This amendment removes the power to confer functions on a specified person in connection with the enforcement of regulations made under clause 9. This is because there are existing powers that are considered sufficient and appropriate to deal with enforcement in relation to any breaches of those regulations.
Again, I will set out a little bit about what clause 9 does before explaining how Government amendments 7 and 25 relate to that. The key point is that clause 9 contains a regulation-making power to enable the Secretary of State to prohibit trustees or managers of a scheme from obtaining a pensions promise from a third party unless specified conditions are met. The concept of pensions promises obtained from a third party is important, because one of the ways in which risk-sharing may be delivered in our DA world is not where either the employer or the scheme member takes on the risk directly but where a third party is involved, such as an insurance company. Clause 9 relates to the rules around, for example, buying in a pensions promise from an insurance company or someone like that. It allows for safeguards to be put in place where the pensions promise in a scheme is secured through the scheme from a third party.
The regulations may also make provision overriding scheme rules and provide for the regulator to impose a financial penalty for non-compliance. The clause amends section 34(7) of the Pensions Act 1995 to ensure that regulations made under clause 9 cannot be overridden by section 34 of that Act. It also allows for regulations to confer functions on a specified person to enforce compliance with the conditions set out in regulations.
Amendment 7 removes the power to confer functions on a specified person in connection with the enforcement of regulations made under clause 9. That is because we now believe there are existing powers that are considered sufficient and appropriate to deal with enforcement in relation to any breaches of those regulations. When we first drafted clause 9 we thought that we might need this additional power; but on further reflection we think that we already have the powers we need about having a specified person who is responsible for enforcing these regulations. Amendment 7 therefore takes out that provision.
Amendment 25 amends clause 35 and is similar to amendment 7. Clause 35 relates to the enforcement of regulations made under part 3, which is the collective benefits section. It allows regulations to confer functions on a specified person—that is, a power to enable an appropriate body to regulate schemes offering collective benefits. It also allows regulations made under part 3 to provide for section 10 of the Pensions Act 1995, on civil penalties, to apply where there is non-compliance. Amendment 25 impacts on clause 35 and removes the power to confer functions in exactly the same way that I described just now in the context of shared risk schemes. Later in the Bill we do the same for collective schemes: it made sense to deal with that issue once and here. The amendments are required because sufficient and appropriate powers already exist to deal with enforcement in relation to any breaches of regulations made under clause 9 and part 3 on collectives. The Pensions Regulator and the Financial Conduct Authority already have the necessary powers and authority, under the Pensions Act 2004 and the Financial Services and Markets Act 2000, to enforce the conditions that will be required.
The current regulatory structure will remain; that is, the appropriate regulator for these requirements will be determined by the current structure and remits. There is no intention to change the current roles or remits of the current regulators. As a general rule, this means that the Pensions Regulator will regulate occupational schemes and the FCA will regulate personal pension schemes. However, there is of course a crossover of interests for workplace pension schemes and on some particular matters, such as investment.
The intention is that the Secretary of State will make any regulations in respect of occupational pension schemes, which the Pensions Regulator will regulate. Personal pension schemes will be governed by any rules developed by the FCA. Government and regulators will continue to work closely together to make sure that rules and regulations deliver consistent protections and outcomes for members.
I hope that is helpful to the Committee. I commend amendment 7.
I think this is an appropriate moment to raise again with the Minister the issue of regulation. I found it striking, although understandable and expected, in the sense that the Minister referred there to the Secretary of State, in concert with the Pensions Regulator, setting the rules regarding occupational pensions under the TPR. At the same time, the Minister went on to say that those other types of schemes would be under the regulation of the FCA. Does he have any observations on whether the route that the Bill takes us down raises questions about whether it remains appropriate to have two regulators? What about the issues around the benefits and potential costs of a two-regulator system in pensions? Does the Bill begin to eliminate some of those issues? Would he like to have these pension schemes under the ambit of one regulator? I know he will not commit to that in any deliberate sense, but does he think there are issues around the fact that we have two regulators in pensions, and does the Bill eliminate some of those issues?
These are clearly big issues that have been raised by, among others, the Select Committee, and they were raised on Second Reading. It is a perfectly sensible discussion to have. Is it the appropriate regulatory framework, and do we need two or one? Where we have two regulators there are two issues. There is overlap, duplication and gaps. We work very hard—the two regulators work very hard—to co-ordinate. In all the work we have been doing on charge caps, for example, we have needed DWP legislation to deal with trust-based occupational schemes and we have needed mirroring FCA activity to deal with contract-based schemes. As I think I observed on Second Reading, it would have been easier to deal with one body rather than two, and that is not surprising.
