My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 55 [Right of employee not to be unfairly dismissed]:

moved Amendment No. 109:

In responding to the amendment proposed by the noble Lord, Lord Skelmersdale, I shall speak also to government Amendment No. 109A. Clause 55 provides a new day-one employment right for employees not to be unfairly dismissed on grounds related to membership of a qualifying pension scheme. This protection will cover circumstances in which employees are dismissed for claiming entitlements to save in a qualifying workplace pension as a result of the new employer duties introduced under our reform. As with existing unfair dismissal rights, we want that protection to extend to employees who are dismissed for making a claim to such an entitlement, even if it is an incorrect claim, provided that it is made in good faith. That is what proposed new Section 104D(2) of the Employment Rights Act, as inserted by Clause 55, would do.

The noble Lord’s amendment would remove the provision, which would mean that employees would not be able to claim unfair dismissal in relation to the new duties in certain circumstances. For example, an employee earning below the qualifying earnings band who was dismissed for asking his or her employer automatically to enrol them into a qualifying scheme would not be able to claim unfair dismissal. I hope that the noble Lord, Lord Skelmersdale, will agree that this effect would not be desirable.

Government Amendment No. 109A is a drafting amendment that puts right an inconsistency in the wording of proposed new Section 104D of the Employment Rights Act, as inserted by Clause 55(2). The amendment clarifies that it is a Chapter 1 requirement and that its enforcement should be referred to rather than rights. That makes the approach in Clause 55 consistent with the approach in Clause 53. I therefore would ask the noble Lord to withdraw his amendment.

The Government are being unduly suspicious. The Minister has just said that if an employee earning less than £5,035 a year asks his employer to auto-enrol him—or, to put it another way, claims his auto-enrolment rights—and, as a result, the employer sacks him, that would be unfair dismissal. I cannot envisage such an event, but I will look again at what the noble Lord has said. Incidentally, as I should have said at the beginning, I have no objection to government Amendment No. 109A, nor, indeed, have I ever had. I will look carefully at what the noble Lord said and hope that I do not have to return to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 109A:

moved Amendment No. 110:

Some of us were glad to be invited to the 25th anniversary party of TPAS last night. I agree that, where a case of employment law goes to the employment tribunals, advice must be given before the complainant goes to such a tribunal. Since we are talking about pensions in this case, that advice should be given by someone with relevant experience. I agree with the noble Baroness, Lady Turner. However, I wonder whether this matter is not covered in subsection (6), which provides that a person is a relevant adviser if they work at an advice centre or, under paragraph (d), if they are,

“a person of a description specified in an order made by the Secretary of State”.

Either of those could apply, but I agree with the noble Baroness, Lady Turner, that this matter is so vital that it should be expressed in the Bill. I therefore support her.

I join the noble Baroness, Lady Turner, and the noble Lord, Lord Skelmersdale, in paying tribute to TPAS. Like them, I think that there is no reason why this provision should not be in the Bill and so am happy to support the amendment.

I declare an interest as a trustee of TPAS. I hesitated about whether to speak. Although in the context of the Thoresen review this is only one of many areas in which advice may be needed, it seems that identifying TPAS by name may give a signal—it is not a word that I like to use—that TPAS is an appropriate body, agency or resource for other and wider areas of financial information and advice. In that context, it would be helpful if the Minister could give a positive answer.

I thank my noble friend Lady Turner for tabling the amendment and for providing an opportunity to discuss the clause and the role of TPAS. I thank other noble Lords, too, for their contributions. Before I discuss the amendment, let me acknowledge the valuable role that TPAS plays in providing information and guidance to members of the public on a wide range of pension-related issues. It helps thousands of people each year and is successful in helping to resolve issues that are brought to it. My noble friend has given long and distinguished service in that cause, as my noble friend Lady Hollis is now doing.

The amendment is to Clause 56, which specifies the conditions regulating compromise agreements under the Act. Under them, it is possible for employer and worker to agree to limit or exclude the employer duties or individual rights arising from these reforms. This is possible only in very limited circumstances relating to conciliation proceedings. One of the conditions is that an individual must have received advice from a relevant independent adviser on the terms and effect of the proposed agreement and on the ability to pursue their rights before an employment tribunal. The Bill lists at Clause 56(6) the types of person who can act as a relevant independent adviser. This includes qualified lawyers and certified trade union officials. The amendment would list in addition persons appointed by TPAS to act as independent advisers.

As the noble Lord, Lord Skelmersdale, spotted, it is quite possible that TPAS advisers may already be covered by the existing provision at subsection (6)(c), which includes as a relevant independent adviser somebody who,

“works at an advice centre (whether as an employee or a volunteer) and has been certified in writing by the centre as competent to give advice and authorised to do so on behalf of the centre”.

However, if, as we suspect, subsection (6)(c) is not sufficient to cover a person appointed by TPAS for this function, it would nevertheless be possible to add them to the list of independent advisers under the order-making power in subsection (6)(d), which authorises the Secretary of State to allow a person of a description specified to act as an independent adviser.

In considering whether persons appointed by TPAS should fulfil this role, we would need to assess whether they had sufficient knowledge and experience of employment law in addition to their pensions expertise. We will have to discuss that in detail with TPAS. We are planning to commission an independent review of TPAS this summer, which will consider how TPAS’s role might change as a consequence of the 2012 pension reforms. The results of that review should prove helpful in the context of whether to use the order-making power in this clause. Therefore, while I appreciate the thrust of my noble friend’s intentions, I believe that the amendment is unnecessary. TPAS-appointed advisers may already be able to act as independent advisers for the purpose of Clause 56, under subsection (6)(c) or, more likely, added to the list under the order-making power in subsection (6)(d). Whether it might be more appropriate for the order-making power in subsection (6)(d) to be used in this way would be best considered once this high-level review of TPAS’s role in the reforms is concluded.

