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Baroness Hollis of Heigham: I am not saying that the role of trustees will not be made more complex as a result of these provisions. Part of the problem is that in some cases trustees have not been sufficiently trained and supported in exercising their role. However, in terms of civil penalties, we go back to the debate opened up by the noble Baroness, Lady Barker, about "knowingly" and "recklessly".
I am not talking about a situation where trustees, in good faith, accidentally make an overpayment which may or may not be recoverable. I am talking about a situation where trustees knowingly and deliberately arrange payment in such a way as to increase the deficit falling on the PPF. We do not believe that that should be allowed to happen, and that is why the civil penalties are attached, otherwise it would be an offence without a punishment.
Baroness Turner of Camden: As my noble friend knows, I am very keen on employee trustees. In fact, I have tabled an amendment—to be debated later—to increase the number of employee trustees. This would mean that people would have to be adequately trained to cope with the situation, which is much more complex. Organisations exist which are concerned with the training of trustees and I know that unions are involved in the process.
However, a number of us have a real fear that quite well motivated people, and people who would be quite qualified in a general way, may feel reluctant to put themselves forward as trustees because of the complexities of this legislation. One has to be careful about that because it is very important that people who well know their own schemes become trustees. Employee trustees get to know the workings of their own companies and their own schemes and often
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become experts in that context. However, they will be very concerned if they feel they could be in difficulty with the complexities.
Baroness Hollis of Heigham: In a way, we are touching on some of the issues on the security difficulties that arose on earlier amendments in regard to the role of trustees and the board during the assessment period. If it will help the Committee, I shall be pleased to circulate a descriptive note of what will happen and the steps to be taken during the assessment period, the degree of trustees' responsibilities and how they taper out, and the overriding powers of the pension protection board. I am very happy to ask officials to circulate a descriptive note of how we expect the assessment period to work and the parallel and ultimate responsibilities of the trustees and the board. I am in the Committee's hands.
Lord Oakeshott of Seagrove Bay: I would welcome that. Could it be written in a simple form outlining the instructions that will be given to trustees of what they should do?
Baroness Barker: Perhaps I may add that it is not only the responsibilities but the flow of information that is important. I work with trustees on a daily basis in a slightly different context. We can support and train trustees as much as we like, but they cannot possibly deal with liabilities which they cannot estimate. The key part of what the noble Baroness has said is not who has responsibility at a particular time but who is in possession of the material information. If that can be included, it would go a long way towards solving some the problems that have been quite rightly raised by the noble Lord, Lord Higgins.
Baroness Hollis of Heigham: We shall take all those proposals on board. My officials have been here to listen to them and they will be drafting the note. I shall check it to see that it meets the requests of the Committee and send it on its happy way.
Clause 130, as amended, agreed to.
Clause 131 [Loans to pay scheme benefits]:
Baroness Hollis of Heigham moved Amendment No. 200E:
On Question, amendment agreed to.
Lord Skelmersdale moved Amendment No. 201:
The noble Lord said: If one refers to subsection (3) of Clause 131 and omits paragraphs (a) and (b), the Bill states:
"Where an amount lent to the trustees or managers of a scheme under subsection (2) is outstanding . . . that amount, together with the appropriate interest on it, falls to be repaid by the trustees or managers of the scheme to the Board at that time".
However, paragraphs (a) and (b) refer to three separate times. Can the noble Baroness explain? I beg to move.
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5.15 p.m.
Baroness Hollis of Heigham: I think that the noble Lord's amendment is rather attractive. If he agrees, I should like to take the matter away and consider whether we should come back with a change of wording.
Lord Skelmersdale: Day six and I am finally delighted. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 131, as amended, agreed to.
Clause 132 [Reviewable ill health pensions]:
Baroness Hollis of Heigham moved Amendments Nos. 201A to 201D:
On Question, amendments agreed to.
Lord Skelmersdale had given notice of his intention to move Amendment No. 202:
The noble Lord said: I tabled the amendment to obtain some appreciation of the draft regulations which might be made under the clause. However, having listened to the opening statement of the Minister, I realise I shall get precisely nowhere. I shall not move the amendment.
[Amendment No. 202 not moved.]
On Question, Whether Clause 132, as amended, shall stand part of the Bill?
Lord Higgins: The clause is concerned with reviewable ill-health provisions, as indeed are Clauses 133 and 134. I am somewhat surprised at the complexity of the three pages of the Bill which deal with ill-health provisions during the assessment period. The noble Lord, Lord Borrie, and several others have been worried about the whole idea of an assessment period. Can the Minister give some indication of how long she envisages these assessment periods will last? A whole chunk of the Bill is concerned with them and the fact that the board needs to review ill-health provisions in the course of the assessment period seems to be legislating in immense detail for something which is of a temporary nature and is never likely to be material so far as the assets of a scheme are concerned. Do we really need this clause and the following two clauses?
Clause 134 interprets Clauses 132 and 133. The assessment period, it is to be hoped, will not be for very long, and having an ill-health provision which can be dealt with immediately after the assessment period—even taking into account the fact that a decision may be delayed—would seem to be rather sensible.
Baroness Hollis of Heigham: Clause 132 sets out the provisions relating to reviewable ill-health pensions. My understanding is that between 10 and 20 per cent of early retirements are through ill health. Clearly,
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given that ill-health pensioners in the PPF receive 100 per cent compensation rather than the 90 per cent compensation for deferred members, we are anxious to ensure that, in the three years or so preceding the scheme coming into the assessment period, ill-health pensions have not been used as a way to appropriate and protect some pensions for some people at the expense of the PPF.
That means that the board has a right to review such pensions to ensure that they are well founded. On the presumption that they are, people will continue to receive their pensions. If the board feels that ill health has been used as a device—and there have been cases of people recovering from Alzheimer's disease, for which they have been given a pension, and so on—it will consider what to do.
The purpose of the clause is to protect the PPF from potential abuse and inappropriate awards of health pensions, which is the only way in which a scheme member under normal pension age could receive a 100 per cent level of uncapped compensation from the PPF. As I say, a member without an ill-health award would have his 90 per cent compensation capped at £25,000. We think the numbers will be very small. However, we have seen in today's press the generosity of some of the current pension settlements.
Where there is evidence to suggest that an ill-health pension awarded in the couple of years preceding the scheme going into the assessment period—which allows a person to retire with not only a 100 per cent pension but an uncapped pension—is ill-founded, we believe that the board, having reviewed the situation, should have the power to revoke and reconsider the matter.
As the Committee knows, the three-year rule is designed to prevent any manipulation of a scheme, either between DB and DC schemes or ill-health pensions, in the years preceding the insolvency event, where the directors and trustees are likely to know that a company scheme is at risk and may seek to take protective action by going for an ill-health pension under pensionable age to attract its more favourable terms. The board needs the right to review such pensions to ensure that they have been appropriately awarded. That is the purpose of the clauses.
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