SOCIAL SECURITY BILL

HL Deb 18 June 1973 vol 343 cc1026-113

3.0 p.m.

THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE)

My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.

Moved, that the House do again resolve itself into Committee.—(Lord Aberdare.)

LORD SHEPHERD

My Lords, before we proceed to the next Amendment, I feel that I should address a remark to the noble Lord, Lord Aberdare, and seek the assistance of the House in what is a very difficult situation. I think the Government should be reminded that you Lordships' House is still an unpaid, voluntary House. We do our best within our limited resources, but we need to have some understanding and consideration when Amendments are put on the Marshalled List. The noble Lord will recall that I undertook with him on Thursday, in the light of the Amendments that were already on the Marshalled List, to make a serious effort to complete the Committee stage of this Bill this afternoon or this evening, and the noble Lord thought that that was a very good example to set. Unfortunately, he did not draw my attention to the fact that there were to be some 76 pages of Amendments in his name to be considered this afternoon. I do not know the merits of these Amendments; I saw them for the very first time only this morning when I attended my office. I gather that a letter was written to my noble friend Lady Phillips by the noble Lord's Department on Friday, which was posted on Friday. But how my noble friend was ever to have seen the letter and the explanation before to-day I really do not know.

My difficulty is in considering the merits of these 76 pages of Amendments. Clearly, in the time available I have not had an opportunity so to do. I would suggest to the noble Lord, Lord Aberdare, that if, as he thinks (because we have had a telephone conversation), these Amendments are basically drafting, or redrafting of an existing Schedule to the Bill, so that there is no particular change then they ought to be taken on Report. I am very willing to have conversations with the noble Lord, Lord Aberdare, outside the Chamber, but if these Amendments introduce something new I would ask him to consider the recommittal of the Part of the Bill with which they deal.

I hope the noble Lord will recognise that he has placed the Opposition and other Members of your Lordships' House in a considerable difficulty. This Bill has been before your Lordships for, I think, some three weeks and, quite honestly, it is intolerable that there should be this flow of Amendments—how important, none of us knows—from his Department. In the light of what has transpired about the Immigration Act, where perhaps we did not do our work as we should have done, I think we need to be particularly cautious in this situation. I hope the noble Lord, Lord Aberdare, will recognise the spirit in which I now speak and will not move these Amendments to-day in Committee, but will move them on Report after consultations with the Opposition between now and then.

LORD ABERDARE

My Lords, I am grateful for the tone in which the noble Lord made that protest, and I should like immediately to apologise to him and to other noble Lords opposite, as well as to the House, if in putting down these many pages of Amendments we have erred. No discourtesy was meant. In point of fact my calculation was that there were 71 pages; at least, the main Amendments, which are three Schedules—Schedule 22 and Schedules 24 and 25—cover 71 pages, and there may be one or two other consequential Amendments. Schedule 22, which covers 27 pages, applies the terms of the Bill to Northern Ireland, and we covered some of this aspect at a previous stage of the Committee. It does not affect anything in the Bill and merely makes the provisions applicable to Northern Ireland. Schedules 24 and 25 are concerned with minor and consequential Amedments, and repeals of other legislation. They have to do with the effect of this Bill on other legislation, and the changes made in consequence of the passage of the Bill through Parliament are purely consequential. To make them more easily understood, the whole Schedules have been replaced, rather than amended.

I am quite willing to have further conversations with the noble Lord privately, though I do not think we shall find much time to have them this after- noon. I must say that when I saw the size of the Amendments my feelings were somewhat like his, and I had an idea that we might keep them until the Report stage. But on further consideration I believe—if I can convince the noble Lord that they do not involve any change in the Bill—that it may be more convenient to put them into the Bill now, so that it will make a good deal more sense as a Bill when we come to consider it at Report stage. Perhaps the noble Lord would care to consider that suggestion. Those are the reasons for what has happened, and I tried to inform noble Lords opposite by sending a letter as soon as I could to the noble Baroness, Lady Phillips.

LORD SHACKLETON

My Lords, the noble Lord clearly accepts that the Opposition are not seeking to make difficulties for hint, or for his colleague who is the new Leader of the House, but I am bound to say that, in my experience, this action is completely unprecedented. I should like to ask the noble Lord—though he may regard it as an internal Departmental matter—when he himself saw these Amendments. The fact is that Ministers are in charge of what they bring to this House and—I am sorry to press this—they really have to convince the House that they have our interests at heart. In this matter it is every Member of the House who is concerned, and not just the Opposition. Either there has been a failure of imagination in the noble Lord's Department or, if I may say so, a failure of imagination in his part. It simply is not enough just to write to one Member of the Opposition and assume that that will satisfy the House as a whole. It would have been reasonable to telephone or to call a meeting.

I have taken a quick look at these Amendments and I am inclined to agree that, essentially, they appear to be of a consolidation kind. But we really need to take these matters more seriously, and I am bound to say that what has been done is simply not good enough. I would ask the noble Lord the Leader of the House to talk to his noble friends, and see that we are not put in the embarrassing situation where, as a result of the rapid passage of a Bill, it is quite obvious to anyone observing the proceedings of this House that nobody except the Minister has had a chance to look at the Amendments—and, so far as I know, the Minister did not look at them. He took a decision that it would be easier to deal with the Bill on Report if these Amendments were included, and I accept that. But it would have been better to have consultations, and I do not think that this procedure is satisfactory.

THE LORD PRIVY SEAL (LORD WINDLESIIAM)

My Lords, if I may intervene briefly, I understand very fully the feelings of the House on this matter. My noble friend has given an explanation and, as I understood it, has given an apology to the House as well. What has to be decided now, the protest having been made, and I think having been taken, is whether we should consider these Amendments to-day in Committee, which would have the result of putting them into the Bill in its amended form. The House would then have the Bill, with these new rather substantial Schedules, before it on Report and then, if there are points which noble Lords wish to raise, they can do so and fully debate them on Report. I quite accept that this is not an ideal procedure, and it is one which we must certainly try to avoid occurring again.

LORD SHEPHERD

My Lords, with the leave of the House I feel that I should say this. The noble Lord can explain these Amendments, but from our point of view there is nothing we can do. We have not had an opportunity of examining them. I do not think that the Committee ought to accept this position, and I hope the noble Lord, Lord Aberdare, will respond to my suggestion, which I made in all good faith, that if the Amendments are basically redrafting they can best be dealt with on Report. That would at least give Members of your Lordships' House an opportunity to consider the Government's proposals. I think it would be quite wrong to put in what could be major changes without the House having an opportunity to reflect and consider.

THE EARL OF BALFOUR

If I may speak as a Back Bencher, while not having studied this Bill particularly, if at Committee stage your Lordships accept in the Bill the Amendments, practically all of which amend other Acts, then I think your Lordships' House would be in a much better position to criticise and have real time to study these Amendments between Committee and Report. There is much less time and a more difficult procedure to adopt at the Report stage of this Bill when it is much more difficult for anybody to compare the Bill with previous legislation. The fact that these Amendments have been completely re-written is bound to assist anybody doing research, particularly back to previous legislation.

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 49 [Recognised pensionable employment]:

3.12 p.m.

THE EARL OF GOWRIE moved Amendment No. 55: Page 63, line 25, at beginning insert ("all").

The noble Earl said: With the leave of the Committee I should like to speak also to Amendments Nos. 56 and 57. These are technical Amendments, designed to close unintended loopholes in the definition of a public service pension scheme. The intention has always been that the definition should only cover the small group of schemes— for example, those of the Civil Service, teachers, local government, police, fire service, National Health Service—which are subject to detailed Ministerial control and are financed partly out of the consolidated fund or funds voted by Parliament. It was not intended to cover the nationalised industries' schemes which are now independent of Ministerial control and are separately financed. The Amendments put the matter beyond doubt. I beg to move Amendment No. 55.

LORD HOY

I do not want to cavil with the noble Lord who has moved this Amendment, but I do not think he has been altogether forthcoming about it. He said in the course of his speech that the intention always was to do certain things, and this is going to do more than certain things that apparently were first intended. Now what difference does the word "all" make in the Amendment he moved? What is the distinction between "all" and the clause as it is at present written? How many more schemes are going to come in as a result of the inclusion of this word which I cannot remember seeing before in legislation? I always accepted that when a Bill said that particulars are set out that this included what the Government intended.

Secondly,I should like to know about line 28, where the Minister proposes that we delete— has been approved as an appropriate scheme and insert the words on the Marshalled List which say— leave out from 'which' to 'by' in line 29 and insert 'cannot come into force, or be amended, without the scheme or amendment being approved'". Is the Minister in fact saying to noble Lords now that no matter who may make the recommendation, no matter what consideration this may have had and no matter what thought is given to this recommendation, at the end of the day the Minister will say, "I just do not like it and I am not going to accept it". Is that what the Amendment means? That is what must be read into the particular Amendment which the Minister is moving. I should be grateful to know from the Minister whether my interpretation is correct or not.

THE EARL OF GOWRIE

I do not think the noble Lord, Lord Hoy, is correct. As I said originally, these Amendments are designed to close loopholes in the definition of a public service pension scheme. Therefore their validity, which he is questioning, hinges on whether there are such loopholes. The existing definition in the Bill is, we feel, deficient because it is not confined to schemes whose amended rules will in the future always require either legislation or Ministerial approval, and therefore it might have been taken by the noble Lord or noble Lords generally that it would extend to the nationalised industry schemes which satisfied those conditions in the past but will no longer do so. Therefore, as I said originally, the Amendments are designed to put the matter beyond doubt.

LORD HOY

Is the Minister saying to the Committee that these specific institutions which he has outlined will still have the power to make an amendment whether the Minister approves or not? Is that the short answer to it?

THE EARL OF GOWRIE

I am not saying that at all. I am saying what I have already said, that we do not want the definition confined to schemes whose amended rules will in future always require either legislation or Ministerial approval. Some of the categories which I gave in my initial answer are in fact subject to detailed Ministerial control already, and are financed, at least partly, out of the consolidated fund or funds voted by Parliament. That, of course, involves the highest degree of scrutiny.

On Question, Amendment agreed to.

THE EARL OF GOWRIE

I beg to move Amendment No. 56.

Amendment movedȔ Page 63, line 26, leave out ("any") and insert ("an").

On Question, Amendment agreed to.

THE EARL OF GOWRIE

I beg to move Amendment No. 57.

Amendment moved— Page 63, line 28, leave out from ("which") to ("by") in line 29 and insert ("cannot come into force, or be amended, without the scheme or amendment being approved").

On Question, Amendment agreed to

LORD HOY moved Amendment No. 57A:

Page 64, line 6, at end insert: ("( ) The Occupational Pensions Board are satisfied that the contributions made by the employer to the scheme are at least equal to the contributions which would have been payable into the Reserve Pension Fund. Nothing in this subsection shall have the effect of requiring an employer to make regular payments into an occupational pension scheme.")

The noble Lord said: May I move this Amendment on behalf of my noble friend Lady Phillips? It seems to us that there is some difficulty in understanding what is meant by this particular provision. We have a series of Amendments down trying to elucidate whether the right of option will be given to the insured contributor. As we read it, it appears that the Bill as drafted would leave the contributor with no right to make a decision; the employer will make a decision, with the contributor having no right it in. We should like to know, as a result of this Amendment, if there is any way in which the contributor—whether male or female—will have a right to say in which way they would like the pension or some other form of assistance to be treated. I beg to move.

LORD ABERDARE

The amount paid by the employee in an occupational pension scheme will of course be subject to the usual negotiations that take place between those who represent the employee's interests and the employer, but the Amendment seems to assume that employers tend to shift the burden of occupational pension scheme contributions on to their employees, and secondly, that an employer wishing to do so will be able to get away with paying almost nothing to a recognised scheme.

On the first of these two assumptions, which I would suggest are incorrect, the Government Actuary's fourth survey has shown that employers' contributions to private sector scheme were £515 million in 1967 and £725 million in 1971, compared with only £185 million in 1967 and £290 million in 1971 by their employees. I think these figures make it abundantly clear that employers generally assume a very large share in the financing of these schemes, and we have no reason to believe that this state of affairs will change.

In fact, of course, far from being able to escape financial responsibility for the minimum benefits, employers who seek recognition for their schemes will be faced with several statutory requirements. First, unless they cannot be bound in this way—and there are one or two small exceptions—they must have some legal liability to finance the minimum benefits. Secondly, where there is a contribution test—and this is pertinent to the noble Lord's Amendment, where it refers to money purchase schemes—a minimum employer's contribution of 2½ per cent. of reckonable earnings is required; and that meets the point made by the noble Lord in his Amendment. In addition, there will be many cases which will be even harder on the employer, who will have to stand behind the minimum benefits; and we have empowered the Occupational Pensions Board to require steps to be taken to increase the resources of the scheme in order to secure minimum benefits. We have already imposed a minimum employer's contribution under the money purchase test, which is quite simple; but in other schemes, such as the final salary type of scheme or the average salary type of scheme, this would be quite alien to their structure. In such a case the employer can never know exactly what his commitments are: instead of paying a predetermined contribution he guarantees the scheme's overall benefits. The cost of providing these benefits will inevitably vary over the years, but he is bound to stand by them.

We canot have it both ways. A benefit test gives employees the security of a guaranteed level of benefit in retirement, and it requires employers to stand behind those benefits by making good any deficits. It is quite simple with a contribution test to require a minimum employer's contribution, but where it is a matter of benefits emerging at retirement these will be those purchased by the contributions actually paid. To mix these tests by requiring employers both to stand behind the benefits and to pay a specified level of contribution would not only be unnecessary but would also be undesirable as its only result could be to deter employers from continuing with or taking out any liabilities other than those on a money purchase basis; and the long-term effect, therefore, would be to deprive some employees of their existing rights to benefits based on their final salary.

BARONESS PHILLIPS

I followed the noble Lord's reply except that I did not quite get the answer to the very simple question: will the employer's contribution in his own scheme be such as to produce benefits equal to the benefits which the State scheme will provide? That is really the burden of this Amendment. One has to put it in a slightly complicated form, but that is really what we are after, to make sure that no employer will have a scheme what is not as good, at least, as the State reserve scheme.

LORD ABERDARE

This particular Amendment refers to the level of contributions. What I am trying to say is that, where it is a matter of a money purchase scheme and where the level of contributions comes into it, therefore, it will never be less than that in the reserve scheme—it will be 2½ per cent. But other schemes are of a different sort. In the final salary scheme, the employer is guaranteeing a benefit which is not really related to contributions, and may in the long run cost him a great deal more than he would have paid under a money purchase scheme.

LORD HOY

We are grateful to the noble Lord for what he has said in reply, and also for the assurance that he has given. As my noble friend was saying, what troubled us a little was whether there would be a difference so far as the contributor was concerned if in fact he or she was under the State reserve scheme or the other scheme. All we wanted to be assured of was that, whichever one was opted for, the contributor would not be at a disadvantage. The noble Lord tells us that that is the case, and we accept his assurance and withdraw the Amendment.

Amendment, by leave, withdrawn.

THE EARL OF GOWRIE moved Amendment No. 58: Page 64, line 7, leave out from ("it") to ("as") in line 11 and insert ("complies in all respects with sections 51 to 58 of this Act in respect of minimum personal and death benefits, and of the other matters mentioned in those section, or, in such cases or classes of cases as may be prescribed, with those sections").

The noble Earl said: This is a technical Amendment designed to clarify the meaning of this provision. It ensures that compliance with the conditions attaching to any of the options permitted under Clauses 51 to 58—which, if I may remind your Lordships, are in the Part of the Bill dealing in the main with minimum requirements for the recognition of an occupational pension scheme—is as much a condition of recognition as compliance with the main recognition requirements. In addition, it ensures that the regulation-making power in this paragraph extends to all the matters covered in Clauses 51 to 58and is not restricted to the main recognition requirements.

The regulation-making power in this paragraph is primarily intended to introduce an element of flexibility into the recognition conditions. Although the recognition conditions include a number of alternatives to meet the differing structures of various types of scheme, it has become clear in recent consultations that anomalous situations could arise unless there is a power to modify the requirements to meet the needs of particular categories of scheme. For example, a scheme which fixes its retirement date according to the anniversary date nearest to pensionable age, and therefore requires some members to postpone retirement for up to six months after attaining that age, might reasonably be permitted to continue lump sum death in service cover during that period instead of being required, as now in the Bill, to provide a pension whenever death occurs after pensionable age. Similarly, it has been suggested that a scheme which wishes to provide a widow with both a pension and a lump sum when death occurs before retirement should be recognised if the two together amount in value to at least one and a half times the man's annual reckonable earnings before his death. that is to say, the lump sum permitted under Clause 54(2)(b). The regulation-making power will be used to permit this kind of easement for specific categories of scheme. I beg to move.

LORD HOY

I have just one or two words on this Amendment. I thank the noble Earl for his explanation, but he must not take it that we understood every word of what he said, because these are extremely difficult and technical matters and, if I speak for myself, I put myself in that position. The only thing I think I can say with some certainty is that I speak for a 100 per cent. membership of your Lordships' Committee. Perhaps I may put one question, because this is one of the points I was seeking to raise on the first Amendment. Is the noble Earl saying to us that, so far as widows are concerned—and he chose the widows as an example—a widow would in fact have a choice, and that she could take part of something that will be her right in a lump sum and part in pension? In moving this Amendment, is he in fact saying that a widow will have this right with the assurance that she will lose nothing in the process?

THE EARL OF GOWRIE

I agree and sympathise with the noble Lord—in fact, I think I am singularly well positioned to sympathise with him—about the difficulties of mastering such a very technical Bill as this, and he will realise, of course, that the instances I gave were given as examples of the kind of anomalous situations which could be rectified if a technical Amendment of this kind went through. But if he will allow me to stress that I was giving the instance that I gave as an example, I would say that, in the case of the widow, it is felt that a scheme which wishes to provide such a widow with both a pension and a lump sum when death occurs before retirement should be recognised—so one can say "Yes" to him—but should be recognised if the two together amount in value to at least one and a half times the man's annual reckonable earnings before his death. So it is to some degree a matter of quantity.

