My Lords, this amendment relates to the proposed new objective for the Pensions Regulator. The Pensions Regulator oversees the scheme funding regime for defined benefit pension schemes. This regime requires, among other things, the regular evaluation of a scheme’s funding position and a formal recovery plan to plug any deficit identified.
In undertaking this evaluation, the Pensions Regulator is guided by a number of objectives set out in the Pensions Act. It is therefore important, in reference to
the remarks of the noble Lord, Lord Whitty, and the noble Baroness, Lady Sherlock, that when we talk about this new requirement, it is placed in the context of the six or seven different measures that the Pensions Regulator will take into account in determining the funding rate that is necessary for the scheme to make up any deficit. While some consideration of sponsoring employers is implicit in these objectives, the new objective will make it explicit that the regulator must consider them, alongside members and the Pension Protection Fund, in deciding upon the suitability of deficit recovery plans and other decisions related to scheme funding.
The new objective responds to concerns expressed by sponsoring employers which felt that they needed to be recognised in the regulator’s statutory objectives, given their importance to defined benefit schemes. The current wording of the objective refers to sustainable growth, as the Government believe that the best protection for scheme members is a strong, healthy employer standing behind its scheme now and in the future. Whether that is a charitable organisation or a commercial organisation, its health must be the first objective in order to keep a sustainable body behind the scheme. Sustainable growth can benefit both the organisation and pension scheme members via a potentially stronger employer covenant underpinning the pension promises made.
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I can reassure the noble Lord that the proposed objective on sustainable growth is intended to be interpreted in a broad sense. The regulator has outlined this approach in its ongoing consultation on its updated code of practice and funding policy, which will take account of the new objective, subject to it becoming law. In that consultation, the regulator recognises that the proposed objective may need to apply,
“differently to different employers. For some, growth is a real prospect while for others it may be more about maintaining their position or limiting the effects of a declining business. For employers in the not-for-profit sector, growth can also have a different meaning than for employers in a purely commercial environment”,
as the noble Lord, Lord Whitty, and the noble Baroness, Lady Sherlock, mentioned. Of course, trustees—and the regulator, if called upon to intervene—will still need to assess the impacts and understand the risks attached to any proposals in respect of the funding recovery plan. Ultimately, the new objective is about balancing the long-term risks to members and employers in respect of sustainable growth.
To sum up, we believe that the interests of all kinds of employers will be sufficiently covered by the new objective. I therefore ask the noble Lord to take comfort from that reassurance, and my reassurances that the measures will apply equally to private and non-government sectors, and consider withdrawing his amendment.