§ Mr. Ingram
I beg to move amendment No. 16, in page 5, line 7, at end insert—'(1 A) Where an application is received from the member nominated trustees of a scheme and where those member nominated trustees including any pensioner trustees selected by the members of the scheme comprise less than 50 per cent. of the total number of trustees the Authority may direct the trustees of the scheme to appoint an independent trustee to be drawn from a register of approved trustees to be compiled by the Authority.(1B) The Authority shall establish and maintain a register of approved independent trustees.( IC) Where a direction under Clause 7(1)(a) is not complied with, sections 3 and 10 apply to any trustee who has failed to take all such steps as are reasonable to secure compliance.'.
§ Mr. Deputy Speaker (Sir Geoffrey Lofthouse)
With this, it will be convenient to discuss the following amendments: No. 1, in clause 16, page 9, line 39, at end insert—'(6A) The arrangements must provide that when a scheme has more than 850 members, and pensioner members comprise a majority, one additional trustee shall be nominated, who shall be a pensioner member of that scheme.'.No. 10, in clause 16, page 9, line 39, at end insert—'(6A) The arrangements must provide that when a scheme has more than 500 members, one trustee shall be nominated who shall be a beneficiary of that scheme or a person approved by the beneficiaries of that scheme.'.No. 11, in clause 17, page 10, leave out lines 4 to 30.
No. 12, in clause 17, page 10, line 9, after `procedure', insert`and are not rejected by at least 10 per cent. of active and pensioner members or by 5, 000 such members, whichever is the lesser number.'
§ Mr. Ingram
In dealing with this group of amendments, I shall speak to amendments Nos. 16 and 1.
Amendments Nos. 16 and 1 set out to achieve very different objectives. Simply put, the purpose of amendment No. 16 is to provide a mechanism for member-nominated trustees in schemes with less than 50 214 per cent. of member-nominated trustees to ask the regulatory authority to appoint an independent trustee. If the grounds for that application satisfy the authority, the authority may direct the trustees of the scheme to appoint an independent trustee from a register of approved independent trustees.
Those of us who have spent weeks and months achieving a smattering of knowledge about the Bill will know that it already gives the regulatory authority considerable power to remove or suspend trustees in given circumstances: clauses 3, 4, 5 and 6 refer to those powers. Provisions also permit the appointment of independent trustees in given circumstances: clauses 23, 24 and 25 relate to those powers. Amendment No. 16 proposes that member trustees be given a role in that process in circumstances where they consider it to be in the best interests of scheme members that an independent trustee be appointed to assist in the on-going running of a scheme.
Although the issue was dealt with briefly in Committee, it was discussed in broad terms. Amendment No. 16 adopts a specific approach. Amendment No. 68, which was debated in Committee on 9 May, drew particular attention to clause 7(4), which vests wide-ranging powers in the regulatory authority, including the power toappoint a trustee of a trust scheme in prescribed circumstances.It could well be argued that amendment No. 16, which aims to give powers to member-nominated trustees to adopt such an approach, is already covered by clause 7.
Although I do not wish to go into all that was said in Committee on 9 May, I think it is worth examining what the Minister said:Clause 7 deals with the power to appoint trustees. In view of the expense that an additional trustee might impose on a scheme, the Government felt that it was important not to give the authority unfettered power to appoint trustees in any circumstances. That would have been one of the alternatives to a regulation-making power. Indeed, we have sought to set out on the face of the Bill the situations in which we believe that the power is most likely to be exercised.The Minister continued:It would be nice to think that we had been able to anticipate all such situations, but we need to be able to add to the list in case, in the light of experience, there proved to be other situations where it would be desirable for the authority to be able to make appointments."—[Official Report, Standing Committee D, 9 May 1995; c. 107–8.]We could drift into an argument about the unfettered powers of the regulator, as we are dealing with the powers vested in the authority and in the Government, through regulation; but I think it useful to examine precisely what the Minister said on 9 May. The amendment gives him the chance to be "nice". We had some pleasant debates in Committee, and I am sure that this would not be the first or, indeed, the last opportunity for him to be nice.
Others have speculated about the future that lies before the Minister, given the events that have taken place elsewhere this afternoon. Someone may well be nice to him if he is nice to those who tabled amendment No. 16. What could be nicer than to accede to the request of member-nominated trustees that an independent trustee be appointed? If such a request were made, it would not be made lightly or frivolously, but in the context of specific circumstances pertaining to specific schemes.
The argument in support of the amendment is linked to the wider debate on the number and percentage of member-nominated trustees appointed to schemes. That 215 issue, too, was debated extensively in Committee: we discussed the balance between member and employer-based trustees, which was also dealt with at length in the other place. Strong arguments were advanced in favour of the principle of a 50:50 split between member and employer-nominated trustees, notwithstanding the view adopted by the Goode committee—and expressed in the Bill—that the statutory requirement should be a minimum of one third member-nominated trustees in schemes above a certain size. It is worth repeating that some of the best and biggest final-salary schemes in the country operate above that minimum: Rothmans, Jaguar, Leyland DAF, Thomas Cook, Shell, Allied Lyons, Albright and Wilson, Courtaulds, Lucas, Sainsbury and Boots all have 50 per cent. member-nominated trustees.
ICI has six employer trustees, six member trustees and one independent trustee; its scheme has been in operation since 1926. Unilever—one of the top companies internationally, not just in the United Kingdom—has 12 employer trustees, 12 employee trustees and one pensioner trustee. That, without doubt, is a roll-call of some of the best companies in British industry, and it could be expanded further. For instance, the Rolls-Royce pension scheme has 80, 000 members and a market valuation of £1.63 billion. It goes further than most: it has 13 trustees, five appointed by the company and eight elected by the members.
§ Mr. Michael Stern (Bristol, North-West)
The hon. Gentleman and I share the distinction of being Rolls-Royce Members. Does he agree—I hope to say more about this later if I catch your eye, Mr. Deputy Speaker—that, at least until recently, not a single pensioner was represented among those eight employee trustees?
§ Mr. Ingram
That is true, but it could be changed tonight if the hon. Gentleman votes with us. Rolls-Royce falls into a category with which I shall deal when I speak about amendment No. 1; at present, however, I am speaking to amendment No. 16, and referring to the balance between member and employer-appointed trustees.
The Government rejected our argument originally. An earlier amendment was not selected, and this is not an attempt to return to it, but the underlying argument in amendment No. 16 relates to the rights, role and functions of member-appointed trustees, and what they can and cannot do. It aims to give them additional power, strictly regulated by the authority. I think that the point made by the hon. Member for Bristol, North-West (Mr. Stern) is more relevant to amendment No. 1.
In Committee, in another place and on the Floor of the House, Ministers have strongly opposed the extension of the one third-two thirds member-employer relationship laid down in the Bill, but that argument is not solid. It is based on the list of companies during the two Committee stages. There is nothing to show that a 50:50 split is impracticable, cumbersome or costly; if it were, none of those blue-chip schemes would have adopted such an approach. Experience and best practice tell us that the 50:50 balance is a respectable and tried-and-tested approach.
216 On 16 May, the Under-Secretary of State said—this relates directly to the underlying principle of amendment No. 16—However, it would not be right for us to go further than setting a floor. We have set a floor of at least a third of the trustee board being member nominated and many people may wish to build on that floor."—[Official Report, Standing Committee D, 16 May 1995; c. 173.]If the Government are serious in their intention that schemes should be allowed to build on the one third-two thirds floor set down in the Bill, they can have no argument against amendment No. 16, which provides for precisely that. It identifies the concept of the floor and allows member trustees to argue something at variance with that floor—again, only with the approval of the regulatory authority. Clearly, granting the power proposed in amendment No. 16 would give much encouragement to member trustees who may be operating in a one third-two thirds environment and finding that all their reasonable requests are simply being rejected or overturned by the majority view of the trustees.
We accept and understand that the purpose of trustees is not to represent sectional interests, but another argument is involved here that does not stand up to examination. To be realistic, it must be recognised that, in many instances, employer-based trustees will represent the interests of their company where they believe the better interest of the company must be served and, likewise, employee-based trustees will seek to operate in a similar fashion. That is the reality.
§ 8 pm
§ Sir Andrew Bowden (Brighton, Kemptown)
The hon. Gentleman makes the point about specific interests being represented by trustees. Surely each group has a specific interest. Employers have an interest and contributors to the scheme who are still employees have an interest. Why do we not have a pensioner interest as well? They all have particular interests to further and to work for.
§ Mr. Ingram
I agree entirely. I do not have time to return to the Second Reading debate but, in reply to it, I welcomed the hon. Gentleman's speech and suggested that it might be worth his serving on the Committee as he was clearly a man of independent spirit and mind. His views could have added considerably to our debates in Committee. I do not know whether it was his or someone else's choice that he did not serve. He makes a strong, valid and telling point, but it deals with amendment No. 1, to which I shall come shortly. I agree, however, with his point.
The Government say that there must be a floor of one third member-nominated, employee-based trustees, which can be exceeded and amended with the approval of the trustees, the company that is funding the scheme and the other contributors. In those circumstances, however, member trustees who consistently argue what they believe to be a reasonable case and find themselves frustrated—it will and does happen—have no way of amending the scheme to achieve a 50:50 split.
