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Baroness Turner of Camden: My Lords, I too welcome the Bill. It is an immense document and comes just when we had hoped that pension provision and the legislation on which it is based would be simplified. However, legislation that amends existing law and builds on previous structures is bound to be complex.

There is to be a new regulator. That must be the third since Barbara Castle introduced SERPS. For 17 years, I was a member of the Occupational Pensions Board, which was followed by OPRA. The new regulator will have more powers than either of its predecessors. I well remember the Maxwell scandal, which occurred when I was a member of the OPB. We were criticised for that, but in fact we had no power to deal with it. Now OPRA has not had the power to prevent the catastrophe that has hit many employees who were members of schemes where the employer has become insolvent. The new regulator plus the other provisions in the Bill are meant to deal with that.

I am a fan of final salary pension schemes; they were one of the successes of the previous century. Employees fortunate enough to have been members of such schemes have in the main been able to enjoy a relatively comfortable retirement. Now it looks as though the era of defined benefit schemes may be coming to an end, at least in the private sector. Many employers are closing them to new entrants and offering, if anything at all, membership of defined contribution (money purchase) schemes, where the employee bears the risk himself or herself and has no certainty about the eventual outcome. Employers give a number of reasons for that change of policy—mainly, of course, financial.

During the good days of high investment returns, many employers took contribution holidays. Although there were protests at the time, auditors assured us that benefits were safe. Then there was Treasury action over ACT, which led to large sums being removed from pension funds to the benefit of the Inland Revenue. Finally, low and uncertain investment returns. Unions claim, with some justice, that employers who benefited from high investment returns and took contribution holidays ought now to be prepared to maintain final salary schemes.

Meanwhile, we have had the ASW scandal, with more than 60,000 employees from that company and others facing an impoverished future, losing what they have contributed. Something clearly had to be done about that; hence this Bill, one of the main provisions of which is the establishment of the pension protection fund (PPF). The fund has been widely supported, not only by unions but also by many employers. The Engineering Employers' Federation, for example, says that it should provide greater security for pension scheme members and could help to rebuild employee confidence in occupational schemes. It would help, I believe, to prevent a further decline in the number of defined benefit schemes. A board will be responsible for setting the funding levy, overseeing investment strategy and running the PPF itself. The scheme will
 
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cover defined benefit and hybrid schemes, where the employer is insolvent and there is not enough in the fund to buy the PPF level of benefits.

There has been some criticism, some of which was voiced today, but, generally speaking, the whole concept has met with approval. No doubt, we will have the opportunity in Committee to discuss some of the criticisms, some of which are valid.

Most concern has been voiced, however, about the fact that the original Bill had no provision for retrospection, so employees of ASW and other firms still had no redress. The Government have now indicated that a scheme will be introduced to provide some compensation for those employees. They propose that £400 million be provided over 20 years, but members of the Pensions Action Group believe that that is not enough, since it would produce pensions of just £6 a week for the 60,000 workers. The campaign for the scheme has been supported by the TUC, the general-secretary of which has welcomed the decision to set up the fund. But he says that the task is now to ensure that each individual who has lost out gets a fair deal from the funds available.

There are a number of issues arising from other parts of the Bill, to which my noble friend the Minister will, I am sure, be able to respond. The new regulator has very wide powers. There will also be a tribunal to deal with complaints. It will inherit some of OPRA's powers but have some objectives that OPRA did not have. The key one is to reduce the risk of claims on the PPF. It is also to provide education, advice and guidance, and must take account of the interests of members. It will publish codes of practice. There will be an ombudsman and a deputy ombudsman. I would be interested to know how that new apparatus relates to what currently exists.

As the Minister knows, I have for many years been a member of the council of the Occupational Pensions Advisory Service (OPAS). It was established originally as a charity, with a nationwide network of advisers able to deal with pension queries and complaints. The advisers were, and still are, all volunteers but professionally qualified. It has been very successful and eventually received government funding, which came to it via the OPB and then via OPRA. It provides a valuable sifting service before cases go to the ombudsman. I believe that there have been discussions with OPAS officials about its future, and I would welcome whatever the Minister can tell us about that today.

