Clause 23 - Validation of action in contravention of freezing order

Pensions Bill – in a Public Bill Committee at 10:15 am on 11th March 2004.

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Question proposed, That the clause stand part of the Bill.

Photo of George Osborne George Osborne Shadow Minister (Treasury)

I want to ask the Under-Secretary about something; he touched on it when he gave his explanation of clause 21, but as the power of validation is given in clause 23 I thought that I would wait until now to raise the point. Clause 21 addresses the consequences of the freezing order. As the Under-Secretary said, it states that

''any action taken in contravention of the order is void''.

That is reasonable. The whole point of the freezing order is to freeze things and to stop trustees and managers doing things that they should not do.

However, there is a get-out clause in clause 23. Subsection (1) states:

''If a freezing order is made in relation to a scheme, the Regulator may by order validate action taken in contravention of the order.''

In other words, someone could, in effect, break the law; they could break the terms of the freezing order but have their action made legal retrospectively. Will that not run the risk of encouraging some trustees and managers to break those terms in the hope that the regulator will subsequently validate their actions? That may be a false expectation; they may be over-confident of their abilities—or they may be genuinely concerned, because these provisions deal with schemes that are in a mess. However, will not clause 23 give them an

excuse to break the terms, and therefore undermine the whole point of the new power?

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions

That is a valid point—no pun intended. As I have explained on several occasions, the purpose of the freezing order is to make sure that the members' interests overall are neither enhanced nor diminished during the period for which it is in force. That is why any action is treated as void unless validated by the regulator. The purpose of the clause is to allow the regulator to provide a proportionate and flexible response to circumstances as they arise. Therefore, there may be actions that, as I have explained, do not affect the generality of interests of members of the scheme. In those circumstances, it is sensible for the regulator to have the power to validate those actions.

This is a positive power, whereby the regulator must decide whether the actions would be validated. The hon. Gentleman's anxiety about the provision simply defusing the whole purpose of the freezing order is probably unjustified. The regulator will have a keen eye to see whether the trustees, or anyone else involved in the scheme, are trying to pull a fast one in that way, or are acting unwisely by arguing that certain actions should be validated. We must look to the expertise of the regulator to make sure that that danger is minimised.

Question put and agreed to.

Clause 23 ordered to stand part of the Bill.