Amendment No. 16 therefore proposes the simple mechanism of putting a case to the authority. If there is a logjam and something in a scheme is not in the interests of the scheme members, who may be losing out because of the intransigence of the employer trustees, those 217 members could say to the regulator, "Please consider the appointment of an independent trustee to assist us in determining a way out of this impasse."
It is important to consider in detail what amendment No. 16 proposes. It does not propose that power be given to member trustees to insist that an independent trustee be automatically granted. That must happen by leave of the regulatory authority, so that important power resides elsewhere. Clearly, trustees would need to submit a strong case to satisfy the conditions that are likely to be laid down by the regulator.
That is the underlying principle of amendment No. 16. It touches on some of the arguments relating to the balance of trustees on schemes. If passed, it would give some comfort to member trustees who may be battling away, doing their best in difficult circumstances and acting honestly to achieve changes to the operation of the scheme, but making no progress. In the normal course of events, they would have no recourse other than to the authority. Amendment No. 16 says that one helpful recourse would be for member trustees to be able to put the case to the authority that they need to break the logjam or to overcome the difficulties that they face. If the authority agrees, an independent trustee could be appointed and would undoubtedly be of great benefit not just to trustees, but to the scheme members involved in a scheme.
I commend amendment No. 16 to the House on that basis. Others may wish to speak in relation to this point, but I suspect that the real debate will take place in relation to amendment No. 1, which relates to the appointment of pensioner trustees.
All those who have been involved in the consideration of the Bill—and, I suspect, all other hon. Members—have received considerable correspondence from a wide variety of interests making the case for a pensioner trustee. The issue was debated at length in another place, and of course during our deliberations in Committee. When the matter was considered in the other place, a wide-ranging amendment was proposed. It says simply:At least one trustee to be nominated by pensioner members of the scheme".That wide-ranging demand was modified when we debated the matter in Committee.
Despite the fact that in this country there are 4, 500 schemes with 1.83 million members that have a pensioner trustee, the Government have rejected the arguments in favour of the principle proposed in the amendment. Lord Mackay of Ardbrecknish said:If pensioner members were singled out to have the right to nominate their own trustee, there could be a danger that that trustee might not enjoy the confidence of active members."—[Official Report, House of Lords, 13 February 1995; Vol. 561, c. 460.]That is a strong statement by a Minister, but he did not back it up with any facts. He simply ignored the fact that 4, 500 schemes already have such an approach. I am aware of no evidence—perhaps the Minister has evidence that Lord Mackay received but did not give to his Committee—that the pensioner trustee members in those schemes do not enjoy the confidence of active members. If the Government are basing their rejection of the principle of pensioner trustees on such an assertion, they must prove their case. That case has not been proven.
§ Mr. Frank Field (Birkenhead)
Is my hon. Friend not being typically generous to Treasury Ministers? If their 218 argument is correct, surely they must move even further. If the pensioner interests on pension trusts are behaving in the way that was described in the other place, surely they should be removed from the trust.
§ Mr. Ingram
I thought that my hon. Friend was going to say that those Ministers should be removed from the Treasury, but that may come as well. That is a strong point. If pensioner trustees did not enjoy the trust of active members, that action could be taken. The case advanced by Lord Mackay of Ardbrecknish was not supported by any fact, but he based his rejection of the arguments advanced in another place on that case.
In Committee on 11 May, the hon. Member for Antrim, South (Mr. Forsythe) moved an amendment with the support of Labour Members, which appeared in column 143 of the Official Report.He was more specific about the way in which this matter should be dealt with. Rather than adopting the general approach of the amendment in the Lords, his amendment provided:Once a scheme of more than 1, 000 members comprises a majority of pensioner members, for at least one trustee to be nominated by pensioner members on that scheme".Clearly that narrows it down to particular schemes—large, mature schemes. It says that, where there was a majority of pensioner members, one of the trustees should be nominated by pensioner members on that scheme. That was an advance on what was being proposed in the other place simply because it dealt with schemes that operate in a particular way. It was supported by the arguments advanced in the Goode report. That document was used extensively in Committee.
On page 261, Goode reported thatThe case for pensioner trustees is not without merit. There is some anxiety that the interests of pensioners may be very much in the background if there is no pensioner trustee, particularly since they are not involved in the negotiating process between employer and employees. In addition, they are thought to be less susceptible to some of the pressures that face active members. The case for pensioner trustees is particularly strong where they represent the majority of the scheme beneficiaries".Goode went on to reject the idea of pensioner trustees. However, the analysis that I have quoted is met by the amendment that was moved in Committee by the hon. Member for Antrim, South, and met, in its entirety, by amendment No. 1.
Simply put, the case for pensioner trustees is that a pensioner trustee will bring a wealth of experience to a trustee board. The experience of the many schemes that have pensioner trustees shows that such trustees tend to be people with considerable experience in the company. Many are retired senior managers who know the company inside out, who are committed to advancing the company's interests, who have served for many years, ensuring that the company was successful, and therefore who want it to continue to be successful. There is incredible loyalty among the pensioner trustees whom I meet and many pensioner members of schemes who wish to serve in that capacity. They have a loyalty to the company that they have served—in many cases, for 20, 30 or 40 years. They often bring expertise of senior management.
Perhaps more important—this argument was picked up by Goode in the passage that I quoted—pensioner trustees would not be susceptible to pressure from elsewhere. That is very important, given the new concepts that have been developed in the Bill about whistleblowing.
219 We must live in the real world. Many member trustees would have second thoughts about blowing the whistle if they considered, notwithstanding the protection that may or may not be in the Bill, that they had only, say, a 40 per cent. question mark in their mind about wrongdoing. Most member trustees would have to be very satisfied about what was going on before they ever blew the whistle on the scheme.
Such pressure and uncertainty would never exist in the mind of a pensioner trustee. A pensioner trustee has no need to fear, however strong his commitment and loyalty to the company. The minute that there was any hint of mismanagement or perceived irregularities in the operation of a scheme, he would not hesitate in blowing the whistle.
§ Mr. Stern
I am not sure that I follow the hon. Gentleman's logic. Employer-nominated trustees or member-nominated trustees have a vested interest in the well-being of the scheme, which may in itself encourage them to blow the whistle over malpractice, but surely the same considerations apply to a pensioner trustee whose pension is not necessarily purchased outside the scheme but depends on the future funding of that scheme by the employer and by existing employees.
§ Mr. Ingram
I am not adopting an absolute position that pensioner trustees will always operate on that basis—they will undoubtedly have other factors in their mind. I hope that I have not lost the support of the hon. Gentleman for that concept because he believes that there is illogicality in what I have said.
§ Mr. Frank Field
If the hon. Member for Bristol, North-West (Mr. Stern) recalls the genesis of the Bill, it resulted from what happened in the Maxwell pension schemes. An employer removed people at his will if they did not do as he wished. That would not occur if they were retired, because they would not have jobs to lose, which would lose them the place on the pension scheme.
The case of Imperial Tobacco appeared before the courts. Trustees had been removed from pension schemes, and the judge said that to lose one set of trustees was carelessness, but to move two was a much more serious charge against the employer. Surely, given the origins of the Bill, we are trying to build some safeguard into it.
§ Mr. Ingram
My hon. Friend makes his own argument extremely well, based on his knowledge and experience of investigating that specific scheme. My memory tells me that one of the trustees was not simply moved but was sacked by Maxwell, because he was the one who was identifying much of the wrongdoing. That trustee was dismissed from the company, not from the trust, but obviously, the minute that he was out of the company he was no longer eligible to serve as a trustee. That could not happen to a pensioner trustee, who is free to tackle such matters.
I do not believe that such things will be happening daily. We have come to expect and accept that most pension schemes in this country are well run. However, it has been clearly proven—in the Maxwell case and in many other cases documented in the Goode report and elsewhere—that irregularities do creep in and major 220 wrongdoing does take place. A pensioner trustee would simply be another bulwark against that eventuality occurring in schemes covered by amendment No. 1.
Some people may want to argue differently, but I emphasise that amendment No. 1 does not argue that pensioner trustees should be appointed as of right. A pensioner trustee should be appointed only to mature schemes, the majority of whose beneficiaries are pensioners.
We must respond to another development that has taken place in the economy in which we all now have to exist. Many large companies have been divesting themselves of employees rapidly in the past 10 or so years, creating a shift, which many people could not have predicted, in the balance in pension schemes between active members and pensioner members.
The National Federation of Post Office and British Telecom Pensioners says, in its briefing material, which has been sent to all hon. Members, that 66.3 per cent. of members of the Post Office scheme are pensioners and 69.4 per cent. of members of the British Telecom scheme are pensioners. In absolute terms, there are 192, 000 pensioner members in the Post Office scheme and 211, 000 members in the BT scheme. Those are very large numbers of people who have no right of direct representation.
Ten or 15 years ago, people could not have predicted that shift, which has been mirrored in large scheme after large scheme, and the percentages to which the National Federation of Post Office and British Telecom Pensioners draws attention are borne out by arguments advanced by other groups acting on behalf of pensioners' interests.
