Pensions Bill

My Lords, as I mentioned briefly on Monday in introducing my amendments, we are seeking to amend the insufficiently resourced test that must be satisfied if the regulator is to issue a financial support direction so that a group of associated or connected persons cannot avoid their pension liabilities by dividing up their resources between them. A financial support direction may be issued where the employer in relation to a pension scheme is a service company or insufficiently resourced. It can direct persons who are associated or connected with the employer to put in place financial support for the pension scheme. As a result of the way the Act is drafted, the direction may only be used if there is a single person who meets the test of being sufficiently resourced. Once the test is satisfied, the direction could be issued to any of the associated or connected parties, subject to reasonableness. This means that the direction could be avoided simply by dividing resources between the associated and connected parties so that no single party was sufficiently resourced. The Government’s amendment tackles this problem by providing that a direction may be issued if there are two or more connected or associated parties who between them meet the test of being sufficiently resourced. The amendment of the noble Baroness would remove the regulator’s ability to show that a group of associated or connected persons are between them well enough resourced to meet the test. I understand it is a probing amendment and am sure the noble Baroness will agree that it is wrong that a group of companies could potentially take advantage of a loophole and arrange matters so that they avoid meeting their pension responsibilities. The CBI, for example, supports the change we are making. Some concerns were expressed in the consultation that an unrelated investor or company could be exposed to greater risk of a financial support direction as a result of the proposed changes. It is unlikely that an otherwise unrelated company in another venture capital portfolio who is strictly connected and associated with an employer but remote from the employer and its scheme could find itself liable under a direction for another group’s pension deficits. The current legislation already requires the regulator to consider all relevant facts, which can include the value of any benefits received from the employer, the company’s relationship with the employer including whether it controlled the employer, and the company’s connection or involvement with the scheme. It would likely be unreasonable for the regulator to issue a financial support direction where there was no persuasive evidence of such benefit, relationship or involvement. Crucially, none of that is affected by this amendment, which simply relates to the closure of a loophole for triggering the financial support direction, not the range of persons to whom the financial support direction could be issued. It does not change the range of people who could be reached. I hope that puts matters clearly on the record for the noble Baroness and has reassured her again in an area where I know there are some concerns.