Pension Schemes Bill [ Lords ] (First sitting)

Guy Opperman Excerpts

Committee stage & Committee Debate: 1st sitting: House of Commons
Tuesday 3rd November 2020 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Clauses 2 to 6 stand part.

That schedule 1 be the First schedule to the Bill.

Clauses 7 to 25 stand part.

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

It is a great pleasure to serve under your chairmanship, Mr Stringer. I thank colleagues for attending today’s debate. I hope to proceed with cross-party agreement on those matters that are relatively uncontested, so that we can make progress and then focus on and debate properly those matters that are genuinely contested.

I stand to introduce clause 1 and the associated clauses up to clause 25 and to speak in support of the new form of occupational pension that we are introducing, commonly called collective defined contributions. In CDC schemes, members and employers make fixed-rate contributions to the pension fund. At retirement, members receive their regular pension income paid out of the fund each year until death. The rate or amount of the pension is not guaranteed and will be adjusted annually depending on how much money is in the fund and the projected cost of providing benefits under the scheme. CDC schemes offer the security of an income in retirement, which we know many people value, without individuals having to purchase an annuity on retirement. However, CDC schemes do not require the employer to make additional financial contributions to the scheme if the scheme’s financial position weakens. CDCs have been introduced under a cross-party approach, with great support from all parts of the House. The pioneers of the scheme are the Communication Workers Union and the Royal Mail, which have proposed a way forward.

The Bill allows us to extend CDC provision to master trusts or non-connected multiple employers through further secondary legislation when appropriate, and we look forward to working with such employers in the industry on how such provision should operate and be regulated. It is a brave man who cites Tony Blair in aid of his proposals, but I genuinely believe that this is a third way in terms of pensions, as an alternative to defined-benefit and defined-contribution schemes. It is unquestionably something that huge numbers of people have sought to bring forward, so that we can address things in the main.

[Ms Angela Eagle (Wallasey) (Lab)]

The Minister talks about the third way. Will he also take a little time in his opening remarks to recognise that pensions policy is best if it is done cross-party? We are dealing with changes to the Pensions Act 2004, which was cross-party legislation that introduced opting in. Changes and tweaks to the system are far more likely to last across different Governments and across time if we have some form of cross-party consensus. It is not only a third way. The only way we will end up with a workable pensions scheme is by building in sustainability across Governments and across time. As a former Pensions Minister who put the auto-enrolment regulations on to the statute book prior to our loss of office in 2010, I am committed to cross-party working and I hope that the Minister is, too.

[The Chair]

This is an ideal opportunity to say that I do not think that members of the Committee will have any difficulty in catching my eye, but interventions should be brief and to the point.

[Guy Opperman]

I endorse that approach, Mr Stringer, but I also take the opportunity to welcome the cross-party approach to so much of pensions. I am conscious that two former Ministers of the Department for Work and Pensions are sitting on the Back Benches and that they will correct me and intervene regularly. I accept entirely that pensions policy works on a cross-party basis, whether it be automatic enrolment—which was introduced by the Labour Government through the Turner commission, brought forward by way of statute under the coalition, and expanded under this Conservative Government—or such successes as the Pension Protection Fund, which was one of the great successes of Blair’s Labour Administration, and the variety of reforms that we have introduced. There are some cross-party matters, such as the increase in the state pension age, that some parties do not necessarily wish to continue to own and embrace after they have left office, but such is the way of life.

As I tweeted yesterday, this Bill has, effectively, 98% cross-party agreement and, although there may be legitimate debates on how we progress, we have worked on that basis. The hon. Member for Birmingham, Erdington (Jack Dromey) and I have worked together on a tremendous cross-party basis. My wife often comments that I text him way too much. The practical reality is that I have also engaged repeatedly with the hon. Member for Airdrie and Shotts, who represents the Scottish National party. We have exchanged emails, trying to work out where we disagreed and where we agreed, and there is a great deal of common ground. Both SNP spokesmen made that clear on Second Reading, though there is legitimate debate regarding the best way forward on other matters. I look forward to those debates.

[Neil Gray (Airdrie and Shotts) (SNP)]

I concur with the Minister’s remarks on cross-party working. He said that CDC schemes, which we support, would become a third way, but can he clarify whether he sees CDC schemes as replacing good DB schemes? Clearly, we would not see them as an alternative but as a fall-back for when schemes run into trouble in other areas.