Then there is the matter of pension fund trustees. I understand that the Bill provides for at least one third to be member-nominated. Attempts have been made in the other place to increase the proportion to one half; I am very sorry that that was not successful. I have always been very much in favour of member-nominated trustees. In my experience, many become very committed to their schemes. They have the advantage also that they know their companies well. Unions have for many years provided training for trustees. There is now a new requirement in the Bill for trustees to be conversant with, or have knowledge and
 
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understanding of, a very wide range of issues. The regulator is expected to produce a code of practice. No penalties are specified but the regulator apparently has power to create them.

I am a little concerned, however, that if there is too much regulation—too many requirements imposed on trustees—people who might be suitable might not be willing to come forward. Many of the problems encountered recently in occupational pension provision have been the fault not of lay trustees but of company managements. It would be a great pity if lay trustees felt they were being discouraged and became unwilling to serve in that capacity. There is a trustees' code of practice group, consisting of lay trustees of a number of large schemes, which has devised a code of practice that has had government support. It would be a good idea if such people could be consulted; I am sure that it would be helpful to all.

Another aspect that concerns me, which has been mentioned on several occasions in debate, is the proposal to reduce the cost-of-living cap, which currently stands at 5 per cent per annum. For the future, it is suggested, it will be reduced to 2.5 per cent. It is true that we have lived through a period of low inflation, but we cannot be certain that that will continue. If it does not, and 2.5 per cent is the maximum that future pensioners can expect, many will face a substantial lowering of standards. Since we are all apparently living longer, some elderly pensioners will be liable to lose out. It is not necessary, and, if it is a way of off-setting the costs of the PPF, it is not acceptable either. I urge the Government to think again about that.

Then there is the matter of what happens in mergers and takeovers. Employees currently have a form of protection under what have become known as the TUPE regulations. The Government quite rightly want to ensure that protection exists in relation to pensions. However, the protection on offer is of a minimum level, with the employee entitled to either a stakeholder or other form of money purchase pension. A member of a final salary scheme is therefore likely to lose out quite substantially. It is necessary that at least comparable provision should be made available in such cases.

The Bill concentrates on defined benefit—that is to say, final salary—schemes, and rightly so, since the main objective is the establishment of the PPF. However, it might be appropriate to say something about stakeholder pensions. I am sure that the Government would agree that take-up has been disappointing. That is because all the employer has to do is to provide access for a provider of such a scheme. No contribution is necessary from the employer. Take-up improves dramatically when the employer makes a contribution. Compulsion is often mentioned as a way of ensuring that individuals make provision for themselves—the noble Lord, Lord Freeman, has just mentioned that. Is it not about time that we started looking at a measure of compulsion as far as employers are concerned, and perhaps not only about stakeholder provision but across the board? If there is
 
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widespread concern about retirement provision, why should not employers be asked to bear at least a part of the burden?

The issue of compulsion is being raised by the unions; after all, pensions have always been regarded as deferred pay. It is not uncommon for employees to stay with a company, even when they could get better pay elsewhere, if the employer provides a good pension scheme.

A good pension structure must be built on good state provision. All that many people can expect is what the state pension scheme provides. The value of the basic state pension has declined, and under present policies it is not likely to increase. I understand that some people have been able to benefit from the pension credit; that is to be welcomed. But it depends on a system of means testing, which means that some people who are entitled to it will simply not get it. Moreover, means-tested benefits are expensive to administer. I still believe, as do many others, that the foundation of pension provision should be a good basic state pension linked to the wages index.

The tax system can be utilised to make sure that if there is what the Government would regard as overprovision because of additional income from other sources, appropriate deductions are made. I do not expect the Minister to agree with me, but she will surely know that what I have just enunciated is a widely held view. Meanwhile, there is much to welcome in the Bill; no doubt we shall have the opportunity to explore it further in Committee.

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