Pensions Bill

moved Amendment No. 134A: 134A: Clause 109, page 51, line 13, leave out paragraph (a) The noble Lord said: This is a probing amendment; whether it will remain so in the Bill’s future stages depends very much on the Minister’s answer. It would delete paragraph (a) from Clause 109(1). We have already had an important debate on the powers of the Pensions Regulator. Compared with the extensive powers proposed in the Government’s new clause before Clause 107, the extension of the powers of the regulator in Clause 109 is much less significant, but we should still debate the need for the alterations proposed in that clause. Under the Pensions Act 1995, the Pensions Regulator can remove trustees when it thinks that it is ““necessary”” to do so. Clause 109 changes that test to one that is ““reasonable””; my amendment deletes that change. Trustees are the bedrock of the pensions system in the United Kingdom and they operate in trust law to act for the benefit of members. We are concerned that this change will act to undermine the foundations on which private sector pension provision is based. Pension schemes can have a mix of trustees, ranging from the completely independent and professional trustees through to employer-nominated and member-nominated trustees. There is an exception to this general rule, which we will come to shortly. This general rule reflects the fact that it is useful to bring to bear different perspectives. I acknowledge that there can be difficulties with boards of trustees in practice, if only because trustees are human and their abilities and knowledge can vary hugely. The average trustee—this includes professionals as well as non-professionals—can struggle to cope with the complexities of modern investment strategies and the strength of the employer covenant when corporate restructuring is proposed. They are also severely tested when issues such as buyouts confront them; we have debated that subject extensively over the past few days. That is why we can see that the Pensions Regulator should have a reserve power to change the trustees when it is necessary. To extend that power to where the regulator thinks that it is ““reasonable”” risks undermining the whole model. Why does the 1995 Act need to be changed? The existing power was perfectly adequate, for example, to allow the regulator to appoint independent trustees in the case of Telent and the Pensions Corporation. The regulator has the power conferred by Section 33 of the 2004 Act to issue prohibition orders in respect of trustees who are not considered to be ““fit and proper””. Furthermore, Clause 109(1)(d) extends the circumstances in which the regulator may appoint trustees for the protection of the interests of the generality of the members. Can the Minister describe the circumstances in which a combination of the existing powers and those in paragraph (d) would not be adequate? As I said, the powers were used effectively, and even upheld on challenge, in the Telent case. What could be more challenging than that? We do not believe that it is appropriate to confer powers on the regulator unless there is a clear need for them. Using the criterion of reasonableness could allow the regulator to start to impose his own judgment on the abilities and competence of trustees. That would go in the wrong direction from a regulatory standpoint. The appointment of trustees goes to the heart of the operation of pension schemes. A power based only on reasonableness would be a step on the road to making our defined benefits system almost state-controlled rather than state-regulated, which is an enormous difference. I beg to move.