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Baroness Seear moved Amendment No. 184HA:


Page 78, line 19, leave out ("from") and insert ("to be paid from the resources of the scheme by").

The noble Baroness said: The purpose of this amendment—this matter has come up already in earlier debates—is to avoid putting too heavy burdens on trustees. We are anxious to encourage people to be prepared to be trustees but the threat and dangers of heavy financial commitment are such as to discourage the very people whom we would wish to be trustees

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from taking on the job. Therefore we want to put a limit on their liabilities and ensure that if there is a case for a repayment, it falls on the funds of the trust as a whole and not on the individual members. I beg to move.

Lord Mackay of Ardbrecknish: These amendments share a common purpose: to protect trustees from personal liability for debts relating to the scheme fund. I understand the noble Baroness's concern that trustees should not have to fund the levies from their own pockets. I can assure her and the Committee that that has never been the intention. There will be a range of provisions in place to ensure that whenever levies are payable, appropriate resources are available to the trustees. Therefore, in practice we do not consider that this amendment is necessary to safeguard the trustees' position. Nevertheless, someone has to be legally responsible for the payment of the levies. It is only right that that responsibility should be placed on the trustees.

In salary related schemes, the sponsoring employers stand to bear the balance of costs, and the minimum solvency provisions will safeguard the funding levels. In order to ensure that levy payments do not undermine the minimum solvency requirements, we intend to provide that, where necessary, amounts of levy may be included in the agreed schedule of contributions to be paid by the employers.

The situation in money purchase schemes is very similar. In both cases, failure to pay amounts due under the agreed schedule will create a debt on the employer.

However, we recognise that where a scheme is frozen or paid up, there may be no active, solvent employer standing behind the scheme. In that case, we acknowledge that there may be a danger of levy payments eroding members' benefits. In such cases, the trustees will be able to apply to the registrar to waive collection of the levies. We intend that the registrar will have the power to waive collection only in certain circumstances: where there is no solvent employer and where the registrar is satisfied that payment of the levies would adversely affect members' accrued benefit entitlements. That will ensure that the position of both members and trustees is protected in these circumstances. We do not wish to disturb the existing arrangements for liability for, and payment of, the levy, which work quite satisfactorily.

Amendment No. 184HA seeks to ensure that trustees and scheme managers should not be personally liable for the debt to the Secretary of State that will arise on full or partial restoration of a member's state scheme rights.

Unlike the levy liability, which in the majority of cases falls on schemes with active employers, such a debt can only arise where the sponsoring employer is insolvent and the scheme is winding up in deficit. As with the levy provisions, special treatment is required where there is no solvent employer.

The provisions enabling the Secretary of State to restore the member's state scheme rights, in whole or in part, closely follow present provisions contained in Schedule 2 of the Pension Schemes Act 1993. I alluded to that some little while ago when answering a question from the noble Baroness, Lady Turner, with regard to the Maxwell pension arrangements.

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At present, regulations provide for the payment of any state scheme premium imposed on the trustees of a scheme to be a liability to make that payment out of the resources of the scheme. I can assure the Committee that we shall maintain that position. The amendment is, therefore, not required. I trust, in the light of that explanation, that the noble Baroness will be satisfied and feel able to withdraw her amendments.

Baroness Seear: I thank the Minister for that very clear explanation. It is useful to have it on the record. I intend to withdraw the amendment but I wish to ask him one further question. He said that the regulator would make regulations to cover this matter. Will those regulations come before the House? Will it be done by affirmative order? Will we see it? I think it would be reassuring to be told that we shall.

Lord Mackay of Ardbrecknish: If the regulator is making the regulations, I am not sure whether they would come before the House. Regulations made by the Secretary of State or by the Government come before the House in either of the ways. However, I shall check that point and let the noble Baroness know.

Baroness Seear: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 125 agreed to.

Clause 126 [Interim arrangements for giving effect to protected rights]:

Lord Haskel moved Amendment No. 184HB:


Page 79, line 2, leave out ("In the case of a personal pension scheme,").

The noble Lord said: In moving this amendment I shall speak also to Amendment No. 184HC. A few moments ago the Minister spoke to us about choice. He will be delighted to know that this amendment is about choice. It asks why the Government are restricting choice.

The new facility announced in the Budget and provided for under the current Finance Bill allows for the purchase of an annuity to be deferred but cash payments can be taken from the fund in the meantime. The intention is to enable those who retire at times when investment conditions are unfavourable to wait until they are better. The provision in the Bill extends only to appropriate personal pensions. The purpose of the amendment is to find out why it is not also extended to money purchase schemes and other pension arrangements. Obviously the Government intend to encourage personal pensions whenever possible, but it does not seem reasonable that this deferment cannot be extended to people who have chosen other forms of pension. As the Government are very much for choice, I should have thought that they would accept the amendment. I beg to move.

Lord Mackay of Ardbrecknish: It is always nice to know that one's arguments on previous amendments are being listened to. The noble Lord will be hoping that I am listening to his arguments. The effect of the amendment would be to extend the option allowing

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members to draw an income from their appropriate pension fund scheme to the members of contracted out money purchase occupational pension schemes. People in those schemes could delay the taking out of an annuity in their scheme and draw down on income during the years in which they delay taking out an annuity. My understanding is that that is possible currently, or would be possible if the employer agreed, but I think the noble Lord is inviting me to go a little further and give it as a right.

Money purchase occupational pension schemes have a very different tax regime from that of personal pension schemes. Extending the flexible annuity proposals to money purchase occupational pension schemes would not be straightforward. Although, as I have mentioned, some employers may give the right, many other employers would not want to take on the extra administrative work involved with continuing, if I may so describe it, to have someone on their books after he retires. In the normal way of things the person would have bought his annuity and would have removed himself from the ambit of the employer. Members would also have the option to transfer to a personal pension scheme and they could then use the provisions which are currently in the Bill.

My right honourable friend Anthony Nelson, the Economic Secretary to the Treasury, said in relation to this matter in another place on 30th January during the Committee stage of the Finance Bill, which extends similar flexibility to non-appropriate personal pensions:


    "If there proves to be a problem in practice, we shall certainly reconsider the matter but we think that the flexibility for retirement annuity contracts and for occupational pensions is adequate".—[Official Report, Commons, 30/1/95; col. 722.]

On the understanding that the Government have already indicated in the Finance Bill that they are prepared to consider any ideas for introducing more flexibility in this area for occupational pension schemes, I hope that the noble Lord, Lord Haskel, having made the point and having listened to what I said, will be able to withdraw his amendment.

4.45 p.m.

Lord Haskel: I thank the Minister for that explanation and I am glad that he thinks that the proposal adds to the flexibility of the pension regime. Obviously we shall not pursue the matter further as it is being considered. I would just recommend that the Minister consider the proposal favourably because flexibility is another word for choice, a subject on which we were lectured earlier this afternoon. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 184HC not moved.]

Clause 126 agreed to.

Clause 127 [Requirements for interim arrangements]:

[Amendments Nos. 184HD and 184HE not moved.]

Clause 127 agreed to.

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Clause 128 [Interim arrangements: supplementary]:

[Amendment No. 184HF not moved.]

Clause 128 agreed to.


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