House of Commons Hansard Debates for 4 Jul 1995

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amendments simply because it is too prescriptive and would create as many anomalies as it would destroy. I also reject the hands-off approach, which the Government appear to be proposing, that we cannot do anything right and, therefore, should do nothing.

There is scope for the Government and, in particular, OPRA--which is being set up under the Bill--to go further than the Government have so far. It should be open to the Government positively to encourage all schemes regulated by OPRA to introduce as soon as possible, within the circumstances of each particular scheme, some form of pensioner membership. My hon. Friend the Minister has previously argued, and may well do so again tonight, that that would create representative vested interests on a scheme. However, I join the Opposition in saying that those vested interests already exist and it would do no harm to recognise them.

Mr. John Denham (Southampton, Itchen): During discussions in Committee and on earlier stages of the Bill, I have found rather curious the Government's resistance to the idea of

pensioner-nominated or pensioner-member trustees. It appears quite straightforward to me that such trustees would add strength to the trustees of pension funds, would add a welcome element of independence and would reassure millions of pensioner members of funds. Those are all good reasons for having pensioner trustees. The Government have not produced any strong or overwhelming arguments for resisting the extension of those trustees to a much larger number of schemes.

The amendment focuses on larger, mature schemes where the majority of members are pensioners. However, I do not see any absolute reason why we should restrict our support for pensioner trustees to schemes that have a majority of pensioners. The advantage in debating the amendment is that it focuses clearly on the interests of pensioner members of schemes, which are not properly represented at the moment.

In Committee, the hon. Member for Antrim, South (Mr. Forsythe) moved a similar amendment, but with a slightly higher threshold--1,000 scheme members rather than 800. Both amendments have the same principle. The hon. Gentleman estimated that his amendment would cover 720 of the 128,000 schemes in this country. A relatively small number of schemes would need to adjust to fall within the terms of that amendment, but it would cover more than 4 million people, many of whom feel that they are not adequately represented. The slightly lower threshold in the Labour amendment would draw in a larger number of schemes. However, both amendments, with the condition of schemes being of a certain size and with a majority of pensioner members, are aimed at a particular group.

Three or four key questions must be asked about the principles behind our amendment. First, would pensioner members of schemes feel more confident about their pensions if those principles were adopted? I cannot believe that any hon. Member--certainly none who served in Committee--could be in any doubt that pensioner members would feel more confident if someone whom they had directly chosen represented them on the board of trustees.

I am sure that we have all received letters from the British Telecom and Post Office schemes and had meetings with and representations from the Confederation

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of Occupational Pensioners Associations. That has left us in little doubt that people speaking for the majority of pensioners have a strong case. For as long as they are excluded from representation in a scheme, they and those whom they represent will continue to feel that their interests are not being adequately safeguarded. It is true that, as has already been said, no one measure could absolutely safeguard the pensions either of people who are already receiving them or of those who will do so in future. However, the very act of exclusion--and that is the way in which the Government's proposals are being interpreted-- leaves many pensioners feeling disfranchised. If the amendment was adopted, people would feel more secure and would be reassured that their pensions were being better looked after.

Secondly, would it cause any substantial problems to adopt the amendment? Are there any overriding difficulties or overwhelming problems standing in the way of doing so? In Committee, the Minister produced a series of rather curious arguments. He raised a complete red herring about making regulations that cover a wide variety of schemes. However, under the Bill, schemes will have to make arrangements, and rules will have to be drawn up for consulting on the selection of member trustees, so there seems to be no reason why the modest amount of additional work and thought needed to find a way to consult pensioner members, and so choose a representative whom they find satisfactory, cannot be part and parcel of drawing up those rules.

Thirdly, what would the role of the trustees be? Would they act irresponsibly or pursue narrow, sectional interests to a point that damaged the operation of the fund and the trustees as a whole? I felt in Committee- -and nothing has been said today to change my mind--that the clinching argument is that there are already a significant number of schemes with pensioner representatives in one form or another, yet no one has shown us any evidence that pensioner-nominated trustees are more inclined to breach trust law, or that they are more likely to act more irresponsibly than any other type of trustee. There is no evidence that pensioner-nominated trustees would create problems for the operation of existing funds.

