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Viscount Long: My Lords, I beg to move that the House do now adjourn during pleasure until 7.50 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.45 to 7.50 p.m.]

Pensions Bill [H.L.]

House again in Committee on Clause 18.

Lord Lucas moved Amendment No. 117:


Page 9, line 13, leave out ("within the prescribed period").

The noble Lord said: In moving this amendment I shall speak also to Amendment No. 118. The Bill as it stands requires us to prescribe in regulations a time limit within which the appointment of an independent trustee must be made. In these two amendments we propose to relegate our power of prescription to a back-up role. We wish to substitute a requirement to appoint an independent trustee as soon as reasonably practicable. We intend that guidelines should be drawn up by the insolvency service and that we should resort to regulation only if these guidelines do not work. I beg to move.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 118:


Page 9, line 15, at end insert:

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("( ) The duty under subsection (1) (b) must be performed as soon as reasonably practicable and, if a period is prescribed for the purposes of that subsection, within that period.").

On Question, amendment agreed to.

Lord Haskel moved Amendment No. 118A:


Page 9, line 24, at end insert:
("( ) he is not an employee or partner of any company which, for the purposes of the Companies Act 1985, is an associated company in relation to a company that practises as an insolvency practitioner, and").

The noble Lord said: Without casting any aspersions on the insolvency profession, this amendment is a safeguard against those very few accountants and insolvency practitioners who ignore the rules. Sadly, there are people who have lost their licences through making what are called "reciprocal arrangements". That misconduct not only creates problems with their current work but also casts doubt on their previous work. This amendment states quite unequivocally that there should be no reciprocal arrangements between trustees. I beg to move.

Lord Mackay of Ardbrecknish: I do not believe that this amendment is necessary. One of the requisite qualifications for an insolvency practitioner under the Insolvency Act 1986 is that a person must be an individual. It follows that the amendment cannot have the effect intended, since no company can practise as an insolvency practitioner. Any problems with an independent trustee being connected with, or an associate of, an insolvency practitioner is covered in Clause 18(2) (b) (ii), which is itself re-enacting a similar provision in the Pension Schemes Act 1993. With that explanation I hope the noble Lord will withdraw the amendment.

Lord Haskel: I thank the Minister for that response. I was under the impression that although they act as individuals the practitioners have to be licensed. However, in view of what the noble Lord said we shall study his response. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 118B:


Page 9, line 25, at end insert ("and—
( ) his name is included in the Register of Independent Trustees to be maintained by the Authority;").

The noble Baroness said: This is a very simple amendment and it follows on from what we were saying earlier as regards the section dealing with the requirement for an independent trustee. This amendment simply adds to the list of requirements that the name of the independent trustee should be included in the register of independent trustees to be maintained by the authority. I believe that the reason for that is fairly clear. Quite obviously, if there were a register it would be available for inspection. It would be an assurance to members of the scheme that an individual who is an independent trustee is an approved person because he or she is on the register of independent trustees. It is some extra assurance for scheme members that an

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independent trustee when appointed is a person acceptable to the authority and a member of the register to be maintained by the authority. I beg to move.

Lord Mackay of Ardbrecknish: The amendment adds to the definition of an "independent trustee" provided in clause 18(2). It provides that an independent trustee must be included on a register of independent trustees which is to be maintained by the authority. This would mean that only a trustee included on the register could be appointed to a scheme under Clause 18(1).

The purpose of Clause 18 is to ensure that a person is independent in relation to the particular scheme for which he acts. Such a person might never take on the duties of trustee again. But there is no reason why he should not, provided he is independent of any new scheme for which he acts. Consequently, requiring the authority to maintain a register of independent trustees seems to me to serve no useful purpose.

If the intention behind this amendment is to introduce a form of regulation for professional independent trustees, I have to say that I do not believe that OPRA is the appropriate mechanism. OPRA will be an enforcement agency for occupational pension schemes, and independent trustees do not act exclusively for pension schemes.

More importantly, OPRA has the necessary powers to deal with any trustee of an occupational pension scheme who is found to be in breach of an obligation. It has the power to fine them and the power to remove them. These powers and how they can be used by the authority are set out in Clauses 9 and 3 of the Bill respectively. OPRA can also disqualify a trustee under Clause 24. An independent trustee disqualified under this clause would be prevented from acting as a trustee of an occupational pension scheme ever again.

I hope that what I have said will persuade the noble Baroness that there are already pretty reasonable safeguards in the Bill in this regard and that we do not need to add to it the complication of a register of independent trustees.

Baroness Turner of Camden: I thank the Minister for that explanation which we shall look at with interest in Hansard tomorrow. I note that he believes that reasonable safeguards already exist in the Bill. It was because we were worried whether or not they did that we wanted to establish a register of suitable people who would be independent trustees. However, having heard what the Minister said, I do not intend to press this provision, which is somewhat of a probing amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18, as amended, agreed to.

