ESTABLISHMENT OF SCHEMES (Hansard, 14 July 1987)

§ Sir Brandon Rhys Williams
I beg to move amendment No. 41, in clause 20, page 12, line 5, at end insert 'after consultation with the Occupational Pensions Board'. Amendment 41 requires the Treasury, before amending section 20, to consult the Occupational Pensions Board. I express reservations about the role of the Inland Revenue in the pensions scene and I have my reservations about the Occupational Pensions Board too. I am afraid that on a number of issues on which I hoped that it would speak out clearly and strongly, it has appeared to be rather pusillanimous and vacillating, possibly because it is not quite sure whether it is expected to respond to guidance from the Inland Revenue or from the DHSS. Nevertheless, that body has been set up and it has a status that is very important for occupational pension schemes and I think that it should be made to rise to its responsibilities and should be encouraged to do so.
Clause 20(4) states: The Treasury may by order amend this section as it has effect for the time being. That places in the hands of the Treasury a very substantial power particularly as clause 20(5) states: An order under this section shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons. Unfortunately, hon. Members who study statutory instruments and the way in which the House deals with them know that again and again, once the statutory instrument is in print that is really the end of the matter and although hon. Members may have reservations they cannot voice them, as was the case sadly with the 20 statutory instruments tabled last week by the DHSS, and with all too many statutory instruments laid under provisions of this kind.
I hope that, even if the House of Commons is unlikely to have any say in what the Treasury does in amending the section, proper consultations will take place with the Occupational Pensions Board. I must announce to the Committee that the example before us this week is not very optimistic. I am referring to the report from the Occupational Pensions Board in relation to statutory instrument number 1105 which is now before the House entitled Occupational Pension Schemes (Disclosure of Information) (Amendment) Regulations 1987". I do not know how many hon. Members have gone so far as to read the comments in the report. I thought that they might have some relevance to the debate.
Indeed, I discovered that they had relevance when I read what the Occupational Pensions Board had to say on the draft statutory instrument submitted to it for comment. The board's comments are dated 3 June 1987 and are alarmingly trenchant. The report ends as a sad story. I hope that I am not detaining the Committee too much if I read just the comments made by the board with regard to regulations 2(5) and 2(11). The report states: Regulation 2(5) requires the information introduced into Schedule 2 of the principle regulations to be furnished on request to any member of a tax-approved scheme. We believe that these requirements for information about additional voluntary contributions are incapable of being met and are 1032 likely to prove to be completly unacceptable to the pensions industry and trustees. To determine the maximum amount of AVCs that a member may make the scheme would need to have full details of remuneration (including overtime earnings and benefits in kind) and this information would often not be available to the administrators. It could be misleading to members to quote the maximum tax-deductible AVC if payments of AVCs at this level could result in the Inland Revenue benefit levels being exceeded. There is another potential problem. The Government have announced their intention that scheme members should be free to pay AVCs to schemes other than their own occupational pension scheme. If this proposal is implemented, it would mean that scheme trustees and managers would have no control over the payment of these AVCs or of the benefits that they produce. We therefore believe the practical considerations of actually providing the information required would make this provision unworkable. 7.30 pm
In the same report, we read the reply, dated July 1987, on behalf of the Secretary of State: As regards paragraph 7 of the Board's report, regulations prescribing the information to be provided about additional voluntary contributions will not he made until the Board of Inland Revenue have published any requirements that they may have in regard to such contributions. We read in the revised, summer Finance Bill, that, notwithstanding that type of extremely trenchant comment from the Occupational Pensions Board, which may presumably be regarded as the most expert in the field, the dogs may bark but the caravan moves on. So far as we can read in the Bill, the Inland Revenue has simply repeated the unacceptable recommendations which appeared before the House in the first Finance Bill this year, and which aroused a great deal of adverse comment from the professionals at that time. If, in regard to anything as important as this, the Revenue is simply not prepared to listen to the Occupational Pensions Board, and the DHSS abdicates its role and leaves the Revenue to carry on as it pleases, how much hope have we that, when the Treasury exercises the power that the Committee is about to grant it under the subsection, there will be any closer liaison in the future?
I hope that the Committee will agree that it would be a good idea at this stage to write in the requirement for consultation with the Occupational Pensions Board when the clause is amended by statutory instrument.

