Draft Pensions Regulator (Employer Resources Test) Regulations 2021

Guy Opperman Excerpts

Wednesday 21st July 2021 General Committees

[The Chair]

Before we begin, I remind Members that Mr Speaker has stated that the wearing of masks is encouraged. Hansard colleagues will be most grateful if Members could send their speaking notes to [e-mail].

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I beg to move,

That the Committee has considered the draft Pensions Regulator (Employer Resources Test) Regulations 2021.

It is a great pleasure to serve under your chairmanship, Ms McVey. The draft regulations were laid before this House on 28 June. It is the mission of this Government to make pensions safer, better and greener, and the Pension Schemes Act 2021 has definitely taken things forward. It strengthens the powers of the Pensions Regulator, and fulfils our manifesto commitment to take action against those who think that they can plunder the pension savings of hard-working employees.

The draft regulations provide essential details on the new employer resources test, which forms part of the Pension Regulator’s contribution notice regime. The regime enables the regulator to demand that money is paid into a pension scheme from those who have caused detriment to the scheme. A recent example is Dominic Chappell, who was ordered to pay £9.5 million by the regulator into the British Home Stores pension schemes. The new employer resources test that the draft regulations relate to will enable the regulator to overcome existing challenges of assessing the act, or failure to act, that has affected the financial strength of the sponsoring employer and therefore its ability to support the scheme, rather than damaging the scheme directly.

With the new provisions, we will also avoid the associated challenge of having to assess the future likelihood of members receiving their accrued benefits. In addition to looking at the health of the employer, the regulator also has a focus on the scheme, where it is required to assess the reduction of material compared with the scheme’s estimated section 75 liability. We remain committed to ensuring that there should be no place for those who put workers’ retirement savings at risk. The draft regulations will play a vital role in enhancing the regulator’s ability to protect pension scheme members, and I commend the regulations to the Committee.

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[Guy Opperman]

I am grateful for the hon. Gentleman’s support for the principle of the regulations. I can assure him that the Pension Regulator and I have engaged extensively with stakeholders over the past three years during the build-up, passage and implementation of the Pensions Schemes Act 2021.

As for the regulator’s staffing and resources, the hon. Gentleman will be aware that its budget has effectively increased by 100% in the past five years. Although it is quite clearly adjusting to the new burdens in the 2021 Act, at the same time some issues have lessened. For example, auto-enrolment occupied a massive part of the regulator’s time when it was launched in 2012, but it is now not such a large issue.

Regulations are always kept under review, and the hon. Gentleman and I can happily discuss them on an ongoing basis. As for the profit before tax measure, he is correct that we have provided the regulator with a tool to make a simple snapshot assessment of the impact of an act, or the failure to act, by an employer. It was selected for measuring the resources of an employer because the term is widely understood by the industry and the regulator and, on that basis, it was shown to be an appropriate test.

As for ensuring that defined benefit schemes continue, the whole purpose of the DB White Paper and the 2021 Act is to ensure that this Government continue to support DB and members with a DB pension. Aside from DB, we are also developing the third way—not to be too Clintonian in the matter—with collective defined contribution pensions, which represent a genuine alternative for employers, employees and unions. I commend the regulation to the Committee.

Question put and agreed to.