My Lords, the question of delegated powers has already been extensively discussed in relation to the relevant clauses. My noble friend Lord Howe has already eloquently covered the Government’s position on these powers. As I said before to this Committee, the use of secondary legislation to set out more detailed technical matters, or to amend primary legislation for specified purposes, is consistent with the general approach in pensions legislation.
As with other pensions legislation, the provisions in the Bill embody the fundamental policy, while provisions of a more technical nature, or which are by their nature liable to change, are delegated to secondary legislation. This staged approach has two benefits. First, it enables flexibility to ensure that the legal framework remains appropriately tailored to developments in the pensions industry. Secondly, it enables government to provide legal certainty more quickly. This is important for the pensions industry and for member protection. It is a common feature of pensions legislation, which is by its nature very technical and can be subject to change.
6.45 pm
I turn now to some of the areas singled out by the noble Baroness, Lady Bowles, in her amendment. One was the rationale for a delegated power to introduce new criminal sanctions. There is no delegated power in the Bill to create a new criminal offence through regulations. However, the noble Baroness might have in mind in tabling this amendment the delegated powers in Clause 107. These allow regulations to prescribe schemes or types of DB pension schemes to which the offence of failing to comply with a contribution notice or employer debt liability will not apply. These powers are necessary to fine tune how the offence will apply in order to target the types of schemes most at risk. It will also allow the Government to respond to any changing and emerging risks to pension schemes.
On the rationale for delegated power to restrict the powers of trustees, the amendment would also prevent us using regulations to place significant restrictions on trustee activities. There are some areas where we think the powers could be seen to enable regulations to restrict the powers of trustees to some extent. For example, there is a delegated power in Clause 18 to prescribe and then, if necessary, amend the framework which trustees of a CDC scheme must follow when setting the rules for the calculation and adjustment of CDC benefit values.
We do not wish to interfere with trustees’ activities unless necessary. For example, as I said in Committee last week in relation to Clause 18, we would not want
to interfere with authorised CDC schemes that meet all the Pensions Regulator’s supervisory criteria. Pension scheme trustees are directly responsible for millions of ordinary people’s retirement incomes. For CDC schemes, in particular, trustee decisions might directly affect the amount of pension income a person gets to live on each month. It is therefore right, and indeed necessary, that the Government have the powers in some circumstances to place regulatory restrictions on trustee discretion.
There are regulation-making powers in the Bill which could potentially restrict the power of pension schemes’ trustees on investments. These powers are taken because there could be situations where members’ benefits might be at risk. It is important that the Government can, where necessary, use regulations to place requirements on trustees in order to safeguard members. We are mindful that we do not wish to interfere unnecessarily but our view is that taking a power to act swiftly where required is appropriate and proportionate.
The noble Baroness, Lady Bowles, raised a point about the rationale for delegated power to amend the legislation in order to create multi-employer collective money purchase schemes. The amendment would also prevent us using regulations to amend this Bill to provide for CDC master trusts and other kinds of non-connected multi-employer CDC schemes.
As I said previously in this Committee, many people, including those from the insurance industry, trade unions, pension providers and pensions commentators, have called for CDC provision to be extended to master trusts, decumulation-only vehicles and other models of non-connected multi-employer schemes. Part 1 was drafted with the intention of using regulations to open it up to other kinds of CDC schemes in the future. Primary legislation sets the framework and principles all CDC schemes must follow, and regulations will then be used to ensure the legislation works appropriately for different kinds of schemes.
The proposed amendment to these powers would delay the rollout of these other scheme types, as it would require us to bring forward new primary legislation to achieve it. This would mean that many employees and businesses would not get the benefit of CDC pensions as early as would otherwise be possible. As I said last week, the power in Clause 47 to disapply the prohibition on master trusts and other types of non-connected multi-employer schemes to provide CDC benefits via regulations is subject to the affirmative procedure to enable debate. We intend that any such regulations will also be the subject of further consultation.
As the Committee is aware, there are a number of Henry VIII powers in this Bill. These powers to amend legislation through regulations will ensure that the legislation can be adapted to cover future developments in the pensions industry, while keeping members well protected. I am aware of the views expressed by the Committee about the use of any Henry VIII powers. I have listened to those concerns today and when they have been expressed to me previously. However, I am also clear that they appear in this Bill only for wholly appropriate reasons. These powers are included to ensure that the legislation can operate effectively and, where necessary, respond to developments in industry.
I want to be clear to noble Lords that there is no need to rule out the creation of a regulator through regulations, as there are no powers in this Bill to create a regulator.
I should have included this point in my response to questions about the Henry VIII powers, so forgive me for not doing so. As CDCs are a new type of benefit, we want to ensure that they work as intended. Royal Mail is currently the only employer that has committed to establish a CDC scheme, and we want to take the time to learn before opening up CDC provisions more widely. We are aware that various industry bodies have expressed an interest in other models of CDC benefit provision. This power would enable the Government to react to industry developments, so that CDC provisions can be extended to other models, such as non-connected multi-employer or commercial providers, but only to the extent appropriate, as the noble Baroness pointed out.
The noble Baroness, Lady Bowles, raised a point about not using delegated powers to create a new regulator. I have already covered that.
As for delegated powers to amend the legislation in order to create multi-employer collective money purchase schemes, and the fact that these provisions are not in the Bill, we need to consult with actuaries, pension lawyers, pension providers, employers and any other interested parties before we finalise our provisions in this area. The design of CDC master trusts and other non-connected multi-employer CDC schemes might need to have slightly different authorisation requirements or continuity strategies, and we need to engage with the industry on this.
With the further assurances I have provided, I respectfully request that the noble Baroness withdraw her amendment.