To return to my opening remarks, TPAS advisers already play a vital role and it is likely that that role will become even more important in future. We recognise and value their expertise in the field of pensions advice and look forward to exploring with them how their role will develop to fit the landscape that we are creating in these reforms. I acknowledge that that does not amount to accepting the amendment in the Bill, but I hope that the tenor of my remarks indicates how highly we value TPAS, which we feel should have a role in that connection in future. I urge my noble friend to withdraw the amendment on the basis of those comments.

I thank my noble friend for those comments and the noble Lords, Lord Skelmersdale and Lord Oakeshott, for their support. Obviously the work of TPAS is known to those who are interested in pensions provisions. I am glad that it is acknowledged that that work has been valuable and that it will continue to be valuable. I am glad to learn, too, that this matter is under further consideration, perhaps even with a view to extending the role that TPAS plays. In view of what has been said and the assurances that have been given, I thank everybody who has contributed. TPAS will be glad to learn what has been said this afternoon. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 56 agreed to.

Clause 57 agreed to.

Clause 58 [Power to establish a pension scheme]:

moved Amendment No. 110A:

This clause is at the heart of the Bill. The Government have stated that they have an absolutely firm and clear intention of bringing in auto-enrolment and this scheme. I agree with the noble Baroness, Lady Noakes: I cannot see why the Bill should not say “shall”.

I thank the noble Baroness for the amendment. I hope to satisfy both noble Lords as to why the Bill is drafted as it is. As the noble Baroness has said, we have now reached Chapter 4 of the Bill, which sets out the legislative framework for establishing personal accounts, one of the cornerstones of the reform package proposed by the noble Lord, Lord Turner.

The Pensions Commission proposes the establishment of a low-cost simple pension scheme for low to moderate earners who are currently without access to a pension. Last year’s Pensions Act established the delivery authority that is to be charged with building this scheme. This year’s Bill provides the legal basis on which the scheme will be built. The scheme will be set up as a trust-based occupational scheme. It will be run by a sole corporate trustee, constituted as an NDPB. This provides accountability both to the Secretary of State and to Parliament. The Bill sets out the framework; the detail of the scheme will be set out in the scheme order, which will be secondary legislation. Further detail will be set out in the non-statutory scheme rules. We intend to consult on the draft order and the rules on the scheme, which will give all interested stakeholders the opportunity to comment well before the scheme is up and running.

Clause 58 gives the Secretary of State the power to establish a pension scheme, ensuring in particular that the scheme is treated as established under a trust. The amendment in the name of the noble Baroness would impose a duty on the Secretary of State to set up the scheme, rather than provide a power to do so. I sympathise with the need for clarity around the Government’s intentions to establish this scheme. Let me be absolutely clear, as was my honourable friend Mike O’Brien in the other place. We will use this power to create the personal accounts scheme and it will be a defined contribution occupational pension scheme.

However, the wording of this clause reflects the view of those drafting the legislation on how best to construct a power that provides for our desired approach of creating the scheme by developing a scheme order that is analogous to a trust deed. The details of the scheme will be set out in the scheme order. It may be either desirable or necessary, sometime in the future, for the Government to amend the scheme order. In accordance with the apparently tried and tested provisions of the Interpretation Act 1978, we will be able to use the power in Clause 58(1), as currently drafted, to do so.

By converting that to a duty, the amendment would—in drafting terms—remove that opportunity, unless we drafted a further power. It would mean that this clause no longer allowed for an amending order, should that need arise. I draw noble Lords’ attention to the fact that if an amending order were to proceed, it would be subject to Clause 32 of the Bill and would require the consent of the trustees. A duty would not, apparently, work in the same way as a power. There cannot be a duty that would require the Secretary of State to amend the order, whether that was needed or not.

I hope that that rather technical drafting point will allay noble Lords’ concerns. I also hope that the noble Baroness will accept my reassurances that we will use this power to establish the scheme and that the permissive drafting is there to allow for future changes only. On that basis, I hope that she will feel able to withdraw the amendment.

The Minister keeps saying “we will”. We, on these Benches, would be very happy if he moved an amendment to say “will” instead of “shall”, but the rest of his argument is gobbledegook.

It might have been gobbledegook to the noble Lord. The point that I am trying to make is that, if we have a power for the Secretary of State, that power not only enables the Secretary of State to set up the scheme under the order as proposed at the start of proceedings, but can be used subsequently to bring forward the further order, subject to the safeguards in the Bill. We received legal advice that we could not do that in the same way if the power were a duty. That is the reason. I cannot believe that noble Lords would think that we had any intent other than to proceed as we have made absolutely clear. We have a lot of political capital invested in this, apart from the aspirations of millions of people who deserve an entitlement to a decent pension.

I thank the noble Lord, Lord Oakeshott, for his support. I agree that what the Minister said is gobbledegook. I am a plain sort of person; I believe that Bills should say what the Government mean. If the Government say that they are going to set up a pension scheme in order to deliver personal accounts, the Bill should say that they will—whether it is “shall” or “will”. The Government’s argument is that they want to use the power to do two kinds of things: to set the scheme up and later to amend it. That may well be the case, but we should be clear in the Bill that the Government must set up this pension scheme, otherwise the employer duty in Clause 3 is either meaningless or impossible to comply with, which would be unacceptable. The Government could make a further amendment for powers if they wanted to.

If personal accounts were not to proceed—and that will simply not be the case, as they will proceed—that would preclude the employer duty from proceeding. It is right to say that this would be very difficult without personal accounts. We should not be apart on this. It is abundantly clear that we are going to set up this scheme. I have explained that we have the power rather than a duty because of the ability to make changes subsequently. I really do not see why this is giving rise to such concern.

