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Mr. Butterfill: I had anticipated that the Minister would make that argument, which has been made before. However, the situation has now changed. When that argument was first made, we did not have the regulation of custodians that we now have under the pensions regulations and the Financial Services Act 1986. The onus on custodians is, therefore, now much greater. However, even if that were not the case, the onus imposed on custodians by the new clauses would deal with that point.
Mr. Rooker: I am grateful for that intervention, as it gave me time to find the note that I was looking for. I have already partly dealt with the point, but I also accept the hon. Gentleman's comments on the changes, which I shall deal with in a moment. However, he made the point that the use of custodians would have stopped Maxwell and prevented other people from raiding pension fund assets. That is not strictly true. Some of the assets misappropriated by Maxwell were placed with independent custodians, but that did not stop him. Independent custodians also would not necessarily deter another Maxwell. The custodians are bound to release the assets that they hold in accordance with their contracts.
The man was a crook, and a determined one. It is very difficult to guarantee that we can prevent all future problems caused by determined fraudsters, although we can erect the best barriers possible--and considerable barriers have been erected since 1995. However, appointment of a custodian offers no significant protection against a determined fraud. That holds true today.
The Government therefore consider that the voluntary use of custodians by occupational pension schemes recognises both the advantages of custodianship and its inherent limitations. Making use of custodians mandatory might well convey the impression to scheme members that the assets of their schemes are secure, when in fact they are no more secure than they would be if no custodian were used.
Additionally, for the small number of schemes which for reasons of their own do not make use of custodians, making their use mandatory might place additional and
unnecessary financial and administrative burdens on schemes whose arrangements for security of scheme assets serve them perfectly well and have done so for many years.
The only point that I need to make on new clause 31 is that, since June 1997, as the hon. Member for Bournemouth, West said, the investment activity of custodians has been regulated under the Financial Services Act 1986. There is no need to set up a new regulatory body to oversee custody business.
Mr. Butterfill:
Will the Minister address the fact that even the latest legislation does not require arm's-length appointment of trustees, as the new clause would?
Mr. Rooker:
I am not seeking to give the impression in my response, inadequate though it may be, that the position is perfect and everything is locked down. No doubt we shall return to the issue in due course.
A number of measures were introduced in the 1995 Act with the aim of promoting security for members of pension schemes, including the minimum funding requirement. It is important to protect members and the benefits that they are promised. There can be no objection to that.
Amendment No. 83 would undermine the minimum funding requirement for some schemes, which would be considered as meeting the requirement even if there were insufficient funds to meet the rights of members on the basis on which they were accrued. If a scheme was not funded to the minimum requirement, the liabilities--the members' pension rights--could be reduced to the level of the assets available in the scheme rather than increasing contributions.
The minimum funding requirement is not a guarantee of solvency. I freely admit that as a lay person I had thought it was. In the past eight months, since I have been at the Department of Social Security, I have looked at the issue in more detail. The lay person can get a false impression from the minimum funding requirement. It is not intended to force employers to contribute at a higher rate than is needed in the long term to meet the benefits promised.
A wide-ranging review of the minimum funding requirement is being carried out by the Institute of Actuaries and the Faculty of Actuaries in Scotland, in partnership with the Department of Social Security. It has been a significant and detailed review, with different groups looking at seven different papers and sub-groups set up. The report is due this spring. There will be full consultation on any changes that we propose. We have to strike the right balance. This can be a sensitive issue, because of the differences in pension funds. In the light of what I have said, I hope that the hon. Gentleman will withdraw the motion, on the promise that the issue will be raised in the other House.
I pay tribute to my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller), who raised the issue behind new clause 34 with me a few weeks ago in respect of the former members of the H. H. Robertson pension scheme. He has been a tireless campaigner and
has a good record for raising the issue with Ministers in my Department and the Department of Trade and Industry. The sale of a business by one employer to another is a common occurrence. There are provisions in pensions legislation to protect the funding of pension schemes. I freely accept that those provisions were not in place when the relevant events at H. H. Robertson occurred, but I hope that my hon. Friend accepts that they are in place now and are worthwhile additions to the protection afforded to scheme members.
My hon. Friend alluded to the situation at Rover. In that case, one company has been sold to two other companies, with a bit of it being retained by the current owner, as I understand it. Occupational pensions are voluntary. There is no requirement to run a scheme and I have no information on Alchemy's proposals. Ford is a responsible employer of many thousands of people in this country with occupational pension schemes. We can assure Rover employees who are members of the existing occupational pension scheme that the pension rights that they have already earned are protected. It is crucial that that is understood. The trust arrangements are irrevocable.
I do not know the details of the Rover scheme, but it is true that surpluses sometimes accrue. It is a moot point who owns the surplus. The legal authority is such that the surplus is not in the members' ownership: as long as the money is there and the pensions are being paid, it seems to be in the ownership of the employer. That is a not unimportant point: especially when large companies break up other companies and sell them as though they were a row of cans on a supermarket shelf, it is crucial to ensure that the protections put in place after 1995 are thoroughly explored and the schemes are secure for current pensioners as well as those who are paying in for the future.
Trustees have a role in seeking to ensure that debts due from an employer are paid promptly, including any debts created by ceasing to participate in the scheme, if the scheme is underfunded or if no contributions, or the incorrect contributions, are paid. My hon. Friend the Member for Ellesmere Port and Neston spoke about the Serious Fraud Office being called in. I have no information on that aspect of the specific case, and it would be improper for me to speculate on it.
The minimum funding requirement should lessen the risk that a scheme is underfunded through, for instance, an over-extended contributions holiday. There are many home-grown blue-chip companies in this country that have not paid a penny into their pension funds for years. Many of my constituents who are members of the Lucas pension fund have often had cause to speak to me about that situation.
The MFR is an on-going requirement on schemes to monitor their funding position and to have in place a contributions plan to ensure that the appropriate funding level is maintained. The Occupational Pensions Regulatory Authority must be told if employers fail to stick to the contributions plan and to pay contributions on time.
We are aware of the importance of protecting members' rights. That is the bottom line. If we cannot do that, they have no one else to look to. Where there are gaps in the legislation, we must block them. There is no evidence of major difficulties. Reviews are going on and we will report the results to the House as early as we possibly can.
There will be full consultation on any changes that we propose, and one can assume from that that there will be further debate on the issue.
Mr. Butterfill:
I am grateful to the Minister for that response, but I do not accept his arguments on custody. Of course, some of the Maxwell funds were held by custodians, but custodians were not regulated at that time, so that argument does not hold water. They are now properly regulated, although I think that the regulations could have been improved, and the need for custodianship remains.
Of course, nothing that we can do will prevent a determined fraudster from getting his way--we cannot stop crime--but we can make it a darn sight more difficult for such a fraudster, and that is what we ought to do. I do not understand the argument advanced by both the previous and the present Government, that investors would be lulled into a false sense of security. How would that change their behaviour? Would they not then belong to their company's pension scheme? The argument is a non sequitur. We need to give investors as much security as we can.
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