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Baroness Hollis of Heigham: I would prefer to write to the noble Lord about the Channel Islands and the Isle of Man.
Lord Higgins: It is quite important.
Baroness Hollis of Heigham: I accept that. However, I should like to take advice on that point and on other
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alleged tax havens. I repeat that, if it is a US scheme, it will be regulated by the US regulator. If there is a separate branch in the UK, it will be covered by us.
Lord Higgins: Who is affected? Who are the people in Section 144?
Baroness Hollis of Heigham: All that is being said here is that Section 154 of the Finance Act refers to Section 144 of the previous legislation. It defines Section 154 and lists the financial institutions that can provide personal pensions, including insurance companies, unit trust schemes, recognised collective investment schemes, investment companies, building societies, banks and investment portfolio managers. I do not know whether that answers the noble Lord's question.
Lord Higgins: We are making heavy weather of this. The clause states that a personal pension scheme means a pension scheme that,
"is established by a person within any of the paragraphs of section 144(1) of the Finance Act 2004".
We have established that the Finance Act 2004 has received Royal Assent. I am not clear which persons are covered by the paragraphs of Section 144(1) of the Finance Act. It seemed from the noble Baroness's reply that it was persons in the sense of corporate bodies rather than individuals.
Baroness Hollis of Heigham: That is correct. I am sorry about the confusion. I would like to check this; I was slightly taken aback by the mention of the Finance Act. Section 144 is now Section 154 of the Finance Act, but the persons referred to are the bodies or institutions of companies that I listed—that is, insurance companies, unit trust schemes, investment companies, building societies, banks, and so on.
Lord Higgins: Are we really saying that a personal pension scheme means a scheme that is established by a bank, an insurance company, and so on? Is that the total content of the provision, or are such schemes more clearly defined?
Baroness Hollis of Heigham: No, I think that that is correct.
Lord Skelmersdale: I am sorry to intervene, but I am now slightly more confused than I was to start with. The noble Baroness mentioned Section 154, and the Bill refers to Section 144. Are we therefore expecting a government amendment on Report to remove "section 144" and substitute "section 154"?
Baroness Hollis of Heigham: If the noble Lord looks at Amendments Nos. 295F and 295G, he will see that the reference to the Finance Act has been changed from Section 144 to Section 154. That is all. The substantive point is that raised by the noble Lord, Lord Higgins, about which persons are involved. The answer turns out to be financial and finance-related companies.
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Clause 229, as amended, agreed to.
Baroness Hollis of Heigham moved Amendment No. 296:
"MEANING OF EMPLOYER IN PART 1 OF THE PENSIONS ACT 1995
(1) In section 125 of the Pensions Act 1995 (c. 26) (supplementary provision relating to interpretation), in subsection (3) (extension of meaning of "employer")—
(a) after "include" insert "—
(a)"
(b) after "scheme" insert ";
(b) such other persons as may be prescribed".
(2) In section 175 of that Act (parliamentary control of orders and regulations), in subsection (2) (instruments subject to affirmative resolution procedure), omit "or" at end of paragraph (c) and after that paragraph insert—
"(ca) section 125(3)(b), or"."
The noble Baroness said: Amendment Nos. 296, 346, 346C, 347 and 348 allow regulations to prescribe by the affirmative procedure that in particular circumstances certain persons shall be treated as employers for the purposes of any provisions of the Bill. The amendments are required because under Clause 39 and Section 75 of the Pensions Act 1995, certain related companies or other bodies or persons will be providing back-up support to pension schemes pursuant to arrangements agreed with the regulator.
Those entities will have responsibilities similar to participating employers in schemes. For that reason, it is necessary to have the power to treat such entities as employers for specific purposes.
In particular, the regulator has a number of powers to seek information in relation to schemes and their employers to enable it to monitor the position of schemes and exercise its functions properly. It is intended that this new power will be used to include these guarantor-type employers in the category of bodies in relation to which the regulator can seek information. For example, under Clause 65, "Reports by skilled persons", if a person is named in a financial support direction under Clause 39, or an appropriate arrangement under Clause 260, they have a choice as to the type of arrangement they put in place, which must be approved by the regulator.
