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Pensions Bill

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

Clause 111 [Investment of funds]:

Baroness Hollis of Heigham moved Amendment No. 134:


"(1A) When exercising the power conferred by subsection (1) in relation to the Pension Protection Fund, the Board must have regard to—
 
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(a) the interests of persons who are or may become entitled to compensation under the pension compensation provisions (see section 160) or any corresponding provisions in force in Northern Ireland, and
(b) the effect of the exercise of the power on the rate of any levy which may be imposed under section 172 or 173 or any corresponding provision in force in Northern Ireland and the interests which persons have in the rate of any such levy.
(1B) When exercising the power conferred by subsection (1) in relation to the Fraud Compensation Fund, the Board must have regard to—
(a) the interests of members of occupational pension schemes in relation to which section 187(1), or any corresponding provision in force in Northern Ireland, applies, and
(b) the effect of the exercise of the power on the level of any levy which may be imposed under section 187 or any corresponding provision in force in Northern Ireland and the interests which persons have in the rate of any such levy."

The noble Baroness said: My Lords, I love the enthusiasm for pension matters.

Clause 111 provides for the board to invest for the prudent management of its financial affairs, and for it to appoint at least two fund managers with the appropriate knowledge and experience. We are introducing the amendment in response to the points raised in earlier debates in this House about investment by the PPF board.

Lord Higgins: My Lords, which amendment is the Minister moving?

Baroness Hollis of Heigham: My Lords, I am moving government Amendment No. 134. I apologise if I said differently.

Lord Higgins: My Lords, my problem was simply that I had some difficulty relating the noble Baroness's remarks to Amendment No. 134. They seemed to have little to do with it. Amendment No. 134 is about Northern Ireland, as I understand it.

Baroness Barker: My Lords, we too were expecting a speech on Northern Ireland.

Baroness Hollis of Heigham: My Lords, I am slightly thrown. I am confident that I am speaking to the right amendment. Let me finish. It is about,

Let me contextualise it for a moment. When noble Lords pressed me on the matter, they were anxious that the statement of investment principles should have due regard to the interests of the parties concerned. The reference to Northern Ireland is that whatever we introduce extends to Northern Ireland, or we would have to table a separate amendment for it. There should be no misunderstanding about that. I am sorry; I suddenly thought that I had got the wrong file, but I think that I am correct. We are introducing this amendment in response to the points raised in earlier debates in this
 
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House about investment by the PPF board. Perhaps to the noble Lord's surprise, which may be why he is slightly taken aback, we have listened to the debate and brought forward an amendment to address, I hope, the concerns raised on opposition Benches. This amendment expands on the provisions of Clause 111 and clarifies the interests which the board must consider when exercising its powers to invest in relation to the Pension Protection Fund and the Fraud Compensation Fund.

The amendment provides that the board must consider the interests of two key stakeholders when exercising its powers to invest. When investing in the Pension Protection Fund, the board must consider the interests of current and potential recipients of PPF compensation and the interests of those who are responsible for paying the levy—that also applies to Northern Ireland. Similarly, in investing in the Fraud Compensation Fund, the board must consider the interests of occupational scheme members and of fraud levy payers. Of course the board remains responsible for its own financial management and investment strategy. The principle that the PPF shall be an independent body which operates at arm's length from government is unaffected by the amendment.

We have reflected on earlier debates and we think—in fact, I think—that the case has been made well by the opposition parties for some clarification of the board's investment objectives which are consistent with the overall aim of prudent management of its financial affairs, so that the PPF provides cost-effective compensation for pension scheme members. The amendment promotes those aims and I urge the noble Lords to accept it.

I should add that I have in hand a version of a draft regulation to that effect; it is brief—about a page and a half—and we will be sending it out to consultation. So, given that it is a draft and may need to be altered I am happy, if it helps noble Lords, to circulate it to them for their consideration before Third Reading to discover whether they feel that the Government have met the concerns raised by the opposition parties in Committee.

With that, and, I hope, the entirely benign, entirely welcome and entirely enthusiastic response that I anticipate from the Benches opposite, I beg to move.

Lord Skelmersdale: My Lords, yes, certainly our reception to the amendment is enthusiastic, as the noble Baroness said. These were points that were raised at earlier stages of the Bill. It always occurred to us that it is odd that the PPF, when taking over schemes in particular circumstances, should not have a direction at any point and that it should look after the best interests of the members that it acquires—either deferred, existing or potential.

So it is with many thanks that I, for one, accept the amendment. I should say that, at the beginning of this second day of the Report stage, the Minister has been exemplary in examining our points—certainly some of my more obstruse ones—and she has taken enormous trouble to prove me either wrong or half right. I am particularly grateful.
 
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We and the Liberals Democrats will look forward eagerly to the draft regulations—a theme that I have pursued throughout the Bill's progress. We understand the health warnings of which the Minister has advised us.

Lord Oakeshott of Seagrove Bay: My Lords, we, too, welcome the amendment and the spirit in which it has been moved. Given that we are talking about investment policy, perhaps I may ask the Minister whether she has received and seen the recent paper on investment policy for the PPF published by the National Association of Pension Funds and, in particular, its conclusion that the fund would need to run in an extremely risk-averse manner; which, by that token, would yield a very low return and a very expensive long-term investment policy. I would welcome her views, because it cannot be in the interests of the fund or its potential beneficiaries to have a very low return investment policy in the long term.

Baroness Hollis of Heigham: My Lords, I am grateful for that generous response. I will ensure that the draft regulations are circulated with health warnings. Indeed, I have a copy of the NAPF report here; I have read it and we are reflecting upon it. We welcome the NAPF view that investment decisions should consider the interest of both levy payers and recipients. We are setting parameters and it will be for the board to take its investment decisions as an independent non-departmental public body, operating at arm's length from government. NAPF is a, if not the, major player in the field. Its views would be taken seriously, but some of the earlier discussion regarding two-fund managers and so on will allow the board to have access to independent professional financial advice, which it will be able to assess in the light of some of the concerns raised by NAPF. So we are well aware of those concerns and, as the noble Lord would agree, whether we endorse them or not, it will be for the board to consider in the light of its professional advice.

Having said that we have taken those comments on board—or, at least, registered them—I hope that your Lordships will agree to the amendment.

On Question, amendment agreed to.

Clause 112 [Investment principles]:


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