Pension Schemes Bill [HL] — House of Lords, 2016-12-19
Topic: Government Operations
David Freud (Conservative, Centre-right): My Lords, these amendments put the noble Lord, Lord McKenzie, not just ahead but well ahead—because he and other noble Lords expressed concern in Committee about the Bill’s approach to regulation. With many regulations subject to negative resolution, they felt that they would not be subject to adequate scrutiny. Noble Lords will remember that I responded that I would reflect on that point, and the amendments before us now are a result of that reflection We accept that the first regulations made under several of the powers in the Bill could be made under the affirmative resolution procedure to allow for scrutiny via parliamentary debate. After the first set of regulations introducing the authorisation regime has been brought into force, subsequent amendments to those regulations are likely to be relatively minor and, as a result, we do not think that affirmative resolution at that stage would be appropriate. Parliament will, of course, have the opportunity under the negative resolution procedure to require a debate on any such regulations if there is concern The provisions that will be subject to affirmative resolution as a result of these amendments represent significant aspects of the authorisation regime, including the fit and proper person test, financial sustainability, systems and processes, continuity strategy and significant events I owe the noble Lord, Lord Kirkwood, a proper exposition of the process of how we get to these regulations. Currently there is an engagement process with stakeholders to develop the detailed policy. We anticipate that that and an initial consultation to inform the regulations will take place in the autumn of 2017. That will be followed by formal consultation on the draft regulations. Our intention is to lay the regulations over the summer period and commence them during October 2018 I will now touch briefly on the actual provisions that are covered. Clause 7 relates to the need for individuals involved in the scheme to be fit and proper people. Subsection (4)(a) allows the Secretary of State to make regulations requiring the regulator to take into account certain matters when assessing whether a person is a fit and proper person to act in a particular capacity. Clauses 8 and 9 relate to the financial sustainability of a master trust. Clause 8 requires that the regulator must be satisfied that the business strategy relating to the scheme is sound and that the scheme has sufficient resources to meet certain costs. The power in Clause 8(4) is to enable regulations to set out matters that the regulator must take into account when deciding whether it is satisfied on these matters. Clause 9 relates to the requirement for a scheme strategist to produce a business plan, and the power in Clause 9(2) allows the Secretary of State to set out what information should be included Clause 11 makes provision for systems and processes. It includes a regulation-making power to require the Pensions Regulator to take into account specified matters when deciding whether it is satisfied that the systems and processes adopted by schemes are sufficient to ensure that they are run effectively. Clause 12 sets out the requirement for the scheme strategist to prepare the continuity strategy. The powers in subsections (5) and (6) allow the Secretary of State to determine the format in which the level of charges should be set out. Clause 16 puts a duty on specified persons involved in running an authorised master trust scheme to notify the regulator when they become aware that a "significant event" has occurred This group of amendments also includes one further amendment which inserts a power to make consequential amendments to other legislation, including primary legislation. I am grateful to the noble Lord, Lord McKenzie, with whom I have discussed this amendment, for allowing me to bring it forward at what I acknowledge is a late stage. It is a standard power that we have in other pensions legislation, and I really must repeat my apologies that it was not in place at the introduction. The power will be narrow in scope. It is limited to amendments that are consequential to allow for necessary technical fixes and will apply only to existing legislation and legislation passed in this Session While we have made every effort to identify and make the necessary consequential amendments in the Bill, pensions legislation, as I suspect noble Lords will acknowledge, is very complex and technical. Similar powers were included in the Pension Schemes Act 2015 and the Pensions Act 2014. The power is used to ensure that the legislation works as intended. For instance, the power in the Pensions Act 2014 was used to ensure that the new state pension was taken into account when setting the automatic enrolment earnings threshold. As was the case in these Acts, this power will also be subject to the affirmative resolution procedure when used to amend primary legislation After the concerns expressed in Committee, I hope that these proposed amendments have met noble Lords’ concerns that the crucial aspects of the regime will have appropriate scrutiny. I also hope that I have explained why the amendment to Clause 37 is necessary in order to ensure that the legislation works as it should. I will once again repeat my thanks to noble Lords for bearing with me in bringing forward these amendments at this stage, and I trust that I have explained the position properly and given the appropriate level of reassurance. I beg to move.