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Standing Committee Debates
Child Support, Pensions and Social Security Bill

Child Support, Pensions and Social Security Bill

Standing Committee F

Thursday 17 February 2000


[Mr. William O'Brien in the Chair]

Child Support, Pensions and Social Security Bill

10 am

Mrs. Jacqui Lait (Beckenham): On a point of order, Mr. O'Brien. I wish the Under-Secretary a happy birthday. I welcome her to her next decade. We hope that she has a happy day and that she is not too bored with us.

Might I have an update from the Minister of State on the situation after the Government's little local difficulty last Tuesday?

The Minister of State, Department of Social Security (Mr. Jeff Rooker):

Further to that point of order, Mr. O'Brien. We also offer greetings to the Under-Secretary: 39 seems a wonderful age.

I thank the Opposition, and the hon. Member for Sutton and Cheam (Mr. Burstow) in particular, for their co-operation on Tuesday. What happened was necessary for the good order of our discussion, and we are grateful to them. I promise to give the Committee an update of our position at about ten minutes to 5, before we finish our second sitting of the day. I should probably be able to say by then that things might happen tomorrow or on Monday. We expect to be able to act much quicker than had seemed possible on Tuesday. I shall be able to give a more up to date and accurate report on the situation this afternoon than I can now—I do not know what will happen today.

Clause 33

Member-nominated trustees

Mr. Rooker: I beg to move amendment No. 269, in page 31, line 12, at end insert—

    `( ) In subsection (8) (persons ceasing to be member-nominated trustees on ceasing to be qualifying members of the scheme)—

    (a) for ``The arrangements must'' there shall be substituted ``The arrangements—

    (a) must''; and

    (b) at the end there shall be inserted ``; and

    (b) may provide for a member-nominated trustee who—

    (i) is a qualifying member of one of the following descriptions, that is to say, an active, deferred or pensioner member, and

    (ii) ceases (without ceasing to be a qualifying member) to be a qualifying member of that description,

    to cease, by virtue of that fact, to be a trustee.''.'.

The Chairman: With this we may discuss Government amendment No. 271.

Mr. Rooker: Clauses 33 to 36 make changes to the Pensions Act 1995 which govern the appointment of member-nominated trustees and directors to the boards of occupational pension schemes. Amendments Nos. 269 and 270 amend clauses 33 and 34. The amendments make the same change; one of the clauses operates in respect of member-nominated trustees, the other in respect of corporate trustees. The amendments correct an accidental omission For convenience, I shall refer only to member-nominated trustees, for everything will apply equally to member-nominated directors, who are the subject of clause 34.

The amendment will allow nomination and selection arrangements to include a provision for member-nominated trustees to stand down automatically if they change the category of membership. If an active member leaves to take up employment elsewhere and becomes a deferred member, the individual will be able to cease to be a trustee.

The power is permissive. Such a rule will not be adopted without a conscious decision by the trustee or the employer. If such a rule is adopted, a trustee required to stand down will, of course, have the opportunity to stand for reselection, and the members may decide whether they want the person to serve as a member-nominated trustee. Such people will still be members of a scheme, although their category has changed. It is reasonable to give the membership the opportunity to decide whether they want a deferred member who was originally nominated when an active member to continue, or whether they want to nominate someone else.

Without the amendments, we will not give full effect to the proposals in the consultation paper issued on 1 October. They were developed in consultation with key organisations in the pensions industry, which fully support them. As I said, they correct an accidental omission.

Amendment agreed to.

Mr. Rooker: I beg to move amendment No. 270, in page 31, line 18, after `which' insert—

    `, and the time within which,'.

The Chairman: With this it will be convenient to consider Government amendment No. 272.

Mr. Rooker: The amendments make the same changes as the previous two amendments considered and also apply to clauses 33 and 34. One deals with member-nominated trustees, the other with member-nominated directors. For convenience I shall refer only to member-nominated trustees.

The amendments correct an oversight in the drafting of the clauses. An equivalent regulation-making power is contained in section 21(4)(b) of the Pensions Act 1995, under which regulations are in force. We always intended to carry that power forward to the new provisions. As it stands, the Bill removes section 21(4)(b) from the 1995 Act without making similar provision elsewhere. The amendments restore that provision.

The amendments enable us to continue to provide a time limit within which member-nominated trustees must be nominated and selected in accordance with the arrangements. The regulations will prescribe a time limit of six months for the nomination and selection of member-nominated trustees. That is the current limit, so there is nothing new in the amendments. Not only will members have to make the arrangements, but they will have to put them into operation. Without the amendments, there would be a small loophole in the Bill. We do not want to allow such loopholes to remain.