The problem is that the Minister has just said that the Government could implement Clause 3, which is the employer duty, without having put in place a pension scheme for personal accounts. The Minister is trying to say that he needs the power to do two things: first, to set the scheme up and, secondly, to amend it. It seems to me that the Minister needs two kinds of formulation in the Bill, not one. For that reason, I would like to test the opinion of the Committee.

moved Amendment No. 110B:

I am sympathetic to proposed new subsection (1B), which says that if there is to be a delay, the Secretary of State should effectively come forward, come clean and explain what is happening. However, I am a little concerned about proposed new subsection (1A), although I may have misread it. There are slight echoes of the amendment on which we have just voted. If we say that a scheme,

“must be established and capable of operation not later than 1st April 2012”,

which we all want, what happens if, for understandable reasons, we miss that date? Are we then in the position, if we agree to the amendment, that the whole thing falls away? Perhaps I misunderstand it but that is my worry. I support proposed new subsection (1B) but I am concerned about proposed new subsection (1A) because if there is a delay we do not want to lose the whole scheme.

Before I deal with the amendment, I say to the noble Baroness that comments like, “Honesty is not what he is paid for” ill becomes her and our debates in this Chamber, particularly when someone is referred to who is not here and who is not able to respond. Also, challenging the Government’s honesty in this is entirely unfair.

This amendment would place in the Bill a deadline for implementation of 1 April 2012 for what could be the largest occupational pension scheme in the UK. After Tim Jones was appointed, he took the sensible approach of carrying out a review of the plans that he inherited to satisfy himself that they were deliverable. The review was completed at the end of March and Tim Jones has made it clear that he has a credible set of plans that are consistent with delivery of the scheme from 2012. Following the review, a copy of A Report on the Personal Accounts Delivery Authority’s Plan for Delivery was placed in the Library of the House. Notwithstanding the noble Baroness’s comments, that was an attempt to take stock of where we are and the timeframe for delivery.

Our intention has always been to introduce the reforms from 2012 and that is still the case. However, we are still four years away from the go-live date of a complex programme delivering groundbreaking reforms. So clearly we cannot say that there are no uncertainties, risks or events around the corner that may change how we see things. A fixed implementation date, particularly one that is so precise—to the day—for this scheme would allow no flexibility should unforeseen events lead us to reassess our approach to implementation. While we firmly believe that there is no reason why we will change our approach, we do not think that a fixed date would be prudent.

This amendment also places a requirement for a report to be laid before Parliament in the event that the implementation date appears to be unachievable. The requirement does not seem to negate the requirement in the amendment to establish the scheme—the noble Lord, Lord Oakeshott, focused on that point. We do not believe that this is necessary, as progress towards implementation will be subject to scrutiny on an ongoing basis and there will be numerous opportunities for stakeholders, including Parliament, to input and review progress. For example, the delivery authority will produce an annual report and accounts setting out its progress over the past year. This will be laid in the Library of the House. In addition, it will produce a business plan, setting out its objectives and priorities for the forthcoming year. Both of these documents will be available on the authority’s website and therefore open to scrutiny by everyone. As part of continued stakeholder engagement, we aim to set out our plans for the employer duty in the autumn before going on to publish draft regulations in the spring of 2009. We will also consult on a draft scheme order and rules in the spring of 2009.

I was going to say that I would hope that the noble Baroness is reassured by that response, but from what has happened to date, I doubt whether she is. I say to both the noble Baroness and the noble Lord, Lord Oakeshott, that Tim Jones and Paul Myners have invited opposition Members to discuss the details of their plans. I do not know whether noble Lords have taken that opportunity yet, but I would certainly urge them to do so. Indeed, Paul Myners turned up at a meeting of noble Lords but I think that only the noble Lord, Lord Skelmersdale, was there. It is not helpful to place fine details of the project on the record at this time when procurement has not yet commenced. We must appreciate that there are commercial sensitivities around this.

The noble Baroness asked some specific questions about whether we have committed to 1 April as a start date. The answer to that is, no, we have not. As Mike O’Brien said in another place, that may well be the right date to start, but the commitment is in 2012. In any event, from provisions that we have previously discussed, we would see a phased introduction of the auto-enrolment duty which would potentially impact on personal accounts as well. It may well be the right date; it may be the date that it does happen; but we have not committed to it in any way. The noble Baroness asked whether there are project plans. I am sure there are project plans. There will be business plans and the framework agreement between PADA and the DWP will require targets, a plan to be set down and an annual report.

This is a major project to change fundamentally the pensions landscape. The enabling savings retirement programme covers the implementation of personal accounts, the introduction of automatic enrolment, the mandatory employer contribution and the communications to support these reforms. Tim Jones’s report sets outs the key stats which PADA needs to undertake before the reforms can be introduced. The first step is going through government approval processes before the procurement process can begin. Part of that is the passing of this legislation. Before these approvals can be obtained the funding strategy needs to be developed. The secondary legislation also needs to be developed and passed. We intend to consult on a draft order, as I said earlier, in the spring of 2009. Subject to approvals, PADA is intending to issue an OJEU advertisement in January 2009 for the main procurement exercise. Estimates of the time suppliers will need to put in place the necessary capabilities to deliver such a scheme are subject to negotiation during the procurement exercise. The suppliers will then need to design, build and test systems before they can be implemented.

These are major reforms and it is important that we get them right. However, as we have said repeatedly, it is our intention to introduce the reforms from 2012 and this is still the case. I understand the desire of noble Lords to have as much detailed information as possible but they must understand precisely where we are on this exercise. I would urge them to talk to Paul Myners and Tim Jones and get this directly from those who have the responsibility.

I was looking for information and commitment from the Government. Their agent is PADA; if it does not do the job properly then they can sack the people who work there. It is not for opposition Members to inquire of the staff of quangos—that really is not how life is supposed to work. The Minister said that he thought that there were detailed project plans, which I found extremely unspecific. I asked whether there were detailed project plans and I did not get a specific answer. I was hoping to follow up my query by asking to see them. Is there any reason why detailed project plans cannot be made available to Parliament?

