HL Deb 27 June 2000 vol 614 cc784-800

(" . The Secretary of State for Social Security shall consult the relevant Governments about a full or partial uprating of British state retirement pensions for British pensioners living overseas and report on his findings and recommendations within one year of this Act receiving Royal Assent.").

The noble Baroness said: My Lords, in moving the amendment which stands also in the name of the noble Lord, Lord Goodhart, I speak also to Amendment No. 79.

These amendments have previously been the subject of debate in this House. However, I make no apology for again raising the issue since they seek to redress a longstanding grievance. I go further than "grievance" and say a longstanding injustice. They relate to British pensioners living overseas who do not have annual upratings which pensioners living in this country receive.

The fact that a grievance is old makes it no less vivid or unkind for those who are the victims. I know from discussions that individuals and organisations overseas feel very aggrieved by the failure of successive governments to do anything about the situation. It is all the more remarkable when one bears in mind that the noble Lord, Lord Shore of Stepney, who was a member of the Cabinet which made the decision in the first place, spoke on the subject in recent months, explaining that the only reason upratings for overseas pensioners were not allowed was that there were severe exchange control difficulties at a time when tourists were allowed to take out only £50 in currency. He said that there is a clear moral case for uprating. That lends strength to my own views that it is high time that the grievance is redressed.

I am, of course, aware of the cost. I know, for example, that there are some 190,000 British pensioners in Australia and many other parts of the world. But the grievance is compounded by the fact that there is a lottery depending on where one happens to live overseas. If one is within the European Union one is covered by its requirement that one is treated equally. If one goes to those countries where there is a reciprocal arrangement, all is well. If one happens to go to other countries, notably Australia and Canada, where there is no such agreement, one is stuck with the size of the pension when one left the country. Noble Lords can imagine the miserable pension for someone who may have been retired for 30 years. That is not impossible. Many people live in positive penury because of this arrangement. I bring this issue to your Lordships' House because those people are by definition elderly. They lack the pressure which people in this country can bring to bear. It behoves those of us who are here to speak firmly on their behalf.

I know that the argument is always one of cost. Crudely encapsulated, the Government's view is, "This will cost a great deal of money. We have better things on which to spend it". It may be crude, but I believe that that sums up their argument. That will be dressed up by the Minister when she responds. Having heard the arguments previously, I believe that I could give a fair representation, if I chose to do so, of the arguments that the noble Baroness will deploy in due course. I believe that it is high time that we did something about the matter.

Recognising that cost is an issue, I have sought to modify what I should like to see—a total uprating immediately, and backdated—on the line that politics is the art of the possible. It is a theme I first heard the noble Baroness, Lady Thatcher, declaim when she first came into Parliament many years ago. Given that politics is the art of the possible, I have suggested a compromise whereby the Secretary of State should consult with the other relevant governments as to whether there could be at least a partial uprating. There are several possibilities: that there should be no backdating but that the provision should come into effect only from the point when it comes into law; or that it should go only to the older pensioners over, let us say, 75, 80 or 85—those who are most likely to be in the direst need. There would be other possibilities with which I shall not bore your Lordships today.

Having sought to make a move in this direction, I hope that the Minister will look more sympathetically on this case. I repeat: it is a longstanding injustice. It is compounded by the fact that it depends where one lives as to whether one has an uprating. I believe that the time has now come to take definitive action. I beg to move.

Lord Goodhart

My Lords, I have put my name also to the amendment. I believe that the provision that removes the right of overseas pensioners to an annual uprating in line with those who are resident in this country is one of the most mean-minded pieces of legislation that has ever been placed on the statute book. These are people who worked in this country; they paid their national insurance contributions in this country; and they paid tax on their earnings in this country. They are surely as entitled to a full state pension for the period while they worked in this country as anyone else.

The fact that they now live abroad, and perhaps pay taxes abroad, is irrelevant. Indeed, if it has any relevance it can be said to strengthen the argument for giving them the full pensions to which they are entitled on the ground that by deciding to live abroad they have removed themselves from any obligation on t his country to provide care for them through the National Health Service or through the publicly-funded social services.

I can see no justification in logic for saying that people who live overseas, and who are drawing pensions which they have earned by their contributions in this country, should see those pensions decline in real terms year by year. It is not as though the pensions were earnings linked in which case one might say that there is no logical reason why they should share in the increased prosperity of this country. But to remove their right to maintain their pension in real terms seems intolerable.