I agree with the points made by a number of hon. Members on both sides of the House. The Government are in a state of complete confusion about whether trustees from different constituencies represent certain interests. Throughout our debates on the Bill, the Government have failed to produce a single logical argument. When it has suited them, Ministers have argued that trustees are responsible only to the trust deed and to the operation of the fund, so that where they come from is irrelevant. The Government have used that argument to resist the idea of pensioner-nominated trustees. They have said that that would be a terrible step in the wrong direction as it would create a set of special interests, and they have added that they do not wish to encourage the recognition of special interests within pension funds. But the Government have not used that argument when it comes to the overall make-up of the trust. When we advocated a 50:50 split of employee and employer representatives on the trust, the Government said that that was not a good idea and was going too far. They readily conceded that employers would take the view that such a scheme would involve too many people

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who did not represent the employers' interests on a trust. For the sake of logic, the Government should have been consistent on the principle throughout the Bill.

When the Government rejected the idea of a 50:50 split of employer and employee representatives in the membership, they recognised de facto that the members would represent different interests within the pension funds. The members will all be bound by trust law--as a pensioner's representative would be bound--but they will bring to the operation of the pension fund a special knowledge of and a special interest in their own area.

We expect that the people who are nominated by employers will bring to the operation of a pension fund a special interest in the employer's viewpoint of the management of the fund, and we also expect that employee representatives will bring a special insight of the view of the active members of the fund of the way in which the fund is administered. There is nothing wrong with recognising that. We think that the Government have got it wrong, and that there could well have been a 50:50 balance that would not have harmed the operation of the funds. My hon. Friend the Member for East Kilbride (Mr. Ingram) gave a long list of examples where such schemes work perfectly satisfactorily. During the consideration of the Bill, the Government should have reflected on the underlying principle that there is nothing wrong with people bringing a special insight to a pension fund.

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It is possible to identify fairly readily the sort of situations where it would be useful to have a member of a scheme who had an interest and insight into the concerns of the retired members who are the beneficiaries of the fund. The most obvious example is when the immediate interests of both the active members--the current employees--and the employer coincide, but in a way that is to the detriment of the pensioner members of the scheme. A company running into financial difficulties will clearly be under pressure to accept a lower funding level for the scheme than might otherwise apply. A base line is now in place as a result of the introduction of the minimum funding requirement. None the less--as we rehearsed many times in Committee--that level may well be significantly below that which a company would normally wish. It would be useful in those circumstances for pensioners to have a voice within the fund to say, "We understand and appreciate the difficulties, but other interests are involved."

Self-investment is tightly prescribed within the Bill, but--as I recall--it is not ruled out. That is another example of where the immediate interests of the active members and the employer may coincide, when it might be healthy to have a third point of view, to question whether that is in the best interests of the scheme as a whole.

When a company is restructured, there is a temptation--all hon. Members will have seen this in their constituencies--for various employers to use the surpluses in the fund to enhance the early retirement benefit for the active members. Again, that is an instance where it would be useful to have retired members questioning whether such an operation was really in the interests of all the beneficiaries of the scheme. In all circumstances, the management of a fund would benefit from having a pensioner-nominated member.

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In opposing the amendment tabled by the hon. Member for Antrim, South in Committee, the Minister deployed three arguments, one of which I have touched on. The Minister's red herring was that the amendment would create enormous difficulties for schemes, but I do not accept that argument. The schemes will be drawing up rules and procedures for consulting members and finding out how best to consult them on member-nominated trustees. The Minister also quoted the Goode committee report--which came out against the representation of sectional interests-- but my views on that matter are very much in line with those of the other hon. Members who have spoken in the debate. The Minister's third argument was a curious and democratic one. He seemed to argue that, in the type of schemes that the amendment addresses, where there is a majority of pensioner members, that majority would in principle be able to organise themselves in such a way as to make sure that their interests were adequately represented among the trustees. I am not sure that that approach is realistic, wise or healthy for the management of schemes that have a majority of pensioner members.

