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Lord Monson: My Lords, before the noble Baroness sits down for the second time, when she says that pensioners left this country in the full knowledge that their pensions would be frozen, does she agree that they could not have had knowledge of the way in which inflation would totally destroy the value of those pensions?

Baroness Hollis of Heigham: My Lords, that may be true but, equally, although I am not sure that many overseas pensioners with a right to vote will have voted for the present Government, they will be pleased to see that under this Government inflation is now below 2 per cent. Whatever arrangements one makes with regard to pensions, one tries to predict what will happen, whether it be in relation to annuity rates or whatever. None the less, when pensioners left this country--and many will have left during periods of high inflation--they knew what the situation was likely to be regarding their state pensions. The literature is quite unambiguous. I have read the leaflets myself and they are clear. People knew what they were doing and chose to make that decision.

One must consider the cost. Arrangements could not be made with only one country; I suspect that there would need to be open consultation with all the big countries. The cost would be £300 million a year and rising; more so if inflation were to return. That represents a significant part of the budget and that is why the noble Lord, Lord Mackay, regularly resisted the proposal in this House against the wishes of his own Back-Benchers. It is why Mr Hague made the points at least as forcibly in 1995 as I have tried to do today.

Baroness Fookes: My Lords, I had anticipated what the noble Baroness would say and particularly that she would call in aid the record of previous Conservative governments. However, I had a small hope that new Labour might bring forth a new policy. Clearly, it is in the same mould as the old government. That said, I am disappointed that what I considered to be a more modest compromise has not been accepted by the noble Baroness. I do not believe that my modest suggestion is worth going to the stake for; indeed, I

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should prefer to bring forward a somewhat bolder, more full-blooded clause at a later stage. Therefore, at this point, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 79 to 81 not moved.]

Clause 43 [Member-nominated trustees]:

4.45 p.m.

Baroness Turner of Camden moved Amendment No. 82:

    Page 37, line 42, at end insert--

("( ) After subsection (3)(a) there shall be inserted--
"(aa) that the employer shall have no part in the selection of member-nominated trustees, and".").

The noble Baroness said: My Lords, we have now reached a group of amendments which deal with the matter of trustees and governance by trustees. In Committee I moved an amendment designed to ensure that employers played no part in the selection of member trustees. It was not accepted by the Government and today I come back with a slightly different wording which makes the intention absolutely clear.

Under the trustee route, which allows significant flexibility but which is not to be subject to prior consultation with members, the present trustees, who in many cases will not include member trustees, can propose selection by a panel where the employer representatives participate so long as they are in a minority position. It is not clear how the member representatives on the panel will be derived, and it is often the case that senior managers and directors are members of the scheme and their inclusion could shift an employer minority to a majority on the panel.

Managers will be able to make a lot of fuss about competence and experience that may or may not be justified, particularly if there is proper training for trustees, in order to select the management candidates whom they want rather than those who might take an independent view. Candidates may also be deterred from applying if they conceive the panel to be employer-nominated.

Of course, some employers basically oppose the involvement of employee trustees. The present arrangements leave a loophole through which they can exercise undue influence. The amendment seeks to establish that the law requires not only member-nominated trustees but member-selected trustees. Employers have to be told that they must accept representatives of members on the trust board and that they should not attempt to control who those members are.

In putting forward this amendment, I wish to declare an interest as a member of my union, MSF. My union feels strongly about this issue, which is why I return to it on Report. It is very necessary that employees have confidence in their pension scheme, and that is one of the objectives of my amendment. I beg to move.

Baroness Hollis of Heigham: My Lords, Amendment No. 82 would prevent employers taking

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part in the selection of member-nominated trustees. It applies equally to arrangements under Section 16, the trustee route, and Section 18A, the employer route. We discussed briefly a similar amendment in Committee. In that case, the amendment was presented somewhat differently in that it provided that only members or member representatives would be involved in the selection of member-nominated trustees. This amendment approaches the same issue from another direction by seeking to exclude employers from any involvement in the selection of member-nominated trustees.

As I explained in Committee, the trustee route will provide that, where there are more nominations than vacancies, the final selection will be made either by means of a ballot of the members or by a selection panel. We shall consult on the details of regulations in due course. However, the intention is that, if selection panels are used, they must comprise a majority of scheme members or their representatives. On the other hand, the amendment would exclude the employer from sitting on a selection panel alongside members or member representatives. We see no reason to be quite so restrictive.