If there is any logic in the decision, it lies solely in the fact that few of these pensioners have votes and the issue is, therefore, irrelevant to a future general election. I regard that as a wholly inadequate ground of objection. It is time that the pensions of overseas pensioners were restored; and, if not restored, at least restored to the extent proposed by the noble Baroness, Lady Fookes, so that at least in future they will receive the uprating along with anyone else who is entitled to it in this country.

Lord Campbell of Alloway

My Lords, I support the amendment so reasonably and cogently argued by my noble friend Lady Fookes and the noble Lord, Lord Goodhart.

All that is sought under Amendment No. 78 is that, The Secretary of State for Social Security shall consult the relevant Governments". The Governments most relevant appear to be Australia and Canada. It is totally reasonable that such consultation should ensue albeit that there should be no retrospective effect, albeit that perhaps some compromise should be arrived at, and albeit that some special consideration should be made as regards age. Surely, this House should support an amendment that seeks only consultation on these matters. On that, in view of the way in which this has been presented by both my noble friend and the noble Lord, I strongly support this amendment.

Lord Renton

My Lords, I too support the amendment. I go a little further than my noble friend Lord Campbell of Alloway in hoping that Amendment No. 79 will be considered as linked very relevantly with Amendment No. 78 because, after all, Amendment No. 78 calls upon the Government to consult other governments. Amendment No. 79 would require—when consultation has been successful presumably—that the Act of 1992 should be amended in the way proposed.

I hope that no Members of your Lordships' House will think that people who go to spend their retirement abroad should not have sympathy. Indeed, in my opinion they should have plenty of sympathy. They may be British citizens who have married people abroad. There may be those who have served in our Foreign Service for many years, whose service, perhaps for the last 20 years, kept them in one country and they may feel that is the country in which they would like to end their days. There are those who have been in business abroad and done great things for this country in that regard who have a house and home abroad and they want to remain there. Of course, there are those—and we are familiar with the situation—who, for health reasons, have been advised that they should live in a warmer climate than we have consistently here. There could be other reasons also. I hope that there will be no lack of sympathy on the part of the Government in this matter.

There are two other things I should add. There are a good many foreigners living here in retirement, and we welcome them. Perhaps it is too vague a proposition to mention, but we should bear in mind that increasingly this is becoming one world.

Lord Williamson of Horton

My Lords, I should like to support the amendments presented by the noble Baroness, Lady Fookes, and the noble Lord, Lord Goodhart. This is a question of equity, and quite a lot of people in this world look to the House of Lords to deal with questions of equity. This question has been on the table a very long time. We should at least launch the possibility of correcting the current situation.

For myself, I find it hardly possible to defend a situation in which British pensioners living overseas are deprived of any uprating on their pension. It is not necessarily a world-wide problem because it does not arise in the European Union; it is mainly a problem in a certain number of major Commonwealth countries such as Australia and Canada. What we are talking about are people who have worked all their life in the United Kingdom, or a lot of it, and then decided that they wished to reside for the latter part of their life in those countries, perhaps because they had or have had family there.

I agree with those noble Lords who said that Amendment No. 78 is extremely modest. If one cannot accept Amendment No. 78, I really wonder what one can accept. The absolute minimum that should be done now is to launch a consultation with the governments of those countries. That would be a rather small first step, but at least it would be launching the process of creating a much fairer—I repeat "fairer"—situation for British pensioners resident overseas. I hope that the Government will be able to respond favourably to these amendments.

Lord Selsdon

My Lords, I have found myself working around the world most of my life. This has been the issue that has been raised again and again by British nationals abroad. It is, in part, the money. Your Lordships may be aware that in some parts of the world even the Church is seeking to help impoverished British elderly gentlemen and women. They made a decision at a particular time in their lives, most of them with great patriotic feeling, where they had served either in the Commonwealth or in this country, as to where they would be safest and best for their twilight years. They had no knowledge of the economic incompetence of successive governments that would lead to the desperate devaluation of sterling, and they suffered there. They had no knowledge of the extra benefits that were beginning to accrue to the elderly.

For example, this morning I received an extremely kind letter suggesting that, as I was approaching the age of 75, I might no longer have to pay for a television licence. I know that the average age of your Lordships' House is rising, but I am still just below the average age. I receive letters from airlines suggesting that, as I have reached a certain age, I might be able to travel free provided that I do not talk about it, or travel cheaply on certain airline flights.

