Pension Schemes Bill [HL]

Lord Kirkwood of Kirkhope Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 28th November 2016 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I will comment briefly. I find it difficult to support this proposition. The noble Baroness drew attention to contracting in local authorities, and we understand that—a number of us have been there. But is not the key issue here that the market does not produce the right result? There is weakness on the buyer side, and given the complexity of the product, you need some specific provision to deal with that. We are dealing here of course with a ban on member-borne commission and a cap on early exit charges. The latter in particular is seen to be an inhibitor to people accessing their pensions—indeed, the evidence is clear that it is an inhibitor. If those issues have to be addressed, then we have to use the mechanisms which are at hand. I agree that causing an override of these contract provisions is not the most comfortable mechanism, but it already exists in relation to scheme details, I understand, between the FCA and contract-based schemes, and this extends it to deal with other contractual arrangements relating to schemes.

I am afraid that this proposition does not have our support. We think it is important that we go ahead and get the ban on member-borne commission and the cap on early exit charges in place as soon as possible. On that latter point, I am bound to say we are somewhat disappointed. We are pleased to see the press release from the Minister announcing a cap of, I think, 1%, or 0% for new provisions. But it is will be October next year before that is in place, which again seems a little bit tardy, because the FCA is moving to get the restrictions in place by the end of March.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I will add my voice to commend the merits of my noble friend’s position. I understand what the noble Lord, Lord McKenzie, says, and I understand too the grave situation and the need for protection, but as I have said before—the Minister was sensitive enough to pick it up the last time we discussed this—the provision of an override completely freezes the responsibilities and duties of the trustees. There is a master trust here, which presumably—I cannot see any way round this—has a trust deed which sets out the rules and responsibilities. The provisions in this clause do not just override the contracts but run a coach and horses through the trust deed and the responsibilities of the trustees. It is effectively a vote of no confidence in the trustees, as far as I can interpret how this is to be used, and that is an extremely serious situation.

In the past, trust law has served pension provision well in this country. In addition, there are extremely onerous fit-and-proper-person tests in the earlier clauses of this Bill. The assumption should be that people of good faith and knowledge and experience will not get into these positions at all. We have always been able to rely, in the main, on trustees doing their duty well, but this clause gives them no chance to do that. It sets them aside and is a vote of no confidence in what they do. If I was in that position, I would resign as a trustee—and if the trustees of the master trust resign, then the pause period might be not just three months or six months but a lot longer. My position in supporting careful consideration of this clause before we vote it into law is not just about the important points my noble friend made but about how this will impact on the assumption and service of trustees. If I was invited to become a master trustee in these circumstances, I would look twice at the provisions in this clause before agreeing to do any such thing.