Pensions Bill

My Lords, I thank the noble Baroness for tabling the amendment and I thank the noble Lord, Lord Oakeshott, for his support. I shall start by saying that the Government accept the principle that the operation of new Sections 38A and 38B should be kept under review. These are new provisions and we want to ensure that they operate as intended, which is to provide adequate protection for members and the PPF, and that they do not have unforeseen consequences for business. Under current arrangements, these provisions will be monitored by the regulator and the department. The regulator will want to keep the operation of the anti-avoidance measures under regular review, as they have an important role in encouraging appropriate behaviours. These powers will also be overseen and evaluated by the department as part of the regular liaison between the department’s officials and the regulator. This regular review will assess and evaluate the operation of policy and legislation alongside formal performance reviews and liaison at senior official and ministerial levels. The Government recognise that stakeholders and the Opposition have raised a number of concerns about the operation of these provisions. Unless the noble Baroness presses me to do so, I will not go back through them, as they are on the record, but I would be happy to try again if she so wishes. However, concerns have been raised about the operation of these provisions in respect of whether there will be any unintended consequences, in particular that, while deterring what we would all agree is bad practice, they should not operate unreasonably to deter genuine and desirable corporate activity. I appreciate that there may be a desire for a commitment in the Bill for the department to carry out a review to ensure that the policy is operating as intended. Therefore, we are content to agree to the noble Baroness’s amendment seeking a formal review with a report to Parliament. This will put beyond doubt our commitment to evaluate the operation of these provisions. On the time period, two years is too short; four years is a more realistic and appropriate timeframe for a review. It is important to allow time for the legislation, the regulator’s code of practice and its guidance to bed in and for these to be tested in operation. A period of four years will provide the regulator with an opportunity to properly implement the amended powers and for employers and those who advise them to become more familiar with the regulator’s approach. A four-year timeframe will ensure that the immediate and longer-term impacts can be properly considered, based on a robust and substantial body of evidence. Following the introduction of the 2004 Act moral hazard provisions, there was a period during which the market adapted to the legislation. It is important to note that the regulator experienced an initial high volume of clearance inquiries as the market responded to the 2004 Act changes. This has since stabilised and there has been a decline in clearance inquiries since 2005. Similarly, there may be an initial increase in inquiries relating to the amended powers, but we expect that this will decline over the longer term. We therefore believe that a review after four years would better ensure that the business community has had sufficient opportunity to understand the new powers and that we are past any initial learning curve as experienced in 2004. We are pleased to accept the amendment and thank the noble Baroness for tabling it.