Pensions Bill

I am grateful to the noble Lord for raising the important issue of the policy on restitution. As we have already discussed, making contributions to pension schemes in full and on time is vital to the growth of the individual’s pension fund. This is one of the key intentions of the compliance regime and the focus of this subsection of the Bill. Where employers are late in paying contributions for a short period, which will be set by regulations, we propose that they be required to pay only backdated contributions. Their worker can choose whether to pay their own missed contributions and elect to do so in instalments. However, where an employer is late paying contributions for a longer period, the worker may not be able to pay arrears of their contributions. Without the worker contributions, an individual’s pension pot will be significantly smaller over time. In this situation, it would be unfair if workers were disadvantaged by their employer’s failure to pay contributions on time. Therefore, where the contribution arrears are for a longer period, the employer may be required to pay both their own arrears and those of their worker. As well as being fair to the worker, it should act as a strong incentive for employers to comply and pay contributions on time. The principle behind the clause is supported by a range of stakeholders, including Help the Aged, the TUC and Which?. Certain stakeholders, including Help the Aged and the TUC, have suggested that the period be three months. However, before we identify a period, I want to discuss it fully with stakeholders, including business organisations. The amendment would remove the requirement on employers to restore missed worker contributions even where they had been non-compliant for a long period. It would mean workers ending up with a smaller pension pot, which, I am sure we all agree, would be undesirable. In addition, as I have just said, it would reduce the incentive for employers to pay on time and mean that scheme members lost out on the investment value of their contributions. I therefore urge the noble Lord to withdraw his amendment.