Pension Schemes Bill [HL] — House of Lords, 2017-04-05
Topic: Labor
Oliver Michael Robert Eden (Conservative, Centre-right): My Lords, it will be convenient to take Amendments 5 to 19 at this stage. In the other place, Amendment 2 resulted in the removal of Clause 9, which had been inserted in this House after a vote on Report on an amendment tabled by the noble Baroness, Lady Drake. It provided for a scheme funder of last resort to meet costs where a master trust is being wound up without the necessary funds to transfer the accrued benefits. It remains the Government’s view that this provision is simply not required. I do not want to go through all the arguments put forward by my noble friends Lord Young and Lord Freud who took this Bill through the vast majority of its stages late last year. The Bill requires that in order to operate, a master trust must be authorised. The authorisation criteria include that the master trust must be financially sustainable and have sufficient systems and processes for the running of the scheme. To meet the financial sustainability requirement, the scheme will, among other things, need to provide evidence to the Pensions Regulator that it has sufficient funds to meet the costs of wind up. It will also have to provide evidence that it has sufficient systems and processes, which will include its arrangements for holding accurate records on its members and the rights and benefits to which they are entitled. The Pensions Regulator will carry out ongoing supervision of master trusts. The schemes will be required periodically to provide the Pensions Regulator with information on its financial resources and administration to enable the Pensions Regulator to be satisfied that the funding remains adequate and the systems and processes robust. A scheme funder of last resort would therefore be required only if this whole approach to regulation fails in some catastrophic way. I have no reason to believe that it is likely to do so. Amendments 5 to 19 concern the provisions in the Bill for a master trust that is going to wind up; they are intended to address concerns that were raised in earlier debates in this House that finding another master trust to take members on may be difficult. The amendments allow regulations to provide that master trusts that are to be wound up under continuity option 1 can transfer their members’ accrued rights and benefits to a pension scheme other than a master trust. In addition, the same restrictions in the Bill on new or increased charges being applied to a master trust receiving scheme could be applied by regulations to that non-master trust receiving scheme In introducing these amendments in another place, my honourable friend the Minister for Pensions said: "The non-master trust receiving scheme would be made subject to exactly the same restrictions on increasing or introducing new charges as those to which master trust receiving schemes are subject".—[Official Report, Commons, Pension Schemes Bill Committee, 7/2/17; col. 65.] The amendments allow for regulations to be made that would widen the potential destinations to which members of a master trust being wound up can be transferred, while ensuring that their savings cannot be used to fund the costs of that transfer. In another place, my honourable friend the Minister for Pensions explained: "Allowing other types of pension schemes to receive transferred members, as long as they meet specified requirements, could increase the options available to trustees, introduce extra flexibility and widen the market for potential schemes. This might be useful if trustees found that they were struggling to find somewhere appropriate for their members’ rights, which might particularly benefit members using decumulation options. Being able to increase the options in future might help reduce the risk that trustees of failing master trusts might not be able to find another master trust to take their members on".—[Official Report, Commons, Pension Schemes Bill Committee, 7/2/17; col. 66.] Amendments 5 to 19 are therefore primarily useful in future-proofing this aspect of the authorisation regime, and will be used as and when developments in the market give rise to a need for them. Not to include them in the Bill at this stage could unnecessarily restrict the market for members’ rights and benefits to their detriment. I beg to move.