My Lords, I signed the amendment of the noble Lord, Lord Vaux, and agree entirely with the principle of both these amendments. I was particularly drawn to the notion of having a threshold and notification, as provided by the amendment of the noble Lord, Lord Vaux. He circulated it for comment and therefore I signed it after some negotiations with him.
Put simply, if the deficit is large and the effort to close it is too small—smaller than the dividend—the payment of the dividend becomes a notifiable event. The sequel to that would surely be what the noble Lord, Lord Flight, has just pointed out: that it be looked at and perhaps in certain cases, though not all if there are other things that could be taken into account, the dividend payment be stopped. The point is that it is brought to the regulator’s notice, rather than the regulator potentially having to look at an awful lot of dividends and payments being made. Indeed, how will the regulator even find out about them? The amendment of the noble Lord, Lord Vaux, solves that little loop of how the regulator gets to know about them and has a reasonable number to look at rather than being overwhelmed.
In our negotiations, we tried to find a formula to keep the momentum going to close the gap, even within the five years, as a lot can go wrong in that period. I got as far as something like “the ratio of the dividend to deficit not being greater than the reciprocal of the remaining years and not conveniently commutative”. I concluded that, if I carried on in that way, I would have to put in a job application to Dominic Cummings.
More seriously—I refer here to the helpful meeting I had with the Minister and officials yesterday—I want to see some specific push in the Bill for the regulator to be tougher, including in setting the contribution schedule for paying down the deficits. As has already been explained by other noble Lords, TPR has come forward with a set of principles, but maybe it needs something to back them up and get them over the line in enforcing them.
In the meeting yesterday, it was pointed out that more powers are being given to the regulator in the Bill and that regulations will be forthcoming. That is
well and good, but something has to make sure that the regulator is urged to use those powers and to be strong, especially in standing up to larger and more forceful companies and individuals. We know that the record there is not necessarily all that good. The policy impetus needs to come from government and Parliament; otherwise, there may be more power but no enforced policy shift.
We also know that boards will take advice on these kinds of matters and be told what the market norms are, or at least what other companies have done. If the dial is to be shifted, the advice has to be shifted. The way to ensure that advice is shifted is for there to be an indication of the policy in the Bill, because an adviser cannot go against that in their duty to advise the companies.
It was very good to hear that the new offences that we discussed on Monday—which seems a long time ago now—are wide enough to embrace advisers, but you have to get at what their duty is to those they are advising. There are lots of reasons to have something in the Bill to make sure that the principles already outlined by TPR have that backing to be enforced and have that effect. As I said on Monday, it should not be normal to accept overly long continuation of deficits just because a company is well capitalised.
There can be many claims on and reasons for that extra capitalisation—there may be lots of tentative reasons why they need it. There might be plans to spend it to buy another company. All kinds of things could be going on, and what looks like a good capital margin could actually be shoring up many other things as well as the pension deficit. What is the excuse to the Pensions Regulator? What excuse might be given to other sources? Some of the clever analysts may work out what is going on; the ordinary investor and the ordinary pensioner is unlikely to do so. Therefore, I support the principle of both the amendments: something should go in the Bill to push or shore up the Pensions Regulator in its actions.