At one end of the spectrum there is a difficulty in organising a dispersed group of pensioner members who may, by now, be living at different ends of the country, a long distance from the workplaces where they originally worked. In many companies, those workplaces may not now exist. Their ability to organise themselves to reflect their interests will be much weaker than that of active members who may well, in some big companies, still be in large workplaces, well organised by trade unions and able to have a clear, collective voice.

From time to time I receive various ballot papers from building societies asking me to vote in building society elections. One reads the information and generally does not have a clue whom to vote for. I feel very much the same in some of the obscure regional elections of my trade union, when I receive CVs from apparently identical candidates. A dispersed electorate has difficulty in organising itself to get its views across.

There is a danger that, although in principle, pensioner members could use the new procedures in the Bill to ensure that their interests are represented, that will not happen in many cases. When the rules are initially drawn up under which active members and pensioners are to be consulted on the selection of the member trustees, it will, in many cases, be difficult for the retired members to have a clear voice on whether those rules and procedures will enable them effectively to express their apparent majority. I do not think that they will be able to do so very often. The rules and procedures will presumably govern whether statements and manifestos can be circulated to all members. It would be essential for such items to reach retired members, so that they could be asked to vote for a specific person because he or she would be willing to act in the members' best interests.

The current rules and procedures could easily result in some funds in which pensioners were not organised. Although there might be a majority of pensioner members, they could ultimately end up with very little representation on the trust bodies. However, it is at least theoretically possible, perhaps in some of the large schemes where pensioners are extremely well organised and where there is a considerable majority--of two to one or three to one of pensioner members to active members--for pensioner members, as I understand it, to

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use the rules and procedures to ensure that every member trustee of the scheme is a pensioner member or a pensioner- nominated member. I am not sure that that would be healthy for the management of pension funds.

I doubt whether there would be many employers who would be happy for their active members of the scheme to be excluded from the scheme's management and for it to be dominated by pensioner interests. I am not sure whether many employees and active members would welcome that outcome. By advancing the democratic argument that if there is a majority of pensioners, they will be able to ensure that they are adequately represented, the Minister is encouraging a dangerous and unstable position.

It would be more prudent to define a clear role for

pensioner-nominated members of the scheme. If that were done and made best practice and enforced as best practice in the way suggested by the amendment, pensioners would, by and large, accept it. They would see it as a means by which their interests would be clearly represented in future. Such a policy would also add to the stability of the management of the schemes.

I believe that the Government have resisted the proposal more from their general desire not to prescribe regulations if they think that they can get away with it. In this case, they are doing so in a way that will leave many pensioner members feeling that they are poorly represented and unable to contribute to the security of their own pensions.

Mr. Wolfson: I have, all along, been uneasy at the difficulty that the Government appear to have in accepting compelling arguments for pensioner representation on the trustee bodies. It seems that we are inevitably in a working world of much greater insecurity than existed in the past. New technology means that this is a continuous process; short- term contracts and rapid changes in the skills required for the job mean that, during their working lives, people feel less secure than they used to, whatever their employment. For pensioners, that sense of insecurity has become much stronger since the Maxwell fiasco.

As the Bill was instigated as a result of the problems arising from the defrauding of the Maxwell funds, I find it odd that we are not focusing very strongly on giving future and existing pensioners a feeling of security that their funds will be properly guarded and secured through thick and thin. Pensioner fund members have an independent voice, which I believe could make a valuable contribution to the discussions of a trustee body.

The chairman of any pension trustee body must weld its members into a coherent team that looks at all the problems rather than just arguing for the vested interest. As the hon. Member for Southampton, Itchen (Mr. Denham) made clear, employers and employees will inevitably have vested interests in the scheme, but the beneficiaries of the scheme do not have an opportunity for any input. I believe strongly that we should move towards taking account of their views. Finally, it would be wise for the Conservative party to demonstrate a voter-friendly policy on the issue and perhaps this, of all days, is the day to do it. A great many natural Conservative voters who are members of pension

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schemes look to us to safeguard their interests and they are rather surprised and bewildered that we appear not to be doing so. I hope that it is not too late to think again.