[Guy Opperman]

We will debate DB schemes, which I think have a great future. We have gone to great efforts to support the future of DB schemes. This is an alternative way forward that some organisations—Royal Mail is the classic example, but there are others who are looking at this—will welcome. Under no circumstances should it be implied or in any way taken that the Government will do anything other than support DB schemes on an ongoing basis.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship today, Mr Stringer. May I thank the Minister for the collegiate way in which he has undertaken debate during the progress of the Bill and, indeed, prior to that, on the issues and decisions we are making?

I thank my hon. Friend the Member for Wallasey for her comments on the importance of a continuing cross-party dialogue on the issue of pensions. I was involved in some of the Labour’s Government’s work on addressing pensions inequality for women and the Turner commission. I also pay tribute to the hon. Member for Airdrie and Shotts for his contribution to the collegiate way in which we have all been working together and for raising important issues for debate.

I speak on behalf of the Opposition, along with my hon. Friend the Member for Westminster North. We also speak on behalf of my hon. Friend the Member for Birmingham, Erdington (Jack Dromey), who is unable to be with us this week. Before I begin, I want to thank the Committee Clerks, who are ever helpful, professional and a true credit to the House.

As the Minister well knows, we have always been clear that we support the Bill, but, as hon. Members can see, we have identified some ways in which we believe it could be made better. We will discuss those areas in detail as we progress.

I turn to the general provisions in parts 1 and 2 of the Bill, on collective money purchase schemes, which is the legislative term for collective defined contribution or CDC schemes. The provisions mark a welcome innovation. I join colleagues in congratulating the CWU and the Royal Mail on their groundbreaking agreement to pursue the creation of a CDC scheme. They have forged an exciting pathway to a better pension for around 141,500 Royal Mail employees. Members will be aware that my hon. Friend the Member for Birmingham, Erdington was closely involved in that process.

CDC schemes offer many potential benefits, as the Select Committee on Work and Pensions concluded in a 2018 report:

“Through the pooling of risk between scheme members, CDC may well…provide more generous pensions on average than standard DC saving…To offer more good choices is entirely consistent with both pension freedoms and promoting retirement saving.”

There could hardly be a more important time to focus on reducing risks to people’s pension savings. As we have seen, the coronavirus crisis poses a serious and significant risk to pension funds. Sadly, many members of defined-contribution schemes have suffered pension reductions of around 8% to 10%, due to the financial market reaction to the pandemic. In many cases, that has led to individuals deferring their retirement.

In that context, it is massively encouraging that the modelling conducted by Willis Towers Watson shows that the Royal Mail CDC scheme would have provided better outcomes for savers through this crisis than traditional DC schemes. According to the modelling, even with the severe level of market shock experienced earlier this year, there would have been no effect on current pension levels for CDC schemes. Future pension increases would have been affected, but only by 0.25% a year. That is in stark contrast to the losses that I have outlined for DC pension savers and is to be welcomed in the light of the turbulent economic circumstances we face for the foreseeable future. It is welcome, too, that supporters of CDC schemes make a wide and varied coalition, including the CBI and the TUC.

In summary, Labour supports part 1 of the Bill and the move to create CDC schemes provided, of course, that they are not used as a means of downgrading good DB schemes, a point that has already been made.

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[Neil Gray (Airdrie and Shotts) (SNP)]

It is a pleasure to take part in this Bill Committee with you in the Chair, Mr Stringer. Like the Labour spokesperson, I pay tribute to the Minister, and to the hon. Member for Birmingham, Erdington, for the cross-party work that brought the Bill to this point. We welcome the Bill as it has arrived from the Lords, though we have concerns about some of the amendments put forward. It is an important piece of legislation, and the part that brings about CDC schemes has arrived in a good state, which is why there are so few amendments to these clauses. The Minister has obviously done a good job on the drafting from that point of view.

I thank the Clerks for their time and patience in working with me, my hon. Friend the Member for Gordon and our staff in putting forward our amendments and priorities. We greatly appreciate all their help and support.

Following on neatly from where the Chair of the Select Committee left off, we very much support the creation of CDC schemes. We pay tribute to Royal Mail and the CWU for the work that they have done with the Government to get the Bill to this stage. As I intimated in my intervention on the Minister, and as the Chair of the Work and Pensions Committee, the right hon. Member for East Ham, also intimated, the CDC schemes cannot be seen as a panacea or the right solution for everybody. It is important—I think this will be a theme of our discussions—that people are given access to as much impartial information about their pensions as possible, giving them confidence to make informed decisions about their savings.