There are many countries that look after their elderly. Why should we, who have our elderly more widely spread than any other nation, desert them? It is true that we do not think about them. We do not care. It is communication that is of importance. Many of them are on the breadline. That feeling of poverty becomes worse when there is a happily married couple who have joined their children in a particular country and those children move on and one of the couple dies and the other is at a loss, still in a way in a strange land. We know the names, we know the addresses; they are easy to find. We should think of ourselves as a caring nation rather than uncaring one.

Lord Higgins

My Lords, I intervene only briefly because my noble friend Lady Fookes has made the case so eloquently, as have other Members in other parts of the House. This is an issue that has been going for very many years; I feel bound to say, for as long as I can remember. The sense of injustice has not diminished and to some extent has been exacerbated by the extraordinarily random way in which uprating takes place. Out of something like 840,000 pensions paid, about 460,000 are not uprated. The division between the countries where they are uprated and those where they are not can only be described as bizarre. They include the European Economic Area countries; not the European Community countries. They include, quite arbitrarily, Norway, Iceland and Liechtenstein. I am not clear whether those countries also have reciprocal arrangements. Perhaps the noble Baroness can tell us whether Liechtenstein has a reciprocal arrangement. There are also a number of other countries which have genuinely reciprocal arrangements, ranging from the Philippines to Turkey and Cyprus to Yugoslavia, including the former republic apparently. People in those countries are all uprated and many people in other countries are not.

Having said that, I know that it has been a longstanding problem and I fear that I cannot, keen though I would be to do so, commit myself to Amendment No. 79.

Amendment No 78 has a great deal to be said for it, not least because the arrangement which has been standing for 46 years with Australia appears to have been terminated or is about to be terminated. The noble Baroness shakes her head, in which case no doubt she can clarify the position since the time when she made an announcement back in April. If there has been a change, I imagine that the House will welcome it.

At all events, if my noble friend Lady Fookes does not press the amendment to a Division today, I hope she will consider very carefully bringing back Amendment No. 78 at a later stage, because there seems to be a considerable argument for consulting rather more broadly on this issue with countries of such varied natures that are either included or excluded.

4.30 p.m.

Baroness Hollis of Heigham

My Lords, given the noble Lord's "on the one hand" and "on the other hand", I was trying to work out where he was standing. However, I am happy to give him the information he requested about Liechtenstein. It is true that we have a reciprocal obligation with that country and, as far as I know, it affects all of 10 citizens. Therefore, it is not such that it would swamp our finances.

New Clauses 78 and 79 have a familiar purpose. They attempt to redress the situation where more than half of UK pensioners who live overseas do not receive annual cost of living increases in their retirement pensions. We have discussed the issue on many occasions. I am aware that many of your Lordships have strong views on the subject and that there is strong feeling among many UK pensioners overseas. The noble Baroness, Lady Fookes, said that she could make my speech for me—I am sure that she could make it better than I can—but I anticipated the arguments which she would bring before the House.

Amendment No. 78, which commits the Government to consultation, is not, as the noble Lord, Lord Williamson, seemed to suggest, a modest one. I believe that it is shrewd and clever and subtle and ingenious, but it is not a compromise or first step. As the noble Baroness will know, on all occasions the relevant governments—in particular Canada, Australia, New Zealand and South Africa where most people with frozen pensions live—have been pressing us to take this step and I believe that I know what the outcome of the consultation may be. I will tell your Lordships why—

Lord Campbell of Alloway

My Lords, I am obliged to the Minister for giving way. The proposal is neither ingenious nor clever. It is a step towards a humane compromise and that is all.

Baroness Hollis of Heigham

My Lords, I was about to say why I do not believe it is a compromise. At any reception I attend when the relevant ambassador or high commissioner is present, I am pressed on the point. I do not want to say that consultation is a waste of time, but the facts are what they are. There is no equivalence between the position of the governments of Australia or Canada and our own.

Perhaps I may remind your Lordships of the figures. I know that Members on the Liberal Democrat Front Bench are well aware of them because we have exchanged them previously. As far as we know. 17,000 Australian pensioners live in this country while 214,000 UK pensioners live in Australia. In other words, it is hugely to the financial advantage of the Australian Government and hugely to the financial disadvantage of the British Government to move even in the direction suggested by the noble Baroness. The inequity of population applies also to Canada. As far as we know, 9,500 Canadian pensioners live in the UK while 138,000 UK pensioners live in Canada. The same inequity is true of New Zealand; 7,500 live here while 34,000 live there. Alas, I do not have the figures for South Africa.

