HC Deb 03 April 2000 vol 347 cc766-71
Mr. Miller

I beg to move amendment No. 70, in page 35, line 25, at end insert—

  • '(za) The word "and" shall be omitted and after paragraph (a) there shall be inserted—
    • "( ) that in the case of schemes which fall in a prescribed class, that such arrangements for the selection of persons nominated by pensioner members and deferred members of the scheme to be trustees of the scheme as are required by this section are made, and".'.

Mr. Deputy Speaker (Sir Alan Haselhurst)

With this it will be convenient to discuss the following amendments: No. 72, in page 35, line 30, leave out subsection (3) and insert—

  1. '(3) In subsection (3) (selected persons to be trustees)—
    1. (a) in paragraph (a) for "in accordance with the appropriate rules" there shall be substituted "as a member-nominated trustee"; and
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    2. (b) after paragraph (b) there shall be inserted—
      1. "(c) for member-nominated trustees to be selected only by the members of the scheme or their representatives;
      2. (d) regulations may prescribe who is a representative for the purpose of paragraph (c).".'.
No. 71, in page 35, line 39, at end insert— '(5A) In paragraph (b) of subsection (6), after the words "total number of trustees" there shall be inserted the words "and in the case of schemes to which paragraph (b) of subsection ( 1 ) above applies, at least one additional trustee nominated by the pensioner members and deferred members of the scheme.".'. No. 95, in page 35, line 41, after "(6A)", insert— 'The arrangements must provide that pensioner members of a scheme have the same rights of nomination and selection for member-nominated trustees as all other members of a scheme. (6B)'. No. 73, in page 36, line 19, leave out "and".

No. 74, in page 36, line 22, at end insert— ', and (c) unless a proposal is made to which section 1 8A below applies, and regulations made under section I8A(4) apply as a consequence. the manner in which the trustees are to inform and consult with the members and former members of the scheme about the effect of the arrangements to be made in accordance with this section.'. No. 66, in page 36, line 22, at end insert—

  1. '(9A) The Secretary of State shall make regulations providing that all trustees shall be required to have attended an approved training course explaining the role and responsibilities of trustees within six months of being either elected as a member-nominated trustee or appointed as a trustee by the scheme's sponsoring employer.
    1. (9B) Regulations under subsection (9A) shall also prescribe the content of such an approved training course.
    2. (9C) The failure of a trustee to attend such a course as is mentioned in subsection (9A) within six months of being either elected or appointed as a trustee shall nullify the trustee's election or appointment.'.
No. 75, in clause 41, page 37, line 7, at end insert— '(5A) In paragraph (b) of subsection (6) for the words "at least one third" there shall be substituted "at least one half.".'.

Mr. Miller

In view of the time, I will deliver the abbreviated version of the long tome that I have in front of me.

These amendments to the Pensions Act 1995 would ensure that all schemes have member-nominated trustees by not allowing employers to propose opt-outs with no member-nominated trustees, or with less than one third; would provide a new statutory route for the selection of MNTs, whereby trustees can implement proposals within a framework of legislation and regulations without scheme members' approval having to be gained through the statutory consultation procedure, under which proposals are published and allowed to proceed if fewer than 10 per cent. of members object; and would allow employers to make proposals for MNTs outside the bases permitted by the statutory route, but to subject that scheme-specific route to a more rigorous statutory consultation procedure than now applies.

I turn to amendment No. 70. The National Association of Pension Funds survey indicates that only 30 per cent. of members of private sector occupational schemes are active members—38 per cent. are pensioners and 32 per cent. are deferred members. Ten years ago, the corresponding percentages were 46 per cent. active, 34 per cent. pensioners and 20 per cent. deferred members. That trend will continue.

There is no doubt that pensioners as a rule do not feel that their interests are adequately considered by trustee boards. There is a widespread misconception that, if pensioners are given an inflation-linked increase, that is all they should and could have. Pensioners tend to feel, with some justification in many cases, that benefit improvements are concentrated on active members.

I move to amendment No. 72. Under current legislation, the provision is for one third MNTs. By default, that means two thirds company-appointed trustees. The amendment says that "member nominated" is not sufficient and we should have "member selected" trustees.

The confidence of members in schemes demands that member trustees be perceived as representing members. We need to make it as clear as possible that member trustees should be independent of the employer. That purpose will be served by requiring that member trustees be in all cases selected by members of the scheme, or member representative bodies, which may be pension committees, trade unions or pensioner associations.

The amendment proposes that, for a scheme above a size to be prescribed, and where pensioners comprise a specified proportion of members to be prescribed, an additional pensioner trustee should be required. Such a basis would be a modest advance on the one-third minimum, but could still allow employer-appointed trustees to remain in a majority.

I come next to amendment No. 71—the debate about a half, rather than a third. The general conclusion drawn on member trustees is that they improve the working of trustee boards both by their input and by ensuring that trustee boards conduct their meetings properly and in accordance with the Pensions Act. They add to member confidence in schemes, which has been so badly damaged, as the hon. Member for Bournemouth, West (Mr. Butterfill) noted, by the actions of Robert Maxwell and of others.

The Government, and bodies such as the National Association of Pension Funds, endorse the view that having 50 per cent. member trustees represents good practice, but are not keen to make that a statutory requirement. However, many large schemes have operated on that basis without alienating the sponsoring employers. The alphabetical list starts with Allied Domecq, British Airways, British Aerospace and BT, and goes right through to the Prudential, Rolls-Royce, Rover, Shell and Unilever. In my previous work, I had some direct dealings with those funds.

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Amendments Nos. 73 and 74 would require the trustees to consult on the proposals under the statutory route. Under the new statutory route, where the employer makes a proposal but does not get approval for it under the scheme-specific route, it falls to the trustees to devise and implement proposals for member trustees. They would not be obliged to consult anyone, or to seek member approval for the basis that they devise.