An outline of the approach is set down in the Library and the noble Baroness has referred to that. The noble Baroness may not want to talk to these individuals directly, but that is her choice. PADA is an NDPB. It will have a framework agreement which needs to be revised once the new powers of PADA come into being after the Bill is passed. That will require a business plan, annual reporting and a report on PADA’s progress under the responsibilities imposed on it. That will be in the public domain and will be available on an annual basis. All that is quite normal; it is how these processes work. The noble Baroness keeps asking to go along and look at the books and at every plan that is being developed, but I am not sure that that is necessarily the role of politicians, the Government or the Opposition. Again, I urge the noble Baroness to talk to PADA. I am sure that it will explain in some detail where it has got to.

I welcome the fact that I have had an invitation to meet Tim Jones and Paul Myners, and I look forward to doing so. I do not think that that is in any way inappropriate; I shall find it helpful and useful.

The Minister has again referred to the little diagram in the document placed in the House of Commons Library—not, I should add, the House of Lords Library—but it is not a project plan. It is a million miles from a project plan but we are invited to believe that it will all be all right in 2012.

The Minister referred to phased auto-enrolment, but that cannot even begin unless the personal accounts scheme is up and running because there is no sensible way of phasing other than having the whole scheme operational. It seems to me that the Minister is hoping that PADA will deliver. He refers to annual reports and accounts being available to Parliament but those will not say anything about delivery; we know that. All the documents that have been produced so far are so unspecific as to be barely worth the paper that they are written on.

We will have some time during the Summer Recess to progress this issue and I hope that the Minister will be able to procure some more detailed information. This does not require the breaching of commercial confidentiality but it does require information to be in the public domain. It is not enough for private meetings to take place, because many people are interested in the detailed outworking of this policy. I said at the outset that my amendment was probing. I have probed and found the Government wanting but, for today, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 110BA:

I thank the noble Baroness for bringing forward the amendments, which relate to the auditing requirements on the scheme. As the noble Baroness said, the Institute of Chartered Accountants in England and Wales—a fine body, if I may say so—raised the issue with officials. I am grateful to the institute for its help in ensuring that we get the shape of our legislation right. The amendments relate to the application of regulations under Section 41 of the Pensions Act 1995 to the personal accounts scheme. In short, current regulations under that section require an auditor to state that he or she is satisfied to a high level of detail about contributions made by each employer into the scheme. The requirement from the auditor’s statement about all contributions to the personal accounts scheme will be costly and difficult to compile due to the sheer number of employers and workers participating in the scheme. An auditor may be unable to satisfy himself that contributions had been paid properly and may have to qualify the accounts and the audit will be of relatively little benefit to members.

The principle of proper accounting is paramount, but it is true that this scheme will be of a different scale and type from other schemes, for which the provisions in the Pensions Act 1995 were primarily designed. We have been considering the matter with the delivery authority and have concluded that the approach that the ICAEW suggests is the right one. I am pleased to give an assurance that the scheme will not need to apply the provisions made under Section 41 of the 1995 Act.

I can also confirm that no amendment to the Bill is necessary as we already possess the legal powers to achieve the objective of the amendment, either by regulations under Section 41 of the Pensions Act 1995, under Clause 116 of the Bill, or within the scheme order. In agreeing that the scheme should not need to apply the auditing requirements, we also agree that we need alternative assurance arrangements based on the principles of openness, accountability and probity. Those arrangements will need substantial consideration in their detail. I believe that the intention of Amendment No. 110DA is a good starting point from which PADA can consider the detail, although I was surprised to see that it reads “may” rather than “must”. The detailed planning work has not yet been carried out, so it is too soon for us to agree to the final audit arrangements now.

Fortunately there is no need for primary legislation to stipulate the assurance arrangements as the Bill’s current drafting allows the scheme order to set out the arrangements. The scheme order and the rules will be the subject of full consultation next spring. I hope that my assurances on the scheme audit and the robustness of the financial controls are sufficient for the noble Baroness to withdraw the amendment.

I am very grateful for what the noble Lord said. He has certainly gone further than the Minister went in another place when these or similar amendments were considered. On behalf of the Institute of Chartered Accountants I express thanks to the noble Lord for taking it this far. I am sure that the institute will want to read Hansard and, if necessary, return to his officials to clarify the position. From what I can tell, the outcome he proposed is entirely satisfactory. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 110C:

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.

I am grateful to the Minister for setting on record his reasons for drafting the Bill as it is. I can see why the rules should not affect the purpose or object of the scheme; I am much less convinced on such issues as,

“meetings, committees or delegation of functions”.

Those appear to me to be quintessentially internal matters for the trustees to develop over time, and of no real concern to the Secretary of State.

On the amendments that I mainly expect to speak to today, I will raise a number of issues that probe the role of the Secretary of State and the trustee corporation. We need to take an overall view on whether the balance of the ongoing involvement of the Secretary of State veers toward micromanagement, and whether that is inappropriate. On reading the Bill, my initial view is that the DWP’s officials have gone overboard, as usual, in finding so many nooks and crannies of the trustee corporation for the Government to be involved in.

It is fine if we discuss some of that detail in due course, but I draw the noble Baroness’s attention specifically to Clause 62(2), which says that:

“The Secretary of State may not make the order without the consent of the trustees”—

that is, an order other than one setting up the scheme—and that the trustees have to consult members’ and employers’ panels. That seems quite a long way from the Secretary of State micromanaging the scheme.

I thank the Minister for reminding me of that clause, which I was aware of, and I will take it into account when considering the role of the Secretary of State in the round. For today, there is no point in pursuing matters further and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 58, as amended, agreed to.

Clause 59 [Scheme orders: general]:

[Amendments Nos. 110D and 110DA not moved.]

Clause 59 agreed to.