That shows that disproportionately and overwhelmingly the flow of money would not be equal. The money going from this country to our pensioners in other countries and the money coming from other countries to their pensioners here would not be equal. Overwhelmingly, the flow would be from this country to Australia, New Zealand, Canada and South Africa. Therefore, if I sound critical of the concept of consultation it is because I believe that we can anticipate the result. The points have been made to me in person by the relevant high commissioners or senior government officials when I have visited those countries.

Earl Russell

My Lords, is the Minister telling us that it is wrong to do an injustice to a few people but quite all right to do an injustice to a lot of people?

Baroness Hollis of Heigham

My Lords, no, I am saying that at the end of the day it is a question of where your financial priorities lie. I shall make the point more fully in a moment. The noble Earl would ask us to equalise the benefits as between those under 25 and those over 25. He would regard that inequality as an injustice and I understand his point of view; he has argued it over many years. Is he about to say to me, "You should do that and somebody has to find the money for it"? We could go down a shopping list; indeed, the noble Earl has tabled amendments on the single-room rent. Does he regard that also as an injustice? I can see where he is coming from, given the research and the views he has expressed in the past.

Nevertheless, it is not enough to say that there is an injustice or an anomaly. One must also say how one rates the reparation of that in terms of the financial contours of the Budget. The noble Earl must say how his proposal will be financed and the Official Opposition Benches must say where they are going to make cuts in order to fund their proposal.

When we last debated the Bill in your Lordships' House, the noble Earl was distressed that changes in some of the pension arrangements were to be funded by cutting half of the Social Fund. It was proposed that £90 million would be taken out of the fund and the noble Earl, Lord Russell—and I was cheering him on—wanted to know from where else the noble Lord, Lord Higgins, would fund his proposed change.

The change to complete unfreezing would cost about £300 million; a partial unfreezing, say, for those over 75, which the noble Baroness suggested would be a compromise, could cost half of that sum. Those are substantial amounts and the changes must be funded at the expense of other priorities.

Perhaps I may remind your Lordships that UK pensioners are paid anywhere in the world and we pay some 870,000 pensioners in more than 150 countries. In 1999, the UK paid more than £1 billion in retirement pensions to pensioners living abroad. Some 470,000 of those pensioners have what is commonly referred to as a "frozen" pension. That means that the pension remains fixed at the rate payable when the person chose to leave the country. The pension remains permanently at that rate or at the rate initially awarded on retirement if a person is already resident abroad.

There are two broad grounds for uprating. They are paid within the European Economic Area, in the Channel Islands and the Isle of Man and in about a dozen other countries where certain long-standing social security agreements, mostly dating back to the 1950s, exist. Apart from a case in which the agreement was made earlier and not implemented until later—I believe it was in the Dominican Republic—I am not aware of any change made throughout 18 years of the previous administration in order to advance the general cause or to renegotiate any new bilateral agreements.

The policy has been followed by successive governments ever since retirement pensions and widows benefits became payable world-wide in 1955. I am sorry, but it is not a priority for this Government to reconsider. When the Social Security Select Committee considered the matter in 1996, it recognised that priorities for public expenditure would inevitably be taken into account in considering the issue. We know that that cost is likely to be £300 million a year and I believe that if the noble Lord, Lord Higgins, proposes to support the amendment in a Division tonight he is under an obligation to tell us how it is to be funded. I could point out to him that there is still another £90 million in the Social Fund and I suppose that he could raid the last of it, but he has to say from where the funding will come.

In 1995, a Member of Parliament said: I hope that the House will remember that any increase in spending commitments involving sending money to people overseas will of course mean corresponding reductions in our expenditure here at home. Members should bear that in mind". That was not said by me and not even by the noble Lord, Lord Mackay, although I have many quotations showing his position. It was said by a then fairly junior member of government, Mr William Hague. Only five years ago, the now Leader of the Official Opposition said that he did not regard this as a priority and that if it was to be supported by his government other reductions in expenditure would have to be found. If the precedent is the Social Fund or abolishing the New Deal for lone parents or the working families' tax credit, I would ask your Lordships to consider where your priorities lie. The change has to be funded from somewhere.

