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Lord Lucas: One of the other differences is that, when we were debating the Bill that created OPRA, I was on the Front Bench and therefore the legislation was perfect. Now that we are looking at the provisions in opposition, we question some of the things that we did at the time. I understand what the noble Baroness says and can see that it will all come out in the wash, except perhaps in cases where an employer has gone bust. Under these provisions, we are telling pension scheme trustees that, if the employer goes bust or fails to pay the premiums, they are on their own and cannot
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get insurance unless they pay for it themselves. That seems to be inviting them to resign en masse the moment the employer goes bust.
Baroness Hollis of Heigham: Can we get matters into proportion? We are talking about insurance for regulator penalties, for which the maximum is £5,000. The analogy given to me suggests that this is no different from saying that, although you have motor insurance, it does not cover parking fines.
Lord Lucas: No, but often one's employer will pay them.
Baroness Hollis of Heigham: Parking fines?
Lord Lucas: Certainly, if you are in the business of making deliveries.
Baroness Hollis of Heigham: Ah, I see.
Lord Higgins: I am still concerned about this. The point made by the noble Lord, Lord Oakeshott, is absolutely right. The feeling among people taking on posts such as executive or non-executive director of a charity or whatever is that one can be inadvertently and without malice caught out, and that it would be foolish to take up such a position without insurance. The trustees are there helping the pensioners, therefore it seems not wholly unreasonable that the pensioners should pay the insurance. The trustees are not company employees.
Baroness Hollis of Heigham: Forgive me, but this is not a debate about insurance, is it? It is a debate about saying that if a trustee has behaved unreasonably— whether it is recklessness is another matter—and, as a result, has incurred a fine, members should not pay for this.
One of the issues that I have picked up throughout the Committee is Members' concern about issues of liability in any role. Perhaps it would help if I wrote to Members explaining why a fine would be imposed at the end of a long series of steps of intervention by the regulator which the trustees had not corrected and was a last step. At that point, having failed to correct "a, b, c or d", as the regulator has invited, it is not then reasonable to expect members to pay for the trustee's failure to alter his or her actions.
Rather than push further on the matter now, perhaps I could outline the position in writing and give details of the steps and safeguards that are in place, as a preparation for returning to the item on Report.
Lord Oakeshott of Seagrove Bay: Could the noble Baroness concentrate on the insurance point? So far as I am concerned, this debate is about insurance. I accept entirely what she says about subsection (1), but she said initially that it was a separate issue. In my view, we are talking about who pays for insurance and what is acceptable.
Lord Higgins: Subsection (2) refers specifically to insurance premiums and so on. If the risk is as slight as the noble Baroness says, any such insurance premium
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would be trivial anyway. It is a question, not of what the risk is, but of whether the trustee perceives that he may be at risk and is not covered if he is. If one wants to encourage trustees and schemes, and to deter companies from switching to defined contribution schemes to avoid this, then the clause is probably counterproductive.
Clause 246 [Conditions for pension protection]:
Lord Higgins moved Amendment No. 303A:
Page 167, leave out lines 40 to 41 and insert "if the benefits are provided under a money-purchase scheme"
The noble Lord said: The amendment is grouped with Amendment No. 303B. These are concerned with the transfer of schemes from one employer to another, if I understand them correctly. As currently drafted, defined benefit schemes with a money purchase option for voluntary contributions could be excluded from the protection provided by the clause. The amendment seeks to rectify that position. I beg to move.
Baroness Hollis of Heigham: I am in a bit of a dilemma and I shall seek the help of the Committee. This is the start of a debate on TUPE. I could either take the opportunity now to say something about TUPE or I could hone in narrowly on the noble Lord's point and, perhaps, have a stand part debate on TUPE in a moment, which your Lordships might prefer.
It may be that the noble Lord has misunderstood the intention of the provisions regarding money purchase schemes. The effect of his amendment, given that there are occupational schemes such as hybrid and mixed benefit schemes, would mean that requiring the contributions to comply with conditions would not comply with the respective schemes which are not money purchase schemes, such as defined benefit or hybrid schemes which provide some money purchase benefits. Technically, his amendment obscures the problem with hybrid schemes. Amendments Nos. 303B and 303C extend the same provision to employees eligible to join the scheme who have not yet joined and to employees who are serving a qualifying period of employment before vesting rights.
