Pensions Bill

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Danny Alexander: I understand what the Minister says about the need for flexibility in designing this, and I was encouraged by what he said at the beginning of his remarks about following best practice. In the interests of brevity, can I ask him whether the ideas contained in subsections (3F) and (3G) of the amendment—which relate to the way in which the representations made by the panel have to be listened to, and the advice and research functions of the panel—do in fact follow best practice, particularly relating to the financial services consumer panel? Are they are the sorts of things that he would like to see the panel carry out in relation to personal accounts under the Bill?
Mr. O'Brien: Members of the trust board would want to have regard to the views of the panel. We would not want them necessarily to be bound in this sense. The trustees are going to have to make decisions. That is what they are there for. When they make decisions, they will no doubt listen to the views of the panel and the members. I suspect that if they went very strongly against either, they would have to have very good reasons for doing so.
However, we are creating a trust-based pension scheme here, in which the trustees have to make decisions. We can say, “Look, we are creating for you a larger scheme than anything that exists at the moment anywhere else in the country, and you probably have greater responsibilities than any other trustees”. One of those obligations is to have regard to the views expressed by the panels. I do not, however, think that we should change the decision-making capacity of trustees so fundamentally that we effectively create a new type of body that has to do what members’ panels say.
The members’ panels are a way of getting soundings. They are not a way to make final decisions. That responsibility must lie where the legal responsibility lies, and that is with the trustees. That is the way other pension schemes work. That is where trust comes from. A genuine sense of responsibility should lie on the trustees’ shoulders.
Amendment No. 64 would give the employers’ panel a similar function to the members’ panel to nominate members of the trustee corporation. The role of the employers’ panel is important. It will be charged with providing advice on matters relating to the scheme as they affect employers. It will be the main channel for consultation between the trustee and the employers. The requirement to have member-nominated trustees stems from the desire to ensure that the scheme is run primarily for the benefit of members. It is the scheme members who ultimately benefit from the introduction of the scheme, especially those people for whom no pension is available at the moment. That is why the Bill ensures that members will be able to nominate trustees, and this is in line with the current legislative requirements. Trusts are there for the benefit of members, not employers. They are beneficial organisations and the beneficial owners are the members. The trustees hold the organisation and its assets in trust for the beneficial owners. That is the way the system works.
All the individuals who form the corporate trustee will have the sole obligation to act in the members’ best interests, rather than representing employers or any other particular interest group. It will not be possible for the trustee to meet its duty of acting in the members’ best interests without taking account of employers’ concerns, but it is not appropriate to appoint members of the trustee with this as a specific role or indeed in any sort of representative capacity for the employers. Employers should not be represented on that board, because the trustees are all there to represent the members.
I want to say a brief word about the effects of amendment No. 27. The amendment as written provides that the trustees will determine the composition and function of the panels under an order. However, the trustees cannot make an order, this being the prerogative of Government. So they would have to set the detail out in some administrative document that would not necessarily be open to any debate, let alone a debate in Parliament. The trustees would later amend the rules to include this detail, but the panels must be established first because the trustees cannot make any rule changes without first consulting the panels. The consequence of this amendment, therefore, would be to delay setting up the panels and remove the public or parliamentary debate about their constitution and functions. I am sure that is not the intention of it, but that would be the consequence, so I just lay that out as a warning.
Turning to amendments Nos. 154 and 155, I note the reference to payments being made to the chair and members of the members’ panel and the points being made about appropriate recompense for those who are acting in that capacity. I would like to take this opportunity to say that I was looking to introduce an amendment to subsection (5) of this clause to make it clearer that all members of both employers’ and members’ panels could receive such payment for their time spent on panel duties and reimbursement of any necessary expenses.
As PADA will be advising on the constitution and functions of these panels, it would also consider and advise on what payments may be appropriate in order to secure the services of the most suitable people to be panel members. So I do want to flag up that, on this particular issue that the hon. Member for Inverness, Nairn, Badenoch and Strathspey is raising, I do propose to table an amendment that will address at least one of the points that he made in his intervention. I hope with those reassurances and some of the concerns about the detail of these particular amendments the hon. Gentleman will feel able to withdraw the amendment.
Danny Alexander: On the last point that the Minister made about the payments to panel members, I am reassured by what he said. What he is proposing—to bring forward another amendment to widen the scope slightly—will have a beneficial effect, particularly on the range of people who will feel able to take on the duties of involvement in a members’ panel. I do understand what he is saying about the need to think through the scope and range of the panel, and that is what he is asking PADA to do. That will be brought forward in regulations.
Mr. O'Brien: Just to give the hon. Gentleman some reassurance, I take his point in relation to proper resourcing. It will be noted by those on PADA, who look at the detail of this, that we regard both the members’ and employers’ panels as vital. They will therefore need to be appropriately and properly resourced. He also makes a valid and interesting point about research, which I will consider further. I cannot give him any further reassurance on that, but I am sure that those on PADA who will be listening to these debates will be aware that there may well be a requirement that the members’ and employers’ panels should be properly informed. I am conscious, however—I am conscious, too, of the length of this intervention—that there are cost implications which need to be properly factored into it. Rather than trying to deal with that now, we should let PADA do it in due course and advise.
Danny Alexander: I am grateful to the Minister for that necessarily lengthy intervention and I am reassured. He is right that there has to be a proper balance between the costs found; no doubt PADA will bring that forward. However, an understanding now of the importance of the members’ panel having access to independent research is important. My other point, which relates to the intervention from the hon. Member for Carmarthen, West and South Pembrokeshire, concerns the process by which the panel members are chosen—the Minister has addressed that adequately in his response. It also relates to the way in which the views of the panel have to be listened to and responded to by the trustees.