It is therefore right that that reasonably new and developing make-up of pension schemes—of pensioners being in the majority—is recognised.
I accept that the Government may argue that there is nothing to prevent pensioner members from becoming trustees. We discussed that at length in Committee, and it is correct. Pensioners can become trustees if they are so elected.
However, we should return to the real world. The real world proves that it is very difficult for pensioners to organise. They lack the financial resources; they do not necessarily have all the relevant information to hand. It is quite a task to organise 192, 000 pensioners, as in the case of the Post Office scheme, or more than 200, 000 in the BT scheme.
I accept that 850 members is an arbitrary figure. Other figures could be set; I think another amendment sets the figure at 750. In Committee, the hon. Member for Antrim, South set the figure at 1, 000. It is the principle that is being argued for.
I hope that the Minister will accept the arguments about the need to recognise the changed circumstances that now apply in many large pension schemes and the important role that pensioner trustees can play in a free and unfettered way. They would not need to look over their shoulders or worry about employer pressure if they reported perceived wrongdoing in a scheme.
The expertise that those pensioners can bring to the operation and management of individual schemes is important. There is a wealth of talent screaming out to he included in many sue) schemes. We can address that argument by accepting amendment No. 1. I am sure that it will be warmly welcomed by hundreds of thousands of pensioners in schemes throughout the country.
§ Sir Andrew Bowden
I should like to concentrate my comments on amendment No. 10, which stands in my name and that of the hon. Member for Birkenhead (Mr. Field). I support a large part of the comments made by the hon. Member for East Kilbride (Mr. Ingram) in moving his amendment.
I ask the Government to understand that there is strong feeling among pensioner organisations about their lack of representation. Many hundreds of thousands of people are involved. They are frustrated because they feel that they have no effective say and no direct influence on the handling of schemes or on the boards of trustees.
I know that there was considerable debate on this issue in Committee, where my hon. Friend the Minister for Social Security and Disabled People said:The Government agree that there should not be a requirement to appoint pensioner trustees, but we are trying to facilitate pensioners having a voice on an equal basis with active members, which would go further than the Goode report suggested."—[Official Report, Standing Committee D, 16 May 1995; c. 156.]I am glad that they are trying to do that. What we are asking my hon. Friend the Minister to do tonight is to put those words into operation. It is a great opportunity for him to do so.
I believe that the Goode committee side-stepped the matter. It took the soft option when it used words to the effect that pensioner trustees should be encouraged. It should have gone much further. I do not know why it did not. I suspect that there was some disagreement in the committee about how far it should go and it compromised on encouragement instead of being more positive.
The 1993–94 report of the pensions ombudsman makes an interesting statement:Trustees' conflicts of interests…Trustees are often appointed from the management sponsoring company, or company itself … Conflicts of interest can arise in which consciously or unconsciously the individual concerned may not distinguish between their differing responsibilities adequately.That refers to the point that we were discussing earlier.
Frankly, it is a fig leaf argument to claim that trustees should not represent sectional interests. In the real world, in practice, they do. Quite correctly, employers and member trustees have sectional interests. Why on earth should not the pensioners have a sectional interest and a sectional voice, too?
§ Mr. Peter Griffiths (Portsmouth, North)
I hesitate to interrupt my hon. Friend, but he and the hon. Member for East Kilbride (Mr. Ingram) used the phrase "pensioner trustee". My interest was not aroused when the hon. Member for East Kilbride used it because amendment No. I refers to a trusteewho shall be a pensioner member",but amendment No. 10 refers to a trusteewho shall be a beneficiary of that scheme or a person approved by the beneficiaries of that scheme.Is my hon. Friend using those two phrases interchangeably or does he see a distinction between a pensioner trustee who is a pensioner and a trustee appointed to look after the interests of pensioners?
§ Sir Andrew Bowden
There is a distinct difference on this point between amendment No. 1 and amendment No. 10, which extends a view that I have expressed in the House before. Where appropriate, we should encourage people to join boards of trustees who are not necessarily 222 beneficiaries and who do not necessarily contribute to the scheme but who would be there with the approval and support of the pensioner beneficiaries. That would enable a much wider range of people to join trusts and use their expertise and knowledge.
In groups of beneficiaries, there will be individuals who could do a very useful job, but there may well be occasions when the beneficiaries will want to bring in from outside somebody who might have had a great deal of experience and knowledge of pension matters. Such a person might be a retired solicitor who specialised in that subject or a Member of Parliament who had retired or whose services had been disposed of by the electorate but who had some expertise that could be used. There is a range of possibilities. We should not be rigid and say that trustees must come from one category or another.
§ Mr. Andrew Miller (Ellesmere Port and Neston)
As a Back Bencher, I appreciate the difficulty of drafting amendments. For clarity in this debate, would the hon. Gentleman confirm that he uses the word "beneficiary" to mean somebody in receipt of a pension? I ask because there has been confusing use of that word. For example, consider the judgment against Lord Hanson in the Hanson-Imperial Tobacco case. The word "beneficiary" is used to cover active scheme members, deferred pensioners, pensioners and, indeed, the company. I take it that the hon. Gentleman means specifically those people in receipt of a pension.
§ Sir Andrew Bowden
Yes, I mean people who actually get the benefit of the pension. It is always difficult, as the hon. Gentleman said, for Back-Bench Members to get the wording of amendments exactly right. I am sure that my hon. Friend the Minister knows what I mean and I am certain that the House does.
I should be delighted if my hon. Friend the Minister were to say, "I have to tell my hon. Friend that his amendment is not quite correctly worded, but I agree with the spirit of what he intends and wishes. I shall take it back to my Department, get the wording right and submit it through further stages of the Bill so that it will become law." I very much hope that that will happen. I am clear that I am talking about those actually in receipt of a pension.
There are large groups of people who meet regularly to discuss their schemes and their problems as pensioners. There is one other thing that slightly worries me. I have no specific, hard evidence to establish it, but I get the feeling that there is some prejudice against allowing pensioner beneficiaries to become trustees because there is a feeling that they might be a bit old and past their best. People wonder whether they can really make a useful contribution. I hope that that is not the case because a large number of people in their 60s, 70s and, indeed, 80s are very able. There are some hon. Members in that age group who are excellent Members of Parliament. I therefore trust that I am mistaken, but I have a feeling that I am not.
There is also a feeling that beneficiaries who are on the board of trustees will lack impartiality. I should not mind if they lacked impartiality in the sense that they were battling to ensure that the beneficiaries got a full and fair deal. If we put the right people on boards—people who can also consider the overall position of the trust and the decisions that it has to make—they could make a valuable contribution.
223 I hope that my hon. Friend the Minister will be more positive tonight than he was in Committee. I look forward to hearing what he has to say.
§ Mr. Frank Field
I support amendments Nos. 1 and 10 for various reasons. My hon. Friend the Member for East Kilbride (Mr. Ingram), who spoke with typical force, outlined one of the most important arguments that we ought to consider. No one but a knave or a fool would claim to have the panacea with which to safeguard pension funds. We are trying to knit together a series of mechanisms that will minimise the chance of any group of pensioners going through what the Maxwell pensioners had to go through.
When my hon. Friend the Member for East Kilbride spoke about the need for pensioner trustees, he meant that they might be less easy to nobble than other trustees, given the frailty of human nature. He was not saying that, if only we had a pensioner trustee on every trust, we could guarantee the safety of the funds. We could not do that, but the chances are that we would improve the safety of funds if there was such a trustee whose job was not dependent on his carrying out his employer's wishes.
In response to my intervention, my hon. Friend made my point more forcibly than I did and in the manner that I should have employed. People are often on boards because they hold a particular job. If they prove difficult as trustees—if they do not do what the employer wants—they risk losing their job because dismissal can be the only way to take them off the trust board. It is crucial to have on the board a number of people who speak the truth as they see it, without fear or favour of their employer.
§ Mr. Mark Wolfson (Sevenoaks)
I agree with what the hon. Gentleman says about people who are trustees of a pension fund and in related employment. Often, the pressure may not be as direct or overt as the risk of losing a job. If someone is making a nuisance of himself, as it were, his prospects in the company can be diminished—it might be no more than that, but it can nevertheless be very damaging.
§ Mr. Field
Most people would be helped by there being an independent/pensioner trustee behind whom other trustees could group their arguments. I should hope that that case alone would persuade the Government even at this late hour to improve the Bill by accepting the amendments.
There is another reason for supporting the amendments. The more the Government claim that people do not speak for specific sectional interests but are bound by trust law, the weaker is their case against having on trust boards people who represent particular special interests. In this context, I disagree slightly with the way in which my hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden)—I call him my hon. Friend tonight—presented his case. It is important to have on trusts people who represent specific ideas while abiding by the framework of trust law, or who have a general duty to promote the trust, as specified in law.
Let us consider our roles as Members of Parliament. We all enter the House with a party label. Indeed, we should be foolish to think that we would be elected without our party 224 labels. We therefore bring a particular interest, whether it be Labour, Tory or Liberal. However, once elected, we represent all of our constituents. Bringing a particular point of view to our work here does not make us any the less Conservative, Labour or Liberal, but we regard our constituents' interests with particular eyes.
