The clause relates to the difference, in the defined-contribution world, between trust-based schemes, which have trustees, as the name suggests, and contract-based ones, which have managers.
Section 32 of the Pensions Act 2008 provides that trustees in a trust-based scheme may, by resolution and with the employer’s consent, make certain changes to their schemes. That modification power was introduced to allow employers to make improvements, where the powers in the trust deed and rules are limited, to their money purchase schemes and certain hybrids, by increasing contributions, the basis on which they are calculated or their frequency. That power makes it easier for trustees and employers to comply with automatic enrolment requirements.
Clause 13 is a technical amendment that will correct the drafting of section 32. The clause will extend the modification power to scheme managers. The modification power will apply to schemes with managers as well as those with trustees; in other words, to contract-based defined-contribution pensions and not just trust-based ones. It will make it easier for employers with certain trust schemes to comply with their auto-enrolment duties. Without clause 13, employers offering certain trust-based schemes administered by a manager might find it difficult to modify their scheme if the trust deed and the rules were restrictive—to be absolutely clear, there was a power for a trust-based scheme administered by trustees to make amendment, but not trust-based schemes administered by a manager. That was never the policy intent, and clause 13 therefore deals with that. I commend it to the Committee.