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Baroness Seear: Does what the Minister said mean that where there is only one-third of employee members, the employer members can override on every occasion if a majority decision is required? That makes a nonsense of employee membership based on a third.

Lord Mackay of Ardbrecknish: I do not believe that it does. Clause 27(3) (a) provides that the trustees may determine that a decision be taken provided that a majority of the trustees is present. The fact that a majority of the trustees is present acts as a protection against a minority of trustees being totally overridden.

Baroness Hollis of Heigham: No.

Lord Mackay of Ardbrecknish: It depends upon how one defines a majority and minority. We believe that there should be provision for majority decision-making in certain circumstances. We are giving the trust board the right to decide if it wants to take that route. It may decide not to take that route or that it wants to take it only in certain circumstances. The rules governing what forms a majority are tightly drawn. They mean that a few members of the board would not be able to take decisions when other members were not there who may or may not wish to vote against them. There are considerable protections in the current situation. I doubt whether we need to enlarge them in the way in which the amendments do.

Baroness Dean of Thornton-le-Fylde: I do not understand the Minister's rationale or arithmetic in respect of majorities. Earlier today the Minister stood by the provision of two-thirds of the trustees in occupational pension schemes being employer-nominated. Therefore, there is an inbuilt majority. Unless at a later stage the Minister is persuaded to give way that provision will remain in the

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Bill. There is reference elsewhere in the Bill to majority decisions. Where amendments have been put forward and the principle has been accepted we shall at a later stage table amendments requiring at least one member-nominated trustee to be present at the trustee meetings.

I rest my case on the recommendation in paragraph 4.5.58 of the Goode Report. It concedes the principle of decision by majority and states:

    "There is one further matter to which we wish to draw attention, namely the legal rule that under English law decisions of trustees must be unanimous unless otherwise provided by the trust instrument".

That is what the Minister quoted to us. The report continues:

    "We believe that such a rule is not suitable for pension fund administration; indeed, scheme rules regularly provide for decisions to be taken by a majority of trustees".

It concludes:

    "We recommend that this should be the law except where the trust deed otherwise provides".

That is specifically what Amendment No. 118N would provide. I had thought that the Minister would respond warmly to the final sentence of that paragraph, which states:

    "This would bring English law into line with Scots law".

I ask the Minister to reconsider the matter. We shall look at it again because it is an important principle to concede. Nevertheless, on this occasion—

The Earl of Clanwilliam: Is it not required to specify a quorum of trustees if the whole board is not present at a meeting?

Lord Mackay of Ardbrecknish: Yes, there would be a requirement for a quorum before any decision could be taken by majority voting.

Baroness Dean of Thornton-le-Fylde: Indeed, any meeting normally requires a quorum. If the trust deed provided other than a majority—and some trust deeds could do so—the majority rule would not apply, which is being suggested in the amendment. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 118P to 118R not moved.]

Lord Lucas moved Amendment No. 119:

Page 14, line 25, leave out ("reasonable").

The noble Lord said: I shall speak also to Amendments Nos. 120 and 121. The purpose of the amendments is to strengthen the requirement that trustees be given notice of all meetings. They will enable regulations to specify precisely where, in what way and within what timescale, notice must be provided to all the trustees. This will enforce the policy intention that all trustees, including member-nominated trustees, should be able to play their full part in the deliberations of trustee boards. OPRA will have powers of enforcement in case of a breach. I beg to move.

Lord Renton: The word "reasonable" is attractive but it gives rise to a great deal of argument in the courts.

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It would be far better to leave out the word "reasonable" and have definitive arrangements for the giving of notice. I gladly support the amendment.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 120:

Page 14, line 27, at end insert:
("( ) Notice under subsection (3) (b) must be given in a prescribed manner and not later then the beginning of a prescribed period.").

On Question, amendment agreed to.

Baroness Dean of Thornton-le-Fylde moved Amendment No. 120A:

Page 14, line 27, at end insert:
("( ) A determination under subsection (3) (a) of this section shall not be valid unless it specifies that at least one member-nominated trustee appointed under sections 14 or 15 shall be present when any decision is so taken, whether at a meeting of the main trust board or of any committee of trustees.").

