Clause 4 - Regulator's functions

Part of Pensions Bill – in a Public Bill Committee at 2:30 pm on 9th March 2004.

Alert me about debates like this

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 2:30 pm, 9th March 2004

I have not tabled any amendments to clause 4 because it is fairly straightforward; it mechanistically moves functions from OPRA to the new regulator. Nevertheless, an important issue that is exercising the thoughts of organisations such as the National Association of Pension Funds is how those functions should be carried out.

With your usual attention to detail, Mr. Griffiths, you will have noticed that I tabled new clause 4, which relates to the exercise of the regulator's functions. No doubt, if the new clause had not had a star next to it, we would have debated it today. As we will not do so, and because I think that it is inconvenient to wait until the end of the Committee stage, I beg your indulgence in allowing me to draw on some of the principles behind it in discussing how clause 4 will operate.

In a moment, we will discuss clause 5, which deals with the regulator's objectives. We wanted to propose some additional objectives. There is significant

concern about how the functions will be carried out. The NAPF makes it clear that it is worried about

''the potential lack of transparency, proportionality and accountability in the way in which the . . . Regulator carries out''

those functions. It draws a parallel from the Financial Services and Markets Act 2000, and it believes that, as I have set out in new clause 4, in carrying out those functions the regulator should have regard to three things. First, it should have regard to the need to use its resources efficiently and effectively. I do not think that anyone could quarrel with that. Secondly, it should have regard to the principle that any burden or restriction imposed should be proportionate to the benefits thereof. There are other examples of that principle in amendments that we will discuss later. Thirdly, there is a need to be open and transparent at all times, and to consult those with an interest when developing policies, procedures and practices.

Those aims are all pretty unexceptionable; I cannot imagine that anyone debating the Bill would disagree with them. We would prefer them to be set out in the Bill, and we may return to that issue on Report. The point about use of resources is pretty clear. The need to be open and transparent and to consult those with an interest is obvious, because if the regulator is to be a success, it will clearly need to carry the whole sector with it.

I shall focus for a moment on the third principle that I mentioned: the need for any burden or restriction that is imposed to be proportionate to the benefits. One could say that that is part of the philosophy behind the new regulator, because one of the criticisms of the old regulator was that it took a kind of scattergun approach. It tried to cover an awful lot of schemes and was often dealing with relatively minor or trivial issues. As I understand it, the aim of the new regulator it is to focus firepower on the areas where it will make a significant difference. To that extent, the principle ought to chime in with the Government's stated intentions.

Whatever burdens are being imposed, either through the regulator or the pension protection fund—we will come to that later—it is important that they should be proportionate; there should be a real benefit to be shown as a result of the burdens imposed. There should be a real lead in terms of consulting the pensions industry, pension schemes and their representatives to ensure that those burdens are not disproportionate and produce the benefits that are claimed for them.

Functions are one thing and objectives are another, but there is a significant argument for some guidance on how the regulator carries out those functions, and even if it is not set out in the Bill, it should be set out elsewhere.