My consistent view has been that now is not the time to start reorganising regulators again. The FCA was set up only a couple of years ago. We are in the middle of the roll-out of automatic enrolment. In my judgment, throwing all that up in the air and coming up with a new regulatory framework right now would not feel right. There is a process of triennial reviews of arm’s-length bodies in our Department. We have just concluded the review of TPR. There were some minor operational things, but broadly the status quo was fine for now. As the roll-out of auto-enrolment concludes when the next three-yearly review is up, that would be a logical point to look at this again.
My only hesitation is that, whether we have one brand or two, or one building or two, most of the same issues are still there. In other words, we still need a regulator that understands employers and the issues for sponsoring employers, and understands funding and the implications of recovery plans for the sustainable growth of the employer and so on. We need a regulator that can do compliance on, for example, auto-enrolment—like minimum wage compliance—and can make sure that that happens. We also need a regulator that can do the things the FCA does, which regulates the sale of financial products in the insurance industry. That whole range of skills will still be needed. Indeed, we would still need a set of rules for trust-based schemes and contract-based schemes, because they are different types of thing.
Even if it was one organisation doing it, we would still be amending different bits of legislation. Whether we did it under one Government Department or two, it would be up for grabs. From a co-ordination point of view, I can see the potential benefits of having one organisation and not two, but I do not think it is a silver bullet. There would still be issues of overlap and gaps, and the different skill sets would still be needed. I know our deliberations may be followed by those who work for one of the regulators. My message to them would be that each, regardless of the banner under which they operate, has a vital role to play, and in any future structure one would envisage that they still played it. Certainly, for now, I would not envisage any change, but I think it is something that the next Government will probably want to look at. I hope that that is a constructive response to the hon. Gentleman.
The purpose of amendment 8 is to clarify that regulations made under clause 9 may impose requirements on trustees in the context of a trust-based scheme, and on managers in the context of a scheme not established under trust. Clause 9 includes a regulation-making power which provides that the trustees or managers of a DB scheme or a shared-risk scheme must not obtain a pensions promise from a third party unless conditions specified in the regulations are met.
The amendment inserts a definition of “trustees or managers” into subsection (3) of clause 9 which confirms that
“trustees or managers means… in relation to a scheme established under a trust, the trustees, and… in relation to any other scheme, the managers.”
Amendment 26 inserts the same definition of “trustees or managers” into clause 36 to clarify that regulations made under part 3 may impose obligations on trustees in the context of a trust-based scheme, and on managers in the context of a scheme not established under trust. That is a bit like we did in the last group. We are doing it here and, to save us coming back to it when we get to the collectives bit, we are doing exactly the same thing with clause 36.
Amendment 26 clarifies how the regulatory requirements should apply in schemes offering collective benefits where there may be both trustees and managers. The amendment makes it clear that regulations made under part 3 may impose obligations on trustees in the context of a trust-based scheme, and on managers in the context of a scheme not established under trust.
We have used the term “trustees or managers” in various parts of the Bill. Our main aim in inserting a definition for the term “trustees or managers” is to make it clear that where either an occupational or a personal pension scheme is established under trust, any regulatory requirement on “trustees or managers” will fall on the trustees even if there are other people, other managers effectively. But if the scheme is not established under trust we want the requirements to bite on the person responsible for the management of the scheme.
There is a kind of hierarchy going on here. If it is a trust-based pension scheme where we use the phrase “trustees or managers” in the legislation, we do not mean managers if there is a trustee knocking around, or if there is no trustee, because it is not a trust-based scheme, then we mean the person responsible for the management of the scheme. I hope that has helped with what I hope are relatively uncontentious amendments. I commend them to the Committee.
I want to make an observation. It is very clear what a trustee is. It is someone who has an obligation under trust law. In this case it is to manage a pension scheme. It seems less clear to me what a manager is. It seems, to put it politely, a more capacious definition and, impolitely, open to a number of interpretations. While it is clear what a trustee is, could the Minister elaborate on who can fill the role of a manager? What sort of agents are we talking about in this context? We know what a trustee is but who is a manager? There are a number of different definitions of a manager contained in the terminology.
I am grateful to the hon. Gentleman. We are not inventing these concepts for the purpose of the Bill. He will know that the phrase “trustees or managers” that we are using here is defined in the Pensions Act 1995 and “managers” is defined under the Pensions Act 2004. I hesitate to say, “You’d know it when you saw it”, but essentially we are talking about the person responsible for the management of the scheme. Clearly one of the things about primary legislation is that we cannot be too descriptive as we end up missing people out and not covering certain sorts of circumstance. Just as we used the phrase “pension promise” earlier in the Bill to mean what everybody knows a promise is, we are using the term “manager” here simply to refer to the person responsible for the management of the scheme. This is a familiar concept to those who run pension schemes and has not caused any problems in the past.