For the reasons that the right hon. Gentleman outlined, I wish to put on the record again that although the SNP feels that CDC schemes have major benefits—certainly for some scheme members in DC schemes—we would not wish them to be seen as a replacement for good DB schemes or for people to feel that they are necessary. I look forward to the rest of the debate, which I feel may well be rather more contentious than the issues that we are discussing at this early stage of the Committee.

[Guy Opperman]

I echo the support for the Clerks from this side of the Committee. We had a very helpful session yesterday, and they have been very helpful throughout. I will address the four or five points that have been raised.

On communications, I utterly endorse the point made by the Chair of the Select Committee. He will, I hope, appreciate that over the last three years, one of the major things that I have tried to drive forward in the Department is communications across the level. We are using simpler statements, by taking the 10 to 43-page pension statements that very few people read—putting them in a kitchen drawer and not necessarily taking them on board—and providing a simpler two-page statement and a written version. Our pensions dashboards create an amenable version of the online version, with great, ongoing communication.

On CDCs, I totally endorse the points that the right hon. Gentleman made: it is vital that we learn the lessons from the Netherlands, and that we ensure good communication. The possibility of fluctuations in benefits will be made clear and transparent in key member communications at points throughout their pension journey, including by providing details of fluctuation risks at the point of joining, by emphasising benefit changes in both active and deferred members’ annual benefit statements, and by making clear in retirement information packs that benefits can change during retirement.

Quite simply, that point was not made clear to members in the Dutch example. Some may not have taken it on board at the start, while others perhaps did not quite understand the situation as well as they would have had it been explained to them. We hope that we have learned that particular lesson and have very much taken that on board. I know that the two organisations that are looking at CDCs are very conscious of that and, to their great credit, have held multiple roadshows around the country, talking about this and engaging with people long before the legislation was introduced.

The reality of the situation for the CWU and Royal Mail was that their endorsement of the approach would not have been possible without member engagement from the very start. They have probably engaged more with a pension scheme than anyone has ever done before, prior even to the drafting of the legislation. They very much wanted that engagement to take place.

[Ms Eagle]

Clearly, the changes that the Bill would make allow for pioneering in the CDCs that Royal Mail and the CWU have introduced to be put into effect. Will the Minister say a little about how other organisations —smaller employers, perhaps—might try to get into the CDC space? Clearly, Royal Mail and the CWU are an unusual combination, both in the size of the industry and their buy-ins—very few employers are of the same size as the CWU, which represents its members, and Royal Mail, which wishes to offer this particular CDC.

[Guy Opperman]

I agree that large employers, such as Royal Mail, which employ nearly one out of every 200 full-time working employees in this country, will look at that and say it is a potential way forward.

Before I come to the hon. Lady’s point, I want to address DB briefly and make it clear that CDC is intended to offer a further pension-saving option for employers and their workers, should they wish to make use of it: it is for the employers and the workers to decide the type of benefit they wish to have via their occupational pension scheme. That has always been the right of the employer fundamentally, but also engaging with the employee. We specifically amended the subsisting rights provisions via clause 24 to prevent existing DB benefits in the scheme from being converted into CDC benefits. I hope that I have addressed in full the DB issue, which was also raised separately by the right hon. Member for East Ham.

[Stephen Timms]

I am grateful for the Minister’s reassurance on communications. Will good communications be a consideration for the regulator in determining whether a proposed CDC scheme should go ahead?

[Guy Opperman]

The short answer is yes.

[Neil Gray]

To build on that, does the Minister see the engagement, which he has rightly described as one of the most extensive from an employer and an employee-representative organisation in terms of changes to pension provisions, as being the gold standard going forward, if an employer seeks to switch from a DC to a CDC scheme in the future? Is that the bar that needs to be met?

[Guy Opperman]

I am now straying into industrial relations and how best to manage a company to take someone’s employees with them in a complex negotiation about future pension rights. All I can say is that I have worked and sat down regularly with the leading individuals in the Communication Workers Union and the individuals who have been running Royal Mail—that has changed slightly as it has gone along. I have seen the way in which they have engaged with their workforce and had a proper conversation up and down the country in a series of roadshows. With a large unionised workforce in the modern era, that is the right way in any event. I would certainly endorse that approach. It is clear that the company and the employees have been able to work together—working with the union, working with representatives—and it seems to me that, while I would not say the phrase is “gold standard”, it is an advisable way to proceed and it is good company relations to have a proper dialogue and engagement with individual employees.

