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Page 6, line 45, leave out from ("not") to end of line 2 on page 7 and insert ("provide for a greater number of member-nominated trustees than that required to satisfy that minimum unless the employer has given his approval to the greater number").

The noble Lord said: This is a technical amendment to clarify the intention behind the clause. Schemes must permit their members to select at least one-third of the trustees, with a minimum of two, or one if the scheme has fewer than 100 members unless they opt out of the member-nominated trustee requirements.

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However, we recognise that there are many excellent schemes which currently exceed that minimum and we wish them to continue if the sponsoring employer is content. The current wording of Clause 14(7) (b) may suggest that employers have the right to approve or reject particular individuals as trustees, which is certainly not our intention. The amendment makes clear that the employer's agreement is required only for the member-nominated trustees if that number is above the statutory minimum. I beg to move.

Lord McIntosh of Haringey: We have no objection to the amendment which seems to improve the wording. I ask the noble Lord not to describe the amendments as "technical" all the time. He did so on the first day of our Committee stage and on a number of occasions that simply was not the case. Real changes of policy were involved even though the amendments had been described as "technical". The amendment is not objectionable but it is not a technical or drafting amendment.

On Question, amendment agreed to.

Baroness Seear moved Amendment No. 109A:

Page 7, line 2, at end insert:
("( ) The arrangements must provide for at least one trustee to be nominated by pensioner members of the scheme, once pensions are paid from it.").

The noble Baroness said: This amendment seeks to include on the trustee board a number of existing pensioners. I anticipate that the noble Lord will say that such a pensioner represents a special interest. We ask that a pensioner should be there because he has a special point of view, knowledge and appreciation of how the scheme works. Therefore, he can contribute to the collective knowledge of the unified group of trustees which will make the decision regarding the pension scheme.

It is true also that the interests of the member trustee who is still working in the organisation are not necessarily exactly the same as those of the pensioner who is benefiting currently from the scheme. At times, when there is any doubt as to whether the scheme is being properly run, it would be easier for a pensioner member to "blow the whistle"—the phrase we agreed to use to describe the situation when the regulator needs to be alerted to the fact that things are going wrong. He could not be victimised or lose his job because he does not have a job to lose, which would not be the case for a member trustee. Therefore, the argument for having a pensioner as a member of the trustee board is very strong. I beg to move.

Lord Desai: I support the amendment. I have been approached by the BT and Post Office Pensioners Association which is strongly in favour of the amendment. I agree with what the noble Baroness said. As a group, pensioners have an interest in how schemes are run. Although we take the point that trustees are trustees and are not representing sectional interests, I believe that it is fair and just that one pensioner should be on the board, especially when a scheme is mature and pensions are being paid through it.

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This proposal has commanded a great deal of support in the briefings I have received. Some Members of the Committee may have seen a letter in The Times on 4th February by Mr. Don Langford who is chairman of the English China Clays Executive Retirement Benefits Scheme Pensioners' Association. He believes that the proposal is in the interests of pensioners. Therefore, I support the amendment.

Baroness Hollis of Heigham: I support the amendment for three reasons. There are three rather than two parties to the pension promise—the employer, the employees and pensioners, both active and deferred. It is right and fair that the trustees should reflect the experience of the three parties, even though they are acting in an overall fiduciary way. There are 5,000 schemes with 1.83 million members which have a pensioner trustee and that is regarded as a valuable addition. It is necessary to ensure that the trustees reflect the balance and breadth of interest we wish to see.

Secondly, to emphasise a point already made, the experience and interests of pensioners may differ from those of employees. It is important that the trustee board should hear that voice. For example, issues as regards the eligibility of new members which may dilute schemes; changes in benefits for contributions; or changes in accrual rates which may add to future liabilities, are all matters of considerable significance to pensioners. Their interests may be at odds with those of active members. That is especially important when the scheme has in it more retired than active members.

The third reason for supporting the amendment is that a pensioner—in particular a pensioner who is elected or selected by his fellows—has time to give, very often has a real expertise, and has the retirement status to make him independent of improper pressure from any quarter. In a very real sense, a pensioner is less likely to be sectional and more likely to carry a fiduciary responsibility and stewardship than the other parties to the pension promise. For those reasons, we strongly support the amendment.

Lord Ezra: It seems to me that the argument is unassailable that we need to have on the boards of trustees members who represent all interests. Of course they will serve the scheme jointly, but in performing that service they would bring to it the expertise which has come to them from being concerned mainly with management, being working members of the scheme, or being pensioners. I should have thought that the Government could agree that such an amendment would strengthen the legislation.

