HC Deb 08 May 1973 vol 856 cc282-93

When the Occupational Pensions Board has exercised its powers under section 50(1) of this Act to reject an application for recognition or to withdraw a recognition certificate in respect of an Occupational Pension Scheme, it shall not be permissible to make membership of that scheme a condition of employment.—[Mr. Dell.]

Brought up, and read the First time.

Mr. Dell

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

It will be convenient to take also new Clause 4:

Conditions of membership of occupational pension scheme

  1. (1) On the exercise of their powers under Section 50(1) of this Act to reject an application for, or cancel a recognition certificate, the Occupational Pensions Board shall issue a determination stating whether the scheme shall be permitted to make membership a condition of employment.
  2. (2) On an application made to them in respect of an unrecognised occupational pension scheme by persons competent to make such an application in respect of it, the Occupational Pensions Board shall issue a determination as to whether or not the scheme shall be permitted to make scheme membership a condition of employment.
  3. (3) For the purposes of paragraph (2) above, "persons competent" shall be as defined in Section 61(5) of this Act.

Mr. Dell

I need not take long on this clause because the Government must this time accept its principle. The question is whether, as a condition of employment, a person should be compelled to be a member of an unrecognised occupational pension scheme. It would be absurd for a person to be thus compelled, because it would mean that he would have to contribute towards the basic pension, the reserve pension scheme, and also the unrecognised occupational pension scheme.

The basic contribution of a young married man with children would be 5.25 per cent. of his salary, his reserve pension contribution would be 1.5 per cent. of his salary, and his contribution to the unrecognised scheme might be 2.5 per cent. of his salary, or perhaps more. This young man would therefore be paying out of his salary, which might be a low one, a minimum of 9.25 per cent., and perhaps more.

In Committee I argued that it should not be a condition of employment that a person should be compelled to be a member of an unrecognised occupational pension scheme. I thought it must be an error of omission that the Government had failed to provide for this, but, no, the Under-Secretary of State said that he would not have this minor change made in the Bill. He said that it should not be assumed that benefits available in an unrecognised scheme must necessarily duplicate or overlap those provided by the reserve pension scheme."—[OFFICIAL REPORT, Standing Committee E, 8th March 1973; c. 867.] I assume that he was referring to schemes which provided for a lump sum payment on retirement which would not get recognition under the Bill. I was not assuming that the benefits available under an unrecognised scheme necessarily duplicated those available under the reserve pension scheme. All I asked was that it should not be a condition of employment that a person should be a member of such a scheme, but the Government would not accept my amendment.

As is my usual practice, I offer the Government a compromise position. If my clause is unacceptable because it represents an absolute prohibition, let us try new Clause 4, under which the Occupational Pensions Board would decide whether that should be a condition of employment. The board could decide either when it considers the scheme on an application for recognition or when an application on that point is made to it by competent persons. That would not be a grave additional burden on the board, because it will have to look at most of these schemes anyway.

The hon. Member for Kensington, South (Sir B. Rhys Williams), who unfortunately is not in his place, supported this idea strongly in Committee. If I have not influenced the Government perhaps the representations, public and private, that I hope he has made, will do so. It is a relatively small point, but employees are entitled to better protection than they are given in the Bill and I hope that the Minister will accept one of the new clauses, or at any rate the principle of one of them with a view to changing the Bill later.

Mr. Dean

As the right hon. Member for Birkenhead (Mr. Dell) said, he is following his normal tactics. Having put forward a proposition which was not acceptable in Committee he is offering, on the Floor of the House, what he calls a compromise. The Government understand the point he has in mind. I hope I shall say something that he will feel is conciliatory and helpful on the principle that underlies new Clause 4.

First, I will say a word on new Clause 3. Some hon. Members argued in Committee—the right hon. Gentleman did not quite use this argument this afternoon— that employees should be protected against being forced to join what might be called rogue schemes and being compelled to pay additional contributions that they could not afford. Unrecognised schemes may not necessarily be rogue schemes. Some may provide lump sum benefits which are not satisfactory for recognition purposes although they may be perfectly secure and respectable schemes which fulfil a valuable function for employees. Anything I say in sympathy with the right hon. Gentleman's argument does not necessarily mean that I regard unrecognised schemes as bad schemes. They may be fulfilling a purpose which would not be fulfilled otherwise, and for that reason I do not condemn them.

Another difficulty with new Clause 3 is that in a Bill of this kind we do not want to interfere in matters which largely concern conditions of employment which are best left to free negotiation and discussion between employers and employees.