The same applies to a member of a trust. He joins the trust with employer or employee interests, trade union interests or, as we are discussing now, special independent interests or pensioner interests. That trustee brings different qualities. If I compare the qualities that I try to bring to the House with those of my colleagues or Conservative Members, it is clear that we all bring something different to the debates although each of us tries to represent properly the views of all our constituents. That argument applies equally to members of pension trusts.
There is a final reason why the Government should concede the amendments. I believe that they would do so had they been present when the hon. Member for Antrim, South (Mr. Forsythe) and I took evidence in Northern Ireland about the Harland and Wolff pension scheme. The evidence that we heard was disgraceful, as was the attitude of those in charge of the pension fund. In fact, it was doubly disgraceful because they did not know how disgraceful their views appeared to all those present.
The prevailing attitude was not merely condescending but a dismissal of people who had given all their working life to Harland and Wolff. People were publicly humiliated for trying to represent their interests effectively as pensioners. I believe that I am right to say that they were denied information about other pensioners. Their efforts to represent pensioner interests were thwarted at every turn. Instead of seeing a mature group of individuals in charge of the Harland and Wolff scheme and rejoicing in the fact that people were actively trying to represent their own interests—that, after all, is the very lifeblood of democracy—those in charge tried to humiliate those people. Those in charge have now made some minor concessions. They will appoint someone from the group, but they did not trust the vast majority of those interested in the scheme to make that decision themselves.
If one believes the Government's rhetoric, as I do, that ownership of pension assets is probably more important than the value of one's house—even before the age of negative equity—one must surely move with alacrity to accept the amendments.
The genesis of the Bill was the theft of pension funds from Maxwell pensioners and future pensioners. No one pretends to be able to guarantee the absolute safety of pension funds. The amendments seek to make pension funds more representative and to make it a little more difficult for the awful Maxwell scenario to happen again. Given the purpose of the Bill, I think that the Minister will have to have some pretty good arguments if he is, with a clear conscience, to persuade his colleagues to vote against the amendments.
§ Mr. Stern
I am happy to continue in the spirit with which the hon. Member for Birkenhead (Mr. Field) concluded. When considering this group of amendments, I find myself in a not unusual position for any Back Bencher of any party. I am pretty convinced that the Government have got it wrong. I am also pretty convinced that the amendments do not represent much of an improvement. By using a couple of arguments, I shall explain why, from experience, I believe that.
225 I came to the House in 1983 as the representative of an area in which Rolls-Royce Aero Engines was—and still is—the second largest employer. My first involvement in this argument occurred when a small group—first two people, then half a dozen—of Rolls-Royce pensioners came to see me to complain with some fairly abstruse figures that the pension scheme into which they were locked had been disadvantaged by a subsequent action by the company in favour of another pension scheme into which a larger number of employees was locked, but in which there was also a larger number of non-pensioner members.
The group of half a dozen people tried to enlist my help and I contacted Ministers and the company. In the end, I suggested to them that it would be a good idea, given the local involvement of Rolls-Royce, to arrange a meeting and invite a representative of the company to explain its point of view. I was a little surprised when more than 500 people turned up—it was just one branch of the company.
The nub of the argument was very simple. Although it was not as extreme an example as Harland and Wolff, which the hon. Member for Birkenhead described, Rolls-Royce had taken a decision which appeared to be in , the interests of the company and the on-going contributors to the pension scheme, but which meant that a group of pensioners had no say, and no opportunity of a say, in the argument. They had no representative on either the pension trust or the company funding committee, which examined the levels of contributions made to the pension trusts. They were the ultimate disfranchised minority whose financial future was being affected by decisions that were outside their control.
I suppose that, from that date, I became convinced that some greater pensioner involvement was necessary to look after—or at least speak for—the interests of pensioners. A second example, again in my constituency, confirmed that feeling. It concerned another former major employer in the Bristol area, Imperial Tobacco, which was much more to do with southern Bristol than northern Bristol, but nevertheless involved a considerable number of people.
After the war, Imperial Tobacco set up the dream pension scheme especially for its managers—the famous Ross-Goobey scheme, which was the benchmark for many years. When I was elected, a large number of my constituents—as is the case even now—enjoyed very generous pensions because of the way in which that pension scheme was set up.
A few years ago, efforts were made by the then owners of Imperial Tobacco, Hanson plc, to alter the rules of the scheme. Those efforts ended up in a highly expensive legal action which the company happened to lose. There may well be a division of opinion across the Floor of the House on the rights and wrongs of that action but, as was explained to me by the company, it was not a raid on the pension fund as some people thought. It was a straightforward lack of anybody at decision-making level able to put forward the very deeply held views of the majority of pensioner members.
That is another example of the interests of pensioners being deliberately or inadvertently damaged—at least from the pensioners' point of view—because of the pensioners' lack of even one representative on the scheme whom they could regard as acting in their interests.
226 So far, I have advanced arguments that back those, especially those put by the hon. Member for East Kilbride, for the need for further prescription, but this is where I start to have some doubts. I have spent a large part of my working life as a practising chartered accountant. Inevitably, as such, I have advised companies on setting up schemes and advised companies with schemes in place on how to change them. The one conclusion that I have come to, which makes me very doubtful about any setting up of rules for pension schemes generally, is that every pension scheme is different. The ebb and flow of individual interests in a pension scheme not only varies from month to month, but from company to company and from industry to industry.
The hon. Member for Birkenhead talks—rightly— about mature schemes in which there are a large number of pensioners. I have to ask him how it would be possible, for example, to set up rules for the following two schemes with an identical number of pensioner members. With Rolls-Royce, pensioners are concentrated in two or three places, so a large number of them can get together. In another company, such as a tour operator, in which the employers are worldwide, every individual receives his or her pension in a different way and the interest of each individual varies according to the movement of currencies, and it is virtually impossible to get a common opinion, let alone a common voting system, among pensioners. I therefore come to a slightly different solution from that suggested by the hon. Member for Birkenhead.
In the 1980s, I was proud of being in this House and of serving on the Committee on the Bill that abolished compulsory membership of pension schemes, which I regard as one of the great advances in pensions. The Government have given employers and active employee members of pension schemes a way out. Just as employers always had the right to cease to fund a pension scheme subject to existing contracts, employees were given the right, by a Conservative Government under the Social Security Act 1985, to opt out of pension schemes that they found inimical to their interests. That right does not apply, except to some extent, to deferred pension scheme members and it does not apply to any extent to pensioner members.
§ Mr. Frank Field
Before the hon. Gentleman congratulates himself too much on supporting that particular measure, does not he see some inconsistency with the general stance of those on the Treasury Bench, which I also accept, that wherever possible people should provide for themselves and not draw means-tested welfare? Will not that very measure, which he is so proud to support, increase the number of people on means-tested pensions and therefore the burden on taxpayers?
§ Mr. Stern
I fear that the hon. Gentleman's comments, however apposite they may appear, have nothing to do with the subject that we are discussing. I prefer to stick to the subject that we are discussing.
Compulsory membership of pension schemes still exists in all its full force for people who are currently drawing a pension. The Government need to go a little further to address that and see whether additional rights can be given to those pensioner members. I reject the prescription approach set out in the Opposition 227 amendments simply because it is too prescriptive and would create as many anomalies as it would destroy. I also reject the hands-off approach, which the Government appear to be proposing, that we cannot do anything right and, therefore, should do nothing.
There is scope for the Government and, in particular, OPRA—which is being set up under the Bill—to go further than the Government have so far. It should be open to the Government positively to encourage all schemes regulated by OPRA to introduce as soon as possible, within the circumstances of each particular scheme, some form of pensioner membership. My hon. Friend the Minister has previously argued, and may well do so again tonight, that that would create representative vested interests on a scheme. However, I join the Opposition in saying that those vested interests already exist and it would do no harm to recognise them.
§ Mr. John Denham (Southampton, Itchen)
During discussions in Committee and on earlier stages of the Bill, I have found rather curious the Government's resistance to the idea of pensioner-nominated or pensioner-member trustees. It appears quite straightforward to me that such trustees would add strength to the trustees of pension funds, would add a welcome element of independence and would reassure millions of pensioner members of funds. Those are all good reasons for having pensioner trustees. The Government have not produced any strong or overwhelming arguments for resisting the extension of those trustees to a much larger number of schemes.
The amendment focuses on larger, mature schemes where the majority of members are pensioners. However, I do not see any absolute reason why we should restrict our support for pensioner trustees to schemes that have a majority of pensioners. The advantage in debating the amendment is that it focuses clearly on the interests of pensioner members of schemes, which are not properly represented at the moment.
In Committee, the hon. Member for Antrim, South (Mr. Forsythe) moved a similar amendment, but with a slightly higher threshold—1, 000 scheme members rather than 800. Both amendments have the same principle. The hon. Gentleman estimated that his amendment would cover 720 of the 128, 000 schemes in this country. A relatively small number of schemes would need to adjust to fall within the terms of that amendment, but it would cover more than 4 million people, many of whom feel that they are not adequately represented. The slightly lower threshold in the Labour amendment would draw in a larger number of schemes. However, both amendments, with the condition of schemes being of a certain size and with a majority of pensioner members, are aimed at a particular group.
