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Lord Boyd-Carpenter: My Lords, my noble friend referred to Amendment No. 117 and indicated that this was to secure that verification was undertaken by an actuary. The amendment refers to a "prescribed person". Where is it laid down that a "prescribed person" means an actuary?

Lord Mackay of Ardbrecknish: My Lords, to answer my noble friend Lord Boyd-Carpenter first, in a slightly less simple question than the one he asked me earlier, I have explained that it is our intention to ensure that the people defined will be as I indicated—Fellows of the Institute of Actuaries or of the Faculty of Actuaries. We shall be making it clear in regulations that those qualifications will be necessary for those individuals described as "prescribed persons". It is not laid down in the Bill, but our intention is that it will appear in the regulations.

To turn to Amendment No. 120, as the noble Baroness indicated, we would normally expect the employer and the trustees to agree the rates of contribution to be entered in the schedule. But there needs to be a failsafe in the event of their being unable to agree. We believe that it is appropriate for that failsafe to rest with the trustees but that they should not be able to expose employers to financial risk. The amendment would leave the trustees with the power to set the contribution rate but limit their discretion so that they cannot prescribe a rate which is more than adequate to comply with the minimum funding requirement.

The noble Baroness is arguing that that limits the powers and the responsibilities of the trustees. But this is a default procedure in the event of an agreement not being reached between the employer and the trustees. It must be in the interests of all the parties that that does not happen and that they do reach agreement. The amendment is necessary to keep a balanced approach and avoid the risk of the employer being put at financial risk should the trustees demand an unreasonably high rate of contributions which was over and above the rate acceptable to the employer and more than adequate for the scheme to meet the minimum funding requirements.

Our analysis indicates that the vast majority of schemes, as the noble Baroness said, are already funding above the minimum funding level and there is no reason why the introduction of the minimum funding requirement should change that. It would be prudent practice for schemes and sponsoring employers to keep a margin in the fund above the minimum level to avoid the risk of the scheme failing to meet the test and

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triggering what could be a destabilising cash call on the employer. We hope that Amendment No. 120 provides a backstop—a failsafe—in the event of the employer and the trustees being unable to reach agreement.

While I see the point being made by the noble Baroness, we hope that we have struck a balance in the light of disagreement between the trustees and what their views might be and the needs of the employer. However, we hope that the situation will not arise where the use of the failsafe becomes necessary.

Baroness Hollis of Heigham: My Lords, the Minister has confirmed what I feared—where there is a dispute the minimum funding requirement becomes effectively a maximum funding requirement. His point that most schemes will go above it, for the sake of prudence and so on, should precisely apply in those situations where there is a dispute between employers and trustees, because that dispute is likely to occur when there is either some controversy in the management or there is some doubt about the financial viability of the employer's scheme, and so on.

I am rather worried. From what the Minister has suggested, those schemes where the trustees have most doubt, because there they are not getting the support of the employer, are precisely the ones which will have as their maximum funding requirement the minimum funding requirement and, as the Minister himself said, that is not for the most part likely to be adequate for a scheme to be prudently managed. The Minister has allowed no headroom for a situation where there is a dispute between employers and trustees. I wonder whether even at this late stage the Minister might like to produce some headspace. After all, this is only about an 80 per cent. minimum funding requirement of what is required for full solvency. Therefore, where there is a dispute—precisely where headspace is needed—there will not be headspace. That will expose more scheme members to more risk than was ever intended. Can the Minister help us further?

Lord Mackay of Ardbrecknish: My Lords, of course I should like to help the noble Baroness further in this regard but I should perhaps remind her that we had a debate about this problem. I cannot recall whether it was a long one or a short one. It did not take up too many columns of Hansard, so it must have been fairly short. My noble friend Lord Buckinghamshire raised a concern that the Bill as originally drafted would leave the trustees with control over the rates of contribution payable by the employer and that could potentially leave employers financially vulnerable.

The amendment with which we are dealing now was made in the other place in June. It is needed to achieve the objective that the trustees, if there is a disagreement, should not have a power to decide on a rate which is more than adequate for the MFR rate. It is a failsafe. I do not really believe that one could operate a failsafe which set a floor for the failsafe above the level of the minimum funding requirement. That is what the noble Baroness wants me to do. I do not think one should do that. If I were to do that she would accuse me of not looking at the MFR as a safe floor. Therefore, we have to aim at looking at the MFR as the safe floor, in what I think we would both agree is the very unlikely event that the failsafe power is needed.

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A balance has to be struck here. I am sorry that the noble Baroness feels uneasy about it but I can assure her that we believe that this is the right balance. We do not believe that it will be putting members of pension funds at risk. I hope that she can see her way to agreeing with me that it is better that we treat the MFR as the floor in this regard rather than attempt to set another floor above that MFR.