With regard to the Australian point, I was not shaking my head and saying that the situation had moved on since the matter was raised in the House in April. I meant merely that people seem to believe erroneously that Australia uprates British pensions. It does not. It allows British national insurance contributions to count for the Australian means-tested pension in the same way as we allow Australian national insurance contributions to count against eligibility for our non-means-tested pensions. If Australia decides to move away from that agreement, perversely the British Government will save money because more Australians benefit from the arrangement in this country than do our British people in Australia. It affects only 3,000 people; not the 200,000-odd people who are resident there.

Therefore, I am afraid that our policy is clear. We do not consider unfreezing to be a priority call on resources. We want and need to focus help on pensioners in the UK and we want to do most for those who need it most. I do not need to talk about winter fuel payments, TV licences or the minimum income guarantee. I do not even need to talk about our proposals for the introduction of the new pensioner credit to reward thrift on which we hope to go out to consultation in due course.

I recognise that people feel strongly about this matter. However, my first point is that people chose to leave this country in the knowledge that their pensions would be frozen. Secondly, if we were to uprate, as has been suggested, or even to go for consultation, what would the outcome be with regard to the position of other governments? It would cost £300 million, and that would have to be found from somewhere. We believe that our priorities lie elsewhere. Therefore, the Government do not plan to unfreeze UK pensions paid abroad, and I hope that noble Lords will not pursue these amendments.

Lord Selsdon

My Lords, before the noble Baroness sits down, I take some of the points that she made in her charming way. However, a problem exists which is not purely monetary; it is one of understanding. Perhaps her department could produce a small leaflet to be sent to pensioners explaining the position. They would at least then feel that someone had cared for them in some way, whatever the outcome.

Baroness Hollis of Heigham

My Lords, I am happy to ask officials to look at the literature that we give to people at the point at which they make their decision in order to ensure that they are as fully informed as possible. I believe that that is an entirely reasonable point to make and I shall certainly follow it up. Of course, if anyone writes to us from overseas—indeed, I receive letters regularly on this subject—I shall be happy to send the type of information to which the noble Lord referred.

Lord Monson

My Lords, before the noble Baroness sits down for the second time, when she says that pensioners left this country in the full knowledge that their pensions would be frozen, does she agree that they could not have had knowledge of the way in which inflation would totally destroy the value of those pensions?

Baroness Hollis of Heigham

My Lords, that may be true but, equally, although I am not sure that many overseas pensioners with a right to vote will have voted for the present Government, they will be pleased to see that under this Government inflation is now below 2 per cent. Whatever arrangements one makes with regard to pensions, one tries to predict what will happen, whether it be in relation to annuity rates or whatever. None the less, when pensioners left this country —and many will have left during periods of high inflation—they knew what the situation was likely to be regarding their state pensions. The literature is quite unambiguous. I have read the leaflets myself and they are clear. People knew what they were doing and chose to make that decision.

One must consider the cost. Arrangements could not be made with only one country; I suspect that there would need to be open consultation with all the big countries. The cost would be £300 million a year and rising; more so if inflation were to return. That represents a significant part of the budget and that is why the noble Lord, Lord Mackay, regularly resisted the proposal in this House against the wishes of his own Back-Benchers. It is why Mr Hague made the points at least as forcibly in 1995 as I have tried to do today.

Baroness Fookes

My Lords, I had anticipated what the noble Baroness would say and particularly that she would call in aid the record of previous Conservative governments. However, I had a small hope that new Labour might bring forth a new policy. Clearly, it is in the same mould as the old government. That said, I am disappointed that what I considered to be a more modest compromise has not been accepted by the noble Baroness. I do not believe that my modest suggestion is worth going to the stake for; indeed, I should prefer to bring forward a somewhat bolder, more full-blooded clause at a later stage. Therefore, at this point, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 79 to 81 not moved.]

Clause 43 [Member-nominated trustees]:

4.45 p.m.

Baroness Turner of Camden moved Amendment No. 82: Page 37, line 42, at end insert— ("( ) After subsection (3)(a) there shall be inserted— (aa) that the employer shall have no part in the selection of member-nominated trustees, and".")

The noble Baroness said: My Lords, we have now reached a group of amendments which deal with the matter of trustees and governance by trustees. In Committee I moved an amendment designed to ensure that employers played no part in the selection of member trustees. It was not accepted by the Government and today I come back with a slightly different wording which makes the intention absolutely clear.

Under the trustee route, which allows significant flexibility but which is not to be subject to prior consultation with members, the present trustees, who in many cases will not include member trustees, can propose selection by a panel where the employer representatives participate so long as they are in a minority position. It is not clear how the member representatives on the panel will be derived, and it is often the case that senior managers and directors are members of the scheme and their inclusion could shift an employer minority to a majority on the panel.

