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Lord Lucas moved Amendment No. 142:


Page 19, line 22, after (" 50") insert ("or 51").

The noble Lord said: The effect of this amendment is to include certificates prepared under Clause 51 among the documents which trustees or managers of

13 Feb 1995 : Column 558

occupational pension schemes may be required by regulation to make available to scheme members and others. I beg to move.

On Question, amendment agreed to.

[Amendment No. 142A not moved.]

Clause 35, as amended, agreed to.

[Amendment No. 142B not moved.]

Clause 36 [Time off for performance of duties and for training]:

Baroness Hollis of Heigham moved Amendment No. 142C:


Page 20, line 16, at end insert:
("(2A) Notwithstanding the provisions of paragraphs (a) and (b) subsection (2) above, "reasonable" shall be deemed to mean not less than ten days' training within the first two years of appointment as a trustee, and not less than three days in every subsequent year.
(2B) Where the trustee, whether an employee of the employer in relation to the scheme or not, does not take time for training at the minimum level specified in subsection (2A) above, the scheme administrator shall report the matter to the Authority who shall, if it deems it appropriate, take action under sections 3 and 9 of this Act.
(2C) Every trustee shall, on his appointment, undertake a short course of training and a failure to undertake such a course within 3 months of appointment as a trustee shall be grounds for disqualification under section 24.
(2D) It shall be for each person who is a trustee, in his own absolute discretion, to decide whether such training should be provided to him by the advisers to the scheme or other firms of advisers, other independent or professional bodies, or an independent trade union recognised to any extent for the purposes of collective bargaining in relation to the scheme members concerned.
(2E) The Authority shall maintain a register of all firms and organisations providing training for trustees in fulfilment of the requirements under this section.
(2F) The Authority shall produce a code of practice for training courses and training material, in consultation with those who appear to the Authority to have an interest in the training of trustees.").

The noble Baroness said: This amendment seeks to persuade the Committee of the need for mandatory training. All trustees should be trained. It should be a condition of their assuming office that they will do so within a defined period. We all agree that a measure of training is necessary. This has been reflected in the Bill, which requires employers to provide time off for that purpose. But we do not think that that goes far enough. Unless there is a requirement, we believe that there will be schemes where the trustees will remain untrained despite the fact that trustees will continue to bear very considerable legal liabilities of which, if they are untrained, they may not be fully aware. Equally, we want to ensure that the training schemes which trustees go through are approved and appropriate. Organisations such as the Pension Trustees' Forum and trade unions could together draw up an approved list of training courses. But if we want trustees to be effective, both in their fiduciary responsibilities and in meeting their legal liabilities, and, if appropriate, to whistle blow, they must be trained. I beg to move.

Baroness Seear: I support the amendment. Given the responsibilities that trustees have to assume, it surely is short-termism and a failure to operate a "stitch in time saves nine" policy not to put money into training. To say that it would cost would be a ridiculous reply if the cost of not training trustees would be very considerable

13 Feb 1995 : Column 559

indeed. Schemes will not operate properly unless trustees are adequately trained. It would be a very good investment.

Lord Mackay of Ardbrecknish: This amendment would, in effect, require compulsory training. We are fully in favour of trustees being properly trained. But we do not believe that it should be compulsory. The training needs of trustees will vary according to the particular circumstances of each individual and each scheme. What is appropriate for one will be totally inappropriate for another. We believe that schemes themselves must decide the training needs of each of their trustees.

The Bill will require employers to allow trustees time off with pay for training. There will be redress to an industrial tribunal if there is any dispute. We do not believe it is sensible to go further in legislation. It may well be a matter which is more appropriate for the codes of practice which pensions organisations are developing. While I understand and share the wish of both noble Baronesses to ensure that trustees are properly trained, I believe that it would not be correct to be as prescriptive as they both would like to be.

Baroness Hollis of Heigham: I am disappointed by the Minister's reply. However, it is late at night. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 agreed to.

Clause 37 [Payment for time off]:

Baroness Hollis of Heigham moved Amendment No. 142D:


Page 21, line 1, leave out ("an industrial tribunal") and insert ("the Authority").

The noble Baroness said: In moving this amendment I shall speak to Amendments Nos. 142E to 142N. They are very straightforward. We want to ensure that where an employee does not get facilities for training, in the shape of time off, that he has an adequate recourse. Under the Bill he may take his employer to the industrial tribunal. We have no objection to that except that that system is becoming heavily overloaded with the additional functions placed on it by government. It seems sensible to keep the matter with the regulator and give him powers to make orders which must be carried out. That is what these amendments seek to do by having recourse to the regulator rather than to the more cumbersome industrial tribunal procedure. I beg to move.

Lord Mackay of Ardbrecknish: The Bill sets out a clear commitment to allow trustees time off to attend to their duties as trustees and to undergo training. Employers have given their broad support to the proposal to allow employees time off as appropriate and there is no reason to suppose that large numbers of employers, if any, will not comply. Of course, I accept that employees should have an effective form of redress where an employer chooses to act unreasonably.

Where a dispute arises between an employer and an employee who is a trustee over time off, these amendments would have OPRA rather than industrial

13 Feb 1995 : Column 560

tribunals adjudicate the matter. I cannot agree with that. OPRA's role is to enforce compliance with obligations concerning the security of pension schemes, not with employment matters. Industrial tribunals are much better placed to examine the full circumstances behind this kind of dispute and settle matters, awarding compensation and restitution of salary where appropriate. Any decision by an industrial tribunal will be in the public domain, so the intention behind one of the noble Baronesses' amendments would be fulfilled.

