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Lord Hoyle: I rise briefly to support the amendment, which stands in my name as well as that of my noble friend Lady Turner of Camden. I do so because, as she rightly said, there is a strong feeling among retired people who have contributed to a pension all their life that they also want to be represented in order to safeguard their pension interest. As a member of MSF, I have received a large number of letters from other members signalling the need for that, and also from members of other pension funds. As has rightly been said, there is an attempt on the part of some large companies to keep in touch with pensioners so that they are aware of what is going on. It would be even better if they were represented on the boards of the pension funds. As has been pointed out, their interests may not be the same as those of other members, but their interest is to ensure a valid pension and adequate funds to pay not only their pensions but the pensions of those who will benefit in the future.
Baroness Hollis of Heigham: The combined effects of Amendments Nos. 144 and 147 would be to provide for an additional member-nominated trustee in prescribed schemas over and above the minimum one-third to be nominated by the pensioner and deferred members. Similarly, Amendments Nos. 148 and 152
would mean that schemes with at least two member-nominated trustees or directors must have one who is appointed by active members and one appointed by pensioner members. Currently, schemes with a minimum of 100 members must have at least two member-nominated trustees. Schemes with fewer than 100 members need have only one. In both cases, the scheme is subject to the requirement that at least one-third of the trustees are nominated by members. The revised provisions do not change this.It may be helpful if I explain how we see the new provisions working and why they are devised as they are. First and most importantly, the new provisions will ensure that there are member-nominated trustees or directors in every scheme. Our most important priority is to get members on to boards. Beyond that, we are also mindful of concerns that the present legislation is too complex and difficult to operate. Equally, we have to consider the costs associated with forcing schemes to change their existing arrangements.
To satisfy the new requirements there will be two routes, which for convenience we have labelled the "trustee route" and the "employer route". Under the trustee route, trustees will implement nomination and selection procedures using a framework set out in regulations. They will have some flexibility; for example, they can divide the membership into constituencies and there will be scope to use selection panels and so on. All active, deferred and pensioner members will be free to stand for selection. All active and pensioner members, and such deferred members as the trustees decide to include, will have to be invited to make nominations. The statutory framework will ensure that members are treated fairly. Therefore, unlike the current provisions, there will be no need for consultation or member approval. As a result, the whole process will be simpler and cheaper, which we believe will be widely welcomed.
Giving schemes flexibility is important. That is why, under the employer route, employers will have the right to propose bespoke nomination and selection arrangements for their schemes. The proposal must provide for a minimum of one-third member-nominated trustees, but the provisions are more flexible and for that reason must be approved by the members. We do not want to disrupt existing arrangements, which is why for many schemes the employer route will be the only way to do this. There will be more scope for the employer to determine the selection arrangements under this route. But the final choice will be made from individuals who have been nominated by scheme members, and the proposal will be adopted only if the members agree. The employer will be required to consult scheme members under a statutory consultation procedure similar to that currently in force. However, we need to look carefully at the matter to see whether it can be improved in any way. Under the new provisions, employers will no longer be able to opt out altogether. Therefore, every scheme will have member trustees, whichever route is used. Our first priority is to get member trustees in every scheme.
We thought long and hard about whether we should make a special case for pensioner trustees. In the consultation paper Strengthening the Pensions Framework we proposed that there should be a pensioner trustee in large, mature schemes. This generated a good number of responses, some supportive but most not. Most concern centred on the fact that in law all trustees have the same roles and responsibilities in respect of all the members. There was a real danger that we would have been seen to suggest something different. On balance, we decided not to do anything which suggested that any trustee had a representative role, and to focus on our main priority of ensuring that every scheme had members on the trustee board. Who those members should be, and whether they should be active, pensioner or deferred members, is something that is best left to the trustees and scheme members to determine. They know the scheme better than anyone; it is not for government to decide. I do not know what kind of schemes my noble friend has in mind for inclusion within a "prescribed class", but I suspect that it may be the larger, more mature schemes where there is a significant proportion of deferred and pensioner members.
Amendments Nos. 144 and 147 go further and make special provision for deferred members as well as pensioners. I am aware of concerns that sometimes deferred members are overlooked. This concern is highlighted by the fact that changes in the labour market mean that there are increasing numbers of deferred members with significant stakes in the scheme. But we also have to think about the practical consequences. Many deferred members have simply lost touch with their scheme or have only limited rights under it. We believe that the trustees are in the best position to determine the matter. I doubt that those responsible for running pension schemes would thank us for the consequences of Amendments Nos. 148 and 152. They make no allowance for the membership profile; they could have very few pensioner members or active members.