Managers will be able to make a lot of fuss about competence and experience that may or may not be justified, particularly if there is proper training for trustees, in order to select the management candidates whom they want rather than those who might take an independent view. Candidates may also be deterred from applying if they conceive the panel to be employer-nominated.

Of course, some employers basically oppose the involvement of employee trustees. The present arrangements leave a loophole through which they can exercise undue influence. The amendment seeks to establish that the law requires not only member-nominated trustees but member-selected trustees. Employers have to be told that they must accept representatives of members on the trust board and that they should not attempt to control who those members are.

In putting forward this amendment, I wish to declare an interest as a member of my union, MSF. My union feels strongly about this issue, which is why I return to it on Report. It is very necessary that employees have confidence in their pension scheme, and that is one of the objectives of my amendment. I beg to move.

Baroness Hollis of Heigham

My Lords, Amendment No. 82 would prevent employers taking part in the selection of member-nominated trustees. It applies equally to arrangements under Section 16, the trustee route, and Section 18A, the employer route. We discussed briefly a similar amendment in Committee. In that case, the amendment was presented somewhat differently in that it provided that only members or member representatives would be involved in the selection of member-nominated trustees. This amendment approaches the same issue from another direction by seeking to exclude employers from any involvement in the selection of member-nominated trustees.

As I explained in Committee, the trustee route will provide that, where there are more nominations than vacancies, the final selection will be made either by means of a ballot of the members or by a selection panel. We shall consult on the details of regulations in due course. However, the intention is that, if selection panels are used, they must comprise a majority of scheme members or their representatives. On the other hand, the amendment would exclude the employer from sitting on a selection panel alongside members or member representatives. We see no reason to be quite so restrictive.

One of the key objectives of the proposals is to avoid disrupting existing arrangements wherever possible. The effect of the amendment would be to force changes on a number of schemes with long-standing nomination and selection arrangements where the final selection is made by a panel that includes a representative of the employer. I believe that that would be a shame and we should ask ourselves whether it is really necessary.

Under the employer route, employers will have the right to propose bespoke nomination and selection arrangements for their scheme. The proposal must provide for a minimum of one-third member-nominated trustees. However, the provisions are more flexible and for that reason must be approved by the members. There will be more scope for the employer to determine the selection arrangements under this route. That is undeniable. However, the final choice will be from individuals who have been nominated by scheme members; and, most importantly, the proposal will be adopted only if the members agree to it.

Although the amendment would have much the same effect as our proposals, it would force many schemes to change their arrangements for no good reason. I understand fears that employers may use their position to try to secure their preferred candidate. We have very good relationships with OPRA, which my noble friend served with such distinction for many years, and with the many representative bodies in the pensions industry. If there were evidence that the involvement of the employer was having undesirable effects, they would be quick to let us know.

The way the legislation is drafted in the Bill would allow us to respond quickly to any changes by changing regulations. Our new provisions provide the opportunity for schemes to meet the new requirements with the minimum of disruption. They allow for flexibility without undermining the key aim of getting member trustees on to trustee boards. I would remind your Lordships that these proposals have the full support of all the key organisations in the pensions industry and I would be sorry if we were to lose that support now. In the end, the decision firmly remains with members and I hope that in the light of this explanation my noble friend will feel able to withdraw her amendment.

Baroness Turner of Camden

My Lords, I thank my noble friend for her explanation of government policy on this issue, and I am not at all surprised at what she has said. Of course part of the argument is that it is not desirable to disrupt existing arrangements, and one would agree with that if they are satisfactory.

The reason for my bringing forward this amendment again in a different form is that it has been apparent to me that a number of unions are not happy that the existing arrangements actually operate effectively. However, I understand that there is to be consultation on the regulations and no doubt there will be an opportunity for some input at that time, particularly if (as seems likely) there is some dissatisfaction with existing arrangements in some quarters. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 83: Page 38, line 41, at end insert— ("(10) The Secretary of State shall make regulations providing that all trustees should be required to have attended an approved training course explaining the role and responsibilities of trustees within six months of being either elected as a member-nominated trustee or appointed as a trustee by the scheme's sponsoring employer. (11) These regulations shall also prescribe the content of such an approved training course. (12) The failure of a trustee to attend such a course within six months of being either elected or appointed as a trustee shall nullify the trustee's election or appointment.").