The noble Baroness said: I shall speak also to Amendments Nos. 143 and 144. As the Bill is worded there is no reference to the recommendation made by the Goode Committee, nor to the reference in the White Paper accepting that recommendation. The amendment will insert a new subsection requiring at least one member-nominated trustee to be present when decisions are taken. Paragraph 49 of the Goode Committee recommends:

    "Schemes should set a quorum for meetings of trustees which should include at least one member-appointed trustee".

The White Paper stated that the Government accept that recommendation, but there is no reference to it in the Bill. We suggest that the Bill is deficient on that basis, even though subsection (3)(b) provides reasonable notice of meetings. I have had experience of such provisions and know that one can run a coach and horses through them. One can always ensure that some trustees do not receive notice or that meetings are held at times and in venues that are not necessarily appropriate.

The new subsection would ensure that a member-nominated trustee was present at meetings of the board and we hope that the Minister will accept that.

Amendment No. 143 provides for "may" being changed to "shall" because it is important to ensure a mandatory requirement. Amendment No. 144 provides that the,

    "Regulations shall require that a minimum number of trustees shall be present",

and shall,

    "include at least one member-nominated trustee".

I beg to move.

Lord Mackay of Ardbrecknish: Amendments Nos. 120A and 144 refer primarily to the requirement that a member-nominated trustee should always be present at any meeting of the main board or of any committee of trustees when any decision relating to the scheme is taken. In some respects they are linked with the previous debate.

We certainly support the principle that member-nominated trustees should be able to participate fully in the decisions of the trustee board. However, we do not believe that this amendment is an appropriate

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way to achieve that objective. It would effectively give member-nominated trustees a veto, and that is clearly not the intention.

To provide particular trustees with the means to dictate to trustee boards in this way would place disproportionate power in the hands of member-nominated trustees. A less than co-operative trustee, for whatever reason, could have a potentially disruptive effect on the scheme. It is a question of balance—and perhaps I may be forgiven for using that phrase for the second time today. We want to ensure member-nominated trustees are able fully to participate in the decision-making process but not at the expense of the efficient running of the trustee board. To achieve this we are taking steps to ensure that individual trustees have every opportunity to attend trustee meetings so that the full range of views can be heard.

On Second Reading the noble Baroness gave more detailed examples of the ways in which someone might make it impossible for a trustee to attend a meeting. He might say, "I will have the meeting at 11 o'clock tonight in Guadeloupe. By the way, my private plane is the only one that is going and I am sorry that there isn't a seat on it". That may be an exaggerated case but perhaps the noble Baroness has experience of something akin to it. The noble Baroness would be well advised not to accept a lift on a boat in those circumstances.

In Clause 27 we are taking power to require that notice of all meetings, including meetings of any sub-committees, must be given to all trustees in a prescribed manner and at a prescribed time. In that way we believe that the policy intention of providing all trustees with the opportunity to attend all trustee board meetings will be achieved. We fully intend that to be the outcome.

Amendment No. 143 would remove the flexibility provided in subsection (2) to make exemptions in certain cases from the requirements to keep books and records. It is normal practice in the majority of schemes for trustees to keep proper books and records, including records of all their meetings. Subsections (2) to (4) provide powers to make regulations and it is intended that these will set minimum standards of compliance.

We fully intend to bring forward regulations which will require those books and records to be kept by schemes, but there are some schemes for which that requirement would not be necessary. We are still considering what those possible exemptions might be, but there are unlikely to be very many. Those we have in mind at present are schemes with fewer than two members and so-called "unapproved schemes"; that is, schemes which are not approved for tax purposes.

In view of that explanation of what I expect to be in regulations, I hope that the worst fears of the noble Baroness have been removed in relation to catching the plane to Guadeloupe.

8.30 p.m.

Lord Renton: It may be that I did not hear my noble friend correctly and, if I did not, I apologise to him. However, there may be another reason for rejecting the amendment. Clause 14 envisages that there will not

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always be a member-nominated trustee. There may be a vacancy. Arrangements are made to deal with that. Clause 14(5) states:

    "If a vacancy for a member-nominated trustee is not filled because insufficient nominations are received";

and then it states what must be done. That is another reason why the amendment moved by the noble Baroness, Lady Dean of Thornton-le-Fylde, presents a difficulty.

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