For these reasons the Government do not feel that new Clause 3 is satisfactory. It would impose a complete ban on compulsory membership where recognition has been refused or withdrawn although the scheme concerned is sound and such a condition had been agreed by employees' representatives. Moreover, it would be ineffective because it would not extend to all unrecognised schemes, and only a few changes would therefore be necessary in a scheme which had been refused recognition, for the employer to present it as an entirely new scheme in respect of which recognition had not been sought.

New Clause 4 is a different matter, because it permits the circumstances of each scheme to be examined before a decision is reached on whether or not membership may be made a condition of employment. There would, however, be difficulty in imposing such an additional duty on the Occupational Pensions Board at this stage. I think the House will agree that the board, which at present is in existence only in shadow form and will not have full statutory powers until the Bill receives Royal Assent and appointments have been made, will have a massive amount of work to do between now and 1975 because of the large num- ber of schemes which will require authoritative decisions from the board.

Therefore, I hope the House will feel that it would be only right and proper that the board should be able to concentrate all its efforts on recognition provisions and reservation requirements. We would be reluctant to put this additional work on the board at this moment. However, while we do not feel able to accept the new clause for this reason, I am prepared to give an undertaking to keep the situation, and the particular point mentioned by the right hon. Gentleman, carefully under review. If cases occur where employees are compelled against their will to join schemes in which their contributions are at risk. I would be prepared to ask the board, when it has completed its initial task to which I have referred, to examine ways of preventing this. I hope the right hon. Gentleman will feel that in the circumstances we have been able to go some way to meet the principle behind new Clause 4, which aims to extend the policing activities of the Occupational Pensions Board when the initial rush of its work has been completed.

Mr. Dell

Surely there would be some need to have some power in the Bill to enable the board to do this effectively? There should be at least a regulation-making power to enable the Government to give the necessary powers to the board. On what authority would the board be able to do this as the Bill stands?

Mr. Dean

Wide powers are given to the board already and there will be the possibility of the Government of the day seeking advice from it. I am advised that the undertaking I have just given to the right hon. Gentleman is adequately covered under the Bill as it stands.

Mr. George Cunningham

The Undersecretary used some such words a moment ago as "if the contributors' contributions are at risk". What did he mean by that? There may be a common situation in which one wants to prohibit making membership of a scheme compulsory, not where the contributions are believed to be at risk but simply where the benefits almost duplicate those which will be acquired under the State reserve scheme, when the employee will have to be a member of that scheme.

Mr. Dean

The hon. Member for Islington, South-West (Mr. George Cunningham) is going much wider than his right hon. Friend the Member for Birkenhead went. If evidence is building up that people are compelled to join a scheme which is not satisfactory and where the contributions they make may be at risk, there would be a case for the Occupational Pensions Board to examine, to see whether the conditions of employment laid down were appropriate in those circumstances. I should not feel it would be right and proper to get the board involved in an area of terms and conditions of employment, which is a matter largely for discussion between employers and employees.

7.15 p.m.

Perhaps I may take the opportunity of referring to the Government's intention, outlined in paragraph 65 of the Explanatory Memorandum, of ensuring that the Truck Acts and similar legislation should not impede the operation of recognised occupational schemes. It has not yet been possible to settle on the precise amendments necessary for this. There are some legal complexities which require consideration, but it is our intention to examine them when the Bill reaches another place. It is probable that we shall exclude from the operation of the Truck Acts all bona fide pension schemes, not merely recognised schemes, because we might not otherwise be able to avoid a situation in which doubt is cast on the legality of the deduction from wages of contributions to perfectly respectable schemes. If that is the case, I would regard it as a satisfactory solution.

We would be removing any operation of the Truck Acts from the pensions field —a field which they were not designed to cover. There would be no distinction in that field between certain manual workers and the generalitly of employees. All employees would be on the same footing and it would be up to them to negotiate with employers as to whether a scheme membership should be compulsory.

Mr. Cunningham

I think the Minister will get into difficulty about this. It could happen that a recognition certificate would be withdrawn—perhaps that would be the most obvious case— because in some respect it fell short of recognition requirements. Of course one would hope that then the employer would amend his scheme to re-acquire recognition, but there are some daft employers about just as there are daft employees. He would then be faced with the situation where because of a defect employees would be obliged to contribute to the reserve scheme as well as to a defective scheme. Then employees would say, "Why did you not fix this in the Bill? Will you introduce an amendment now?" The Government would say that it had no time to do so because of its heavy programme and we would all be condemned as noodles. We seem to be laying up for ourselves criticism in the future.

