I will explain the purpose of this relatively short clause to the Committee. The Pensions Regulator has the power to issue notices under section 72 of the Pensions Act 2004 requiring persons to provide them with information or documents. Failure to comply with such notices without reasonable excuse constitutes a criminal offence punishable under section 77 of the Pensions Act 2004 by a possible liability to a fine of up to £5,000 and/or imprisonment for up to two years.
Sections 40 and 41 of the Pensions Act 2008 gave the regulator an alternative sanction of financial penalties for failure to comply with section 72 information notices. Section 40 fixed penalties are £400, and section 41 escalating penalties are between £50 and £10,000 per day.
The clause corrects two minor errors in the Pensions Act 2008. It is almost like part 5 tidying up the bits that the previous Government got wrong before. The clause corrects two minor errors in the 2008 Act at sections 40 and 41 and at section 61, which inserted section 72(1A) into the Pensions Act 2004. The first of the errors inadvertently opened the possibility of 2008 Act penalties applying in respect of 2004 Act non-compliance. I am sure that no one would want that. To correct that, the first subsection confirms that the Pensions Act 2008’s fixed and escalating penalty notices may be issued only in respect of non-compliance relating to the new employer duties and safeguards in part 1 of the 2008 Act. Only non-compliance with information notices issued in relation to the regulator’s compliance functions set out in that part of the Act may give rise to penalties.
The second error referred too narrowly to the regulator’s functions when amending its power to issue information notices. To correct that, the second subsection confirms that the power to require in a section 72 notice that the recipient gives an explanation of any information or document to the Pensions Regulator applies in respect of all of the Pensions Regulator’s employer compliance functions regarding the new employer duties and safeguards as set out in part 1 of the Pensions Act 2008.
Members will be asking themselves why this is necessary. Without the amendment there is the possibility that the penalty notice powers would be applicable in relation to the Pensions Regulator’s general regulatory functions under the 2004 Act. That was not the original intention and is not appropriate. Financial penalties are not considered an appropriate alternative to the criminal sanction for non-compliance with information notices issued in relation to the Pensions Regulator’s general regulatory functions under the 2004 Act.
I should clarify for the Committee what all the talk about criminal sanctions and imprisonment is about. Some of the Pensions Regulator’s compliance action under the 2004 Act involves the most serious of cases involving millions of pounds. The criminal sanction remains the appropriate deterrent in that context. A temporary fix was provided for pending amendment by way of partial commencement of sections 40(1)(d) and 41(1)(d) from 1 July 2012. That meant that the penalty powers were commenced only in so far as they related to compliance action under the 2008 Act.
I hope that explains in crystal clear language why it is necessary for clause 37 to stand part of the Bill.