§ Mr. Norman Lamont
I congratulate my hon. Friend the Member for Kensington (Sir B. Rhys Williams) on his assiduity and research in digging out the report of the Occupational Pensions Board. We shall probably discuss the relationship of AVCs to scheme limits on a later amendment. It may be more appropriate then to discuss the practicalities of observing the final salary scheme limits and discussing the extent to which they are endangered by the AVC proposals, or the extent to which the proposals may be criticised on grounds of practicality.
The purpose of the amendment is to require the Treasury to consult the Occupational Pensions Board before making an order to amend clause 20. I think that the amendment is unnecessary. Clause 20 sets out which bodies may establish personal pension schemes. The main purpose of the Treasury order would be to extend the range of personal pension providers, if and when that seems appropriate, without having to introduce primary legislation in a future Finance Bill.
1033 If such an order were being made, we should naturally consult the OPB, and any other interested body, if appropriate. But the OPB would not always be the appropriate body to consult. The hoard is responsible for certain aspects of occupational pension schemes, in particular contracting-out rules and the preservation of deferred benefits. It is not a general pensions watchdog and it is not necessarily equipped to act as such.
We might, for example, be dealing simply with pensions for the self-employed, in which event it might not necessarily he appropriate for us to consult the board. In many cases, we would consult the board, but I would resist the idea of writing such consultation into the legislation.
The regulations are primarily a DHSS matter, concerning the requirement on scheme administrators to disclose information to members about the scope to pay AVCs. They are not strictly tax matters, although, as my hon. Friend the Member for Kensington spotted immediately, they have some relevance to the relationship between AVC's and benefit limits. We shall discuss that later.

§ Sir Brandon Rhys Williams
My right hon. Friend is right in saying that some of my remarks were wide of the immediate context of clause 20. I took the opportunity of pointing to a place where it seemed to me that the relationship between the OPC and the Revenue had already broken down, which could not possibly refer to the particular interests found in clause 20.
I do not wish to press the amendment, because I hope that what I have said may have had a small effect, at all events, in advancing the cause of the OPB as a body that ought to be taken seriously and should play a serious role. This was the first opportunity that presented itself in the Bill for me to make the points that I have sought to make, and if they went somewhat wide of the clause, I apologise.
Having made that point—I see that my right hon. Friend has taken it on board—I beg to ask leave to withdraw the amendment.

§ Mr. Blair
I should like clarification of one small point. There may be a very straightforward answer. The purpose of clause 20, as the Financial Secretary rightly said, is to give a list of new pension providers. I understand that some of those—for example, the banks—are already engaged indirectly in the provision of pensions. How much real change does the clause make regarding the bodies able to provide pensions? Are many of these institutions, albeit indirectly, already providing pensions, or is the measure of a much wider nature?

§ Mr. Norman Lamont
It is a considerable change. In future, direct providers will include not just banks—the hon. Gentleman suggested that they were already providing pensions indirectly, and I suppose that that is right—but building societies and authorised unit trusts. The clause also provides for other types of provider to be authorised subsequently by the Treasury. For example, it is possible that investment trusts may provide personal pensions in the future. At present, the business can be carried out only by life assurance companies and certain friendly societies.
1034 This considerable change is very much in keeping with the breaking down of divisions that we are seeing in the City and in financial markets generally. However, I do not think that its significance can be underestimated.

§ Mr. Blair
I am grateful to the Financial Secretary. I was uncertain about how far some of the institutions were already engaged in providing pensions, but it is clear that there will be considerable changes.
The Financial Secretary spoke about investment trusts. Has the Treasury certain types of institution already in mind which it might allow, using its power under subsection (4), to carry on such business, or is the power to be held in reserve?

§ Mr. Norman Lamont
The power will be used largely in response to representations. I referred to investment trusts only as an example. We made several changes in the clause in response to representations, and I imagine that any further widening will be based on representations from those in the market place who wish to get into this business. It is not a question of us wishing to impose it; it is more a question of the people who wish to join the pensions industry—one can think of many institutions—coming to us. We have not yet worked out the plans.