I remind the Committee that the Government have worked very closely with the pensions industry and other groups, including OPRA and the TUC, to produce these changes which will give members greater participation and confidence in their pension schemes and, at the same time, will make arrangements for the nomination and selection of member-nominated trustees easier to operate. These proposals, which we believe are a sensible and measured response, have been widely welcomed and represent a real strengthening of the pensions industry.
Under the trustee route, the new provisions would provide equal status for active and pensioner members. Under the employer route, the employer will be able to propose his own nomination selection arrangements to suit the circumstances of the scheme. The price of additional flexibility is that the proposal has to be put to the members for approval. If pensioner members feel that they are being treated badly, they will have the opportunity to voice their objection.
In the light of what I have said, I hope that my noble friend will feel able to withdraw the amendment.
Baroness Turner of Camden: I thank the Minister for that comprehensive reply. It is plain that the Government have given serious consideration to the issue of pensioner trustees. I am sorry that, nevertheless, they have come to the view on balance that it is probably not a good idea. I am not sure that I agree. Although I accept that trustees do not have a specifically representative role, nevertheless it appears to employees and to members of the scheme that they have put forward individuals who, without being specifically representative, would bear in mind the concerns of the people who put them there.
However, it is not my intention at this point in the proceedings to test the feeling of the Committee. I shall consider carefully what the Minister said. I am glad that the Government have given serious consideration to the issue and probably continue to do so. I hope that their minds will change in the future and, perhaps through general good practice, and so on, large schemes will be persuaded that it is in their interests ultimately to have representatives of pensioners on their board. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Dean of Harptree moved Amendment No. 144A:
- Page 38, line 23, at end insert ("; and
The noble Lord said: The amendment is similar to Amendment No. 144 moved by the noble Baroness, Lady Turner. I agree with everything she said. My amendment goes a little further, but the principle is the same. I am indebted to the National Federation of Post Office and BT Pensioners for the amendment. I declare an interest. I am an unpaid pension trustee and an occupational pensioner.
The Pensions Act 1995 introduced the requirement for member nominated pension trustees for occupational pension schemes. However, in practice there have proved to be too many opt-out provisions. The Government deserve great credit for pushing forward the frontier in the Bill, but I agree with the noble Baroness that they do not push it forward adequately enough as regards pension trustees.
The Minister, as I expected, argued that pensioners should not be trustees because they are pensioners. I agree that it is the job of pensioners to look after the interests of everyone concerned and not just one particular group. It is their job to look after all interests and not just the group to which they belong.
However, that argument could apply equally to employee pensioners. So I do not regard that argument as having much validity. The principle that we should apply here is that all those involved in pension
I know that the Minister's heart is in the right place on this matter. I hope that she will consider again those practical points and will recognise that there could be a big loophole so far as concerns effective representation for pensioners. I beg to move.
Baroness Turner of Camden: For some reason, Amendment No. 144A has been grouped with Amendment No. 145, which is similar to an amendment that I drafted. I believe that Amendment No. 145 should have had my name to it, and perhaps I may say a few words about it.
The purpose of the current legislation is to ensure that members' views are represented on trustee boards and that not all trustees are appointed by the employer. The whole purpose of legislation could be undermined by leaving the door open to an employer to have a say on the selection of member trustees. The legislation addresses those employers who have been most determined to resist members having even a minority say in the running of their schemes. The next line of defence for employers who wish to resist having member-nominated trustees would be to try to get member trustees of their own choosing rather than those chosen by the scheme members.
Even under the proposed statutory route, the outline proposal allows an option under which employers can be represented on a selection panel for member trustees provided that they are in a minority. The presence of a senior company figure and the control of proceedings by the company-appointed pensions manager clearly has the potential to allow an employer considerable influence over the outcome. Amendment No. 145 makes it clear that member-nominated trustees must be selected only by the members, without influence by the employers.
( ) after paragraph (b) there shall be inserted ", and
(c) that those arrangements provide for all members of the scheme, that is to say, active, deferred and pensioner members, to have equal rights of nomination and selection for member-nominated trustee seats."").
11.45 p.m.
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