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Secondly, as currently drafted, the requirements in Clause 34 for the employer to calculate the amount of contributions not paid to a scheme and to pay unpaid contributions do not apply to compliance notices in cases where that employer fails to auto-enrol a jobholder or induces a jobholder to opt out. The policy intention here is to have a mechanism that ensures that the employer makes up any unpaid contributions in those instances. For that to occur, there must be a recognised appropriate date on which contributions were expected to have been made, but where the employer has not automatically enrolled the jobholder, or has induced them to opt out, there is no scheme and therefore no relevant due date.
The second group of amendments, Amendments Nos. 91D and 91E and 92E and 92F, ensure that the regulator can issue an unpaid contributions notice in cases of failure to auto-enrol and compliance notices for induced opt-outs. The amendments provide that compliance and unpaid contribution notices can specify an appropriate date from which contributions should have been paid. The amendments also enable the regulator to use a compliance notice for both the remedy of auto-enrolment failure and to recover missed contributions, rather than having to introduce a compliance notice followed by an unpaid contributions notice.
Finally, Amendments Nos. 91A, 92F and 116A will ensure that the regulator can take enforcement action against an employer in respect of an individual who no longer works for them. That will ensure that compliance notices and unpaid contributions notices can be applied to all employers, past and present. For example, an individual may change jobs, but their original employer
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I apologise for the length of my introduction, but I hope that my explanation has been helpful to the Committee. I beg to move.
5.30 pm
Lord Skelmersdale: For once, I am almost speechless. I will have to read carefully what the noble Lord has said when Hansard is published tomorrow. My only comment on this large group of government amendments concerns Amendment No. 91A. It would seem to be more appropriate to look for this provision in Clause 77, on definitions, which applies to the whole of Part 1. I offer that only as a thought. I do not expect the Minister to respond at this moment.
On Question, amendment agreed to.
Clause 30, as amended, agreed to.
Clause 31 [Compliance notices]:
Lord Tunnicliffe moved Amendment No. 90B:
The noble Lord said: This group of minor and technical government amendments is designed to ensure that the compliance provisions achieve their intended effect. I will explain each of them briefly. Amendments Nos. 90L, 92H, 97D, 97E and 139A clarify meaning and correct minor exclusions. Clause 31 enables the Pensions Regulator to issue a compliance notice, which may require the employer to take steps to restore the jobholder’s position. Subsection (5) spells out what that means for defined benefit schemes. Amendment No. 90L extends the provisions of that subsection to hybrid schemes. It is right that subsection (5) should apply here because hybrid schemes are partly defined benefit in their structure.
Clause 35 gives the Pensions Regulator the power to issue a fixed penalty notice to persons who fail to comply with the new employer duties and compliance or contributions notices. As drafted, Clause 35(5)(g) refers only to notifying,
and appeal rights, even though fixed penalty notices may also be issued to persons other than employers. Amendment No. 92H corrects that exclusion.
Amendments Nos. 97D and 97E relate to Clause 41, which extends Section 80(1)(a) of the Pensions Act 2004. These amendments correct drafting to ensure that the extension of Section 80 is clearly expressed. Amendment No. 139A clarifies how Section 80 will be changed. Amendments Nos. 90B, 105A and 123A are drafting amendments to clarify references to the Pensions Regulator, while Amendments Nos. 90T and 91C are drafting amendments to clarify references to unpaid contributions.
Finally, Amendment No 90N removes the power to make regulations about the application of the employer duties where an employer has been issued with a compliance notice. In its recent report, the Delegated Powers and Regulatory Reform Committee noted that,
- “special provision for employers who are subject to compliance notices could almost certainly be achieved under the wide additional powers conferred by clause 116(3)”.
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We note and accept the recommendation of the committee and accordingly are making this amendment to implement it. I beg to move.
Lord Skelmersdale: I am grateful to the Minister for explaining these essentially drafting and technical amendments so clearly. I was particularly impressed by his explanation of Amendment No. 90N, which leaves out the regulating power in Clause 31 on compliance notices. I am delighted that the Government have yet again seen fit to agree with the Deregulated Powers Committee.
On Question, amendment agreed to.
Lord McKenzie of Luton moved Amendment No. 90C:
The noble Lord said: In moving Amendment No. 90C, I shall speak also to the other amendments in this group. These government amendments are designed to ensure that the Pensions Regulator can respond effectively to all instances of non-compliance. Under Clause 31, the regulator can issue a compliance notice to an employer who fails to meet one of the employer duty provisions. However, there are two scenarios in which this provision would not enable the regulator to issue such a notice.
