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Lord Lucas: I will answer the point raised by the noble Baroness. If you are running a company, you do not go to a regulator for advice on how to run it. The most immediately obvious adviser that you would turn to is your accountant, or perhaps your auditors. Amendment No. 156, in my name, brings in that part of the European directive that requires schemes to be properly run. That becomes a matter on which the auditors report and the auditors have an interface. That would be the ordinary way in which a scheme would become and be seen to be well-regulated. To my mind, that is how it should be done, rather than compromising the regulator.
Baroness Dean of Thornton-le-Fylde: The noble Lord has more confidence in accountants and auditors than I do.
Lord Lucas: That is because I am one.
Baroness Dean of Thornton-le-Fylde: Yes, well, that is fine. We talked about two cases that are with the FSA at the moment. If we look at the record of the City, the scandals and their implications for the position of the professional bodies, accountants, auditors, lawyers, I suggest that their record is far worse than the record of the FSA.
Lord Lucas: Yes. That is exactly why the regulator should stick to its business of criticising and leave advice to other people.
Baroness Hollis of Heigham: Before the noble Lord, Lord Higgins, decides what to do with his amendment, I shall come back. I am disappointed that noble Lords
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opposite, certainly the noble Lord, Lord Lucas, have such a negative, disciplinary idea of the role of the regulator. We are trying above all to create a culture of compliance, information and best practice. One should not extract that from what else is going on in the Bill. For example, I referred earlier to the fact that for the first time all companies will be required to have at least one third of their trustees nominated by members. That will mean that for the first time we will have a new cohort of trustees who possibly have not been trained. We hope and expect that they will be trained and will act in a responsible way, and there are clauses dealing with that.
That is the sort of thing that I would expect the regulator to be issuing as guidance; whether you call this information, education, or a climate of compliance, I do not really mind. It might also be guidance to trustees to ensure that accounts are provided on time, or checking the cash equivalent transfer values.
I was talking to an old friend who is chief executive of a major media company, and he is also on the pensions board of the consortium of those companies, from the Anglia region. I asked him what percentage, in his major company, of member nominations trustees there were. There was something like half. I asked him if they were useful, and he said "Yes. For example, we wanted to adapt, or change, the cash equivalent transfer value of schemes, which as far as existing employees were concerned, was absolutely fine by them, but none the less the trustees, including the member nominations, said that we had to do a broad consultation exercise, which we had not expected to do". That was their experience.
If you are trying to lay down lines for CETV—and there are new rules under the Pensions Bill which will allow you to do that—you will want to establish the good practice in the minds of employees and employers alike that you do not milk people who are leaving the scheme and who may as a result never build up a decent pension portfolio.
Whether you call this information, education, compliance or informed choice I do not really mind or care, it is a job that needs to be done—particularly given the increased responsibility of trustees for the scheme specific funding, which they will have to monitor with the aid of the one-size-fits-all minimum funding requirement that we have had in the past. This suggests that the regulator needs to act in a proactive way, which I think is highly desirable.
I cannot conceive that the regulator and members of the regulatory body will wish to go down any route that interferes with their task of ensuring the protection of members' benefits. The best way to do that is to have alert and empowered trustees. The regulator has a part—but only a modest part—to play in developing that expertise.
Lord Higgins: I shall come back to the role of trustees, which is extremely important, at a later stage of the Bill.
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I do not think there is any difference between the noble Baroness, Lady Turner, and myself; we are all agreed that it is important that the position of pensioners should be protected. But if one is not to deter companies from continuing to have such schemes, then it is important that the burden on them should be minimised. That is what the amendment seeks to do. Whether it is a function or an objective is an arguable point.
So far as concerns the first amendment, the question is whether it is an appropriate objective of the regulator—it is interesting that it appears as an objective and not as a function—to promote better understanding and so on. The noble Baroness, Lady Dean, saw it as more of a function. If the regulator is to intervene in the kind of situation she described—where a particular fund has problems and so on—it may be appropriate for it to intervene in ensuring that pensioners are protected, but a role in educating trustees across the board would seem to be a quite different function.
There are various other organisations to which trustees can go for advice.
Baroness Hollis of Heigham: How I envisage that might happen, for example, is that the regulator would issue a document offering advice about best practice which may or may not have statutory authority. Why would it not be appropriate for the regulator to issue a code of guidance on some aspect of best practice to all trustees, not only in the major companies but in the tiny companies that will come within this remit for the first time? Why should it not do that?
If we do not have this power in the way laid out, it is conceivable that someone could complain on the grounds of ultra vires that it did not have the power to use it. That would be absurd.
Lord Higgins: If it were a power it would be under "regulatory functions". I think I am right in saying that this is an objective, not a power. But, by all means, let us transfer it to regulatory functions. In that case it is clear what it will be doing; it will be issuing codes of practice and so on.
It will certainly not be possible to operate within the very tight manpower restraints referred to by the noble Baroness earlier; there will be only £7 million a year more than for OPRA to go into the highways and byways and carry out a broad educational process. It does not seem to me that that is what a regulator is about. The regulator's function and its objectives are rather different. I should like an exhortation, if you like, on the face of the Bill that the carrying out of its prime responsibilities to protect the benefits set out in paragraphs (a), (b), (c) and so on should be exercised with the minimum of cost to pension schemes. I think that is important. I would very much like to believe the Minister when she says that there will be interventions only in badly run schemes. I will probably never know, but I would be astonished if the scheme of which I was chairman until recently—it was even commended as a
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well run scheme by the NAPF—did not find itself having heavier burdens imposed on it as a result of the change.
Baroness Hollis of Heigham: It is not a change. OPRA already does everything about which we are talking. Again, I am puzzled.
Lord Higgins: I am not on the promotion point, but on the one about the extent to which there is intervention. I take note of what has been said. Again, the question is one of balance. We must make sure that we do not create a situation where, because things become too interventionist and heavy handed, schemes close down and pensioners do not have the benefit of a scheme. It is all very well to protect them in the existing scheme, but if employers get fed up and decide that they will not have it anyway, the object is pointless.
The amendment sought to ensure that the risk of schemes closing down was reduced, as the regulator would always have in mind the costs that it was likely to impose on business. There may not be any difference between us, but the balance seemed better restored with the amendments. If we do not have them, things are more lopsided. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 32 and 33 not moved.]
On Question, Whether Clause 5 shall stand part of the Bill?
Lord Higgins: I have only a very small point on the matter. I do not quite understand the terminology, and one would have thought that I would by now. Subsection (2), at line 11 of page 3, refers to,
I do not think that I have previously come across the expression "direct payment arrangements". I do not know what it means, and it might help if the noble Baroness told us.
The subsection refers to subsection (1)(b), which protects the benefits and so on. That seems rather restrictive, as it applies to only those who have direct payment arrangements, whatever they may be, and when the pension is a stakeholder pension. We agree that most of the Bill is concerned with defined benefit schemes, but the provision seems to extend it to defined contribution schemes. Is that why the provision is there? Is it simply to make it clear that not merely defined benefit schemes are covered?
Alas, we do not appear on television in this Room, so the nods from the advisers behind the noble Baroness will not be seen. I have often been inclined to agree with Edith Sitwell, who said that television was a good way of killing time for those who like it dead. At all events, one disadvantage of being in Grand Committee rather than downstairs is that we do not
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appear on Sky at four o'clock in the morning. Be that as it may, perhaps the noble Baroness will clarify the point.
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