Previous Section Back to Table of Contents Lords Hansard Home Page

Lord McIntosh of Haringey: I am grateful to the noble Lord. What he says corresponds with my experience. I had two group personal pension schemes. As to one of them, I said that I would not as an employer put in anything unless employees put in 5 per cent. If they did that I would also put in 5 per cent. As to the other scheme, my fellow directors said that they would put in money even if the employees put in only 2 per cent. I thought that that was quite inadequate. I do not believe in encouraging employees to deceive themselves into thinking that they have adequate pensions. It is right to make a real contribution, and that is what good employers should do.

Lord Peston: I have been listening to my noble friend most attentively but occasionally I become lost in the technicalities, in particular his argument on compulsion. Perhaps at a later stage we can come back to it. I thought that my noble friend's argument on compulsion was decisively in favour of it, and then he suddenly concluded that he was against it. He lost me completely on that. The remarks of the noble Lord, Lord Goodhart, on compulsion--in particular that within a firm one would not want to have similar workers with different packages--were overwhelmingly correct. We can return to that on another occasion. But I became really lost when my noble friend spoke about the self-employed. I believe that the self-employed are eligible for the stakeholder pension. We keep switching--outside the rules of the game--to the state second pension. I am trying to keep that out of my mind because, as I understand it, that is not part of this Bill. Nonetheless, as we have wandered into that matter, will the self-employed be eligible for the state second pension--or is it wrong of me at this stage even to ask the question?

Lord McIntosh of Haringey: I hope that I did not give a false impression. My noble friend is right to say that the self-employed are able to join the stakeholder pension. I did not mean to suggest--if I did--that a

24 Jun 1999 : Column 1105

decision had been taken about the self-employed and the state second pension. We are still consulting on that matter.

I hope that I have made clear that we are very strongly in favour of giving every encouragement both to employees and employers to participate in adequate pension schemes. It is not because of any antagonism to employer contributions that we resist these amendments. We believe that, because of the effect on lower paid workers in particular and the need to provide encouragement at both ends, it is a better to rely on encouragement rather than compulsion at this stage. Therefore, we must resist Amendment No. 2 and, in due course, Amendment No. 19.

Baroness Turner of Camden: I thank my noble friend for his very comprehensive answer to all the arguments raised in what I believe has been a very useful and interesting debate. However, I still hold to the view that it will be very difficult to persuade younger people in particular to contribute the necessary amount to provide them with a proper pension when they reach retirement age. Very few people will understand just how much of their disposable income they are expected to invest if they are to be properly looked after when they reach normal retirement age. For that reason, my amendment suggests that employers should make a minimum contribution.

My noble friend said that everything possible would be done to persuade employers and employees to participate in pension provision, and for that I am grateful. However, I should like to consider what has been said in the debate this afternoon, with much of which I agree. For example, I agree absolutely with the noble Lord, Lord Freeman, that everything possible must be done to encourage defined benefit schemes as distinct from money purchase. On the other hand, the amendment is designed to ensure that whatever method is used, whether money purchase or defined benefit, there is still a necessity for the employer to make a payment.

Lord McIntosh of Haringey: Before my noble friend leaves that point, perhaps I should respond to one point made by the noble Lord, Lord Higgins. He suggested that it would be necessary for employers to close occupational pension schemes, if I understood him aright, as a result of our proposals. That is certainly not our intention. Those who offer occupational pension schemes will face no extra requirement, and those who offer an occupational pension scheme to some employees but not others can extend that scheme if they want. I thought it necessary to make that clear in case that was in the mind of any Member of the Committee.

Lord Higgins: I am trying not to be disorderly. I did not want to make an intervention in an intervention. The noble Lord misunderstood me. I am suggesting that people who are in a scheme where the employer makes

24 Jun 1999 : Column 1106

a contribution may well feel that they should switch to a stakeholder pension which does not require a contribution.

Lord McIntosh of Haringey: That was what happened after 1988 when occupational pension schemes could no longer be part of a contract of employment. That happened under the Conservative government--and a very bad thing it was, too. That shall not happen in any additional way under this proposed legislation.