On Question, Amendment agreed to.

3.30 p.m.

THE EARL OF GOWRIE moved Amendment No. 59: Page 64, line 22, leave out ("in accordance with") and insert ("so as to comply with the requirements of").

The noble Earl said: With the leave of the House I should like to speak to Amendments Nos. 59 and 60 at the same time. These are technical Amendments designed to clarify the meaning of this provision. The intention was to take a regulation-making power to prescribe the form and content of the scheme rules applying to minimum benefits but to ensure that the Occupational Pensions Board had a similar power so that the regulations could, if these seemed desirable, leave most, if not all, of the requirements in this field to the Board. Doubt has arisen as to whether the working of the Bill at present would permit the Board to impose requirements as to form and content. It was suggested that they might be able to deal only with other matters concerning scheme rules. These Amendments are designed to remove this doubt. I beg to move.

BARONESS PHILLIPS

I should like to thank the noble Earl for that explanation. I welcome anything which will make it impossible for the occupational pensions to be of a poor character. We all appreciate that the majority of employers—99 per cent. of them—will introduce splendid occupational pensions schemes; but we also recognise that unless the Bill ties this matter up specifically there will be employers who will introduce very poor schemes which the unfortunate employees will have no option but to accept. I commend this Amendment.

LORD HOY

This is legislation which is going to last a very long time. In introducing the Amendment the noble Earl said that the Government felt that they had given this power to the Pensions Board and that as a result of further consideration the Government found that there was some doubt about whether the Board had this power. Is the noble Earl saying that the result of the Amendments he has just moved is that the Board will have the power, without any right of intervention by the Government or anyone else?

THE EARL OF GOWRIE

There is a sting in the tail of the noble Lord's last sentence. Certainly the Amendments are designed to remove the doubt which I outlined and which he reiterated; but the regulating provisions and their connection with the Board in the Bill may at any time be prayed against. This is not going outside any form of Parliamentary scrutiny.

On Question, Amendment agreed to.

THE EARL OF GOWRIE

I beg to move Amendment No. 60 formally.

Amendment moved— Page 64, line 24, after ("requirements") insert ("as to form and content").—(The Earl of Gowrie.)

On Question, Amendment agreed to.

LORD ABERDARE moved Amendment No. 60A:

Page 65, line 14, at end insert: ("(6A) The Secretary of State may make such regulations as he thinks appropriate for securing that earners, notwithstanding their terms of employment, are freed from any liability to be or become members of, or to contribute to, an accupational pension scheme—

1. (a) which is not for the time being recognised in relation to any employment; and
2. (b) in whose case the Board are satisfied that the benefits of the scheme are not adequately secured, or that it is otherwise unsound in respect of its management or financing.")

The noble Lord said: This is not one of the technical Amendments with which my noble friend is so adept at dealing. This is an Amendment which fulfils an undertaking given by the Government in another place. Concern was expressed there that employees might be compelled against their will to join unrecognised schemes whose finances were unsound and in which their contributions would therefore be at risk. While there is no evidence that employees are at present being forced to contribute to unsatisfactory schemes, we accepted that this would be undesirable if it occurred. We gave an undertaking to keep the situation under review and, if evidence of such undesirable compulsion came to light, to ask the Occupational Pensions Board, once they had completed their initial task of recognising schemes in time for the start of the new arrangements, to examine ways of preventing it. In addition, my honourable friend undertook to amend the Bill to provide regulation-making power so that any advice that the Board gave on this matter could be implemented. This is the regulation-making power which could be used to back up any recommendation from the Occupational Pensions Board. I beg to move.

LORD HOY

I should like to thank the noble Lord for moving this Amendment which was the result of an undertaking given in another place. He says that he does not think it will happen that the people who organise the company will always be guarantors for what the workers are insured for. We have always had doubts about this. I should have thought the noble Lord would be better with another example, that of motor car insurance. Many thousands of insurers with what appeared to be a sound company found that the company had gone bankrupt and they were without motor-car insurance. The workers would not like to be in the same position in respect of this Bill. For that reason, we are grateful to the noble Lord for moving the Amendment.

On Question, Amendment agreed to.

Clause 49, as amended, agreed to.

Clause 50 [Provisions as to certification of employments]:

LORD REIGATE moved Amendment No. 60B: Page 66, line 35, leave out from ("which") to end of line 38, and insert ("gives grounds for apprehending that the scheme may become one which the Board should not treat as proper to be recognized").

The noble Lord said: I beg to move the Amendment standing in my name. This, too, hardly comes under the heading of technical. This clause deals with certification by the Occupational Pensions Board of those employments which are recognised as pensionable employments by virtue of service in them qualified by reference to an occupational pensions scheme. The Board determines whether or not the scheme should be recognised. If it determines against the scheme there are considerable financial consequences both for the members of the scheme and for the employer. If the scheme is not recognised, both the employer and the employee are under obligation to pay contributions to the Reserve Pension Scheme.

In Clause 55 (which we have not yet reached) there is provision for the review of the Board's determinations; but such a review is by the Board itself. In itself that is slightly undesirable. It is only on a point of law that there can be an appeal to any other tribunal from a determination of the Board. In Clause 82 it is provided that such an appeal is to the High Court or to the Court of Session. Determinations as to whether a scheme is acceptable or not will, in the first instance, be made by members of the staff of the Board; and although the Board itself reviews its own decision it will be revised by the same staff. It seems to me, therefore, that it is important that the criteria set out in the Bill according to what determinations by the Board are to be made should be of such a nature as to afford opportunity of appeal to the High Court if the Board should appear to exercise its powers unfairly or unreasonably.

Clause 50(4)(b) provides for a certificate to be withheld or cancelled if it appears to the Board that there are circumstances relating to the scheme or to its management which make it inexpedient—that is the crunch of the matter—that the employment should be or should continue to be recognised pensionable employment by reference to the scheme. The Shorter Oxford Dictionary informs me that the modern usage of the word "expedient" is "useful, politic, as opposed to just or right". It seems to some people to be difficult for the High Court to consider an appeal on a point of law whether the Occupational Pensions Board had acted unfairly or unreasonably if the only criteria by which the Board made its determination was expediency. Your Lordships will remember that a rather similar point was raised on the Insurance Companies Bill in this House. The Bill was then amended by the substitution of the word "desirable" for the word "expedient". My Amendment is designed to find a more satisfactory alternative to the words at present in the clause.

LORD ABERDARE

My noble friend has explained the purport of his Amendment extremely clearly and I understand what he wishes to do. He wishes to narrow down the circumstances in which the Occupational Pensions Board could use its discretionary power to refuse recognition, and he is asking for some means of review of such a decision. My noble friend may not agree with this, but the fact is that we have drawn this power deliberately in wide, rather vague terms, because it is intended for use in circumstances which cannot be foreseen but where action by the Board seems necessary to protect the interests of the emloyees concerned; and perhaps even the good reputation of the pension industry as a whole. Because we are dealing with the unknown we should prefer not to narrow down the circumstances in which this power of non-recognition may be used. We should be very sorry to see the Board powerless to refuse recognition where, for example, an employer is placing on his employees an unfair share of the total contribution required (that was a point made in respect of an earlier Amendment by noble Lords opposite, or where the Board considered that the trustees or managers of a scheme were not fit people to assume the responsibilities of running the scheme. Yet these two cases would be excluded by the proposed Amendment.

Our difficulty is that it is almost impossible to deal with the various cases that may arise without some fairly vague wording, comparable to that which we have put in the Bill. As my noble friend has mentioned, there are safeguards. Perhaps the most important is the calibre of the people we intend to appoint as Board members. They will include experts in all aspects of pension matters, and certainly they would not embark lightly on a course of action which could bring a particular scheme into disrepute. In addition, any decision of the Board on this or any other matter may be challenged by applying for a review, and the Board will be required to give reasons for any decision reached on review. If the Board refuse a review they will be required, through regulations, to state their reasons. As my noble friend mentioned, anyone aggrieved by the decision reached on review will have the right of appeal to the High Court on any point of law.

The discretionary power in Clause 50(4)(b) is circumscribed by safeguards which we believe will give adequate protection against possible abuse but, at the same time, leave the power itself sufficiently wide to cope with the most unforeseen of circumstances. I hope, therefore, that my noble friend will feel he need not take this restrictive Amendment any further, because it is very important that the Occupational Pensions Board should be left with the widest power to act on behalf of the employees in ensuring that pension schemes proposed by employers are adequate in every way.

LORD REIGATE

I am sorry to disagree with my noble friend, but there is absolutely nothing in my Amendment which in any way restricts the power of the Board to reject an unsuitable scheme. In fact, I think it rather widens that power and allows them to disqualify when something gives grounds for apprehending that a scheme may be one which they should not treat as proper. It is simply and solely that when a scheme is rejected by the Board the right of appeal away from the Board is only on a point of law. The word "expedient" is not very good grounds for making an appeal to the High Court, because it means exactly what the Government Department in question says it means. I must remind my noble friend that exactly the same type of arguments that he is using now were employed on the Insurance Companies Bill, and the Government eventually saw the error of their ways, if I may say so, and had a different wording. It is not my intention to press this Amendment to a Division, but I hope that between now and Report stage my noble friend will look at this point again to see whether he can at least avoid the use of the word "expedient".

LORD ABERDARE

Certainly I will look at the word. Perhaps I ought to make a little clearer what I was trying to say to my noble friend when I said that the Amendment was restrictive. The two examples I gave were of an employer placing an unfair share of the total contribution on an employee, or where the Board considered that the scheme's trustees or managers were not fit people. Neither example would be covered by my noble friend's Amendment; first, because arrangements the employer makes for financing the scheme do not necessarily undermine the suitability of the scheme as a scheme. Therefore if we accepted his Amendment there would be no objection to a scheme on those grounds. Secondly, the unsuitability of those running the scheme would not be a ground for fearing that the scheme might become unsuitable for recognition under the terms of the Amendment. It would be a factor in deciding that the scheme was unsuitable for recognition. Perhaps my noble friend would agree that in these respects his Amendment does not quite meet the case he was trying to put. I will accept that the word "inexpedient" is not a very happy one, if we can find a better. I will look at that between now and Report stage.

LORD REIGATE

In both the cases my noble friend has given I am quite certain that the Board would be quite right, and would be able to stand up to any court of law, in saying that the scheme was not one which should properly be recognised. But in view of my noble friend's agreement—

LORD HOY

Before the noble Lord, Lord Reigate, asks leave to withdraw the Amendment I should like to thank the Minister for what he has said in reply. We on this side of the Committee are grateful for his courtesy, but I think that the two examples he gave left some doubt in the matter. I was about to raise the question whether a thing is "expedient" or "inexpedient". During a fairly long Parliamentary life I have always had some doubt about this. The fact that the Minister has said that he does not like the word seems to confirm my point of view. The two points raised by the noble Lord, Lord Reigate, are important; but equally important is that the Minister has said that he is willing to have a look at the word between now and Report stage, and if between us we can find a better word, he will be willing to have a look at it then. I thought that we ought to express our thanks to the Minister.

Amendment, by leave, withdrawn.

Clause 50 agreed to.

Clause 51 agreed to.

Clause 52[Rate of minimum personal pension]

THE EARL OF GOWRIE moved Amendment No. 61: Page 69, line 42, leave out ("number of years") and insert ("period (expressed as a number of years or of months, or a combination of years and months)").

The noble Earl said: This is a technical Amendment, but I hasten to assure noble Lords opposite that if they decide to move Amendments Nos. 61A and 61B I shall reply to them and they can give me a viva voce examination for as long as they wish. This present technical Amendment is designed to ensure that schemes using the final salary method of calculating benefits will be required to multiply the appropriate fractional percentage of final salary by the full length of the employee's service in recognised pensionable employment. It removes any doubt that the present wording in the Bill might permit schemes to exclude incomplete years from this calculation. The only easement likely to be permitted in the regulations is that such schemes need not count uncompleted months.

LORD HOY

I think I like this Amendment. I accept that what the noble Lord is saying is that when an insured contributor has made his contribution for, say, ten years and 11½ months, in fact the 11½ months will be included in his pension assessment. The reason why I comment on this is because in another place, and contrary and quite unlike the generosity of the Minister in this respect, Members were told by the Minister that if a person had served for 20 years, 11 months and three weeks he could receive a pension for only 20 years. We are grateful that the Minister is saying that for other people they can have 11 months and 3 week taken into account. I must say that in another place they have now put it right, but it took a damn long time to do it.

On Question, Whether Clause 52, as amended, shall stand part of the Bill?

BARONESS PHILLIPS

I am not sure that I should be using the right phrase if I said that I should like to make a protest, but at any rate I wish to make a statement. This is where we first get the statement that women are to receive lower pensions than men. I think this occurs in both the occupational pension scheme and the State reserve scheme. When we appreciate that the contribution is the same, it is extremely unfair that the benefits drawn should be different. I know the Minister will tell me that women live longer and therefore in the end will receive as much money as the men, and possible more. But if we were doing this on an equitable basis, we should look at the kind of work, and say that possibly a white collar worker will live longer than a manual worker and therefore they should pay different contributions. I do no think that in this day and age it is a very sensible explanation. It disturbs me very much that in a Bill of this character, legislating for the future and not for the present—and this is another point we may return to—we have it laid down that women, paying the same contribution, will only receive 70 per cent. benefit. I am sorry that the Government have not seen fit during all the discussions in the other place to make some change in the legislation. I am afraid I shall have to return to this point later.

LORD ABERDARE

I should not have expected the noble Baroness to say anything less than she has done in defence of her fair sex, which she graces so nobly. She is quite right of course in saying that when it comes to occupational schemes, and indeed the reserve pension scheme, these pensions, whether they be for men or women, are worked out actuarially and depend not only on the length of time the person is in retirement but also the age at which they receive the pension. A woman under our scheme receives a pension at 60, whereas the man receives it at 65. This actuarially makes a difference to the amount of pension. We shall be coming to another Amendment, as the noble Baroness will be aware, on the reserve pension scheme which covers this point, and we can debate it further then.

LORD ROYLE

In support of what my noble friend has said, I wonder whether the noble Lord would agree that this is quite against the spirit of the Equal Pay Act, and that we might be thinking of pension contributions in the same way as we are thinking of equal pay in 1975. In view of the new spirit which has entered into our thoughts on these matters, this is something to which the Government might give serious attention.

LORD ABERDARE

I do not think I can agree with the noble Lord that this has anything to do with the Equal Pay Act. Here are pensions being received as a result of contributions, depending on the number of contributions and on the length of time the benefit will be paid. It is a fair system, and the noble Lord cannot get away from the fact that this is worked out by insurance actuaries and not by politicians.

BARONESS SEEAR

It is the case that there are many aspects of this Bill where actuarial principles are not used. Why should it be only when it is the amount of pension due to women that we should suddenly become actuarially minded? There are many other aspects where the needs of the persons concerned are considered to be more important than the actuarial principles. Why must we have the actuarial argument in this particular case?

LORD ABERDARE

It is true that the basic scheme is much more a transfer of money from the working population to those in need, and to that extent the noble Baroness is quite correct. But these other schemes are, and have been for many years, real insurance schemes based on actuarial practice.

LORD HAWKE

If women want their pensions at 60 at the same rate as men how much would their contributions have to increase under the Bill?

LORD ABERDARE

I think we are getting into a rather detailed debate on the Question, That the clause stand part. All I can say to my noble friend—and these are technical matters—is that if a woman in the reserve scheme defers drawing her pension until the age of 65, which is the same age as that at which a man retires, then her pension, as it so happens, comes out at about the same figure as the man's.

BARONESS PHILLIPS

I can only say, in answer to the noble Lord, Lord Hawke, that I am a member of an occupational pension scheme and therefore a certain proportion of my earnings is taken. This is the recognised system which we read into the occupational pension scheme in the Bill. I think it is quite wrong to disregard the Equal Pay Act, because obviously more women will be earning the same level of pay as men (this is what equal pay is all about) and therefore their deductions will be heavier. But at the end of the day, because the insurance actuaries say that they live longer, they must have less pension. My only point is that if you are going to take everything actuarially (if we take a car insurance it is not only based on being a woman; I think a West Indian has to pay more, and actuarial schemes show that certain persons have more accidents than others) many other factors have to be taken into account, and not merely sex. But for some reason the Government persist in this strange and, I say again, totally outmoded attitude by saying that women are going to live longer. Perhaps if they worked longer to 65 they would not live so long, and that would put the matter right.

Clause 52, as amended, agreed to.

Clause 53 [Minimum death benefit (cases and form in which it is to be payable)]:

3.58 p.m.

LORD HOY moved Amendment No. 61A: Page 71, line 46, leave out from ("form") to ("of") in line 47.

The noble Lord said: I have been asked to move this Amendment on behalf of my noble friends. Before I do so, I should like some explanation, because the noble Earl, Lord Gowrie, in dealing with a previous Amendment, said that it could be discussed on this Amendment. He then used a Latin tag which I am bound to inform him I did not quite understand. It put me in mind of a debate that we had in the Scottish Committee some time ago, when Mr. George Buchanan, winding up the debate, said: "And so, Mr. Chairman ipso facto, as we say in Scotland …". I must say that when the noble Earl used his expression I was equally as surprised. Perhaps when he comes to reply he will tell us what he was saying, because it is a little difficult for those of us who have been educated in elementary schools to understand these Latin tags.

I now come to Amendment No. 61A in the names of my noble friends, and perhaps we can take No. 61B at the same time, because one makes it possible to move the other. Here I am raising the point that I raised in an earlier Amendment. We are saying that the insured contributor may be awarded the choice as to whether to take the payment as a pension or as a lump sum. If this Amendment were accepted, it would give legal sanction to this process. I do not think it is asking very much to give the contributor this choice. Perhaps the noble Earl, having heard on the first explanation that it is so simple, will be delighted to accept the Amendment. It will be just about the first one that he has accepted to this Bill.