Three or four key questions must be asked about the principles behind our amendment. First, would pensioner members of schemes feel more confident about their pensions if those principles were adopted? I cannot believe that any hon. Member—certainly none who served in Committee—could be in any doubt that pensioner members would feel more confident if someone whom they had directly chosen represented them on the board of trustees.
I am sure that we have all received letters from the British Telecom and Post Office schemes and had meetings with and representations from the Confederation 228 of Occupational Pensioners Associations. That has left us in little doubt that people speaking for the majority of pensioners have a strong case. For as long as they are excluded from representation in a scheme, they and those whom they represent will continue to feel that their interests are not being adequately safeguarded.
It is true that, as has already been said, no one measure could absolutely safeguard the pensions either of people who are already receiving them or of those who will do so in future. However, the very act of exclusion—and that is the way in which the Government's proposals are being interpreted—leaves many pensioners feeling disfranchised. If the amendment was adopted, people would feel more secure and would be reassured that their pensions were being better looked after.
Secondly, would it cause any substantial problems to adopt the amendment? Are there any overriding difficulties or overwhelming problems standing in the way of doing so? In Committee, the Minister produced a series of rather curious arguments. He raised a complete red herring about making regulations that cover a wide variety of schemes. However, under the Bill, schemes will have to make arrangements, and rules will have to be drawn up for consulting on the selection of member trustees', so there seems to be no reason why the modest amount of additional work and thought needed to find a way to consult pensioner members, and so choose a representative whom they find satisfactory, cannot be part and parcel of drawing up those rules.
Thirdly, what would the role of the trustees be? Would they act irresponsibly or pursue narrow, sectional interests to a point that damaged the operation of the fund and the trustees as a whole? I felt in Committee—and nothing has been said today to change my mind—that the clinching argument is that there are already a significant number of schemes with pensioner representatives in one form or another, yet no one has shown us any evidence that pensioner-nominated trustees are more inclined to breach trust law, or that they are more likely to act more irresponsibly than any other type of trustee. There is no evidence that pensioner-nominated trustees would create problems for the operation of existing funds.
I agree with the points made by a number of hon. Members on both sides of the House. The Government are in a stat of complete confusion about whether trustees from different constituencies represent certain interests. Throughout our debates on the Bill, the Government have failed to produce a single logical argument. When it has suited them, Ministers have argued that trustees are responsible only to the trust deed and to the operation of the fund, so that where they come from is irrelevant. The Government have used that argument to resist the idea of pensioner-nominated trustees. They have said that that would be a terrible step in the wrong direction as it would create a set of special interests, and they have added that they do not wish to encourage the recognition of special interests within pension funds. But the Government have not used that argument when it comes to the overall make-up of the trust.
When we advocated a 50:50 split of employee and employer representatives on the trust, the Government said that that was not a good idea and was going too far. They readily conceded that employers would take the view that such a scheme would involve too many people 229 who did not represent the employers' interests on a trust. For the sake of logic, the Government should have been consistent on the principle throughout the Bill.
When the Government rejected the idea of a 50:50 split of employer and employee representatives in the membership, they recognised de facto that the members would represent different interests within the pension funds. The members will all be bound by trust law—as a pensioner's representative would be bound—but they will bring to the operation of the pension fund a special knowledge of and a special interest in their own area.
We expect that the people who are nominated by employers will bring to the operation of a pension fund a special interest in the employer's viewpoint of the management of the fund, and we also expect that employee representatives will bring a special insight of the view of the active members of the fund of the way in which the fund is administered. There is nothing wrong with recognising that.
We think that the Government have got it wrong, and that there could well have been a 50:50 balance that would not have harmed the operation of the funds. My hon. Friend the Member for East Kilbride (Mr. Ingram) gave a long list of examples where such schemes work perfectly satisfactorily. During the consideration of the Bill, the Government should have reflected on the underlying principle that there is nothing wrong with people bringing a special insight to a pension fund.
It is possible to identify fairly readily the sort of situations where it would be useful to have a member of a scheme who had an interest and insight into the concerns of the retired members who are the beneficiaries of the fund. The most obvious example is when the immediate interests of both the active members—the current employees—and the employer coincide, but in a way that is to the detriment of the pensioner members of the scheme. A company running into financial difficulties will clearly be under pressure to accept a lower funding level for the scheme titan might otherwise apply.
A base line is now in place as a result of the introduction of the minimum funding requirement. None the less—as we rehearsed many times in Committee—that level may well be significantly below that which a company would normally wish. It would be useful in those circumstances for pensioners to have a voice within the fund to say, "We understand and appreciate the difficulties, but other interests are involved."
Self-investment is tightly prescribed within the Bill, but—as I recall—it is not ruled out. That is another example of where the immediate interests of the active members and the employer may coincide, when it might be healthy to have a third point of view, to question whether that is in the best interests of the scheme as a whole.
When a company is restructured, there is a temptation—all hon. Members will have seen this in their constituencies—for various employers to use the surpluses in the fund to enhance the early retirement benefit for the active members. Again, that is an instance where it would be useful to have retired members questioning whether such an operation was really in the interests of all the beneficiaries of the scheme. In all circumstances, the management of a fund would benefit from having a pensioner-nominated member.
230 In opposing the amendment tabled by the hon. Member for Antrim, South in Committee, the Minister deployed three arguments, one of which I have touched on. The Minister's red herring was that the amendment would create enormous difficulties for schemes, but I do not accept that argument. The schemes will be drawing up rules and procedures for consulting members and finding out how best to consult them on member-nominated trustees. The Minister also quoted the Goode committee report—which came out against the representation of sectional interests—but my views on that matter are very much in line with those of the other hon. Members who have spoken in the debate.
The Minister's third argument was a curious and democratic one. He seemed to argue that, in the type of schemes that the amendment addresses, where there is a majority of pensioner members, that majority would in principle be able to organise themselves in such a way as to make sure that their interests were adequately represented among the trustees. I am not sure that that approach is realistic, wise or healthy for the management of schemes that have a majority of pensioner members.
At one end of the spectrum there is a difficulty in organising a dispersed group of pensioner members who may, by now, be living at different ends of the country, a long distance from the workplaces where they originally worked. In many companies, those workplaces may not now exist. Their ability to organise themselves to reflect their interests will be much weaker than that of active members who may well, in some big companies, still be in large workplaces, well organised by trade unions and able to have a clear, collective voice.
From time to time I receive various ballot papers from building societies asking me to vote in building society elections. One reads the information and generally does not have a clue whom to vote for. I feel very much the same in some of the obscure regional elections of my trade union, when I receive CVs from apparently identical candidates. A dispersed electorate has difficulty in organising itself to get its views across.
There is a danger that, although in principle, pensioner members could use the new procedures in the Bill to ensure that their interests are represented, that will not happen in many cases. When the rules are initially drawn up under which active members and pensioners are to be consulted on the selection of the member trustees, it will, in many cases, be difficult for the retired members to have a clear voice on whether those rules and procedures will enable them effectively to express their apparent majority. I do not think that they will be able to do so very often. The rules and procedures will presumably govern whether statements and manifestos can be circulated to all members. It would be essential for such items to reach retired members, so that they could be asked to vote for a specific person because he or she would be willing to act in the members' best interests.
The current rules and procedures could easily result in some funds in which pensioners were not organised. Although there might be a majority of pensioner members, they could ultimately end up with very little representation on tile trust bodies. However, it is at least theoretically possible, perhaps in some of the large schemes where pensioners are extremely well organised and where there is a considerable majority—of two to one or three to one of pensioner members to active members—for pensioner members, as I understand it, to 231 use the rules and procedures to ensure that every member trustee of the scheme is a pensioner member or a pensioner-nominated member. I am not sure that that would be healthy for the management of pension funds.
I doubt whether there would be many employers who would be happy for their active members of the scheme to be excluded from the scheme's management and for it to be dominated by pensioner interests. I am not sure whether many employees and active members would welcome that outcome. By advancing the democratic argument that if there is a majority of pensioners, they will be able to ensure that th y are adequately represented, the Minister is encouraging a dangerous and unstable position.
It would be more prudent to define a clear role for pensioner-nominated members of the scheme. If that were done and made best practice and enforced as best practice in the way suggested by the amendment, pensioners would, by and large, accept it. They would see it as a means by which their interests would be clearly represented in future. Such a policy would also add to the stability of the management of the schemes.
I believe that the Government have resisted the proposal more from their general desire not to prescribe regulations if they think that they can get away with it. In this case, they are doing so in a way that will leave many pensioner members feeling that they are poorly represented and unable to contribute to the security of their own pensions.
§ Mr. Wolfson
I have, all along, been uneasy at the difficulty that the Government appear to have in accepting compelling arguments for pensioner representation on the trustee bodies. It seems that we are inevitably in a working world of much greater insecurity than existed in the past. New technology means that this is a continuous process; short-term contracts and rapid changes in the skills required for the job mean that, during their working lives, people feel less secure than they used to, whatever their employment. For pensioners, that sense of insecurity has become much stronger since the Maxwell fiasco.
