Pension Schemes Bill [HL]

Baroness Donaghy Excerpts

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

[Baroness Stedman-Scott]

Requiring the payment of dividends to be reported is not necessarily very helpful to the regulator. It is likely to inhibit legitimate business processes without getting more resources for the scheme. We need to take a proportionate approach. We think that the priority is to ensure that a suitable recovery plan is put in place that takes account of the full range of circumstances of the employer and the scheme.

Trustees and the regulator need to look at a whole range of demands on the employer’s resources. Dividends are just one of these. Others may include maintenance of its business, and investments in its sustainable growth and debt repayments. All of these need to be considered in deciding whether a recovery plan is fair.

The Pensions Regulator scrutinises all valuations and recovery plans submitted, assesses the key risks, and assesses whether further engagement and potential enforcement action is required. Measures in the Bill will help to clarify exactly what is required for an appropriate recovery plan. Along with the regulator’s revised funding code, these measures will make it clear to trustees and employers what is expected, and will support the regulator in taking enforcement action where necessary. Provided that an appropriate recovery plan is in place, how the employer chooses to spend the remainder of its free resources is rightly a matter of business priority.

[Baroness Donaghy (Lab)]

I have listened carefully to the debate and cannot help but think that this is not sufficiently fleet of foot to prevent those such as BHS and Carillion—there is recent past history on this—which were basically giant Ponzi schemes towards the end, where they were paying dividends instead of funding the pension scheme, had deliberately obscure governance rules and left their pensioners bereft of a considerable proportion of their money. Is this system sufficiently fleet of foot? Would it take account of a company which then decided to sell itself to another person for, for the sake of argument, £1? Would it help to cover the situations covered by the amendments? It does not sound to me as though we are doing anything different from just saying, “Everybody has the right to the appropriate dividends.” How do we know that those dividends are appropriate, and how do we have power for the regulator to ensure that there are not some really bad guys out there?

[Baroness Stedman-Scott]

The noble Baroness makes some valid points. We consider that dividends are paid at a point in time. The regulator needs to form a picture of the employers’ ability to pay and, for a period in the future, needs to see the whole picture.