THE EARL OF GOWRIE

I certainly did not mean to batter the noble Lord with my learning. What I was trying to impress upon him earlier was that it would not be for ever that I should be taking refuge behind technicalities and that he would have a chance to let fly at me a little later. I think I used the phrase "viva voce examination", which is a particular type of adolescent ordeal in universities in this country—I do not know about Scotland.

LORD HOY

They are much more intelligent there.

THE EARL OF GOWRIE

The noble Lord is perfectly within his rights to submit me to viva voce examination, even on technical Amendments. It is just that my explanations in those areas may be a little more obscure than I hope they will be on this occasion. I can go a certain way here with the noble Lord. I do not feel irremediably hostile to the Amendment. My feeling is that it is not perhaps necessary, because much of what the noble Lord wants is already covered by the Bill. As he said, the effect of Amendments 61A and 61B would be to require schemes to pay the minimum death benefit in lump sum form whenever death occurred before pensionable age, unless the beneficiary consented to the payment of a pension. The Amendments therefore restrict the freedom of schemes to vary the form of benefits made to particular categories of employees. It is that, rather than the basic principle, to which we object. The Amendments, if carried, would mean that schemes must provide lump sums unless the beneficiaries stipulate the payment of pensions.

The Government were impressed by arguments that arose in another place over the fact that we were allowing the schemes to vary the form of benefit according to the type of beneficiary involved. The Opposition there argued that under this provision employers could always choose the cheapest way out. We were impressed by that argument. It seemed eminently reasonable, and so in the regulations we shall say that employers must either obtain the beneficiary's consent in each case as to whether it is to be a pension or a lump sum, or the rules of a scheme must state clearly which type of benefit is on offer and in which circumstances. Thus there would be no question of choosing the cheapest way out. My short answer to the noble Lord—and I hope it is a satisfactory one because, as I say, we felt there was reason behind this thinking—is that the Amendments are unnecessary because they will be dealt with under the regulations. I hope noble Lords will resist the Amendment.

LORD HOY

I should like to push this matter just a little further, because the Minister seems to be saying that there is considerable substance in the Amendment I have just moved. He then says, "Do not be too hasty about it; do not press for it to be in the Bill. We are prepared to meet the case that you have made for the Amendment by inserting the provision in the regulations." I do not think that is an unfair summary of what the noble Earl has said. Although we are grateful for that, if in fact this is the intention of the Government, why not put it in the Bill itself instead of in the regulations? Indeed, we are always told by Governments—and I speak of all Governments—that they can never find time to deal in the House with all the matters they would like. We even had that repeated to-day during Questions. If the noble Earl agrees that the argument in favour of the Amendment is right, why not put it in the Bill? I am grateful to him for saying that at least the Government will deal with this matter by regulation, but it would be much more satisfactory from all points of view if it were put into the legislation itself. Therefore, while I am grateful to him for accepting the argument that I have made, I should be even more grateful if he would say that between now and Report stage he would see if this provision could be written into the Bill itself and thus save the regulations.

THE EARL OF GOWRIE

The noble Lord, Lord Hoy, asked the Committee a moment or two ago whether he had represented me fairly in what I have said, and I can reply to the Committee that in my view he was representing me fairly—but only up to a point. The point at which we differ is that while we are in sympathy with the spirit of Amendments 61A and 61B, they do, in fact, go rather further than the noble Lord has "let on". They would, in short, remove from the trustees of occupational schemes any power at all to vary the form of benefit according to the needs, as against the wishes, of the beneficiary involved. They would, for instance, make the payment of minimum lump sum death benefit the norm for a death occurring before pensionable age. That is the reason why we prefer the flexibility of working by regulation and why we feel that the Amendments of the noble Lord go a little too far.

LORD HOY

I must say that I find it a little difficult to understand the addendum that the noble Earl has made to his original speech. I thought that he said our intention was absolutely clear, but now he seems to think that I was concealing something from the Committee—as if there was some hidden meaning behind what I said. I can assure the noble Earl that I am being absolutely straightforward and I thought he had accepted the Amendment as I had moved it. If he is saying "I will not reject it"—and one is inclined to agree with a Minister when he goes as far as that—I would admit that if this is going to be done by regulation at least it would meet a considerable part of my case However, I should like him to prove that my Amendment would do very much more that I in fact intend it should. While I accept his word at the present time—as indeed, at all times—obviously he will expect my noble friends and me to look at what he has said between now and the Report stage. However, I should not like to detract from our thanks and I would now beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 53 agreed to.

Clauses 54 and 55 agreed to.

Clause 56 [Transfer of benefit between schemes: linked qualifying service]:

4.8 p.m.

THE EARL OF GOWRIE moved Amendment No. 62: Page 75, line 8, leave out ("Part of this").

The noble Earl said: This is a technical Amendment, designed to ensure that the definition of "linked qualifying service" in this subsection extends also to Part III. This may already be achieved by the inclusion of this term in Clause 96(1), but the Amendment puts the matter beyond doubt. I beg to move.

On Question, Amendment agreed to.

LORD HOY moved Amendment No. 62A:

Page 75, line 37, at end insert: ("( ) Where an occupational pension scheme does not comply with the conditions prescribed under subsection (4) of this section, the scheme shall undertake to review the scheme rules for the purpose of providing for the making of transfer payments and the acceptance of transfer credits. The Secretary of State may prescribe a date for the completion of this review.")

The noble Lord said: I beg to move this Amendment, which I think is really very simple and is easily understood; there is no subtlety about it at all. All we are asking for in this particular Amendment is that it will be made possible and legal for a review to take place. We do not think it is over-stating the case to say that when we are making legislation of this kind, powers should be taken for reviews to be made to see that all provisions are being complied with. Indeed, the Amendment merely asks that the Government will agree to a review being included in the Bill as it stands. I beg to move.

LORD ABERDARE

As I understand it, this Amendment is to review specifically the provisions for making or receiving transfers within a scheme, and I quite appreciate the desirability of moving towards transferability between recognised schemes.

Both the recognition and the preservation requirements permit schemes to transfer an earner's accrued rights, with his consent, as an alternative to preserving his benefits, and Clause 62 empowers the Occupational Pensions Board to assist schemes in modifying their rules to pro- vide for making or receiving transfers. We believe that these provisions will encourage the development of transfer arrangements throughout the occupational scheme world—particularly as schemes will now have an incentive to explore such methods of removing from their books large numbers of small preserved pensions. Moreover, the public service schemes (which already provide for transfers between themselves) are actively seeking to promote arrangements for transfers to and from the private sector, and we may well ask the Occupational Pensions Board, when they have completed their initial tasks, to explore the possibility of removing obstacles to transferability.

We do not believe that it would be desirable to go any further than this at this stage. To require schemes which do not wish to make or receive transfers to include rules permitting this would not achieve very much because such schemes would, like the proverbial horse—even a Scottish horse—at the trough, refuse to make use of such facilities. To require them both to include such a rule and to make use of it would virtually amount to compulsory transferability.

While the Government accept that many employees will stand to gain from a transfer, we do not believe that the time has come for compulsory transferability. At this stage therefore the Government consider that it is best to require preservation and merely to permit transferability. Indeed, because of the danger that employees might lose out in a transfer, we have made it clear in both the recognition and the preservation requirements that a transfer may generally only take place when the employee consents.

These are the reasons why I do not think the Amendment is desirable; I do not think it helps us very much further forward. I am sure we shall work towards transferability for the reasons I have given; but to impose upon a scheme the need to review it so far as transfer payments and transfer credits are concerned would not, I think, lead us very much further forward. I hope that the noble Lord will agree with me on the desirability of transferability without pressing his Amendment.

LORD HOY

I am grateful to the noble Lord for his reply, but I am disappointed. I think that is the least convincing reply that he has given this afternoon. Our Amendment says: Where an occupational pension scheme does not comply with the conditions prescribed under subsection (4) … the scheme shall undertake to review …;". All we are saying is if it does not comply surely a review is not a great deal to ask for. Secondly, the Minister said he had no doubt at all that we will work towards a system of transferability. This may well be true, and I would of course agree with it if it could be done. I want it done a little more quickly than the Minister intends. The Amendment is not saying that they have to make this change; what we are saying is if these conditions are not met at least the scheme will review the rules. I should have thought that under these circumstances the Minister would have been delighted to accept the Amendment. Perhaps he thinks this Amendment is too widely worded. I am not an expert in drafting Amendments—we simply do the best we can. If the Minister was saying that the Amendment was too widely drafted I could understand it and would be delighted to consider further amending it before Report stage. But we have given the reason for the Amendment—which I am sure the Minister does not dispute—and we are saying that if these conditions are not met the scheme shall undertake to review the rules. We are spelling that out clearly and plainly. I do not think the Minister would dissent from that.

Then the Minister has said we must consider working towards transferability. If that is true, I can only repeat what my noble friend Lady Phillips said earlier: this scheme is not only for the present time, it is going to last for a long time ahead. We are legislating for years ahead. I should have thought that from the Minister's own point of view he would have wanted to have taken things like this into account in the legislation so that we should not be faced within a short period of time with other legislation amending this Bill, which will then be an Act of Parliament. I beg the Government to look at this matter again, when the Minister may find a better answer from his advisers.

4.17 p.m.

LORD ABERDARE

The noble Lord's Amendment is defective, but I would never dream of putting that as an argument to him. I am doubtful about the benefit that would come from compelling occupational pensions schemes that did not wish to receive transfers from other schemes to conduct a review if they did not wish to do so, for they could conduct a review but still not make the transfer. On the other hand, to compel them to do so is compelling them to make transferability possible when there are all sorts of difficulties at the moment that still have not been solved; for example, when it comes to making a transfer of the pension of a person who had been on a cash purchase scheme and is now moving over to a final salaried scheme. There are many difficulties involved, and all I am saying is, that as we cannot get to that stage of transferability it does not seem very useful to compel schemes to review their transfer proposals if they are not willing to make transfers in the long run.

LORD REIGATE

I have great sympathy with the noble Lord, Lord Hoy, in what he is seeking to do in this Amendment; so has my noble friend. When I first read the Amendment I was a little baffled because I could not see how a scheme could undertake to review its own rules; it did not seem physically possible. A scheme is a piece of paper, and I thought the onus should have been placed on the employer, or whoever was responsible for producing the scheme. May I make a suggestion to my noble friend which I hope may meet with the approval of Lord Hoy, that at Report stage there should be proposed an Amendment making a general charge to the Occupational Pensions Board to report at whatever the suitable interval is on the progress which is being made towards transferability.

BARONESS PHILLIPS

We considered the proposition put up by the noble Lord. We were trying to be tactful about this and we thought that if we suggested to the Government that they had to do things of that character the Amendment was more likely to be turned down. So we have produced this rather curious Amendment. It was practically impossible to put it into a Parliamentray draftsman's words. I was interested to see that in a judgment of the House of Lords in a particular case which was quoted recently one noble and learned Lord said that Acts of Parliament consisted of what I think he called "verbiage" and that those listening did not understand it. We are going to do the same thing again. We are going to pass an Act, and later, when there is a query, the Government will say, "'That is what we meant; if you did not understand it that is rather unfortunate." So we are getting more careful about these things, and we want them written into the Bill.

I take the noble Lord's point about not being too compelling to firms, but it is a serious matter. One could have a bad scheme which would never move towards transferability unless there was some way in which it could be jerked into action. I think it is also possible that somebody might be employed three or four times in his lifetime and always be in a scheme of this kind, so that his pension would always be commuted or frozen and he would never be able to move from one position to another. The review of their own scheme seems a very reasonable proposition and I hope that the Minister will look at it. Otherwise we shall be obliged to return to the point at Report stage.

LORD ABERDARE

I said we were thinking of asking the Occupational Pensions Board to explore the possibility of removing obstacles to transferability. We are only too well aware that the Occupational Pensions Board is going to have a very full task on its hands in the immediate future in studying the propositions that are put for recognition from existing and new schemes. But I should be happy to think about what my noble friend has suggested: that this is something on which we might somehow commit ourselves, and let the Occupational Pensions Board in due course review the progress towards transferability. It seems to me a sensible suggestion which we might easily wish to do in any case, but may I have a chance to look at it before Report stage?

LORD HOY

We are grateful to the noble Lord for his assurance, and grateful to the noble Lord, Lord Reigate, for the suggestion he made. In these cir cumstances, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 56, as amended, agreed to.

Clause 57 [Financing and security of minimum benefits]:

4.22 p.m.

THE EARL OF GOWRIE moved Amendment No. 63: Page 76, line 25, after ("Act") insert ("or the corresponding Northern Ireland legislation").

The noble Earl said: Noble Lords opposite, I think, particularly will remember that, due to what I fear is chronic slowness on the uptake, I found myself forced to speak three times, I think it was, to this Amendment and other Amendments dealing with the application of the Bill to Northern Ireland, on the first day of the Committee stage. I would further ask leave to speak to Amendment No. 64 with No. 63. These were spoken to formally last Tuesday. They pertain to North of Ireland application. I beg to move No. 63.

On Question, Amendment agreed to.

THE EARL OF GOWRIE moved Amendment No. 63A: Page 76, line 29, after ("then") insert ("subject to the following subsection").

The noble Earl said: With leave, I should like to speak to Amendment No. 63B at the same time as No. 63A. These Amendments will have, I think, particular appeal to those of your Lordships who are versed in accountancy. They are concerned with schemes which include a priority winding-up rule but accord different degrees of priority to a number of liabilities, including those listed at paragraphs (a) to (c). They ensure that in these cases the Occupational Pensions Board need only satisfy themselves as to the adequacy of the scheme's resources in relation to the liabilities at paragraphs (a) to (c) of the clause, and also any others accorded the same or a higher degree of priority. In more simple words, the Board will be concerned only with resources needed to back the benefits given priority, which include the benefits needed for recognition. I beg to move.

On Question, Amendment agreed to.

THE EARL OF GOWRIE

I beg to move Amendment No. 63B.

Amendment moved—

Page 76, line 33, at end insert— ("(3A) In applying subsection (3) above, the Board may disregard liabilities with priority, in so far as their priority ranks lower than that of the liabilities specified in paragraphs (a) to (c) of the subsection and lower also than liabilities in respect of the expenses of administration."). (The Earl of Gowrie.)

On Question, Amendment agreed to.

Clause 57, as amended, agreed to.

Clause 58 [Provisions barring commutation, surrender or forfeiture of minimum benefit]:

LORD HOY moved Amendment No. 63C: Page 78, line 5, after ("amount") insert ("provided that commutation provisions remitted by this subsection shall only have effect when they are accompanied by provision for the earner to opt for a payment into the State Reserve Scheme instead of accepting commutation;").

The noble Lord said: I beg to move Amendment No. 63C standing in the name of my noble friends. I have tried to point out to your Lordships this afternoon that a whole series of Amendments we have been dealing with is to make alternative provisions available to the contributors. In this particular Amendment we are saying: provided that commutation provisions remitted by this subsection shall only have effect when they are accompanied by provision for the earner to opt for a payment into the State Reserve Scheme instead of accepting commutation ". So what we are doing once more in this particular Amendment is saying that the contributor should have this choice if he desires to make it. It seems to us that to overload against the contributor who is making these contributions is being a little unfair. We have worked out certain figures which would appear in this particular case to be unacceptable to women. If the Minister is prepared to accept the Amendment I will not prolong the proceedings at this stage, though I promise that I will come back if we do not accept what he has to say. I think he sees the gist of the argument we are making. Even the wording, whatever its deficiencies, is absolutely explicit and clear. I beg to move.

LORD ABERDARE

I have no quarrel with the noble Lord's competence and I will not say that this Amendment is defective in any way. But I am afraid I cannot offer him acceptance of it although I have great sympathy with what underlies his intentions: to ensure that an employee should not be forced to commute a pension benefit merely because it is very small. But we do not believe that the suggestion made by the noble Lord in this Amendment would be practicable.

The regulations that we shall make under Clause 58(2)(b) will follow the Inland Revenue rules and generally only permit commutation on triviality grounds at the time a benefit would otherwise have come into payment. This means that at the time commutation takes place the earner will be in the older age group and any premium paid at that age would therefore purchase very little benefit indeed in a money purchase scheme such as the reserve pension scheme. The cases where trivial commutation will be permissible should not be very common, because minimum pensions will only be commutable where the total benefits payable from all schemes in the same employment amount to less than £52 per annum. So where minimum benefits are small, but the employee is also entitled to fairly substantial benefits from that or another scheme in the same employment, no commutation will be permissible. The purpose of this provision is only to permit commutation where the continuing payment of such very small sums would be administratively burdensome and very costly. If, of course, the reserve scheme were to be required to accept premiums in these cases, it would also be undertaking an obligation that would be equally administratively very burdensome and very costly. These are the reasons why, although I sympathis, I hope the noble Lord will not press his Amendment.

BARONESS PHILLIPS

I would only say that we are dealing I think—although the sum involved is not very much—with a larger group of workers than is probably recognised. Far more people than we appreciate move about several times in their period of employment, and we have to be careful that they are not put to a disadvantage. I am sure the Minister will know by now that the reason for administration is not one that weighs heavily with me. We always have to look at the benefit of the person being administered. I do not think that in this case we have really thought the matter through well enough. I feel that there are far more people involved than was recognised when the matter was originally worked out, and I should like to keep an open mind on this and perhaps return to it at a later stage of the Bill.