The noble Baroness said: My Lords, this amendment deals with the training of trustees. In Committee I moved an amendment designed to make mandatory the training of trustees. There was general agreement at that time that it was very necessary that pension fund trustees should be trained. As we all know, the duties are now quite onerous and the expectations of scheme members are substantial. The scandals of the past, notably that of the Maxwell affair, have to some extent undermined confidence in occupational pensions, despite their success during the past 20 years in providing benefits to former employees.

I recall saying in Committee in response to my noble friend the Minister that we had scored a small victory the last time around, because she agreed with much that had been said and had undertaken that there would be consultation with the industry to see what could be devised. I understand that she has been as good as her word. The consultations have taken place.

One of the reasons for the amendment therefore is to ask her to tell the House what the Government's view is following those consultations.

Of course the organisations consulted have also written to me, and I am sure they will also have written to a number of your Lordships. So I have some idea of the reactions to the proposals. I believe the Engineering Employers Federation, which was responsible for briefing me at Committee stage in support of compulsory training, is still of the same view although the CBI, while supporting the principle of trustee training, is concerned about the cost of policing a statutory requirement and about the administrative and financial burdens generally that it might impose. It favours legislation for a requirement for training to be made available to trustees at employers' expense. Others favour "best practice" guidelines and disclosure requirements so that in annual reports to members those in charge of schemes would be required to state their policies on trustee training and say which trustees had undergone training, together with the nature of that training.

I still favour some form of compulsion, but I appreciate that it is necessary to secure the willing cooperation of the pensions industry and of pension schemes to bring this about. I am glad that our amendment in Committee prompted an examination and discussion of this very important topic. I therefore wait 'with interest to hear from the Minister what the Government's response has been both to the debate that we had in Committee and to the consultations which I know have taken place since then. I beg to move.

Lord Higgins

My Lords, we on these Benches agree with the noble Baroness, Lady Turner, that all trustees and not just member-nominated trustees should receive training as regards their role and responsibilities. However, we do acknowledge that inevitably there are some practical difficulties with introducing legislation to make trustee training compulsory and in ensuring that it is enforced.

Like the noble Baroness, Lady Turner, we have been contacted by a number of bodies since these amendments were tabled. We have taken their observations on board and accept that making trustee training compulsory at this stage is not appropriate. We are aware of the administrative and financial burdens that a statutory training regime would entail. The cost of policing a statutory requirement and of accrediting training would be very high and the costs could well outweigh the benefits.

As the noble Baroness has just said, at Committee stage the noble Baroness the Minister promised that she would take this issue away and consult further with the pensions industry. I therefore look forward to hearing what suggestions the Minister has for promoting and encouraging trustee training as right and normal, without direct government intervention.

Lord Goodhart

My Lords, I rise to say that I have received a briefing paper from the National Association of Pension Funds, which opposes the idea of compulsory training, for reasons which appear to me to be quite persuasive. It seems to me that we are in a situation where employers are not obliged to provide pension funds for their employees. It is good practice for them to do so, and a large number do, but there is a risk of over-regulation here and I think that this increases the risk that employers might be persuaded to abandon pension funds because of the complications involved.

It is clearly good practice that the trustees who need it—not all of them do—should receive training, but I hope that will be dealt with as a matter of good practice and perhaps as a matter to be shown in the annual report of the pension fund rather than as a matter of compulsion.

Baroness Hollis of Heigham

My Lords, Amendment No. 83 would require that all trustees are required to undertake an approved training course explaining the role and responsibilities of trustees, and that regulations would prescribe the content of the, training. Anyone not receiving such training within six months of becoming a trustee would have their appointment revoked.

We debated the subject of trustee training in Committee. It was clear to me then that there is a great deal of support in the House for the principle of compulsory trustee training. Trustees have overall responsibility for the proper running of a pension scheme under the rules of the scheme and in accordance with the Pensions Act. It is vital, therefore, that they have a full knowledge and understanding of their role and responsibilities.

I said in Committee, as your Lordships have acknowledged, that I would like to go away and talk to the pensions industry to see how they felt about the idea of compulsion. My officials have been talking to representatives of various organisations, including the Occupational Pension Schemes Joint Working Group, the TUC, OPRA, the CBI, the Pensions Management Institute and the Association of Corporate Trustees. I should say that the Occupational Pension Schemes Joint Working Group comprises representatives of the National Association of Pension Funds, the Association of Pension Lawyers, the Association of British Insurers, the Society of Pensions Consultants and the Association of Consulting Actuaries. In effect I believe that the officials have spoken to all the major organisations in the pensions industry. I think they have done a very thorough job since the Committee stage and I am grateful to all of them for taking the time to consider and respond at such short notice. I am also grateful to the organisations involved.

