Clause 231 - Modification of this Act in relation to hybrid or multi-employer schemes

Part of Pensions Bill – in a Public Bill Committee at 9:45 am on 22 April 2004.

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Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions 9:45, 22 April 2004

The best way to approach the group is to start with the meat of the three new clauses. New clauses 34, 35 and 36 would introduce the requirement for employers to consult affected active members of their pension schemes, or representatives of those members, before making a major change to future pension arrangements. Many employers already consult on pension changes as a matter of good employment practice. The CBI and other business groups have been keen to stress that point, and I entirely accept it. However, we must recognise, from the history of the past couple of years, that some employers do not consult. Together these clauses would ensure that, in future, employers would have a statutory obligation to consult on a proposed major change before the decision was made.

New clause 34 relates to occupational pension schemes. It would enable regulations to require employers who propose to make a prescribed decision in relation to their scheme, or who have been notified by their trustees or managers that they propose to make a prescribed decision, to consult in the ways set out in the regulations before that decision was made. The clause also makes provision for trustees or managers not to make certain decisions until they are satisfied that the employer has fulfilled the consultation requirement. That takes account of the varieties of scheme rules, which may give different powers to trustees and employers.

Opposition amendment (a) to new clause 34 seeks to place the detail of prescribed decisions on which consultation should take place under primary legislation, and to ensure that the prescribed persons to be consulted would not include trade unions where an employer has established procedures for directly consulting employees, but employees have not specifically chosen that. Rather than adopting that approach, we intend to use the power in the new clause to prescribe decisions to cover the relevant changes.

I will come to our choice of the secondary legislative vehicle rather than the primary one. However, Committee members will first be interested in the substance of the relevant changes. Those will include winding up the scheme or closing it to future accruals, closing a scheme to new members, changing from a defined benefit scheme to a defined contribution or hybrid scheme, and significantly reducing or removing an employer contribution to a defined contribution scheme.

Although that statement obviously does not spell out everything in the regulations in detail, the types of change to pension schemes that I have just mentioned cover all the main issues that we would expect to see in the regulations. I hope that Opposition members of the Committee will accept that assurance.

I turn now to why we believe that there are good reasons why it would be more appropriate for the changes to be in regulation rather than in the Bill. We have opted to set out the detail of the consultation requirement in regulation so that we can ensure that the approach fits well with the forthcoming regulations on information and consultation, and so that there is scope to adjust the regulations as pension schemes develop and innovate over time.

To give an example, changes involving hybrid schemes are relatively recent. There are, no doubt, other ways in which pension schemes will evolve in years to come. We intend to use the power to prescribe who should be consulted to require employers to consult recognised trade unions or to consult via approved information and consultation arrangements that have been agreed by the employees. That is in line with our original commitment in the Green Paper to implement the requirement to consult on pensions alongside consideration of the implementation of the information and consultation directive.