§ 7.40 p.m.
§ Baroness Hooper
My Lords, I beg to move that this Bill be now read a third time.
Since the merger between the TSB Group and Lloyds Bank in December 1995, the banking activities of the two organisations have been carried on separately. The need to have a Private Bill arises out of the fact that the bank may not transfer a customer's money to another body without the consent of the customer. Only through this means can a bank's operations be merged without going through the massive administrative task and the uncertainty of seeking the agreement of each customer individually in order to transfer his or her account from one entity to another. In this way, and in this particular case, some 8 million customers are also therefore spared the accompanying inconvenience. This is the usual and recognised way of dealing with this particular task. An average of one bank Bill each parliamentary Session attests to that. However, it must be said that usually such Bills, like most Private Bills, pass through all their stages without discussion.
Nevertheless, the Lloyds TSB Bill has been making steady progress through this House since its first Reading in January last year and its Second Reading in March last year. At Second Reading we had an interesting and wide-ranging debate. Then, following the general election and the Summer Recess, the Unopposed Bill Committee stage took place on 27th November last year.
As some noble Lords may be aware, the Lloyds TSB Group undertook exhaustive and free-ranging discussions about its future relationship with the Banking Insurance and Finance Union (BIFU) and the Lloyds TSB Union, the LTU. It did so as soon as the merger was announced. It successfully concluded agreements with both BIFU and the LTU to the satisfaction of each of the parties during last year's Summer Recess.
The most significant and relevant features of those agreements were: to give equal recognition rights to BIFU and the LTU up to the same level in both TSB and Lloyds banks; to reaffirm that compulsory redundancy would continue to be very much a policy of last resort; to provide improvements when harmonising terms and conditions of contracts of employment and guarantees as to how the new terms will apply to individual members of staff; further, to agree a process for proposed branch reductions and to reaffirm the assurances previously given regarding the TSB Bank in Scotland.
Certain questions were also raised at earlier stages of the Bill in regard to pensions. The Bill does not have an impact in any way upon any of the schemes within the Lloyds TSB Group. Nevertheless, I am assured that the Lloyds TSB Group takes its responsibilities in this area most seriously. In particular, the schemes in the group are well-funded and provide an excellent package of benefits to pensioners. In addition to strength of funding, the schemes enjoy a comprehensive framework of statutory, regulatory and fiduciary safeguards for their 1313 beneficiaries which are in line with best practice among major corporate pension schemes throughout the United Kingdom. Against the background of the agreements reached with the unions and the assurances given to them, the unions withdrew their petitions against the Bill, which enabled us to have an unopposed Committee stage.
I understand that the noble Lord, Lord St. John of Bletso, wishes to raise again the issue of pensions, albeit at this very late stage. Unfortunately, I have been unable to ascertain the concerns of my noble friend Lord Northbrook, but I look forward with interest to hearing the remarks of both noble Lords. I beg to move.
§ Moved, That the Bill be now read a third time.—(Baroness Hooper.)
§ 7.45 p.m.
§ Lord St. John of Bletso
My Lords, while I in broad terms welcome this Bill and the potential benefits to shareholders and customers of Lloyds and TSB, I should like briefly, as the noble Baroness mentioned, to express my concern for the pension rights of the ex-employees of TSB, Hill Samuel and the other companies whose pension funds were amalgamated into the TSB group pension scheme, which currently has a large surplus.
I know that the noble Lord, Lord Northbrook, will be elaborating on the concerns of the TSB Hill Samuel Action Group, representing those ex-employees. The group has over 50,000 members, of whom, at the date of the last accounts, more than 20,000 were current employees; 20,000 were deferred members; and under 9,000 were pensioners.
The Bill draws reference to the,transfer to, and vesting in, Lloyds … of the undertakings of TSB … and Hill Samuel".In essence, I would like to see improved safeguards being put in place to ensure that the surplus pension assets in the TSB pension scheme are used to improve the benefits of existing and former members to the maximum level permitted by Inland Revenue requirements. I was encouraged by the remarks of the noble Baroness, Lady Hooper, who said that Lloyds TSB takes its pension responsibilities very seriously.