Mr. Meacher

This is an important new clause to ensure that it shall not be a condition of employment that members of the reserve pension scheme shall be members of an unrecognised occupational pension scheme. I do not think the Under-Secretary has fuly taken into account the force of the argument. My right hon. Friend the Member for Birkenhead (Mr. Dell) is well known for his encouragement of options. Clearly, if this new clause were not accepted it would be denying the option to a member of an occupational scheme to join the reserve pension scheme when it might be considerably better for him to do so.

In Committee, the Under-Secretary said that the chances were that in the majority of cases members would have a higher level of cover in occupational pension schemes than in the reserve schemes. I stress the words "in the majority of cases". There is at least a minority of cases—an unspecified number—in which the member would be worse off if compelled to be in the occupational scheme as opposed to the reserve scheme. We are debating whether an employee should have the choice of what is in his own interests. The question to be considered is whether, on the rate of inflation, the occupational scheme is better than the reserve scheme. One aim of the Bill, if this proposal is not accepted, will be to encourage employers to set up schemes and to avoid the 2½ per cent. minimum contribution.

They will be able to do this, amazing as it might seem, because the minimum benefit criteria are so low. As my right hon. Friend the Member for Birkenhead said, a young person with family commitments may well wish to postpone his liability to pay say, a 5 per cent. contri- bution to an occupational scheme until he is better off. The Minister did not comment on that argument. I would have thought it a reasonable one because clearly a person cannot always commit himself to five years' service to get a preserved pension.

I recall the relevant estimate which my right hon. Friend gave in Committee. I am grateful for it. It was not denied by the Minister at the time. It was that a young man in a job for as much as six or seven years would do as well with a 1½ per cent. contribution to the reserve pension scheme as if he were to make a 5 per cent. contribution to an occupational pension scheme and if he then went into the reserve pension scheme afterwards and obtained a preserved pension. We have to bear in mind the fact that the reserve pension scheme offers bonuses. That is a pretty staggering comparison and shows how unreasonable it would be to deny all choice to a member and force him into an occupational scheme which is not even recognised.

Thirdly, it is agreed on both sides that in some occupational pension schemes the young subsidise the old. Although this may be to the advantage of older workers it is a rather different principle to insist that younger workers should be forced into a situation whereby they are bound to do this. That again would follow if new Clause 4 were not accepted.

The fourth reason why the Minister has been altogether too quick in dismissing the clause is that preservation in an occupational pension scheme is worse for a number of young workers. If a single person in such a scheme leaves his employment before he marries when no widow's benefit arises from the preserved pension. However, if he had been in the reserve pension scheme all the time he would be able to pay benefit for his future wife.

The last reason why I believe that this is an important clause and will recommend my hon. Friends to support it is, as the Minister will recognise, employers might be denying recognition for other than reasonable reasons. They might refuse to seek recognition because they do not want to give information to the Occupational Pensions Board or they might be investing their money as a form of self-investment in a way which clearly the board would think inappropriate. The reasons which the hon. Gentleman gave for rejecting Clause 3 was that the member of the reserve pension scheme might be a member of an occupational scheme which provided a lump sum benefit on retirement which was not such as to gain recognition but which at the same time was nevertheless handy to him.

I accept the point that it is not only rogue schemes which cannot gain recognition. The point remains that there are a number of rogue schemes, and employees clearly need protection in such cases. The Minister suggested, as a reason for rejecting new Clause 3—which I would not insist on putting to a vote— that it was best left to negotiation between employer and employee. While I agree that the powers of the clause are rather stronger than I would wish, nevertheless this is endangering the interests of employees, because clearly in a number of cases employees will not be able to detect some of the disadvantages under this exceedingly complex Bill. To assume that all employees are members of trade unions, all of whom are advised by pensions experts, is, I regret to say, unrealistic. The rejection of new Clause 3 is unhappy.

The Minister's rejection of new Clause 4 was altogether much weaker and more unreasonable. He said it would be difficult to impose on the Occupational Pensions Board at this stage. He further said that he would keep the matter under review which is a first-class way of passing the buck. He said that if he found from experience that employees were compelled against their will to join an unsuitable scheme then he would ask the Occupational Pensions Board to examine the situation and to prevent it. My hon. Friend the Member for Islington, South-West (Mr. George Cunningham) put his finger on the point when he said it is no good allowing such a Bill to go through with a loophole of that kind merely with a commitment that if what is feared will happen happens the Government will look into it. It is clear that it will happen in some cases. That can be predicted. It is irresponsible not to take some reasonable amending action now.

