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Lord Astor of Hever: My Lords, I am grateful to the Minister for that reply. I am disappointed she feels that the amendment is unnecessary but she has given her reasons for that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 [Jurisdiction of the Pensions Ombudsman]:

8.45 p.m.

Lord Astor of Hever moved Amendment No. 6:

The noble Lord said: My Lords, I rise to give my objections to Clause 53 of the Bill and, with the leave of the House, to speak to Amendment No. 7. Clauses 53 and 54 introduce powers for the pensions ombudsman to decide matters which directly affect the benefits and interests of members and employers who are not party to the ombudsman's investigation. In our view, these clauses contain a significant extension of the jurisdiction of the pensions ombudsman and the nature of the cases which he or she then has power to determine. It would result in there being no material difference between the jurisdiction of the courts and the jurisdiction of the pensions ombudsman in determining pensions cases. However, the procedures

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in court contain many checks and balances and the judge will go to great lengths to ensure that all interests are properly considered. Oral hearings take place in court. They rarely take place in proceedings before the pensions ombudsman.

The provisions contained in these clauses appear to be an attempt to get round the restriction apparently placed on the ombudsman's jurisdiction resulting from the case of Edge v. Pensions Ombudsman. However, in the view of the Law Society of Scotland, the case of Edge simply interpreted the extent of the powers given under the existing statute--the Pension Schemes Act 1993. In the absence of detailed rules protecting an individual's right to a fair hearing, the extension of powers in the way proposed in Clauses 53 and 54 may not be compliant with Article 6 of the European Convention on Human Rights. I beg to move.

Baroness Hollis of Heigham: My Lords, Amendments Nos. 6 and 7 seek to remove Clauses 53 and 54 from the Bill. These clauses concern the powers and duties of the pensions ombudsman, what types of cases can be accepted and how investigations should be conducted.

The pensions ombudsman provides a useful service to scheme members and those who run pension schemes. He can consider both complaints of maladministration and disputes of fact or law and provides a cost-effective way in which these issues can be dealt with. Clause 53 will allow the pensions ombudsman to consider five new types of case and fill in gaps in the pensions ombudsman's jurisdiction. There are a range of issues that the pensions ombudsman can investigate but some areas where he currently cannot. On the basis of past inquiries, it is anticipated that these new areas of jurisdiction will increase the pensions ombudsman's caseload by some 2 to 3 per cent. To the individuals concerned, however, each case is important. Scheme members and those who run pension schemes will have access to the pensions ombudsman in more circumstances and thus have those complaints and disputes dealt with in a cost-effective and efficient manner. Without the changes contained in Clause 53, the only option in many cases would be to take the matter to court. That is a daunting prospect and has financial implications.

Clause 54 is also concerned with access to the pensions ombudsman. It ensures that the pensions ombudsman can look at cases that affect the interests of individuals not directly involved with the case. As a result of a ruling in the Court of Appeal last year, the existing pensions ombudsman legislation means that the pensions ombudsman should not accept a case if the investigation of it would impact on the interests of those not directly involved in the case. Such cases would have to go to court. These changes mean that the pensions ombudsman will be able to accept cases concerning such issues as winding up, death benefits and the use of surplus, which affect the interests of a range of individuals. The clause allows those whose

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interests may be affected by the complaint or dispute to be linked to the case, including members and those running pension schemes.

Importantly, it also ensures that all those who have an interest in the case have the opportunity to put their point of view to the pensions ombudsman, either personally or through an appointed representative. They will also be informed of the outcome of the case and be bound by it. We believe that the clauses should remain in the Bill. In the light of that we hope that the noble Lord will withdraw the amendment.

Lord Astor of Hever: My Lords, before the noble Baroness sits down, will she address my point that the two clauses may not comply with Article 6 of the European Convention on Human Rights?

Baroness Hollis of Heigham: My Lords, I originally signed a statement to the effect that to the best of my belief, having taken advice at the highest possible level, the Bill is compliant. I have no reason to think that it is not. I shall check that point further. If the noble Lord would like to write to me to explain why he thinks the Bill may not be compliant, I shall be able to give him a fuller answer.