Our proposals mirror very closely the existing provisions relating to trade union and health and safety officials. In both cases there are limited rights to paid time off for the performance of recognised duties. In both instances it is recognised that disputes are matters relating to employment and fall within the jurisdiction of industrial tribunals. I believe that that is the right place for disputes regarding time off for trustees to stand.

Baroness Hollis of Heigham: I thank the Minister for that reply which clearly hinges on the notion as to whether time off for being a trustee is an employee-employer relationship in which it comes through the industrial tribunal, or whether it is instead a matter of being a trustee. The obligations of trustees to and for their schemes rest with the regulator. Our view is that this is an issue which belongs to the second—the trustee—category. The first category is an employee category.

However, we shall take on board what the Minister said and we may return to the matter on another occasion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 agreed to.

Clause 38 [Time limit for proceedings]:

[Amendments Nos. 142E to 142H not moved.]

Clause 38 agreed to.

Clause 39 [Remedies]:

[Amendments Nos. 142J to 142N not moved.]

Clause 39 agreed to.

Clause 40 [Professional advisers]:

Baroness Hollis of Heigham: moved Amendment No. 142P:


Page 21, line 28, at end insert:
("( ) Except with the consent of the Authority, the auditor to the scheme shall not be the same person, nor belong to the same firm as, the auditor to the employer in relation to the scheme.").

The noble Baroness said: In moving this amendment I shall speak to Amendment No. 142Q. I am sorry that such an important amendment has to be discussed quite so late at night although I shall try to be extremely brief. All the evidence from the Maxwell affair shows that there were at least six layers of "whistle blowers" who did not blow the whistle. One of the reasons, and only one, was that Maxwell the company and Maxwell the pension schemes used the same professional advisers. The House of Commons Select Committee made much of this point.

13 Feb 1995 : Column 561

There was a conflict of interest and in the face of the powerful presence of Maxwell it was understandable, although regrettable, that many professional advisers resolved that conflict of interest in favour of the employer and not in favour of the scheme. With the experience of Maxwell it is crucial that professional advice be seen as disinterested. It is crucial that, when necessary, professional advisers are able to whistle blow. I ask the noble Lord opposite whether it is more likely that their advice is to be disinterested if they serve the trustees only or the trustees and employers both. Are they more likely to whistle blow if they serve trustees only or if they serve trustees and employers both? We all know the answers to those two questions. As Maxwell has shown, serving two masters inevitably produces conflict.

The Minister may say - he would be right - that the trustees appoint professional advisers, not the employer. But he rejected our previous amendment which sought to ensure some equity or balance on the boards of trustees), thus ensuring a built-in majority for the employer whose interests remain preponderant. Given that the employer will naturally see the advantages of sharing advisers, including that of cheapness, one cannot rely on the trustees being as independent of the employer's view as one might wish.

We are not unreasonable. We recognise that there can be exceptional circumstances; hence the phrasing of the amendment, which seeks to ensure that if a scheme wants to share the same professional advisers as the employer it must first seek the consent of the regulator. That seems to us to give the necessary flexibility in special circumstances where, perhaps because specialist knowledge is required, it would be useful to share scheme professionals. For the main part, we firmly believe that one way of checking Maxwell would have been for the company and the pension scheme to have separate advisers. We want to ensure that at least that never happens again. I beg to move.

10.45 p.m.

Lord Mackay of Ardbrecknish: The amendments relate to Clause 40 which deals with the appointment, role and responsibilities of pension scheme professional advisers. The noble Baroness referred to previous schemes which have gone wrong, such as the Maxwell scheme. I should like to point out that at that time there was no one to blow the whistle to, whereas in the future the whistle can be blown to the regulatory authority.

Amendment No. 142P prevents the same person or firm from acting as auditor for both the scheme and the employer without the consent of the regulatory authority. To inhibit appointments in this way may increase costs to both schemes and employers by complicating flows of information and knowledge without necessarily providing any greater security to the scheme.

In fact, the Pension Law Review Committee was in no doubt that there can be significant advantages in having the employer's auditor as the auditor of the scheme; for example, it is the employer who is

13 Feb 1995 : Column 562

ultimately responsible for adequate funding in a balance of cost scheme and it is therefore helpful if the scheme auditor is familiar with the employer's business. For that reason we accepted its recommendation that the trustees should be free to appoint the auditor acting for the employer.

It is intended that regulations made under subsection (5) will require trustees to draw up terms of engagement with auditors. Such terms will make clear the respective roles and responsibilities of employer, trustees and auditor. They will require the auditor to take instructions from, and report to, the trustees and to make known to the trustees any areas of conflict.

The PLRC recognised, as we do, that there may be cases where it may be improper or inappropriate for the auditor to act for both the scheme and the employer. It saw no role for the regulatory authority because professional bodies are well experienced in issuing guidelines for managing such conflicts. Indeed it recommended no change, and nor do we.

I now turn to Amendment No. 142Q. The Government support the objectives of Amendment No. 142Q and in fact we intend to make regulations under Clause 40(5) (b) which will make provisions as to the terms on which the trustees will appoint professional advisers. Our intention is that the regulations will require an actuary working for both the employer and the scheme to declare this fact, to disclose any conflicts of interest and to notify the employer and trustees if such conflicts make it improper for him to act for either party. It is this kind of detail which we believe is best attended to via regulations rather than in primary legislation. The use of regulations also confers the flexibility to prescribe any additional requirements which may become necessary in future.

I thought it important to address the two issues which the noble Baroness raised even at this late hour and at perhaps a little more length than is usual. However, both points are extremely important and I wanted to get on the record the way in which I believe that the abuses she mentioned might be avoided.


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