Employers, Advice and Personal Accounts
The Pensions Bill went back to the House of Lords yesterday to begin its Report Stage. There were some very interesting debates, but the one that caught my attention concerned just exactly what employers will and won’t be able to say to their employees at the point of their auto-enrolment into pension saving. Employers won’t be able to give advice, but they may be required by the legislation to give information. I suppose larger employers with professional personnel departments would have little trouble with that concept, but there has to be a risk, doesn’t there, that small employers (like chip shop owners) may not appreciate the difference? At the point of giving information to employees about the pension scheme it’s highly likely that some will ask the employer what action they should take. The correct answer to such a question is, of course, for employers to say they’ve got no idea; but the temptation will be there to say something – perhaps “I’d join if I were you” or “I wouldn’t join if I were you” or something similar. It’s a fine line between everyday conversation and the giving of advice. I’ve written BeeLines in the past on just that issue which you may remember.
It’s interesting that this extremely important part of the debate on the Pensions Bill has finally arrived now that it is being discussed by the Lords. I’ve copied and pasted the discussion around the amendment proposed by Baroness Noakes below. The amendment was to exempt employers from any liability for passing on any misleading information to employees about the pension scheme; not quite the same point as I’ve made, but you’ll see the debate does touch on both issues.
The amendment was withdrawn, but only on the promise of further more detailed discussion on this point when the Bill comes up later in the year for its Third Reading. I think this whole advice/information thing will run and run throughout the rest of the Bill’s passage through the legislative mill and that BeeLiners should keep abreast of the debates as they occur. Yesterday’s (shortish) debate is, as I said, reprinted below and if you have the time I think you should read through it. As usual, we’ll keep our eyes open for you and pick out the further twists and turns on this important issue in the future so you can read them too.
8 October 2008
It’s all part of the service:
Clause 10 [Information to be given to workers]:
The noble Baroness said: My Lords, the amendment adds a new clause after Clause 10. Its main purpose is to make it clear that employers have no responsibility to provide advice to their employees. We are clear that some, if not all, employees will need to take advice as to whether they accept auto-enrolment into an employer’s scheme or into personal accounts. We had some discussions in Committee about who should be responsible for the provision of that advice. The CBI, among others, has been clear that employers should not be responsible for advice. The Minister confirmed in Committee that employers would not be required to give advice. Subsection (1) merely places that confirmation in the Bill.
My amendment has another purpose. It relates to Clause 10, which gives the Secretary of State power to make regulations about giving information to jobholders. In Committee the Minister made it clear that the Government may well require employers to give information. Provided that the requirements are not onerous, I am sure that most employers would not object to providing information to their employees. However, employers will want to be clear that they could not incur any liability by complying with information regulations.
Subsection (2) of my amendment is designed to give employers who comply with Clause 10 regulations a safe harbour from any liability in respect of that information. When we debated this amendment in Committee, the Minister said that it was,
That is, the Minister did not give an absolute assurance that compliance with the regulations would, in all cases, hold the employer harmless, and I believe that employers are entitled to that protection.
In Committee, the noble Baroness, Lady Hollis, supported this amendment but suggested that the concept of good faith might be usefully incorporated. I have thought carefully about that but I do not believe that it is the right addition to the amendment. An employer must comply with Clause 10 regulations and I cannot see that the state of mind of the employer in complying with the regulations would in any case be relevant. A “good faith” defence might need to be available if an employer decided not to comply with the regulations because he thought that it would be positively harmful to his employees but it is not a necessary addition to simply complying with the regulations. That is why I did not insert “good faith” into the amendment. It is about protecting employers from the possibly unintended consequences of compliance with legal obligations under Clause 10.
In Committee, I did not detect a massive difference of opinion between these Benches and those opposite except as to whether something needed to be put into the Bill. I invite the Government to reconsider their position on that and to give some welcome reassurance, preferably in the Bill, to the employer community, on whose shoulders the burden of implementation will fall. I beg to move.
Baroness Hollis of Heigham: My Lords, I still have some of the hesitations that I had last time, although I have a lot of sympathy for the amendment. It is entirely reasonable that an employer should not be expected, let alone required, to give advice. That is a very tendentious area, and I think we all agree that straightforward information would be acceptable, particularly if the employer was a vehicle for other people’s information which might be provided by the Government, Citizens Advice or the Pensions Advisory Service, in which I declare an interest as a trustee. The good faith issue was not about testing the mind of the employer but about whether he—for these purposes I shall use the word “he”—had taken reasonable steps to ensure that the information that he was passing on to the employee was correct. Clearly, I would not expect the employer to take any responsibility for information that came from a third-party source—the DWP or Citizens Advice, for example—but if the employer decided to give information, I think that he would have a duty of care to act reasonably by ensuring that the information was correct and not misleading.