Ms Church: I am very happy to follow the hon. Member for Sevenoaks (Mr. Wolfson) in the debate. He is absolutely right: thousands of pensioners up and down the country are watching the outcome of the debate tonight. They may not be natural Conservatives, but the hon. Gentleman is correct that the Government need to woo every voter they can at present.

Pensioners have invested their livelihoods in retirement pension schemes and they are directly and immediately affected by the management of those schemes and by the action of the trustees. They have no right to participate directly in the running of a scheme, so they should have the right, in statute, to nominate a pensioner member.

The arguments in favour of Opposition amendment No. 16 are absolutely clear and they have been put very well by a number of my hon. Friends, particularly my hon. Friend the Member for Southampton, Itchen (Mr. Denham). There is a clear democratic argument: those who are affected directly should have the right to participate in the running of a scheme. There is also a security argument. Pensioner beneficiaries of a scheme need to know that their interests are being safeguarded--as far as that is possible--so that, as my hon. Friend the Member for Birkenhead (Mr. Field) said, they will be less easy to nobble. We know that the operation of pension schemes cannot be safeguarded absolutely, but that would make it more secure for members.

We could also argue for the amendment on the grounds of equity. As existing employees--those who have a deferred benefit from the scheme--participate in the running of the scheme, should not those who are benefiting currently have even more right to participate in the management of that scheme? Pensioner participation would also directly benefit schemes. It is likely that a former employee member of the scheme would, upon becoming a pensioner, be nominated as a pensioner member of that scheme. That person operated as a trustee of the scheme while in employment and would be likely to continue to contribute to the scheme's operation. Such people would bring to the scheme invaluable experience, knowledge of the scheme's history--which is often important to its operation--and a particular perspective as pensioners. My hon. Friend the Member for Birkenhead emphasised the independence of pensioner members, who would not be so susceptible to employer pressure or fear of being sacked for speaking out-- as was the case with members of the Maxwell scheme.

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The existence of pensioner members would increase trust and confidence among existing employees, who would know that if a whistle needed to be blown, it would be blown by someone who did not fear a direct financial penalty, which might be incurred by an employee trustee. Opposition Members and people throughout the country acknowledge those as straightforward arguments, so what are the Government's objections? My hon. Friend the Member for Itchen fully described them, so I shall not go over that ground again. The Government seem to believe that it is not right for someone who is a direct beneficiary to be represented on a scheme. It is not a question of representation.

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Employees have a direct if deferred interest. It is because a pensioner member would have a certain perspective that he or she should participate in the scheme's management. Not for the first time, the Government are standing logic on its head. A pensioner member could not outvote the others, and individuals prepared to be nominated and to stand--from my experience of working as a trade union official before I entered the House--are of high integrity, have sound principles and are deeply concerned for pensioners who will follow them, not just for existing pensioner members.

I say to pensioners who are listening to or watching this debate--and they number thousands, as the hon. Member for Sevenoaks said--that they should listen carefully to Government Members. Listen to their vacuous excuses for refusing to accept the amendment. Listen to their denial of pensioners' interests in the operation of pension schemes. I have been a Member of Parliament for little more than a year, but time after time I have heard the Government talk about choice and protecting the interests of the individual. We hear that mantra time and again, but the truth is that the Government are denying choice to pensioners and failing to protect the interests of individual pension scheme members--be they existing employees, deferred pensioners or existing recipients.

I hope that those thousands of people throughout the country are listening carefully to yet another example of the Government's failure to understand the needs of ordinary people who want extra protection, experience and knowledge brought to the operation of their pension schemes. As a result of scandals and mismanagement, the public have lost confidence in pension schemes. Tonight, the Government have a chance to restore in part that lost confidence, but they refuse to do so. If they persist, they should not be surprised if it leads to the loss of even more of what little confidence the public have in the Government, given their continued failure to protect people who need protection--most of all, our pensioners.

