COMMONS AMENDMENTS (Hansard, 12 July 1995)

§ Lord Mackay of Ardbrecknish
My Lords, with the leave of the House I beg to move that the House do agree with the Commons in their Amendments Nos. 40 to 42 en bloc. I speak also to Amendments Nos. 65 to 69, 71 to 74, 76, 77, 79, 80, 82, 85 to 98, 100, 101, 187 and 235. We have always made clear that professional advisers have a crucial role to play in our reforms. Amendments Nos. 40 to 42 change the requirement that neither the scheme actuary nor the scheme auditor should act as trustees of the pension scheme. Nor can a person who is connected with, or is an associate of, the scheme actuary or auditor. We consider that it would be wrong for an auditor to audit a pension scheme for which one of his associates is a trustee.
However, we believe that a person who is a director, a partner or an employee of a firm of actuaries should not be ineligible to act as an actuary of a trust scheme simply because another director, partner or employee of the firm is a trustee of the scheme.
1695 Amendments Nos. 40 to 42 will allow regulations to permit a person who falls within a prescribed class not to be ineligible to act as an actuary. That will allow firms which provide package arrangements to continue to provide those services.
We have also brought forward Amendments Nos. 71 to 80, 82, and 85 to 91 to ensure that the requirement to appoint a scheme auditor and a scheme actuary can apply to all occupational pension schemes rather than just those which are trust based. We do not mean to require a scheme actuary when there is no need for such services. For example, unfunded public service schemes which are set up under statute and whose benefits are guaranteed will be exempted from the requirement to appoint a scheme actuary. So will most money purchase schemes. However, we shall now be able to ensure consistency throughout the Bill. We can ensure that all relevant occupational pension schemes, and not just trust based schemes, must appoint a scheme auditor and a scheme actuary and so benefit from the whistle blowing provisions of the Bill.
In Amendment No. 96 we have ensured that those involved in running a scheme will be protected from being sued for breach of confidentiality if they report a matter to the regulatory authority. That is designed primarily to protect those individuals who may be employees of the employer sponsoring the scheme whose contracts of employment may include confidentiality clauses. They might otherwise be inhibited from reporting matters of concern about the scheme to the authority. We shall exclude legal advice from this protection. So those involved in running schemes can continue to expect lawyers to treat their exchanges in confidence.
I believe that these and other amendments contained in the group will improve the Bill. I commend them to your Lordships.
Moved, That the House do agree with the Commons in their Amendments Nos. 40 to 42.—(Lord Mackay of Ardbrecknish.)

§ Baroness Hollis of Heigham
My Lords, perhaps I may ask the Minister the intent of Amendment No. 40. I understand the purpose of it: that where the connections are fairly loose one should not rule out an entire firm because of package arrangements.
In the worst possible scenario, if an actuary or an accountant audits a scheme, and, as part of that job, may be required to whistle blow, if another partner in the firm is a trustee of that firm, will he feel free, able and empowered to whistle blow on a fellow partner who may be colluding with impropriety?
I realise that the provision refers to actuaries, but I understand that it also refers to auditors. I think that a conflict of interest could arise. It is asking one auditor to blow the whistle possibly on a partner in his own firm who acts as a trustee. How confident can the Minister be that the whistle blowing will be effective in those circumstances?

§ Lord Mackay of Ardbrecknish
My Lords, it is complicated when so many amendments are grouped together. However, there is a distinction between an auditor and an actuary. Perhaps I may deal with the position about an auditor.
As I mentioned, we consider—I believe this is what the noble Baroness asks me—that it would be wrong for an auditor to audit a pension scheme for which one of his associates is a trustee. The role of an auditor is to provide an opinion on whether the accounts provide a true and fair view of the financial health of the scheme. The actuary's role is different. His job is to take a broad view of the scheme provided by some funding matters, valuations including statements and contribution levels and the calculation of transfer values. The actuary is not involved in matters of scheme security in quite the same way as the auditor. We do not believe that there is the same need to extend the bar to the firm by which the actuary is employed.
That is the position. There is a difference between the actuary and the auditor. Regardless of whatever relationships there may be, there is a statutory duty to whistle blow and there will be professional requirements to do so with disciplinary back up if it does not happen. I hope that with that explanation and assurance the noble Baroness is content.

§ Baroness Seear
My Lords, we understand the explanation but that is not the same as saying that we like it. All the time we were debating the Bill many of us stressed again and again the inadequacy of the provision for whistle blowing. It remains inadequate. I find it difficult to believe that if a partner in a firm has a paid appointment in the organisation—even if it is as an actuary and not as an auditor—he, the potential whistle blower, will not be influenced. He is not likely to blow the whistle against a colleague in his own firm.
However, there is not much point in repeating the arguments that we made at great length during earlier proceedings on the Bill; but simply to remark that we are not satisfied with the solution.