Pension Schemes Bill [HL]

Lord Flight Excerpts

Committee stage & Committee: 1st sitting & Committee: 1st sitting : House of Lords
Monday 24th February 2020 Grand Committee

[Baroness Janke (LD)]

My Lords, I too signed Amendment 2, which my noble friend Lord Sharkey so ably introduced. I will be brief because I think all the arguments have been very well covered. The only thing that I would add is that the importance of transparency in a scheme such as this seems fundamental. I know we are talking about communications and ensuring that members are fully aware of what they are signing up to, both the benefits and the disbenefits later on, but, as part of the arguments that have been put forward in favour of this group of amendments, there is the whole issue of explanation and ensuring that members are fully aware of their position under this type of scheme. I particularly support the idea that in order for a scheme to be registered, the explicit prerequisite is to show what the strategy is to address the whole issue of intergenerational fairness. I know we will be talking about capital buffers later on, but the amendments address the interests of transparency and fairness and the welfare of all members of the scheme, and I support them.

[Lord Flight (Con)]

My Lords, it will be very important to address these issues because I suspect that CDCs will become very popular among the younger generation as they have considerable attractions. I add only that the principle of building up of reserve seems to be one way of evening out fairness.

[Lord McKenzie of Luton]

This has been a good debate. I think we are minded to support this measure. I am not very clear in my mind as to precisely how Royal Mail is tackling this issue at the moment, and if the Minister were able to deal with that in her response that would be a help. One thing that has come through from the Government’s own thinking about this is that wherever we end up on it, there must be specific rules. This should not be just a matter of trustees’ discretion; it should be clearly set out in the rules. I shall wait to hear what the Minister has to say.

--- Later in debate ---

[Lord Hutton of Furness]

My Lords, I am grateful to the Minister for her response but something is still not clear to me. She says that there is a continuing power on the Pensions Regulator’s part to vet all appointments that fall under Clause 9. I cannot find that continuing authority; I do not know where it is in the Bill. If she could, at some future point, alert me to what provision of the Bill covers that ongoing authority on the regulator’s part to make appointments, I would be grateful.

The second interesting point is that the Minister referred to Clause 28 as if it had some relevance to the point covered by my amendment. There is no definition of “significant event” in the Bill; it will be set out in future regulations. My concern may well be addressed if the Minister were to confirm that any new appointments of trustees or other persons listed in Clause 9 falls within the definition of “significant events”.

I know that my final point goes beyond my amendments; I hope that I am allowed to make it. On the assumption that the Bill becomes law—I very much hope that it does—it is striking that we have a specific set of provisions for how trustees for these collective money purchase schemes are to be appointed; they must be fit and proper persons, for example. But if one looks at the appointment process for other pension schemes, such as defined contribution and defined benefit schemes, there is no parallel provision. Under the Pensions Act 2004, those trustees must have some knowledge of pensions law and of their own scheme, but there is no equivalent provision for the appointment of trustees to other pension schemes. I wonder whether it is justifiable to have this particular provision relating just to these new pension schemes—perhaps it is—but not to have a parallel provision for other trustee and significant appointments to DB and DC schemes.

My only request to the Minister at this point—we may come back to it—is that this may be an appropriate time for us to take a wider look at overall pension scheme governance. In my view, there is nothing more important to the health and well-being of a pension scheme than the quality of the governance in place to oversee it. If it is appropriate for trustee and other appointments to these new pension schemes, of which I am very supportive, to be subject to this process, there is a convincing case, too, for an equivalent provision for defined contribution and defined benefit schemes.

[Lord Flight]

The noble Lord is absolutely right. It is extraordinary that one group has a lot of requirements when another has none. Historically—let us say 30 years ago—trustees of pension schemes were often not remunerated. Someone applying to be a CDC trustee today would not think of taking on the responsibilities unless they were remunerated.

[Baroness Stedman-Scott]

On the first point made by the noble Lord, Lord Hutton, we will write to clarify things. We have not listed “significant events” in the Bill because if members are to be protected, it is important that such events can be adapted to emerging threats as well as lessons learned through live running. We want to ensure that these events are appropriate and reflect the specific risks that may be posed by CDC schemes. We will consult with the regulator and others before laying any regulations before Parliament. We will consider the noble Lord’s final point—it was well made—about pension scheme guidance in terms of the new CDC scheme and existing schemes and come back to him on it.