Pension Schemes Bill [HL] — House of Lords, 2020-06-30
Topic: Labor
Sheila Masters (Conservative, Centre-right): My Lords, in moving Amendment 46, I shall also speak to Amendments 47 to 49, which are in my name and those of my noble friends Lady Altmann and Lady Neville-Rolfe. There was a wide-ranging debate in Committee on the two new criminal offences and two new financial penalty powers in Clause 107. Unfortunately, I was unable to be present for that debate, but my amendments were moved by my noble friend Lady Neville-Rolfe, and I have read the record in Hansard The scope of the offences and penalties is very widely drawn and, while they do not apply if there is a "reasonable excuse", there is no clarification of that term in the legislation. My noble friend Lord Howe spoke at length and helpfully in Committee, but it remains the case that there is considerable anxiety from pensions professionals and from companies about the impact of these provisions on ordinary commercial transactions. In Committee, the Government resisted attempts to define "reasonable excuse" and preferred to leave this to non-binding guidance from the Pensions Regulator—that may or may not be forthcoming as there is no obligation on the regulator to produce any guidance—and ultimately to the decision of the courts. We therefore have the classic formula for uncertainty for all those who might be affected by Clause 107, and that uncertainty could of course last many years, until enough cases establish the boundaries of the new offences and penalties My amendments today take a different approach from that in Committee and seek to limit the offences and penalties in the same way as the contribution notice regime in the Pensions Act 2004—namely, to the employer or to an associate or connected person of the employer. In Committee, my noble friend Lord Howe gave some examples of the people that the Government intended to be covered by Clause 107. On my reading of the scope of the contribution notice regime, all those mentioned by my noble friend would indeed have been covered by the amendment. If the Government think that the contribution notice’s scope is inadequate, I would have expected them to amend that scope in this Bill; after all, the contribution notices are there to make sure that defined benefit schemes are adequately funded. Criminal penalties and financial sanctions might make everyone feel better, but they do nothing directly to protect scheme funding I suspect that the Government intend these new provisions to apply to more people than are covered by contribution notices. In that case, it would seem to me essential that the Government set out clearly who they want to be covered by Clause 107. It cannot be right to create criminal offences without such clarity. However, even if the Government will not do that, I hope that the Minister can be clear about who they do not intend to be covered by Clause 107 I shall concentrate my remarks on two groups—lenders and landlords—but the problem is wider and extends to all commercial counterparties. I should at this stage declare my interests as recorded in the register, including my directorship of the Royal Bank of Scotland I start with an employer who has a loan from a bank. That could fall due for repayment, because its term has ended or covenants have been breached. If the bank seeks repayment of a loan or decides not to renew it, that may cause financial difficulties for the employer. At one end of the spectrum, it could impair the employer’s ability to continue to trade as a going concern. In less extreme cases, it could impact, for example, the employer’s ability to meet payments under an agreed deficit repair plan. In either case, the result is material detriment within the terms of Clause 107. A bank should be well aware of this, because lenders have to know basic financial facts about their customers, including their pension commitments. That is clear within the language of Clause 107, but is it what the Government intend? If not, will the Minister say that clearly Similarly, a landlord may decline to renew a lease or decide to enforce early termination due to breaches of covenants. This can cause or amplify financial stress in an employer and have a knock-on impact on its ability to support its related defined benefit scheme. Is the landlord within these new offences and penalties or not? In the case of landlords and banks, there is no commercial or other nexus between them and the defined benefit scheme, yet they are drawn within the net of Clause 107 because their actions or conducts could indirectly impact the benefits payable by the scheme I remind my noble friend that we have not even begun to see the impacts of the coronavirus pandemic on businesses. The wonderful financial support provided by the Government in these early days of the pandemic will soon come to an end. Many businesses will be facing an uncertain future and are likely to have taken on additional debt. They may need more debt to survive. Many have chosen not to make quarterly rent payments this year. Their pension scheme deficits will almost certainly have worsened, due to extremely low interest rates and weak asset prices—a double whammy. The noble Lord, Lord Hain, referred to this in an earlier group of amendments. Banks and landlords will be making big decisions about enforcing existing loans or leases, as well as making new ones The impact could go beyond concerns about particular commercial transactions, with a chilling effect more widely. Defined benefit scheme employers may well become untouchables as counterparties, if there is major uncertainty about the implications for those who deal with them. My preference would have been for the Government to be clear about what counts as a reasonable excuse for the purposes of Clause 107. My Amendments 46 to 49 have instead concentrated on the persons who are intended to be covered by the new offences and penalties in order to invite the Government to provide certainty to third parties about whether they can expect to be covered by Clause 107. I beg to move.