Pensions Bill

moved, as an amendment to Amendment No. 78B, Amendment No. 78DA: 78DA: Before Schedule 9, line 20, at end insert— ““( ) The Regulator shall issue guidance setting out how it intends to define ““material”” and ““likelihood”” for the purposes of subsection (1).”” The noble Baroness said: My Lords, this amendment also concerns the material detriment test and asks the regulator to issue guidance on how it intends to define ““material”” and ““likelihood””. This issue has been raised with us by some of the people involved in the development of the Government’s new proposals. Perhaps I may start with the issue of materiality. The Minister will be aware from his own background that in the accountancy world materiality is a relatively well understood concept and that various rules of thumb are issued from time to time on what constitutes materiality. Normally, people talk of 5 to 10 per cent as being potentially material either for recognition or for reporting. My reason for tabling the amendment is to find out what the Government intend when they talk about scheme benefits being affected detrimentally in a material way. Scheme deficits are very volatile. We can see from recent Stock Exchange market movements that deficits move around considerably at any point in time—certainly way beyond 5 or 10 per cent. Other factors that lead to significant variability include valuations, the discounting of liabilities and things such as longevity. Therefore, many things can change deficits quite a lot, and that is without any acts in relation to the scheme that may or may not have a material detriment on it. Therefore, the purpose of the amendment is to ask the Government what they mean by material detriment. Linked to that is the question of what they mean by ““likelihood””. Is this determined on a balance of probabilities, whereby we have to work out whether it is more likely than not that there will be a negative impact on the scheme, or is the threshold lower than a balance of probabilities? Because ““likelihood”” and ““materiality”” are both crucial parts of the formulation of the test in the new clauses in which the test is being introduced, there is concern in the business community about what these concepts mean in practice and how people should calibrate their understanding of the effect of their actions. People need to know whether they should be seeking clearances or taking other action. Obviously, the existence of the defence is very useful, but unless we can make some sense of ““materiality”” and ““likelihood””, they are not useful concepts at all. I beg to move.