Clause 1 - The Pensions Regulator
Pensions Bill
9:45 am
Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)
Before moving clause 1, I should like to say a few words—and I do mean relatively few, Mr. Griffiths—about the Bill as a whole.
I have already mentioned that the Bill is long and that it deals with complex material. Committee members will know that the two central planks of the Bill are aimed at establishing the pensions regulator, which we are about to discuss, and at establishing the pension protection fund. All being well, we will come to that in a couple of weeks' time in part 2. There are, of course, other important changes in the rest of the Bill, and many of them will provide administrative easements for pension schemes and will help people plan their retirement, in terms of information. I have just given undertakings that we
will do our best to ensure that colleagues receive Government amendments as soon as possible.
Clause 1 establishes in law the pensions regulator. That body will be in place from April 2005, subject to the passage of the Bill and, therefore, Parliament's will. The current pensions regulator, the Occupational Pensions Regulatory Authority, has laid good foundations for the regulation of work-based pensions ever since it was established in 1997. We propose to build on OPRA's experience of more than seven years of regulation. However, we recognise that OPRA's effectiveness has been restricted by the current legislative framework, which often obliges it to take action in respect of many minor breaches of the law.
Our proposals for the new regulator will remove such restrictions and make the pensions regulator more flexible and responsive. Our proposals for the regulator also implement wide-reaching recommendations made about the regulation of work-based pensions in a number of key reports. The Pickering report, the quinquennial review of OPRA and the National Audit Office study of OPRA all recommended that any regulator should target its resources on the cases in which members' benefits are at greatest risk, and should avoid cheapening the regulatory currency, as one organisation put it, by wasting time on what might be regarded as petty breaches. That is exactly what we propose that the pensions regulator will do.
The Cabinet Office's Better Regulation Task Force has stated, from its experience of working with regulators across Government, that regulatory bodies are most effective if they can focus their resources on areas of real risk. The taskforce has also recommended that regulators should, wherever and whenever possible, adhere to the principles of better regulation as expressed by the taskforce, and should be proportionate, targeted, accountable, consistent and transparent in their approach to regulation. We intend the pensions regulator to embed those principles in its design, working processes and overall regulatory approach.
Clause 1 establishes the new regulator for work-based pensions. The pensions regulator will be funded indirectly through a levy on pension schemes, just as OPRA is. The regulator will collect that levy on behalf of the Secretary of State. We currently estimate that the regulator's running costs will be about £23 million a year. That compares with a projected £17 million for OPRA's final year, which we think will be 2004–05.
The increased running costs reflect the staffing and processes required to support the wider and more flexible powers of the new regulator, its additional responsibilities in respect of the pension protection fund, and its more proactive, outward-focused approach to regulation. We will need to review the precise coverage of the new levy and issues such as whether it will continue to include, as the OPRA levy now does, an element for funding the Office of the Pensions Advisory Service, often known as OPAS.
An effective and well respected regulator is central to our reforms. As far as possible, we must ensure that
pension schemes are well run and that their considerable funds are protected against poor administration and wrongdoing. That is the purpose underlying the creation of the new regulator and its governance structure.