Mr. Clifford Forsythe: The Select Committee on Social Security--the hon. Member for Birkenhead (Mr. Field) is its Chairman and I am a member of it--has taken many hours of evidence on pension schemes, starting with the Maxwell scheme. We received evidence from everyone who is significant in the pension scheme world, including actuaries. We arrived at the conclusion that a pensioner trustee or an independent trustee should be an essential member of a board of trustees of a pension fund. We did not pluck that conclusion out of the air. We arrived at it, having listened to everyone in pension schemes throughout the United Kingdom. I still have not been given a satisfactory explanation of the Government's view that employer- representative trustees and employee-representative trustees are acceptable and not regarded as biased--I accept that--while pensioner-representative trustees are not acceptable

It has been said that pensioners are resentful about various things. A good example of their resentment is the Harland and Wolff pension fund. Harland and Wolff pensioners were in dispute about a pension fund surplus when the company was privatised. They felt that the surplus would not be used properly. The House will be glad to hear that I do not intend to go into detail.

The pensioners formed a group and wished to enlarge it. They asked the trustees if they could have the names of other pensioners. That request was refused. They then

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asked the trustees if they could have the addresses of other pensioners on the basis that the trustees would write to those pensioners. That request was refused. They tried everything to enlarge their membership. Each request was refused by the trustees and by the firm. The pensioners were disregarded. They had been members of the Harland and Wolff work force for many years but when they became pensioners they were ignored.

After pressure was brought to bear by the Select Committee on Social Security, the Harland and Wolff trustees decided that they would appoint or have a pensioner trustee. They did not ask the pensioners who they would like as a trustee. As in all quango-type operations, the trustees decided to appoint a pensioner trustee themselves.

I have no objection to the person who was appointed. My objection lies in the way in which he was appointed. The interests of the pensioners were disregarded. As I have said, I have no objection to the representative as a person. My complaint is that a dictatorial decision was made and the pensioners were ignored. Can the House really say that in those circumstances pensioners would not be resentful and would not find a pensioner trustee more acceptable? A pensioner trustee would be loyal to the fund for all the obvious reasons. I am not yet a pensioner, but on their behalf I resent the implication that because someone is a pensioner of a fund, they are not to be trusted to be a trustee.

The Minister and others have said that perhaps pensioners would not have sufficient expertise, but the former chairman of the trustees is now a pensioner. I submit that nobody would be more fitted to be a pensioner trustee than the former chairman of the trustees. I make my few remarks in support of the amendments and I hope that the Minister will accept them.

Mr. Miller: I shall be brief in dealing with the important amendmants under discussion.

First, in respect of amendment No. 16, I was considering the number of companies that already have independent trustees. I would bring to the House's attention a list of companies for which Law Debenture acts as an independent trustee. They are an amazing cross-section of British industry and include the Agricultural Mortgage Corporation, Amersham International, BAA, Bull Information Systems, Chloride, Cory Towage, Freemans, Guardian Royal Exchange Assurance, ICI, John Holt, Logica, Mercantile and General Reinsurance, the Ocean Group, 3i and George Wimpey. There could hardly be a better cross-section of British industry.

It is interesting that the pension trustees of those companies have deliberately chosen to introduce the principle of independence into their schemes. I am sure that none of those companies would be in the circumstances envisaged in amendmant No. 16, but the powers that it gives the authorities to appoint such a person as the list of companies I have read out already use are important and we should be prepared to accept them as a matter of principle.

The hon. Member for Bristol, North-West (Mr. Stern) touched on the Hanson litigation. He was right to say that it was extremely expensive. The only winners were the Chancery Division of lawyers. I cast no aspersions on the Under-Secretary of State for Social Security, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot), who is a member of that profession and who looks

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surprised, but I am sure that he would agree that that is the truth. It is a great pity that many issues of principle had to be dealt with in that way and not by a more rational means.

Mr. Frank Field: My hon. Friend told me privately that I should have been referring to Imperial Tobacco and not British American Tobacco in my earlier intervention. He also said that if I were a smoker I would not have made that error. I am grateful to him for both points.