The short answer I gave to the Chair of the Select Committee was yes, but the longer answer is that there is a whole supervisory regime, which we will discuss later, under clause 27 and thereafter, which must be submitted to the regulator in order to qualify to be accepted as a CDC. The practical reality of that is that I cannot see a way in which the regulator endorses and allows a company to go down the route of a CDC without all aspects of that communication being considered. Clearly, there are secondary regulations that follow. It is not in the specifics of the Bill, as I understand it. I make the point, when I am answering questions, that I am doing this utterly blind, so it has to be from my memory because I cannot take any notes from anybody. That is the fun of a covid Committee, as the right hon. Member for East Ham will know from chairing a Select Committee.

[Ms Eagle]

Semaphore? [Laughter.]

[Guy Opperman]

The practical reality is that there is a supervisory regime that must be embraced as part of the application to the regulator to become a CDC. I believe that that will be comprehensively addressed and it is my intention that that should be so in the relationships that we have.

The right hon. Member for East Ham asked about clause 47 in ballpark terms and the speed and expedition. I take the point that we are not debating those matters but yes, I accept that we need to press ahead with that. I wish to do so. I have been working on the Bill for the best part of two and a half years. It has not been for lack of trying. We started it prior to the general election and had to pause and start again afterwards, so it is not for the lack of trying to progress it. Both Royal Mail and the CWU are very keen to expedite it.

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[The Chair]

Could the Minster be brief, as that moves us into a debate on clause 47, which comes later in the agenda?

[Guy Opperman]

The final question that I was asked was about extensions on DCs, and the answer to that is yes.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 6 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clauses 7 to 25 ordered to stand part of the Bill.

Clause 26

List of authorised schemes

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 6.

Clauses 27 to 44 stand part.

That schedule 2 be the Second schedule to the Bill.

Clause 45 stand part.

Amendment 25, in clause 46, page 36, line 41, at end insert—

“(e) require information to be made available to The Pensions Regulator relating to actions taken by the scheme to ensure diversity considerations are taken into account in the recruitment of the trustee board with regard to—

(i) age;

(ii) gender; and

(iii) ethnicity.”

This amendment is to require pension schemes to send information on the diversity of the trustee board to TPR.

Clauses 46 to 48 stand part.

That schedule 3 be the Third schedule to the Bill.

Clauses 49 to 51 stand part.

[Guy Opperman]

Clauses 26 to 51 complete the parts of the Bill that apply to Great Britain, but not to Northern Ireland. I will briefly address the two amendments. Government amendment 6 removes the provision put in primarily by Liberal Democrat peers in the House of Lords to incorporate a specific requirement of fairness. Unquestionably, as with much of the debate that we will have in Committee over the next two days, it is about the ways in which we proceed where the objective is agreed, and the objective is clearly one of fairness. The Government do not feel that clause 27(3) is appropriate, however, and we will seek to overturn it.

Requiring trustees to make such an assessment is likely to generate confusion unless further clarity is provided, and it may result in legal disputes. We have specifically and intentionally avoided referencing fairness in such a way in any of the CDC provisions, but I make clear to the Committee that we intend to use regulations to set out clear principles and processes that schemes must follow to ensure that different types of members are treated the same where justified.

Those requirements would form part of the authorisation process for the CDC schemes, overseen by the Pensions Regulator. Regulations under clause 18, for example, will require CDC schemes to ensure that there is no difference in treatment between different scheme member cohorts or age groups when calculating or adjusting benefits. That is a clearer, better and more effective approach to delivering fairness in practice, and it is supported by the Institute of Faculty of Actuaries.

I also pray in aid—as we have all cited our support for them—the note submitted by the Communication Workers Union and Royal Mail in written evidence to the Bill. They jointly addressed this specific point, saying:

“We welcome discussions on how to ensure the fairness of future CDC schemes. Royal Mail’s scheme is designed to address the possibility of intergenerational unfairness by not using capital buffers and explicitly preventing the trustees from favouring one group over another. The DWP acknowledged this in its 2019 consultation response. When it comes to Lord Sharkey’s amendment, we agree with Government that we should give careful consideration to how reporting on fairness might work in practice and share their concerns with the additional reporting requirements the amendment introduces. We therefore support the Government amendment which removes Lord Sharkey’s amendment from the Bill.”

I suggest that that statement is telling, and I invite the Committee to support the Government amendment.