Baroness Turner of Camden: The comments of my noble friend remind me of the debate on pensions that we had at that time. I remember tabling an amendment to try to provide for compulsory membership of occupational schemes. That amendment was defeated because it was opposed by the then government. I agree with the noble Lord, Lord Goodhart, that if there are compulsory employer contributions there must, therefore, be a compulsory contribution by the employee. I agree that that is completely logical, and I would feel inclined to support it. However, for the time being anyway, I do not intend to seek to divide the Committee, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 3:

Page 1, line 12, leave out subsection (2)

The noble Lord said: Clause 1 (2) reads as follows:

    "The first condition"-- of a stakeholder scheme--

    "is that the scheme is established under a trust or in such other way as may be prescribed". We change gear slightly at this point, moving from the broad issues we have been discussing to something which is much more specific, because we have sought to focus some of the amendments on particular points. This is one which has already received a great deal of consideration.

What is slightly puzzling at a rather tedious level is this: if establishment of the scheme can be prescribed in "such other way" as may be thought appropriate by the Government, why does "trust" have to be mentioned at all? Perhaps in a way it is fortunate that the Government have mentioned it, because that has resulted in many representations from outside bodies. The Government now seem very confused about whether some of the schemes will be trust schemes and some will not, or whether none of them will be trust schemes, or whatever.

The outside representations seem by and large to come down against trust schemes. The National Westminster Bank said in its response:

    "We don't believe a trust-based governance is necessary. Trustees can add little extra protection but will make schemes more complex and expensive to administer." Pearl stated:

    "The Green Paper's proposal on establishing independent trustees for stakeholder pensions will increase rather than decrease the cost of administering the schemes."

24 Jun 1999 : Column 1107

    Therefore, I hope that the Minister can indicate what the Government's position is given that it has become a little unclear whether they are or are not in favour of a trust-based scheme.

It seems to me that there could be two quite different animals. There could be a scheme with trustees, which in effect would be the same sort of set-up as we have with an occupational pension scheme; presumably the trustees would be responsible for operating the trust and would employ fund managers to manage the assets and so on. On the other hand, a scheme could be entirely on an insurance company sort of basis, where no trustees are involved.

My particular concern is this: if one is to do it on a trustee basis, where will one find the trustees? They will not necessarily be paid. I would guess that most trustees are not, so the cost point which is made in the response to the Green Paper which I have just quoted is perhaps a little unfair.

That having been said, the responsibilities of trustees are very considerable. Following the Pensions Act, which was rightly introduced to deal with events following the Maxwell scandal--when the trustees seemed to hold the most incredible views on the difference between the assets of the trust and the assets of the company--those responsibilities are even more onerous than they were before. Some of the hazards were exemplified in a report in Pensions Week a little while ago, which said that OPRA "takes charity to court." The trustees of a particular charitable pensions fund, who had not fully conformed with the requirements imposed by the legislation and by OPRA, found themselves open to prosecution and considerable prison sentences. The Government may well find it not all that easy to have a stakeholder pension scheme with trustees, given that they are unlikely to be paid and that they will expose themselves to very considerable problems with regard to the administration of the trust.

Am I right in thinking that the Government are fairly clear now that they are not going down the trustee path; or is it otherwise? When I look at some of the other pension provisions, I am not at all clear what will happen about the state second pension. I presume the point does not arise there at all. No doubt the noble Baroness will clarify that. My understanding is that LISAs certainly will not have trustees. The whole issue has become a little unnecessarily crowded, partly because of the wording of the clause, which seems to imply that there may or may not be trustees. Perhaps we may have a reply from the Minister which will clarify the situation.

6.15 p.m.

Baroness Turner of Camden: I hope that my noble friend the Minister will not accept the amendment. Unions which have been involved in discussions over stakeholder pensions and so on are rather keen on the whole idea of having them written under trust law. The idea is that if trustees emerge as a result of some form of election, that will give people more confidence that

24 Jun 1999 : Column 1108

the stakeholder scheme with which they are involved is under lay administration or governance to some degree, and they will therefore feel more protected.

I accept that trustees now have quite onerous responsibilities. Therefore, once trustees were appointed, it would be necessary to make sure that they were properly trained so that they could carry out their task on behalf of the members of the scheme. Frankly, I think that to have stakeholder pensions written under trust law is a good idea, and I hope that the Government will not depart from that.

Next Section Back to Table of Contents Lords Hansard Home Page