Lord Mackay of Ardbrecknish: As has been pointed out clearly by those who have spoken, the amendment would oblige schemes to give pensioner members the right to select trustees. Therefore, it would give pensioner members a status and privilege greater than that given to other members and would limit the freedom of schemes to develop the selection arrangements best suited to their circumstances. Indeed, some schemes operate along the lines suggested by the noble Baroness and a number go even further and have specifically selected or elected pensioner members. Nothing in the Bill prevents that continuing. As I shall

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say on a number of occasions, after the Bill is enacted it will be very much a matter for the active and pensioner members as to how the member-nominated trustee section of the Bill should be dealt with when the scheme is put before them by the employer for their approval.

As I said, a wide variety of schemes operates at present. It would be wrong to impose a rigid and uniform selection process which may be quite unsuitable for some of them. Schemes should be free to develop their own arrangements for the selection of trustees, but such an arrangement must command the approval of active and pensioner members. That may be extended to deferred members if the trustees so wish.

Those arrangements will determine who is eligible to nominate trustees. Members' interests, including pensioner members' interests, will thus be protected by the regular statutory consultation procedure. The Bill gives equal opportunities and rights to both active and pensioner members. I hope that the Committee will agree that it is for scheme members to decide the best way to nominate their trustees.

The amendment would in fact introduce a mandatory pensioner trustee by the back door, although I know that some Members of the Committee would be quite open and would want to introduce such people by the front door. I fully accept that various organisations representing pensioner interests have lobbied us on the point. We have listened most carefully to their arguments; indeed, as I indicated, I share their view on the diligence and competence of the vast majority of pensioner trustees. I do not argue at all with the noble Baroness about that aspect of her speech, although she said it in a way that rather assumed that I opposed it. That is not the case.

I know that many schemes have pensioner trustees. We have received evidence from many sources of the considerable contribution that they can make to running schemes. That evidence may well encourage scheme members to nominate a pensioner member as a trustee voluntarily. We want to see the best possible trustees running schemes. We have no objection to pensioner trustees, or any other type of trustee, if that is what the members want.

The noble Baroness, Lady Hollis, gave three reasons why she thought pensioner trustees were a good idea and should be made mandatory. There is no dispute between us about them being a good idea if that is what scheme members want. However, the dispute between us concerns whether that should be made a mandatory requirement and written on the face of the legislation.

The noble Baroness mentioned the fact that pensioners would somehow be free from improper pressures, although, interestingly enough, she instanced as one of her reasons the particular interest that pensioners would have against what may be the interests of active pensioners. That is not really an argument that I should like to see developed—namely, the role of one trustee against another—as regards members' interests.

One of the noble Baroness's main arguments was about the pressures exerted on employee trustees by an employer. We have heard a good deal about that during our deliberations from the noble Baroness, Lady Dean,

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who has the experience of the Maxwell pension business to fall back upon. Indeed, no one could argue with the horrors of that particular case.

However, similar claims could be made against pensioner trustees—for example, that they were only interested in enhancing pensions and that they see themselves as representative of pensioners. I do not believe that we should give weight to any of those suppositions. I wish to avoid anything that could lead members to regard the trustees whom they select as representative of a particular group or faction among the members of the scheme, whether they be active members, deferred members or pensioner members. If pensioner members were singled out to have the right to nominate their own trustee, there could be a danger that that trustee might not enjoy the confidence of active members. It would of course be quite a different situation if a pensioner member is selected to be a trustee under impartial rules agreed by both active and pensioner members.

As I have said, trustees are not representative of any particular party to the trust deed. They are required to act in the best interests of all parties. Their conduct will very much depend on their qualities as individuals rather than their category within the scheme. However, in the event of improper interference by an employer in areas covered by trustees' powers, there are several safeguards. Trustees will be free to approach the occupational pensions regulatory authority if they feel that the employer is obstructing them in the performance of their duty. There is the duty on scheme professionals to report any irregularities to the authority and the employer will not be able to dispose of a member trustee simply by terminating his employment. Trustees will enjoy the same protection under employment law as other employees.

Pensioner members should have the same rights as active members in approving any selection rules proposed by the trustees of their schemes. However, accepting the proposed amendment would fetter members' choice by imposing preconceived selection arrangements. It would restrict the freedom of schemes to develop their own selection rules which would be developed to meet their own particular requirements. If the matter becomes the subject of a Division, I would urge Members of the Committee to reject the amendment.

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