Clause 60 [Consultation of members and employers]:

[Amendment No. 110E had been withdrawn from the Marshalled List.]

moved Amendment No. 110EA:

We anticipate that the membership of the personal accounts schemes will be very large, numbering in the millions, with members coming from a diverse range of jobs and backgrounds. We also anticipate that there will be many thousands of participating employers with no connection by trade or size. The size and diversity of membership presents the trustee corporation with a unique task in communicating with scheme members and participating employers. However, we firmly believe that the representation of these members and employers is vital to the scheme’s success. That is why we have placed an obligation on the trustee to consult members and employers about the operation, development and amendment of the scheme.

Furthermore, we have placed a requirement in the Bill for the trustee to set up panels to represent members and participating employers. These panels will have to be consulted by the trustee prior to any proposed changes to the order and rules. Setting up the panels to ensure proper member and employer representation is clearly not an easy task, and we have asked PADA to consider the options for their functions and composition. PADA has yet to reach its conclusions, but is considering similar panels operated by the Financial Services Authority and has met officials from pension scheme organisations such as Unite. Even when PADA makes its recommendation, we want the order to set out only the higher level composition and functions, which will leave the trustee and the panels with the flexibility to develop the roles of the panels once the scheme is fully functioning.

The amendment allows only the trustee corporation to determine the composition and functions of the panels. That would mean that the panels could be realised only after the scheme order came into force and following trustee recruitment. While it is possible to grant the trustee sole discretion as the clause is now written, we believe it is appropriate for the Secretary of State to set the basic parameters in the scheme order. Personal accounts are being introduced as part of public policy changes affecting millions of individuals, many of whom have had little prior involvement with pensions. For this reason, there is considerable interest from the pensions industry and consumer organisations about how members will be encouraged to engage with the scheme. By setting the composition and functions of the panels in the order, stakeholders and Parliament will be able to have their say on the vital question of how members should be represented. We hope to publish the order on the rules consultation next spring. I hope that has explained to the noble Baroness why we have structured it this way. This is a considerable undertaking and there are some key high-level issues that it is right are dealt with by the Secretary of State through the scheme order.

It is a question of judgment whether the matter is for the Secretary of State or for the trustee corporation, which we hope will be a free-standing organisation of some stature and substance in the pensions community. This is another area where the question is whether the Secretary of State’s role is correct or too intrusive. For every involvement of the Secretary of State, somewhere in the Department for Work and Pensions there will be one or more job descriptions which include that aspect of involvement. One of the things we are concerned about is that we not only create a bureaucracy in the new trustee corporation but leave lots of pegs under which bureaucracy can thrive in Whitehall, which would not be the right outcome. I will consider that in the overall context. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 110F had been withdrawn from the Marshalled List.]

moved Amendment No. 110G:

Consultation with both employers and members is essential to the success of the personal accounts scheme. The Bill requires the trustee to establish members’ and employers’ panels to ensure that the trustee corporation is informed of the concerns of these groups. This amendment would give the employers’ panel the right to nominate members to the corporate trustee in the same way as the members’ panel can. While the personal accounts scheme will emulate existing occupational pension schemes, it will be unique in scale. The members will be drawn from many thousands of employers and it is likely that many of these members will not have saved in a pension before, which is why it is particularly important that the members of personal accounts should feel a sense of ownership.

All individuals who form the corporate trustee will have the core obligation to act in the members’ best interest, rather than to represent any particular interest groups. It will not be possible for the trustee to meet the duty of acting in the members’ best interest without taking account of the employers’ concerns. It is the employers’ panel role to ensure that it has the information to do this.

It may be helpful to point out the different role of the employer in the personal accounts scheme. In a typical occupational pension scheme, the participating employer would set up the scheme. The personal accounts scheme is being set up specifically for those employers who do not currently offer access to a workplace pension. If an employer chooses to use the personal accounts scheme, he will not be involved in the running of the scheme. The main focus for employers using the personal accounts scheme will be its efficient administration. If an individual employer has any concerns or problems with the administration of the scheme, he can raise this with the administrator or through the employer panel.

The role of the employer panel will be important; the panel will ensure that the views of the wide range and diverse nature of employers using the personal accounts scheme are heard. Ultimately, however, the members are the beneficiaries of the scheme, so they should have a greater stake in how it is run. It is for this reason that we have given only the members’ panel the right to nominate individuals to the trustees. We feel that this is the right balance. I ask the noble Baroness to withdraw her amendment.

I listened carefully to the Minister’s reply but it did not really explain why there was a distinction between the two. I am not persuaded by his reply. This is, after all, only an enabling clause; it does not say that they have to be nominated. I am with the noble Baroness on this.

I am puzzled at the noble Lord’s response, although I can understand where the noble Baroness is coming from. This is a DC scheme, whereas all the assumptions about employer contribution and activity are based on models of a DB scheme where the employer has set up the scheme and is actively contributing but is also expected to honour the pension promise, underpinned by the PPF. This is a DC scheme, in which the disinvestment risk and, to some extent, the investment risk, is carried by the members. The amount of risk carried by the employers is non-existent. Clearly their views matter and will be picked up by an employers’ panel, but I cannot see the place for employers in a money purchase scheme; it has nothing to do with employers apart from their contributions, which are laid down by statute.

I am disappointed in the noble Baroness. In employer-based DC schemes, as well as trust-based DB schemes, employers do take part. The noble Baroness says that we are interested in employers only for their money; fortunately, the Minister went a little beyond that and said that the Government wanted to hear the views of employers through the panel.

I actually said that we would expect to hear employers’ views through panels, which I welcome. I was making a distinction between that and where the risk lay and therefore where the responsibilities of trustees should reside. That is a different point.

The issue of risk does not necessarily drive how to create an effective trustee corporation board. The important thing is that all the right issues are raised and discussed at that board. If the noble Baroness looks at the example of how conventional DB and DC trust-based schemes work, she will see that they are mixed, with employee-nominated and employer-nominated people. They all have the duty to act for the members—there is no question about that. But the issue is how effectively to deal with those concerns.

