Pension Schemes Bill [HL]

Debate between Lord Flight and Lord Sharkey

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 26th February 2020 Grand Committee

[Lord Sharkey (LD)]

I would be surprised as well.

My Lords, I support the thinking behind both these amendments. I congratulate the noble Lords, Lord Vaux and Lord Balfe, on the excellent way in which they have been introduced. Both amendments allow timely discussion of what is a large, widespread and probably growing problem.

After the publication of TPR’s annual funding review in March 2019, the Investment & Pensions Europe magazine reported that TPR had

“vowed to engage with a number of schemes this year if recovery periods were considered to be ‘unacceptably long’, and warned trustee boards to expect communications in the coming months. … Consultancy firm Hymans Robertson estimated that one in five FTSE 350 companies with DB schemes were at risk of intervention from TPR.”

That is an alarmingly large number.

To understand what TPR means by “communications”, it helps to look at what TPR in its annual funding review states as the three key principles behind its expectations. The first is:

“Where dividends and other shareholder distributions exceed DRCs, we expect a strong funding target and recovery plans to be relatively short.”


The second is:

“If the employer is … weak”


or tending to weak,

“we expect DRCs to be larger than shareholder distributions unless the recovery plan is short and the funding target is strong.”

The third is:

“If the employer is weak and unable to support the scheme, we expect … shareholder distributions to have ceased.”


These are all fine principles—in principle. The real question is how, or whether, they are in fact working. How many FTSE 350 companies has TPR intervened on in the last 12 months, and on how many occasions has it advised against or prevented shareholder distributions? Perhaps the Minister could give us an assessment of TPR’s success in applying its three key principles.

Both amendments in this group offer a simpler and different approach to restrictions on shareholder distributions, but in contrasting strengths. Both have the merit, it seems to me, of making responsible behaviour by employers more likely, and that is no small thing if there are 70 FTSE 350 companies out there needing effective intervention to protect employees’ pension rights. I look forward to the Minister’s response.

[Lord Flight (Con)]

My Lords, I think we all understand the reason for these two amendments; whether one of these two or another amendment is to deal with the situation, it needs to be dealt with. I am slightly surprised that neither amendment would actually stop the payment of dividends. I think there is an argument that, where the finances obviously mean that a dividend cannot be afforded, the company should not be allowed to make a dividend payment. I am not sure that Amendment 27 or Amendment 84 addresses the issue as well as it might be addressed. The Government might have another look at what they want to achieve, which should be stopping payments of dividends where they cannot be afforded.

Financial Services Bill

Debate between Lord Flight and Lord Sharkey

Monday 8th October 2012 Lords Chamber

[Lord Flight]

My Lords, I congratulate the Minister on embracing such a broad range of issues, which have been grouped together here. I would like to add only the following. I am pleased to hear what he had to say about the publication of directions relating to promotions, which was really the main point of my amendment. Regarding the issue of the Limitation Act and the 15-year longstop, I am also very pleased to hear that the Minister is focusing on this. As things stand, RDR is likely to result in many thousands of financial advisers ceasing to be in business, with other major problems that can be dealt with at another time in another place. It will be a much bigger issue than it is at present in terms of all these people who are, if you like, retiring and going out of business, and it seems fundamentally equitable that the general law of limitations should apply to all transactions without any special treatment for financial services claims or ombudsmen’s complaints. I wonder whether the judiciary should be advising about this, at least as well as the regulator.

The general issue of promotions will be an interesting double-edged sword for the regulator. I am a commissioner of the regulator that was the first to ban split-level investment trusts at a time when I think the regulator over here was rather slow in being aware of the problems and issues. The very full powers given to the FCA will put it in the limelight to get there in good time and do it right. As I said at the outset, I am certainly not opposed to the power. There has been an obvious need to be able to deal with “wrong” products quickly and effectively. I am still slightly concerned that the framework of the FCA using those powers is pretty broad and I suspect that the FCA itself may want to have a more defined framework for fear of criticism.

Those are the main thoughts behind my amendments in that area. I thank the Minister for his response, which essentially satisfied the points I raised.

[Lord Sharkey]

I beg leave to withdraw the amendment.

Financial Services Bill

Debate between Lord Flight and Lord Sharkey

Wednesday 25th July 2012 Lords Chamber

[Lord Flight]

My Lords, I rise to speak to Amendment 144K, which is intended to ensure that the non-executive members of the PRA board have relevant experience and expertise. In particular, the board should have the benefit of members who have expertise in the sectors regulated by the PRA.

As others have already said, the insurance industry has been something of an orphaned relative. Indeed, I think that the Governor of the Bank of England is on record as saying that the arrangements do not entirely match his wishes. I believe that the Government’s intention is that this should be the case. It is clearly desirable, however, that the PRA should have appropriate representatives from that industry with the right experience, and, indeed, they should be equipped to contribute if the life industry balance sheets get into a position where there needs to be a temporary suspension of the rules, should equity markets plunge dangerously.

[Lord Sharkey]

My Lords, I rise briefly to support Amendment 144K, in the name of my noble friend Lord Flight, and even more briefly to support Amendment 144L, in my name, which covers some of the same ground but is more focused on the need for the PRA board to have non-executive members with relevant experience and expertise in the insurance sector. I am sure that neither of these amendments should be at all controversial. It would be very hard to argue that the PRA non-executive members need not have among them people of experience and expertise across the regulated sectors, but I think that it would be wrong to argue that this provision is not needed in the Bill. There is no reason for this to be left simply to the discretion of the Bank and the PRA and every reason why they should have an obligation to act in the way that both amendments suggest.

Amendment 144L in my name focuses on insurance because I am concerned that the PRA—as a subsidiary of the Bank, and with a special financial stability purpose and a number of Bank officials on the board—will be much more explicitly focused on the banks. It is also true, I think, that the Bank of England has no history of regulating insurance. The FSA currently does this, in succession, I think, to the DTI. In order to make sure that the PRA also effectively and properly focuses on the insurance sector it seems right that it should have, among its non-executive members, people with the appropriate experience and expertise in that sector. That is what my amendment and the amendment of my noble friend propose.