[Neil Gray]

Before we decide what to do on this amendment, I am keen to hear from the Minister. He suggested that if the clause was allowed to stay as it is— as it was amended by the Lords—it could garner legal challenge. Could he clarify where he sees that legal challenge coming from and why he thinks that is a concern?

[Guy Opperman]

If clause 27(3) provides specifically for fairness, it may be open to interpretation and mean different things to different people. The legal advice we have received is that it would be inappropriate to include that in the Bill, and that it is far better to address the matter in detailed regulation rather than through a single word in the confines of the Bill.

[Ms Eagle]

The Minister is trying to achieve fairness across cohorts, and different people will have different interpretations of that. Such schemes are reliant on the general performance of the stock market, investment and what is going on in the world economy. Does he agree that fairness is subject to all those swings and roundabouts?

Will the Minister give the Committee some idea of what he would regard as fair, given that annuities were grossly unfair for those who happened to retire at a time when the market was taking a dip? What would he regard as “fairness” in the requirement that he will put in regulations?

[Guy Opperman]

Having been a 20-year lawyer, whose last client was a very famous Mr Ed Balls—I had to represent him when he was Secretary of State for Children, Schools and Families, five weeks before the 2010 general election—I am loth to start defining fairness, as a Government Minister, specifically because of the problem that has been identified.

I can say that we are attempting to ensure that members are treated fairly, and that has been part of the central thrust of our work on CDCs from the outset. We have learned from the problems experienced by the Dutch model, which allows schemes to make different benefit adjustments to different groups of members. That transferred contributions from savers to pensioners. The UK system will not work in that way. We intend that regulations under clause 18 will require CDC schemes rules to contain provisions so that there is no difference in treatment between different cohorts or age groups of scheme members when calculating and adjusting benefits. If the scheme design does not do that, it will not be authorised. That goes to the whole proposal under the supervisory regime and the submission.

Further—we will come to the word “bespoke” later in our consideration of the Bill—this is an opportunity for individual schemes. The examples have been given of a small care home scheme coming together, and of the vast might of Royal Mail. Clearly, those are very different organisations. I hope that the regulator will look at them in slightly different ways with an overarching code of principles that allows it to permit such a scheme to go ahead. I will resist the hon. Lady’s kind invitation to provide the exact definition that, we submit, would be one of the problems with clause 27(3).

[Ms Eagle]

We are here to tease out what the Government mean in the Bill, ahead of the unamendable regulations that have not yet been written. I hope that the Minister will indulge our temerity in using the Bill Committee to ask some relevant questions.

What the Minister said earlier about the Dutch schemes is correct. By reducing the available pensions, some choices were made between existing pensioners and those who were saving. His tone suggested that he judged that to be unfair. He states that he wants to achieve fairness between cohorts in CDCs, but how will that be done in reality?

[Guy Opperman]

I am invited to give a view on the future consultations on the points that the hon. Lady raises. The term “fairness” can be open to interpretation and can mean different things to different people. We envisage that regulations will clearly set out the principles and processes that schemes should follow to ensure that all types of members in CDC schemes are treated the same, where appropriate. Setting the requirement in regulations will give us the opportunity to consult on the approach that is to be taken. I respectfully suggest that rather than defining that in the Bill, the appropriate way forward is to consult, and to use all the opportunities that consultation entails for submissions on what that should look like, so that detailed regulations can then be taken forward.

[Ms Eagle]

rose—

[Guy Opperman]

I will give way once more, but I am not sure I can improve on the answer I have already given.

[Ms Eagle]

I thank the Minister for the further explanation, but is he saying that he does not yet know how this will work, because the regulations have not been written? Is he stating that he wants to achieve a certain principle without yet knowing how it will be achieved?

[Guy Opperman]

No; I can merely repeat the answer I have just given, which is that the regulations under clause 18 will require schemes to contain provisions so that there is no difference in treatment between different cohorts or age groups of scheme members when calculating and adjusting benefits. If the scheme design does not do that, it will not be authorised.

I will try to expand on that and give a better answer. There is a two-phase process. In the first phase, a company must come forward to the regulator and seek permission to go down the CDC route; that goes back to the way in which the company and the employees work. A separate set of regulations will then be the framework on which that is judged. I suggest that this is specific to individual companies, because fairness will be different for different organisations and they will be treated in different ways. There is a supervisory regime that must be gone through, and there will be a consultation on regulations regarding how it will be administered. For the present purposes, that is the best I can give to the hon. Lady.

