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Pensions Bill

I thank each Member of the Committee who has spoken. I say to the noble Baroness, Lady Thomas, that I was aware that the noble Lord, Oakeshott, was unable to make it today. I am sure that she will ably substitute for him. The noble Lord, Lord Skelmersdale, ranged widely over a number of issues that we shall pick up on in subsequent amendments, so I will not dwell on some of those details in my reply. The proposed new clause would require the trustee corporation to have regard to a set of principles that is essentially a variant on those to which the Personal Accounts Delivery Authority must have regard in exercising its functions. I emphasise that the functions of the trustee corporation are very different from the functions of PADA. PADA is tasked in the Bill with designing the scheme within the framework of the principles set out in Clause 70. These important principles will have a vital part to play in the design of the scheme: they will underpin everything that the authority does. I know that Members will wish to discuss them when we get to that part of the debate in Committee, so I will wait until then for that. However, we are clear that the principles do not have an explicit part to play in the trustee’s functions, and for very good reasons. The trustee corporation will be charged with running the scheme, as designed by PADA, within the framework of the principles and other requirements of the Bill. The scheme will be set up as a trust-based occupational pension scheme, so the trustee must always act in the best interests of members and beneficiaries. That is the duty of trustees of other trust-based schemes, and will apply here too. Of course, the principles set out in the amendment appear largely to fall within that overriding duty; most certainly, participation—in proposed new subsection (2)(a)—cost of membership, returns on investment, members’ preferences and diversity do. They are directly related to members and beneficiaries, so will generally come within the duty of the trustee which, as I am sure noble Lords are aware, is embedded in trust law. That leaves proposed new paragraph (b), which deals with minimising burdens on employers, and proposed new paragraph (c), which covers minimising adverse effects on other qualifying schemes. However, I am afraid that I cannot agree that either is directly relevant to the trustee corporation. PADA is charged with designing a scheme that does not place disproportionate burdens on employers. The trustee will be responsible for running that scheme, as designed by PADA. I see no reason why the trustee corporation, any more than any other set of trustees, should be charged with considering adverse effects on other schemes. The scheme it will be running will have a unique feature making it suitable for its target group and will be designed to complement, not replace, other qualifying schemes. Indeed, both proposed new paragraphs (b) and (c) are in PADA’s principles so will be firmly entrenched in the design of the scheme, as will the others under Clause 70. However, they are precisely about the design of the scheme, not about the running of it, and are therefore not for the trustee corporation. I hope that that distinction is clear. There are also some serious concerns about the legal and operational implications of requiring the trustee to have regard to these principles, which I shall explain. The job of a trustee is mainly set out in their particular trust instrument, under general duties of trust law applying to all trustees and in additions made by pensions law for all pension scheme trustees. The amendment would impose an extra layer of scheme-specific statutory duties on this trustee, and only this trustee. In substance, this is unnecessary for the reasons I have already explained. However, we should not assume that such duplication is harmless. The job of legislation is to change the law, and it is therefore always assumed to mean something. Knowingly duplicating duties that already apply, and things which will already be embedded in the scheme, is therefore bad in principle. In this case, the principles would also be legally and operationally undesirable in practice. They would add a unique further layer of prescription, in statute, applying only to this scheme and only to this trustee, which is a body with an already challenging job. Not only would the trustee have to do all that is already required by the scheme trust, by trust law and by pensions law, it would have to consider these new principles and their interaction with each of those other sets of duties, too. The trustee’s main job is to serve the interests of actual beneficiaries. The balance between those interests and the interests of other people will be set out in the trust scheme. These principles would confuse what that duty is, and could upset that balance in unexpected ways. For instance, they could result in suggestions that issues on which key judgments have already been made are reopened; employers’ interests are mentioned, for example, as are the interests of other schemes. These things are all going to be considered in designing the scheme and, in important respects, will already be built into it: contribution limits, transfers and investment choice. Putting these principles in legislation would create a new opportunity for someone to challenge the corporation on the design of the scheme, and ultimately to do so in the courts. That is not appropriate. These are, first and foremost, matters for PADA, then consultees and then Parliament in designing the scheme itself. In summary, not only will adding a new and unique statutory burden fail to add anything to what this Bill already achieves, it also risks confusion and complexity that could be really detrimental. I hope that the noble Lord has therefore been helped by that explanation. It would not be appropriate to impose these principles upon the trustee corporation. I ask him to withdraw the amendment.