Memorandum submitted by Which? (PE 23-B)

Suggested amendment to give PADA an overriding duty to act in best interests of members and future members

Amendment to Clause 62 (1)

Page 29, line 3 at end add-

'and the Authority must exercise an overriding duty to act in the best interests of members and future members of the scheme'.

1. Purpose

This amendment would ensure that all decisions made by PADA regarding the establishment and operational structure, the processes and the procurement of the Personal Accounts scheme should be made in the best interests of members and future members of the scheme.

The overriding duty must be to give assistance and advice in connection with the operation and establishment of a scheme under Section 50(1) in the best interests of the future members of the scheme.

2. Argument

Introducing an overriding duty on PADA to act in the best interests of future members will:

 

Help ensure that all decisions regarding the structure and procurement are taken in the best interests of future members

Send out a strong message to consumers that Personal Accounts will be a first class scheme

Improve consumer trust and confidence in the scheme

 

3. Background

The Personal Accounts Board will be a trustee corporation which will be run by a board of trustees. Trust law requires trustees in discharging their functions to carry out their fiduciary duty and to act "prudently, responsibly and honestly" in the best interests of members and beneficiaries. This sends out a strong message that the scheme will be run by an independent board which will act in the members' best interests.

The Personal Accounts Delivery Authority is not a trustee corporation. The functions of the Authority are defined in Clause 61(2) as:

 

a) To give any assistance and advice that the Secretary of State may require and any advice that the Authority considers expedient, for or in connection with the establishment and operation of a scheme under Section 50(1);

b) To give any assistance and advice that the Secretary of State or the Pensions Regulator may require, and any advice that the Authority considers expedient, for or in connection with arrangements to enable requirements imposed under Chapter 1 of this Part to be complied with and enforced.

Section 62 (1) states that in carrying out these functions the Authority must have regard to the principles set out in 62 (2).

4. Which? view

It is essential that the Delivery Authority has the remit and powers to deliver the best possible scheme for prospective members. The Delivery Authority will be making major decisions concerning the structure and processes of the scheme, in addition to overseeing the procurement. We are concerned that PADA will not have an overriding duty to act in the best interests of prospective scheme members. Our consumer research has consistently demonstrated that consumers trust an independent board the most to administer Personal Accounts. Which? believes that the Bill needs to be explicit that all decisions by PADA should be made in the best interests of prospective members of the scheme. This will make it clear that where principles or objectives are conflicting, the overriding duty must be to members and future members of the scheme.

The overriding duty to scheme members will make it clear that the Delivery Authority has a clear remit to make the Personal Accounts the best possible scheme.

January 2008