Lord Astor of Hever: My Lords, I thank the noble Baroness. I shall write to her on the important point of the European Convention on Human Rights. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 [Investigations by the Pensions Ombudsman]:

[Amendment No. 7 not moved.]

Clause 55 [Prohibition on different rules for overseas residents etc.]:

Baroness Hollis of Heigham moved Amendment No. 8:

    Page 59, line 1, at beginning insert ("Except so far as regulations otherwise provide,").

The noble Baroness said: My Lords, in moving Amendment No. 8, I should like to speak also to Amendments Nos. 9, 10, 11, 38 and 39. These amendments are needed to address concerns expressed by pension industry contacts. The existing practice of some occupational pension schemes is to pay annual increases in pension in payment based on the rate of inflation of the country of residence, not by reference to the rate of inflation in the UK. Our initial legal advice is that this practice would be prohibited under the terms of Clause 55 but the position under the terms of the directive is less clear.

The amendments have two specific purposes. First, they provide that the clause shall come into effect on a date to be appointed in a commencement order instead of on Royal Assent. That will allow time to investigate fully the circumstances which have given rise to the pension industry's concerns. Secondly, they provide that regulations may specify exceptions to the provisions in Clause 55. Clearly, we want to avoid a situation whereby the legislation in the UK could

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cause UK schemes to be in breach of the terms of UK law even though the directive was not being breached. The regulation-making power may be used at a later date if necessary to make exceptions that would enable the UK to comply with the provisions of the directive without placing unnecessary restrictions on UK schemes. I commend the amendments to the House.

Lord Higgins: My Lords, the House will be grateful for that explanation. I should like to add my own thanks to the Minister for writing to me on this issue. She has rightly pointed out that, at this stage, the Government are unable to come to a firm decision and are therefore taking provisional action while they try to sort matters out by statutory instrument once they are clear about the legal position. The noble Baroness referred to the EU directive, 98/49/EC, which is designed to safeguard the position of members of occupational pension schemes with statutory rights.

However, what is not clear to me is why the Government agreed to this directive in the first place. It is difficult to see how the directive will operate in other member states. Is this measure aimed only at the United Kingdom? I believe that I am right in saying that, until recently, because, for example, of trade union pressure in France in pursuit of higher state pensions, it has been illegal to form company pension schemes. The situation in Germany is also very different. Germany does not have funded schemes. Indeed, the funds invested in British schemes are greater than those in the entirety of company schemes throughout the rest of the European Union. Moreover, in some countries of the European Union, if a company has set up a scheme but then finds that it has run into difficulties, it is able to claw back moneys that have previously been invested in the pension fund; that is a form of legalised "Maxwell" situation.

Is it right to assume that this directive, to the implementation of which this clause gives effect, will not apply to other countries in Europe? It seems to me that either it should apply to all the countries or that it should not apply to us, unless the Government feel, in their wisdom, that this is an appropriate action so far as concerns this country. In that case, it could be done on a unilateral basis. However, in the context of the European pension system, this entire set-up is very strange.

Perhaps I may make a further point. The Government, perhaps quite rightly, have decided to extend the provisions of this clause beyond the European Union to all overseas countries where a particular pension scheme takes into account the rates of inflation in the countries of domicile rather than the rate of inflation in this country. The Government are seeking, by dint of the clause and in the amendments, to protect against that. No doubt the noble Baroness will correct me if I am wrong on that point. It would

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seem strange, therefore, if a pension scheme is told that where the rate of inflation in, say, a South American country is 25 per cent, pensioners will receive rises of 25 per cent, but the scheme members resident in this country will receive rises equivalent only to the rate of inflation in this country. The effect of that on funds and surpluses, about which we all know, may be extremely unfair on members of such a scheme.

It is clear that the Government were taken by surprise by the provisions of the directive. I feel, therefore, that the clause requires rather wider examination than simply to say, "Do not worry. We shall sort out the whole thing using a statutory instrument". Such an instrument is not easily amended and only very limited time will be allocated to debate it.

To reach Third Reading of a Bill with such amendments being introduced seems to me to be an unsatisfactory situation. Perhaps, at least on some of the points that I have raised, the Minister can put our minds at rest.

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