risk and regulation April 15, 2008Posted by Bradley in : Uncategorized , trackback
In January Gordon Brown announced the establishment of a Risk and Regulation Advisory Council which was going to take over from the Better Regulation Commission. At the time some commentators suggested that setting up another commission in this area was not the answer and that more aggressive action was necessary (to reduce regulatory burdens). The RRAC doesn’t seem to have done a whole lot in the last couple of months – they don’t even seem to have their own web pages but lurk on the BERR website. Of course, now may not be the best time to be dismantling too many rules : the financial markets are uncertain at best right now.
Meanwhile, other government departments are moving forward on their own risk agendas. The Department for Work and Pensions is steaming ahead with proposals to increase the Pensions Regulator’s powers to issue contribution notices requiring payments to be made into a pension scheme:
The Government therefore proposes that Contribution Notices may be issued where the effect of an act is materially detrimental to a scheme’s ability to pay members’ current and future benefits in order to cover situations such as this. This change would mean that the Regulator would no longer need to prove intent on the part of a party to avoid funding the scheme, but rather that the effect of an act or course of conduct posed a materially detrimental risk to members’ benefits.
The Government recognises that a new power such as this must be defined carefully to give clarity to pension schemes and their sponsors, and to ensure that it may be deployed by the Pensions Regulator where necessary without undue burden. It will therefore consult on the best approach to draft such a power. The Government will ensure that new powers are appropriately targeted on actions which pose risks to pension schemes. For example, it may be appropriate to limit the use of the power to situations in which the prospective recipient of a Contribution Notice is unable to demonstrate that the likely consequences of their actions could not reasonably have been foreseen.
The Government also proposes to remove the existing provision that states that a Contribution Notice may not be issued where a party has acted in good faith, but their actions have had the effect of preventing a debt becoming due. Operational experience has shown that this is an unhelpful hurdle which would prevent the power being used in situations where parties have simply not considered impacts on pension schemes.
These approaches have precedent in tax legislation – but we are consulting widely to avoid legislation with unforeseen side-effects.
The detailed consultation paper is yet to be published although the Government proposes to backdate the effect of the rules to April 14th. The language of the reference to the consultation is unusually frank:
This consultation approach will ensure that everyone gets a chance to influence the way these changes are made.