I therefore ask the hon. Gentleman to look again at the force of the arguments that have been put forward about how unreasonable it is to compel someone against their self-interest, and I think he will acknowledge that, to be a member of a scheme when it is not in their long-term interests. Is it not also the case that as this amendment is likely to be necessary at a later stage it would be far better to insert it now? On that basis, unless the hon. Gentleman can give me further satisfaction, I will have to recommend my hon. Friends to vote on new Clause 4.

Mr. Dean

I will reply with the leave of the House. I thought that I had made a sympathetic and forthcoming response about the principle of new Clause 4. I do not want to delay proceedings by rehearsing the arguments. If I did not convey that clearly enough let me be a little more specific. I understand the point that has been made. There is an area in which additional safeguards may be required. If I have not given a sufficiently clear assurance let me go a bit further and say that I will undertake to introduce an amendment in another place which will permit regulations to require some form of intervention by the Occupational Pensions Board in this sphere.

I must make it clear that 1 do not think it would be reasonable to ask the Board to do this until after April 1975 when the original rush of work is over. If it would satisfy the House I am prepared to go a little further and ensure, by the necessary amendment to provide a regulation-making power, that the power is specifically there and can be used if it is required after the completion of the initial rush of work.

Mr. Meacher

Will the hon. Gentleman clarify what he said? He said at the end of his latest speech that if it were necessary he would do this. I thought he started by saying he would do it anyway. If it is merely a case of introducing regulations to prevent such malpractices or undesirable practices, if that is found necessary, I cannot see that this is different from what he said initially. I gave my response to that. If he is saying that he will definitely do it I cannot see why he is unwilling to accept the clause now. In any case, I cannot see how far the hon. Gentleman has helped the House.

Mr. Dean

If I may again have the leave of the House, clearly it would be wrong for the Government or this House to prejudge the way in which the Occupational Pensions Board will carry out its duties. I cannot therefore be as specific as new Clause 4. What I have done is to give an undertaking that we will introduce an amendment in another place permitting regulations to require some form of occupational pension intervention. I hope the House will feel that this is a forthcoming undertaking and as far as I can reasonably go in an area in which the Occupational Pensions Board must have a say about how it carries out these powers.

7.30 p.m.

Mr. Dell

The hon. Gentleman has met the point of my intervention. He is now saying that a regulation-making power would be necessary, and that the Government will introduce an amendment in the House of Lords to ensure that the necessary powers are available. There is still some worry about the matter. The hon. Gentleman says that the Occupational Pensions Board will not, for some time, have the resources available to take on this additional task. That is a cause of worry because there may be cases in which the action 'should be taken very rapidly after the inauguration of the Bill. If the board cannot undertake this additional task the hon. Gentleman should provide some other way for it to be done.

Members of the Opposition have on many occasions expressed concern about the resources of the board in relation to the task which is laid upon it in the Bill. What the Minister said today confirms my feeling that it will be greatly over-weighted. The Minister may find that some machinery other than the board will be needed. I mentioned the board in the clause, because I did not think it was for me to create the new machinery, in the light of the Minister's earlier assurances.

Will the Minister consider whether the amendment which he proposes to introduce in the House of Lords should give the possibility of some other means of intervention if the board is overwhelmed by its existing statutory task? Can the Minister go a little further and say that the Government recognise the matter as being sufficiently important to have a reserve up their sleeve in case the board is not able to deal with it? It would be wrong for Parliament to place people in that sort of peril when by a small change in the Bill it could be prevented. I am sure that the House will give the Minister leave to speak for the fourth time to say whether he will consider embodying in the amendment which he proposes to put forward in the House of Lords reserve machinery to tackle the task if, as I suspect, for some years after 1975 the board will not be able to deal with the task.

Mr. Dean

With the leave of the House, I should like to say that I will consider, without commitment, what the hon. Gentleman said. The Occupational Pensions Board will have substantial powers in this area. The fact that any scheme has to be recognised and must fulfil the standards in the Bill, and must satisfy the board that it is doing so, or that the people concerned have to be in the reserve pension scheme, is a considerable power.

In addition, there is the power of supervision through the tax relief mechanism. There will be these two areas of control over schemes, one of which has not previously existed. The power will be very considerable and adequate. Without commitment I will consider what the right hon. Gentleman said about the amendment to which I have referred and to the regulations which will follow.

Mr. Dell

In view of the Minister's assurances, I will ask leave to withdraw new Clause 3, and I will not move new Clause 4. I beg to ask leave to withdraw the Motion.

Motion and clause, by leave, withdrawn.

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