Mr. Miller: Amendment No. 1 is about the basic issue of democracy. We have heard an awful lot in this place today about issues of democracy, but it is something that we cannot forget. The hon. Member for Sevenoaks (Mr. Wolfson) made the wise suggestion that his party should examine carefully the interests of pensioners. If he says that with a majority of 19,000, the hon. Member for Bristol North-West, with a majority of 45, needs seriously to consider those wise observations.

The Confederation of Occupational Pensioners

Associations--COPAS--sets the matter out in stark terms in a leaflet distributed to members of the Committee yesterday. Under the heading,

"Discrimination of the very worst kind",

the leaflet points out that

"NO existing Act of Parliament permits the discrimination which the Pensions Bill contains. Discrimination on the grounds of race, religion, gender or sexual orientation is unlawful.

But discrimination against pensioners will be enshrined in law if the Pensions Bill goes unamended".

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COPAS has a sound point. Its leaflet sets out the case for pensioners in detail, but I shall not repeat it all because time is pressing and several hon. Members have made that case clear already. The association represents a significant number of pensioners, and its arguments are based on the simple principles which, as my hon. Friend the Member for East Kilbride (Mr. Ingram) said, were touched on by the Goode inquiry but were not developed to their logical conclusion.

The leaflet continues:

"Many good pension schemes include a pensioner Trustee. No evidence has ever been produced that pensioner Trustees do not act in the best interests of their schemes overall. But where there are pensioner Trustees, they are there by agreement, which can be withdrawn, not by right."

Hon. Members on both sides of the House have said that putting a pensioner trustee in by statute would give such trustees the independence that would mark them out as different from people who can be leaned on by employers.

COPAS goes on to say:

"The truth is that unscrupulous employers can ensure that management Trustees do their bidding or face the consequences. They can also influence employee Trustees or remove them by sacking them from the company.

The one Trustee who is totally independent of the employer is the pensioner Trustee. The one Trustee who has the most time for his or her duties is the pensioner Trustee. The one Trustee with the longest--and, perhaps, the greatest--experience is the pensioner Trustee. The one Trustee with the biggest investment in the scheme--his or her life savings--is the pensioner Trustee.

Why, then, is the Bill denying all schemes the advantage of one truly independent pensioner/trustee watchdog?"

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The amendment is specific and deals with people in mature schemes--those with more than 850 members. It raises some organisational issues; the hon. Member for Bristol, North-West pointed out some of them and my hon. Friend the Member for Southampton, Itchen (Mr. Denham) mentioned some others. But those can be addressed by good organisation and by ensuring that such schemes, with the enormous resources at their disposal, properly facilitate the trustees' carrying out of their functions, as has to be done for every other trustee. The exceptional circumstances mentioned by the hon. Member for Bristol, North-West need dealing with, but that could all be encompassed within the spirit of the amendment. The amendment would do a service to democracy in this country by encouraging the development of pensioner organisations that could participate in such schemes, as many of the COPAS members already do.

The points made during the debate are valid, and although there can be arguments about technical details, however one regards the specific amendments, the House should accept the principle and spirit underlying them. If the Government are serious about doing a service for the 7 million pensioners in this country, they should adopt the spirit of the amendments, which I urge the House to accept.

Mr. Bayley: I mentioned earlier that I had received a letter from a group pensions manager of Nestle , in which he said:

"The key to preventing any future Maxwell . . . is good governance in trustee boardrooms."

I firmly believe that the key to good governance is to ensure that there is a strong voice for the beneficiaries of pension funds. There are, of course, three types of beneficiary for pension schemes: contributing members, deferred members, and pensioner members. I would have liked a situation in which the beneficiaries of the scheme, the people for whom the scheme was established in the first place, were a majority among the trustees, but sadly that is not to be the case, because the Government have stood in the way of that. Amendment No. 16 proposes that, in those circumstances, some redress could be achieved by allowing for the appointment of an independent trustee or trustees.

