Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty's Government whether the withdrawal of credit insurance to a company sponsoring a pension fund with a large deficit requires approval by the Pensions Regulator.
Answered by Baroness Buscombe
The Pensions Regulator does not have jurisdiction over corporate business transactions, such as the withdrawal of credit insurance, and does not have the power to require insurance companies to seek approval before withdrawing insurance cover.
The Pensions Regulator operates a voluntary clearance procedure to those who are considering transactions involving companies with defined benefit schemes. If clearance is not applied for and granted, the Regulator may exercise its anti-avoidance powers, if it considers that the transaction was aimed at avoiding a debt to the pension scheme. These powers can be applied up to six years after a transaction has taken place.
Employers sponsoring defined benefit pension schemes are also required to notify the Regulator of certain prescribed events. These do not include the withdrawal of credit insurance but should the withdrawal of such insurance trigger a prescribed event, including insolvency, then the employer would be required to notify the Pensions Regulator.
Defined benefit pension schemes also go through a valuation process every three years (tri-annual evaluation), comparing assets against liabilities, and the withdrawal of credit insurance might be identified by the Regulator as part of this process.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty's Government, further to the Written Answer by Baroness Buscombe on 23 October (HL10674), whether they include in supplier contracts a specific requirement that they do nothing to harm public confidence in the person of the Secretary of State for Work and Pensions; and if so, whether this is a new policy, and when it was introduced.
Answered by Baroness Buscombe
Contractual provisions that impose obligations on suppliers not to harm the reputation of the purchasing authority or otherwise bring it into disrepute are not new policy, such provisions are well-established and widely used in both the public and private sector and are transparent throughout the tendering process. These provisions ensure that contractors adhere to good working practices and governance, for example by ensuring they do not break employment law or use dangerous, unfair or unethical practices which may bring the Authority into disrepute or harm public confidence. Such provisions do not stop any contract holders or affiliates from criticising any specific government department, government policy or politicians.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty's Government whether any contracts drawn up by the Department for Work and Pensions for suppliers working on Universal Credit include a clause requiring the supplier to do nothing that will attract adverse publicity to the Secretary of State or harm public confidence in her.
Answered by Baroness Buscombe
In contracts used across government, including at the Department for Work and Pensions and its Universal Credit programme, there are clauses that vary in different forms, typically these clauses require the supplier to ensure that neither it, nor any of its Affiliates, bring the Authority into disrepute by engaging in any act or omission which is reasonably likely to diminish the trust that the public places in the Authority, regardless of whether or not such act or omission is related to the Supplier’s obligations under said Agreement.
These clauses do not prevent the contracting bodies from making statements critical of government policy, or programmes such as Universal Credit or politicians, and certainly do not prevent whistle-blowing (as this would be unlawful). They are designed to protect government, to ensure that contractors adhere to good working practices and do not engage in activities that will bring the Authority into disrepute or otherwise harm the confidence of the public in Government.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty's Government how many contribution schedules to a pensions scheme have been issued by the Pensions Regulator since it was established in 1996; and what assessment they have made of the number of schedules issued.
Answered by Baroness Buscombe
The independent Pensions Regulator was established by the Pensions Act 2004. Its predecessor, the Occupational Pension Regulatory Authority did not have the same level of powers as the Regulator does now and was not able to issue a schedule of contributions.
The legislative framework within which the Regulator operates gives it a range of powers to protect the benefits of members of occupational pension schemes. It is down to the Regulator to decide which of its powers are appropriate in each investigation it undertakes.
Contribution schedules are required to be agreed by the trustees of the pension scheme and the sponsoring employer. However, where agreement cannot be reached, the Pensions Regulator has the power to set the schedule of contributions in relation to a recovery plan. Since this power was introduced, the Pensions Regulator has issued one warning notice, but has never been required to exercise the power to issue a schedule of contributions.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty's Government what assessment they have made of the effectiveness of the Pensions Regulator.
Answered by Baroness Buscombe
The Pensions Regulator was established by the Pensions Act 2004. The assessment of the performance of the Pension Regulator was decided by the previous government as follows: The Pensions Regulator has a broad set of responsibilities across occupational pension schemes. Its performance, as measured by Key Performance Indicators, has been steadily improving since 2015. In 2015/16, it fully met 10 out of 17 of these indicators, whereas in 2017/18 it met 17 out of 18.
Working collaboratively with the Department for Work and Pensions, the Pensions Regulator has successfully implemented one of the most significant reforms in recent years, the introduction of Automatic Enrolment. To date, 9.6 million workers have enrolled into a pension by over 1.2 million employers. This is being achieved at a time of great change and challenge in the pensions landscape, with changes in longevity and structural changes in the workplace.