All the groups we consulted recognise the importance of trustee training and I am pleased that the Government, the Opposition and the pensions industry can all speak from a common position on this. However, of all the people we spoke to, only the TUC actively supports the idea of making training for trustees compulsory. Given that we all agree that trustee training is a good thing, perhaps it would be helpful to set out the reasons why the Government are not in favour of making it compulsory.

First, there was a general concern that it would add to the regulatory pressures on occupational pension schemes. I believe that the noble Lord, Lord Goodhart, touched on this: as ever, we have to find the right balance between placing regulatory burdens on business and protecting the interests of scheme members. We cannot justify imposing extra costs and burdens without firm evidence that there is a problem which needs fixing.

There are also genuine concerns about practicality and cost. What seems like a simple idea could be difficult to implement. For example, many trustees come with very different backgrounds and experiences and the schemes themselves are also varied. There are obvious differences between defined benefit schemes and defined contribution schemes. Back in the winter of 1994–95, when I knew nothing about pensions, my noble friend Lady Turner patiently and painstakingly took me through the elementary building blocks of pension provision, explaining the differences between various schemes and the issues of employer holidays. There are also much more detailed differences in the roles that trustees are required to play in individual schemes.

There is not a one-size-fits-all solution. The amendment would require only that trustees were trained in the role and responsibilities of trustees. Oddly, that might not go far enough, resulting in a levelling down of standards.

There is also the question of policing and enforcing any new requirements. We would have to create obligations on the trustees to provide the prescribed training and on the individual trustee to attend. OPRA has already said that investigating complaints and enforcing such a provision would be difficult.

Another strong argument is that we would have to think about issues such as whether trustees should be required to show that they had reached a certain level of knowledge or competency at the end of the training, how such knowledge could be kept up to date and how one would offset the training and experience that individual trustees could bring to the job. Then, of course, there is the issue of who would pay for the cost of the training and of setting up an approval system.

I could go on. The concept of compulsory trustee training sounds simple, but its execution is anything but. We agree with the majority view of the pensions industry that it would be premature to take such a major step. The joint working group has said: We do not believe compulsion in this area is workable, nor do we believe that it is needed given the generally high standards of scheme governance reported by JWG bodies. However, that does not mean we should do nothing. The joint working group has suggested that trustees should be required to disclose information about trustee training in their scheme's annual report. That might involve a statement of the trustees' policy on training or details of any training that had taken place in the period covered by the report. That idea has great merit, because it would ensure trustee boards addressed the matter of training by putting the spotlight on it in their annual report. We can do that in regulations. The idea has the support of the industry and offers the most practical way forward. We therefore propose to pursue that suggestion.

My noble friend has secured a scheme that, although admittedly voluntary, will go a long way towards securing her objective of ensuring that all concerned— employers and newly nominated trustees—recognise the need for training and that a section of the annual report should address issues such as the extent to which trustees have been trained and the need for such training. It will also allow the Government, OPRA and the National Association of Pension Funds to highlight best practice and use it to encourage other schemes.

I congratulate my noble friend on causing the House to put pressure on the Government to conduct further consultation and to show that we have listened and moved. We have come forward with a useful and positive suggestion that will highlight the importance of training and encourage those who have not already addressed the matter to do so. The proposals have wide support in the House and outside. My noble friend has done jolly well and I hope that she will feel able to withdraw the amendment.

5 p.m.

Baroness Turner of Camden

I thank my noble friend for that comprehensive response. I am glad that there was such a broad consultation process. I take it that the Government favour the joint working group's recommendation. Of course the group is in favour of training as well, but its suggestion is that the annual report should say which trustees have had training and specify how much training has been done. That is a good idea and moves strongly in the direction that I have argued for.

The CBI suggested that training should be available to trustees at employers' expense. That could be looked at for the future, but in the meantime I thank the Minister for her response. This has been a satisfactory exercise, even though it has not achieved exactly what some of us wanted. The TUC still stands for compulsory training and I think that my union does, too. Nevertheless, this is a sizeable step in the right direction, so I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 84 not moved.]

Baroness Turner of Camden moved Amendment No. 85:

After Clause 46, insert the following new clause—