of its term, so as to secure an opt-out
from
the personal
account scheme. Nothing in new clause 24 or the other new clauses that
we are considering would prevent
that.
My correspondent
helpfully provides a specific illustration of a practice that he tells
me is current within the university employment world,
whereby it is represented to a
member of staff newly appointed on a limited term
contracttypically a researcherthat if he or she opts
out of occupational pension
provision
there just
might be a better chance of their contract being renewed next year. I
hope that the Minister is following me intently and understanding the
argument. My correspondent
continues:
The
plausibility of this representation has been heightened by the
practice of some research councils (which I believe still continues) of
providing grants on the assumption that
14%
considerably
higher than the 3 per cent. that we are talking about in terms of
personal
accounts
will be
added to the basic salary costs of a project by way of employer
contributions
to the
relevant pension scheme. However, they
are
not clawing back the
net saving if those employed with the funds opt out of that
scheme.
In other words,
research councils are providing money to employ someone and giving an
extra 14 per cent. That 14 per cent. is not going into a pension scheme
and the university is renovating the science laboratory or employing
another secretary or something like that. I am not familiar with that,
but it has been put to me that it is a current practice. All of us
should be extremely grateful to people up and down the country who, by
virtue of the internet, are following in great detail the new clauses
and amendments put forward by all members of the Committee, the
responses of the Government and so on.
I am reasonably persuaded that
there is an issue here because, at the risk of labouring the point,
financial pressures on universities in this case, rather than
businesses, are acute. Everything is costing more these days, so the
desire to save money from any quarter is
huge.
Mr.
Waterson:
I am very interested, as I see the Minister is,
in what my hon. Friend is telling us. Does not it make him think that
if this sort of thing happens in the groves of academe, how much more
likely it is to happen in the corner bodywork shop or the fish and chip
shop or the small hairdressers or
whatever?
Andrew
Selous:
My hon. Friend is absolutely right, although we
should not assume that universities are centres of moral virtue in
every aspect. The point he makes is that we are legislating for every
type of employer, large and small, in every sector up and down the
country.
Mr.
Waterson:
On the subject of moral virtue in universities,
my hon. Friend may know that at the university of Oxford, a lecturer
can be removed from office for gross immorality, whereas a professor
can only be removed for persistent gross
immorality.
The
Chairman:
Order. I am not sure that the hon. Gentleman
should respond to that, unless he can connect it directly to the new
clauses.
Andrew
Selous:
I am grateful to you, Sir Nicholas, for saving me
from theI will not quite say stingingintervention from
my hon. Friend, who has a
delightful habit of enlivening and informing our proceedings in all
sorts of ways, even if not entirely within order.
My correspondent has done his
homework and has studied new clause 24 in some detail. I feel that it
is a bit mean on the Minister, because this letter has come into my
possession relatively recently so I have not had the chance to amend
the new clause, even if it is possible to do soprobably not. My
correspondent makes various proposals to amend the new clause. He has
gone into some detail to try to address the points that I have made. I
do not think that it would be helpful to go through the specific points
that he is making; it would be difficult for the Hansard
writers. Perhaps I might share the relevant points with the Minister by
way of correspondence later. That would probably be a more helpful way
to proceed. Nevertheless, I hope that the Minister has taken my general
point. I know that conversations have been had and the Opposition
welcome that from the point of view of consensus. All I ask is for the
Minister to indicate in his response whether he will look at the
proposals in relation to the new clause, and have an open mind to
tweaking new clause 24 slightly on Report.
Mr.
Greenway:
I will try to make a brief intervention, rather
than a longer speech later. What are the two critical points? First,
that is a specific problem relating to people who, traditionally, are
employed on short-term contracts, which are then renewed. Second, as a
consequence, it is not so much a recruitment issue, which is what the
new clause refers to, but a negotiation of terms and conditions issue.
That may be the area in which the new clause might be amended when the
Bill returns to the Floor of the
House.
The
Chairman:
I congratulate the hon. Gentleman for that brief
intervention.
Andrew
Selous:
My hon. Friend the Member for Ryedale is right.
Those are the specifics of the case that I laid out. He is right to
summarise it in that way. I am still considering whether there might be
other cases, perhaps within the field of employment, where it might be
best or necessary to amend new clause 24 slightly further. My hon.
Friend is right about the specifics of the case that I have read out. I
would ask for the Ministers open-mindedness and whether we
might have further discussions on the issue that I laid before the
Committee.
Mr.
O'Brien:
First, I am grateful to the hon. Gentleman for
his indication of broad support for my new clauses. He raised an issue
of post-employment inducement, particularly where short-term contracts
were involved, which greatly concerns me. He made some telling points.
He has asked for an open mind, but I think I have a closed mind: that
sounds like something that we have to deal with. I am not sure that we
can deal with it here, at the moment, but I appreciate, having sight of
his letter and the issues raised, that we do not want that sort of
behaviour occurring. I do not think that the appropriate way of dealing
with the matter would be by amending the new clause, but probably with
another new clause in due
course. Let me have a look at that. He raised some valuable insights,
which we need to take account of. I am happy to do that and to respond
positively to the hon. Gentlemans
intervention.
Question
put and agreed
to.
Clause
read a Second time, and added to the
Bill.
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