Clause 29 - Deficits attributable to an offence or the imposition of a levy

Part of Pension Schemes Bill – in a Public Bill Committee at 2:00 pm on 30th October 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 2:00 pm, 30th October 2014

One of the attractions of CDC for employers is that there is not something on their balance sheet; there is not a number that goes up or down, a deficit or a surplus, which has been one of the problems with DB. The basic principle of CDC is that there are no hard promises, only targets. An employer cannot have a legal obligation to put money into the scheme to deal with, for example, a deficit or a surplus. In general, that is the principle. However, clause 29 allows for exceptional circumstances such as where an offence results in an imposition on the scheme that the employer would be expected to pay.

I deliberately read out some quite precise forms of words to reassure employers—it is employers and their organisations and pensions funds that raise those issues with us—to make clear that it is not a Trojan horse to suddenly risk employers being on the hook for deficits or surpluses in schemes with collective benefits. It is a very narrow, specific situation that can already arise in DB schemes and money purchase schemes. In a sense it is analogous to existing provision because with existing  money purchase benefits, an employer can be required to put money into a money purchase scheme in that kind of situation. We want to make it clear that we are not driving a coach and horses through the basic principle that an employer is not on the hook for benefits in a CDC scheme.