There has been a certain amount of press coverage, citing TSB and Noble Lowndes as mis-selling pensions. I also understand that Noble Lowndes advised some of the group's redundant employees of their entitlements, and that they were not happy with the quality of that advice. I should like to know to what extent such cases have been resolved by Lloyds TSB.
In conclusion, I reaffirm my support for the Bill, but hope that my concerns for the rights of the pensioners can be addressed when the undertakings of TSB and Hill Samuel are "transferred to, and vested in", Lloyds.
§ 7.48 p.m.
§ Lord Northbrook
My Lords, I thank the noble Baroness, Lady Hooper, for her detailed explanation of the background to the Bill. I seek to express some of the concerns of the TSB Hill Samuel Action Group, whose 1314 members are ex-employees of the TSB, Hill Samuel or other companies whose pension funds have been amalgamated into the TSB group pension scheme. They are not opposed in principle to the Lloyds TSB Bill. They recognise that it will bring substantial benefits to the promoter. However, they believe that, in view of those benefits, certain anomalies in the protection available to pensioners and in the treatment of redundant and other ex-employees must be remedied by the promoter before the Bill is passed. In default of such remedy, they will petition the Bill in another place.
As the noble Lord, Lord St. John, has already given details of the current membership of the TSB group pension scheme, I should like to focus on the other ex-employees transferred out of the scheme on terms which, at least with hindsight, were insufficiently generous, so contributing to the large surplus in the fund. From the figures it is apparent that large numbers of employees do not remain for long enough to reach the minimum pensionable age of 50. In view of the continuing staff reductions in the retail banking sector, and at Lloyds TSB in particular, the number of deferred members of the pension scheme can be expected to increase, both in absolute and relative terms. Therefore, bearing in mind that the employees of the Trustee Savings Bank were in many cases relatively lowly paid, that many older pensioners have had their entitlements eroded by inflation and that many of the members will have left before pensionable age, frequently through being made redundant, a significant proportion of the members of the scheme are, or will be, receiving relatively low incomes.
As has been mentioned, there is a substantial surplus in the TSB group pension scheme of at least £850 million, or 48 per cent., at the date of the last accounts, enabling the employer to anticipate a contribution holiday until the year 2015.
In detail, the action group has two major and interrelated concerns: protection of potential benefits out of the fund surplus for the actual and deferred pensioners and equity in distribution to the beneficiaries in general and the poorest pensioners in particular.
As regards the first issue, the action group is concerned about what will happen if there are future mergers between the TSB scheme and other, less well-funded schemes, as well as the consequences of the present planned merger of the undertakings of Lloyds Bank, TSB and Hill Samuel, particularly as the potential cost to the fund of remedying anomalies does not seem to have been addressed. The action group believes that Clause 8 of the Bill, which makes provision for retirement benefit schemes, does not provide sufficient protection for the interests of the members. The rules of the TSB scheme offer no protection if there is alteration to the benefits payable to the members without their consent, to the detriment of those members. Similarly there is no provision that would even prevent the ending of the TSB scheme. The action group believes that protection should be incorporated into the documents which constitute the TSB scheme to ensure that the interests of present and future pensioners are unaffected 1315 by the consequences of the proposed merger. Such protection is needed before the Bill is allowed to pass into law.
The action group is anxious to ensure that the TSB scheme funds should not be used to pay benefits to the members or former members of other pension schemes operated by merged banks which might follow an amalgamation of the schemes. The action group is also determined to ensure that such protection should be extended to any future merger proposed by Lloyds TSB. It is also concerned that no part of the TSB scheme funds should be returned to Lloyds following any winding up of the scheme after the transfers of operations contemplated in the Bill. For these reasons, the action group believes that adequate safeguards should be put in place to ensure that the surplus assets in the TSB scheme are used to improve the benefits of the existing and former members to the maximum levels permitted by Inland Revenue requirements, as stated by the noble Lord, Lord St. John.