I will now address amendment 25, which is about the actions of the regulator in relation to diversity considerations, taking into account the recruitment of the trustee board. This issue was raised in the other place as a point of debate. The Pensions Regulator is part of an ongoing discussion, and in February this year it launched an assessment of the appropriate way forward, looking at trustee board diversity across all schemes. It plans to set up an industry working group to bring together the wealth of available material and experience to help pension schemes to improve the diversity of scheme boards. I suggest it would be premature to pre-empt the outcome of the regulator’s work in this area. It has indicated to me, unofficially, that it will respond by Christmas. It is certainly the case that this Government has brought forward, on a cross-party supported basis, environmental, social and governance regulations in respect of investment. We would certainly hope that organisations that treat their investments with due account to social and governance matters would also take an appropriate way forward in that respect.

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[Ms Eagle]

I want to support, or enhance, the comments that have just been made by Opposition Members about the two issues that we are discussing in this group of amendments: amendment 25 on diversity, which was tabled my right hon. Friend the Member for East Ham, and the issue of intergenerational fairness and how it can be properly guaranteed in CDC schemes.

I hope the Minister will reaffirm on the record, in no uncertain terms, his agreement with the principles behind the amendment on intergenerational fairness that was made in the other place, even if he has issues with how one defines fairness in law. I have to say that, in social justice terms, we would have made very little progress in the whole of our society if we quibbled about the meaning of fairness in law. Just because it is difficult to define, it does not mean that we should not assert it or seek to bring it about.

The Minister’s response is a rather a technical answer to the principle that has been asserted by the change that their lordships made to this part of the Bill. His responses to my questions earlier did not fill me with confidence that he knew how the principle would be brought about if the amendment that their lordships put in the Bill was taken out. He simply seemed to say that it was a good thing to assert, and that it would be brought about by regulations that have not yet been written. He could not really give us any thoughts about how it might be guaranteed in the future, although he is asking us to take out an amendment that has actually been made to the Bill. He is asking us to exchange something that is really quite good and not damaging for something that is very nebulous and does not exist yet—it might do at some point in the future—in regulations that will be unamendable. We will have to take them or leave them when they come to the House, so I am slightly worried about that.

As is his wont, my right hon. Friend the Member for East Ham has zeroed in on the issue of diversity on boards and given us some shocking figures about what is happening on pension trustee boards. That ought to raise many alarm bells about potential group-think and about how the decisions made by trustee boards are not representing the interests of the many people who have pension savings in a way that we would find modern or appropriate.

Amendment 25 is a modest amendment. My right hon. Friend is asking only for the publication of information. He is not doing what I might do, which would be much more radical and would probably include all sorts of things, such as quotas and positive action, in order to make a real difference quite quickly. It is a modest amendment. If the Minister cannot accept that it is and does not have the good grace to support it, I will be rather disappointed.

[Guy Opperman]

I will try to address some of the issues raised. In respect of the approach of the regulator, the regulations for CDC schemes will require schemes to provide information to enable members to understand the unique risk-sharing features of CDC schemes. That will be underpinned by clause 15, which we have already debated. It requires the regulator to be satisfied that a CDC scheme has adequate systems and processes for communicating with members and others. Regulations will also require that scheme information is made available more widely to other interested parties, including employers, on a publicly available website. The practical reality is that we have learned from the Dutch model, which some argue had intergenerational fairness issues, and are producing a considerably fairer approach.

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[The Chair]

With this it will be convenient to discuss the following:

Clauses 53 to 57 stand part.

That schedule 4 be the Fourth schedule to the Bill.

Clauses 58 to 95 stand part.

That schedule 5 be the Fifth schedule to the Bill.

Clauses 96 to 99 stand part.

That schedule 6 be the Sixth schedule to the Bill.

Clauses 100 to 102 stand part.

[Guy Opperman]

With respect, Mr Stringer, I propose to address all these matters together. Clauses 52 to 102 replicate the measures outlined in clauses 1 to 51 and apply them to Northern Ireland, which has a different system. This required us to replicate the measures in their entirety. In discussing clauses 1 to 51, I outlined why CDCs are the appropriate measure, and I ask the Committee to imagine that I made the same speech, at great length, in respect of clauses 52 to 102.

[Seema Malhotra]

I will not make any further comments. I agree with the Minister.

Question put and agreed to.

Clause 52 accordingly ordered to stand part of the Bill.

