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Lord Higgins: My Lords, the House will be grateful for the Minister's, as always, eloquent exposition. She described the amendment as not reasonable, not feasible, unrealistic and unworkable. One cannot help feeling that there must be something wrong with it somewhere! However, I was fascinated by what she said and believe that we should fax it immediately to Mr Frank Field, who may have different views on this aspect since in the past he used dramatic words about the likelihood of getting a benefit from contributions to some pension schemes. Subject to that, the Minister has given an interesting reply and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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9.15 p.m.

Baroness Turner of Camden moved Amendment No. 23:

Page 2, line 35, after (“scheme") insert (“or that the scheme was established to replace an occupational pension scheme").

The noble Baroness said: My Lords, Clause 2(3) of the Bill allows OPRA to refuse to register a stakeholder scheme which does not fulfil the conditions of Clause 1. This amendment gives a similar power to refuse registration to a stakeholder scheme if OPRA is satisfied on reasonable grounds that the intended scheme replaces an existing occupational scheme.

The Government have said on many occasions that they support occupational pension schemes. I believe that they have been a success story and I believe that my noble friend the Minister shares that view. Their growth in the UK was largely stimulated by the plan introduced by my noble friend Lady Castle of Blackburn in the mid-70s. In addition to providing earnings-related pensions to many who could never before have contemplated them--employees in small companies without pension schemes and so forth--by setting standards for contracting out, it improved existing schemes and actually resulted in the creation of a number of new schemes.

As a result, a generation of pensioners is now much better off than its predecessors--that is, the pensioners who had the opportunity to belong to occupational schemes arising during that period. The stakeholder concept may have--quite unwittingly--the opposite effect. The National Association of Pension Funds, whose meetings I attend fairly regularly, is very concerned that since the employer has an obligation to give access only to a provider, many will believe that that fulfils their obligation. Some employers may feel that having afforded access and agreed to deduct contributions from salaries, there is no need for them to do anything else. Their employees are in a scheme and they have nothing further to bother about; therefore the amount of pension that they receive is a matter for those individual employees.

There is really no substitute for a good occupational scheme. Stakeholder schemes must not be used to replace them. I am sure that that is not the Government's intention, but it may well be the ultimate result. In good occupational schemes the employer is always under an obligation to make a contribution, which is often far higher than the contribution rate paid by the employee. There are usually other benefits in the scheme as well. If stakeholder schemes are allowed to replace such very good provision on all sorts of perhaps spurious grounds advanced by providers, it will not be to the ultimate advantage of pensioners. I hope that the Government will be prepared to look favourably on the amendment which is intended to be helpful. I beg to move.

Lord Higgins: My Lords, I merely add to the noble Baroness's remarks that I share the fear she mentioned. There is some danger that because a company has an occupational scheme which involves

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it in making contributions, it may somehow now regard a stakeholder scheme as the norm, or in some ways the Government's ideal, and will therefore no longer feel obliged to go beyond what it is currently doing. Alternatively, it may simply close the existing scheme to existing members and move over to stakeholder schemes for new joiners. There is a real danger here and I should be interested to hear the Government's response.

Baroness Hollis of Heigham: My Lords, Amendment No. 23 gives OPRA the power to refuse to register or, if it has already been registered, to remove from the register, a stakeholder pension scheme if it is satisfied that it was set up to replace an occupational scheme. Stakeholder pensions are aimed at those people who do not have access to an occupational pension. Membership of an occupational scheme is not an option for the 35 per cent of employees whose employers do not offer a scheme.

I hope that my noble friend will recognise that we share the same commitment to occupational schemes and that we therefore intend stakeholder pension schemes to be a supplement (for those 35 per cent of employees) rather than to replace occupational schemes, which currently cover more than half those in the labour market.

I do not believe that there is anything in our proposals which should lead employers to close existing occupational schemes when they would not otherwise have done so. Employers who now offer an occupational scheme to all employees will not be affected by the requirement to designate a stakeholder scheme. Where employers currently exclude some employees--such as part-timers--they will have the option of changing the occupational scheme rules so that they are included. Equally, I believe it right that we should expect other employers at least to provide access to a good value pension scheme.

I now turn to the particular amendment. I do not believe that, if adopted, it would do anything to protect overall pension provision. An employer with an occupational pension scheme will have to offer a stakeholder scheme only if the occupational scheme does not offer membership to all employees. Affected employers will have a choice: to offer a stakeholder scheme or to extend membership of the occupational pension to all employees. Both measures should increase overall membership.

Of course, as the noble Lord, Lord Higgins, suggested, the employer could simply close the occupational pension and merely offer access to the stakeholder scheme. I believe that that is the concern behind the amendment. We should, however, remember that no employer is compelled to offer an occupational scheme. For those who do offer such a scheme it would surely be perverse to cancel arrangements that are long-established and working well simply because provision has now to be made for all members of the workforce. It is not an onerous additional responsibility.

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But even if we assumed, in the worst possible scenario, that an employer closed his scheme and went over either to a stakeholder or to a money purchase scheme or whatever, I do not believe that the amendment would help. There would be enormous practical difficulties in establishing that a stakeholder scheme had been set up expressly to replace an occupational pension scheme. Indeed, in many cases we expect stakeholder pension schemes to be set up to cater for groups of members spread across a range of employers. Even if it could be shown that the stakeholder pension scheme had been set up to replace an occupational pension scheme, refusal to register the replacement scheme could simply make it more difficult for the employer to comply with the employer access requirement. I cannot believe that that is what my noble friend intended.

Therefore, I hope that my noble friend will accept our commitment to occupational schemes. I hope that she will accept that we do not follow her reasoning on this--that employers will be motivated to close down good occupational schemes and take up a stakeholder scheme where, for example, so far they have not moved from final salary to money purchase over the past few years. There has been virtually no movement on that front, or very little.

In the light of that explanation and the fact that, even were this amendment to be passed it would not offer any protection against what she most fears, I ask my noble friend to withdraw her amendment.

Baroness Turner of Camden: My Lords, I thank my noble friend for that explanation of the Government's position. Unfortunately I have some doubts about it because it seems to me that a number of employers might very well find that closing their scheme and opting for a stakeholder scheme is a cheaper option, a cheaper option that would enable them to fulfil their obligation as they see it and still provide access for their employees to some form of pension provision. I believe that that could be a very real danger with the proposition contained in this Bill. As I indicated earlier, I am not alone in that belief. That is the view of a number of quite large pension schemes represented in the NAPF. That view was advanced very strongly by the president of the NAPF at a meeting which I recently attended.

Therefore, a genuine fear exists among proponents of occupational schemes that this could have a weakening effect. One must remember, of course, that the number of new final salary schemes that have been opened in recent years is very small.

Lord Higgins: None.

Baroness Turner of Camden: My Lords, the noble Lord, Lord Higgins, says that there is none. Yes, exactly, because employers regard it as an open-ended and expensive commitment and they may well regard the stakeholder provision as a very much cheaper option. That is one reason that I felt it was a good idea

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to table this amendment. However, I do not intend to call a Division on this issue at this particular stage, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 [Duty of employers to facilitate access to stakeholder pension schemes]:

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