LORD HOY

In case there should be any misunderstanding, may I say that I can see some part of the argument made by the noble Lord. My noble friend has said that perhaps we all underestimate the number of people who would be involved in an action of this kind, and I would not dispute that. It may be that the numbers are much greater than we all think. I also see some logic in the noble Lord's argument, although my noble friend does not altogether agree with it. She thinks that even if a little expense is entailed, whether the numbers be large or small it ought to be undertaken as part of the scheme. But I can see a case where the numbers may be so small that the cost may appear to most people to be prohibitive. Inasmuch as we may wish to return to this Amendment after considering what the Minister has said, I think it would be better if I withdrew the Amendment now and the Minister will then understand that we may return to it at a later stage. With the consent of the Committee I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 58 agreed to.

Clause 59 [Minimum benefit to be inalienable]:

LORD ABERDARE

I beg to move Amendment No. 64.

Amendment moved—

Page 78. line 42. at end insert ("and in its application to Northern Ireland the reference to a person's bankruptcy shall be read as including the vesting of a person's estate and effects in the official assignee under section 349 of the Irish Bankrupt and Insolvent Act 1857") —(Lord A berdare.)

On Question, Amendment agreed to.

Clause 59, as amended, agreed to.

Clause 60 agreed to.

Schedule 13 [General provisions as to recognised pensionable employments and recognised schemes]:

4.33 p.m.

LORD HOY moved Amendment No. 64A:

Page 165, line 47, at end insert: ("9. The Secretary of State shall make regulations requiring occupational pension schemes to issue to their members and the Occupational Pension Board at prescribed intervals, a statement setting out the total membership of the scheme and incorporating art estimate of the number of scheme members whose accrued benefits are less than the benefits which would have accrued if they had been a member of the state reserve scheme.")

The noble Lord said: As one goes through these Amendments one says to one's noble friend, "What is this all about?" Even though one has read it this is an intricate Bill, but I have an assurance from my noble friend that this Amendment is absolutely simple—so simple that even the Minister will understand it. In this Amendment we are asking for a simple set of figures to give us the number of people who are involved and what benefits would have accrued if they had been in the state reserve scheme rather than in the other one. This will allow us to estimate what in fact will be the best award that the contributor is getting in one scheme as against another. I do not think this proposal will be regarded as alarming. I am sure everybody would like to see how both sections of the scheme are working, and that is what we are seeking to achieve by this Amendment. I beg to move.

THE EARL OF GOWRIE

It really distresses me to have to point out to the noble Lord, Lord Hoy, the very old truth that because something is simple —and he has presented it simply and clearly—it does not necessarily mean that it is right. The problem here is that he and I must agree as to what the effect of this Amendment would be. As I see it, the effect would be to require recognised schemes to make periodic reports about their membership and, in particular, the proportion of members who would have fared better under the reserve pension scheme. In other words what the noble Lord is seeking is really a kind of built-in monitor on the scheme, and as such I agree that the idea has its attraction. But the problem is that I do not think the effects he is hopeful of achieving through his built-in monitor would in fact be the effects that he achieves. In a reserve scheme, the usual case is that it is a money purchase scheme so that the amount one pays out controls the pension. Where occupational schemes are concerned these normally operate on an average salary basis; that is to say, on 1 per cent. of the accrued earnings or on a final salary basis. So it seems to me that we cannot at any particular point make a direct comparison between the two and hope to arrive at a useful conclusion.

There is a further point: while the Government accept the desirability of schemes giving employees as much information as possible, we do not believe that this should be on the basis of constant comparisons with the reserve scheme. But we are setting minimum standards—and I hope the noble Lord will draw some comfort from this—for recognised schemes which should ensure that the employees concerned receive benefits which are at least broadly comparable to those payable over a full career by the reserve pension scheme and which in many cases (indeed in most cases) will be better. Our aim is to encourage occupational schemes to look ahead and to plan further improvements over and above these minima. Comparisons with other similar schemes providing higher and better benefits will therefore be more fruitful than a comparison with the reserve pension scheme, whose structure is alien to that of many occupational schemes and whose contribution levels cannot be pitched very high in view of the number of low earners likely to be included in its membership —a factor which I think the noble Lord left out of his argument. Indeed such a requirement could well have the undesirable effect of encouraging complacency instead of critical examination in some occupational schemes. I am sure the noble Lord, Lord Hoy, would not wish that.

If the occupational schemes could show their benefits to be better than those provided on the basis of a 4 per cent. contribution in the reserve pension scheme they might tend to sit back on their laurels and fail to consider the much better benefits payable under other occupational schemes. We therefore believe that the annual reports of the Occupational Pensions Board and the periodic surveys of the Government Actuary's Department will do far more to raise general occupational scheme standards than a requirement that schemes should continually compare themselves with the reserve pension scheme. That is why I must ask the noble Lord to withdraw his Amendment.

LORD HOY

I find that reply very disappointing indeed. I think the logic produced by the Minister is open to challenge because he was asking us to console ourselves with the thought that there will be writtin into the Bill some minimum payment that will be made to members. I do not regard this as a great assurance, because it reminds me that just before the war, when unemployment in this country was extraordinarly high, we were employing railwaymen for about 28s. a week. A man met a railwayman one day and asked him what he was being paid. The railwayman said, "I'm being paid 28s. a week "and his friend said, "That is absolutely starvation". The railwayman said, "That may be true, but it is constant". I have never regarded it as any consolation to be employed in a job at a constant wage which was practically at starvation level. I should have thought that we were entitled in a Bill of this kind to lay down an adequate minimum. So I simply do not accept that merely because some minimum payment is laid down it is acceptable. One must know what the minimum payment is going to be.

I think the noble Earl was quite right when he said that this Amendment would in fact provide a built-in monitor; but surely there is nothing wrong with that—to know how benefits compare and what each is going to get in return for his contributions. Surely there can be nothing wrong in knowing how the scheme is working. It is not for me to say that, because it is so obvious that the depositor is entitled to all the information possible. What is incumbent upon the Minister to do is to disprove what I am saying in the Amendment and to say that this would not be correct. He has to go somewhat further than he has already gone. When the Minister says to me, "What you have to accept is that the employers will give information ', what does he mean by that? Is he saying that the employers will do what our Amendment seeks to do? If that is so, why does he not accept the Amendment? If he is saying that the employers, as a result of what he has said, will only give whatever information they wish to give, and not the whole facts of the situation, that does not take us any further along the road. We should get a better answer than we have so far got. I should not like at this late stage, when we are getting on reasonably well, to divide the Committee, but I think the Minister should make a further effort to satisfy me that this Amendment is not acceptable to your Lordships' House.

THE EARL OF GOWRIE

The last thing I wish to be is obtuse. What I was pointing out to the noble Lord was that I had some sympathy for his motives but I did not think his suggestion would achieve the effects that he himself wanted. It hinges therefore on the question whether the comparisons he wants are valid comparisons—in other words, would the data one got out of such comparisons act as a built-in monitor. It was my contention—and this may be a shared difference of opinion between us—that it would not do so.

LORD HOY

I do not want to interrupt the noble Earl. I heard him when he said that the first time; but it is not very good and not good enough, if I may suggest respectfully, for the noble Earl to say that it would not do that. What the noble Earl has to show is why it would not do that.

THE EARL OF GOWRIE

I was going on to elaborate on my additional answer and to show why it would not do so. It would not do so in our view because the only practicable basis of comparison would be to calculate each person's accrued benefit entitlement under the scheme to date, that is to say, at each report date, and compare that with what each person would have earned had he been in the reserve scheme. Those comparisons would have to be made individually, taking into account each person's age and earnings; and apart from providing no very useful information it would have the side effect of imposing on the administrators of the scheme a very large extra burden which would effectively discourage the Government's objective. The Government objective, as noble Lords will know, is the growth and development of occupational pension schemes. In principle that is what the Bill is about. But I say to the noble Lord, and especially to his noble friend Lady Phillips who raises this matter very often, that we are not resting on the administrative argument here at all.

The principal argument is that the picture which such comparisons would present at any given time would be totally unreal and misleading since pensions are a long-term commodity. The noble Lord and I would be in agreement, I am sure, in saying that what matters at the end of the day is the amount of pension payable, and that is virtually impossible to forecast many years in advance. In the case of the reserve scheme pension, for example—one factor in the comparison made—much will depend on the bonuses which are paid. In all cases the outcome will depend on the individual's own earnings experience. The individual's own earnings experience cannot be forecast with any certainty, but it is especially crucial in the case of final salary schemes, which I mentioned in my opening speech,where everything depends on the individual's earnings at the end of his service. So what we are saying, and I have elaborated the point, is that this comparison in addition to being burdensome in administrative terms would also be misleading as to the end result.

BARONESS PHILLIPS

I must confess that I do not understand the kind of bookkeeping that these occupational pension schemes will have. For instance, if an employee leaves they will have to work out the commutation, or one of the other ways in which they are going to deal with the money that is paid in. So is the noble Lord saying they will work this out only at the point where somebody leaves, or dies, or needs to have the money? Each three months I receive a statement from my occupational pension scheme telling me that if I retire at that particular moment I would receive some such princely sum as £3 a week, or something of the kind. But at least I get a statement telling me precisely how much I have paid in and how much I will draw. There is nothing very complicated about that, and I cannot follow the logic of why this will involve such a terrific amount of accountancy and bookkeeping. I can see that one will have two figures. But already employers have to deal with tax as well as a number of other things, and I do not think that this would present quite the difficulty that the noble Earl is presenting to us.

THE EARL OF GOWRIE

One of the difficulties between the two sides of the Committee here is that noble Lords opposite tend to say "employers" quite shortly, whereas what I have been talking about are employers' occupational schemes. There is a distinct difference. One is not talking about protecting the rights of employers as against the rights of employees; one is talking about the undesirability—or unprofitability, to put it more neutrally—about making statements of comparisons 'between reserve schemes and occupational schemes, and it is for the reasons that I gave—I hope clearly, but I shall give them again if the noble Baroness wishes —that we feel such comparisons would not have the effect that the noble Lord desires.

LORD SHEPHERD

Can the noble Earl help me in one particular? This is one part of the Bill I have not studied. Since this is the first time that employed persons will be required to be either in an occupational scheme or a reserve scheme, is there any provision in the Bill that a person who is in an occupational scheme will be given an annual report, or perhaps a report of a longer period, in order to be able to ascertain what the scheme is and what benefits will arise? It seems to me that the points which my noble friends have been putting forward are points about which anyone who is making a contribution to a scheme is entitled to know. What is the size of the scheme? What are the benefits of the scheme? The noble Earl may say that this is difficult, but I have only to look at my Sunday papers to see that there are pages and pages of occupational schemes which are selling their wares by saying that if one contributes so much, then at the end of a certain period the benefits will be as follows. Often there are variations available which are open to the option of the contributor.

Bearing in mind that many employed people are perhaps for the very first time going to find themselves in an occupational scheme, they may well wonder whether they might not do better under the reserve scheme, and I should have thought it was right and proper to provide them with a comparison. It does not necessarily have to apply directly to themselves but should be sufficiently portrayed so that a comparison can be made. I should have thought that would be in the Government's interest, since they have made it very clear that what they wish is for more people to be in the occupational schemes and not in the reserve scheme. If they can show very clearly to the employed person that the occupational schemes are so very much better than the reserve scheme, I should have thought it was very advantageous if this information was available. That is in fact being suggested in this Amendment.

LORD ABERDARE

May I intervene for one second? My noble friend, I am sure, will be able to answer the questions that the noble Lord has put about whether there are in the Bill matters that make it imperative for the scheme to inform its members about their situation. But the argument which my noble friend has been putting forward has not been based purely on administrative reasons. The argument he is making, if I have it right, is, in essence, that the reserve scheme is a money purchase scheme. You pay in so much money—and if I may use that term which I do not think the noble Baroness likes—actuarily the result comes out at the end as to what your pension is, although, of course, there may be bonuses along the line. Therefore, if you take that as the standard with which to compare the occupational pension scheme it is all very well comparing another money purchase scheme, because you can tell at any particular time what the similar benefits are, but it is almost impossible to compare a final salary scheme. The final salary scheme is one of the best schemes you can possibly have, because you stay on in your occupation and get a very good salary at the end, and very often it is the employer who has to make the biggest contribution towards it. But to compare the two types of scheme is almost impossible. At an early stage in somebody's career it is impossible to predict what his final salary will be. You could say that if he left at a particular moment he would get so much, but that would not reflect what his full prospects were. This is the difficulty of trying to compare what are not like; they are two completely different sorts of schemes.

4.52 p.m.

BARONESS PHILLIPS

I expect the noble Lord does know that this is the method used now in occupational schemes. They actually show what a man would take out of the scheme if he had to take it out at that particular moment; and this, of course, cannot take account of his rising salary expectations. What we have to recognise is that, unfortunately, all too many schemes will not be based on expectation of increments, because this is not a common practice; it runs only through professional and white collar schemes. I feel that some of the advertisements for occupational pension schemes to which the noble Lord referred alert one to the kind of propaganda that is being put about. One that I noticed the other day used the words "unless you want your members to be below the State reserve scheme". This was suggesting that this was the end: that if you entered the State reserve scheme this was a fate worse than death. That is how the advertisement suggested it. I appreciate how you buy in and you take out but I still say that it seems to me a matter of bookkeeping.

THE EARL OF GOWRIE

The noble Lord, Lord Shepherd, asked me a question and was kind enough to keep talking while I checked my reply.

LORD SHEPHERD

I must say to the noble Earl that it is only late in the evening when I keep talking for the benefit of Ministers. I was in fact making a case, and I am sorry the noble Earl was not able to hear what I was saying. I do not intend now to repeat what I said for the benefit of the noble Earl; I would ask him to read it. But I should not like him to go unchallenged on the Record that I kept talking while he found out some information on what was a very simple question.

THE EARL OF GOWRIE

What is quite clear is that I have misjudged the noble Lord's kindness on this occasion. I assure him that the message of his speech,, which has been answered by myself and by my noble friend, was quite clear to us. The particular question he asked, as I understand it,—and I will recapitulate to make sure I have it clear —is whether there are any mandatory requirements in the Bill for occupational pension schemes to make available information about their operation to their members. The answer is that there are not mandatory requirements; the Bill does not require them to do so. But the Government have got together with the C.B.I. and with all major pensions organisations and persuaded them voluntarily to issue a code of conduct setting out the type of information which employers' schemes should aim to give employees. There are, of course, additional safeguards under the Industrial Relations Act as to the information which must be given by employers, because, of course, pension schemes are effectively part of remuneration.

LORD HOY

I do not think we can take this matter any further. I am disappointed with the reply. I thought we were not asking too much in asking for this information. I was a little disappointed that the noble Earrl should give us a little homily pointing out how employers were not involved in this. When we talk of "employers", we are in fact using the word to make a distinction between occupational pension schemes and the reserve scheme. Indeed the noble Lord, Lord Aberdare, pointed out, quite correctly, that even under the reserve scheme what you are buying is in units. I do not see any difficulty about providing this information. Any person in this country can read any day in any newspaper advertisements of insurance companies asking them to buy certain units, pointing out that if they buy insurance at a certain time and make certain contributions, at the moment they depart this earth they will get a certain sum. I should have thought that this was fairly simple.

LORD ABERDARE

But not with the final salary scheme, because nobody can know what the final salary is going to be.

LORD HOY

I am talking about the first point. I will come later to the final salary scheme. Nobody knows at any time what that will be. But we are not arguing that. What we are arguing is that at any given time people ought to know what they are entitled to. I can think of many schemes at the present time where people leave their employment. or may have their services dispensed with, and certain benefits will accrue as a result; they know exactly what is going to happen. Indeed, I do not want to take it too far, but one can think even of the redundancy scheme, where a person's labour is no longer required; he or she knows what will accrue as a result. All we are arguing is that these details should be available to those who are members of the scheme. I do not think it is asking too much. I think anybody who pays into a scheme is entitled to know what the benefits are going to be. They are the people who are depositing, along with the employers. Really, if the Minister cannot do better, and I am very sorry to say so, I shall ask the Committee to make a decision.

THE EARL OF GOWRIE

I think we agreed that employees are entirely entitled to this information. I am not quite clear about the degree of difference between us. I think it is less wide than perhaps the noble Lord thinks. We feel that it would be very cumbersome, would cause unnecessary work and confusion,

if all schemes, which by their very nature vary greatly from each other, were to be obliged statutorily to make periodic statements of the sort mentioned in the Amendment. We feel that there are protections given, both under the Industrial Relations Act and by the fact that a lead is being given in drawing up a code of practice which we will keep very carefully scrutinised.

LORD SHEPHERD

As I understand from the noble Earl, he is saying that an employed person is entitled to this information. Earlier on he was quite specific that the Government do not think that these provisions in terms of information should be mandatory, but there was to be an agreed solution, a code of practice agreed by Her Majesty's Government, the C.B.I. and the insurance companies. But if, as the noble Earl says, employed persons are entitled to this information, I should have thought this Amendment was absolutely necessary to ensure that what an employed person is entitled to will in fact be made available.

4.59 p.m.

On Question, Whether the said Amendment (No. 64A) shall be agreed to?

Their Lordships divided: Contents, 42; Not-Contents, 65.