Protection already exists where transferors provide hybrid pension schemes which provide money purchase benefits. As this type of scheme is becoming more popular with employers, I am sure that the noble Lord would not like to restrict that. As it happens, his amendments have the technical effect of denying the protection to hybrid schemes that I am sure he would wish to see extended. It may be that it would be more appropriate to have the wider debate on the clause stand part debate, but I can assure the noble Lord that, as drafted, his amendments would provide narrower, rather than enhanced protection.
Lord Higgins: It was my intention that the amendment would ensure that money purchase options would be included rather than excluded. Perhaps I should withdraw the amendment and raise the whole issue on the clause stand part debate, which, as the Minister said, largely concerns TUPE.
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Amendment, by leave, withdrawn.
[Amendments Nos. 303B and 303C not moved.]
Clause 247 [Form of protection]:
Baroness Dean of Thornton-le-Fylde moved Amendment No. 304:
"(i) is certified by the actuary to provide to or in respect of the employee, benefits of similar value to the occupational pension scheme referred to in section 246(1)(c),"
The noble Baroness said: In the absence of my noble friend Lady Turner, I shall move the amendment and speak to the other five amendments in this group. Clause 247 is intended to implement the Government's commitment to extend the protection afforded by the Transfer of Undertakings (Protection of Employment) Regulations. The move is much welcomed by many workers in such situations.
However, there is concern among many workers who are facing this situation about certain aspects of the Bill as currently drafted. I should like to briefly cover those and I very much look forward to the response from my noble friend the Minister.
The Bill provides for a maximum of 6 per cent contribution from the employer—12 per cent in total. The reference scheme test under paragraph 699 of the Explanatory Notes refers to that. But the benefits could differ greatly from those that employees received before they transferred. For instance, they may be on a 1/60th scheme and able to retire at 60. I am given to understand that, under the provisions of the Bill as it stands, people could get much lower benefits than that on transfer. Younger people may well meet the benefits, but in the case of older people in some schemes, the contribution from the employer needs to be much higher than the 6 per cent specified. That is the bones of Amendment No. 304.
The amendment also includes an actuary provision to provide employees with benefits of similar value. That links into Amendment No. 305. The Explanatory Notes, under the reference scheme test, refer to the standard under Section 12A of the Pension Schemes Act 1993. This amendment is intended to move towards the benefits that may be paid out where there is not a money-purchase scheme. The issue is quite complicated, but nevertheless there is a concern about a shortcoming in the Bill. I would welcome a response from the Minister.
Amendment No. 305A is tabled in my name. I am seriously concerned about subsection (6) of Clause 247. It refers to subsection (1), which covers the scheme requirements under the Bill, stating that it,
"does not apply in relation to a contract if or to the extent that the employee and the transferee so agree at any time after the time when the employee becomes employed by the transferee".
In other words, as I understand it, if an employee in a pension scheme transfers to another employer, the Bill will enable the employer to try to put pressure on the employee to convince them that you do not need the provisions in the Bill or the continuation of the contract to continue a pension scheme. I would welcome very much my noble friend's comments. I am sure that what I have described was not intended when the Bill was drafted, but it looks like that would be the result. I would like some assurance.
Amendment No. 306, in the name of my noble friend Lady Turner, is aimed at achieving clarity and protection for the scheme. Amendment No. 307 is better than my Amendment No. 307A, so I shall speak to it. It provides that you do not see a diminution of contribution and therefore a diminution of benefit, so the transferee should not be able to pay less and the employees should not be required to pay more. That might sound like fairyland, but I have seen that happen in pension schemes, particularly in the old schemes where there were surpluses: employers took a pensions holiday but the employees continued to pay, or a scheme was in trouble and employees were expected to pay more but not the employer.
I do not suggest that that is the intention of the Bill. It is intended for the very best of reasons. But we all know that, between cup and lip, a slip can happen on drafting. There are some serious concerns about this part of the Bill. I beg to move.
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