There are two panels—one is invited to put its people on to the board and one is invited to stay at arm’s length. Issues will arise that need employer input. That is the way in which the scheme operates. It is all about information flow and how employers deal with the interface on behalf of their employees. The construct that the department has and the noble Baroness seems to have—that employers are there to be consulted but are not really part of the process—may in the long run create an ineffective organisation because it does not have all the right interests welded into its operation. Having a consultation panel is not the same as having people on the board if other consultation panels appear to dominate the scheme.

I am not trying to make a case for employers dominating a scheme or doing anything other than acting in members’ interests. I should like the Government to think again about whether it is the right answer to exclude employer representatives from the panel. The experience of existing employment-based provision suggests that this is fundamentally a good process. It sometimes causes difficulties but, overall, it allows a forum in which issues can be raised. I hope that the Government are prepared to look at this again. I am not seeking to put forward an employer-dominant case; I am just concerned about the efficiency of the scheme.

We have not heard anything to date that would cause us to change our mind. However, if the amendment is not pressed to a vote, we will reflect on the noble Baroness’s words between now and Report and may come to a different conclusion.

I am grateful for the Minister’s comments. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 60 agreed to.

Clause 61 [Contribution limits]:

moved Amendment No. 111:

Perhaps the noble Baroness would let me speak to my amendments in this group. We could then deal with all the issues covered by this group of amendments. I have grouped my amendments here because the noble Baroness, Lady Greengross, tabled Amendment No. 112 in this group. I had not intended to group my other amendments with those of the noble Baroness, Lady Hollis, but since I have done so, I shall speak to the amendment of the noble Baroness.

I was somewhat surprised.

My purpose was to group my amendments with Amendment No. 112, that of the noble Baroness, Lady Greengross. I have some sympathy with the amendment of the noble Baroness, Lady Hollis. She has helpfully clarified that she was referring only to employee, or individuals’, contributions, and that did not carry any sense of backdating employer matching for any purpose. That is fine. My concerns are practical rather than theoretical. The amendment will involve considerable additional complexity for personal accounts, which would then have to track records of contributions year by year. That record could extend for up to 50 years if somebody started contributing at the age of 16 and stopped when they were somewhere in their sixties, or possibly even older. This Bill allows contributions up to the age of 75, so I will change that to 60 years or more.

Anybody who knows anything about NIRS2, the system for recording NI contributions, as I am sure the noble Baroness, Lady Hollis, does, will know that recording, maintaining and holding details of contributions over these very long periods is neither easy nor cheap. I have a very real concern about the additional burden that the amendment would place on the implementation of this scheme, particularly in the design phase. From what I understand about their attitude, those running PADA would run a mile from that complexity. I am also concerned about the cost of doing this, and the impact on the cost limit that we were aiming at. This was set at 0.3 per cent or 0.5 per cent; we will come to that in due course. That limit is already under some stress. Those difficulties of both complexity and cost pressure are real. At heart, the amendment is sensible, but the practicalities may be very difficult to cope with.

My amendments in this group address the broad theme of not allowing personal account schemes to crowd out private pension provision. In that respect, it addresses some of the issues raised by the noble Baroness, Lady Hollis, when she spoke to her amendment. We are concerned, as are such organisations as the Association of British Insurers, that the personal account scheme will become a vortex, sucking in all manner of pension contributions and other savings so that, at the end of the day, existing pension and savings-product providers will find it difficult to compete.

To be clear, we stand for healthy competition, but competition from a state and statute-backed pension provider may not be healthy if that becomes the default repository for all long-term savings from large swathes of the population. That will, in turn, weaken the UK’s financial services industry, a major contributor to our economic growth. We interfere in this sector at our peril. We agree with the Government—and, probably, with all sides of the House—about the need for greater pensions saving. We are not apart from the noble Baroness on that. We certainly support the creation of the personal accounts scheme if it can be delivered. Our support is tempered by the need not to create some kind of nationalised industry, which brings unfair competition to private-sector providers.

Let me deal with some of my amendments. Amendment No. 111A explicitly states that employers should not contribute more than the 3 per cent that the scheme is based on. The noble Baroness is shaking her head, but let me explain. The rationale for this is that personal accounts should be a default scheme for those employers who want to contribute the minimum. If they want to contribute more, they should research something like group personal pension schemes, to allow them to contribute higher amounts to a workplace-based pension scheme for themselves. We must not let the personal account scheme crowd out people who want more than the default, and should therefore go out into the market to find other options for their employees.

I am grateful to the noble Baroness for giving way. Why should they go out into the market? I can see that they might wish to do so, but why push them into the market if they would prefer the simplicity of adding to the existing personal account contribution? Why place additional burdens on business?

They then do not go into personal accounts and add to them; they go into another form of scheme. If they choose to do more for their employees, we must not discourage that. At the same time, we do not wish to divert pension savings from pension providers that are part of the backbone of our financial services industry. There is a great danger that this scheme, in the way that it is set up, will become a magnet, attracting all forms of additional contributions from all over the place. Some will be from employers and some from employees; we will come to that. That is the reason. My amendment does not preclude higher employee contributions, which is what the amendment of the noble Baroness was about. It is a default scheme, where employers contribute the minimum and that is it. If employers want to do more, they should be out in the marketplace.

Amendment No. 111B is designed to place in the Bill what we understand to be the Government’s policy; namely, that there will be a maximum contribution level of £3,600 for any employee in any year. I have provided that this should be uprated in the same way as the earnings band under Clause 13. It is logical that the band should be increased; that should be provided. The £3,600 limit allows contributions to rise above the minimum allowed by the band, but not by such a huge amount that it would start to displace private sector provision. The earlier proposal for a £5,000 limit, as the Minister will be aware, generated considerable opposition from the pensions industry, which remains concerned about the Government’s intention. The Government have said that it is their policy. If that is the case, they should be prepared to place it in the Bill.