Clause 19 [Members' powers to apply to court to enforce duty]:

[Amendment No. 118C not moved.]

Clause 19 agreed to.

Clause 20 [Appointment and powers of independent trustees: further provisions]:

[Amendment No. 118D not moved.]

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8 p.m.

Baroness Hollis of Heigham moved Amendment No. 118E:


Page 11, line 20, after ("actuary") insert ("or otherwise as a paid professional adviser").

The noble Baroness said: In moving Amendment No. 118E, I should like to speak also to Amendments Nos. 118F to 118K which stand in my name. Amendment No. 118E is the first of a series of amendments about the role of professional advisers. Wherever possible, we want to avoid conflicts of interest. Such a conflict may arise because the professional adviser is advising both the trustees and the employer, an issue to which we shall return later. In addition, we do not believe that it is right that the same scheme professionals giving disinterested, paid, professional advice to the trustees should also be trustees. The Government have accepted that argument for auditors and actuaries, but not in the case of other paid professionals. We believe that that principle should be extended to other paid professionals. Nobody can doubt that lawyers abide by the highest standards of professional ethics, but, as a general principle, it seems wise to avoid potential conflicts of interest wherever they might occur. I beg to move.

Lord Mackay of Ardbrecknish: The amendments seek to broaden the authority's power by placing a general duty to enforce trust law, to prevent all professional advisers to the scheme from acting as trustees and to prevent exceptions to the general rule that a trustee and any person who is connected with or an associate of such a trustee should be ineligible to act as an auditor or actuary of the scheme.

Turning to Amendment No. 118K, the authority is there to ensure that those involved with the running of schemes comply with the regulatory provisions. We believe that we have underpinned the key trustee responsibilities with the obligations placed on them by Part I of the Bill. Trustees who are found to be in serious or persistent breach of these provisions may be removed by the authority and disqualified. That means that removal and disqualification relate to breaches of clear duties, rather than leaving it open to wide interpretation and potential dispute as to whether someone has rendered themselves unfit to continue to act as a trustee.

I have been asked to introduce more robust rights of review and appeal against such decisions. If we were to go down that route, the authority would need to have clear grounds on which to base its decision; otherwise the process of review or appeal would become extremely protracted and the subject of prolonged and contentious argument. I am afraid that I cannot accept amendments which place a general duty on the authority to enforce trust law. Amendment No. 118K would do just that. I believe that the enforcement of trust law is best left to the courts.

We agree with the Pension Law Review Committee that the existence of the professional relationship that the actuary and auditor have with a scheme would be incompatible with trusteeship because of the potential conflicts of interest involved. Clause 22 extends that

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provision so that a person who is connected with or an associate of the scheme actuary or auditor is also ineligible to act as a trustee of the scheme. However, under subsection (2) we are proposing that in prescribed circumstances it should not apply to actuaries who are connected with or an associate of the scheme trustee.

We consider that there is a fundamental difference in the role of actuaries and auditors that justifies a slightly different approach. The actuary's basic role is to give advice to the trustees on funding matters. His job is to take a broad, full view of the scheme and to provide the trustees with advice on funding matters, valuations, including statements, contribution levels and calculation of transfer values. His role is one of advice-giver whereas the auditor is more of a policeman to the scheme. The actuary is not involved in matters of scheme security in quite the same way as the auditor and we do not therefore see the same need to extend the bar to the firm by which he is employed. To do so would prohibit the sort of "package" arrangements which many schemes, particularly small and medium-sized schemes, purchase from firms of actuaries, pension consultants and insurance companies. We see no justification for upsetting that. Actuaries are bound by professional codes of conduct and discipline and we have no reason to believe that "package" arrangements are anything but effective and secure. To outlaw such arrangements is likely to incur extra costs for the schemes that use them and this is of course something we wish to avoid.

Turning to Amendments Nos. 118E, 118G, 118H and 118J, as the Committee will recall, in Clause 22 we are endorsing the Pension Law Review Committee recommendations that the actuary and the auditor should not act as scheme trustees because of unacceptable conflicts of interest. We believe it is right that those professionals should be under an obligation to whistle-blow. We have placed the whistle-blowing duty on the key individuals that the schemes will be required to appoint; namely, the actuary and the auditor. They will have access to all the key scheme documentation. We want to encourage others to report to the authority if they believe that a scheme is not being run properly. However, we believe that it is neither appropriate nor necessary to place them under a duty to do so.

If the other scheme professionals are not under a duty to whistle-blow, they will not have a conflict of interest. If we debarred those individuals from acting, trust boards would effectively be purged of any professional employed by the scheme. We do not believe that that is in the interests of ensuring that schemes are properly run. With that long explanation of the details, I hope that the noble Baroness will withdraw the amendment.


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