| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Baroness Hollis of Heigham: I wanted to respond on only one point. Obviously, the recruitment process for the board is different from the recruitment process for staff. I have been involved, appropriately at arm's length, with things such as disability living allowance boards, and members of such boards are run on Nolan principles. The members of the board conform to the Nolan system of recruitment to an NDPB. Staff are also professionally recruited in an appropriate way.
On the legal point, I do not know, but let me see if there is any substance to the noble Lord's point. If there is, obviously we must respond to it. I am not persuaded that there should be, given the structure. I do not think that it is any different from the legal position of someone on a DLA board or an incapacity benefit board. They also make decisions that affect people's income. But let me reflect on that to see whether the noble Lord's point should be taken further.
As for the argument about the difference between trustees and the other staff of the regulator, the PPF, I hope that the noble Lord will accept that they are very different. There is provision to ensure that they are not liable unless they act contrary to human rights or with malice—I was wondering whether to raise the point about acting with malice earlier—but they are not individually liable unless, as I say, they knowingly flout the Human Rights Act or act with malice. That returns us to the point about publication that I think we raised yesterday.
However, I will push that point a little further to see whether I am missing anything, because that is not impossible.
Lord Higgins: It is worth thinking about. The provision on malice, human rights and so on, would not protect a trustee on a pension fund who got it wrong because he did not take advice. So let us examine it. I think that the regulator and the PPF are much closer to a pension fund than they are to the other kinds of board mentioned by the noble Baroness, which, generally speaking, deal with public money in a
14 Sept 2004 : Column GC371
more specific sense. But let us not take longer on the matter now; let us think about it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Skelmersdale moved Amendment No. 302:
"INTERNAL CONTROLS
Regulations may provide that trustees of an occupational pension scheme must secure that the scheme has appropriate and sufficient systems of internal control."
The noble Lord said: Although my noble friend, Lord Lucas, is absent, I know exactly what he is worried about. He has been doing something that I would not do: ploughing through the European Pensions Directive, which must be made law in its entirety in the United Kingdom by September 2005, as I understand it. Article 14 of the directive is very short and comparatively sweet. It talks about powers of intervention and duties of a competent authority. It states:
"The competent authorities shall require every institution located in their territories to have sound administrative accounting procedures and adequate internal control mechanisms".
It may be that buried somewhere in this enormous Bill, Article 14 is covered with both belt and braces, but my noble friend Lord Lucas, in his reading of the Bill, clearly failed to find it. Therefore, he suggests that a new clause be inserted to implement it. The most appropriate place in the Bill would seem to be around Clauses 237, 238 and 239, which already cover the trustees of occupational pension schemes, as we have just discussed. He also feels that it would be appropriate to mirror the wording of the directive as closely as possible, and this he has sought to do. I beg to move.
Baroness Hollis of Heigham: As the noble Lord identified, we are talking not particularly about DB schemes, which tend to have internal controls in place, but DC schemes—money purchase schemes. We are in a way resuming a debate that we had on Amendment No. 155 before the Summer Recess, in the light of Article 14.1. I argued at the time that I was not persuaded or entirely clear that those internal controls did not exist to a sufficient degree to meet the requirements of the European directive.
Lord Skelmersdale: Could the noble Baroness rephrase that? It sounded like the most appalling double negative.
Baroness Hollis of Heigham: There is a fine history of double negatives in this country. Since when have they been appalling? I am quite sure that I cannot repeat the sentence.
Baroness Hollis of Heigham: Following the debate on Clause 155—when the noble Lord, Lord Lucas,
14 Sept 2004 : Column GC372
argued the need for internal controls, in which he was supported by the noble Baroness, Lady Noakes, and I said I was surprised that they thought this so important—I was left unpersuaded that we did not already have in place sufficient internal controls to meet the requirements of the European directive. I think that that is a perfectly proper use of a double negative, according to my O-level Latin.
Officials take the deliberations of members of the Committee very seriously, and we have looked at this further in the light of the arguments then expressed a view. We accept that European directives can lend themselves to a variety of interpretations. We thought, as I say, that we were showing full compliance with Article 14.1 and felt that the totality of the existing regulatory regime has, in effect, created an environment in which schemes already have to have internal controls, as most schemes do.
Since the detailed discussions between officials and representatives of the Institute of Chartered Accountants, we have been urged to put the matter beyond doubt and provide an explicit legislative reference. To some extent, the noble Lord, Lord Lucas, was acting as the accountants' voice on this occasion. This would give us the flexibility to decide, in the light of events and our experience in operating the directive, whether any further intervention by Government was necessary.
Although we are not convinced that it may be needed, we are willing to accept the case for flexibility and the clarity for which the accountants are asking. In the light of that, it is highly likely, if members of the Committee agree, that I shall return to this matter at a later stage to see whether I can give reassurances that we do not need this or accept the obligation that we do. In that case, we shall come forward with appropriate words to that effect.
Given the understanding that we are continuing to explore this, we have had differing advice from different bodies. In the light of that, I hope that the noble Lord, Lord Skelmersdale, will recognise that we are engaged in an honourable activity and will withdraw the amendment on behalf of his noble friend.
Lord Skelmersdale: What I recognise is that the matter is pending. I know that my noble friends Lord Lucas and Lord Hunt will be delighted that the department is taking that point seriously. I really have nothing more to say except that I hope that the matter ends satisfactorily and goes into the out-tray and the Bill in due course. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 303 not moved.]
On Question, Whether Clause 239 shall stand part of the Bill?
Lord Higgins: This clause is concerned with payment of surplus to an employer. There has been an enormous amount of controversy recently in the light of changed circumstances as to whether it was appropriate for trustees to grant to employers
14 Sept 2004 : Column GC373
contributions holidays and so on. The circumstances have changed very radically indeed. However, as I understand it, there has always been a huge debate about who owns the pension surplus. I believe that there is a whole string of decided cases on that point.
The purpose of the contributions, whether from an employer or an employee, and the purpose of building up the fund, is to ensure that the liabilities can be met following actuarial advice and so on. In some cases where very large surpluses were accumulated it was clearly inappropriate—indeed, I think I am right in saying that there was a limit on the extent of surpluses—for them to remain the size that they were, which is why they tended to be disbursed in a combination of a pensions holiday and, generally speaking, increased provision for the beneficiaries.
However, suddenly, we come to a clause on payment of surplus to the employer, which seems to run right over the situation that I have just described. I am not clear why that should be. Under Clause 239, new Section 37 is to be substituted for Section 37 of the Pensions Act 1995. I must confess that I have not checked what that provision states. However, I would be surprised if it introduced a measure of the kind that is in the new section. Rather than simply pay a surplus to an employer it is better that there should be some quid pro quo in exchange for a pensions holiday, if, indeed, as I hope might happen at some point, we ever get back to the stage where large surpluses accumulate. That is certainly not the case at present as a result of the events of the past seven years. Perhaps the noble Baroness can tell us why this clause is necessary.
| Next Section | Back to Table of Contents | Lords Hansard Home Page |