CONTENTS
Amherst, E.	Fulton, L	Royle, L.
Archibald, L	Gaitskell, B	Rusholme, L.
Arran, E	Garnsworthy, L.[Teller.]	Seear, B.
Blyton, L	George-Brown, L	Serota, B.
Brockway, L	Henderson, L	Shepherd, L.
Buckinghamshire, E	Henley, L	Shinwell, L.
Burntwood, L	Hoy, L	Stocks, B.
Byers, L	Janner, L	Stow Hill, L.
Champion, L	Llewelyn-Davies of Hastoe, B.[Teller	Taylor of Mansfield, L.
Chorley, L		Wells-Pestell, L.
Diamond, L	Ogmore, L.	Williamson, L.
Donaldson of Kingsbridge, L	Phillips, B.	Wootton of Abinger, B.
Douglas of Barloch, L	Popplewell, L.	Wynne-Jones, L.
Douglass of Cleveland, L.
NOT-CONTENTS
Aberdare, L.	Clwyd, L.	Denham, L. [Teller.]
Alexander of Tunis, E.	Colville of Cuiross, V.	Derwent, L.
Auckland, L.	Conesford, L.	Drumalbyn, L.
Balfour, E.	Cottesloe, L.	Dundee, E.
Balfour of Inchrye, L.	Cowley, E.	Eccles, V.
Belhaven and Stenton, L.	Craigavon, V.	Effingham, E.
Belstead, L.	Crawshaw, L.	Elles, B.
Berkeley, B.	Daventry, V.	Elliot of Harwood, B.
Carrington, L.	de Clifford, L.	Emmet of Amberley, B.
Falkland, V.	Lauderdale, E.	Reigate, L.
Ferrers, E.	Limerick, E.	Sandford, L.
Goschen, V.	Lothian, M.	Sherfield, L.
Gowrie, E.	Macleod of Borve, B.	Strange, L.
Greenway, L.	Macpherson of Drumochter, L.	Strathcarron, L.
Grenfell, L.	Mancroft, L.	Stuart of Findhorn, V.
Grimston of Westbury, L.	Merrivale, L.	Swansea, L.
Hailsham of Saint Marylebone, L. (L. Chancellor.)	Milverton, L.	Templemore, L.
	Monck, V.	Teviot, L.
Hanworth, V.	Mottistone, L.	Vivian, L.
Hayter, L.	Mowbray and Stourton, L. [Teller.]	Wakefield of Kendal, L.
Hylton-Foster, B.		Windlesham, L.
Ironside, L.	Rankeillour, L.	Young, B.
Killearn, L.

On Question, Amendment agreed to.

5.7 p.m.

THE EARL OF GOWRIE moved Amendment No. 65:

Page 165, line 49, leave out paragraph 9 and insert: ("9. Regulations may, in relation to any method adapted in an occupational pension scheme for making ascertainable its minimum benefits, provide for adjusting figures so as to avoid fractional amounts and otherwise to facilitate computation.").

The noble Earl said: With the leave of the Committee, I should like to move this Amendment and speak to Amendment No. 67 simultaneously. These are drafting Amendments which do not in any way alter the effect of these paragraphs. The first simplifies the drafting of paragraph 9, removing an element of repetition; and the second deletes words which are redundant in view of the definition of "the Board" in paragraph 1.

THE EARL OF GOWRIE moved Amendment No. 65A: Page 166, line 20, at end insert ("and regulations under this paragraph may include provision for securing that, in such cases, an earner's employment does not cease to be recognised pensionable employment only because his service for the time being does not qualify him for minimum benefits").

The noble Earl said: This Amendment is designed to clarify the scope of the regulation-making power in this paragraph. The intention has always been that the regulations should permit an earner to be covered by a recognition certificate during a period in which he was unable to accrue minimum benefits because either he had already earned the maximum permitted by his scheme (or by the Inland Revenue) or his scheme was such that benefits earned during one period of membership must be taken together with those accruing in a subsequent period in order to satisfy the recognition requirement—for example, in a money purchase scheme which chose for some reason to be recognised under the average or final salary tests. The safeguard would be that even if the benefits for one particular period did not match the recognition requirements, the total benefits eventually provided when the employee left his scheme would have to be at least equal to his minimum benefit entitlement for the whole period of recognised pensionable employment concerned. I beg to move.

THE EARL OF GOWRIE moved Amendment No. 66: Page 166, line 29, after ("if") insert ("and to the extent that").

The noble Earl said: This is a technical Amendment designed to ensure that where the Board agree to validate a rule change with retrospective effect they should be able to determine the extent of the retrospection. This was always the intention and the Amendment merely puts the matter beyond doubt. I beg to move.

BARONESS PHILLIPS

The Minister said that it is technical, but did I understand him to say that it should have been in this form but was

THE EARL OF GOWRIE

No, what I said was that it always was the intention of the Bill to ensure that where the Board agreed to validate a rule change with retrospective effect they should be able to determine the extent of the retrospection. What the Amendment does is to put this beyond doubt.

BARONESS PHILLIPS

I am not very happy with anything where it is possible to play about with a rule and put it into a retrospective situation, but I feel that we can only agree to it at this point.

THE EARL OF GOWRIE: I beg to move Amendment No. 67.

Amendment moved— Page 166, line 45, leave out ("Occupational Pensions")—(The Earl of Gowrie.)

On Question, Whether Schedule 13, as amended, shall stand part of the Bill?

5.10 p.m.

LORD HOY

I will not hold up proceedings except to say that the Minister, in his last speech, pointed out that retrospection might have to take place; and obviously this causes us a little concern. I shall not say at the moment whether it is right or wrong, but your Lordships know how much concern there is in either insurance or law when retrospective action is introduced. So perhaps between now and Report stage we shall have to look at this point. What interested me more than anything else was the first Amendment to the Schedule, No. 65, under which there is apparently no difficulty in providing what the noble Earl was so against in the Amendment moved by my noble friends and myself. The Amendment stated: Regulations may, in relation to any method adopted in an occupational pension scheme for making ascertainable its minimum benefits, provide for adjusting figures so as to avoid fractional amounts and otherwise to facilitate computation It seems to me that the noble Earl is making provision for a great deal more than we have ever asked for; and if that is so then I am grateful to him.

LORD BYERS

Is it not conceivable that in this partciular case the retrospection could be of benefit to a particular individual?

LORD HOY

It might not.

LORD BYERS

That is what I am trying to elicit, because in insurance schemes of this sort retrospection is usually to the benefit of the individual. In general, I would agree with the noble Lord, Lord Hoy, but it would be useful to know in what respect retrospection is to take effect.

THE EARL OF GOWRIE

It is possible for retrospection to be of benefit to an individual, though one would have to acknowledge that the reverse could also be true. I do not think that the noble Lord has cause for concern here. I shall try to satisfy both myself and him fur-then at the next stage, if he wishes. As I understand it, the Bill already provides for the Board to validate a rule change retrospectively. The Amendment merely empowers the Board to determine the extent of retrospective validation.

LORD HOY

May I ask one further question, because it is not an unimportant point? The noble Earl has just said that the Board will have power to validate. I am not being argumentative, but I would ask how this validation will take place. Will the Board decide for itself and will that be sufficient, or will its decision to validate be remitted to the Minister for his decision, or will it come to the House in the form of an Order? All I want to know is what procedure will be adopted.

LORD ABERDARE

The Occupational Pensions Board will be there to recognise that a scheme is a good one and can be recognised for the purposes of the Bill. In a case like this, where a scheme's rule is being changed, it has to be agreed by the Occupational Pensions Board. I would say to the noble Lord, Lord Byers, that it is nearly always to the advanta^ge of an employee, because in the great majority of cases rules are changed only in order to do better for the scheme, and although a rule change may help anybody who is in a scheme at that time it might also be desirable to ante-date it by retrospection. If that was for the benefit of the employees, then the Occupational Pensions Board would be in a position to agree and, as it were, to validate it.

LORD SHEPHERD

Where does the Board get the power to do it? I think that is the question which my noble friend put.

LORD ABERDARE

The Board exists for the recognition of schemes. Their task is to say which schemes are recognised schemes under the Bill. They write to the firm.

Schedule 13, as amended, agreed to.

Clause 61 agreed to.

Schedule 14 [Requirements as to preservation of benefit under occupational pension schemes]:

5.16 p.m.

THE EARL OF GOWRIE moved Amendment No. 67A:

Page 167, line 35, leave out from first ("age") to ("there") in line 37 and insert ("is to be construed as follows. (2) Where the scheme provides for the member only minimum benefits for recognition purposes, "normal pension age" means the earliest age at which the member is entitled to receive his minimum personal pension on retirement from relevant employment. (3) In any other case, "normal pension age means the earliest age at which the member is entitled to receive benefits (other than minimum benefits) on his retirement from such employment. (4) For the purposes of this paragraph").

The noble Earl said: This is a technical Amendment, the purpose of which is to ensure that where a recognised scheme provides benefits in addition to minimum benefits, normal pension age should be the earliest age at which the member is entitled to receive those other benefits on his retirement. This, again, was always the intention, but without the Amendment normal pension age in a recognised scheme cannot be later than 65 for men and 60 for women, because minimum benefits will normally have to be payable at 65 and 60 respectively. The Amendment makes it clear that in recognised schemes short service benefits above the minimum level will be treated in the same way as short service benefits in other schemes. "Normal pension age" is a term used only in Schedule 14. It is used to determine when short service benefits are payable, and in certain cases how they are calculated. It derives directly from the age at which a particular member of a scheme is entitled under the scheme's normal rules to receive benefits on retirement. I beg to move.

BARONESS PHILLIPS

Am I correct in assuming that we are leaving sub-paragraph (2) as it is, and adding sub-paragraph (3)? I cannot see the difference in the words in the Schedule relating to subparagraph (2).

THE EARL OF GOWRIE

Can the noble Baroness be a little more precise? What is it that she is worried about?

BARONESS PHILLIPS

I am looking at the definition of "normal pension age", and the words already in the Bill seem to me to be the same as the words in the Amendment. Therefore, I am asking whether I am correct in assuming that sub-paragraph (3) is the relevant one, because that is extra.

THE EARL OF GOWRIE

I think the noble Baroness is right. I was simply trying to flesh out my description a little by giving the definition in the Schedule of "normal pension age".

LORD HOY moved Amendment No.67B:

Page 169, line 39, at end insert:— ("(5) Where an alternative to short service benefit prescribed under sub-paragraph 2(b) above includes payment by way of return of contributions are permitted by sub-paragraphs 4(a) and 4(h) above, then if the period is not less than 2 years, the return of contributions shall be supplemented by interest at a rate laid down from time to time by the Occupational Pension Board.")

The noble Lord said: This, also, is a very easily understood Amendment. I say that as I do not want the noble Earl to say that, because it is simple, it does not necessarily mean that it ought to be approved. The simplicity which I talked about earlier was that the Amendment was so simple that every Member of your Lordships' House understood it, which could not be said for the Government's Amendment. This Amendment is in the same category. What we are saying in this Amendment is that … if the period is not less than 2 years, the return of contributions shall be supplemented by interest at a rate laid down from time to time by the Occupational Pension Board. In other words, the interest rate should be fixed by them and embodied in the contributions. We think that this is fair and reasonable and I hope the Government will feel the same way. I beg to move.

LORD ABERDARE

I understand the noble Lord's motive in moving this Amendment which is intended to give greater benefit to the employee who leaves. This of course has attraction from the point of view of such employees, but it is not, I am afraid, in harmony with the content of the Bill. Schedule 14 is designed to ensure preservation of pension rights so that they are available in retirement to the employee who leaves. While it has been necessary to provide for alternatives to preserved benefits (for example, transfer payments) in the interests of both flexibility and convenience, it would be moving outside the concepts of the legislation to make provision for the regulation of contribution refunds to the individual who leaves his scheme. The aim of Schedule 14 is to ensure income in retirement, and although refunds of contribution will be permitted —though only with the consent of the individual member—in respect of service given before the operative date of the legislation, this is by way of a transitional provision and it is to be hoped that employees who might take such a refund will increasingly choose preserved rights instead.

The Amendment relates to service of two years or more and if adopted would mean that we were going further than the present legislative requirements which lay down the five-year period as a qualifying condition. This is not really justifiable as essential to the preservation strategy and might diminish its coherence. Members who leave with less than five years' service are protected because they must receive either minimum benefits under a recognised scheme or benefits in the reserve scheme. These are the arguments that I would put as matters of principle to the noble Lord, but it would also be an inescapable consequence of his proposal that the resources of the scheme would be diverted away from those remaining in the scheme to meet the interest payment and the administrative cost, which could be significant especially if the interest rate were revised from time to time as is implied in the proposal. Employees who take a refund at present may or may not receive interest, according to the circumstances of their particular scheme. That is the reason why I would ask the noble Lord to withdraw his amendment. Basically what we are doing is saying that if a man serves five years in any particular scheme then all his benefits are protected under the scheme. If he leaves before the five years then his contribution has to be put into the reserve pension scheme and it is a matter for the particular occupational scheme if there is money left that can be paid back to him in the form of a lump sum. Whether or not this is done will depend on the nature of the particular scheme, but it would not be desirable in this Bill to alter the arrangement in the particular scheme.

On Question, Amendment negatived.

THE EARL OF COWRIE moved Amendment No. 68:

Page 170, line 1, leave out from ("apply") to ("at") in line 2 and insert ("to so much of any benefit as— (a) accrues").

The noble Earl said: With leave I should like to speak on this occasion also to Amendments Nos. 69 and 70. These are technical Amendments designed to restrict the method of computation set out in paragraph 11 to those benefits or parts of benefits described in paragraph 10(3). As drafted the paragraphs would apply, inappropriately, to the whole of the benefits provided by a scheme even where only some of them fell within the description in paragraph 10(3). All short service benefits which do not come within the scope of paragraph 11 must be calculated in accordance with paragraph 10(1), that is to say, on the same basis and under the same rules as the long service benefit. These Amendments will therefore mean that a scheme's members will be protected by whichever is the more appropriate of paragraphs 10(1) and 11 in relation to each of the benefits provided. I beg to move Amendment No. 68.

Amendments moved—

Page 170, line 7, leave out ("for benefit to be") and insert ("is").

Page 170, line 12, leave out from beginning to ("computed") in line 13 and insert— ("11. So far as any short service benefit is not required to be computed in accordance with paragraph 10 above, it must be").

THE EARL OF GOWRIE moved Amendment No. 71: Page 171, line 41, leave out from ("assignment") to end of line 42 and insert ("of short service benefit, and must not enable such benefit to be surrendered or commuted").

The noble Earl said: With the leave of the Committee I should like to address myself to Amendment No. 72 as well. These are Amendments designed to remedy an unintentional omission in the Bill. While paragraph 15(3)(d) permits the commutation of a member's short service benefit, with his consent, in a few limited circumstances, it does not extend to any benefit provided for his widow or dependents on death after retirement. This was not the intention, and Amendment No. 72 now permits regulations to prescribe the circumstances in which a widow's or dependant's benefit may be commuted.

As sub-paragraph (3) is concerned solely with the surrender of the member's short service benefit, it was necessary to deal with commutation separately by drafting a new sub-paragraph as in Amendment No. 72. As a paver to this, Amendment No. 71 now includes commutation as well as surrender in the provisions of sub-paragraph (1). I beg to move.

Amendment moved—

Page 172, line 7, leave out from beginning to ("circumstances") in line 11 and insert: ("(3A) Provision may be made for a member's benefit to be commuted, but only—

1. (a) in a case where he opts (at any time) to commute at or after normal pension age; or
2. (b) in exceptional circumstances of serious ill-health; or
3. (c) in such other circumstances as may be prescribed;

and where a scheme provides benefit for a member's widow or dependant, it may provide for commutation by the beneficiary in such").

LORD ABERDARE moved Amendment No. 72A:

Page 172, leave out lines 22 to 24 and insert: ("(2) Subject to paragraph 17(1) below, provision may be made for forfeiture of the whole or part of any short service benefit by reference to an event").

The noble Lord said: This is a technical Amendment to paragraph 16(2) consequent on the Amendment which I shall be proposing to paragraph 17. As drafted, paragraph 16(2) refers to the, "failure to claim" provision of paragraph 17, and the intention is to refer to paragraph 17 as a whole. I beg to move.

The EARL OF GOWRIE: moved Amendment No.73: Page 172, line 34, leave out from ("bankruptcy") to end of line 35 and insert ("or, in the case of benefit for a widow or dependant of the member, the beneficiary's bankruptcy").

The noble Lord said: This again is a technical Amendment designed to extend to the widows and dependants of the short-service member the protection afforded under paragraph 16(3)(b) to the member himself. The purpose of this sub-paragraph is to enable schemes to hold the benefit in trust for the pensioner or his dependants instead of paying it to someone else— for example, his creditors in the event of his bankruptcy. This is achieved by permitting the benefits to be forfeited in these circumstances. Once the benefit has been forfeited it may then be held in trust for payment at the discretion of the trustees, to assist the member and his dependants. This provision is thus wholly beneficial in intent: it enables schemes to provide the member and his family with a security which would not otherwise be available in cases of bankruptcy. With this in view I commend the Amendment to your Lordships. I beg to move.

LORD SHEPHERD

Certainly we on this side of the Committee have no objection to this Amendment. In fact, I think it is worthy of inclusion. I rise only to mention one point. The noble Earl referred to it as a technical Amendment, and he has used this phrase on a number of occasions. It seems to me that this Amendment is something more than a technical Amendment. It seems to me, at least from the way the noble Earl spoke about it, an Amendment of substance, and of such substance that we should welcome it. I would merely express a caution to the noble Earl, that the word "technical" tends to make one feel that it is something a little more than drafting but that there is not a great deal of substance in it. I would merely ask the noble Earl to be a little careful in the use of that word.

THE EARL OF GOWRIE

I am always glad to expunge the word "technical" from my vocabulary as I have to say it so often. But in this case the reason I used the word—and may I say that I am very pleased that the noble Lord is welcoming the Amendments?—was because this protection, which he finds admirable and which I find admirable, is in fact afforded under paragraph 16(3)(b) to the Member himself, and we are extending it. That is why we put in the word "technical"; but I stand corrected, and I take the point he made.

THE DEPUTY CHAIRMAN OF COMMITTEES (BARONESS WOOTTON OF ABINGER)

I have to call the attention of the Committee to the fact that if Amendment No. 74 is agreed to I cannot call Amendment No. 75.

5.32 p.m.

LORD ABERDARE moved Amendment No. 74:

Page 173, line 10, leave out paragraph 17 and insert: ("17.—(1) No rule must operate so as to deprive a person of short service benefit (whether a member himself, or his widow Or a dependant) by reference to—

1. (a) the person's failure to make a claim for the benefit or for any payment due as benefit; or
2. (b) the person's failure, at any time after termination of relevant employment, to give any notice, or comply with any formality, required by the scheme as a condition of entitlement.

