Regulations modifying application of Part 1

Part of Pension Schemes Bill [Lords] – in a Public Bill Committee at 12:15 pm on 9 February 2017.

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Photo of Richard Harrington Richard Harrington The Parliamentary Under-Secretary of State for Work and Pensions 12:15, 9 February 2017

I thank the hon. Gentleman for his comments, which I will answer. The overall principle is to allow the flexibility that accepts that master trusts, which have grown tremendously over the past couple of years, do not fit into a one-size-fits-all formula. It is certainly not a case of saying this is the scheme’s rule; it is basically optional whether someone is in it or not, because it can be carved out. I know that the hon. Gentleman understands that and respects the principle. Again, it comes down to how it will be applied. We want to make it specific. We have had some useful consultations with master trusts and others on this subject. The regulations will give us the flexibility to ensure that we can deal with the existing situation and see what examples have been thrown up. More importantly, there will be the flexibility to change. The clause makes provisions to modify part 1 where it applies.

We have tried hard in a complex area to ensure that all relevant master trusts are in the scope of the authorisation regime. That is the point of the part of the Bill that we have been discussing up to now. As I have said, things change and the industry moves quickly. That is why we are calling for a type of flexibility that would not on the face of it seem necessary because the Bill regulates master trusts, which we all agree is the right thing to do—there is no question about that. The industry has shown that it is very flexible and can change. The provisions will be designed so that the regulations can be disapplied if they are not relevant. We intend to ensure that the whole system for authorisation, which we have discussed at length, applies in a proportionate way.

The scope of the power was discussed extensively in the other place. We have made it clear—this is the critical point, if the hon. Gentleman will bear with me—that we intend to continue discussions with the industry and also with the regulator to develop secondary legislation. It is not as though civil servants, however good they are, have sat in a room and just designed regulations. We have asked for time after the Bill to make sure they reflect the way in which the industry has developed. The passage of the Bill, from concept to now, could be near equivalent to the time that master trusts have grown in the first place. I hope that the hon. Gentleman will bear with me. We have indicated that we intend to consult on regulations under clause 41(1)(b) in relation to mixed master trust schemes, where the only money purchase benefits are those related to the additional voluntary contributions. It is technical and much of it is common sense, but it has to be done right, otherwise there will be unintended consequences of institutions and members of schemes being caught when it is perfectly well dealt with elsewhere. I know that the hon. Gentleman would not want that to happen.

Another example would be the provisions in clause 41 for regulations

“which provide for two or more pension schemes to be treated as a single Master Trust”.

Again, that is in certain circumstances. Those circumstances would be common control, common rules or schemes provided by the same service provider. It is easy to say that common sense will prevail but we need the flexibility to ensure that the framework is there for those specific, albeit exceptional, cases.

I believe strongly in the clause and think it necessary that the significant regulatory powers included in it have the potential to alter the scope of the regime. Members will want to debate and approve the making of such regulations. That is why, as I have mentioned several times—albeit once incorrectly—that these are subject to the affirmative procedure; they will not be done on new year’s eve at five minutes to twelve without anybody noticing. The purpose is not to hide this from Parliament or anybody else, but to ensure that we get this important provision in the Bill absolutely right.