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Lord Ezra: I should like to support what the noble Baroness, Lady Turner, has just said. While it is perfectly right that the penalties which can be incurred by trustees in breach of their duties should be clearly spelt out, at the same time it is important that people should not be frightened off. We would be expecting a great deal of trustees of these funds if they were to feel that such dire penalties could be imposed upon them for breaches which they might not be aware they were committing. In particular, in relation to Amendment No. 28, there should be a possibility for the person concerned to be warned and given the time and opportunity to put matters right before the penalties were imposed.

Lord Mackay of Ardbrecknish: The authority can only be effective if it can apply sanctions to ensure that the obligations that we will impose on it under Part I of the Bill will be met. This group of amendments seeks to make changes to the provisions in Clause 9 which give the authority the power to impose civil penalties for breaches of the requirements placed on those running the schemes.

The noble Baroness, Lady Turner, thought that the penalties were too draconian. Perhaps if they were less severe we might be discussing increasing them. I believe that we all agree that the punishment has to fit the crime. OPRA will have a range of fines at its disposal. It will not always fine at the highest rate any more than the courts do. It will not necessarily impose fines at all. A warning or a reprimand may be all that is needed. That would be at the authority's discretion.

I shall now turn to the amendments in detail. Amendments Nos. 35 and 38 remove the power to set the maximum civil penalty in regulations and substitute requirements for it to be a reasonable amount. While we agree that the civil penalties imposed should be reasonable, I do not believe that the amendments are the best way to achieve that.

I note that the Delegated Powers Scrutiny Committee suggested in its report that either the maximum civil penalty should be set out in the Bill, as Amendment

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No. 40 seeks to do, or that regulations under this clause should be subject to the affirmative resolution procedure. I am a little surprised that no one pointed out that part of the report of the Delegated Powers Scrutiny Committee. Having read what the committee said, and mindful of the fact that I was a founding member of the committee, I am prepared to consider those options further with a view to bringing forward a suitable amendment, if appropriate, at a later stage. That is on the maximum civil penalty point.

Amendments Nos. 36 and 39 would require the maximum civil penalty to be determined by a formula related to the losses caused by the breach for which the penalty is imposed. It is an ingenious proposal. If we had time I am sure that I could make comparisons across the whole field of law enforcement where a similar provision could be used. However, I believe that it is not a provision that we should accept. There are important obligations on which it may be difficult to make a direct attribution of the loss—for example, those concerning the provision of information to scheme members. So I do not believe that an ingenious formula, even as ingenious as this, would be workable in practice.

Amendment No. 41 removes the authority's power to recover an unpaid civil penalty and instead makes it a criminal offence to fail to pay a civil penalty. Under the clause as drafted, the authority would pursue an unpaid civil penalty as a debt through the civil courts. We do not believe that there is anything to be gained from criminalising failure to pay the civil penalties imposed by the authority and would not wish to add further to the burdens on the courts.

Amendments Nos. 28 and 43 prevent the authority from prosecuting a trustee who acts when removed or imposing a civil penalty for breach of duty unless the individual has failed to take steps to correct the wrongdoing despite being given reasonable opportunity or, in the case of civil penalties, the infringement was the result of deliberate wrongdoing. We have sympathy with the thrust of the amendments, but believe that it would unnecessarily hamper the ability of the authority to remove trustees or impose civil penalties on those who have breached obligations.

The authority will have the discretion to decide in every case whether a civil penalty would be the most effective way of securing the proper running of the scheme. There are cases for which the authority may decide that a civil penalty is not needed. There may, however, be circumstances where a civil penalty should be imposed even though the individual has subsequently taken action to put matters right—for example, where the breach committed was particularly severe or has taken place after a warning from the authority.

With the provisos that I have made, I shall certainly look at the point made by the Delegated Powers Scrutiny Committee. I hope that with that explanation of the powers in Clause 9, the noble Baroness will be prepared to withdraw the amendment.

Baroness Turner of Camden: I thank the Minister for his comprehensive reply and I am inclined to agree with some of it. I am grateful for his assurance that he will consider what the scrutiny committee said.

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On this side of the Chamber it is a question of getting the balance right. We accept that there have to be penalties for wrongdoing or malpractice, as I said at the outset, but we do not wish to have penalties which appear to be so heavy that individuals are reluctant to come forward to take on what they see as rather onerous and frightening duties. Because of that, we put down this series of probing amendments to see whether or not they were likely to attract any support or sympathy from the Minister. From what he says, I believe that he sympathises to some extent with what we seek to do. Perhaps our wording is not apposite. On the other hand, I believe it is important that we have people who are scheme members, and members who are likely to be member trustees, who are not put off from taking on such work. It may not be enough simply to say, "You will be trained and given lots of instruction, and so on". If people believe that they may have heavy fines imposed on them which they may not be able to meet, and they do not have the opportunity to put right what has gone wrong, they may be reluctant to put themselves forward for those jobs.

I believe that those are important considerations. We shall have to consider the situation again. However, in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

Clause 6 [Appointment of trustees]:

Baroness Dean of Thornton-le-Fylde moved Amendment No. 29:


Page 3, line 37, at end insert:
("( ) Where the existing trustees have not met their obligations under sections 14 and 15 below, the Authority shall by order appoint an additional trustee who shall ensure that these obligations are properly met.").

The noble Baroness said: In moving the amendment, I speak also to Amendments Nos. 33 and 34.

Amendment No. 29 refers to the obligations under Clauses 14 and 15 of the Bill. Clause 14 deals with the requirement of trustees of the scheme to include persons nominated and selected under the scheme rules, removal of trustees, action in the event of an unfilled vacancy, and a period of office of between three and six years. Clause 15 provides for the exceptions.

The amendment provides that the authority shall have the right to appoint an additional trustee. That additional trustee is already provided for under Clause 7(4) (b) of the Bill which makes provision,


    "for powers or duties to be exercisable by a trustee so appointed to the exclusion of other trustees".

That additional trustee appointed by the authority would ensure that the trustees in post who had not carried out the provisions under Clauses 14 and 15 of the Bill can have another trustee imposed on their work who will have the power of the regulatory authority behind him. We believe that that makes sense.

Amendment No. 33 is a probing amendment. It calls for appointments not to be restricted to those with particular qualifications or experience. Clause 6(6) states that,


    "Regulations may make provision about the descriptions of persons who may or may not be appointed trustees".

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One has to bear in mind that at present only 35 per cent. of the 150,000 schemes have member trustees. I am sure we all hope that that will change significantly with the introduction of the Act. Those trustees will be aware of their responsibilities. One hopes that they will have had training, which will be compulsory if we are able to change other parts of the Bill. One also hopes that there will be only an insignificant need for the appointment of an additional trustee, and, under Clause 6(6), trustees.

What we do not wish to see is the professionalisation of the pensions field, if I may so call it. The member trustees have an important role to play. I suggest that it would not be helpful if we suddenly found that the regulator was appointing only accountants, actuaries or people with professional qualifications.

In his response, perhaps the Minister will indicate whether the regulations will be issued. At present the Bill states "may". Will regulations be issued? If so, what restrictions does the Minister anticipate will be in those regulations as regards the qualifications of individuals? As drafted, the Bill refers to "experience" with regard to descriptions of individuals. What is that "experience"? I seek clarification from the Minister as to whether the regulations will provide for charges that such trustees can make.

Amendment No. 34 is straightforward. It introduces into the Bill a set period of time for trustees who are appointed to serve. That makes sense as an addition to the Bill because the present wording leaves it open-ended. I beg to move.


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