Pensions Bill

My Lords, indeed, it was. There is nothing sinister about this. The issue is a serious one; we are trying to understand the scale of the issue and how it might be addressed, if it warrants a change in the current position. I stress that there is no shift in relation to the position so far as we have discussed the material detriment test and the code of practice. As for the consultation on the code that we refer to here, it cannot start until Royal Assent, which we hope will be imminent. We hope that the code will be in place in the first half of 2009—obviously, after being laid before Parliament. Noble Lords will recall that, as part of the package of amendments on the Pensions Regulator’s anti-avoidance powers, we introduced a requirement on the regulator to publish a code of practice. This code would set out the circumstances in which the regulator expects to issue a contribution notice under the material detriment test, as the noble Baroness explained. The Government concluded, in consultation with key stakeholders, including the CBI, that setting out these circumstances in a code was the most appropriate approach. This approach would allow the regulator, in consultation with stakeholders, to update the code in light of its operation while giving employers and trustees a degree of certainty on the application of the law. Section 91 of the 2004 Act allows for codes of practice to be updated, but such changes have to be consulted on and are subject to the Secretary of State’s approval. The Secretary of State is required to lay the draft code in Parliament for a period of 40 days and either House may resolve that no further proceedings be taken on the draft code. Amendment No. 36 would remove the regulator’s discretion to modify the code of practice in the light of its operation during the first two years of its introduction. It would not be right to prevent the regulator being able to update the code to deal with new risks to members’ benefits in this fast-developing and innovative market. We cannot rule out that certain parties may see the definitions in the code as a challenge to design structures not falling within these definitions, which may still cause unacceptable risks to pension scheme members and the PPF. However, I understand that employers and the pensions industry require as much certainty as possible. As I said at Report, officials worked closely with the regulator and key stakeholders during the summer to prepare the contents of the draft code, which was published on 20 October. In drafting the code, the regulator and stakeholders started from a consideration of new business models and the risks that these represented to members’ benefits. They considered a range of circumstances where it could be appropriate to use the material detriment test. For example, most routine corporate activities, such as routine dividend payments, are excluded from the code; whereas other non-routine events, such as the severance of the operating company from its pension scheme which may substantially increase risk to members benefits, would be in scope. Following this development work, the regulator is confident that the draft code sets out the right circumstances. Therefore, I should like to offer my assurance that the regulator cannot currently envisage any other circumstances which it would need to add to the code in the next two years. As a precautionary measure, however, we could not preclude that if circumstances arose. On that basis, I ask the noble Baroness not to press the amendment.