Clause 43 - Maximum period between scheme returns to be 5 years for micro schemes

Pensions Bill – in a Public Bill Committee at 4:00 pm on 11th July 2013.

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

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

Clause 43 is a deregulatory measure, as are so many of the measures we have brought forward in this Parliament. The Committee may be aware that we have something that used to be called “one in, one out”. In other words, the Government have decided that, whenever a Government Department passes a regulation that applies, say, a £1 million regulatory burden on British business, it cannot do so without identifying £1 million of deregulation to offset that. The DWP was the exemplar par excellence—I think one can be, and we are—of a deregulatory Department with a substantial “one in, one out” balance at the end of last year.

However, the Government decided they were not being deregulatory enough and have introduced “one in, two out”. In other words, for every £1 million of regulatory burden I might wish or feel obliged to put on British business, I now have to identify £2 million of deregulation to undertake.

Clause 43 is one small measure in the spirit of “one in, two out”. I strongly expect that “one in, three out” might be around the corner. The point about “one in, two out” is that it ensures that, within the scope of the regulations counted in the exercise, this Government will be the first ever to be a net deregulator.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Does the Minister really believe that this is simply an arithmetical exercise? Does it have nothing to do with the quality of the regulation? One could end up taking away things when it would be quite dangerous to do so.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

The road to hell is paved with good intentions. What has tended to happen over the years is that successive Governments have legislated and regulated and added more costs and burdens, without particular regard for the implications for jobs and competitiveness.

Each regulation was seen to be good in its own lights and worth while. Accumulated together, they have often been counter-productive. The welcome discipline I have been under for the past three and a bit years has been, each time the instinct has been to put in a new cost, burden or regulation, to think, “Hang on. How does this compare with the stock of regulation? Is there less cost-effective regulation already in place that could be removed?” That has led on a number of occasions to the Government not regulating, in that there is a list of regulations that were never passed and by definition will never appear.

Clause 43 will be on the credit list of the things we have been doing, albeit at the margins; we do not always count some of the relatively small ones. Clause 43 relates to micro pension schemes—those that have between just two and four members. At the moment, they have to produce a scheme return to the Pensions Regulator every three years, and we are relaxing that rule to every five years. The Pensions Regulator is provided with the flexibility to alter the frequency with which it requests  scheme returns from DC micro-schemes. That saves a third of a million pounds for very small pension schemes. In the grand scheme of pensions, that is not a huge number, but it reduces the regulatory burden.

An important point about the Pensions Regulator is that its job is to be risk-based. Many of those very small pension schemes are closed to the owners of the firm and are actually quite well scrutinised. They are not where the bulk of the large-scale risks are. That is why we have taken the view that requiring those very small schemes to be regularly producing scheme returns is unnecessarily bureaucratic. Many of those two to four member defined contribution schemes are what are called tax wrappers, so they often do not move up and down the size category. We thought about including the slightly larger, five to 11 member schemes in the five-year return category, but as schemes get larger, members may have less influence over and knowledge about them, so they require more regulatory scrutiny, especially if they are used for automatic enrolment. The rules for schemes with 12 or more members are different again, and warrant a more regular scheme return. We judged that the savings made by including schemes with five to 11 members would be disproportionate to the increased risks we might run, but that we could do more for those with two to four members, and the clause provides that flexibility.

Question put and agreed to.

Clause 43 accordingly ordered to stand part of the Bill.