Pensions Bill

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Mr. Webb: The hon. Gentleman's amendment relates to the information that the regulator will seek and pass on to the pension protection fund. Will the Minister clarify one important thing for me? The more I think about the Bill, the more it seems that the regulator and the pension protection fund are the same thing. That is not quite the way that the Department sees it, but they closely overlap. Both monitor what is going on in schemes, both worry about funding levels, and both obtain information.

I have not yet tabled the merger amendment—the mega-amendment—and I see the Minister's officials fainting at the suggestion. Will he assure us that we will not have a situation in which the regulator asks for information from schemes for its own sake and for information from schemes on behalf of the pension protection fund while, at the same time, the pension protection fund asks schemes for information for its own purposes? Will there be a mechanism whereby the pension protection fund does everything through the regulator? It is not apparent now, but perhaps we will reach that provision later in our proceedings. Will the Minister clarify that? Clearly much common information is needed, which is what the clause is

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about, but in terms of burdens on schemes and duplication, will he assure us that a mechanism will be in place to ensure that there is no duplication and that there is as much pooling of information as possible to enable both organisations to fulfil their functions effectively?

Malcolm Wicks: The amendment would require the regulator to assess the benefit of each piece of information that it collects that is relevant to the functions of the PPF. That is not unreasonable. The clause exists for a number of reasons, not least to ensure that the two organisations—the PPF and the regulator—do not seek the same information with the additional cost burdens that that would impose on schemes. Those two bodies will work closely together, but they do not have the same functions. Given the closeness of the relationship between the two, it would be wrong if they both had to seek the same information.

Hon. Members will realise that the gathering and analysis of information is fundamental to the risk-based approach of the regulator and the protection fund. The regulator needs to gather information for its own functions, some of which will be directly relevant to the PPF. It is sensible to put in place arrangements so that the two bodies will not have to ask schemes to provide the same information twice.

To reduce even further the burdens on schemes, the regulator will be able to ask for information that it may not need for its regulatory functions, but which it believes the pension protection fund needs for its functions. Information collected in that way must appear to the regulator to be relevant to the exercise of the functions of the board. An example of that type of information is the data required to apply the risk-based element of the pension protection levy. Of course, the information collected by the regulator may be of use in the exercise of its functions, thus enabling it to take early action when problems appear to be imminent and step in as early as possible to try to get things put right. In doing so, it may be able to prevent scheme members from losing out financially. It may also be able to prevent a scheme from having to become a customer, as it were, of the pension protection fund when it would otherwise have done so, which in turn will protect the members of all pension schemes that are liable to pay the PPF levies.

In the unfortunate circumstances when the PPF—a term that we will, perhaps, get used to—becomes involved with a scheme, the regulator will be able to disclose to the board any relevant information that it has collected using the power. That means that the PPF will immediately have a large part of the information that it needs to fulfil its functions and will be able to act quickly if necessary to protect the scheme members and prevent the scheme funding level from deteriorating further. That is important.

There will, of course, be circumstances in which the PPF will need to gather information itself to carry out its functions. If that were so, the regulator and PPF would work together to reduce any possible duplication. Although I do not think that we should

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tempt Committee members to discuss the pension protection fund per se, the interface is important.

There are differences. Although the regulator will gather information on behalf of the PPF, there will also be circumstances in which the PPF will need to gather information to carry out its functions. At that point it would be normal for the regulator to step back and allow the protection fund to take the lead in gathering information about a scheme—this is the crucial part—once the sponsoring employer has entered insolvency proceedings. If that happens the two bodies will work together, but the PPF will mainly take the lead.

Let me give two examples. The protection fund will normally become involved with a scheme because its sponsoring employer has entered insolvency proceedings. As soon as the PPF is notified of those proceedings, it will carry out a detailed valuation of the assets and liabilities of the scheme to help it assess whether it should enter the protection fund. The regulator will not have gathered all the information needed for that valuation, therefore the actuary working for the protection fund will need to gather and analyse data that is fully up to date. Similarly, a scheme with an insolvent employer may apply for fraud compensation. That is another aspect that we should not forget. At that point it would be appropriate for the PPF to collect data relevant to the fraud application. The regulator will not play a part in the payment of fraud compensation.

There will be more to say on that when we deal with the protection fund clauses. Nevertheless, I hope that I have persuaded the hon. Member for Tatton that the information we are seeking is proportionate and that it makes sense for the regulator to play a leading role in collecting information just once—albeit on a regular basis—even if some of it is primarily for the purposes of the PPF.

3.15 pm

Mr. Osborne: I am not sure that I am entirely convinced. Most of what the Minister said related to the inquiry by the hon. Member for Northavon about the relationship with the PPF. What he said about my amendment was that it was not unreasonable and would require the regulator to assess the value of the information that it requests. It is jolly good to know that one's amendments are not unreasonable. It is also good to know that the amendments would require the regulator to assess the value of the information that it requests. One would hope that a regulator would do that before requesting the information. However, I do not intend to die in a ditch over this amendment, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43 ordered to stand part of the Bill.

Clause 44

Duty to notify the Regulator of certain events

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

Malcolm Wicks: Clause 44 provides for a new statutory obligation on trustees and managers of

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occupational pension schemes to report to the regulator in writing any prescribed event in relation to the scheme. Those events must be reported as soon as reasonably practicable. Along with the regulator's power to collect information relevant to the functions of the PPF board, the clause provides the backbone of the early warning system for the PPF.

We are working with the Pension Benefit Guaranty Corporation of the United States of America and the pensions industry in the United Kingdom to determine precisely what the notifiable events should be. The events will be specified in regulation and will include, for example, corporate restructuring affecting an occupational pension scheme or a significant payment becoming due to an individual scheme member in certain circumstances.

The regulator's power to collect such information serves two purposes. First, it may alert the regulator to potential or actual problems, and enable it to step in as early as possible to put things right. In doing so, the regulator may be able to prevent scheme members from losing out financially. It may also prevent a scheme falling into the jurisdiction of the PPF when it would otherwise have done so, which, in turn, will protect the members of all pension schemes that are liable to pay PPF levies.

Secondly, the regulator will be able to gather and disclose to the PPF any information that is relevant to the fund's functions. That will enable the PPF board to fulfil those functions. For example, the information that the regulator collects will be used by the board when setting and calculating the levies. It also means that, where the PPF becomes involved with the scheme, it will be able to act quickly if necessary to protect scheme members and prevent the scheme funding level from deteriorating further.

Mr. Osborne: In general, clause 44 seems sensible. I want to pick up again on the use of the phrase ''as soon as reasonably practicable.'' The Minister says that the clause is the early warning system and the crucial trigger that will help protect scheme members who may be in danger of losing their pensions. However, ''as soon as reasonably practicable'' is broad and allows someone to plead that it was not reasonably practicable for them to do something for a considerable amount of time. I want the Minister's reassurance that the regulator will take a tough view of people who procrastinate in providing important information.

The Minister also told us something of what would be in the regulations, which will obviously be important. Perhaps he will tell us when we might see them. He says that he is consulting with the Americans and others. I understand the Government's desire to get on with the Bill and give our constituents the protection that we all want them to have, but there is a balance to be struck between that and proper parliamentary scrutiny, with access to the full facts as we investigate legislation on behalf of our constituents.

 

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Prepared 11 March 2004