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[Guy Opperman]

It is very hard to turn down such a great man as the right hon. Member for East Ham, and I fully understand why you have given him some latitude, Mr Stringer. The answer is that I cannot be precise. Clearly, it is a matter for the Northern Ireland Government and the various civil servants who will take the legislation forward, but we expect them to take a similar approach. If I am wrong, I will write to the right hon. Gentleman to correct the record, but that is my expectation.

Clauses 53 to 57 ordered to stand part of the Bill.

Schedule 4 agreed to.

Clauses 58 to 95 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clauses 96 to 99 ordered to stand part of the Bill.

Schedule 6 agreed to.

Clauses 100 to 102 ordered to stand part of the Bill.

Clause 103

Grounds for issuing a section 38 contribution notice

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 104 to 106 stand part.

[Guy Opperman]

I am grateful to you, Mr Stringer, and to colleagues for the progress we have made in respect of collective defined contributions. We now turn to part three of the Bill, on regulatory powers. The powers are, in broad terms, agreed, as I understand it, subject to debate on clause 107. It is entirely right that we have set those out in defined benefit and regulator consultations over many years and in the preparations for White Papers and Green Papers, and that enhanced powers will be given to the regulator on an ongoing basis. I recommend the regulations to the Committee.

[Seema Malhotra]

We will not be making any further comments. We support the Minister on these clauses.

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[Ms Eagle]

I support my right hon. Friend the Member for East Ham, who has crystallised some of the dangers in private sector schemes. I do not want to add to the excoriating verdict of his predecessor Committee in the two cases mentioned, except to say that this does have an effect on the willingness of individuals to save into pension schemes. Although people might not know the detail of this behaviour and the losses it has caused to retirement income, some out there in the ether will use the lack of effective protection that has resulted from the failure both of regulation and in pursuing effectively those who engage in this kind of larceny. Individuals who may otherwise be pension savers choose not to save into a pension and regard it as a bit of a mug’s game because their money is not properly protected. They know that there are scams and that a range of people out there—from the great killer sharks who loot pension schemes, to those who do dodgy things at the margins—are causing people who were saving into pension schemes, in good faith, to lose benefits in retirement.

How will the Minister drive the Pensions Regulator to be far more proactive and effective? Later, we will come to the Bill’s measures on scamming and the even worse end of bad behaviour, but that is for a future part of the Bill. I hope the Minister can reassure us that he will insist that the regulator transforms its passive attitude into a much more aggressive one that not only actively deters but drives this appalling behaviour out of the whole of the pension scene.

[Guy Opperman]

I utterly endorse the speech of the right hon. Member for East Ham. I did not disagree with a single word of it. I could wax lyrical about why the Government, with the support of the Work and Pensions Committee and the special joint inquiry it set up with the Business, Innovation and Skills Committee to address BHS, have introduced this overdue legislation, which is linked to a much-enhanced regulator with a strong direction from Select Committees and the Government that there should be a much more robust approach. The new chief executive of the Pensions Regulator was appointed by the Secretary of State and me with a specific exhortation that they take a different approach.

The actions of Philip Green at BHS and the Carillion case, with which the right hon. Gentleman is extraordinarily familiar, scarred all Members of Parliament. No matter what our political party, we have all seen the impact that those cases have had on individual members of our communities. I take the point that the hon. Member for Wallasey made: these scandals involving organisations and companies that have not been sufficiently regulated, and for which the regulator has not, to be blunt, had the power, to intervene and take a different approach, have affected people’s perceptions of the sanctity and safety of their pension.

We have gone to great effort to ensure, on a cross-party basis and taking on board the various Select Committee recommendations, that we give the regulator enhanced powers. We will come to the significant reality of the criminal sanctions that clause 107 outlines. Without a shadow of a doubt, we are in the business of ensuring that callous crooks who put a pension scheme at risk are not able to function as they did in the past. I most definitely endorse every comment that was made.

Question put and agreed to.

Clause 103 accordingly ordered to stand part of the Bill.

Clauses 104 to 106 ordered to stand part of the Bill.

Clause 107

Sanctions for avoidance of employer debt etc

[Neil Gray]

I beg to move amendment 19, in clause 107, page 90, leave out lines 5 and 6 and insert—

“(c) The person neglected to act in accordance with their duties and responsibilities.”

This amendment and amendment 20 are intended to avoid the risk that routine behaviour by parties involved with pension schemes and others would be judged criminal, and thereby to protect professional advisers from criminal liability for carrying out their role.

