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This provision was originally intended to enable the Secretary of State to set the limits within which the regulator would work. This power has never been used. We are therefore proposing, via Amendment No. 141, a repeal of this unnecessary provision, to ensure that there is no confusion about the regulator’s ability to spend money on contracting out. As I said, we are committed to enabling the regulator to ensure value for money and to use private sector expertise where appropriate. I hope that noble Lords will feel able to support the amendments.

On Question, amendment agreed to.

Clause 111 agreed to.

[Amendment No. 135 had been withdrawn from the Marshalled List.]

[Amendment No. 136 not moved.]

[Amendment No. 136ZA had been withdrawn from the Marshalled List.]

2.45 pm

Lord Fowler moved Amendment No. 136ZB:

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“(b) are selected as a result of a ballot in which all the eligible scheme members are given the opportunity to vote.””

The noble Lord said: These amendments have been given some marvellous numbers. I declare an interest as a member of the Parliamentary Contributory Pension Fund.

Parliament passes Bill after Bill on pensions. Since 1997, we have had the Welfare Reform and Pensions Bill, the Child Support, Pensions and Social Security Bill, the State Pension Credit Bill, the Income Tax (Earnings and Pensions) Bill, the Pensions Bill of 2003, the Armed Forces (Pensions and Compensation) Bill of 2003, the Pensions Bill of 2006 and the Pensions Bill that we are discussing today. As I think that list establishes, we are very willing to place obligations on other people and on outside schemes. Indeed, in an earlier intervention, the Minister talked on the vital role of trustees and the obligations that we place on them. But when it comes to the Parliamentary Contributory Pension Fund, we do not follow the rules laid down for others or for schemes in the outside world.

I concede immediately that my mind and the minds of others have been concentrated by errors that the parliamentary fund has made concerning many members of the fund and their pensions. However, I do not want to detail all that in this debate. Suffice it to say that the pension fund made an error and that pensions have been paid incorrectly for several years to about 50 or 60 members. There has been an overpayment and a mistake concerning the guaranteed minimum pension. There is no dispute whatever that the parliamentary fund made the mistake. There is also no doubt that the error has led to financial demands to pay back and new reduced pensions.

Although those errors are not insignificant factors, they have simply spurred this amendment. They are a part of that case, which will be decided in other ways, and I do not want to go into individual cases at this point. But I am told that the fund made the error because it relied on the advice of HM Revenue and Customs. One might think that the fund must have had its own skilled pensions advice available to it, but the truth is that it did not. I am told that, until very recently, the fund employed no professional pensions expertise. As extraordinary as it might seem, the fund was run by the Fees Office. As the Treasury took the view that the cost of professional pensions expertise was unnecessary, no such expertise was available. It is to the credit of the pension fund chairman and the other trustees that that position has changed. However, it has changed only recently.

It is impossible not to come across further anomalies in the detail of the arrangements for the fund, including the arrangements for trustees, to which this amendment relates. As the Minister knows, the rules that generally apply mean that pension schemes have to ensure that at least one-third of trustees are nominated by the members. The trustees must make arrangements for

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the selection of member-nominated trustees, and there are a couple of stages to that appointment process. First, the trustees must ask at least the active and pensioner members for nominations. A member can nominate any other scheme member whom he believes is fit to act as a trustee of his scheme, and the nominated person must obviously give his consent. Next, the trustees have to decide on the selection process. Either a selection committee decides or, if a ballot is arranged, details of the nominated persons are put to all eligible scheme members. The members are asked to vote for whoever they believe is fit to act as a trustee. Those with the highest number of votes are thereby elected as member trustees.

That is the general view. The Parliamentary Contributory Pension Fund, however, is one of a number of funds to which an exemption has been given. That should come as no surprise, because it relates to the purpose of my amendment. This fund is exempt from the trustee requirements of a normal pension scheme. No pension trustee is nominated, let alone elected, by the members. Trustees are, in effect, appointed by the House of Commons Whips—I was going to say the usual channels—whose pensions knowledge is encyclopaedic and renowned; it is only their vow of silence that prevents them holding forth on the technicalities of the guaranteed minimum pension and other such subjects. In so far as the trustees answer to anyone, they seem to answer to the Leader of the House, who may or may not have some knowledge of pension matters.

Lord Naseby: I declare an interest as a trustee. First, when I was appointed as a trustee in your Lordships’ House, I was, to the best of my knowledge, appointed by the usual channels in this House, not the usual channels in the other place. Secondly, those who have most recently been appointed as trustees have had the most experience of pension funds. So although my noble friend is correct to say that such experience did not previously seem to be a requisite, the position has changed more recently.

Lord Fowler: I welcome my noble friend to the debate. He is indeed a trustee, and he is one of the exceptions among the 10 members of the trustee board. All the others, with the exception of Sir Graham Bright, are Members of the House of Commons. I exempt my noble friend from what I said about appointment through the usual channels in the House of Commons; he has obviously been appointed through the usual channels in the House of Lords. If that satisfies him, I am very happy to make the correction. But the point is that he was appointed. The point that I am making is that the conditions that apply to other pension schemes should apply also to our own pension fund.