Amendment agreed to.

Mrs. Lait: I beg to move amendment No. 237, in page 31, line 20, at end insert—

    `9(A)(a) The Secretary of State shall make regulations providing that all trustees will be provided with adequate training to enable them to carry out their responsibilities.

    (b) These regulations shall also prescribe the content of such training.

    (c) This training shall be provided at the expense of the pension fund.'.

We are not planning to hold up progress today—[Interruption] I thought that it would be nice to reassure the Committee on that point.

Mr. Rooker: The hon. Lady has not been holding up progress today.

Mrs. Lait: I am delighted to hear the right hon. Gentleman express that view. [Interruption.] And at least the Whip is present to hear it.

The amendment deals with the provision of training for trustees who require it. I remember listening to long discussions about the training of trustees during consideration of the Bill that became the Pensions Act 1995. Anybody who has had experience of occupational pension funds will know how heavy, difficult and often bewildering the rules, regulations and legal responsibilities are for the trustee of a pension fund. Although many trustees are well equipped, those who come from the members will often need more help. The issue has been circulating for a long time, and some responsible employers and many trade unions have provided training. I am happy to learn from the experts on the Labour Benches, but I understand that there has been a noticeable diminution in the amount of training that trade unions can provide, largely because of their declining membership. Not only will that deter willing volunteers who are unaware of the relevant issues from becoming trustees; it will discourage people from volunteering at all. A large number of trusts will have to be created under the stakeholder pension scheme envisaged by the Government, so there will be a huge demand for people who are willing to serve as volunteers.

The question of who should pay for training has always been problematic. As I have said, companies will sometimes pay for it, especially well funded, responsible companies. Trade unions will sometimes pay for it and some members may take the matter sufficiently seriously to fund it themselves. It occurred to us that the best way to fund training would be to pay for it out of the expenses of the pension fund.

I am well aware that the primary duty of trustees, and indeed anyone involved with the management of pensioners' and potential pensioners' money, is to produce the best possible return on the money invested and to ensure that money is put into a wide range of investments, including gilts, equities and property portfolios, in a sensible, well run fund. The costs of fund managers obviously fall on the pension fund, and it occurred to me that, in ensuring that pension funds are as well run as possible, where necessary, the training of trustees should be paid for out of the pension fund, but without diluting the return on the investment.

Mr. Desmond Swayne (New Forest, West): For the assistance of those of us who are unfamiliar with the responsibilities of a trustee, my hon. Friend say what order of costs she anticipates will be incurred? Presumably, that will depend on the sort of training that is involved, so will she also say what sort of training would be required?

Mrs. Lait: I envisage that training would relate to how stock markets, property markets and the gilts system work, as well as to the legal responsibilities of trustees. As my hon. Friend is undoubtedly aware, if something goes wrong, trustees can find themselves exposed both financially and legally. I confess that I have not worked it out, but I would have thought that the cost would be modest compared with the cost of paying fund managers to manage the money. There are not that many trustees on the board of any pension fund, although that depends on its size. We want trustees to have the highest quality training, and I would not suggest that a pension fund should spend money on anything other than professional training, but in the scale of things, the cost of professional trainers would be at the margins rather than a huge percentage.

It is crucial that trustees are properly trained and aware of their responsibilities. The result of not properly training trustees could be disastrous for a pension fund. That could lead to trustees agreeing to do something illegal without realising it, or failing to produce the best return for pensioners. We are looking for a breed of person to volunteer for trusteeship who can acquire a huge range of new skills. We must ensure that the people who become trustees are equipped with the necessary skills and knowledge so that they do not feel that they have been dragooned into, for example, an investment programme or change in the rules without being aware of the consequences. The ability to provide for the necessary training out of the pension fund is key to the amendment. There is no disagreement on the need to train trustees. The solution, as I said to my hon. Friend the Member for New Forest, West (Mr. Swayne), is not highly expensive. It would not penalise pensioners or potential pensioners, but it would ensure that they are secure in the knowledge that the people who are looking after their money have an idea of what they are doing and are equipped to carry out their role as trustees.

10.15 am

If the Minister of State looks kindly on the suggestion, it will bring relief and comfort to trustees who are not as well equipped as they would like to be. They often find it difficult to get the information and help that they need. It will also reassure members of occupational pension schemes that their money is being looked after by people who are aware of what is required, which should help them to benefit from good pensions.


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Prepared 17 February 2000