Pensions Bill

moved Amendment No. 1: 1: Clause 1, page 1, line 11, leave out from earnings”” to end of line 12 and insert ““are payable by the employer in the relevant pay reference period (see sections 13 and 15)”” The noble Lord said: My Lords, I shall also speak to the other government amendments in the group. Ministers and officials have held a series of meetings with stakeholders over the summer to discuss qualifying earnings and, in particular, the impact on employers using money purchase schemes. In response to the concerns raised and debated in Committee we have tabled a group of government amendments that together make clear that employers may meet the test on the basis of an assessment of the value of contributions paid into a scheme over an annual period regardless of the method by which these contributions are calculated. This enables employers to assess the flow of contributions over a whole year and avoid any difficulty created by irregular payments if the assessment were done on a monthly basis, for example in a month when bonuses are paid. In effect, employers and their schemes will be able to smooth the flow of contributions into workplace pension saving over the course of a year while ensuring that all members receive the minimum standard. These amendments achieve the use of an annual assessment by making three broad sets of changes. Amendments Nos. 1, 17, 18, 19, 20, 24, 26, 29 and 30 relate to the pay reference period that may be prescribed in relation to the money purchase qualifying test. Pay reference periods are used to determine the value of qualifying earnings for different purposes in the Bill, including for the purposes of assessing contributions in money purchase schemes. Stakeholders initially raised concerns that the test would require minimum contributions to be made every week or month depending on when the jobholder was paid. They feared this would mean a scheme would fail to qualify in periods when irregular payments such as bonuses were paid, even where the worker received contributions higher than the minimum in all other periods. Taken together the amendments make it clear that regulations can require different pay reference periods for the different purpose in the Bill. They also clarify that the values of qualifying earnings in Clause 13 are expressed annually. This means that we can set the pay reference period for assessing the contributions required into a money purchase scheme at one year. Amendments Nos. 13, 22, 34 and 35 address the risk highlighted by stakeholders that the reference to scheme rules in the quality test might be narrowly interpreted. Contribution arrangements can be contained in a variety of forms of scheme documentation such as the member information pack. A specific reference to scheme rules, if interpreted too narrowly, could drive an employer to undertake costly amendments to the founding rules of a scheme. Amendment No. 22 therefore removes any confusion that the contribution requirements have to sit in a single ““scheme rules”” document. This amendment makes clear that, provided the scheme requires the minimum contributions in respect of the member, it does not matter if this requirement arises by virtue of the scheme rules or from any other form of scheme documentation. Amendments Nos. 13, 34 and 35 are for consistency with Amendment No. 22. Amendments Nos. 23, 25, 28 and 31 seek to address the concern of stakeholders that the wording of the quality requirement could be interpreted to force employers to replicate the minimum contributions formula of 8 per cent of qualifying earnings into their scheme documentation. The amendments therefore confirm that a scheme can use any formula for calculating pension contributions or any definition of pensionable pay provided the actual value of contributions required by the scheme is equal to or higher than the value of 8 per cent of qualifying earnings. This makes clear that employers with money purchase schemes will not be obliged to adopt the same method for calculating contributions as is used to express the minimum contribution requirement. Amendments Nos. 27, 51 and 67 are consequential to those dealing with pay reference periods. They ensure that the definition of ““tax year”” where it is used in Part 1 is clear. When taken together, these amendments will enable the overwhelming majority of employers who already provide a headline contribution rate of 8 per cent to meet the test using their own definition of pensionable pay without the need for any changes. Departmental analysis shows that 98 per cent of the members who currently receive total contributions of 8 per cent and 3 per cent employer contributions under their DC scheme today will meet the test. We believe the annual equivalence assessment provided for by these amendments addresses the concerns raised by stakeholders at and around Committee stage. Over the summer, stakeholders articulated further concerns and, as a consequence, I recognise that some do not feel that these amendments go far enough. However, we are still working with them and looking at further options. We need to be satisfied that any further options do not have an adverse effect on pension outcomes for individuals and do not introduce unnecessary additional administration. I believe that some of the remaining concerns of the stakeholders have been reflected in the amendments that have been tabled by the noble Baroness, so I will give way at this point to enable her to speak to her amendments. I will comment further when I make my winding-up speech. I beg to move.