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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


[Sir David Madel in the Chair]

Child Support, Pensions and Social Security Bill

Clause 37

Information to be given to the Authority

Amendment proposed [this day]: No. 238, in page 37, leave out line 21.—[Mrs. Lait.]

2.30 pm

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking the following amendments: No. 239, in page 37, leave out line 22.

No. 240, in page 37, leave out line 23.

No. 248, in clause 40, page 44, leave out lines 40 to 42.

The Minister of State, Department of Social Security (Mr. Jeff Rooker): I welcome you back to our proceedings, Sir David. We are trying to make them as exciting as possible.

At the end of our previous sitting, I said that we should consider the reasons why a scheme would be wound up. The hon. Member for Beckenham (Mrs. Lait) used the term ``whistle blower'', and I thought about that after I had left the Room. I would like to put that phrase to bed immediately. It describes someone who blows the whistle on a problem in an existing scheme, so it cannot apply to schemes that are being wound up. We do not want to curtail any activities, but I assume that whistle blowing generally applies to an on-going scheme in which no problem such as insolvency has arisen, unlike a scheme that requires winding up for reasons such as those that are set out in the explanatory notes. That is why I will not deal with her point about whistle blowing.

When an employer is insolvent, it is important that a trustee is in place to ensure that decisions are taken about the scheme's future, especially as insolvency can trigger the winding up of a pension scheme. There is now no requirement for the Occupational Pensions Regulatory Authority to be notified when an employer becomes insolvent and there is no trustee. Schemes can be left in limbo, so the clause introduces a requirement for Opra to be informed, in some circumstances, when an employer sponsoring an occupational pension scheme becomes insolvent. That will help to ensure that, following the insolvency of an employer, trustees are in place to protect members' interests and prompt decisions are made about the scheme's future.

Trustees, or those defined as persons involved in the administration of the scheme, must now notify Opra when a scheme that should have an independent trustee has none, or when an insolvent employer that was the sole trustee is no longer able to fulfil that role. If it appears that Opra is already aware that there are no trustees or that the insolvency practitioner is due to appoint a trustee within specified time limits or at times specified in the regulations, that requirement will not apply. Opra can inquire about the position and arrange for a trustee to be put in place.

Amendments Nos. 238, 239 and 240 would include employers, trustees and scheme actuaries and auditors as persons involved in the administration of the scheme for the purposes of the obligations in the clause. We want Opra to be told quickly when an employer is insolvent and either there is no independent trustee or the insolvent employer is the sole trustee. The obligation should fall on those who are likely to become aware of the employer's insolvency fairly soon.

We do not want to identify those who are involved in the administration of the scheme generally. We want to limit the requirement to notify Opra to those persons involved in the administration who are best placed to do so promptly. Trustees are not included because, when there are trustees, the requirement to notify Opra, if an independent trustee has not been appointed, already falls on them. Including them in the definition of those involved in the administration of the scheme would place the obligation on them twice, which would be out of order.

An employer whose insolvency triggers the requirement for an independent trustee is unlikely to continue to be involved in the administration of the scheme following his insolvency. He may not be aware whether an independent trustee has been appointed. In practice, it is therefore more sensible to place the notification requirement on those administering the scheme, who would still be in place after the employer's insolvency. When the employer is the sole trustee of the scheme and no independent trustee is required, it makes no sense for him to have to report on himself.

Not everyone who is involved in the administration of the scheme would have sufficient regular involvement to be aware of the employers' insolvency shortly after it happens. For example, auditors and actuaries may not become aware of the employer's insolvency for some months. I was not sure whether I should say that, because I thought that auditors were supposed to be the bedrock of society. However, I live in the real world and when the Financial Times reports on something that has happened, the response often is, ``What were the auditors doing?'' [Interruption.] They usually have a valid professional explanation that gets them off the hook. Nevertheless, they may not be aware of what is happening in, say, small firms.

We are introducing a new requirement and if, in the light of experience, it seems that the requirement to notify Opra should fall on others or that there are others involved in the administration of the scheme who should not be required to notify Opra, the regulations will allow us to make the changes. In other words, the matter will be under constant review. We are trying to speed up the winding-up process. That it could take 20 years is ridiculous. To avoid confusion, an almost identical definition of persons involved in the administration of the scheme is included in proposed new subsection 72B to which clause 40 refers. The new subsection will allow Opra to direct that specific information should be provided or action taken during winding up.

