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Lord Higgins: This has been a helpful debate. As the noble Lord, Lord Goodhart, rightly suggests, perhaps the figure of 10 is not necessarily the appropriate number of employees. The Minister and the noble Baroness, Lady Crawley, have suggested that 84 per cent of employers would be excluded on that basis.

There are two separate issues. One concerns whether the employers should provide facilities for making contributions. Considering our discussion a few days ago on working families' tax credit, this is yet another complication with regard to the way in which the companies account for PAYE and so on. The burdens are, yet again, placed upon small businesses by the Government, but one can understand why they believe that it is appropriate that that should be so.

The second question is that of selecting a stakeholder scheme. If there are only three employees, it is debatable whether they are in as good a position to make the decision as the company, which may involve, at most,

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one or two people. At this stage it becomes a personal matter, rather than a matter for a company as such. The employee and the employer are probably equally qualified to make a choice.

There is also the question of the extent to which--

Lord McIntosh of Haringey: The only argument for the employer making the choice is that, if he makes the selection and offers that to the employees, he will make deductions for one scheme only, whereas if three employees choose different schemes the employer would have to make deductions on behalf of three schemes, which would be more complicated.

Lord Higgins: I am not suggesting that if there are three employees and two employers they could all choose different schemes. That would be pretty unlikely, as I believe the Minister would accept. However, the question is how much variation there will be in the schemes. Given the tight way in which the proposal is circumscribed, it is difficult to see how they will be greatly differentiated, or indeed why the employer should select one rather than another. There will not be many schemes offering the provision of the product at less than 1 per cent on the costs and presumably they will be much the same. I leave on one side trustee schemes involving trade unions and so on. Presumably the small employer will have a certain number of providers who will say that they can make the schemes pay at the level of charges that the Government impose. To what extent the products will be differentiated is difficult to see. The well known system of sticking a pin in a list of names may as well be used.

Lord McIntosh of Haringey: Good capitalist competition will mean that many will beat the minimum conditions set out in our consultation paper and, therefore, there will be real competition.

Lord Higgins: In deference to the noble Lords, Lord Peston and Lord Desai, I shall not go into economists' views on perfect competition. As the noble Lord has described, in the circumstances they very often come up with the business.

On a serious level, it will be difficult for employers to make a choice. Subject to that, I beg leave to withdraw the amendment. I may want to return to the point made by the noble Lord, Lord Goodhart. There is probably a minimum level at which stage it becomes absurd, other than in the context of collecting the contributions.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 24:

Page 3, line 25, at end insert ("but an employer shall in no way be responsible for any consequences which result from the failure or performance of an authorised stakeholder scheme")

The noble Lord said: We have already stressed the difficulty which employers may face in deciding which scheme to go along with. But what is clearly the case is that the employer ought not to be held legally responsible for what happens, either with regard to a specific stakeholder scheme failing--I presume that is

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not totally impossible because such schemes are not subject to the kind of provisions to which some occupational schemes are subject--or its performance. It may be that the employee feels that the scheme that has been recommended has not performed in the way expected. Therefore, to exonerate employers from the consequences of having been compelled by the Government to choose one scheme rather than another, we ought at least to give them the protection which this amendment seeks to give. I beg to move.

Lord McIntosh of Haringey: I do not like the noble Lord's arguments, but I have some sympathy with his amendment.

I want to make it absolutely clear that Clause 3 imposes no duty on employers to designate a scheme which performs to any particular standard or to investigate a scheme before designating it. The duty is simply to select a scheme from the register and offer access to it in the way set out in Clause 3. An employer could, of course, choose to do more than this; for example, by meeting scheme representatives or consulting league tables.

An employer might become liable if he misinformed his employees about the designated scheme or misled them. Any such liability would arise under the general law of negligence--as it would at present, for example, if he made any misleading statements about a group personal pension. It would certainly be sensible for employers to make clear to their employees what they are and are not doing in designating a scheme; that is, that they are not recommending it, offering advice about it or any guarantees about its performance. In addition, we hope that employers will take some action, perhaps by notifying the Occupational Pensions Regulatory Authority or informing their employees, if they discover a serious problem with the designated scheme. Such actions would be both proper and prudent.