(2) Sub-paragraph (1)(a) above is not to prevent reliance on any enactment relating to the limitation of actions; and in cases of failure to claim, the scheme may provide for the right to receive any payment to be forfeited in the event of its not being claimed within 6 years of the date on which it became due.")

The noble Lord said: In moving this Amendment, if it is convenient to the noble Lord, Lord Stow Hill, perhaps I may at the same time speak to Amendment No. 75, which stands in his name. This Amendment extends the circumstances in which schemes are prevented from depriving a beneficiary of his short-service benefit, and it also overcomes legal technicalities which might have prevented some schemes from writing off arrears of benefit after six years. As the Bill is drafted at present, schemes are prevented from depriving a member of his short-service benefit, including benefit payable to his dependants, where he failed to claim it. This protection is now extended to cases where the dependant fails to claim. In addition, the Amendment prevents schemes from depriving either the member or his dependants of benefit merely because of failure to comply with some formality or to notify the scheme of a particular event—for example, that he got married—after he left the scheme. I am sure your Lordships will agree that these aspects of the Amendment are therefore entirely beneficial to, and entirely in the interests of, the employee. They recognise that an ex-member or his dependants may well lose contact with a scheme, and ensure that they cannot be penalised because of that.

The Amendment will mean that schemes will not be able to place all the onus of maintaining contact on the member himself. This will be particularly important in schemes which provide cover for death after retirement, because they will be required to extend that cover to any dependants a short-service member may have acquired between leaving the scheme and reaching normal pension age. The Amendment ensures that if an ex-member, who perhaps lost contact with the scheme, failed to notify the scheme authorities of his marriage, his widow cannot be penalised. The provision permitting writing off after six years is in accord with the general effect of existing legislation on the limitation of actions. The paragraph as drafted did not achieve the effect intended because schemes operating under a deed of trust derive only very limited advantages from that legislation. We thus thought it important to put down this Amendment, which enables such schemes to write off short-service benefit arrears on the same basis as other schemes; that is, all schemes will in this respect be on the same footing. The provision would, however, permit only arrears of benefits due for the period ending six years before the claim to be written off: the remainder of the arrears and any benefit due as to the future would still be payable when it was claimed.

LORD FRASER OF LONSDALE

May I ask the Minister a question? Suppose someone does not claim his benefit, and his widow does not. Is it then carried on for a century or so?

LORD ABERDARE

This is the point of the six-year cancellation. After six years the claim is no longer valid. The effect of Amendment No. 75, in the name of the noble Lord, Lord Stow Hill, would be to reduce that period to two years. Not only would it reduce to two years the period after which unclaimed benefit could be written off, but it would also permit the whole benefit, past and future, to be forfeit in such circumstances, subject only to the inclusion of a discretionary power to pay it if the trustees saw fit. It would therefore substantially reduce the protection which the paragraph provides for the early leaver. We believe that paragraph 17, as amended by my Amendment No. 74, strikes a fair and reasonable balance. I beg to move.

LORD STOW HILL

I put down the Amendment which stands in the name of my noble friend Lord Garnsworthy and myself because it was a matter of concern to the Association of Consulting Actuaries. This particular part of the Schedule of course deals comprehensively with the whole question of forfeiture of short-service though not long-service, benefits. I feel that in the circumstances, as the Government have obviously worked out what they think is fair when short-service benefits are not claimed, my Amendment is perhaps, in a sense, lost. Nevertheless, I think perhaps I should put the reasons which actuated the Association in putting forward the proposal embodied in the Amendment in the name of my noble friend and myself. What the Association thought was this. You have short-service benefits; that is to say, those defined in paragraph 6 as becoming available if a man has at least five years' pensionable service. The person entitled to a short-service benefit may well leave the employment in which he became entitled to that benefit. He may go from that employment to another, then to another and then to another. Though he would leave the employment, under the Schedule as it is at present drafted the trustees would nevertheless have to keep on their books his short-term entitlement, they would have to service it, and they would have to provide the interest increments, and so on, if the scheme so provided.

What the Association felt was that a great deal of perhaps somewhat fruitless work might be occasioned in a number of cases where the individual entitled to the short-term service benefits was most unlikely ever to claim them. That was the reason why the Association sought to abbreviate the period of six years to two years, but they were anxious that it should be emphasised that the Amendment which they asked me to put down (and which I, of course, entirely on my own responsibility, did put down) included this provision about the discretion of the trustees. The last thing they wished to bring about was that there should be any hardship, or that a person who had a reasonable entitlement and who for one reason or another had not over a period of time laid claim to his or her benefit, should lose it. That was far from their minds, and they felt that that objective would obviously be achieved by giving the trustees a discretion to pay the benefit, however long it had gone by, or, at any rate, however long until the expiry of six years which would, under the existing form of the Schedule, bring the rights to the benefits to an end under existing legislation.

That was their proposal. I hope your Lordships will not think it was in any way a callous proposal: that was the last thing that they had in mind. They hoped, and I hoped, that because of the trustees' discretion it could not cause hardship in any case where there was merit. The Government have thought the matter out carefully. They have adhered to the six-years' rule and they have, as the noble Lord has said, limited the forfeiture to arrears as distinct from the whole pension as such.

In those circumstances, I do not know whether my noble friend Lord Garnsworthy will feel that the matter has been discussed and carefully weighed. The Amendment I had put down would not make a basic change; it would simplify procedure and avoid unnecessary bookkeeping. As it has now been discussed thoroughly—and there are arguments both sides; it is a matter of balance—I feel that, even if the Chair had been able to call the Amendment on the assumption that the Government Amendment were carried, I should have decided not to press it in view of the changes the Government propose. With those observations on the attitude that has been adopted by my noble friend and myself at the instance of the Association, I shall not oppose the Government Amendment.

THE EARL OF GOWRIE moved Amendment No. 76: Page 174, line 25, at end insert ("and these regulations may relate to service under or, as the case may be, by reference to different schemes at the same time, or at different times").

The noble Earl said: This is a bona fide technical Amendment. The purpose of Paragraph 23 is to enable regulations to apply the preservation requirements in cases where an employee has been a member of two or more schemes while in the same employment. This Amendment merely clarifies its meaning and ensures that the regulations may cover cases where membership of the schemes concerned occurred at different times as well as when it was concurrent. I beg to move.

Schedule 14, as amended, agreed to.

Clause 62 [Modification and winding-up by order of Occupational Pensions Board]:

LORD ABERDARE moved Amendment No. 76A: Page 84, line 39, at end insert—

Rule against perpetuities

("(f) to qualify under section 66A (Rule against perpetuities) of this Act or to have included in, or removed from, it provisions designed to avoid the effect of the rules of law relating to perpetuities.")

The noble Lord said: I beg to move Amendment No. 76A: it is ancillary to Amendment No. 82A, which introduces new Clause 66A. The Amendment adds an additional item to the list of purposes for which the Occupational Pensions Board may facilitate the modification of an occupational pensions scheme. It will enable the Board, on application, to authorise a modification needed either: to enable the scheme to qualify for exemption under New Clause 66A, or having secured such exemption, to remove a provision which is no longer needed, or because it is no longer to be exempt, to include a provision to protect it against the rules on perpetuities. This additional modification power will be subject to the various limitations and safeguards already set out in Clause 62.

LORD SHEPHERD

Amendment No. 82A to which I presume the noble Lord was speaking is one of some complexity —I was going to use the word "technicality"—and it has only recently been placed on the Marshalled List. From what the noble Lord has said, I would accept it, but I think I should need to look at it more carefully with some of my right honourable friends in another place and, if necessary, come back to it on Report stage. I should enter that caveat and not let the Amendment go without recording our difficulties.

LORD ABERDARE

I was moving only Amendment No. 76A. I intend to go a little further in explanation of Amendment No. 82A when we reach it, if that meets the noble Lord's convenience.

THE EARL OF GOWRIE moved Amendment No. 77:

Page 86, line 42, at end insert— ("(11) In section 22 of the Finance Act 1971 (provisions for amendment of schemes with a view to obtaining Inland Revenue approval), subsections (4) to (10) (powers of Chief Registrar of Friendly Societies to amend schemes) shall cease to have effect.")

The noble Earl said: This is a technical Amendment to remove from the Chief Registrar of Friendly Societies powers which Clause 61(1) and (3) of the Bill gives to the Occupational Pensions Board. Although subsections of the Finance Act 1971 from which his powers are derived are repealed by Schedule 25 to the Bill, it is additionally necessary to make this Amendment because without it the repeal would not technically be consequential upon the provisions of the Bill. I beg to move.

Clause 62, as amended, agreed to.

Clause 63 [Modification, etc. of public service pension schemes]:

THE EARL OF GOWRIE

I spoke to Amendments Nos. 78, 79, 80, 81 and 82 moving the applicability of these Amendments to the Northern Ireland sections of the Bill on Tuesday. If it meets the convenience of the Committee I beg to move Amendments Nos. 78 to 82 inclusive en bloc.

Amendments moved—

Page 87, line 2, leave out ("Minister") and insert ("authority")

Page 87, line 7, leave out ("Minister") and insert ("authority").

Page 87, line 10, after ("Service") insert ("or, in Northern Ireland, the Ministry of Finance")

Page 87, line 12, leave out ("Minister") and insert ("authority")

Page 87, line 24, leave out ("Minister") and insert ("authority").—(The Earl of Gowrie.)

Clause 63, as amended, agreed to.

Clause 64 agreed to.

Schedule 15 agreed to.

Clauses 65 and 66 agreed to.

LORD ABERDARE moved Amendment No. 82A:

After Clause 66 insert the following new clause: 66A.—(l) At any time when an occupational pension scheme qualifies under this section it shall be exempt from the operation of any rules of law relating to perpetuities which would otherwise invalidate, or might be taken to invalidate, any of the trusts of the scheme or any disposition made under it or for its purposes (whether trusts created, or dispositions made, before or after the scheme first qualified under this section).

(2) A public service pension scheme qualifies under this section at all times; and otherwise a scheme qualifies at any time when—

1. (a) it is recognised under this Part of this Act in relation to any employment; or
2. (b) it satisfies the requirements of regulations under this subsection.

(3) Regulations under subsection (2) above may require a scheme—

1. (a) to contain provisions in any prescribed form, or to any prescribed effect; or
2. (b) to have, or to be such that it may be expected to qualify for, tax-exemption or tax-approval;

and the regulations may be so framed that, in prescribed circumstances, the requirements can be treated as satisfied if application has been duly made to the Inland Revenue with a view to obtaining tax-approval for the scheme.

(4) In subsection (3) above, "tax-exemption" and "tax-approval" mean respectively exemption from tax and approval of the Inland Revenue in either case under any such provision of the Income Tax Acts as may be prescribed by regulations.

(5) Regulations may include provision whereby a scheme which ceases to be recog- nised, or ceases to satisfy the requirements of regulations under subsection (2) above, may nevertheless be treated as continuing to qualify under this section for a further period of 2 years from the cesser, or for such longer period as the Occupational Pensions Board consider to be reasonable in the case of a particular scheme.

(6) As respects the operation of the rules of law referred to in subsection (1) above:

1. (a) this section does not validate with retrospective effect any trusts created or dispositions made under or for the purpose of a scheme if (taking into account, where applicable, section 3(1) of the Perpetuities and Accumulations Act 1964 ("wait and see") or the corresponding Northern Ireland enactment) those trusts or dispositions were already required to be treated as void under the rules before the scheme qualified under this section; and
2. (b) if a scheme ceases to qualify, trusts so created and dispositions so made shall then again be subject to the rules as if the scheme had never qualified (but without prejudice to any rights which vested during the period of qualification).

(7) There shall cease to have effect:

1. (a) the Superannuation and other Trust Funds (Validation) Act 1927 (power to register superannuation schemes, with consequent exemption from the rule against perpetuities), except section 9 and section 11 so far as it provides for citation and extends section 9 to Northern Ireland; and
2. (b) the corresponding Northern Ireland enactment, that is to say the Superannuation and other Trust Funds (Validation) Act (Northern Ireland) 1928;

but regulations may provide, in relation to a scheme whose fund was registered under either Act immediately before its repeal took effect, for the scheme to retain the benefit of the Act, subject to prescribed conditions and either indefinitely or for a prescribed period.

(8) The said Acts of 1927 and 1928 shall each, until its repeal by subsection (7) above, have effect with the following modifications:

1. (a) no new application shall be made under section 3 of the Act for the registration of any fund (without prejudice to the effectiveness of any application previously made or pending); and
2. (b) the registration of a fund may be cancelled notwithstanding that the fund has not been wound up, if the trustees apply in writing to the registrar stating that they desire its cancellation."

The noble Lord said: We now come to the new Clause 66A on which I owe the Committee a little more explanation. It implements the undertaking in paragraph 65 of the Explanatory Memorandum on the Social Security Act 1972 (Cmnd. 5142) to remove from pension schemes the effect of the rules of law on perpetuities. I understand that the rules against perpetuity are rules of law which came into being to prevent private property, particularly land, from being tied up in perpetuity. The law evolved in such a way that if property were settled in trust without a clause limiting the life of the trust, that trust would be void ab initio. Those rules were never intended to apply to pension schemes, but their effect has been to make such schemes either register under the Superannuation and Other Trust Funds (Validation) Act, 1927, or the corresponding Northern Ireland enactment, or incorporate provisions limiting the life of their trusts to a specified period or one relating to the life of a specified person. Most schemes have chosen the second alternative and therefore contain provisions inherently appropriate to pension schemes.

The new clause exempts from the effect of the perpetuity rules occupational pension schemes in the following categories: public service schemes, recognised schemes and schemes which comply with regulations. This third category will consist primarily of schemes approved by the Revenue for tax relief or schemes which are exempt from tax. In each case the regulations will specify the relevant provision under the Income Tax Acts. The effect will be that all bona fide pension schemes will be freed from the restraints fortuitously imposed on them by the perpetuity rules. I am sure that this will be welcomed in the pensions world. The Validation Act and its Northern Ireland counterpart will, in due course, become redundant and the new clause repeals them—except for certain provisions unrelated to pension schemes—from an appointed day. Meanwhile, there is provision for the modification of these Acts so that, first, the registers maintained under them can be closed to new applications, and secondly, that the trustees may apply to have the registration of their fund cancelled, having secured protection under the provisions of this clause.

5.52 p.m.

LORD ABERDARE moved Amendment No. 82B: After Clause 66, insert the following new clause:

Legal restrictions of doubtful application

"66B.—(1) This section has effect for the removal of doubt as to the application, or possible application, of certain enactments in relation to occupational pension schemes.

(2) Nothing in the Truck Acts 1831 to 1940, or the Truck Acts (Northern Ireland) 1831 to 1940, the Hosiery Manufacture (Wages) Act 1874 or the Stannaries Act 1887 has, or ever has had, effect so as to prevent the deduction from a person's earnings, on their payment to him, of his contributions to an occupational pension scheme, or of sums to be applied for the purpose of acquiring rights under such a scheme, whether for himself or for his widow or dependants.

The noble Lord said: I beg to move Amendment No. 82B, and in doing so I must draw your Lordships' attention to an error on the latest Marshalled List, where the Amendment as printed omits subsection (3), which appeared originally in the Amendment and on the earlier Marshalled Lists. This subsection reads: An occupational pension scheme is not, nor ever has been, a shop club or thrift fund for the purposes of the Shop Clubs Act 1902. This was correctly printed as part of Amendment No. 82B on the revised Marshalled List dated June 11, but I regret that, owing to a printing error, it has not been reproduced on the Second Marshalled List.

The new clause puts it beyond doubt that the Truck Acts and certain associated legislation do not apply to contributions to an occupational pension scheme. In doing so it implements an undertaking given in another place and in paragraph 65 of the Explanatory Memorandum on the Bill. These Acts were intended to prevent abuse in connection with deduction from the wages of certain categories of manual worker, but were not aimed at pension schemes. Moreover, the precise application of these Acts to pension schemes has been a matter of doubt; for example, whether an employee's consent automatically made deductions legal and in what circumstances such consent could be deemed to have been properly given. These somewhat archaic Acts have no real relevance to occupational pension schemes and this Amendment takes such schemes outside their scope. But we recognise that some protection for employees may be needed in connection with pension schemes which are not recognised, and Amendment No. 60A has provided a regulation-making power to give such protection if cases of abuse arise. That power is expressly designed to protect employees, whether or not they be manual workers, from having to join or contribute to an unsound occupational pension scheme. It is a provision in line with current and future needs. The Truck Acts and related legislation are not.

LORD SHEPHERD

From what the noble Lord has said I see no reason why we should be opposed to the Amendment as it appears on the Marshalled List now before us. Subsection (3) which the noble Lord read out, and which I understand has appeared on a previous Marshalled List, is not relevant to our discussion this afternoon. I find it rather extraordinary that the noble Lord's Department did not feel it right to draw the attention of the Opposition to the printing failure prior to this time. Perhaps we might have found some way around the noble Lord's difficulty. As I understand the position, Lord Aberdare's Amendment as it is printed on today's Marshalled List, consists of subsections (1) and (2). The noble Lord read out subsection (3). I can give the noble Lord advice—I am willing again to show my co-operative approach not only to the the noble Lord, Lord Aberdare, but also to the Committee: that if the noble Lord would like to pass up the piece of paper containing the wording of subsection (3) to the noble Baroness in the Chair, and if she would read it out to the Committee as a manuscript Amendment to Amendment No. 82B, I think that then our procedure would be regularised, and the noble Lord would have had his Amendment with its three subsections. Then perhaps we might avoid having to go through the exercise again on Report. I make that suggestion to the noble Lord, Lord Aberdare. If he likes to respond, we on this side of the Committee will concur, and then we could proceed to the next Amendment.