Amendment No. 111C deletes subsection (3) of Clause 61, which allows the Secretary of State to prescribe an amount for top-up payments to be made by a member. The noble Baroness wants this subsection to be made mandatory. We believe that the Bill should specify an annual amount for contributions to the scheme, but the scheme should not get into the general investment business. Staying with the power, in Committee in another place, the Minister sometimes talked about a £10,000 limit under subsection (3) and sometimes about a higher limit, and even a lifetime limit. On Second Reading, the Minister said that the Government wanted flexibility, both in the amount of top-ups and for the period from which they will be allowed. I am not sure what the Government’s policy is. We have heard many figures and the traditional reference to flexibility. Could the Minister provide more clarity on that?

We believe that the personal account scheme is fundamentally about annual contributions to pensions, to build up savings for retirement. It is not designed to be an all-purpose investment vehicle. There should be no possibility of the Bill turning it into that. As I have mentioned, this will be a nationalised undertaking. All past evidence is that when nationalised industries compete in competitive markets, they operate relatively badly. However, when there are market imperfections, which there could be if we are not very careful with the Bill, they tend to clean up. That would be a very serious problem if the personal accounts scheme achieves that by trading from its position as a government-backed organisation with no effective capital market disciplines constraining it.

There is also a question of whether members will properly understand any ability to deposit additional money into the personal account scheme. Such payments will not attract any employer contribution—the noble Baroness, Lady Hollis, made that clear—and may attract tax relief; and, if fair competition rules the day, would not get tax relief. Again, the Government have not said what their position is in relation to additional payments.

Both issues are vital to an understanding of whether it is a good deal to invest in the personal account scheme. The problem is that members could easily be misled by the general information provided by personal accounts. They could be misled into thinking that their additional contributions could produce the same returns as their annual contributions, which it is virtually certain will not be so, if only because they do not get the employer contribution on top of their top-up payments.

The API has pointed out that top ups could be made in an advice-free zone if the personal account scheme was allowed to take them, and that members are very likely to make investment mistakes. Does anyone really want to get into the sort of mis-selling scandal that could be involved? The Government will have set up and be standing behind the personal account pension scheme, so we can expect mis-selling problems to end up, ultimately, on the Government’s door step.

The Government may well think, as I am sure will the noble Baroness, Lady Greengross, that Amendment No. 111C, in removing the power in proposed subsection (3), is too harsh. If so, the Government should come off the fence and say what they intend to do and argue that on the basis of an amendment to place in the Bill whatever limits and constraints there are. A debate can then be had, in particular with those in the pension provisions industry, about the impact of that on existing providers, on the future flows of investment money and the impact on the financial services industry generally.

I received a lot of briefing from the TUC on Clause 61. I say at the outset that I agree with a great deal of what my noble friend Lady Hollis said in moving her amendment. The briefing caused me to give notice of my opposition to the whole of Clause 61, but that was simply a way of being able to say what I have to say about the clause. The problem is that there is not enough flexibility. There should be flexibility for individuals to put extra money into their personal accounts when they can, perhaps when they receive a small inheritance, there is a divorce settlement, when some kind of investment matures, or perhaps with some saving through something like an ISA.

The argument for allowing such additional contributions is that personal accounts will build up to a significant pension only if employees contribute throughout their working lives. Not everybody can or is willing and able to do that. In particular, that may not apply in the case of older workers who will start to save for a pension for the first time when personal accounts commence in 2012. Moreover, there are the working patterns of many women, to which my noble friend Lady Hollis has devoted quite a lot of time. They are much more likely to have breaks in pensionable employment due to child rearing and caring responsibilities, to work part-time or to be in low-paid employment that does not give them the opportunity to build up significant savings for retirement.

Anyone who has missed out on the opportunity to contribute may want to catch up later in their working life. It would be sensible to encourage this and to increase personal responsibility, which has always been a key government objective in the Bill as in other respects. It seems odd that the new system should forbid extra contributions of a size that would probably not make much sense if invested elsewhere in a separate private pension. People in the target market, with no experience of private pension arrangements, would probably be put off from seeking a further pension product.

As indicated earlier by the noble Baroness, Lady Noakes, I suppose that there is the possibility of unlooked-for competition with private investment business. On the other hand, the sort of people for whom this Bill is intended to provide benefits are not liable to be tempted into other investments if they are putting their pension investment into this scheme. It is intended, as everyone has said from the beginning, for people who are not well paid and who otherwise would not have any occupational pension provision except through the personal accounts scheme. If the scheme does not allow them sufficient flexibility to contribute, when can they contribute so that when they actually retire they have a pension entitlement that enables them to lead a reasonable life? They will be forced on to the benefit scheme, as indicated by my noble friend Lady Hollis. I hope that the Minister will consider carefully what has been said about the possibility of allowing extra payments in order to make absolutely certain that when people retire they have adequate retirement benefit.

As to the advantages of putting pots of money into something like a personal account scheme, there are no tax advantages compared with ISAs. In fact there is a big disadvantage in that, having put it in, you can get out only 25 per cent as cash; the rest you have to take as an annuity. So it is a restriction and it may not be advisable to lead people to think that that is where they should put their money. Has the noble Baroness thought about that?

At this stage I will speak to Amendment No. 112 standing in my name and to the other amendments in the group. I particularly support Amendment No. 111 tabled by the noble Baroness, Lady Hollis. Like my amendment, it is aimed to promote flexibility. I am grateful to the People's Pension Coalition and to the organisation Which? for their advice on Clause 61.

