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Baroness Turner of Camden: I fully agree with the noble Lord, Lord Ezra. If one simply reads the Bill as it stands one has no idea that anything received by way of penalty will be used to defray the costs of the authority or reduce the levy. As the noble Earl, Lord Buckinghamshire, and the noble Lord, Lord Ezra, said, it is not as though the authority is being funded by government. Generally speaking, the industry has to pay for the authority. If the intention is, as the Minister

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says—and I have no doubt that it is so—I believe that we must have an amendment to that effect, produced either by the Minister or perhaps by our side at Report stage. As matters stand, this is not what the Bill says. It gives the impression that the Secretary of State will collar any penalty money received. That seems very inequitable.

In the circumstances, I shall not press the amendment to a Division at this hour of the night. However, we flag up that we shall return to the matter at Report. I hope that the Minister will also feel inclined to do so. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 43 not moved.]

Clause 9, as amended, agreed to.

Clause 10 [Powers to wind up schemes]:

Lord Lucas moved Amendment No. 44:


Page 4, line 38, after first ("of") insert ("the generality of").

The noble Lord said: In moving this amendment, perhaps I may speak also to Amendments Nos. 46, 47 and 50. These amendments concern the authority's powers to wind up schemes contained in Clause 10. Amendment No. 44 concerns the authority's powers to wind up a scheme to protect the accrued rights of the scheme members. The amendment ensures that it is clear that the authority is able to wind up a scheme only when that is in the best interests of the generality of members. Amendments Nos. 46 and 47 are amendments which I expect will appeal greatly to Members of the Committee opposite. They remove one of the regulation-making powers in the Bill. These were drafted along the lines of powers contained in the Social Security Act 1973 but on inspection it appears that those powers have never been used and therefore that this Bill can do without them.

Amendment No. 50 clarifies the effect of an order to wind up to ensure that no other rule of law or any provision or procedural device in scheme rules is able to prevent the authority from winding up the scheme when that is in the best interests of scheme members. This mirrors the provision in the Pension Schemes Act 1993, which Clause 10 replaces. I beg to move.

Lord McIntosh of Haringey: I am grateful to the noble Lord for explaining these four amendments. I shall deal with the easy ones first. As he suggested, we have no difficulty with Amendments Nos. 46 and 47, which remove regulation-making powers. There is no difficulty about that. We positively welcome Amendment No. 50. It means that there cannot be rules in one's pension scheme which enable the provisions of Clause 10 concerning the winding up of a scheme to be frustrated.

I have much more difficulty about Amendment No. 44. Perhaps I may explain from personal experience why that is the case. I have no financial interest in the matter because I am a pensioner member of a small pension fund which I established myself 30 years ago. However, I am a pensioner member. After I retired and started to take my pension, the trustees, who did not include a pensioner member but included directors of the company, of which I had been a director for 30

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years, decided for their own reasons to wind up the scheme. They decided that it was sensible for them—I am not saying that they were wrong—to have personal pensions assisted by the company rather than a final salary scheme. What they did not take into account was the fact that at the time they did so there was a surplus in the scheme. They did not take into account the possibility even that I and the other pensioner members ought to have some rights in terms of improved pension arrangements from the surplus of the scheme.

They were able to do so because the rules of the scheme provided that the trustees had the complete freedom to wind up the scheme when they wanted to—that, I hope, will be dealt with by Amendment No. 50—but also they would be able to do it—in my view wrongly—if the words "the generality of" were inserted in Clause 10(1) (c) but not if the Bill remained as originally drafted with the words "the best interests of the members". I am a member but I am not a part of a generality of members. In other words, I am a minority of members. I do not think it is right that a minority of members should be overridden in that way.

Even though the remaining amendments in the group will be accepted by the Committee, I hope the Government will feel that they ought to look again at Amendment No. 44. If the noble Lord will give me the slightest indication that he thinks that there is a case here and is prepared to write to me about it, I may be persuaded not to divide the Committee on the subject.

Lord Monkswell: I rise to support my noble friend. He raises a problem with regard to the Government's thinking on the matter. They really must have another look at this point. As my noble friend so ably described, there is a clear division between employee members of the scheme and the pensioner members of the scheme. Nowhere in the Bill have the Government recognised that division. We tried earlier on to get them to accept that point in terms of the make-up of OPRA but they would not. When it comes to protecting the interests of everyone in a pension scheme, we must recognise that there is this divide. I hope that the Government will take the point very seriously. If they do not, there will be great concern among many pensioners who are currently receiving pensions from occupational pension schemes. I am sure that that is not the Government's intention.

