Pensions Bill

My Lords, I thank the noble Lord, Lord Lucas, and the noble Baroness, Lady Noakes, for the chance to put some issues on the record in relation to the matters that have been raised. I hope I can provide the degree of comfort that is sought. I reiterate briefly what we discussed on Monday: the regulator has said that it cannot imagine going beyond the code. Dividends are not currently included in that draft code. I turn first to Amendment No. 78X. I recognise the concern that individuals may be subject to personal liability, but there are a number of assurances within the existing legislation which address the use of this power. It is already possible, under Sections 38 and 43 of the Pensions Act 2004, for the regulator to issue a contribution notice and, in some cases, a financial support direction to individuals. In most cases it would not be reasonable for the regulator to take action against an individual, and the recipient of a notice would more usually be a corporate body, such as the company that was party to the act. There may, however, be rare cases where it is appropriate to take action against an individual, be that a company director or otherwise, under the material detriment test. I remind noble Lords that the regulator’s use of this power is subject to a number of checks and balances. First, the regulator must act proportionately and only where reasonable. This is a fundamental requirement. Secondly, as I have already mentioned, there are specific safeguards relating to the material detriment power, including a statutory code of practice which will set out the circumstances for its use. Individuals, like corporate bodies, would be able to rely on this as a defence. Importantly, the government amendments would create two new reasonableness factors for the regulator to consider before deciding whether to issue a contribution notice; that is, the regulator must consider the reasonableness of the person’s actions in the circumstances and, where relevant, the value of the benefits received directly or indirectly from the employer or scheme. This is set out in Section 38(7)(ea). Those two extra powers relating to reasonableness apply not only to the new provision, but to the two existing legs of the contribution notice arrangements Finally, as with current practice, any determination to use this new test would be made only by the regulator’s determinations panel, which is independent of those responsible for gathering evidence. The panel will hear both sides of a case. Only if the panel agrees to the regulator’s case can action proceed. Whether or not to issue a contribution notice would of course remain a matter for the regulator. I would go so far as to say that the regulator must get over such a number of hurdles and build such a strong case before it can issue a contribution notice to an individual on the basis of the material detriment test that an individual would know that their intended act was far out of line with reasonable business practice and likely to attract the interest of the regulator. However, if an individual is concerned that they may be party to an act that could lead to them being subject to a contribution notice, they may of course seek clearance from the regulator. A clearance statement would give them certainty that their actions could not attract a contribution notice.