LORD ABERDARE

I am extremely grateful to the noble Lord, Lord Shepherd. That course would be very welcome to me. I apologise again. If I could have got in contact with the noble Lord, Lord Shepherd, earlier, I would have done so, but this information has only just arrived in the form of a note and I was not aware of the difficulty until we were sitting in the Chamber.

LORD SHEPHERD

I acquit the noble Lord, Lord Aberdare. I hope that he appreciates that the reason I "put my boot in", so far as he is concerned, was so that he will more effectively "put his boot in" where it really applies—in his Department—to see that the Committee are not treated in this way again.

LORD ABERDARE

I think that I should accept responsibility for all that goes on in connection with this Bill and that the boot should land on me. I take note of what was said by the noble Lord, Lord Shepherd, and if I may I should like to add subsection (3), which was printed on the original Marshalled List, as a manuscript Amendment to this Amendment. I beg to move subparagraph (3) as an Amendment to the proposed Amendment, No. 82B.

Amendment to Amendment moved—

At end insert: (3) An occupational pension scheme is not nor ever has been a shop, club or thrift fund for the purposes of the Shops Clubs Act 1902."—(Lord Aberdare.)

Amendment, as amended, agreed to.

Clause 67 [Friendly societies]:

THE EARL OF GOWRIE

Application to Northern Ireland. I beg to move Amendment No. 83.

Amendment moved— Page 90, line 37, after ("Societies") insert ("or, in Northern Ireland, the Registrar of Friendly Societies for Northern Ireland")— (The Earl of Gowrie.)

THE EARL OF GOWRIE

Application to Northern Ireland. I beg to move Amendment No. 84.

Amendment moved— Page 91, line 4, leave out ("enactments") and insert ("legislation")—(The Earl of Gowrie.)

LORD GARDINER

May I ask what this means? What is the difference between "legislation" and "enactments"?

THE EARL OF GOWRIE

I apologise to the noble and learned Lord, Lord Gardiner. I was perhaps speaking in "shorthand". What I was attempting to convey, as I have earlier, was that I had spoken to these Amendments on Tuesday in the first stage of the Committee stage, and I am now moving them formally.

LORD SHEPHERD

The question asked by my noble and learned friend, Lord Gardiner, was: what is the difference? Is there some subtle difference between the word "enactments" and the word "legislation"? I was brought up in the belief that in fact they meant the same. If the noble Earl is suggesting that there is a change, perhaps he could give the reason for the change.

THE EARL OF COWRIE

The difficulty is that I should have to look at my notes for the Committee stage of the Bill on Tuesday, when I spoke to this Amendment. I do not have my notes of Tuesday to hand, but I will try to find out the answer for the benefit of the noble Lord, Lord Shepherd, and the noble and learned Lord, Lord Gardiner. I must say that I had not anticipated there was difficulty about these technical provisions because no difficulty was raised when I originally put them to the Committee.

LORD GARDINER

I am sorry that I did not hear this on Tuesday, but it would seem that either there are enactments which are not legislation or there is legislation which is not enactments. I just wondered which was which, and why.

LORD ABERDARE

I understand that this is consequential on the use of words in other legislation or enactments. However, if the noble and learned Lord would be so good as to agree, we can look into this and let him know on paper.

THE EARL OF GOWRIE

I beg to move Amendment No. 85.

Amendment moved— Page 91, line 8. leave out ("enactments") and insert ("legislation").—(The Earl of Gowrie.)

THE EARL OF GOWRIE

Amendment No. 86 is the last Government Amendment relating to Northern Ireland in this section. I beg to move.

Amendment moved—

Page 91, line 12, leave out subsection (4) and insert: ("(4) In this section—

1. (a) as it applies to Great Britain—
1. (i) "the relevant legislation" means the Friendly Societies Acts 1896 to 1971 and Part II of Schedule 8 to the Finance Act 1966,
1094
2. (ii) "registered society" has the same meaning as in the said Acts of 1896 to 1971, and
3. (iii) "approved group insurance business" has the same meaning as in section 10 of the Friendly Societies Act 1971;
2. (b) as it applies to Northern Ireland—
1. (i) "the relevant legislation" means the Friendly Societies Act (Northern Ireland) 1970,
2. (ii) "registered society" has the same meaning as in that Act, and
3. (iii) "approved group insurance business" has the same meaning as in paragraph 11(5) of Schedule 2 to that Act.").—(The Earl of Gowrie.)

Clause 67, as amended, agreed to.

Clause 68 agreed to.

Clause 69 [The Reserve Pension Board]:

6.3 p.m.

LORD SHEPHERD moved Amendment No. 87: Page 92, line 10, after ("earners") insert ("and at least one after consultation with appropriate women's organisations.")

The noble Lord said: We now move to Part III of the Bill, which in a sense breaks new ground, because this Part of the Bill sets up the reserve pension scheme. It is difficult to know the exact number of employed persons who eventually will be in this scheme, but it is given, I think, as a figure of some five to six million people, and of these, because of the nature of their employment, a large number is likely to be women. Clause 69 sets up a Board, to be called the Reserve Pension Board, with responsibility for administering the reserve pension scheme. I entirely agree with the Government that this Board should consist of men and women of outstanding capability not only in the field of administration, but also with knowledge and aptitude in the field of investment, because for the first time under legislation the contributions under a pension scheme can be invested in private industry and business. So quite clearly, taking into account the amount of money that will be invested, this Board will have a heavy responsibility, and therefore will need men and women of the highest capability and character as members.

Apart from dealing with administering the scheme, subsection (2) says: The Board shall have such other functions as are conferred on them by or under this Act, and in particular they shall be responsible for advising the Secretary of State from time to time on such matters relating to the reserve pension scheme as he may refer to them for their opinion. I would assume that the sort of things which the Secretary of State would ask the Board to consider would be not only the question of the income arising from the contributions, but also the benefits in relation to the increased costs which we know are with us all the time. As I have said earlier, women are going to play a notable part not only in membership of the scheme, but also, so far as the Board are concerned, in considering benefits as they apply to women. Subsection (4) says: The Board shall consist of a chairman, a deputy chairman and not less than 6 nor more than 12 other members. … Then we have the usual provision that … one member shall be appointed after consultation with organisations representive of employers. … This is always to be found in legislation of this sort. Then, to balance the position, we have one to be appointed after consultation with organisations representative of employed earners"— and no doubt this will be the T.U.C. So we have the balancing factor in terms of industry. But if women are going to be such a major factor in this new scheme, I should have thought that there ought to be some provision for the Secretary of State to consult with those organisations which have knowledge of and interest in women's affairs.

I read with great interest the debate in another place where my right honourable friend Mrs. Barbara Castle suggested that half the Board should consist of women. I have no doubt that women could be found who are quite equal to the task, but I feel that that would be going a little too far. However, I think I am quite justified in suggesting in my Amendment that there should be at least one member appointed after consultation with appropriate women's organisations. Before the noble Lords says, "What organisations?" if he looks later on in the clause, it is for the Secretary of State to decide which organisations he should consult. So there is no difficulty there. We have well established organisations who represent women's points of view and interests. I move this Amendment with the greatest of expectation that the noble Lord will have forgotten his old-style, old-fashioned attitude towards women, and will readily respond to it. I beg to move.

BARONESS ELLIOT OF HARWOOD

I should like to support this Amendment. There are only two noble Baronesses in the Chamber who are real watchdogs, and as the noble Baroness, Lady Summerskill, is not here, I feel that the mantle has rather fallen on me. I think this is a sensible Amendment and, as I say, I support it strongly. In fact, I should like to go a little further than the noble Lord, Lord Shepherd, because I think that not only the appropriate women's organisations should be consulted, but I cannot see why it should not be taken for granted (although that is difficult when you are getting Government Departments to appoint boards or committees) that at least two or three people on such a board should be women. There is no reason why just as good advice on investment should not be received from women as from men, perhaps even better advice. If consultation is all that is going to occur, I should not find that sufficiently strong. I should like to see women appointed on these boards dealing with any aspect of the pension scheme, since a great many women will be involved in the matter. I hope the Government will accept the Amendment.

LORD FRASER OF LONSDALE

It is with great regret that I differ from my noble friend who sits beside me on this Bench, but I should have thought that your Lordships ought to resist this Amendment most severely, and I feel that the noble Baroness, Lady Summerskill, would be the first to say so were she here, because this is discriminatory in the highest degree. It is singling out women as if they are separate and different creatures, when clearly they are not. The clause which says that an employee must be there does not say that the employee shall be male; and the clause which says that consultation must be made with trade union or employers' representatives does not say they must be male; so I think we ought to oppose this Amendment.

BARONESS SEEAR

I should like to support the noble Lord, Lord Shepherd, but at the same time I must confess that my heart is with the noble Lord, Lord Fraser, in that we do not want the "statutory woman". The danger always is that if we are asking for one person to be appointed after consultation with the women's organisations then people will think that if you have one woman that is all that is required. It would ill become me to oppose this Amendment, but the day will really dawn, I hope—and then we shall really have arrived—when the women who are appointed come as the representatives of the T.U.C. and the C.B.I. This is, I suppose, an acceptable half-way house but it is only a half-way house; and I think it is very sad indeed that we should have to refer once again to the "statutory woman".

BARONESS EMMET OF AMBERLEY

I should like to add just one word to what has been said. I am partly in favour of the Amendment, but I wonder whether the noble Lord, Lord Shepherd, would consider taking out the words, "and at least one" and just leave it at … after consultation with appropriate women's organisations"? I have a fear, as the noble Baroness, Lady Seear, said just now, that if we leave in the word "one", that rather gives a let-out, which is not what we want.

LORD REIGATE

I find myself opposing the Amendment for reasons which are almost identical with those given by the noble Baroness, Lady Seear, in supporting it. She and I sat together on the Select Committee considering her Bill, and I should have thought that every hour we spent on that Bill would lead us to the conclusion that this is entirely the wrong kind of Amendment. We are dealing with the Reserve Pension Board, who are going to be entrusted with the investment of vast sums of money, and I really would think that this is one case when sex really need not come into the matter at all. I share the hope expressed by other noble Lords that there will be women on the Board, and I do not care how many there are, provided they are competent and able to do the job the Board is set up to do.

Having given my views, which may seem reactionary to some, may I also say I think it is high time that we got away from appointing members after consultation with employers' and trade union organisations. This is not an advisory body but an executive one; and the real point is that the members should be competent to do the job. These organisations, whether they are women's organisations, trade union organisations or anything else, are perfectly capable of making representations to the Board if they wish to. However, I realise I should be out of order in pursuing this point. I hope the Committee will resist this Amendment.

6.14 p.m.

LORD ABERDARE

I am very grateful to my noble friend Lord Reigate for his last speech, which seems to me to sum up very aptly what I was about to say. May I also thank my noble friend Lord Fraser of Lonsdale, who equally put his finger on what I might call the main point of the Government's position in asking your Lordships to resist this Amendment.

I agree with the noble Baroness, Lady Seear, that we do not want to have "the statutory woman"; and I do not think she should come in on this occasion in this Amendment, although, like other noble Lords who have spoken, I should have thought it desirable for women to be among those who are appointed to the Reserve Pensions Board—but they should be women who are there on their own merits and by reason of their knowledge and expertise, rather than simply by reason of the fact that they are representing women in general. The fact is that the Reserve Pension Board's duties will be principally concerned with the management and investment of the Reserve Pension Fund, and their role is essentially functional and not representative. It is important to the proper discharge of the duties laid upon the Board that this distinction should be clearly observed. It is true that members are to be appointed after consultation with employers' and employees' organisations, but they will be appointed in a personal capacity and will be in no sense answerable to the organisations consulted before their appointment. The Board will have a direct responsibility for investing something like £250 million to £300 million a year, and they will enjoy a wide discretion as to the best way of making up their portfolio. It is important, therefore, that the members should be chosen for their suitability for the special nature of this job. It will be a matter of knowledge, skill and experience of the work which the Board have to do.

My noble friend Lord Reigate challenged the interests of the contributors and the distinction between the employer and employee members—that is, those members of the Board who represent the interests of such organisations. But this is the natural split the Bill makes between contributors to the scheme, so there is perhaps some justification for that, although that is as far as we think it is reasonable to go. Given that the benefit structure of the scheme is established in the Bill and does not lie within the discretion of the Board, I cannot see how the interests of women, as a particular group of beneficiaries—or indeed, the interests of any other group— can be especially affected by decisions to invest money in one way rather than in another. In this setting, the interests of women are no different from those of the generality of members of the reserve scheme. Therefore if women are to be found, either by the straight test of suitability or by the process of consultation (for which the Bill already provides) as acceptable members of the Board, well and good. But the criterion is not whether the members be men or women but whether, as individuals, they will help to form a board which will be as competent as possible to perform the tasks that face them.

LORD SHEPHERD

I must say that this Committee of your Lordships' House runs true to form. First, it is amazing how many heads suddenly jerk up if you mention sex; even my noble colleagues on the Front Bench have now come in to join me. I also share with the noble Lord, Lord Reigate, a dislike for this particular Amendment. I have never met the statutory woman and cannot really imagine what she looks like, but we know of course to what the noble Lord is referring. I think it is quite wrong that we should have to consider putting this sort of provision into legis- lation, but I will come back to that point in a moment. The noble Baroness, Lady Emmet of Amberley, asked whether I could delete the words "at least". I must explain to her that I put those words in because the Bill refers only to one. I thought that if the words "at least" were put in we might perhaps get two, as a consequence of consultations with women's organisations.

Why did I move the Amendment although I dislike it? If ever I have had any pity for the Front Bench opposite it has been on those occasions when there is a Question in your Lordships' House and my noble friend Lady Summerskill asks how many women are on the proposed committee, commission or board, as the case may be. It is a rare occasion when the noble Lord concerned can reply with a smile saying, "There is one". His smile is even greater and his relief unbounded when he can say that there are two. Sometimes this may seem to be a bit of a laughing matter but it is not really so. Women to-day play a very important role in our national affairs, and while it is acknowledged that the T.U.C. and the C.B.I. need to be consulted—and indeed the noble Lord referred to the natural split between earners and employers—on going through this Bill he will see that women are treated differently from men. They are at a disadvantage to men for reasons that we understand, but they are treated differently. I have no doubt at all that in a few, short years we shall see a dramatic change in this class of legislation, where women will be treated as equals to men, having made the same contribution out of their earnings to either an occupational scheme or a national scheme.

I am in no sense a mischief-maker, but I should love to test the Committee on this Amendment. I hope the Committee will notice one thing: that the noble Lord, Lord Aberdare, despite what the noble Lord, Lord Reigate, said, did not once say, "I can give the Committee an assurance that the Secretary of State, when appointing the Board, will have this question in mind." If the noble Lord, Lord Aberdare, will give the Committee a firm assurance that when this Board is being formed the Secretary of State will have in mind not only the special position of women as major contributors to this scheme but also the problems that will arise as a consequence in regard to benefits and the like, and when he makes his appointment will have this in view as a special consideration, I shall be happy to withdraw the Amendment. Unless he can give me that assurance I should like to test the opinion of the Committee.

LORD FRASER OF LONSDALE

Surely there is no special position of women in relation to this matter. They are asked to advise about investments, not about ages or sex, or anything else. Therefore there is no special position. The noble Lord is looking for some face saving.

LORD SHEPHERD

If the noble Lord wishes to provoke me, as he has done on other occasions, I shall be very happy to respond. The trouble is that we have a lot of Amendments to deal with on the Bill this evening and we should only be delaying the Committee; and the only person who would probably get any satisfaction out of it would be myself. I do not think that is fair to the Committee. Women are affected by this Bill; anyone who has given the Bill any special consideration will see that they have a special role in it. If the noble Lord, Lord Aberdare, can respond to the suggestion that I made that the Secretary of State will have women, particularly in terms of the problems of benefits and the like, in mind when appointing the Board, then I shall be happy to respond.

LORD ABERDARE

I am sure, after what went on in another place and the noble Lord having moved his Amendment here, that my right honourable friend will have very much in mind the position of women in this matter. On the other hand, I must make it absolutely clear that my right honourable friend must be allowed to make his final decision on the basis of which people, be they male or female, are the most competent for the management of investment funds.

LORD SHEPHERD

I thank the noble Lord. It is not a face-saver to say that I find what he has now said nearly satisfactory. Of course I accept that the Board must be of the best, whether they are men or women. We need to be satis- fied that there will be some members who have knowledge of the problems in which major contributors to the scheme are involved. In view of what the noble Lord, Lord Aberdare, has said, I shall be happy to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 69 agreed to.

Clause 70 [The Reserve Pension Fund]:

THE EARL OF GOWRIE

This is a further Amendment relating to the applicability of the Bill to Northern Ireland to which I referred on the first day of the Committee stage. I beg to move Amendment No. 88.

Amendment moved— Page 94, line 19, afer ("department") insert ("in Great Britain")—(The Earl of Gowrie.)

Clause 70, as amended, agreed to.

Schedule 16 [The Reserve Pension Board and Reserve Pension Fund]:

THE EARL OF GOWRIE

I beg to move Amendment No. 89. With the leave of the Committee I should also like to speak to Amendments Nos. 91 and 133 with this Amendment, though I shall move them formally when the time comes. These are technical Amendments consequent upon the Amendment made earlier to Clause 70(6) introducing a requirement that accounts prepared by the Secretary of State in respect of the reserve pension scheme should relate to the financial year. The Reserve Pension Board's annual report and statement of account should preferably relate also to the financial year, rather than the income tax year, for consistency in presentation.

Amendment moved— Page 180, line 15, leave out ("income tax") and insert ("financial").—(The Earl of Gowrie.)

Schedule 16, as amended, agreed to.

Clause 71 [Management of the Fund and its investments]:

6.27 p.m.

LORD SHEPHERD moved Amendment No. 90:

Page 95, line 28, at end insert— ("() Paragraph (a) above shall not apply where the Board satisfy the Secretary of State that to perform the duty laid on them in subsection (1) of this section a larger share holding is required; and if so satisfied, the Secretary of State may authorise a different percentage and set conditions.").