Lord Naseby: My noble friend may well have his viewpoint, which many of us may share, but I would simply re-emphasise that I was appointed solely because I had been a trustee for a normal pension scheme which was certainly regimented. Although one of my noble friends shakes his head—he was, of course, at the Welsh Office when the Welsh Development Agency ran into trouble—that experience seemed relevant.

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Lord Fowler: My noble friend seems to be extending the debate. If I may advise him, I would say that that is not necessarily totally in his interests. He may well have been a trustee of another pension scheme; it is not exactly a unique qualification in this House. I am taking it from the point of view of members of the scheme. The trustees are there to represent the members, so they should have the right to choose a certain proportion of them. I am not making a case against the present trustees; I have been careful not to do so. I strongly advise my noble friend not to provoke me or I may go down a rather different road.

My amendment proposes that at least one-third of the trustees should be not only nominated by the members but elected by them. If they were able only to nominate them, that would bring us back to the current position. Election is the proper way of doing it. The current position is that eight of the 10 trustees are serving Members of Parliament, appointed by the Whips; one, as we heard, is a Member of this House, appointed by the Whips here; and one has been nominated by the association representing former Members of Parliament—a step taken only recently, though it is a step. All of them are members of the scheme; there is no independent member of any kind on the trustee board. In other words, there is no truly independent member and no independent chairman. I emphasise that this is not a criticism of the current chairman, who has done a great deal to try to rectify some of the faults in the present system. I pay tribute to Sir John Butterfill for that. However, there is no independence.

I simply do not believe that anyone can seriously claim that this is a perfect position for a pension fund to be in, let alone a parliamentary pension fund, given all the requirements and conditions that we place on other pension funds. We debate and enact Bill after Bill to place conditions, restrictions and rules on outside pension schemes, yet we have a parliamentary pension scheme system that is antiquated and unreformed. I cannot imagine why we think that reform is right for outside schemes but not applicable to our inside parliamentary scheme. Why do we think it right to enact Bill after Bill that applies outside but not to us?

I should be grateful for the Minister’s guidance, because we are in a pretty technical area and I do not want to table an amendment that does not bring into effect the purpose behind it. I have tried to remove the exemption for the parliamentary pension fund which exists under current law, and impose the requirement that at least one-third of pension trustees should be elected by members of the pension fund. That is my case, which is exploratory at this stage. I am anxious to find out whether the amendment serves the purpose that I have set out. If it does not, we have time to change it before Report stage. The Treasury is at the centre of these arrangements; it rules rather than the trustees. I would like to find out how it sees or defends a position that many in this country regard as out of date. I beg to move.

3 pm

Lord Crickhowell: In making my first intervention on this Bill, I declare an interest as one of those who was affected by the errors described by my noble friend. I emphasise, too, that the present chairman of

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the parliamentary pension fund has made strenuous efforts in recent times to improve the management arrangements. It was extraordinary that the Fees Office had no professional expertise, that the advice received from both the National Insurance Contributions Office and HMRC was wrong and that the errors were not spotted by the Government Actuary or the National Audit Office.

One of the consequences is that the 177 pensioners who were overpaid and the 100 who were underpaid have probably been dealt with less generously than they would have been in a private pension scheme. I feel pretty sure that, in the days when I was a trustee of private pension schemes, with an error of this kind, whose net cost was not substantial after taking account of tax implications and so on and which had occurred because of the lack of professional expertise provided by the employer and the actuary not having done his job properly, most employers would have covered the costs rather than expecting pensioners to repay overpayments at a time that was extremely painful for them to do so.

I need not go further on those matters, except to take up some of the lessons that I think were learnt from what happened after the errors had been discovered. The trouble was that there was no representative group of pensioners from whom advice could be sought or with whom consultations could take place. There were consultations involving the Leader of the House of Commons and an effort was made to bring in the Association of Former Members of Parliament. However, the association was set up relatively recently, after these errors occurred, and I have to confess that I did not know of its existence. It certainly has no specific pension role and cannot be taken to be representative of pensioners.

When I was last a pension trustee in a firm of which I was a director, we had elected pension trustees and we made a point of having an annual meeting to which pensioners could come to cross-examine the trustees and to receive advice about the way in which their pension fund was being managed, the investments were being made and so on. There was always a good attendance at those meetings.

When this episode occurred, no such meeting was convened. I first heard about it when I received a letter saying that my pension would be reduced the following month and that I would be asked to repay a quite substantial sum over the next five years. There were no detailed discussions to explain what had gone on. We then had to seek advice. I sought advice from, among others, the Pensions Advisory Service; my noble friend has read out from the advice the normal way of dealing with these things in private schemes.