Notwithstanding this, concerns are still being expressed about employer liability. The amendment therefore seeks to include a statement on the face of the Bill making clear the intention that employers should not be liable for the performance of their designated scheme. I am pleased to say that we will consider whether it would be possible to include such a statement to the effect that Clause 3 is not to be construed as imposing any duty on employers in relation to the performance of their designated scheme. I hope that that positive response will by itself encourage the noble Lord to withdraw his amendment.

However, by expressly including one duty, we do not wish to suggest that others may be implied, even though they are not apparent on the face of the Bill; nor do we intend to exempt employers from their general liability for negligence or breach of contract. So, we shall have to consider carefully whether it is feasible to include such a statement in the Bill and, if so, how it should be worded. I should therefore like to consider the principle embodied in the amendment and I give my assurance that we shall do so. We are taking further legal advice

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on the issue. In the light of that assurance, I hope that the noble Lord, Lord Higgins, will feel able to withdraw the amendment.

Lord Higgins: That is assurance number two, so we are making rapid progress. It was a helpful remark. The Government recognise that it is particularly unfair for employers to have to take on responsibility for the results of any particular provider of a stakeholder pension which, in effect, the Government are forcing them to recommend. We therefore look forward to seeing the form of words the Government produce at a later stage and hope that that will be enough to meet the point. I am grateful to the Minister for his remarks and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 25 not moved.]

The Deputy Chairman of Committees (Viscount Simon): Before calling Amendment No. 26, I should point out to the Committee that if it is agreed to, I cannot call Amendments Nos. 27 and 28.

10.15 p.m.

Lord McIntosh of Haringey moved Amendment No. 26:

Page 3, line 26, leave out from ("shall") to end of line 29 and insert ("ensure that at all times there is at least one scheme designated by him for the purposes of this subsection which is registered under section 2 and offers membership to all his relevant employees (whether or not any other scheme registered under that section which does not offer membership to all those employees is for the time being designated by him for those purposes).
Before designating a scheme for the purposes of this subsection the employer shall consult with his relevant employees and any organisations representing them.")

The noble Lord said: In moving this amendment, I shall speak also to government Amendments Nos. 30 and 34. I shall also give the noble Lord, Lord Higgins, an opportunity to speak to Amendment No. 27, to which I shall then respond.

Amendment No. 26 makes is clear that an employer can ensure that "at all times" he has designated a scheme which is registered as a stakeholder scheme. That means that employers will be expected to check from time to time that the designated scheme remains on the register. We do not intend that this should impose an unrealistic expectation on employers that they should respond instantly when a scheme is removed from the register. We do not expect the "de-registering" of a scheme to be a common occurrence.

Amendment No. 30 introduces a fifth requirement on employers, although, again, this is simply a clarification of what was originally intended. The amendment makes it explicit that an employer should withdraw his designation of a scheme if it ceases at any time to be registered as a stakeholder scheme. He would then be required to designate a new scheme. This will avoid a situation where a scheme which had lost its stakeholder status continued to be an employer's designated scheme; that would mislead employees. Amendment No. 34

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simply changes the wording of the definition of a designated scheme, as set out in Clause 8, to make it consistent with the new drafting in Clause 3(2).

As I have explained, these amendments do not represent a change in the way we intend the requirement on employers to work. The amendments simply make it clear that an employer who is required to designate a scheme should make sure that it is, and continues to be, registered as a stakeholder scheme; and that if it is removed from the register, he must withdraw his designation of that scheme. This will ensure that employees have continuing access to a stakeholder pension scheme.

We want to ensure that we strike the right balance between minimising costs to business and ensuring flexibility for scheme members. We intend to use regulations to ensure that these amendments do not place an unreasonable burden on employers; for example, the powers in Clause 3(1) can be used to give employers a reasonable period in which to recognise that a scheme had been deregistered and to find and designate a new scheme.

We are committed to consulting further with employers' representatives and the pensions industry on the details of the requirement. Our consultation document on this will be issued shortly. I commend the amendments to the Committee. I beg to move.

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