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Baroness Turner of Camden: I am not really surprised by the Minister's response, although I am a little disappointed. I ask him to accept that indexation is a very important issue for many pensioners, particularly those who have been on a pension for some years because the value of their pension in relation to earnings has fallen as the years have gone by.

I am not very happy with the Minister's response, but I shall take further advice before Report. A number of representations have been made to me on this issue. It has been pointed out to me that there are already pension schemes and pension scheme rules whereby pensioners and indexation for pensioners have the priority which I am seeking to give in my amendment. As I understand it, that will be overruled by this legislation once it is on the statute book. Therefore, although I feel unhappy about this, I am not willing at this time to press the amendment to a Division, so I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Lindsey and Abingdon moved Amendment No. 150A:

Page 37, line 43, after ("accrued") insert ("save that any member of a scheme to which this section applies who has accrued 20 years service and attained the age of 50 shall be entitled to a pension actuarially reduced or otherwise as if entitled under subsection (3) (b) above.").

The noble Earl said: I thank my noble friend the Minister for his comprehensive reply, which was more encouraging than I had expected. However, I still feel that the older pensioner of, say, 65 who, in addition to his company pension, is already drawing a state pension has a substantial advantage over an early leaver. I believe that that still applies because of the actuarial reduction in his benefits. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 151 not moved.]

Clause 66 agreed to.

Clause 67 [Discharge of liabilities by insurance, etc.]:

Lord Haskel moved Amendment No. 151A:

Page 38, line 22, after ("requirements") insert ("being a scheme acceptable to the member").

The noble Lord said: In moving Amendment No. 151A, I should like to speak also to Amendments Nos. 151B and 163B. I am not sure why Amendment No. 163B has been grouped with this amendment, but I shall attempt to speak to it.

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Clause 67(3) lists four ways of winding up a scheme. Paragraphs (a) and (b) allow members' rights to be transferred to other occupational or personal pension schemes. Paragraph (c) allows a scheme to be wound up by purchasing annuities from insurance companies chosen by the members. However, paragraphs (a) and (b), under which members' rights can be transferred, do not require that members should agree. They require only that the new scheme should satisfy the "prescribed requirements". Winding up a scheme is obviously a major decision and I believe that members should be consulted about it, whatever the way in which it is wound up. The amendment therefore seeks to iron out the differences in treatment and requires the members' agreement irrespective of the destination of the members' rights.

Amendment No. 163B deals with payments made in anticipation. It is a probing amendment and is intended to provide an opportunity to make it clear that, when the board makes a payment in anticipation of compensation, the trustees will not become liable personally for repayment. The legislation as it stands says merely that the board can recover part or all of such payments to trustees where it subsequently decides that the necessary criteria have not been met or that the payments were excessive. Without a guarantee that they will not become liable personally, there is a risk that trustees will not apply for such payments and scheme members will lose out. I beg to move.

9.45 p.m.

Lord Mackay of Ardbrecknish: At present most occupational schemes require the trustees to discharge the member's liabilities by purchasing an annuity when the scheme winds up. That is not always the best method of securing a member's pension rights and in the cases of large schemes the costs and volume required may make that avenue impractical.

The Government believe that the trustees should have a number of options for discharging their liabilities. That will provide them with the flexibility to follow the most favourable avenue for members.

Clause 67 will enable trustees to discharge their liabilities by purchasing annuities; by paying the actuarial value of their accrued rights; by enabling members to take transfer credits in another scheme; or by enabling the member to take a personal pension. Secondary legislation will provide that individual members will have a period of six months in which to consider the trustees' proposals, take advice and, if they wish, to put forward an alternative option.

The noble Lord will appreciate that, as a transfer to another occupational pension scheme and a personal pension are individual arrangements, they are dependent on the member's consent. Without that consent, the trustees could not discharge pensions liability through either of the routes to which I have specifically referred. I hope on that basis the noble Lord is prepared to withdraw the amendment.

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I am not entirely sure whether the noble Lord spoke to Amendment No. 163B which relates to the Compensation Board. I do not want to answer an amendment that has not been spoken to, especially at this time of night.

Lord Haskel: Yes, I did speak to it.

Lord Mackay of Ardbrecknish: I thank the noble Lord. One becomes so immersed that one begins to wonder whether one has heard the argument or just read it. Amendment No. 163B concerns the operation of the Compensation Board. The board will be able to make interim payments to schemes to ensure that scheme members, particularly pensioners, do not suffer undue financial hardship. The board will be able to make those payments when it has reasonable grounds for believing that compensation is appropriate. That is essential. It allows the Compensation Board to act quickly and effectively. But the board may decide after further investigation that compensation is not, after all, appropriate or that too much has been paid. There is therefore provision for the board to recover any payments made if that happens. It must be right for the board to be able to do so, because all compensation payments are funded ultimately through the levy paid by other schemes.

I understand the noble Lord's concern that those recoveries should not penalise scheme members. Of course, the intention of the Compensation Board is to assist, not penalise, scheme members; and we do not envisage that the board would press for recovery if it would be detrimental to scheme members. But we believe that that is a matter for the board to determine. Each case will be different and the board will be in the best position to determine what impact any recoveries will have on scheme members. However, we recognise that an important issue has been raised. Indeed, the National Association of Pension Funds has already brought that to our attention and we have undertaken to think about it further. We shall certainly do so after having this short debate.

Lord Haskel: I thank the Minister for his explanation about Amendments Nos. 151A and 151B. That clears up the matter very well. On Amendment No. 163B, I am pleased that the Minister will look into the matter further. The point I wanted to make was merely that it should not be trustees who are liable personally for any repayment. I hope that when the Minister is looking into the matter that point will be taken into consideration. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 151B not moved.]

Clause 67 agreed to.

Clause 68 [Deficiencies in the assets]:

Lord Lucas moved Amendment No. 151BA:

Page 39, line 30, after ("verified") insert ("by a prescribed person and").

The noble Lord said: I shall speak also to Amendments Nos. 151CA, 170A, 170B and 170C. The effect of Amendment No. 151BA is to insert a power into Clause 68 which allows regulations to make it clear

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that the calculation of a debt on the employer is to be undertaken by a suitably qualified actuary. This is an existing provision of the Pension Schemes Act 1993, Section 183(3). The amendment simply ensures that the provision will continue.

Amendment No. 151CA will allow for certain schemes to be exempt from the deficiency on wind-up provisions. This means that schemes which are exempt from the minimum solvency requirement under Clause 49(2) can also be excluded from these provisions. It is important that Clause 68 can be made to dovetail with the minimum solvency requirement. This amendment, therefore, also introduces a general power to modify the provisions as they apply in certain circumstances.

Although there is an existing power to modify Clause 68 included in Clause 108, this is limited to particular sets of circumstances. The power to modify minimum solvency is not limited in this way and it is desirable that the same wider power is introduced into Clause 68. The other amendments are consequential. I beg to move.

On Question, amendment agreed to.

Lord Haskel moved Amendment No. 151C:

Page 39, line 37, leave out ("not").

The noble Lord said: The amendment makes any debt due from the employer when a scheme is wound up a priority under the terms of the Insolvency Act 1986 and the Bankruptcy (Scotland) Act 1985. The money in question is, in effect, the employees' past earnings over which they have had no control and hence should be regarded as a priority debt. The argument made against that previously was that it was impractical for other potential creditors to ascertain what were the employer's unmet pensions liabilities. This argument is no longer valid as they can now seek information on how far a potential debtor's pension scheme complies with the MSR and the contributions to its schedule. I beg to move.

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