In order for the regulator to have appropriate and sufficient information to approve the arrangement, it may be necessary for the regulator to ask for a skilled person report in relation to the arrangements—for example, a financial expert's report. The regulator can issue a notice only to the trustees, employer or person involved in the administration of the scheme. Without the amendment, those named in the direction or arrangement are unlikely to fall within those categories.
In addition, under Clause 166, "Pension protection levies", the board of the PPF will have power, once the risk-based levy is introduced, to include the financial position of the employer as a factor in setting the levy
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under Clause 166(3)(a). When a financial support direction has been made or an appropriate arrangement has been agreed, the board would wish to recognise that the weak employer in relation to the multi-employer scheme is being supported by a stronger group member. It is only fair that this support can be recognised in the levy calculation. The amendment makes that possible.
A further example where the power may be used is to determine what share of any debt arising on the winding-up of a multi-employer scheme is to be allocated to entities, potentially more than one, that have guaranteed the obligations of an employer. Regulations made in relation to the amendments will be by affirmative procedure. I hope that the Committee will accept the amendments dealing with the situation of multi-employer schemes.
Lord Higgins: The amendments come under the general heading of,
I have never heard such a "miscellaneous" amendment, and I do not have any points to raise on it.
On Question, amendment agreed to.
Clause 230 [Requirement for member-nominated trustees]:
Lord Lea of Crondall moved Amendment No. 297:
The noble Lord said: My noble friend Lady Gibson of Market Rasen and I are grateful to my noble friend Lady Dean of Thornton-le-Fylde for taking a brief on this group of amendments because my noble friend Lady Turner of Camden, who is an expert on the subject, is in Brighton with our noble friend Lord Hoyle at the TUC debate on pensions. It is being addressed by the new Secretary of State Alan Johnson.
The issue has moved steadily to the top of the trade union agenda. Trade union experience is that the issue is seen as one of deferred pay. Wearing our trade union hats, we are conscious of the fact that although trustees do not wear a hat on one side or the other, employers, if they have a majority are seen as wearing a particular hat. That is the context of this debate, which I welcome. My noble friend Lady Dean will go into some detail. I beg to move.
Baroness Dean of Thornton-le-Fylde: I would like to speak to the amendment and the others in the group. We feel that it is only fair that we increase the number of member trustees to 50 per cent. That is the case in quite a number of current schemes. We also have to bear it in mind that in most pension funds the trustees do not have the authority either to increase benefits or to reduce contributions without the support of the employer. My noble friend Lord Lea of Crondall mentioned that it was seen as deferred pay; whether that point is accepted or not, the blunt fact is that it is an enormous investment by the individual employees. Therefore, they should have, through their representative group, a fair say.
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I move on to the other amendments in this group. The amendments in my name are not my proudest moment of drafting, and I apologise for that. However, I should like to speak to their general principle, as they are probing amendments.
The reference to trade union representation and trade union-nominated trustees does not mean that the trustees nominated by the employees will automatically be employees in the company. The employees may wish to nominate an independent adviser—perhaps a financial adviser. For them to have the right to have their say and to have their trade union involved in the process is very important, and already applies in quite a few cases.
My noble friend the Minister may argue, when she speaks on Amendment No. 297B, in favour of the words that have been put there by the government amendment—"adequately represents". But what does that mean? Who defines that test, and what is the test for adequately representing? The amendment uses the word "eligible", but it does not actually give rights. So it is all being run very much on the basis of very little involvement of the employees themselves—and this at a time when there is particular sensitivity on the subject because of what has happened in pension schemes.
Employees feel that if they are members of a trade union, the union should have a role, because they have chosen freely to be in that union. They want their own nominated trusteeship of 50 per cent, not a third. The TUC over the years has provided some of the best professional courses for training of pension trustees that we have around. That is simply because trade unions have been very involved in pension schemes for employees. I shall be interested to hear what the Minister says in reply to the amendments.
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