The first scenario is where a person fails to meet one of their duties but is no longer subject to that duty at the time that the regulator wishes to issue a compliance notice. For example, an employer might fail automatically to enrol a jobholder, but the jobholder might then leave the job before a compliance notice was issued. Under current provisions, it is not clear that the regulator would be able to seek unpaid contributions on behalf of that jobholder.
The second scenario is where a duty applies to a person other than an employer. The duties set out in Clauses 2 to 10 will, in the main, fall to employers. These include the core new duties of automatically enrolling jobholders into a pension scheme and paying minimum contributions into that scheme. However, regulations under those sections may prescribe a small number of duties on other individuals. For example, Clause 9 enables regulations to be made detailing the information that a “prescribed person” needs to give to the jobholder. That person would not necessarily be an employer; they could be, for example, a trustee or manager of an occupational pension scheme or the provider of a workplace personal pension. Where duties arise on individuals other than employers, it is right that the regulator should be able to issue a notice if those duties are not met. These amendments will enable the regulator to take that action. It also follows that the Pensions Regulator must be able to issue a notice to a third party who contributes to a breach of the employer duties, whether that duty was breached by an employer or by another person. That is what Amendment No. 90P achieves. In short, these amendments will support a fair and proportionate compliance regime. I beg to move.
Lord Skelmersdale: The Minister has just exemplified a saying that I first heard on the west coast of Scotland: “We think better later”. Clearly, he has. However, it occurs to me that as an employer I am responsible for
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Lord McKenzie of Luton: I will try. There are two different things here. As I said, although those employer duties will fall overridingly on employers, there could be instances where an employer duty—for example, in relation to the provision of information—might fall on someone who is not technically the employer. There are further provisions where third-party compliance notices can be given, which is where someone might contribute to the failure of an employer duty. The distinction between those two is that, if the individual to whom the third-party notice is given or is due does not have the employer duty, he or she is not in a position to rectify that failure of duty, although there may be other things that he or she can do. Therefore, there is a distinction between compliance notices relating to employer duties, which could cover people other than those who are technical employers, and third-party compliance notices for those who might contribute to a failure but who themselves do not have the employer duty. I am not sure whether that has confused or enlightened the noble Lord, but I am happy to have another go at it if he thinks that that would help.
Lord Skelmersdale: This looks like another subject for one of the Minister’s famous letters; I am grateful for the four that I received this morning on earlier discussions in Committee. In what circumstances would the third party be liable for compliance? I accept that the Bill says that to an extent there are third parties that are involved in all this, so I wonder whether the Government have their policy right. However, I shall look carefully at what the noble Lord has said.
Lord McKenzie of Luton: Perhaps I may try to clarify this a little more. I want to differentiate between compliance notices in respect of failures of employer duties and third-party compliance notices where someone has in a sense contributed to a failure. For example, a third-party compliance notice could be given to a trustee of a pension scheme who has not properly given information to enable the employer duty to be fulfilled. It could also be a payroll provider for the employer who, by not doing something, causes a breach of the employer duties. Those are the sort of situations to which I am referring. However, the individuals or entities themselves would not actually have the duty and therefore there is a need to distinguish them from those who do have the duty. That is why there are two sets of compliance notices.
Lord Skelmersdale: We are getting a little clearer. I can well understand that the trustee, for example, who has given information to the employer who then acts on it might well be prosecutable in certain circumstances, but I fail to understand why, for example, a member of the employer’s HR department should have a compliance notice issued against him, as I would have thought that the employer was responsible for his employees. I do not want to take this any further because it is a
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On Question, amendment agreed to.
Lord McKenzie of Luton moved Amendments Nos. 90D to 90N:
On Question, amendments agreed to.
Clause 31, as amended, agreed to.
Clause 32 [Third party compliance notices]:
Lord McKenzie of Luton moved Amendment No. 90P:
On Question, amendment agreed to.
