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"( ) A clearance statement may exempt the applicant from any future contribution in respect of the scheme, or in respect of the obligations of the scheme at a date, or may grant such exemption subject to conditions."
The noble Lord said: My Lords, I wish briefly to return to this matter. In Grand Committee, we ended our conversation on an identical amendment having achieved what I thought was a very unsatisfactory understanding of what the Government intended. I sought to illustrate the circumstances in which this situation might arise.
A company may be in trouble and its pension fund short of money. Someone may come along to consider taking that company on and making it better. It may be that that person could put the pension scheme in a better situation than would be the case if the company were allowed to go bust, even though it would still be a long way short of the pension promise made by the old employer. It may be that, on the basis of projections for the takeover of the company and of additional contributions coming into the pension fund, the pensioners will see the difficult position improving slowly over the years. That would be a reasonable thing for the regulator to agree to. The pensioners are doing better than they would otherwise and better than if the company went bust, and the acquiring company is making a reasonable contribution towards helping out with the situation.
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If there cannot be a situation that will hold over the years and the company that has been acquired does not do as well as expected and cannot make the payments into the pension fund that were indicated, the regulator will, under subsection (5), say that circumstances have changed and will visit the whole pension fund deficit on the acquiring company. That is fundamentally wrong and unfair. It will inhibit ordinary, sensible commercial transactions.
If the arrangements are to work, they must hold down the years. They must hold out against changing circumstances or, at least, be capable of doing so. The regulator must be able to promise that the clearance statement will hold good against changes in circumstances, otherwise no one will ever take on a company in such circumstances. Companies will be allowed to go bust and go through liquidation, which is in nobody's interests. I beg to move.
Baroness Hollis of Heigham: My Lords, I am not sure that the noble Lord has taken us any further than our earlier debate on Amendment No. 53, when he talked about sandcastles and all the rest of it. I quoted the CBI, which appeared not to share his views, and argued that I was aware of nobody else who shared his views or had expressed them to us. All of the parties of whom I am aware who took part in the discussions on the moral hazard document that everybody has seen agreedalmost across the boardthat, if material circumstances changed, the clearance agreement would not hold. The clearance agreement will not hold in perpetuity, come what may. It will deal with a particular situation in which someone needs to know how to act.
We have already discussed the matter. The noble Lord believes that a clearance should exempt the applicant from any future contribution in respect of the scheme and does not think that conditional clearance should be granted. We disagree, and, as far as I know, the consultation exercise has confirmed that the Government's approach is correct and that the approach taken by the noble Lord is not.
The noble Lord made a point about the benefit factor. That is exactly what the reasonableness test is designed to deal with. That is covered by Amendment No. 58, which we have already dealt with. That amendment relates to FSDs and the value of any benefits received directly or indirectly from the employer by the person to whom the regulator is considering issuing the FSD. We have already discussed that.
I am sorry that I cannot take the noble Lord any further. We simply disagree. Until I am persuaded by industry that there is a serious issue about responding to material changes in circumstances that we have not addressed, I will not be able to accept the amendment.
Lord Skelmersdale: My Lords, before the noble GovernmentI mean, "the noble Baroness"sits down, I must ask about something. Actually, the way that she has been talking, she might be the noble Government, but be that as it may.
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I listened carefully before the break, and I have listened carefully now. I am surprised that it has not occurred to anybody that the restructuring might take so long that it would be appropriate to produce a new contribution notice, in certain circumstances, after some time. Have the noble Baroness and the department taken that into consideration when considering what the CBI did or did not say?
Baroness Hollis of Heigham: My Lords, we can certainly look into that and I shall reply. But the core issue is whether, with a clearance statement or whatever, that is a permanent guarantee, come what may. We cannot accept that; it would be quite unreasonable.
Lord Skelmersdale: My Lords, I know that this is not Committee stage, but perhaps I may come back again. It must be extremely unfair on everyone if they are left hanging on a thread for an unlimited period. But I will not pursue the point any further.
Lord Lucas: My Lords, the noble Baroness has challenged me to go away and find someone in industry who agrees with me. If I can, I shall. That is a reasonable request. I understand what the noble Baroness says about Amendment No. 58, but it merely draws the regulator's attention to things that it should have regard to. It does not say that it should be limited to the benefit received. It is quite unclear how the regulator will move in taking those things into account, particularly if it has a pension fund with a large deficit that needs filling and the new owner, or whoever, is the only available company to go after. Under those circumstances, it would probably choose to ignore Clause 43(5)(b) and say, "Well, you may not have received any benefit from this arrangement. But none the less you are the owner, so you're the fellow". However, for the moment, I beg leave to withdraw the amendment.
Page 35, line 22, leave out from "company" to end of line 23 and insert "within the meaning of subsection (11) of section 435 of the Insolvency Act 1986 (c. 45), whether the person has or has had control of the employer within the meaning of subsection (10) of that section),"
"( ) in the case of a person to whom the financial support direction was issued as a person falling within section 43(5A)(b) or (c), the value of any benefits received directly or indirectly by that person from the employer,"
Page 35, line 26, leave out from "company" to end of line 27 and insert "within the meaning of subsection (11) of section 435 of the Insolvency Act 1986 (c. 45), whether the person has or has had control of that company within the meaning of subsection (10) of that section),"
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Page 35, line 32, leave out subsection (5).
"SECTIONS 39 TO 55: PARTNERSHIPS AND LIMITED LIABILITY PARTNERSHIPS
(1) For the purposes of any of sections 39 to 55, regulations may modify any of the definitions mentioned in subsection (2) (as applied by any of those sections) in relation to
(a) a partnership or a partner in a partnership;
(b) a limited liability partnership or a member of such a partnership.
(2) The definitions mentioned in subsection (1) are
(a) section 249 of the Insolvency Act 1986 (c. 45) (connected persons),
(b) section 435 of that Act (associated persons),
(c) section 74 of the Bankruptcy (Scotland) Act 1985 (c. 66) (associated persons), and
(d) section 736 of the Companies Act 1985 (c. 6) (meaning of "subsidiary" and "holding company" etc).
(3) Regulations may also provide that any provision of sections 39 to 50 applies with such modifications as may be prescribed in relation to
(a) any case where a partnership is or was
(i) the employer in relation to an occupational pension scheme, or
(ii) for the purposes of any of those sections, connected with or an associate of the employer;
(b) any case where a limited liability partnership is
(i) the employer in relation to an occupational pension scheme, or
(ii) for the purposes of any of those sections, connected with or an associate of the employer.
(4) Regulations may also provide that any provision of sections 51 to 55 applies with such modifications as may be prescribed in relation to a partnership or a limited liability partnership.
(5) For the purposes of this section
(a) "partnership" includes a firm or entity of a similar character formed under the law of a country or territory outside the United Kingdom, and
(b) references to a partner are to be construed accordingly.
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(6) For the purposes of this section, "limited liability partnership" means
(a) a limited liability partnership formed under the Limited Liability Partnerships Act 2000 (c. 12) or the Limited Liability Partnerships Act (Northern Ireland) 2002 (c. 12 (N.I.)), or
(b) an entity which is of a similar character to such a limited liability partnership and which is formed under the law of a country or territory outside the United Kingdom,
and references to a member of a limited liability partnership are to be construed accordingly.
(7) This section is without prejudice to
(a) section 305 (power to modify this Act in relation to certain categories of scheme), and
(b) section 316(4) (power to extend the meaning of "employer")."
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