Pensions Bill

My Lords, I hope that I can partially satisfy the noble Baroness’s inquiry. She emphasised the importance of there being a clear understanding among employers, trustees, regulators and others of the meaning of the key concepts of ““materiality”” and ““likelihood””. I very much agree. I share her concern that these issues should be clear and I know that the regulator appreciates the importance of clarity in these matters. The regulator’s clearance guidance currently deals with materiality. For example, paragraphs 46 and 47 set out how employers and trustees should decide whether a weakening of employer covenant is material, considering issues such as the amount by which the covenant is weakened, the size of the employer after the event, the size of the pension scheme and the size of the deficit in the pension scheme. I know that industry stakeholders find this guidance helpful. However, I am also aware that the regulator has stated that it will need to update and add to its clearance guidance in relation to the new test and to the defence in order to produce clarity in respect of the concepts of ““materiality”” and ““likelihood””. As I said, we appreciate that the clearance guidance will need to be reviewed and amended. The regulator has undertaken to do that, and it will address, in particular, the issue of ‘likelihood’, which is not currently covered in the guidance. If the noble Baroness will permit me, I shall refrain from offering my own homespun view on those concepts. There must be a proper process and there has to be clarity, and I believe that that is something in which the regulator will engage.