Pension Schemes Bill [Lords]

Lord Harrington of Watford Excerpts

3rd reading: House of Commons
Wednesday 29th March 2017 Commons Chamber

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

I beg to move, That the Bill be now read the Third time.

We return to this Bill after last Wednesday’s traumatic events. My thoughts and sympathies, and those of all the House, are with those who were affected. I take this opportunity to thank hon. Members from both sides of the House and the House staff for their support and professionalism in what was a very difficult time for us all.

I am pleased to see Madam Deputy Speaker in the Chair, as she has not heard any of this before. This Bill focuses on master trusts, introducing a new authorisation regime for them and setting out how they must satisfy the Pensions Regulator of certain criteria before they can begin, or continue, to operate.

The criteria were developed in discussion with the industry, and respond to specific key risks. Although the Bill provides some detail, more will be set out in regulations after further consultation with the industry and others. The Bill gives the regulator new powers to supervise master trusts, and to step in when schemes risk falling below the required standards. It also gives the regulator additional powers when a master trust experiences a key risk event. A scheme that has experienced such an event will be required either to resolve the issue or to wind up. As well as giving the regulator new powers, this Bill supports continuity of savings for members, protects members when a scheme is to wind up, and supports employers with their automatic enrolment duties.

To protect members of existing schemes, some aspects of the regime will have effect from 20 October 2016. Schemes are required to report triggering events to the regulator, and there are restrictions on certain charges until the event is resolved. The Bill also amends existing legislation so that regulations can override relevant contract terms that are inconsistent with those regulations. We intend to use this provision, along with existing powers, to make regulations that cap early exit charges and ban member-borne commission in some occupational pension schemes.

When this Bill was introduced in the other place last October, it was welcomed across the pensions industry as an essential piece of legislation that would protect the millions of people now saving for their retirement through master trusts. I am pleased to say that the Bill has been broadly welcomed by those in all parts of both Houses. We have listened to the points raised in both Houses, and have continued to engage with stakeholders. I can confirm that we have brought forward a number of Government amendments to address their concerns. In the other place, amendments in Committee mainly related to how the regulator would enforce the new authorisation regime.

Amendments on Report in the Lords focused on regulation-making powers in the Bill, in acknowledgement of the report from the Delegated Powers and Regulatory Reform Committee. One amendment inserted a power to make limited consequential changes to legislation to ensure that the law works as it should. We also made a change to allow the provisions on fraud compensation in the Pensions Act 2004 to be modified for master trusts.

On Third Reading in the Lords, we made one minor technical change to clarify that regulations on scheme funders’ accounts may require them to be audited. In Committee in this House, we agreed further changes. First, the Committee removed a clause that had been inserted after a narrow vote on Report in the other place, which provided for a scheme funder of last resort to meet the costs when a master trust is being wound up without the necessary funds to transfer the accrued benefits. We discussed that once again on Report last week, when the House accepted the Government’s argument that this additional provision is unnecessary.

In response to a point raised in the other place about an unintended consequence of the Bill, we made amendments to enable a scheme funder to engage in activities in relation to any part of the scheme, not just the money purchase section. The original requirement in the Bill that the scheme funder be a separate legal entity, and carry out only activities directly relating to the master trust scheme in question, was amended to address concerns about the impact of the requirement on business. The amendments enable scheme funders to operate more than one master trust, and also give the Secretary of State the flexibility to make exceptions to the requirement that scheme funders’ activities be limited to the master trusts of which they are the scheme funder or prospective funder.

I thank hon. Members on both sides of the House for their contributions, including the shadow spokesman, the hon. Member for Stockton North (Alex Cunningham), and the hon. Member for Ross, Skye and Lochaber (Ian Blackford)—not least because I can now say the name of his constituency without reading it. I particularly thank the Bill team from the Department for Work and Pensions, and everyone who has contributed to making this Bill an excellent piece of legislation.