Pension Funds: Trustees' Responsibilities (Hansard, 16 December 1991)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, safeguards already exist in trust law to protect the interests of members of occupational pension schemes. Trustees have a duty to act at all times in the interests of all the beneficiaries of the scheme in accordance with the trust deed.
In addition, the Government will bring forward, early next year, regulations to restrict to 5 per cent. the level of self-investment. Action is also in hand to produce a booklet for pension fund trustees, setting out their role and legal responsibilities.

§ Lord Taylor of Gryfe
My Lords, I thank the Minister for that reply and for his assurance that the self-investment procedures will be covered in new regulations. I thank him also for the background paper in the Library, which I commend to your Lordships, on the Maxwell case and pension fund management. Have not the auditors a responsibility for seeing not only that the fund is prudently managed but also that there is a reasonable balance between the trustees representing employees—that is, pensioners—and management? Can he say too, since there is an ombudsman, how many people know of the ombudsman? Is it not time that publicity was given, first, to the responsibilities of trustees and their accountability and, secondly, to the rights of pensioners?

§ Lord Henley
My Lords, I should certainly be prepared to look at the question of whether further publicity should be given to the role of the ombudsman. His appointment is still fairly new. He took up office earlier this year, so it is still early days in terms of whether people know about his role, his duties and responsibilities. The noble Lord asked whether the auditor should look to see whether there should be a reasonable balance of employees and pensioners appointed as trustees. The question of trustees is a matter for those originally setting up the trusts. We certainly would consider it good practice that there should be a reasonable number of pensioners and employees appointed as trustees. We do not believe that it would be a suitable matter for legislation but something that should develop as a matter of good industrial relations.

Lord Bruce of Donington
My Lords, is the noble Lord aware that a number of these pension funds are under the effective control of limited liability companies? Does the noble Lord agree that it would have been much better if the Government had followed the proposals put forward by noble Lords on this side of the House during the passage of the Financial Services Bill to secure the effective 1017 introduction of audit committees on all boards of directors and a far greater degree of legislation to prevent the misuse of funds of this kind?

§ Lord Henley
My Lords, in the main trusts are very well run indeed in the interests of the members and of the beneficiaries of the trust. We do not believe that it would be right to come forward with rather hurried legislation at this stage to deal with what might be perceived to be problems if, in trying to deal with those perceived problems, we created newer and worse problems.

§ Lord Jay
My Lords, would it not also have been better if the Government had not been using public money to bribe people to leave the absolutely secure state pension scheme and move over into private schemes?

§ Lord Henley
My Lords, I totally resist allegations of bribery. The entitlement of people who have moved out of SERPS into contracted out pension schemes will be protected by the guaranteed minimum pension.

§ Lord Stoddart of Swindon
My Lords, can the noble Lord say why he believes that it is not a matter for legislation that there should be representatives of contributors and pensioners on boards of trustees? I should have thought that that was just such a matter for legislation.

§ Lord Henley
My Lords, as the noble Lord will know, this matter was considered by the Occupational Pensions Board in its report in 1989. It felt—and we agreed—that it was not a matter for primary legislation and would far better develop naturally as part of good industrial relations.

§ Baroness Turner of Camden
My Lords, is the Minister aware that the Occupational Pensions Board to which he referred made recommendations about self-investment two years ago? Is it not shutting the door after the horse has bolted to introduce them now, even though they are very welcome? Is he not further aware that the Occupational Pensions Board recommended that there should be independent trustees as well as employee trustees? Quite recently the TUC has also recommended that there should be an independent chairman of trustees to ensure that there is no misuse of the funds.

§ Lord Henley
Yes, my Lords, the noble Baroness, who is a well respected member of the Occupational Pensions Board, is right that the board made those recommendations some two years ago. We then brought forward legislation—the Social Security Act 1990—to give us the power to make restrictions on self-investment. We then commissioned a report by Ernst and Young into the level of self-investment. We then made various recommendations which we put to the Occupational Pensions Board, which reported to us in July. We are now coming forward with proposals for regulations in January. However, I do not think it would be right to rush into an attempt to deal with the perceived problems of self-investment if in the process one, for example, bankrupted individual companies or 1018 individual pension funds. That would not be in the interests of either those companies or of the current or future pensioners.
As regards the question of independent trustees, my advice is that the Occupational Pensions Board considered it but judged it to be impractical in view of the number of occupational pensioners and of having to find a very large number—some 160,000—of independent trustees to take on that role.

§ Lord Campbell of Alloway
My Lords, I am not suggesting that the Government should rush into anything. However, in the light of recent events, surely they are concerned and will take steps to set up some form of inquiry and take some sort of advice—albeit formal—to safeguard these pension funds. Surely that is a reasonable suggestion?

§ Lord Henley
My Lords, my noble friend is correct; there are matters for concern. In the main we believe that most pension funds are very well run hut, in the light of recent publicity, it is possible that there have been abuses in some cases. We shall consider any representations made to us and, if necessary, come forward with proposals for reform.

§ Lord Taylor of Gryfe
My Lords, will the Minister consider issuing to all trustees of major pension funds copies of the guidelines or the code which indicate their responsibilities and accountability? Further, does he accept that trustees are not appointed with sufficient care and attention, as they should be considering the very large sums of money which they handle and which affect markets as well as pensions?

§ Lord Henley
My Lords, as I said in my original Answer, we intend to produce a booklet as guidance for those trustees. The booklet will be published in January and will be made available to all trustees.