I was seeking to establish that an employer could not act recklessly. It could be the employer in a newsagent or a chip shop who has never been in this situation and decides casually to give information that is incorrect or misleading and, as a result, someone decides to opt out or possibly opt in when they should not do so. Therefore, I suppose that I was seeking to introduce a test relating to recklessness or reasonableness or whether someone has behaved appropriately. I do not have
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precise words for it. I suspect that the noble Baroness and I do not disagree on this but I wonder whether, when she comes to reply, she can help me further. I do not know what her intentions are but if she were to revisit this issue at Third Reading, I would hope very much that she could at least clear up that matter.
Lord Oakeshott of Seagrove Bay: My Lords, this is quite a tricky matter. I completely agree with the noble Baroness, Lady Noakes, that most employees will require advice but that that is not what they get from their employers and no employer should be in the position of giving advice. There is a clear distinction between information and advice, and I suppose that the problem arises if employees are given incorrect information. The more I think about this matter and the more I listen to the noble Baroness, Lady Hollis, the more I question how you tell the chip shop owner that he has been reckless, not reckless or reasonable. Sadly, I do not think those are workable concepts.
I shall listen with great interest to the Minister. What will happen if people give incorrect information? I do not think that going down a reckless route helps us. It may well be that, on balance, one has to go with the raw version from the noble Baroness, Lady Noakes.
Lord McKenzie of Luton: My Lords, I thank the noble Baroness for the amendment and for the opportunity to make our position absolutely clear on what is a very important issue. As I said in Committee, it has never been our policy contention that employers would be required to give advice to workers. The purpose of Clause 10 is to provide for regulations which will clearly set out the key pieces of factual information that must be provided to a worker as part of the wider automatic-enrolment joining process. Evidence suggests that the best means of getting some of that factual information to workers will be through the employer, as much of that information will be known only by the employer at the relevant time. By factual information, we mean, for example, the date of enrolment, details of the scheme and the amount of contributions being deducted from wages and paid over to the scheme. I believe that our aims in this regard are entirely consistent with the first part of the amendment tabled by the noble Baroness, Lady Noakes.
The Government’s position on employers and advice is absolutely clear and, therefore, we do not consider it necessary to put that in the Bill. That has been explained and, in Committee, where we differed was on whether it is necessary to provide employers with protection from any liability as a result of giving information to a jobholder or worker. We considered the issue and decided that there is minimal risk to the employer who complies with what is prescribed in regulations. The regulations will clearly set out what information must be given by the employer. As the employer will be required to provide simple and straightforward information and will not be expected to play any part in the decision-making process, we do not believe that an employer will be held responsible for an individual’s decision to save for retirement.
I appreciate that employers would welcome the reassurance that a safe-harbour provision would offer. However, I am mindful of the potential risks of such
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an approach in the wider employment-law context and wish to consider that further. I would not want to commit to bringing forward a safe-harbour amendment without full consideration of all the issues.
We need to consider carefully how offering employers a safe harbour will impact and interact with other provisions in the Bill. For example, we would not want to introduce accidentally an exemption to the Chapter 3 inducement provisions, nor would we want to provide protection to those employers who influence a jobholder’s decision to participate in pension saving by, say, over-inflating the amount of contribution to be deducted from wages, as the noble Baroness, Lady Hollis, said. Advice needs to be given properly, in a considered and accurate way.
If the noble Baroness does not press her amendment, I promise to return to this matter at Third Reading. I am conscious that we are stacking up a few issues for Third Reading, but I would like to give further thought to whether we can have a safe-harbour provision. I do not commit to being able to do that, but perhaps that might give the reassurance that employers want without giving carte blanche to those who would deliberately not wish to comply with proper information requirements.
Baroness Noakes: My Lords, I thank the noble Baroness, Lady Hollis, and the noble Lord, Lord Oakeshott, for their support in speaking to my amendment. I certainly thank the Minister for what he has said. The noble Baroness, Lady Hollis, raises some important issues about the responsibility of the employer. To some degree, it is difficult for us to debate this fully because we have not seen the draft regulations under Clause 10. We might well have a better fix on what we are talking about if we have an idea of what those regulations will contain. The Minister clearly has had some discussions with his officials on the content of those regulations. My concern is that the employer should not have to do too much; he should just hand over whatever is necessary because anything else would imply that he was acquiring a duty of care which the employer would not want to take. I can see, as we unpick the layers, that it becomes ever more complicated.
I am very grateful to the Minister for offering to take this away and I look forward to debating the issue again at Third Reading, I hope with an amendment, but if not I hope that the Minister can bring some clarity on the role of employers in relation to the information regulations. I beg leave to withdraw the amendment.
Source: Lords Hansard debate, 7 October 2008
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