Amendment No. 248 would make the same changes to that definition of persons involved with the administration of the scheme as amendments Nos. 238 to 240. Regulations will enable directions by Opra to apply to others who may be excluded from the definition of a person involved in the administration of the scheme. I regret that I have had to stick to my prepared notes, as I have had cause to do in respect of one or two clauses recently. Given that people who are involved in such matters read the report of our proceedings, this is not a subject on which I can extemporise. I hope that the hon. Lady now accepts that we have fully met her concerns.

Mrs. Jacqui Lait (Beckenham): I, too, welcome you, to our proceedings, Sir David. If we can keep you awake, we will have achieved something.

I am grateful to the Minister for his explanation. The matter is complex and I now have a much greater appreciation of the reasons why the clause is so drafted. When the right hon. Gentleman was describing the role of an auditor, he may have been aware of a snort from my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles). My hon. Friend then muttered to me that he thought that the purpose of the auditors was to revisit the battlefield after the antagonists had left. There was an air of sympathy in the Room for that point. However, we must not malign auditors, as they do a good job.

Mr. Eric Pickles (Brentwood and Ongar): If my hon. Friend is going to quote me, she should do so in full. I said that the role of auditors was to revisit the battlefield after the battle was over to bury the survivors systematically.

Mrs. Lait: I am good at précising and editing on my feet. We all appreciate that auditors have an important role and are highly professional people. I shall not continue on that subject.

I am grateful to the Minister for the explanation, and for suggesting that the Department intends to keep a close eye on how effectively the new provisions work. We will do the same, and I am sure that we shall be alerted quickly if changes are needed, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): I beg to move amendment No. 276, page 38, line 8, at end insert—

    `( ) In section 178(b) of the Pension Schemes Act 1993 (regulations providing for who is to be treated as a trustee of a scheme), at the end there shall be inserted ``or sections 22 to 26C of the Pensions Act 1995''.'.

The Chairman: With this it will be convenient to discuss Government amendments Nos. 287, 289 and 291.

Angela Eagle: These are technical amendments to deal with an error in an earlier amendment to section 178 of the Pension Schemes Act 1993. The earlier amendment led to the erroneous inclusion of sections 22 to 26 of the Pensions Act 1995, which deal with the independent trustee provisions, in the provisions about who should be treated as the manager of an occupational pension scheme. The correct place should have been in the provisions about who is to be treated as a trustee of the scheme.

Amendment No. 276 corrects the error and the other amendments are consequential. It also ensures that new sections 26A to 26C, inserted by the clause, are included in the provisions that allow regulations to specify who is to be treated as a trustee of a scheme.

Amendment agreed to.

Clause 37, as amended, ordered to stand part of the Bill.

Clause 38

Modification of scheme to secure winding-up

Mrs. Lait: I beg to move amendment No. 241, in page 39, line 27, at end insert—

    `(6A) The exercise of this power shall be subject to the jurisdiction of the court on application of any interested party.'.

    The clause allows an occupational pension scheme to be modified by order of Opra, but does not allow for any appeal mechanism or other process to change the authority's decision. I want to tease out from the Government the thinking behind that, as it is unusual not to have an appeal mechanism, given the many parties involved in the winding up of pension schemes. I sympathise with what the Government are trying to do, and I understand that it can take a long time for winding up to take place.

    At the same time, there must be fair and due process of law. In the United Kingdom, we like to think that our legal system is fair and that everyone has some recourse to appeal mechanisms. I do not necessarily- suggest that the courts are the only mechanism; we are giving the Government some options about instituting an appeal process.

    Involved in any pension scheme are pensioners, employees who expect to become pensioners, members of the scheme, employers, fund managers, actuaries, accountants and lawyers. Many people and organisations will have an interest in that pension scheme. If it is the small sort of pension scheme to which the Minister of State alluded in our previous discussion, or where no employer is involved, an exception might be made because relatively few people are involved. However, it seems bizarre for the authority to have such a draconian power that could be to the detriment of members of the pension scheme.

2.45 pm

We will come later to the role of the ombudsman and to people's right to complain to him. In the absence of an appeal mechanism, I can envisage the disgruntled taking Opra to the ombudsman and clogging up a system that has delays built into it. Why is there no appeal mechanism? I accept that there are vexatious litigants, but there are mechanisms to deal with such people. It seems unfair that there should be no appeal procedure for people who could be affected by the winding up of a pension scheme.


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