It is entirely wrong that the parliamentary scheme should be living in the dark ages of pensions representation and administration in this way. It should set an example and give a lead; it should not have to defend the indefensible. Surely pensioners receiving benefits from the parliamentary pension scheme are entitled to be fully and adequately represented by people whom they have helped to choose. They should have the opportunity to nominate and, preferably, to vote on those people;

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they should not simply be represented by people who, however honourable and whatever efforts they may put into their work, are not chosen representatives.

I warmly welcome the proposals made by my noble friend to bring the parliamentary pension scheme into the modern age. They would make sure that the scheme is properly run and that the representatives of the pensioners are chosen in the way that is considered appropriate for all other pension schemes today. Anything else is indefensible. If the Minister has to say that there is a fault in the detailed proposals that my noble friend has put forward, I hope that he will come up with a solution that offers the members of the parliamentary pension scheme the kind of representation that they should have and which they probably could have if they were members of any other scheme operating under normal rules.

Lord McKenzie of Luton: I should start by declaring an interest as a very modest member of the scheme. I thank the noble Lord for this amendment and for raising this important issue. I do not have any details in my brief about the background to the errors, how they arose and what was entailed, but I can see that there may be a way of taking this matter forward.

The Pensions Act 2004 requires occupational pension schemes established under a trust to have arrangements in place that provide for at least one-third of its trustees to be member nominated. However, as I am sure Members of the Committee will be aware, and as has been explained, the parliamentary pension scheme is covered by separate statutory provisions in the Parliamentary Pensions (Consolidation and Amendment) Regulations 1993. Therefore, the parliamentary pension scheme is exempt from the 2004 requirements.

As the noble Lord explained, his amendment would revoke this exemption and modify the requirement so that member-nominated trustees of the parliamentary pension scheme would be selected by a ballot of scheme members, rather than selected as a result of a process that involves some or all of the members as per the Pensions Act requirement. The existing provisions in the parliamentary pensions regulations arguably provide for greater involvement by members of the parliamentary pension scheme than those provided under the Pensions Act 2004. The parliamentary pensions regulations require all the trustees to be either Members of another place or former Members who are entitled to a pension from the scheme.

The particular point raised was that nominations are usually made through the usual channels. Last year, an appointment was made following a nomination by the Association of Former Members of Parliament. Sir Graham Bright was my old adversary in Luton South; he saw me off twice, regrettably, in 1987 and 1992, but I do not hold that against him. Appointments are made by order of the House of Commons. Members of another place may therefore effectively veto any appointments. I think that Members of the Committee will agree that, because there are separate statutory provisions, it serves no particular purpose to seek to apply the member-nominated trustee requirements in the Pensions Act 2004, which could create an unnecessary legislative complication.

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If the noble Lord believes, as he clearly does, that aspects of the member-nominated provisions should be reflected in the parliamentary scheme regulations, perhaps the route forward is to seek to take them up first by making representations to the Leader of the House of Commons, who is responsible for those regulations. I am sure that the noble Lord, with his experience and standing, would be able to effect those arrangements and I would be very happy to work alongside him to do that.

Lord Crickhowell: There is a difficulty, of course, if this is done by changes in the regulations. Apart from anything else, if the new regulations came before this House, we would have no scope for amending them. We would have to take them as they stand. There are some difficulties in proceeding by that route.

Lord McKenzie of Luton: At this stage, I am suggesting that, if the noble Lord feels able not to press his amendment, perhaps the first thing to do would be to see whether there could be some engagement with the Leader of the other place to raise these issues more directly. The noble Lord may be aware that a review of the parliamentary pension arrangements is in hand. The Leader in another place announced in a Written Ministerial Statement on 17 June—this was particularly because of the anticipated increase in the cost of benefits accruing under the parliamentary pension arrangements—that the Government would shortly be asking the Senior Salaries Review Body to undertake a major review of those arrangements. The review will need to consider among other things the findings of the Government Actuary’s valuation of the parliamentary contributory pension fund, which is to be completed in March 2009. It will perhaps be spring 2010 before the SSRB reports.

Lord Naseby: Speaking as a trustee, I know that one of the frustrations of the current trustees is the slow response that representations from trustees receive from the Leader of the House of Commons. While that route may or may not be appropriate, the speed of response is not acceptable. The Minister mentioned the Government Actuary’s assessment of the value of the fund, which is quite right. But it is now July 2008 and, as I understand it, the assessment will not be completed until March 2009 at best. Those time spans are detrimental to the trustees taking forward decisions. Perhaps my noble friend who tabled the amendments will remember that the current foundations were passed in 1993 when, if I remember correctly, a Conservative Government were in power. I am not sure whether both my noble friends were members of the Government at that time.

Lord McKenzie of Luton: I certainly remember 1993 and the Conservative Government.

Lord Fowler: Let us cut out this ridiculous nonsense about whether it was a Conservative Government or a Labour Government. It is the first time that that has been introduced and it is a completely trivial point.

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