The Minister is right in saying that there is a clear difference between the trustees, who are the sole people for taking decisions, and the panels, who have a responsibility to represent the interests of members and employers and to offer their views. However, it is important—this is something that will have to be borne in mind by PADA—that in constructing the relationship between the panel and the trustees, there are some clear obligations about how the trustees must receive and respond to representations that are made to them by the panel; that is the practice in some other such panels. I hope that those comments will also be noted.
Given much of what the Minister has said, I am happy to withdraw the amendment concerned. However I hope that those points will be noted on the record and by PADA as they go forward to construct the way that the members’ panel works. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Danny Alexander: I beg to move amendment No. 100, in clause 52, page 25, line 31, at end add—
‘(6) The Secretary of State must provide the panels with—
I will not take long with this. The amendment makes a point which, although extremely important, is one that we have debated at an earlier stage. The amendment proposes that, in order to support the work of the panels, it is important that the panel members understand the broader context—the backdrop—against which the scheme is operating. Clearly, members and their representatives, particularly those on the members’ panel, will therefore have a specific interest in how the benefits that members are receiving, or are likely to receive, are interacting with the wider pensions environment. This is particularly true in the pensions environment, as it relates to means tested benefits, but also the wider environment that pensioners are exposed to in terms of means tested benefits. Throughout the earlier stages of the Committee’s deliberations we looked at the importance of housing benefit in this context for some pensioners.
The amendment seeks to oblige the Secretary of State to provide the panels with information: first, that concerning the impact of means tested benefits for members of the scheme; and secondly, whether the way in which the concept of levelling down is happening or not. That will also be a matter of concern for the panels. That is the point of the part of the amendment that refers to
“an annual report assessing the quality of qualifying schemes”.
In case the Minister is in any doubt, I repeat that I welcome the commitment he made earlier in our deliberations to undertake a report suggested by Help the Aged on the broader issue of means testing. That will be subject to further consideration and debate in due course. It is also important that information is provided to the panels as they carry out their work, to enable them to understand the context in which the personal accounts are operated. I look forward to the Minister’s response on that point.
2.30 pm
Mr. O'Brien: I am slightly perplexed by this amendment. It is entirely appropriate that we should debate whether it pays to save and also issues around levelling down. The members’ panels, however, are primarily going to be looking at how the scheme itself operates. It is primarily an internally-focused operation looking at whether this pension scheme is properly run, adequately delivering to the members and whether its strategies are taking account of the views of the members. I think that is a pretty big job.
What the hon. Gentleman is suggesting is that members of the panel should be more outward-looking, examining the impact of personal accounts on levelling down, the benefit system, whether it pays to save and that they should be aware of these things because of the impact on members. I appreciate that these things will have an impact on the members, I am just not sure what impact the members’ panel could have on those things as a members’ panel. It is essentially looking to the board of trustees and ensuring that the board of trustees is doing things that are in the interest of the members. It is a sort of sounding board for the trustees on the operation of the pension scheme.
So while I think these are perfectly proper and legitimate issue which we can debate in a wider context, I am just not sure that they are what I would expect the members’ panel to be focusing on. They will have enough work to do without focusing on those issues. I have no problem with them having information about these things, I am just not convinced that this is what they ought to be up to.
I am confident there will be a proper flow of information between the trustee and the panels, the trustee board will be as keen as the government to make all this work. I do not think it is appropriate to specify the types of information they need to fulfil their duty, to some extent that is for the members’ panels to determine for themselves. I hear what he says about research and if they wanted to get reports on pays to save and whether there is any levelling down, I do not see any reason why they should not get that, but what I would hope if I were ever a member of personal accounts is that whoever is on the members’ panel will be watching the decisions being made by the trustees board and ensuring the trustee is acting in the interest of the members and that investment decisions, the management, the operation, the procedures, the processes of collection and administration and payment are all ones which are in the interests of the members. I just see a different role so I am a little perplexed by the amendment. I do not dispute that the issues are ones we need to discuss, I am just not sure they are issues for the members’ panels. I do not object to them discussing them, it is a matter for them.
Danny Alexander: I am sorry if the Minister is perplexed. The amendment was not meant to be perplexing and he is right to say that in carrying out their work, the members’ panel obviously has to be focused primarily on the operation of the scheme, decisions made by the trustees and so on, but as he also said, one of the roles of the members’ panel is to make sure the scheme is adequately delivering to members. The point of this amendment is simply seeking to draw this out and in his comments I think he accepted that this was an area where the members’ panel might wish to have information from time to time, and, if they did, there would be no problem with them having it. So, in a sense, I regard my point as having been satisfied by the Minister, and therefore I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 52 ordered to stand part of the Bill.

Clause 53

Contribution limits
Mr. Waterson: I beg to move amendment No. 28, in clause 53, page 25, line 34, at end insert
‘save that the employers’ contribution shall be fixed at 3 per cent. of the amount of jobholders’ qualifying earnings in any pay reference period.’.
This is a fairly simple amendment, harking back to earlier clauses—which is very much welcomed by employer organisations like the CBI—and clearly sets out a 3 per cent. employer contribution in the Bill. We had a fairly prolonged debate about this issue only the other day, in the context, I think, of a Liberal Democrat attempt to jack that up to 5 per cent. But we managed to defeat that—or at least persuade them of the error of their ways—on the basis that this was all part of the post-Turner settlement, as it were.
It is important that that be in the Bill and I cannot imagine that there can be any controversy about also writing it in to clause 53, which deals with contribution limits. There are other issues regarding what should be in the Bill and we will come to those in later amendments.
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