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Baroness Turner of Camden: My Lords, I thank my noble friend for that quite detailed response. I can understand that it could be quite a complicated matter in some companies. Nevertheless, the principle is really quite important—the acceptance of the view that all of us in the trade union movement have held for a long time, that pensions are deferred pay.

If that is so, it is reasonable to try to get as near as possible to what was on offer before the transfer took place. Moreover, it has been stated again that, if this were to be put into operation, it might mean that actual transfers did not take place, with consequent loss of employment to people who otherwise would be transferred into other employment. That is a consideration.

On the other hand, I reiterate the principle that deferred pay is important. I will not press the amendment this evening, but I will consider carefully what my noble friend has said and see whether there is any way in which we can return to this at a later stage. In the mean time I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
 
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[Amendments Nos. 243 to 245 not moved.]

Clause 258 [Consultation by employers: personal pension schemes]:

Baroness Turner of Camden moved Amendment No. 246:


"(c) proposes to reduce the contributions which the employer pays to the personal pension scheme"

The noble Baroness said: In moving Amendment No. 246 in my name and that of my noble friends Lord Hoyle and Lady Dean, I shall also speak to Amendments Nos. 247 and 248 in the same group.

The first amendment deals with the situation in which it is proposed that contributions to personal pension schemes be reduced. My amendment requires consultation when an employer who contributes to a personal pension proposes to reduce his contributions.

The category of schemes concerned is wider than might be supposed. Group personal pensions—the commonest form of the DC arrangement and the usual mechanism for providing stakeholder pensions—are personal pensions and not occupational schemes. The clause as drafted requires the employer to consult if it is proposed to change the application of contributions—if the employer proposes to go to a different life office to provide its stakeholder or other GP arrangement. It does not require anything to be done by way of consultation if the employer proposes to change the amount of contributions; surely a more important issue as far as the employee is concerned.

The other amendments in this group deal with consultation and what happens if there is a failure to consult. The Minister made the point in Committee that the content of the right to be consulted can be set out in regulations. However, the penalty for failure to consult cannot and, as drafted, the Bill allows the regulator to fine the employer or trustees only if there is a failure.

The amendment puts enforcement in the hands of the unions and that is important. It is modelled on the tried and tested arrangements for equivalent consultations in the event of collective redundancies or in the event of a TUPE transfer. It gives the union the right to enforce the obligation to consult and to do so through an employment tribunal if necessary. After all, this is an employment issue. Employment tribunals exist for that purpose. The employment tribunal may make a declaration to that effect if it finds that there has been a failure to consult. It may order appropriate compensation to be paid. I emphasise that we are dealing with employment issues, and tried and tested methods exist for dealing with such matters.

The amendments also set out what the consultation regulations shall require. The employer shall consider any representations made by persons prescribed, must reply to the representations and, if he rejects any of those representations, state his reasons. In view of what has happened recently in the pensions industry, it is surely important that employees and those
 
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representing them should have a great deal more involvement in whatever changes may be proposed in relation to their schemes. I beg to move.

Lord Hoyle: My Lords, I rise to support my noble friend in these amendments. There does not seem to be a cost element, but what is important is the consultation with the employee concerned. As my noble friend has said before when she has been on her feet, we regard pensions as part of deferred salary. The matter is very important to ordinary people. Pensions are vital to them. Changes that take place should not be made unilaterally. Consultation should be required.

Not only should consultation take place, it is very important when we look at Clause 258 that, having considered the views of the employees, the employer must then make it clear why he or she is rejecting the representations that have been made. That is natural justice, and I hope that the Minister can accept this very reasonable proposal.

Baroness Hollis of Heigham: My Lords, the three clauses, Clauses 257, 258 and 259, introduce the requirement to consult. These clauses place a statutory obligation on employers to consult before making major or significant changes to future pension arrangements. The obligation will apply to employers who offer occupational pension schemes or group personal pension schemes which have direct payment arrangements in place.

Amendment No. 246 would ensure that an employer must consult before making a reduction in contributions that he pays to an employee's personal pension scheme. The effect would be to impose the obligation to consult in the instance of any reduction in contribution—for example, to changes such as corrections for past overpayment. We intend to use the power in Clause 258 (1)(b) to prescribe decisions that significantly reduce or remove an employer contribution to a personal pension scheme with direct payment arrangements.

Amendment No. 247 would allow employees and trade unions to make a complaint to an employment tribunal, if an employer failed to consult on future changes to personal pension schemes when direct payments exist but not, as it happens, in respect of changes to occupational pension schemes. It would enable the tribunal to make an award of compensation of up to 13 weeks' pay to affected employees in respect of personal pension schemes only. I am not sure whether that was the precise effect intended by my noble friend's amendment.

Part of the duties and objectives of the regulator is to promote compliance and best practice by employers. The regulator has powers to investigate and require employers to provide evidence of compliance. In cases of non-compliance, sanctions may be imposed by way of a civil penalty. I cannot see that it would be appropriate to have employment tribunals make compensation awards against employers in cases of personal pension schemes only, whereas the regulator would sanction employees, trustees or managers in the other occupational pension schemes.
 
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Amendment No. 248 would require employers to consult with a view to seeking agreement and to consider and reply to any representations made, explaining the reasons for any rejections—but, again, only in respect of personal pension schemes. Private pension provision is made voluntarily by employers as part of good HR practice. Therefore, it is right that a requirement to consult on pensions has some differences from existing legislation such as collective redundancies and TUPE transfers, where there are statutory consultation requirements which arise from European directives relating to the protection of employment.

Seeking to put changes to pension provision on the same footing as collective redundancies, for example, would constitute a significant step towards compulsory employer provision of pensions. We intend real substance to these consultative processes and believe that the use of the term "consultation" conveys this in itself. There is established case law to the effect that consultation means the communication of a genuine invitation to give advice, and a genuine consideration of that advice. So it is unnecessary to add the step-by-step procedure suggested by my noble friend. It will be for the Pensions Regulator to consider the actions of an employer in relation to existing and established case law in respect of consultation.

With that fairly lengthy reply, I hope that my noble friend feels able to withdraw her amendment.

Baroness Turner of Camden: My Lords, I thank my noble friend for that response. We attached the amendments to the provisions in relation to personal pensions, mainly because there has been a growth in that area in recent years. The Government have been intent on encouraging the growth of stakeholder pensions—and we will have more to say about that later. That introduces another element into the whole pensions and employment scene, and there must be some means of dealing effectively with it. We believe it to be an employment issue on the same basis that we believe pensions of any kind are deferred pay. Therefore, we attached our amendments to the part of the Bill dealing with personal pensions. However, I note what has been said, and shall consider it carefully in the Official Report to see whether there is any way in which we might pursue the issue of consultation at a later stage. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 247 and 248 not moved.]

Clause 260 [Modification of subsisting rights]:


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