As the Bill was instigated as a result of the problems arising from the defrauding of the Maxwell funds, I find it odd that we are not focusing very strongly on giving future and existing pensioners a feeling of security that their funds will be properly guarded and secured through thick and thin. Pensioner fund members have an independent voice, which I believe could make a valuable contribution to the discussions of a trustee body.
The chairman of any pension trustee body must weld its members into a coherent team that looks at all the problems rather than just arguing for the vested interest. As the hon. Member for Southampton, Itchen (Mr. Denham) made clear, employers and employees will inevitably have vested interests in the scheme, but the beneficiaries of the scheme do not have an opportunity for any input. I believe strongly that we should move towards taking account of their views.
Finally, it would be wise for the Conservative party to demonstrate a voter-friendly policy on the issue and perhaps this, of all days, is the day to do it. A great many natural Conservative voters who are members of pension 232 schemes look to us to safeguard their interests and they are rather surprised and bewildered that we appear not to be doing so. I hope that it is not too late to think again.
§ Ms Church
I am very happy to follow the hon. Member for Sevenoaks (Mr. Wolfson) in the debate. He is absolutely right: thousands of pensioners up and down the country are watching the outcome of the debate tonight. They may not be natural Conservatives, but the hon. Gentleman is correct that the Government need to woo every voter they can at present.
Pensioners have invested their livelihoods in retirement pension schemes and they are directly and immediately affected by the management of those schemes and by the action of the trustees. They have no right to participate directly in the running of a scheme, so they should have the right, in statute, to nominate a pensioner member.
The arguments in favour of Opposition amendment No. 16 are absolutely clear and they have been put very well by a number of my hon. Friends, particularly my hon. Friend the Member for Southampton, Itchen (Mr. Denham). There is a clear democratic argument: those who affected directly should have the right to participate in the running of a scheme. There is also a security argument. Pensioner beneficiaries of a scheme need to know that their interests are being safeguarded—as far as that is possible—so that, as my hon. Friend the Member for Birkenhead (Mr. Field) said, they will be less easy to nobble. We know that the operation of pension schemes cannot be safeguarded absolutely, but that would make it more secure for members.
We could also argue for the amendment on the grounds of equity. As existing employees—those who have a deferred benefit from the scheme—participate in the running of the scheme, should not those who are benefiting currently have even more right to participate in the management of that scheme? Pensioner participation would also directly benefit schemes. It is likely that a former employee member of the scheme would, upon becoming a pensioner, be nominated as a pensioner member of that scheme. That person operated as a trustee of the scheme while in employment and would be likely to continue to contribute to the scheme's operation. Such people would bring to the scheme invaluable experience, knowledge of the scheme's history—which is often important to its operation—and a particular perspective as pensioners. My hon. Friend the Member for Birkenhead emphasised the independence of pensioner members, who would not be so susceptible to employer pressure or fear of being sacked for speaking out—as was the case with members of the Maxwell scheme.
The existence of pensioner members would increase trust and confidence among existing employees, who would know that if a whistle needed to be blown, it would be blown by someone who did not fear a direct financial penalty, which might be incurred by an employee trustee. Opposition Members and people throughout the country acknowledge those as straightforward arguments, so what are the Government's objections? My hon. Friend the Member for Itchen fully described them, so I shall not go over that ground again.
The Government seem to believe that it is not right for someone who is a direct beneficiary to be represented on a scheme It is not a question of representation.
233 Employees have a direct if deferred interest. It is because a pensioner member would have a certain perspective that he or she should participate in the scheme's management. Not for the first time, the Government are standing logic on its head. A pensioner member could not outvote the others, and individuals prepared to be nominated and to stand—from my experience of working as a trade union official before I entered the House—are of high integrity, have sound principles and are deeply concerned for pensioners who will follow them, not just for existing pensioner members.
I say to pensioners who are listening to or watching this debate—and they number thousands, as the hon. Member for Sevenoaks said—that they should listen carefully to Government Members. Listen to their vacuous excuses for refusing to accept the amendment. Listen to their denial of pensioners' interests in the operation of pension schemes. I have been a Member of Parliament for little more than a year, but time after time I have heard the Government talk about choice and protecting the interests of the individual. We hear that mantra time and again, but the truth is that the Government are denying choice to pensioners and failing to protect the interests of individual pension scheme members—be they existing employees, deferred pensioners or existing recipients.
I hope that those thousands of people throughout the country are listening carefully to yet another example of the Government's failure to understand the needs of ordinary people who want extra protection, experience and knowledge brought to the operation of their pension schemes. As a result of scandals and mismanagement, the public have lost confidence in pension schemes. Tonight, the Government have a chance to restore in part that lost confidence, but they refuse to do so. If they persist, they should not be surprised if it leads to the loss of even more of what little confidence the public have in the Government, given their continued failure to protect people who need protection—most of all, our pensioners.
§ Mr. Clifford Forsythe
The Select Committee on Social Security—the hon. Member for Birkenhead (Mr. Field) is its Chairman and I am a member of it—has taken many hours of evidence on pension schemes, starting with the Maxwell scheme. We received evidence from everyone who is significant in the pension scheme world, including actuaries.
We arrived at the conclusion that a pensioner trustee or an independent trustee should be an essential member of a board of trustees of a pension fund. We did not pluck that conclusion out of the air. We arrived at it, having listened to everyone in pension schemes throughout the United Kingdom. I still have not been given a satisfactory explanation of the Government's view that employer-representative trustees and employee-representative trustees are acceptable and not regarded as biased—I accept that—while pensioner-representative trustees are not acceptable
It has been said that pensioners are resentful about various things. A good example of their resentment is the Harland and Wolff pension fund. Harland and Wolff pensioners were in dispute about a pension fund surplus when the company was privatised. They felt that the surplus would not he used properly. The House will be glad to hear that I do not intend to go into detail.
The pensioners formed a group and wished to enlarge it. They asked the trustees if they could have the names of other pensioners. That request was refused. They then 234 asked the trustees if they could have the addresses of other pensioners on the basis that the trustees would write to those pensioners. That request was refused. They tried everything to enlarge their membership. Each request was refused by the trustees and by the firm. The pensioners were disregarded. They had been members of the Harland and Wolff work force for many years but when they became pensioners they were ignored.
After pressure was brought to bear by the Select Committee on Social Security, the Harland and Wolff trustees decided that they would appoint or have a pensioner trustee. They did not ask the pensioners who they would like as a trustee. As in all quango-type operations, the trustees decided to appoint a pensioner trustee themselves.
I have no objection to the person who was appointed. My objection lies in the way in which he was appointed. The interests of the pensioners were disregarded. As I have said, I have no objection to the representative as a person. My complaint is that a dictatorial decision was made and the pensioners were ignored. Can the House really say that in those circumstances pensioners would not be resentful and would not find a pensioner trustee more acceptable? A pensioner trustee would be loyal to the fund for all the obvious reasons. I am not yet a pensioner, but on their behalf I resent the implication that because someone is a pensioner of a fund, they are not to be trusted to be a trustee.
The Minister and others have said that perhaps pensioners would not have sufficient expertise, but the former chairman of the trustees is now a pensioner. I submit that nobody would be more fitted to be a pensioner trustee than the former chairman of the trustees. I make my few remarks in support of the amendments and I hope that the Minister will accept them.
§ Mr. Miller
I shall be brief in dealing with the important amendmants under discussion.
First, in respect of amendment No. 16, I was considering the number of companies that already have independent trustees. I would bring to the House's attention a list of companies for which Law Debenture acts as an independent trustee. They are an amazing cross-section of British industry and include the Agricultural Mortgage Corporation, Amersham International, BAA, Bull Information Systems, Chloride, Cory Towage, Freemans, Guardian Royal Exchange Assurance, ICI, John Holt, Logica, Mercantile and General Reinsurance, the Ocean Group, 3i and George Wimpey. There could hardly be a better cross-section of British industry.
It is interesting that the pension trustees of those companies have deliberately chosen to introduce the principle of independence into their schemes. I am sure that none of those companies would be in the circumstances envisaged in amendmant No. 16, but the powers that it gives the authorities to appoint such a person as the list of companies I have read out already use are important and we should he prepared to accept them as a matter of principle.
The hon. Member for Bristol, North-West (Mr. Stern) touched on the Hanson litigation. He was right to say that it was extremely expensive. The only winners were the Chancery Division of lawyers. I cast no aspersions on the Under-Secretary of State for Social Security, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot), who is a member of that profession and who looks 235 surprised, but I am sure that he would agree that that is the truth. It is a great pity that many issues of principle had to be dealt with in that way and not by a more rational means.
§ Mr. Frank Field
My hon. Friend told me privately that I should have been referring to Imperial Tobacco and not British American Tobacco in my earlier intervention. He also said that if I were a smoker I would not have made that error. I am grateful to him for both points.
§ Mr. Miller
Amendment No. 1 is about the basic issue of democracy. We have heard an awful lot in this place today about issues of democracy, but it is something that we cannot forget. The hon. Member for Sevenoaks (Mr. Wolfson) made the wise suggestion that his party should examine carefully the interests of pensioners. If he says that with a majority of 19, 000, the hon. Member for Bristol North-West, with a majority of 45, needs seriously to consider those wise observations.
