Pensions Bill

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Mr. Steve Webb (Northavon) (LD): If we continue in the spirit in which we have begun, I hope that we can get through this matter in less than half an hour and get on with dealing with the Bill. On behalf of the Liberal Democrats and the hon. Member for East Carmarthen and Dinefwr (Adam Price) we welcome you, Mr. Griffiths, and your colleague, Mr. Cran, to the Chair. We look forward to serving under you.

Our approach to the Bill will be constructive. The Liberal Democrats and the nationalist parties supported the principle of the Bill on Second Reading. That signals that we will be positive in Committee. We want to make pension protection

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effective, in keeping with the discussions on Second Reading.

We share with the hon. Member for Eastbourne (Mr. Waterson) some concerns about the balance of this schedule for debate. The sections on the regulator will be less controversial than the pension protection fund and, as we discussed in the Programming Sub-Committee, the discussion of the scheme-specific funding proposals will be of profound importance to the schemes. Those who are responsible for managing perhaps £1 thousand billion of the nation's assets might feel that more than a couple of hours of discussion of how much they must have in their pension funds can probably be justified.

Labour Members have shown flexibility on some of the timing issues that we discussed last night, and I hope that we can also have a bit more flexibility on the scheduling issues as we work our way through things. We welcome the assurance that at the end of this week we will see how far we have got and possibly revisit those issues.

My hon. Friend the Member for Chesterfield (Paul Holmes) and the hon. Member for East Carmarthen and Dinefwr have taken a keen constituency interest in these issues. All Committee members speak for their constituents, but we are also here to try to create a system of pension protection that will end some of the scandals of the past.

Malcolm Wicks: We have got off to a useful start, except for a slip of the tongue on my part; I suggested that the hon. Member for Eastbourne represented the constituency of my hon. Friend the Member for Northampton, North instead of that seaside resort. I had a useful meeting with older people in my hon. Friend's Northampton constituency and what they had to tell me about pension strategy was still fresh in my mind. I apologise for that error.

My right hon. Friend the Secretary of State for Work and Pensions suggested on Second Reading that we would introduce amendments to several areas of the Bill. The Committee has already seen some of them. Committee members will have noted that many of them are technical or drafting corrections, often intended to ensure internal consistency and coherence. However, we still plan to table some more significant amendments in due course, covering new topics such as the requirement for employers to undertake consultation when they make major changes to pension schemes. We will bring them forward as soon as we are able. We are keen to do what we can to facilitate adequate scrutiny of the Bill, and we will do our best on timing.

9.45 am

On the subject of flexibility, I should say that the Programming Sub-Committee had a useful meeting last night. We should continue in that spirit and ensure that those aspects of the Bill of concern to Committee members get proper scrutiny. I have already undertaken to consider whether we have the balance right between time for the regulator and time for the other aspects of the Bill.

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Mr. Waterson: First, on the consultation proposals for trade unions and others, is there an intention to consult with bodies such as the CBI on that?

Secondly, there has been a lot of lobbying—I think that we have all had a lot of that—in favour of extending the Bill to cover defined benefit schemes. However, that should also have a more detailed relevance to defined contribution schemes. Will the Minister table amendments on that subject? It was not flagged up by the Secretary of State. I am grateful for the general undertaking on timing.

Malcolm Wicks: On the consultation issues, we are in agreement in principle and we will table amendments. However, I have no doubt that without initiating a formal consultation procedure, we would want to discuss with all interested parties—employers, trade unions and others—how to ensure that that sort of consultation was meaningful. I give that undertaking.

Much of the Bill is about final salary schemes or defined benefit schemes; the protection fund is the obvious example. However, other aspects of our proposals on regulation have equal meaning, or some meaning, for defined contribution schemes. We shall come to that, although there is no plan at present to define specific amendments on defined contribution schemes.

If the Secretary of State's undertaking to meet the hon. Members for Havant (Mr. Willetts) and for Northavon still stands, a letter or some form of communication on that will be with Committee members very shortly.

Question put and agreed to.

The Chairman: I remind the Committee that there is a money resolution and a ways and means resolution in connection with the Bill. Copies of those resolutions are available in the Room. I also remind Committee members that adequate notice of amendments should be given, and that, as a general rule, my co-Chairman and I do not intend to call starred amendments, including those reached during an afternoon sitting.

Clause 1

The Pensions Regulator

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: Before moving clause 1, I should like to say a few words—and I do mean relatively few, Mr. Griffiths—about the Bill as a whole.

I have already mentioned that the Bill is long and that it deals with complex material. Committee members will know that the two central planks of the Bill are aimed at establishing the pensions regulator, which we are about to discuss, and at establishing the pension protection fund. All being well, we will come to that in a couple of weeks' time in part 2. There are, of course, other important changes in the rest of the Bill, and many of them will provide administrative easements for pension schemes and will help people plan their retirement, in terms of information. I have just given undertakings that we

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will do our best to ensure that colleagues receive Government amendments as soon as possible.

Clause 1 establishes in law the pensions regulator. That body will be in place from April 2005, subject to the passage of the Bill and, therefore, Parliament's will. The current pensions regulator, the Occupational Pensions Regulatory Authority, has laid good foundations for the regulation of work-based pensions ever since it was established in 1997. We propose to build on OPRA's experience of more than seven years of regulation. However, we recognise that OPRA's effectiveness has been restricted by the current legislative framework, which often obliges it to take action in respect of many minor breaches of the law.

Our proposals for the new regulator will remove such restrictions and make the pensions regulator more flexible and responsive. Our proposals for the regulator also implement wide-reaching recommendations made about the regulation of work-based pensions in a number of key reports. The Pickering report, the quinquennial review of OPRA and the National Audit Office study of OPRA all recommended that any regulator should target its resources on the cases in which members' benefits are at greatest risk, and should avoid cheapening the regulatory currency, as one organisation put it, by wasting time on what might be regarded as petty breaches. That is exactly what we propose that the pensions regulator will do.

The Cabinet Office's Better Regulation Task Force has stated, from its experience of working with regulators across Government, that regulatory bodies are most effective if they can focus their resources on areas of real risk. The taskforce has also recommended that regulators should, wherever and whenever possible, adhere to the principles of better regulation as expressed by the taskforce, and should be proportionate, targeted, accountable, consistent and transparent in their approach to regulation. We intend the pensions regulator to embed those principles in its design, working processes and overall regulatory approach.

Clause 1 establishes the new regulator for work-based pensions. The pensions regulator will be funded indirectly through a levy on pension schemes, just as OPRA is. The regulator will collect that levy on behalf of the Secretary of State. We currently estimate that the regulator's running costs will be about £23 million a year. That compares with a projected £17 million for OPRA's final year, which we think will be 2004–05.

The increased running costs reflect the staffing and processes required to support the wider and more flexible powers of the new regulator, its additional responsibilities in respect of the pension protection fund, and its more proactive, outward-focused approach to regulation. We will need to review the precise coverage of the new levy and issues such as whether it will continue to include, as the OPRA levy now does, an element for funding the Office of the Pensions Advisory Service, often known as OPAS.

An effective and well respected regulator is central to our reforms. As far as possible, we must ensure that

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pension schemes are well run and that their considerable funds are protected against poor administration and wrongdoing. That is the purpose underlying the creation of the new regulator and its governance structure.

Mr. Waterson: This is a useful moment to pull together some of the arguments that will re-appear when we deal with the amendments to part 1 of the Bill, and to look at the philosophy behind the regulator. I was grateful for what the Minister had to say about OPRA. [Interruption.]

 

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Prepared 9 March 2004