The action group is particularly concerned to ensure effective protection of the pension fund surplus. It understands that in the past few years TSB has transferred such surplus to companies acquiring its non-core subsidiaries so that they in turn can enjoy contribution holidays in respect of the staff transferred. It believes that it has not received satisfactory explanations of the numbers of and reasons for several of these transfers which would persuade them that the pension fund surplus was reasonably transferred without detriment to the members.
Moving on to the action group's second major concern, equity in distribution to beneficiaries in general and to poorest pensioners in particular, the action group is particularly concerned by the unsatisfactory explanations it received after it queried apparently unfair and unequal treatment of different groups and categories of pensioners. On the one hand, it is evident from the Lloyds TSB 1996 accounts that certain favoured individuals received substantial exceptional enhancements to their pension entitlements. On the other hand, some pensioners are receiving income support. The action group requires full details of all anomalies for the benefit of all the individuals affected, and not just for those lucky or well enough advised to have discovered discrepancies operating to their own disadvantage. The action group therefore seeks explanations of the numbers of individuals and amounts involved. Without a satisfactory explanation, confirmation will be sought in the other place that all such anomalies have been rectified.
We are not talking about a rerun of the Maxwell situation. However, the concerns of the action group are serious and require a more detailed and satisfactory response than has hitherto been given. If that does not happen, I anticipate further reaction to the Bill in another place.
§ Baroness Hooper
My Lords, I have listened with interest to my noble friend and to the noble Lord, Lord St. John of Bletso, and I feel sure that the promoters and the company will read with care what has been said in the course of the debate this evening. I must reiterate 1316 that the pension schemes are not affected by the Bill and therefore it is not my task this evening to go into the intricacies of the schemes and their surpluses. I fully appreciate that my noble friend and the noble Lord, Lord St. John of Bletso, felt it important and convenient to take advantage of Third Reading to air this issue. However, as I understand it, there is nothing special about this case; it is no different from any other merger of any two companies and their pension schemes. The schemes enjoy a comprehensive framework of statutory, regulatory and fiduciary safeguards, which cannot be avoided. They were put in place as a result of the Pensions Act 1995, which followed the Goode Committee Report. The beneficiaries benefit in this way in line with best practice among all major corporate pension schemes in this country. To go further and to make wider or more general changes, as has been requested, would be unprecedented and would single out these schemes compared to all other corporate schemes, when the Bill has no impact on them at all.
The unions are content with the situation. While the promoters would be prepared to consider these concerns, I believe the concerns are of a general nature and are more properly addressed to the Government. It is ironic that the Hill Samuel scheme, which was merged with the TSB scheme in 1991, is now considerably better funded as a result.
§ Lord St. John of Bletso
My Lords, I am grateful to the noble Baroness for giving way. Would the noble Baroness not agree that, despite what she says, this Bill has no connection with the pension schemes and that the Bill makes specific reference in Clause 3 for the transfer to and the vesting in Lloyds of the undertakings of TSB and Hill Samuel? The reference to the undertakings is surely inclusive of the pension surplus of the TSB pension fund.
§ Baroness Hooper
My Lords, as I understand it, the reference to transfer dates in the Bill is simply a matter of timing and does not in fact affect the contents of the pension schemes or the details of the pension schemes.
Finally, I must reiterate something that I said at Second Reading, that the measure before us today provides simply for an internal reorganisation of the group which is designed to enable Lloyds TSB to get on with what it is good at doing: delivering long-term security and success for the benefit of all its customers and staff and, in doing this, and in seeing the merger through, this is the final full-stop, as it were, in your Lordships' House.
The Bill does go on to another place, where various concerns which may be within or without the terms of the Bill will no doubt be raised again, but I am most grateful to those of your Lordships who have participated in the passage of the Bill through your Lordships' House. I commend the Bill to the House.
§ On Question, Bill read a third time.1317
§ Moved, That the Bill do now pass.—(Baroness Hooper.)
§ On Question, Bill passed, and sent to the Commons.
§ Lord Haskel
My Lords, I beg to move that the House do now adjourn during pleasure until 22 minutes before nine o'clock.
Moved accordingly, and, on Question, Motion agreed to.
§ [The Sitting was suspended from 8.02 to 8.38 p.m.]