The Confederation of Occupational Pensioners Associations—COPAS—sets the matter out in stark terms in a leaflet distributed to members of the Committee yesterday. Under the heading,Discrimination of the very worst kind",the leaflet points out thatNO existing Act of Parliament permits the discrimination which the Pensions Bill contains. Discrimination on the grounds of race, religion, gender or sexual orientation is unlawful.But discrimination against pensioners will be enshrined in law if the Pensions Bill goes unamended".9.30 pm
COPAS has a sound point. Its leaflet sets out the case for pensioners in detail, but I shall not repeat it all because time is pressing and several hon. Members have made that case clear already. The association represents a significant number of pensioners, and its arguments are based on the simple principles which, as my hon. Friend the Member for East Kilbride (Mr. Ingram) said, were touched on by the Goode inquiry but were not developed to their logical conclusion.
The leaflet continuesMany good pension schemes include a pensioner Trustee. No evidence has ever been produced that pensioner Trustees do not act in the best interests of their schemes overall. But where there are pensioner Trustees, they are there by agreement, which can be withdrawn, not by right.Hon. Members on both sides of the House have said that putting a pensioner trustee in by statute would give such trustees the independence that would mark them out as different from people who can be leaned on by employers.
COPAS goes on to say:The truth is that unscrupulous employers can ensure that management Trustees do their bidding or face the consequences. They can also influence employee Trustees or remove them by sacking them from the company.The one Trustee who is totally independent of the employer is the pensioner Trustee. The one Trustee who has the most time for his or her duties is the pensioner Trustee. The one Trustee with the longest—and, perhaps, the greatest—experience is the pensioner Trustee. The one Trustee with the biggest investment in the scheme—his or her life savings—is the pensioner Trustee.Why, then, is the Bill denying all schemes the advantage of one truly independent pensioner/trustee watchdog?236 The amendment is specific and deals with people in mature schemes—those with more than 850 members. It raises some organisational issues; the hon. Member for Bristol, North-West pointed out some of them and my hon. Friend the Member for Southampton, Itchen (Mr. Denham) mentioned some others. But those can be addressed by good organisation and by ensuring that such schemes, with the enormous resources at their disposal, properly facilitate the trustees' carrying out of their functions, as has to be done for every other trustee. The exceptional circumstances mentioned by the hon. Member for Bristol, North-West need dealing with, but that could all be encompassed within the spirit of the amendment. The amendment would do a service to democracy in this country by encouraging the development of pensioner organisations that could participate in such schemes, as many of the COPAS members already do.
The points made during the debate are valid, and although there can be arguments about technical details, however one regards the specific amendments, the House should accept the principle and spirit underlying them. If the Government are serious about doing a service for the 7 million pensioners in this country, they should adopt the spirit of the amendments, which I urge the House to accept.
§ Mr. Bayley
I mentioned earlier that I had received a letter from a group pensions manager of Nestle, in which he said:The key to preventing any future Maxwell—is good governance in trustee boardrooms.I firmly believe that the key to good governance is to ensure that there is a strong voice for the beneficiaries of pension funds. There are, of course, three types of beneficiary for pension schemes: contributing members, deferred members, and pensioner members. I would have liked a situation in which the beneficiaries of the scheme, the people for whom the scheme was established in the first place, were a majority among the trustees, but sadly that is not to be the case, because the Government have stood in the way of that. Amendment No. 16 proposes that, in those circumstances, some redress could be achieved by allowing for the appointment of an independent trustee or trustees.
Many pension schemes are well managed. The Nestle scheme has four managers, two pensioner members and six other members. It is an example of good governance. It is not just an academic or technical argument when I suggest that there are many cases of bad governance of pension schemes. Just recently, the pensions ombudsman published his latest report, which records 59 cases in which members' pension rights were violated by pension fund trustees. In the limited time that I have, I shall give two examples.
First, an employer agreed to augment a pension but withdrew that agreement at the time of the pensioner's retirement. The trustees in that case backed the employer. The pensions ombudsman said that they backed the employer because thealleged augmentation was made in ignorance of the true cost.I am pleased to say that the pensions ombudsman upheld the pensioner's complaint and increased the pension by £2, 890 and awarded compensation.
Secondly, a member of a pension fund was refused a transfer payment when he moved to different employment. The trustees stated that the scheme 237did not have liquid funds available to make a payment.Again, the ombudsman, I am pleased to say, upheld the member's complaint and said that a transfer value of £108, 000 should be paid of behalf of the member, plus a sum of compensation.
Many of the 59 cases are of trustees refusing to award the enhanced benefits that are stipulated under the schemes and promised to employees on redundancy. In many cases, the ombudsman upheld the complaint. In one case, he increased the member's pension by £8, 300.
I firmly believe that if members of pension funds were better represented among the trustees of pension funds, such gross abuses would not take place, or certainly not so frequently. I really am concerned that the Government will not allow the House to give pension fund members the protection that they need with more adequate representation.
Amendment No. 1 specifically looks at the failure of the Bill as it currently stands to guarantee representation for pensioner trustees. I have had dozens of letters from my constituents about various aspects of the Bill, but on that issue in particular I have had a full postbag. John Taylor from the York and district campaign for equal state pension ages says:It should be mandatory that Pensioners Associations be allowed at least 2 nominated Trustees in their Pension Fund Scheme.Mr. Greaves from the Transport and General Workers Union, retired members association, makes a similar point, as does Mr. Webb from the York branch of the British Transport pensioners federation.
The courts have said that pensions belong to pension fund members. They are deferred pay. The Government say that it is good practice to have pensioner trustees, so I hope that the Minister, if he insists on maintaining the Government's argument against the amendments, will explain why they are not backing amendments that will support what they say would be good practice.
§ Mr. Hague
The amendments all deal with the issue of member-nominated trustees. The key provision is contained in clause 16, which gives effect to the Goode committee's recommendation that members of pension schemes should have the right to nominate a proportion of the trustees of those schemes. The main effect of that recommendation—which the Government fully endorse, and which is reflected in clause 16—is to give ordinary scheme members the power to require that trust boards include at least some people whose perspective differs from that of the scheme sponsor, who typically appoints the majority of, if not all, of the trustees.
The underlying purpose of the provision is to reinforce the crucial feature of trust law: that trustees should be independent of the settlor or scheme sponsor, and should consider the interests of all the beneficiaries within the framework of the scheme trust deed and rules. Giving scheme members the power to nominate and select a proportion of trustees should significantly reduce any risk of trust boards' acting primarily in the interests of the scheme sponsor and compromising their responsibilities to scheme members.
There is a range of positive reasons for encouraging the appointment as trustees of people nominated by scheme members. I need not go into them in detail; I think that they have the support of the House. As for the arrangements that would be made to select member-nominated trustees, we were anxious to do as the 238 Goode committee recommended—to avoid prescription, and to allow the wide variety of satisfactory arrangements currently in place to continue without unnecessary disturbance. That is why we have settled on a proposal that we consider flexible, which strikes an equitable balance between the interests of all parties.
Clause 16 leaves schemes free to introduce or maintain arrangements for selecting member-nominated trustees that suit their particular circumstances and are acceptable to members; but—this is an important point—both pensioners and active members will be given the opportunity to influence nomination and selection arrangements through their participation in the statutory consultation procedure.
I do not think that that point has been appreciated widely enough in the House or in the country as a whole. Much of our debate has been based on a misunderstanding. The Government do not oppose the appointment of pensioner trustees, but share the Goode committee's view that it should not be mandatory. We agree with all the positive points that have been made about the qualities of pensioner trustees. Our proposals for member-nominated trustees go further than those of the Goode committee in giving all scheme members—active and pensioner members, and deferred pensioners if trustees decide that it is desirable and practicable to include them—a say in the composition of the trust board through the statutory consultation procedure.
My hon. Friend the Member for Sevenoaks (Mr. Wolfson) rightly reminded me that pensioners look to the Government to ensure that their interests are looked after. As a result of the Government's proposal, millions of pensioners will be consulted about the arrangements for selecting member-nominated trustees—arrangements that will be subject to the pensioners' right to object to them and vote on them if enough people object. We are doing a great deal to ensure the involvement of pensioners.
§ Mr. Wolfson
It is clear that at this stage the Minister's arguments are not hitting home across the country. Many pensioners and their representatives feel that all is not as they would wish. We must change either the perception or the policy.
§ Mr. Hague
My hon. Friend has put his finger on it and he can guess which of those options I shall choose to take. It is important to change the perception. Perhaps in the new spirit of party unity we can set about that, and do so extremely effectively. I will expand on that point and on my argument.
§ Mr. Frank Field
Is the Minister saying that pensioners will be consulted if they are unhappy that they are not directly represented, that they will have the vote and that through that vote they will be able to get representation on the board? That is what I took him to say before his hon. Friend the Member for Sevenoaks (Mr. Wolfson) intervened.