Once implemented, the system would last indefinitely, or until there was a major change in the scheme. Amendment No. 74 proposes a requirement for consultation by the trustees before they implement a proposal. A possible model may be the existing requirement for the employer to inform and consult members three months before implementing a change in contracting-out arrangements. However, there would need to be a change to include pensioners in that.

In making arrangements for member trustees, a key objective is that members should have confidence in the arrangements. If trustees were able to implement a system without notice or consultation they would run a grave risk of alienating members. The amendment therefore asks for regulations to prescribe a basis for information and consultation before trustees implement proposals.

Mr. Burstow

I shall speak briefly to amendment No. 95, which covers some of the issues outlined by the hon. Member for Ellesmere Port and Neston (Mr. Miller).

We want the Minister to clarify how the rules will work for the constituency structure proposed for the composition of the member-nominated members of trustee boards in the future. The Federation of Post Office and BT Pensioners has expressed concern that the rules will mean that the method of selection and nomination of constituency elements of the member-nominated trustees will work against the interests of pensioners. The federation fears that pensioners' role and representation on trustee boards will be marginalised.

I understand that that concern arose at least in part out of a meeting that the federation had with the Minister and departmental officials. I hope that the Minister will confirm the value that the Government rightly attach in the Bill to the important role that pensioner trustees can play. I hope also that he will make some sort of commitment to the importance of ensuring that the constituency nomination and selection procedures will not limit pensioner members' ability to be represented fairly in the schemes.

The key matter is fair representation for pensioner members, who can bring an independence to the boards of trustees that other members often cannot bring. It would be very helpful to hear some reassurance in that regard.

Dr. Lynne Jones

I will be very brief. I should simply like to remind my right hon. Friend the Minister of State of a meeting that he and I and other Members of Parliament representing Birmingham constituencies attended some years ago with representatives of Lucas pensioners. They left us in no doubt that the pensioner members of the Lucas pension fund had interests very different from those of the other members of the pension funds, and made us aware of the need to ensure that their interests in pensioner funds were represented.

I urge my hon. Friend to listen to the arguments in favour of amendments Nos. 70 and 71, to ensure that funds include pensioner representatives and that they do not take a place that is currently allocated to other members.

Angela Eagle: The amendments cover two related issues—member-nominated trustees and training for pension scheme trustees. On member-nominated trustees, clauses 40 to 43 will ensure that every occupational pension scheme has at least one third member-nominated trustees. The provisions in sections 16 to 21 of the Pensions Act 1995 have, by and large, worked, but they do not go far enough. There are still too many schemes that do not have member-nominated trustees. The current provisions give the employer the opportunity to propose arrangements that do not include provision for any member trustees.

The Bill legislates for the principle of member-nominated trustees, and puts it into the law for the first time. We want every scheme to have member-nominated trustees, and as a result of the Bill, they will. We believe that they add value, and increase member confidence.

Regular complaints about the current system are that it is too easy to exclude pensioner members from the process, and that the present legislation is too complex and difficult to operate. We have listened and responded to those concerns. Under the new provisions, there will be member-nominated trustees or directors in every scheme. There will be two routes to satisfy the new requirements—we have labelled them the trustee route and the employer route.

Under the trustee route, trustees will implement nomination and selection procedures using a framework set out in regulations. The regulations will provide trustees with flexibility over certain aspects of the nomination and selection procedures. For example, they will be given discretion to divide the membership into constituencies. However, the framework will ensure that all members are treated fairly, so there will be no need for consultation or for member approval. As a result, the process will be simpler and cheaper, which will be widely welcomed.

Under the employer route, employers will have the right to propose bespoke nomination and selection arrangements for their scheme, but the proposal must provide for a minimum of one third member-nominated trustees to be approved by the members. There will be no opportunity to opt out, so every scheme will have member trustees, whichever system is used.

We thought long and hard about whether to provide for a reserved place for a pensioner trustee in large, mature schemes. We decided, on balance, that it would be unwise to do anything to suggest that any trustee has a directly representative role for a particular group of individuals, and that our priority should be to ensure that every scheme has members on the board. That we have done. However, we are aware of concerns that in some schemes pensioner members have been unfairly excluded from participating in the selection of member trustees. That is why we have gone much further to ensure that pensioner members cannot be unfairly treated. The new provisions ensure that pensioner members are included at every stage in the trustee route, and that they will have a say in the approval process under the employer route.

We have worked closely with the pensions industry and other groups, including the TUC, to produce changes that will give members greater participation and confidence in their pension schemes, and at the same time to make arrangements for the nomination and selection of member-nominated trustees easier to operate.

This package of changes represents a real strengthening of the legislative framework for occupational pension schemes, without imposing undue costs or disturbing existing arrangements unnecessarily.

Amendment No. 66 would make it compulsory for all trustees—employer-appointed trustees as well as member-nominated trustees—to attend an approved training course—

Mrs. Lait

We have not spoken to that amendment.

Angela Eagle

In that case, I will just check that I have not missed anyone else's amendment, and sit down. I hope, however, that my explanation has reassured hon. Members about the principles behind the changes that we have put into effect, and that my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) will withdraw the amendment.

Mr. Miller

I believe strongly that the Bill is a significant step in the right direction. Some issues that I raised could be dealt with under the regulatory regime referred to by my hon. Friend the Under-Secretary. I understand her point about pensioners being treated as a separate class in terms of the responsibilities of the board of trustees of any scheme. However, that issue requires further exploration. As schemes develop, it may be possible to revisit the issue in future.

I acknowledge the positive changes brought about by the Bill, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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