---

Pensions Bill

My Amendment No. 113H is grouped with the amendments of the noble Lord, Lord Judd, to whom I listened with great interest and considerable sympathy. As my colleagues in another place have indicated, on these Benches we believe in the need for a proper appreciation of the importance and benefits of ethical investment. It is true that ethically minded and socially responsible funds are not only increasingly common in the private sector, but they are likely to be as profitable as more traditional schemes. However, I noted that the Minister said on the previous amendment that trustees in a corporation will be subject to the obligations put upon the trustees of all pensions firms by law; for example, an ethical policy, as the noble Lord, Lord Judd, said. However, I cannot support his amendments unreservedly. His Amendment No. 112ZDA envisages giving the trustee corporation an indication that, if another situation such as that in Zimbabwe were to occur, the corporation should consider its investments and perhaps sell any offending companies. Some very large companies are being named as continued investors in that area. It is not at all unlikely that, if personal accounts were up and running, these would be exactly the sort of companies that the trustee corporation would be likely to invest in. However, this policy would not be easy to implement. Any decision to sell out would be complicated and subjective. Pension savings will, after all, be made through funds, rather than directly in shares in any company or companies. It would be no easy matter to determine exactly where the invested money had gone. Additionally, who is to say when the crunch point should come? Many jobholders, if ever they were asked about it, might consider that any investment in Zimbabwe in the past two years or so was unacceptable; whereas for others, that country has only recently gone beyond the pale. These difficulties will be prevalent in every situation. Crimes against humanity are often only clear with the benefit of hindsight, if then. It could thus be too late for an investment decision to have any effect. Few international companies manufacture and sell one product. For example, the arms companies have in the past 20-odd years diversified into medical equipment. Trustees would have a considerable burden to maintain a detailed knowledge of the ethical implications of their entire portfolio. The second amendment, Amendment No. 112ZDB, also commands my sympathy. I look forward to the results of the consultation that has been promised on this point. I hope that the Minister can provide more information on when it will be available and when he expects PADA to report on the responses. However, I have concerns about this amendment. What an ethical policy consists of could be endlessly debated. Issues could vary from crimes against humanity, to green issues, to support for international development and so on. There is a clear danger that this amendment could create a single concept of what ethical investment means against which all funds would be measured. Finally, I turn to my Amendment No. 113H in this group. It summarises my overriding concern with the noble Lord’s amendments. Personal accounts are not meant to be a flagship pension fund setting a good example to other schemes; they are intended to be a vehicle for an acceptable minimum level of pension saving and their costs should reflect that. The primary aim of personal accounts is not to hold corrupt foreign Governments to account but to encourage and enable low earners to save for their retirement. If there is no option for ethical investment, some jobholders, who otherwise would have stayed enrolled, will opt out. I hope that PADA and, subsequently, the trustees, fully appreciate the importance of Clause 70(2)(f), which states that ““diversity … should be respected””. I have already discussed an amendment ensuring that that duty will be extended to the trustees. The noble Lord, Lord Judd, almost accused me of poaching; perhaps I am putting that thought too strongly. Without keeping a watchful eye on the costs of investment, personal accounts will fail. A small increase in the administrative costs will inevitably have a serious impact on the final return that a pensioner will receive. Although the investment funds may be rightly sound in themselves, without a cheap and effective organisation managing scheme they will do pensioners no good. I conclude that there should be several funds, one of which will be a default fund, another a sharia fund, another an ethical fund that is perhaps—I stress that word—based on UN principles. There may well be more but I would go along with the noble Lord, Lord Judd, in as much as I believe that an ethical fund is a necessity.