--- Later in debate ---

That certainly sounds to me like a serious problem, albeit clearly an unintended one, and I am surprised, given that the first of those letters was sent almost a year ago, that it does not appear as yet to have been resolved. The amendments tabled by the hon. Member for Airdrie and Shotts would certainly deal with the problem. I hope the Minister will be able to give us a persuasive explanation for how he plans to overcome what appears to be a clear and serious problem on the face of the Bill as it stands.

[Guy Opperman]

I would like to provide some reassurance on that particular point. I am acutely aware of it and have engaged at length with many different organisations. It is certainly not the intention to frustrate legitimate business activities where they are conducted in good faith. It is important, however, that where the elements of offences are met, no matter who has committed it, the Pensions Regulator should be able to respond appropriately. Any restriction of the persons would create a loophole for these people to potentially act in such a way.

The new criminal offences proposed in the Bill make it clear that an offence is committed only if the person did not have a reasonable excuse for doing the act or engaging in the course of conduct. Crucially, what is reasonable will depend, obviously, on the particular circumstances of the act, but the burden will be on the regulator to prove that the excuse was not reasonable. The regulator will be publishing specific guidance on these powers after consulting industry, but ultimately it is for the courts to decide that an offence has taken place, and, if so, the appropriate punishment.

The amendments also seek to remove the reasonable excuse defence—as set out in sections 58A and 58B—and replace it with a narrower concept of negligence. The existing defence of reasonable excuse is wider in definition than that proposed by the amendments. Therefore, the current defence provides more protection and a greater safeguard to potential targets. What is considered negligent is, in fact, specific and relies on case law—the law of tort, as I am sure the hon. Member for Airdrie and Shotts is aware—therefore introducing the concept of negligence would not help individuals to determine if what they were doing would be deemed negligent.

[Stephen Timms]

I have a real worry about this. Is the Minster saying that, for example, if a trade union successfully called for a higher pay rise than was initially offered, the company subsequently failed and there was a problem with the pension scheme, that the trade union would have to say that it had a reasonable excuse for pressing its pay demand? That seems a strange arrangement for us to be entering into.

--- Later in debate ---

[Guy Opperman]

It is for the regulator to show that that was not a reasonable approach. The burden is on the regulator to bring the offence and to prove it. I will choose my words carefully because this is subject to further regulation and consultation by the regulator, but it is certainly not the case that this is to catch everybody in how they conduct their normal business. However, there has to be a capability to identify and then prosecute and bring action against all persons, if they are found to have committed an offence without reasonable excuse. The ask is to narrow down the scope of the offence. We have just had a debate about circumstances where people have potentially committed things in the past.

[Neil Gray]

I understand the Minister’s riposte, but there are two points here. First, the amendment covers reasonable excuse by allowing consideration to be given to the person’s role in the trust. For instance, in a trade union, to take the argument of the Chair of the Select Committee, consideration would be given to the person’s role.

Secondly, the Minister is asking us to wait until the Pensions Regulator has consulted and says how it thinks it should deal with the matter, but by that point it will be too late to ensure that we have got this measure right. I hope that the Minister looks again at this point and provides better comfort to the likes of the Institute and Faculty of Actuaries, which has a very broad base of professional expertise, and which suggested the amendments. I hope for a more favourable response from the Minister.

[Guy Opperman]

I am happy to write to the hon. Gentleman and set out the position in more detail. I come back to the simple point. If a trade union has a reasonable excuse for asking for a pay rise for its members, given their circumstances in an organisation, there is no reason why it should have any concern whatsoever. The starting point is whether someone has a reasonable excuse to progress a particular thing. If it is clearly part of normal business activities, I would not anticipate a problem.

[Stephen Timms]

I wonder whether the Minister would agree that it does seem very odd that a trade union making a legitimate pay claim might have to worry about whether it is committing a criminal offence because of some future damage to the pension scheme. I am very surprised that the Minister is putting in place measures that would have that effect.

[Guy Opperman]

This is in the context of the offence of avoidance of employer debt. We start with the very eloquent exposition that the hon. Member for Airdrie and Shotts gave on where employer debt arises and contributions are not made to pension schemes. One has to then look at the individuals and their approach. I do not believe that including a reasonable excuse defence will in any way hold back normal, traditional business activity. I can give that reassurance: traditional business activity would clearly include union work. This is clearly an issue that the regulator is very conscious of. On the one hand, we want a more robust approach. On the other hand, we want to ensure that normal business activity goes ahead. I believe that this is the appropriate way forward.