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Pensions Bill

Clause 58 enables the Secretary of State to establish the scheme and provides that it will be a trust, which, like all trust-based schemes, must be run in the best interests of its members. It also sets out provisions which must be made in the scheme order rather than the scheme rules. Clause 59 sets some general conditions for an order made under Clause 58 to deal, in particular, with the role and powers of the scheme trustee. Our intention has always been to allow the trustee as much independence as possible to run the scheme within the parameters of the order and rules and in the best interests of members. None the less we must ensure that the scheme meets the intentions of the wider reforms and, as the scheme is being set up to fulfil a public policy objective, it is right that there should be some limits on the trustee’s powers set by the settlor, the role which is being undertaken by the Secretary of State. As settlor, the Secretary of State has a duty to set out, for example, the purpose of the scheme and the appointment of trustees. Those are of such significance that they must be included in the order and not the rules. The scheme order will in effect be akin to a trust deed in other occupational pension schemes and, like trustees of those other schemes, the trustee will not be able to change the provisions in that instrument. The scheme rules will be non-statutory, so the scheme order can provide for them to be amended by the trustee. Amendments Nos. 110C and 110D will allow the trustee to alter the fundamentals of the scheme through changes to the scheme rules. Amendment No. 110C removes the list of key aspects of the scheme which we believe should be set out in the order. Amendment No. 110D would remove the Secretary of State’s power to place limits through the order on the trustee’s ability to make rules. We think it important to have limits around what aspects of the scheme the trustee corporation can change and how the trustees can make changes to the rules. For example, we do not think that provision about the process of appointing or removing trustees should be a matter for the trustees themselves. Clearly, the trustees are involved in making appointments, but the rights under which they can do that should not be subject to change by them. We also believe that the order should be able to require trustees to consult before making or changing rules. Many noble Lords will, I know, be aware that it is a universal practice for pension scheme trustees to set out the parameters for the trustees’ role. By setting these parameters in legislation we are making sure that some fundamental aspects of the scheme, such as its purpose and the removal of its trustees, are set out in the scheme order and therefore subject to parliamentary scrutiny. At this stage, we do not have precise details of what the scheme order or rules will include, but I can confirm that DWP officials and PADA are working on that. I should add that we will run a public consultation next spring to ensure that the order and rules package achieves the policy aims. As I have said previously, that will give all interested stakeholders the opportunity to consider and comment well in advance of the start of the scheme. I hope that has reassured the noble Baroness on why matters in the Bill are structured as I have outlined.