Lord Lucas: I have great sympathy with what the noble Lord, Lord McIntosh, said. Later on in the proceedings on the Bill we shall come to clauses which deal with the priorities on wind up. At that stage I hope that we shall be able to look again at the points which the noble Lord raised. With regard to this amendment, I shall certainly look at what is in Hansard and what is in the Bill and see whether there is anything which I can usefully write to the noble Lord.

Lord McIntosh of Haringey: I am grateful to the noble Lord. While he is doing that perhaps he will be good enough to consider the issue raised by my noble friend Lord Monkswell. Is it possible to interpret "the generality of" members as being confined to the active members of the scheme—those still employed—while excluding the pensioner members? Clearly, in many pension schemes there could be a conflict of interests

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on winding up between pensioner members and existing members, whether or not there is a surplus in the scheme, as was the position in the case I described. However, the noble Lord has been most generous in offering to write to me. I do not propose to oppose the amendment at this stage.

Lord Lucas: Perhaps I may confirm that we shall certainly take those points and the matters raised by the noble Lord, Lord Monkswell, into account.

On Question, amendment agreed to.

Baroness Dean of Thornton-le-Fylde moved Amendment No. 45:


Page 4, line 39, at end insert:
("(d) the trustees are unable to act properly in a fiduciary manner, owing to serious or persistent interference by the employer.").

The noble Baroness said: Before the Minister says that the amendment is not necessary and that the point is covered in the Bill, perhaps I may pre-empt what he may say by pointing out that there are those who carry out the rules and those who frustrate them. I have represented people who have been at the receiving end of such treatment. Not only are there employers who disregard rules but some may remove themselves as trustees and appoint someone else as an employer trustee who is just a puppet on the end of that first employer's string. We set great store in the Bill by the authority but some employers are adept at delaying tactics. It is said in regard to Mr. Maxwell that much of what he did was quite legal. However, the Maxwell case is only one among many. I have a file half an inch thick of a whole list of companies in respect of which there has been employer interference, frustration and procrastination while all the time the pension fund has been deteriorating.

I do not accept that subsection (1) (c) of this clause is the answer to the problem that I am pointing out here. It is necessary to provide the means whereby the authority can step in to wind up a fund if the trustees have not carried out their duties. It may not always be in the best interests of the members of the fund for different trustees to be introduced and for changes to be made. Sometimes one has to pull up the drawbridge and say "Stop, we cannot carry on with this fund". That is why this amendment is tabled. I beg to move.

9 p.m.

Lord Mackay of Ardbrecknish: Clearly we have been here too long today because the noble Baroness has pre-empted what I am going to say to the Committee about the amendment. The point which she has made about the circumstances which can arise is perfectly valid. A scheme can be so poorly administered that its funding position can only be expected to deteriorate. The case which the noble Baroness is putting is that it is the employer's interference which can bring that about. There can be other reasons. Whether it is the employer's interference or not, we believe that the clause as drafted gives the authority the power to wind up the scheme. There is nothing in the Bill to prevent anyone, including scheme members, bringing anxieties about the

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administration of the scheme to the authority's attention. In most cases it may be better for the scheme members if the authority uses its powers to remove and appoint trustees to restore the scheme to a proper footing rather than to wind it up. Obviously, the noble Baroness had one or two circumstances in mind where, as she put it, the only way to deal with the matter was to pull the plug and wind up the scheme.

Clause 10 certainly gives the authority the power to wind up a scheme as a regulatory action to protect the interests of scheme members. The authority would be obliged to consider all the relevant issues before deciding whether to make an order to wind up. I do not believe that we can envisage here the circumstances which may occur to bring that about. Obviously, decisions of that kind would have to be arrived at very much on a case by case basis and only as a last resort.

As the noble Baroness thought I would, I should like to reassure her that the powers are certainly there to wind up and do not require to be added specifically against an employer's interference. There are other provisions in the Bill to protect the scheme from undue interference by employers; for example, the duty of the trustees to employ the auditors and the actuaries. I have no doubt that we shall come to these issues later.

I believe I said earlier to the noble Baroness, Lady Hollis, that we review all that happens during the day to see what points have been raised and whether our answers were proper, and properly addressed the issue. My answers are always proper, but whether they properly address the issue is another matter. I appreciate the considerable experience which the noble Baroness has had. We shall think about this matter and make sure that what I have said is the case.


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