Since 2005, the Regulator has secured more than £1 billion for pension schemes through settlements and the use of its anti‑avoidance powers. Not withstanding this, the Regulator has also recognised the need for it to change and adapt to the world as it is now, and since 2016 has been engaging with industry on how best to be a clearer, quicker and tougher Regulator. The Government’s Defined Benefit White Paper proposals will provide the Regulator with additional tools needed to effectively respond to today’s challenges.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty's Government whether the Pension Protection Fund nominated someone to sit on the board of Monarch Airlines, or otherwise monitored (1) the financial performance and management of that company, and (2) its relationships with its controlling shareholder, affiliates of that shareholder, and its suppliers of aircraft.
Answered by Baroness Buscombe
The Pension Protection Fund (PPF) is an independent body which pays compensation to members of defined benefit occupational pension schemes where the sponsoring employer becomes insolvent and the scheme is unable to cover the accrued pension liabilities.
The PPF’s engagement with Monarch Airlines is an operational matter, and I have asked PPF to respond directly to the Noble Lord.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty’s Government whether they are investigating circumstances surrounding the pension deficit of Arcadia; and what assessment they have made of the effectiveness of the Pensions Regulator in overseeing the scheme and its governance.
Answered by Lord Henley
The regulatory oversight of work-based pension schemes, including funding issues, is a matter for the independent Pensions Regulator. The recent BHS settlement shows that there is a system in place for protecting the benefits of members of occupational pension schemes.
The government remains confident in the effectiveness of the Regulator however, we have recently launched a consultation on Defined Benefit pensions to make sure the tools they have are appropriate and sustainable. The paper also covers a number of other areas of concern in the defined benefit sector, including the powers of the Regulator. This paper was laid before Parliament on 20 February 2017.
The closing date for comments is 14 May 2017; responses can be submitted to the following postal address:
DB Consultation
Private Pensions
First Floor
Caxton House
6-12 Tothill Street
London
SW1A 9NA
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty’s Government what discussions they have had with the Pensions Regulator about the length of time it will require to report on the BHS pension scheme; and whether they plan to communicate that information to fund managers.
Answered by Lord Freud
The right approach is to allow the Pensions Regulator to get on with its investigations into the use of its anti-avoidance powers. There is a clear legal process that must be followed and this can sometimes take a considerable amount of time. The Pensions Regulator’s Chief Executive has given a commitment that it will have made significant progress by the end of 2016. It has said that when it becomes appropriate to do so it will consider publishing a report of the case under Section 89 of the Pensions Act 2004. The Regulator is independent and Ministers cannot become involved in its decisions on whether or not to exercise its powers or seek to influence its investigations in any way.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty’s Government whether they have made an estimate of the cost of their monetary policy on the solvency of pension schemes, and whether they plan to use the profit made from quantitative easing to strengthen the financial position of the Pension Protection Fund.
Answered by Lord Freud
The UK’s monetary policy framework gives operational responsibility for monetary policy to the independent Monetary Policy Committee (MPC) at the Bank of England. Decisions on setting monetary policy are for the judgement of the Monetary Policy Committee.
The Government is sensitive to the fact that there will be those who gain and those who lose from any particular monetary policy decision. Such distributional effects typically balance out over the course of a policy cycle.
Over the last six years low interest rates have helped households and businesses through challenging economic times. Furthermore, as the Bank of England has explained in its article entitled "The distributional effects of asset purchases" published in its 2012 Q3 Quarterly Bulletin: "Without the Bank's asset purchases, most people in the United Kingdom would have been worse off. Economic growth would have been lower. Unemployment would have been higher. Many more companies would have gone out of business. This would have had a significant detrimental impact on savers and pensioners along with every other group in our society."
The Pension Protection Fund is financially sustainable and there are no plans to further strengthen it. The PPF 2015/16 annual report said that the Fund has over £23 billion assets under management and is 116.3 per cent funded.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty’s Government whether they have any plans to change the discount rate used to calculate the funding status of defined benefit pension schemes.
Answered by Lord Freud
The legislation governing the funding of defined benefit occupational pensions schemes is designed to be flexible, allowing the trustees or managers of these schemes to determine which method and assumptions are to be used in their schemes technical provisions. A number of factors come into play in scheme funding decisions and the Pensions Regulator provides useful guidance for trustees in its codes and supporting guidance and statements.
In determining the discount rate to be used, trustees must act prudently taking into account the yield on assets held by the scheme and / or the market redemption yields on Government bonds or other high-quality bonds.
There is no standard actuarial method and set of assumptions that must be used, however, should the Regulator have concerns about a funding plan it can intervene.