Many pension schemes are well managed. The Nestle scheme has four managers, two pensioner members and six other members. It is an example of good governance. It is not just an academic or technical argument when I suggest that there are many cases of bad governance of pension schemes. Just recently, the pensions ombudsman published his latest report, which records 59 cases in which members' pension rights were violated by pension fund trustees. In the limited time that I have, I shall give two examples.

First, an employer agreed to augment a pension but withdrew that agreement at the time of the pensioner's retirement. The trustees in that case backed the employer. The pensions ombudsman said that they backed the employer because the

"alleged augmentation was made in ignorance of the true cost." I am pleased to say that the pensions ombudsman upheld the pensioner's complaint and increased the pension by £2,890 and awarded compensation.

Secondly, a member of a pension fund was refused a transfer payment when he moved to different employment. The trustees stated that the scheme

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"did not have liquid funds available to make a payment." Again, the ombudsman, I am pleased to say, upheld the member's complaint and said that a transfer value of £108,000 should be paid of behalf of the member, plus a sum of compensation.

Many of the 59 cases are of trustees refusing to award the enhanced benefits that are stipulated under the schemes and promised to employees on redundancy. In many cases, the ombudsman upheld the complaint. In one case, he increased the member's pension by £8,300. I firmly believe that if members of pension funds were better represented among the trustees of pension funds, such gross abuses would not take place, or certainly not so frequently. I really am concerned that the Government will not allow the House to give pension fund members the protection that they need with more adequate representation.

Amendment No. 1 specifically looks at the failure of the Bill as it currently stands to guarantee representation for pensioner trustees. I have had dozens of letters from my constituents about various aspects of the Bill, but on that issue in particular I have had a full postbag. John Taylor from the York and district campaign for equal state pension ages says:

"It should be mandatory that Pensioners Associations be allowed at least 2 nominated Trustees in their Pension Fund Scheme." Mr. Greaves from the Transport and General Workers Union, retired members association, makes a similar point, as does Mr. Webb from the York branch of the British Transport pensioners federation. The courts have said that pensions belong to pension fund members. They are deferred pay. The Government say that it is good practice to have pensioner trustees, so I hope that the Minister, if he insists on maintaining the Government's argument against the amendments, will explain why they are not backing amendments that will support what they say would be good practice.

Mr. Hague: The amendments all deal with the issue of member- nominated trustees. The key provision is contained in clause 16, which gives effect to the Goode committee's recommendation that members of pension schemes should have the right to nominate a proportion of the trustees of those schemes. The main effect of that recommendation--which the Government fully endorse, and which is reflected in clause 16--is to give ordinary scheme members the power to require that trust boards include at least some people whose perspective differs from that of the scheme sponsor, who typically appoints the majority of, if not all, of the trustees.

The underlying purpose of the provision is to reinforce the crucial feature of trust law: that trustees should be independent of the settlor or scheme sponsor, and should consider the interests of all the beneficiaries within the framework of the scheme trust deed and rules. Giving scheme members the power to nominate and select a proportion of trustees should significantly reduce any risk of trust boards' acting primarily in the interests of the scheme sponsor and compromising their responsibilities to scheme members.

There is a range of positive reasons for encouraging the appointment as trustees of people nominated by scheme members. I need not go into them in detail; I think that they have the support of the House. As for the arrangements that would be made to select member-nominated trustees, we were anxious to do as the

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Goode committee recommended--to avoid prescription, and to allow the wide variety of satisfactory arrangements currently in place to continue without unnecessary disturbance. That is why we have settled on a proposal that we consider flexible, which strikes an equitable balance between the interests of all parties.

Clause 16 leaves schemes free to introduce or maintain arrangements for selecting member-nominated trustees that suit their particular circumstances and are acceptable to members; but--this is an important point--both pensioners and active members will be given the opportunity to influence nomination and selection arrangements through their participation in the statutory consultation procedure. I do not think that that point has been appreciated widely enough in the House or in the country as a whole. Much of our debate has been based on a misunderstanding. The Government do not oppose the appointment of pensioner trustees, but share the Goode committee's view that it should not be mandatory. We agree with all the positive points that have been made about the qualities of pensioner trustees. Our proposals for member-nominated trustees go further than those of the Goode committee in giving all scheme members--active and pensioner members, and deferred pensioners if trustees decide that it is desirable and practicable to include them--a say in the composition of the trust board through the statutory consultation procedure. My hon. Friend the Member for Sevenoaks (Mr. Wolfson) rightly reminded me that pensioners look to the Government to ensure that their interests are looked after. As a result of the Government's proposal, millions of pensioners will be consulted about the arrangements for selecting member-nominated trustees-- arrangements that will be subject to the pensioners' right to object to them and vote on them if enough people object. We are doing a great deal to ensure the involvement of pensioners.

