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Lord Eatwell: The Minister has given the game away. He told us that instead of being able to secure with certainty the scheme must be weakened so that the solvency requirement will not be certain. That is what the amendments are for. Their entire and total purpose is to reduce the certainty of the solvency requirement. Instead of "to secure" solvency it is "for the purpose of securing solvency". The England cricket team went to Australia for the purpose of winning the Ashes. It did not win them. I am afraid that these amendments point to the continual weakening of this solvency requirement.

The noble Lord said that it would be impossible to secure because certainty is impossible; but it is not. It is perfectly possible to buy an assured annuity. It would be jolly expensive but it is possible. The problem is that the Government's minimum solvency requirement is creating so many difficulties and problems for the pensions industry that we have to have this steady weakening of the commitment to insolvency.

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The noble Lord, Lord Lucas, has made our case for us. The minimum solvency requirement is a false solvency requirement.

Lord Lucas: There is no weakening of the solvency requirement. These amendments reflect the reality that even an actuary cannot guarantee what will happen in the future.

Baroness Seear: The reality is that they are weak. The noble Lord has said so.

Lord Lucas: I do not think that we should try to put into legislation something that cannot happen. We have to adjust the wording that we use in our legislation to reflect the reality of the way the world works and to balance, as Members of the Committee have been concerned to do over several hours this evening, the interests of the companies and their employees as employees and pensioners to produce the most effective method possible. I believe that the amendments to which I have spoken improve the situation over what was in the Bill previously.

Lord Eatwell: I know that we are seeking a balance. We have heard that word continuously throughout our discussions. But the point is that we have here a further weakening of the solvency requirement from that which was on the face of the Bill. That is what the amendments achieve.

It seems to me that the Government are bringing forward the amendments, quite reasonably, because their solvency requirements will cause such a mess. Therefore, they are trying to weaken the elements which will cause the mess. But would it not be better to go back to the drawing board and, instead of having that imperfect structure, to start again? I do not wish to refer again to the imperfect English cricket team, but let us get the A team from India to play instead. This sort of amendment would be unnecessary and the complexity involved in continuously weakening the solvency requirement would be unnecessary.

Lord Lucas: If the noble Lord wants a perfect English cricket team, he should look to the women.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 145UB:


Page 27, line 42, after ("if") insert ("it appears to him that").

The noble Lord said: I have spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 145UC:


Page 28, line 3, at beginning insert ("Subject to subsection (2A)").

The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 145VB. Amendment No. 145UC is minor and paves the way for Amendment No. 145VB. That provides that where, when carrying out a solvency check, the actuary is of the opinion that the scheme has dropped to below 90 per cent. of the minimum solvency requirement, an emergency valuation must be obtained.

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As I am sure Members of the Committee will appreciate, we do not wish to impose the cost of unnecessary valuations on schemes. Therefore, where the actuary certifies that the schedule of contributions is no longer adequate but he takes the view that the scheme has not dropped below 90 per cent. of the minimum solvency requirement, an actuarial valuation will not be required, provided the rates of contributions in the schedule are revised. The actuary must be able to certify that the revised rates are expected to ensure that the scheme meets the minimum solvency requirement by the end of the period covered by the schedule. Of course, there will be cases where the scheme may prefer to hold a full valuation. However, in any case where the actuary believes that a scheme is less than 90 per cent. solvent, we believe that an emergency valuation must be carried out to establish the exact solvency position. Following the valuation, the schedule must be revised. And if the valuation identifies a shortfall below 90 per cent., the one year time limit for restoring at least to the 90 per cent. level will apply.

Without the amendment, the one year time limit could be sidestepped. We believe that a drop in scheme funding below 90 per cent. represents significant risk to members and that if such a drop is identified, prompt action should follow to remedy the position. I beg to move.

On Question, amendment agreed to.

Lord Lucas moved Amendments Nos. 145UD and 145UE:


Page 28, line 4, leave out ("it appears to him that") and insert ("in his opinion").
Page 28, line 5, leave out ("to secure") and insert ("for the purpose of securing").

On Question, amendments agreed to.

[Amendment No. 145V not moved.]

Lord Lucas moved Amendments Nos. 145VA and 145VB:


Page 28, line 7, after ("if") insert ("it appears to him that").
Page 28, leave out lines 11 and 12 and insert:
("(2A) In a case within subsection (2) (a), the trustees or managers are not required to obtain an actuarial valuation if—
(a) in the opinion of the actuary of the scheme, the value of the scheme assets is not less than 90 per cent. of the amount of the scheme liabilities, and
(b) since the date on which the actuary signed the certificate referred to in that subsection, the schedule of contributions for the scheme has been revised under section 51(3) (b).").

On Question, amendments agreed to.

Lord Eatwell: moved Amendment No. 145W:


Page 28, line 24, at end insert:
("( ) Any valuation or certificate obtained under this section shall be disclosed in accordance with section 113 of the Pension Schemes Act 1993 (Disclosure of information about schemes to members etc.).").

The noble Lord said: In moving this amendment, I should like to speak also to Amendment No. 145YH. The amendments are concerned essentially with the availability of information to members. The clause requires trustees, at prescribed intervals and on

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prescribed occasions, to obtain valuations and certificates as to the adequacy of contributions by reference to the scheme's overall level of solvency.

The amendments require that such valuations and certificates should be disclosed to members and their independent recognised trade unions in accordance with Section 113 of the Pension Schemes Act 1993. Members would be entitled to information about what contributions their employer should be paying to the scheme on their behalf.

It seems to me that one of the best ways to ensure that the minimum solvency requirement works effectively is by giving members the information as to whether or not it is being met or information as to what the contribution should be. What better means of policing a scheme could there be than providing information to members and particularly to their trade unions, which will be able to analyse such information with expert advice?

There may be a problem of overwhelming members with redundant information but that can be avoided by providing in regulations that such information need be furnished only on request. Essentially we believe that the amendments reinforce what the Government wish to do. They reinforce it by providing a policing mechanism which must be the most effective available. I beg to move.

Lord Mackay of Ardbrecknish: I accept what the noble Lord, Lord Eatwell, says about the importance of making available information to members. We believe that it is essential that certificates and reports relating to a scheme's funding position should be available to members.

However, I should point out that Clause 35(3) provides specifically for regulations to require trustees to make such documents required under the minimum solvency provision available to members and those with an interest in the scheme. We intend to make regulations which will ensure that scheme members are informed regularly of the solvency position of the scheme. The power contained in Clause 35 is sufficient to ensure that that can be done. The noble Baroness, Lady Hollis, will recall the amendment to Clause 35(3) which extends the provision so that it covers certificates provided under Clause 51, as well as those under Clauses 50 and 52. I hope that that explanation of the fact that what the noble Lord seeks to achieve is already contained in the Bill will be sufficient to persuade him to withdraw the amendment.

6.30 p.m.

The Earl of Buckinghamshire: Perhaps I may disagree with my noble friend the Minister and the noble Lord, Lord Eatwell, as regards the very sensible idea of giving out information. Who pays for such information to be sent to members if they make consistent requests for it?


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