Clause 9 - Pensions promise obtained from third party

Part of Pension Schemes Bill – in a Public Bill Committee at 11:00 am on 28th October 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 11:00 am, 28th October 2014

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.