The noble Lord said: I beg to move Amendment No. 90. In an earlier Amendment I mentioned that, for the first time under Statute, contributions made to a State Pension Fund would be permitted to be invested in private industry. Once the scheme is in full flow there will be considerable sums of money available to a Board for investment in private industry. The Board has had a duty placed upon it in Clause 71(1) which reads as follows: In exercising their functions under this Part of this Act, and in particular in their management and investment of the Reserve Pension Fund, the Board shall have paramount regard to the interests of existing and future pensioners with pensions paid or to be paid out of the Fund. Therefore the Board has been given a duty as to the manner in which it conducts its investments. It must seek the best return on its investments and take into account the safety and stability of the company in which the investment is being made. There is nothing between us there.

In subsection (2) we have a proviso, a restriction upon the activities of the members of the Board. This restriction seems strange when one remembers the words of the noble Lord, Lord Aberdare, as to the character and capability of the men and women who are to be appointed to the Board. The restriction is that the Board may subscribe to no more than 10 per cent. of the share capital of a public quoted company. In other words, the Board will not be permitted to take more than 10 per cent. of voting shares. It cannot be in the minds of the Government that any limitation on the investment is for the protection of the contributor, because in practice in this legislation there is nothing to prevent the Board from investing in the non-voting shares of the public company. It is quite clear—and it arises from the debate in another place—that what the Government are concerned about is that the Board may acquire such voting power over a public company that it could be manipulated by Her Majesty's Government of the day, which the present Government would regard as contrary to the general capitalist system which they themselves support.

I have moved my Amendment, recognising that I am not likely to shift the Government from that particular principle. I am prepared to bang my head against a wall on quite a number of occasions when I think there is a chance of success, but I do not think I am going to shift the Government on this particular point this evening. But I hope the noble Lord, Lord Aberdare, will understand that there may be occasions when, in order to protect the contributors' money already invested in a company, and perhaps for there to be a bigger voting say in order to affect the board and general management of the company—and I cannot help but feel that if some steps had been taken in the case of Rolls-Royce earlier perhaps Rolls-Royce could have been saved and we should have avoided the break-up of one of the great prides of engineering in this country—it would be right, in the contributors' interest, for there to be a larger share holding in a public company.

The noble Lord may say: "Yes, there could be occasions, but we could not leave it to the Board so to decide." I recognise that and have therefore sought to meet that particular objection by drafting my Amendment as follows: Paragraph (a)— that is, the restriction of the 10 per cent.— shall not apply where the Board satisfy the Secretary of State that to perform the duty laid on them in subsection (1)"— which is paramount with regard to the interests of existing or future pensioners— a larger share holding is required; and if so satisfied, the Secretary of State may authorise a different percentage and set conditions. I should have thought that there one is giving the present Government safeguards as to what could be the activities of the Board if they were to acquire a larger share holding than the 10 per cent. as in the Bill, but it also gives the Board an opportunity, if they feel there is justification in the interests of their contributors to acquire a larger shareholding, perhaps on a temporary basis, for this to be done. Therefore I hope that the noble Lord will feel that the drafting of my Amendment provides sufficient flexibility and that this will now prove acceptable to Her Majesty's Government. I beg to move.

6.33 p.m.

LORD REIGATE

The noble Lord, Lord Shepherd, has moved his Amendment in a moderate and interesting way. I would however ask the Government to resist it. This clause is one of the most important in the whole Bill for the ultimate effects which it could have on the economy of the country. The premium income of this Board, which it will receive every year, is, I understand, going to be roughly three times what the Prudential Insurance Company has to invest every year. It is therefore going to be an enormous factor in the ownership of the public companies of this country. In my lifetime and experience we have seen more and more of the equities of industrial companies taken over by the institutions. In the company with which I am concerned I think I am right in saying that 50 per cent. is owned by bodies such as the Prudential, the Church Commissioners and so forth. I am not entirely happy about this development. One of the few good things that came out of the Lonrho case was the fact that it was the small shareholders who got their way; the institutions had wisely withdrawn at at earlier stage. The Government are therefore wise in fixing a limit to what the Board should have in any one company.

The noble Lord's Amendment seemed to me to be based on the idea that they would always have 10 per cent. and therefore wanted a little more flexibility. I entirely accept the need for flexibility, but I was assuming that the Board would normally not have more than, say, 5 to 71 ½ per cent. in the equity of a company, and therefore the 10 per cent. would give flexibility. I agree with the flexibility; it is only the figure I want to question.

LORD ABERDARE

The effect of this Amendment would be to allow the 10 per cent. limit on investments in any quoted company to be exceeded at the discretion of the Secretary of State. I agree with what the noble Lord said, that the Reserve Pension Board should have as wide a discretion as it is possible to give them in the investment of the Fund, but I also agree strongly with what was so cogently and clearly put by my noble friend Lord Reigate when he said that it is necessary, in our view, to find statutory means of circumscribing the overall area of their operation, because the reserve scheme is a national scheme and because of the likely size of the Fund. We think it particularly desirable that the Board should not be able, by reason of the size of its holding, to occupy a position of undue prominence in a public company. That is the reason for the imposition of the 10 per cent. ceiling, as the noble Lord is well aware.

However, equally, we believe that it is important that that ceiling is of universal application. As soon as you allow discretion for the ceiling to be abandoned in selected cases, then the sense of assurance which it is originally intended that the ceiling should provide disappears; there are all sorts of exceptions and it is finally found that the ceiling is completely destroyed. As a matter of practice, institutional shareholders in any event tend to keep their maximum holdings well below a 10 per cent. figure. Assuming that the Reserve Pension Board is likely to be guided in their professional judgment by similar considerations to those which influence institutional investors in general, there is no reason to suppose that its actions would be vastly different: in other words, the 10 per cent. ceiling set by the Bill should provide ample freedom of movement for any normal investment the Board might want to make.

There is one other difficulty in the Amendment, which is that in conferring a power of discretion on the Secretary of State it would have the effect of requiring him to maintain an administrative apparatus which was adequate to enable him to make a judgment on any proposals that might be put forward by the Board. So, though I recognise that the noble Lord has avoided running into the brick wall and has tried to get round it, we still see grave difficulties in accepting this Amendment.

LORD SHEPHERD

It is not exactly a brick wall. The noble Lord is so thoroughly obstinate. One can understand why he must be, because when he was making his speech in reply to me it was in line with the attitude of his colleagues in another place. I took down the words "the sense of assurance". Now, to whom? To the shareholders of public companies? I should have thought that there is no question of fear on the part of a private shareholder that his shares are going to be in any way detrimentally affected as a consequence of a State pension scheme buying shares in that public company. I should have thought there was a greater sense of assurance if a national pension scheme wishes to invest. I should have thought that from the shareholder's point of view there is no problem about the sense of assurance. There is no doubt about what the noble Lord has in mind when he uses this phrase—friends in the City of the Party opposite. We know that they have never liked the idea of State pension money being invested in they stock market. In the same way the insurance companies, certainly at the outset,

6.47 p.m.

LORD REIGATE moved Amendment No. 90A:

Page 95, line 41, at end insert— ("(3) The Board shall not exercise their powers under subsection (2) so that the fund

did not like the idea of the Government setting up the reserve pension scheme. They see in this an attack upon their particular privileged position. So I do not think there is any point in my continuing to discuss it with the noble Lord. Since it is twenty minutes to seven, and this is a point which has divided my Party in principle, this is an occasion when I again will test in the Lobby the spirit of my own Party at this moment.

6.41 p.m.

On Question, Whether the said Amendment (No. 90) shall be agreed to?

Their Lordships divided: Contents, 28; Not-Contents, 69.

CONTENTS
Beswick, L.	Hoy, L.	Shepherd, I.
Buckinghamshire, E.	Janner, L.	Shinwell, L.
Champion, L.	Llewelyn-Davies of Hastoe, B. [Teller]	Snow, L.
Chorley, L.		Stocks, B.
Davies of Leek, L.	Phillips, B.	Taylor of Mansfield, L.
Diamond, L.	Popplewell, L.	Wells-Pestell, L.
Gardiner, L.	Rhodes, L.	White, B.
Garnsworthy, L. [Teller.]	Rusholme, L.	Wright of Ashton under Lyne, L.
Hall, V.	Segal, L.
Henderson, L.	Serota, B.	Wynne-Jones, L.

NOT-CONTENTS
Aberdare, L.	Elliot of Harwood, B.	Merrivale, L.
Alexander of Tunis, F.	Emmet of Amberley, B.	Milverton, L.
Auckland, L.	Falkland, V.	Monck, V.
Balfour, E.	Ferrers, E.	Monson, L.
Belstead, L.	Fraser of Lonsdale, L.	Mottistone, L.
Berkeley, B.	Furness, V.	Mowbray and Stourton, L.
Brabazon of Tara, L.	Gainford, L.	Napier and Ettrick, L.
Brougham and Vaux, L.	Gowrie, E.	Rankeillour, L.
Colville of Culross, V.	Greenway, L.	Reigate, L.
Conesford, L.	Grenfell, L.	Ruthven of Freeland, Ly.
Craigavon, V.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	St. Aldwyn, E. [Teller.]
Crathorne, L.		Saint Oswald, L.
Crawshaw, L.	Hylton-Foster, B.	Sandford, L.
Cullen of Ashbourne, L.	Ironside, L.	Seear, B.
Daventry, V.	Jessel, L.	Somers, L.
de Clifford, L.	Killearn, L.	Strathclyde, L.
Denham, L. [Teller.]	Lauderdale, E.	Swansea, L.
Derwent, L.	Limerick, E.	Thurlow, L.
Drumalbyn, L.	Lindsey and Abingdon, E.	Tweedsmuir, L.
Dudley, E.	Lothian, M.	Vivian, L.
Dundee, E.	Lucas of Chilworth, L.	Wakefield of Kendal, L.
Eccles, V.	Macleod of Borve, B.	Windlesham, L. (L. Privy Seal.)
Effingham, E.	Margadale, L.	Young, B.
Elles, B.

Resolved in the negative, and Amendment disagreed to accordingly.

shall have any interest in shares comprised in the relevant share capital of a company to which the said subsection does not apply without the prior consent of the Secretary of State and of the Treasury and such interest shall in no event exceed 30 per cent, at any time of the nominal value of that share capital; and in each report which the Board is required to make under section 72 of this Act it shall set out details of all investments made in accordance with this subsection.")

The noble Lord said: In essence this Amendment is on the same lines as the last matter we were considering: that the 10 per cent. proviso only covered shares in quoted companies, and as it seems possible that the Board might wish to invest in shares or companies or corporations which were not quoted on the Stock Exchange, I thought that on the same lines it might be wise to place some limit. I do not want your Lordships to imagine that I am visualising that the Board, which of course will have its quota of women on it, will want to go into some curious or unnecessary enterprise, such as the South Sea Bubble, but I think it is wise that there should be some limitation which should apply to those non-quoted shares, just as we have put a limit on the quoted shares. I have also taken the precaution of requiring the prior consent of the Treasury in addition to that of the Secretary of State. I do not feel that the Secretary of State for Social Services— I am not, of course, referring to the present one—will necessarily always be so wise. He might allow investment in some rather curious schemes, and I think it just as well that the Treasury should have a finger in the pie. I beg to move.

LORD DAVIES OF LEEK

May I ask the noble Lord who has just spoken so very knowledgeably on this matter, how does this work if the Government want to help a lame duck?

LORD REIGATE

They will be allowed to invest up to 30 per cent. of the lame duck.

LORD ABERDARE

We feel that it is in the interest of reserve scheme members that the Board should be allowed as wide a freedom as possible in conducting their investments and that in this respect they should enjoy as much latitude as would those responsible for running an occupational pension scheme. Nevertheless, we have recognised that the very size of the reserve scheme makes a difference and creates a need for precautions against misuse of its power that would hardly be necessary with even the largest occupational schemes. That is why we have built into the clause certain limitations on the Board's freedom of investment, but I do not believe that we should take these limitations any further. The chief limitation which my noble friend's Amend- ment would impose would be on investment in private companies. But if the Board are to be able to conduct their affairs effectively, with the freedom of choice available to other organisations of a similar sort, they may, for example, want to set up wholly-owned management or service companies for their own investment purposes; or they may want to make a direct investment in property, either alone or in association with others. The most suitable vehicle for such an undertaking could be a limited company with the voting equity split between the participants. That is perfectly normal and perfectly healthy as I am sure my noble friend will agree. In so far as this general area of investment also includes private companies that are already formed, broadly speaking they tend to be small concerns with their shares concentrated in only a few hands. But the important thing is that the Board could not invest in such companies of its own volition and without the company's knowledge: they could only go in to it if they were allowed in by the current holders of the shares.

Those are the reasons why we feel that it is not quite a comparable position to the last Amendment moved by the noble Lord, Lord Shepherd, and I hope that my noble friend, after what I have said, will withdraw his Amendment.

LORD REIGATE

I am very grateful to my noble friend for what he has said and in some ways I am satisfied with what he has said, particularly as regards the use by the Pensions Reserve Board of agencies—I think that was the word he used—for investment. In view of that that I propose to withdraw the Amendment. I must say one thing, however, before I do so. I do not see why, if they are to be given the same freedom as the ordinary pension companies, it was necessary to allow 10 per cent. in one case and reject a percentage in this case.

LORD SHEPHERD

Before the noble Lord replies I must say that I found the speech of the noble Lord, Lord Aberdare, quite extraordinary in the light of his reply to mine on the previous Amendment. The noble Lord, Lord Reigate, made the case that the 30 per cent. should he a limiting figure for the purpose of ensuring a degree of safety for the contributors, for the investment. But the noble Lord said that that was a matter which we must leave to the judgment of the Board. However, from what the noble Lord was saying, if the shareholders of a private company decided to sell the entire shareholding, so far as the noble Lord is concerned that would be perfectly justifiable. The only question arises when we get to public companies. This has nothing to do with the contributors, it is merely a question of safeguarding the noble Lord's friends in the City of London, the directors. That is the only reason for this provision being in the Bill. I hope that that particular lame duck will come home to roost at the next Election.

Amendment, by leave, withdrawn.

On Question, Whether Clause 71 shall stand part of the Bill?

LORD REIGATE

On the Question, Whether Clause 71 shall stand part, may I detain your Lordships for a few moments to draw attention to Clause 71(2)? I am sorry to see that subsection (2) reads: The Reserve Pension Fund may be invested by the Board in any manner they think expedient". My comment to myself on seeing the word "expedient" was, "Oh dear, oh dear." I would much rather that the word was "profitable" or "beneficial", because as I reminded your Lordships on an earlier occasion, the Oxford dictionary defines "expedient" as "useful, politic, as opposed to just or right" and if that definition is accepted subsection (2) would then read: The Reserve Pension Fund may be invested by the Board in any manner they think useful, politic as opposed to just or right". I hope therefore that between now and Report stage my noble friend will make his Law Officers work very hard indeed to find a far more suitable word than the word "expedient".

LORD ABERDARE

It would seem to me only expedient to do so.

Clause 71 agreed to.

Clause 72 [Annual report to Secretary of State.]:

6.56 p.m.

LORD ABERDARE

Amendment No. 91 has already been spoken to in conjunction with Amendment No. 89. I beg to move.

Amendment moved— Page 97, line 3, leave out ("income tax") and insert ("financial").—(Lord Aberdare.)

On Question, Amendment agreed to.

On Question, Whether Clause 72 shall stand part of the Bill?

LORD HOY

This is not an unimportant clause. I agreed with the last Amendment because we discussed it earlier, but this is a clause which lays down that the annual report will be made to the Secretary of State as soon as practicable after the end of each income tax year, and about the performance and the operations of it. Normally in most of these matters one takes it for granted that these provisions are made in an Act of Parliament, but on this occasion it is extremely important because what we are dealing with here is an Act of Parliament which will look after social security in this country for many years ahead. I know it is always difficult to define the period but Governments always put in two or three words which always say "as soon as practicable". On an issue of this kind "as soon as practicable" is very important because until we get to know, and fairly quickly, how the new system has worked then so long, will it take us to amend it in the days following. I hope therefore that the Minister will be able to tell us to-night—and I do not pin him down to a month or even a couple of months—what is intended by "as soon as practicable"? This is an issue which affects millions of people in this country, and in my view it is not correct if they are to be kept waiting too long. For instance, I can never find any justification for having to wait twelve months after a year has ended in order to find out the result. This is an extremely important matter and I hope that the Minister will be able at least to assure us that it is not the intention either of the Board or of anyone else to delay the report which is so important to us.

LORD ABERDARE

I can tell the noble Lord that the reference to the word "practicable" in this instance is to take account of the fact that the completion of contributors' records is likely to take some nine months after the end of the tax year. The Board will not have a full picture of their membership and commitments for nine months after the tax year has ended. That is the reason for the word "practicable".

Clause 72 agreed to.

LORD ABERDARE

Would the noble Lord think that this would be the right time to resume the House for an interruption in our business?

LORD SHEPHERD

I would immediately respond to the suggestion of the noble Lord, Lord Aberdare, but on one condition—that it is a break, so far as this Bill is concerned, of one hour and that at eight o'clock we shall resume the Social Security Bill; and that there is no question of the break going on and on until the other business is concluded. There are a number of very important Amendments that need to be considered on the Social Security Bill, and it is our desire to complete the Committee stage this evening.

LORD ABERDARE

I think the noble Lord opposite is right. On the other hand, perhaps a little flexibility could be allowed, if the agreement of the Whips on either side were obtained. If they were within one Amendment of ending their Bill it would be ridiculous for us to insist on 8 o'clock.

LORD SHEPHERD

If we can rely on the noble Lord's undoubted flexibility, which on this Bill is nil, I think my point would be well met.

House resumed.