Mr. Wolfson: It is clear that at this stage the Minister's arguments are not hitting home across the country. Many pensioners and their representatives feel that all is not as they would wish. We must change either the perception or the policy.

Mr. Hague: My hon. Friend has put his finger on it and he can guess which of those options I shall choose to take. It is important to change the perception. Perhaps in the new spirit of party unity we can set about that, and do so extremely effectively. I will expand on that point and on my argument.

Mr. Frank Field: Is the Minister saying that pensioners will be consulted if they are unhappy that they are not directly represented, that they will have the vote and that through that vote they will be able to get representation on the board? That is what I took him to say before his hon. Friend the Member for Sevenoaks (Mr. Wolfson) intervened.

9.45 pm

Mr. Hague: I am saying that the proposals for the selection of member-nominated trustees will be subject to an approval process in which, by law, active and pensioner members must be involved. If a certain proportion of them object--the hon. Gentleman has signed an amendment

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which argues for a proportion or a minimum number, which I shall come to--there must be a ballot or alternative arrangements must be put forward. Pensioners will therefore always have a voice. They will have an influence over these matters. I am not sure that that has been sufficiently widely appreciated.

Mr. Miller: Will the Minister give way?

Mr. Hague: I will give way to the hon. Gentleman and then I should like to develop my argument.

Mr. Miller: Does the Minister agree that, in the context of the amendment proposed by my hon. Friends, we are dealing with mature schemes in many--indeed most--of which there are more pensioners than active members? Does he not believe that in those circumstances the annoyance of pensioners is understandably about the basic issue of fairness and democracy? Does he not understand that that issue needs to be addressed?

Mr. Hague: In those schemes, pensioners will have a huge influence over the selection arrangements. It will be a brave board of trustees that puts out proposals for consultation and for the approval of its members, if a majority of them are pensioners, which do not provide for pensioner involvement in the selection process. If it did so, many of the board members would regret it. That point is fully taken on board by the Government and reflected in our proposals. The requirement in the Bill is that members should have a right to nominate at least one third of their scheme's trustees; a proportion of one third would be a statutory minimum. The hon. Member for East Kilbride (Mr. Ingram) touched on that point and compared it with the arguments for a 50 per cent. split. I should respond to that and I shall return to the point about pensioner representatives. Employers set up schemes voluntarily. In the Government's view, they should be able, if they want to, to retain the right to appoint a majority of the trustees. An occupational pension scheme and its associated fund is established by an employer to achieve a business objective and the employer retains a considerable business and financial interest in the fund's performance and the scheme's effectiveness. The fund is, of course, held in trust by the trustees to be distributed on the basis set out in the trust deed and rules, but in a defined benefit scheme the employer is bound to meet the pension promise and to make good any deficit in the fund. From a member's perspective, the fund offers a degree of security against the employer going insolvent, and it provides a vehicle for delivering their pension, but the pension that they receive is not dependent on the existence or performance of the fund. By contrast, the existence and performance of the fund is crucial to the sponsoring employer. It offers a tax-efficient way of providing an important part of the remuneration package, it smooths out

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the cash flow problems that a pay-as-you-go pension scheme incurs, and its performance and any consequent need to increase pension contributions can have a dramatic effect on company cash flow. The employer is the one giving the guarantee. He must top up or make good the fund in the event of deficiency. He therefore has a major interest in the successful operation of the fund and it is only right that he should be in a position to ensure that the scheme will be administered sensibly.

Mr. Frank Field rose --

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