§ Mr. Hague
I am saying that the proposals for the selection of member-nominated trustees will be subject to an approval process in which, by law, active and pensioner members must be involved. If a certain proportion of them object—the hon. Gentleman has signed an amendment 239 which argues for a proportion or a minimum number, which I shall come to—there must be a ballot or alternative arrangements must be put forward. Pensioners will therefore always have a voice. They will have an influence over these matters. I am not sure that that has been sufficiently widely appreciated.
§ Mr. Miller
Does the Minister agree that, in the context of the amendment proposed by my hon. Friends, we are dealing with mature schemes in many—indeed most—of which there are more pensioners than active members? Does he not believe that in those circumstances the annoyance of pensioners is understandably about the basic issue of fairness and democracy? Does he not understand that that issue needs to be addressed?
§ Mr. Hague
In those schemes, pensioners will have a huge influence over the selection arrangements. It will be a brave board of trustees that puts out proposals for consultation and for the approval of its members, if a majority of them are pensioners, which do not provide for pensioner involvement in the selection process. If it did so, many of the board members would regret it. That point is fully taken on board by the Government and reflected in our proposals.
The requirement in the Bill is that members should have a right to nominate at least one third of their scheme's trustees; a proportion of one third would be a statutory minimum. The hon. Member for East Kilbride (Mr. Ingram) touched on that point and compared it with the arguments for a 50 per cent. split. I should respond to that and I shall return to the point about pensioner representatives.
Employers set up schemes voluntarily. In the Government's view, they should be able, if they want to, to retain the right to appoint a majority of the trustees. An occupational pension scheme and its associated fund is established by an employer to achieve a business objective and the employer retains a considerable business and financial interest in the fund's performance and the scheme's effectiveness. The fund is, of course, held in trust by the trustees to be distributed on the basis set out in the trust deed and rules, but in a defined benefit scheme the employer is bound to meet the pension promise and to make good any deficit in the fund.
From a member's perspective, the fund offers a degree of security against the employer going insolvent, and it provides a vehicle for delivering their pension, but the pension that they receive is not dependent on the existence or performance of the fund. By contrast, the existence and performance of the fund is crucial to the sponsoring employer. It offers a tax-efficient way of providing an important part of the remuneration package, it smooths out 240 the cash flow problems that a pay-as-you-go pension scheme incurs, and its performance and any consequent need to increase pension contributions can have a dramatic effect on company cash flow.
The employer is the one giving the guarantee. He must top up or make good the fund in the event of deficiency. He therefore has a major interest in the successful operation of the fund and it is only right that he should be in a position to ensure that the scheme will be administered sensibly.
§ Mr. Field
Does the Minister now accept that he has made the case for pensioner trustees? He is saying that employers will not abide by those schemes unless they can have a majority of their people on the scheme to represent their views, despite all his talk that trust law will govern those trustees. If it is good enough for the employer to want a majority of members to represent his interests, surely there is a case for ensuring that there is a pensioner representative of pensioners' views.
§ Mr. Hague
There is a strong case for ensuring that there are member-nominated trustees—by which I mean, in that context, trustees nominated, not necessarily only by the active members, but by active and pensioner members. However, let me discuss in more detail the arguments of the hon. Member for Birkenhead (Mr. Field).
We recognise that there are many excellent schemes, more than one third of whose trustees are member-nominated trustees. We recognise that there are many schemes that have pensioner-nominated trustees, and that they can do a good job. The hon. Member for East Kilbride said that the Government had said that pensioners were not trusted or accepted by other members. That is a caricature of the argument made by my noble Friend Lord Mackay of Ardbrecknish in another place. The Government are not arguing that pensioners make bad trustees—quite the reverse. We agree with all the positive arguments made by the Goode committee and by the hon. Gentleman in his opening remarks. Our worry is about the mandatory nature of the proposal.
If pensioners are given a separate facility by statute to appoint a pensioner trustee, other members may well have reservations about the implications of that privileged position compared with the position of other members, and might fear that the pensioner trustee would be inclined to act in the interests of pensioners rather than of scheme members as a whole.
§ Mr. Stern
Now that my hon. Friend has mentioned that matter, I hope that he will answer the argument that I made earlier—that while employers and members have the opportunity of an out from the scheme, pensioners are the one group which is irretrievably locked in, and that is the very group to which he is denying representation.
§ Mr. Hague
My hon. Friend makes a fair argument, but we must set it in the balance against the other arguments that I am about to make. As he clearly said in his speech, there may be no perfect solution and there are very different ways of considering those matters. We must balance some factors against others.
241 I believe, and the Government believe, that creating artificial distinctions between the members to whom, collectively, we are giving rights in the Bill may encourage members to believe that trustees are somehow representatives of the category of member to which they personally belong. Active members may come to regard a statutory pensioner trustee provided by the amendment as somehow called to represent the interests of pensioners.
Arguments can be made, once one has accepted that there should be a mandatory provision for a pensioner trustee, for provision for deferred pensioner trustees or for specific rules to be laid down to say that there must be active member trustees. One can extend that argument to considerable lengths, and argue that widows should be represented in some way. Many different interests are involved, and venturing into the mandatory representation of specific interests creates many more anomalies and difficulties than it is likely to solve.
That amendment would also not do justice—this is the argument of my hon. Friend the Member for Bristol, North-West (Mr. Stern)—to the wide variety of schemes which currently operate. The provisions in the Bill will allow schemes to develop their own arrangements for the selection of trustees, subject to the approval of the active and the pensioner members. Trustees will make those proposals to each active and pensioner member. Members' interests will be protected by a rigorous statutory consultation procedure, which includes consultation on all aspects of the selection process and the conditions necessary to become a member-nominated trustee.
For example, a scheme might decide that its circumstances required a pensioner trustee, or perhaps an independent trustee; whatever the trustees' proposals, however, pensioner members as well as active members will have the opportunity to approve or reject them. It seems clear that, where scheme membership consists of a reasonable proportion of pensioners, those members will be in a strong position to influence the nomination and selection process.
There is a third reason for rejecting amendment No. 1. It would upset the crucial balance between the interests of members and employers on the trust board. It would do that because it provides for a pensioner trustee in addition to whatever proportion of member-nominated trustees a scheme had determined. That would raise the minimum requirement for member-nominated trustees from at least one third to at least one half and, in many cases more than half, for all but the very largest trustee boards. Only if the board had exactly nine or more than 10 trustees could an employer be confident of being able to nominate a majority of them under that proposal. That would conflict with the point that I made earlier about the balance that we have struck.
The amendment would create artificial distinctions between members and constrain the freedom of pension schemes to develop selection rules best suited to their circumstances. It would upset the balance of interests contained in the statutory minimum of at least one third member-nominated trustees.
I emphasise that we have no objection whatever to pensioner trustees if that is what scheme members want. In the Bill we are giving millions of pensioners the right, 242 which they do not have and have never had in the past, to be consulted along with the active membership. It is all very well for Labour Members to shake their heads, but the fact that pensioners will be consulted is set out on the face of the Bill. It is clear that they will be consulted when we have passed the Bill into law.
Amendment No. 16 seems to be designed to provide a back-door way of putting pressure on sponsoring employers to agree to have at least 50 per cent. member-nominated trustees. If they do not, the amendment would impose on them the cost, which could be substantial, of an independent trustee. There is no reason to believe that a scheme with under 50 per cent. of member-nominated trustees would necessarily benefit from the imposition of an independent trustee. It would be wrong to require the regulatory authority to consider applications made on that basis. Of course, if there are genuine concerns about the running of a scheme, however many member-nominated trustees it may have, the regulatory authority has the necessary powers under clause 7 to appoint an independent trustee.
It is a pity that amendment No. 12 has not been referred to very much in the course of our discussions as it is one with which I have some sympathy. It was tabled by my hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden) and the hon. Member for Birkenhead. I appreciate that in larger schemes 10 per cent. of members will be a considerable number.
The practical details of the statutory consultation procedure are to be prescribed in regulations. That is still subject to consultation with those who have experience of the day-to-day operation of schemes. It is therefore not clear at this point that the amendment hits on the right number. The figure of 5, 000 might be too low or, as I suspect, it may be too high. I am therefore unable to accept the amendment. I can assure my hon. Friend the Member for Kemptown and the hon. Member for Birkenhead that I will give the spirit of that amendment very careful consideration with a view to incorporating a provision on the same principle in secondary legislation.
For the reasons that I have given, I think that it would be wrong to sympathise in the same way with the other amendments. The Bill will represent a major extension of the rights of members of pension funds whether they be active or pensioner members. It is important for us to make that clear and for it to be clearly communicated in the way that my hon. Friend the Member for Sevenoaks has asked for. However, it would be wrong to elevate one group of members above the other groups of members, which is what these amendments would do.
§ Mr. Ingram
We have had a useful and interesting debate. It is interesting that the Minister is the only hon. Member who has argued against amendment No. 1. Every other contribution has argued for the principle of pensioner trustees and refuted all the arguments that were advanced by the Minister in his response. He has justified employer-based trustees on a sectional basis but denies that right to other groups that have the right, in the case of large schemes, to seek equal representation.
The case has been strongly argued. I do not intend to press amendment No. 16 to a Division. Given the weight of the arguments advanced in support of amendment No. 1, however, it is right that we should vote on that amendment in due course.
§ Amendment negatived.