One of the key objectives of the proposals is to avoid disrupting existing arrangements wherever possible. The effect of the amendment would be to force changes on a number of schemes with long-standing nomination and selection arrangements where the final selection is made by a panel that includes a representative of the employer. I believe that that would be a shame and we should ask ourselves whether it is really necessary.

Under the employer route, employers will have the right to propose bespoke nomination and selection arrangements for their scheme. The proposal must provide for a minimum of one-third member-nominated trustees. However, the provisions are more flexible and for that reason must be approved by the members. There will be more scope for the employer to determine the selection arrangements under this route. That is undeniable. However, the final choice will be from individuals who have been nominated by scheme members; and, most importantly, the proposal will be adopted only if the members agree to it.

Although the amendment would have much the same effect as our proposals, it would force many schemes to change their arrangements for no good reason. I understand fears that employers may use their position to try to secure their preferred candidate. We have very good relationships with OPRA, which my noble friend served with such distinction for many years, and with the many representative bodies in the pensions industry. If there were evidence that the involvement of the employer was having undesirable effects, they would be quick to let us know.

The way the legislation is drafted in the Bill would allow us to respond quickly to any changes by changing regulations. Our new provisions provide the opportunity for schemes to meet the new requirements with the minimum of disruption. They allow for flexibility without undermining the key aim of getting

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member trustees on to trustee boards. I would remind your Lordships that these proposals have the full support of all the key organisations in the pensions industry and I would be sorry if we were to lose that support now. In the end, the decision firmly remains with members and I hope that in the light of this explanation my noble friend will feel able to withdraw her amendment.

Baroness Turner of Camden: My Lords, I thank my noble friend for her explanation of government policy on this issue, and I am not at all surprised at what she has said. Of course part of the argument is that it is not desirable to disrupt existing arrangements, and one would agree with that if they are satisfactory.

The reason for my bringing forward this amendment again in a different form is that it has been apparent to me that a number of unions are not happy that the existing arrangements actually operate effectively. However, I understand that there is to be consultation on the regulations and no doubt there will be an opportunity for some input at that time, particularly if (as seems likely) there is some dissatisfaction with existing arrangements in some quarters. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 83:

    Page 38, line 41, at end insert--

("(10) The Secretary of State shall make regulations providing that all trustees should be required to have attended an approved training course explaining the role and responsibilities of trustees within six months of being either elected as a member-nominated trustee or appointed as a trustee by the scheme's sponsoring employer.
(11) These regulations shall also prescribe the content of such an approved training course.
(12) The failure of a trustee to attend such a course within six months of being either elected or appointed as a trustee shall nullify the trustee's election or appointment.").

The noble Baroness said: My Lords, this amendment deals with the training of trustees. In Committee I moved an amendment designed to make mandatory the training of trustees. There was general agreement at that time that it was very necessary that pension fund trustees should be trained. As we all know, the duties are now quite onerous and the expectations of scheme members are substantial. The scandals of the past, notably that of the Maxwell affair, have to some extent undermined confidence in occupational pensions, despite their success during the past 20 years in providing benefits to former employees.

I recall saying in Committee in response to my noble friend the Minister that we had scored a small victory the last time around, because she agreed with much that had been said and had undertaken that there would be consultation with the industry to see what could be devised. I understand that she has been as good as her word. The consultations have taken place.

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One of the reasons for the amendment therefore is to ask her to tell the House what the Government's view is following those consultations.

Of course the organisations consulted have also written to me, and I am sure they will also have written to a number of your Lordships. So I have some idea of the reactions to the proposals. I believe the Engineering Employers Federation, which was responsible for briefing me at Committee stage in support of compulsory training, is still of the same view although the CBI, while supporting the principle of trustee training, is concerned about the cost of policing a statutory requirement and about the administrative and financial burdens generally that it might impose. It favours legislation for a requirement for training to be made available to trustees at employers' expense. Others favour "best practice" guidelines and disclosure requirements so that in annual reports to members those in charge of schemes would be required to state their policies on trustee training and say which trustees had undergone training, together with the nature of that training.

I still favour some form of compulsion, but I appreciate that it is necessary to secure the willing co-operation of the pensions industry and of pension schemes to bring this about. I am glad that our amendment in Committee prompted an examination and discussion of this very important topic. I therefore wait with interest to hear from the Minister what the Government's response has been both to the debate that we had in Committee and to the consultations which I know have taken place since then. I beg to move.

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