Baroness Hollis of Heigham: My Lords, I do not want to extend this debate but clearly the MFR is the level to which employers must fund the scheme and, above that, to which trustees might or may fund the scheme. Let us remind ourselves that two-thirds of all trustees will be employer appointed—the Government rejected Opposition amendments to the contrary—so it is unlikely that there will be a dispute between the employer and a trustee body in which the employer's interest remains dominant. A dispute will occur only in situations where even the employer's trustees feel that the scheme is at some risk. However, we have expressed our concerns. I do not wish to push the matter further, but I believe that the Government are leaving scheme members unreasonably exposed in the most precarious of situations.

On Question, Motion agreed to.

123Clause 56, page 35, line 27, at beginning insert 'Subject to subsection (4B)'.
124Page 36, line 3, at end insert:
'(4A) References in subsection (4) and sections 57 to 59 to the terms referred to in subsection (2), or the effect of any of those terms, include—
(a) a term which confers on the trustees or managers of an occupational pension scheme, or any other person, a discretion which, in a case within any of paragraphs (a) to (c) of subsection (3)—
(i) may be exercised so as to affect the way in which persons become members of the scheme, or members of the scheme are treated, and
(ii) may (apart from the equal treatment rule) be so exercised in a way less favourable to the woman than to the man, and
(b) the effect of any exercise of such a discretion;
and references to the terms on which members of the scheme are treated are to be read accordingly.
(4B) In the case of a term within subsection (4A) (a) the effect of an equal treatment rule is that the term shall be treated as so modified as not to permit the discretion to be exercised in a way less favourable to the woman than to the man.'.
125Clause 57, page 36, line 6, at end insert 'and the reference in section 56(4A) to the way in which members of a scheme are treated includes the way they are treated as it has effect for the benefit of dependants of members.'.
126Clause 60, page 37, leave out lines 33 to 41 and insert 'subsections (1A) and (2) (exclusion for terms related to death or retirement) there is substituted—
"(1B) An equality clause shall not operate in relation to terms relating to a person's membership of, or rights under, an occupational pension scheme, being terms in relation to which, by reason only of any provision made by or under sections 56 to 58 of the Pensions Act 1995 (equal treatment), an equal treatment rule would not operate if the terms were included in the scheme.

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(1C) In subsection (1B), "occupational pension scheme" has the same meaning as in the Pension Schemes Act 1993 and "equal treatment rule" has the meaning given by section 56 of the Pensions Act 1995".'.
127Page 38, leave out lines 3 to 17 and insert:
'( ) for subsection (4) there is substituted—
"(4) Subsections (1) (b) and (2) do not render it unlawful for a person to discriminate against a woman in relation to her membership of, or rights under, an occupational pension scheme in such a way that, were any term of the scheme to provide for discrimination in that way, then, by reason only of any provision made by or under sections 56 to 58 of the Pensions Act 1995 (equal treatment), an equal treatment rule would not operate in relation to that term.
(4A) In subsection (4), "occupational pension scheme" has the same meaning as in the Pension Schemes Act 1993 and "equal treatment rule" has the meaning given by section 56 of the Pensions Act 1995".'.

Lord Mackay of Ardbrecknish: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 123 to 127. At the same time I wish to speak also to Amendments Nos. 278, 316, 320, 321, 324 to 326, 374 and 376 to 380. This group of amendments deals with the extremely complex area of equal treatment. Amendments Nos. 123 to 125 will ensure that the principle of treating men and women equally in their access to and membership of occupational pension schemes is complied with even when scheme rules contain an element of discretion. Any discretion permitted to trustees in trust deeds will have to be exercised in accordance with the equal treatment rule.

Amendments Nos. 126 and 127 ensure that UK legislation on sex equality in employment is brought into line with EU law. They reflect the fact that decisions of the European Court of Justice since 1990 have permitted derogations in limited circumstances from the principle of equal treatment in the field of occupational pensions. Employment law will now reflect exactly what pension law requires. The amendments are structured so that future changes in the relevant pensions legislation will apply equally in the employment provisions.

Amendment No. 278 changes the commencement date of the equal treatment provisions in the Bill. Instead of coming into force immediately on enactment, we have decided that it would be better to bring them into force by commencement order. This is to ensure that the powers under which the present equal access regulations are made and related provisions remain in force until the regulations under the new powers in the Bill can be made, laid before the House and brought into force. We intend that the relevant provisions should be brought into force by commencement order instead of on the day the Bill is enacted. This will ensure continuity of the relevant legislation and not lead to the possibility of there being, so to speak, a hole in the system.

Moved, That the House do agree with the Commons in their Amendments Nos. 123 to 127.—(Lord Mackay of Ardbrecknish.)

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