Lord McKenzie of Luton moved Amendment No. 90Q:
The noble Lord said: I shall speak also to the other amendments in this group. Clause 32, to which these amendments relate, enables the Pensions Regulator to issue a third-party compliance notice of the kind that we have just discussed to a person who has contributed to a contravention of an employer duty set out in Clauses 2 to 10. This provision recognises that a third party may bear some responsibility for a failure to meet one of those duties and allows the regulator to issue a notice to that third party requiring that the situation be remedied. Indeed, we were slightly ahead of ourselves in our discussion on the other amendment. These minor amendments would ensure that the provisions reflect the policy intent and that they are consistent with other provisions both in this chapter and the equivalent position in the 2004 Pensions Act.
I shall try briefly to explain each of them. Amendment No. 90Q addresses subsection (2), which, as currently drafted, directs the third party to take steps to remedy the contravention or prevent a recurrence of the failure. However, a person who is not bound by a duty cannot remedy a contravention of that duty. The third party can take steps only to remedy or prevent a recurrence of its failure. This drafting amendment means that the third-party compliance notice will not direct a third party to do something that it is not able to do.
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Amendment No. 90R ensures that the third-party compliance notice states the period within which a third party should stop taking a particular action where that action is contributing to a breach of an employer duty. It will make this clause consistent with Clause 31(3)(a), reflecting the fact that the principle behind both compliance notices and third-party compliance notices is the same, to ensure that failures can be addressed and put right. It will also ensure consistency with the regulator’s existing third-party notice provision in Section 14 of the Pensions Act 2004.
Finally, Amendment No. 90S states that a third-party compliance notice can inform the recipient that he may be subject to fixed penalties if the notice is not complied with. This is consistent with Clause 31(3)(d). The power to issue fixed penalty notices to third parties is already provided for in Clause 35. Those who receive compliance notices will have every opportunity to contact the regulator and to seek help before penalties are applied. Notifying the recipient of the possibility of financial penalties ensures that recipients are fully informed of the consequences of failure to comply. I beg to move.
On Question, amendment agreed to.
Lord McKenzie of Luton moved Amendments Nos. 90R and 90S:
“( ) state that, if the third party fails to comply with the requirements of the notice, the Regulator may issue a fixed penalty notice under section 35.”On Question, amendments agreed to.
Clause 32, as amended, agreed to.
5.45 pm
Clause 33 [Unpaid contributions notices]:
Lord McKenzie of Luton moved Amendments Nos. 90T to 90V:
Clause 33, page 15, line 25, leave out “unpaid relevant contributions” and insert “relevant contributions that have not been paid”
Clause 33, page 15, line 35, leave out “jobholders, or category of jobholders” and insert “workers, or category of workers”
On Question, amendments agreed to.
Baroness Turner of Camden moved Amendment No. 91:
“( ) require, in the event of excessive delay, that interest be paid on unpaid contributions.”The noble Baroness said: I should explain that this amendment was suggested to me by the TUC. As I have already told the Committee, the TUC welcomes the general thrust of the Bill and is entirely supportive of it, but it has one or two points of view that it has put to me that I thought warranted tabling amendments.
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Workers, however, should not experience any detriment or financial disadvantage because of an employer’s failure to enrol them into personal accounts or a qualifying pension scheme. There is a strong case, I believe, for interest payments on unpaid contributions to be made for any delay beyond a reasonable administrative period. That is what my amendment is designed to achieve. It would have the necessary deterrent effect and I hope that the Government will feel disposed to agree to it. I notice that the amendment has been grouped with government Amendment No. 92D, which, although on a different issue, nevertheless seems to accept the idea of interest being paid on unpaid relevant contributions. I hope, therefore, that my amendment will be accepted, as it seems to fit as new paragraph (g) in Clause 33(5). I beg to move.
Lord Oakeshott of Seagrove Bay: The noble Baroness’s amendment seems fair and sensible. We look forward to hearing from the Minister what a reasonable administrative period would be or whether he thinks that there are practical problems. However, the principle that an employee should get the full benefit of the matching employer contributions if those contributions are delayed through no fault on the part of the employee—and as long as there is not a strong excuse on the part of the employer—seems to us to be the right one.
Lord McKenzie of Luton: I start by thanking my noble friend Lady Turner for tabling this helpful amendment, whose intention I agree with. I am also pleased to note the support of the noble Lord, Lord Oakeshott. Clause 33 deals with the power of the Pensions Regulator to issue unpaid contributions notices to employers. This amendment would give the regulator the power, when issuing such a notice, to require the employer to pay interest on the arrears of contributions. When pension contributions are not paid on time, the scheme trustees lose the chance to invest the money on the workers’ behalf and there is a risk that as a result an individual’s pension pot may be smaller over time.
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