While I have some sympathy with what the noble Baroness, Lady Noakes, has been saying, I think that her amendments promote inflexibility in personal accounts for the reason she outlined. Amendment No. 111B fixes in primary legislation the amount of the annual contribution limit at £3,600, which will mean that it is very difficult to vary it. The strict annual limit of £3,600 per year, uprated from 2005 prices, is very inflexible, given the Government’s other pension reforms, which have swept away and tidied up so many other pension rules. I understand that this annual limit is the result of consensus built up following the report of my noble friend Lord Turner. Were it not for that, I would be tempted to suggest no upper limit at all.

I do not think that this provision would crowd out the other schemes that the noble Baroness, Lady Noakes, talked about because it is targeted at a group of people who currently tend not to save at all and tend not to get involved in a private pension scheme. It is a bit like the levelling-down argument; I do not feel that this would damage the industry and I certainly would not wish to do so. I feel that it will not.

Amendments Nos. 112A to 112C seek to set in statute what the Minister has already committed to—that transfers in and out should not be permitted before 2017. I have more sympathy with those amendments, given the consensus that personal accounts should be given a period of time to get established before we consider whether transfers in or out should be permitted. However, what happens if PADA or the wider pensions industry realises that some kind of flexibility is needed before 2017? It will not be possible to make that happen without another DWP Bill, and even then it would take a lot of time. For instance, this Bill will be in Parliament for almost a whole year before it gets Royal Assent. As Which? has already pointed out, one type of transfer into personal accounts will already be permitted: the unvested money when someone leaves an occupational scheme before reaching the end of the vesting period, usually two years. Meanwhile, the other place—especially a member of the noble Baroness’s party, John Greenway MP—has grappled with the thought that some people may have a legitimate reason for transferring funds out of personal accounts prior to 2017; migrant workers returning home, for example.

I do not like inflexibility. The object of my amendment is to build greater flexibility into the contribution limits of personal accounts. It is a probing amendment. I am not sure that the wording “must” is the best way to achieve this and accept that some work needs doing on it. However, the point is that we want people to save more. The contribution limits for personal accounts do not seem to encourage this on a voluntary basis.

I understand the Minister’s desire for simplicity. I also understand PADA's desire to be able to market a simple low-cost scheme to personal account members. The 4-3-1 idea outlined by Tim Jones is a form of “BOGOF”: buy one, get one free. If the employee contributes 4 per cent, the employer must contribute at least 3 per cent and tax relief tops it up with another 1 per cent. My amendment would not confuse that message of simplicity, as that message relates to those who are auto-enrolled into personal accounts and will be getting an employer contribution. My amendment would apply to those who made contributions voluntarily, who would not necessarily have an employer contribution. I should like to see greater flexibility there.

Specifically, the amendment would require the Government to prescribe additional contribution limits into personal accounts in addition to an annual contribution limit. Rather than “may”, they “must” do so; as I said, the wording needs some attention. The sort of additional limits I had in mind are a lifetime lump-sum limit, or a higher contribution limit in the first year; another would be to enable missed contributions to be made up at a later date, tying in with the amendment of the noble Baroness, Lady Hollis, which seeks to do just that.

Which? believes that to support saving in the run up to 2012, consumers should be able to put aside money for their retirement which would be then rolled into personal accounts in the first year; others have also suggested it. I know that the Minister is sympathetic, too—he indicated as much at the briefing session on the Bill that I hosted for Peers prior to Second Reading. More to the point, the Government's White Paper actually suggested a £10,000 limit in year 1. Perhaps the existing ISA vehicle could be used for this purpose in the two years leading to the “go-live date”—that is, from April 2010.

The Government should also examine the feasibility of establishing a lifetime limit in addition to the annual limit to allow consumers to pay in lump sums, such as an inheritance, redundancy payments or bonuses, or to make up missed annual contributions—the subject of the amendment of the noble Baroness, Lady Hollis. This sum could be around £50,000 across a member's lifetime. If this is not acceptable to the Minister, then I would agree with the noble Baroness, Lady Hollis, that personal account members should be able to, as her amendment says,

“make good the shortfall where contributions fell below the maximum amount in a preceding tax year or years”.

My simple amendment would be consistent with the Treasury's publicly stated desire for pension saving to be flexible. I could not put it better than HM Treasury itself when it concluded, in its review of pension tax simplification in 2003, that,

“those on modest earnings who leave their pension savings late will not find that they are restricted in the amount of extra contributions they can make each year”.

Perversely, personal accounts may fail this test without Amendments Nos. 111 and/or 112.

Which? research found that 70 per cent of people agreed that there should be flexibility about how much can be paid into a personal account. Flexibility will allow people who take career breaks, or who have fluctuating incomes, to make up contributions in other years.

Can transfers be covered by an order under subsections (1) or (3) of Clause 61? I ask that because the noble Baroness, Lady Greengross, has spoken to transfers, which I was intending to deal with in the next group of amendments. If the Minister believes that subsections (1) or (3) of Clause 61, which are the objects of these amendments, can cover transfers in and out, I will need to speak to my amendments in the next group at this stage for the convenience of the Committee. Looking at the clause again, I was not quite clear whether existing powers could specify transfers in and out.

Without prejudicing my noble friend’s reply, even if they do I hope that the noble Baroness will resist the temptation to run those other amendments in with this. The group will just become too large; we are picking up three or four themes already. I would hope that the distinct issue of transfers would be separately addressed.

I support Amendment No. 11 of the noble Baroness, Lady Hollis. I am glad to be one of the usual suspects led by the noble Baroness whose mission in life in this context is to try to help low earners with irregular working lives, usually women, save enough for a better pension.

We on these Benches support the amendment, which, as we have heard, would allow employees to make contributions into personal accounts over and above the annual contribution limit in order to make good any shortfall in the preceding year or years. As the noble Baronesses, Lady Hollis and Lady Turner, have explained, this would particularly help women with broken work records in one year to top up their contributions as their circumstances improved in the next. It would also help older workers who will not start to save for a pension until 2012 and who will need all the help they can get to build up a significant pension by the time they retire. Neither should we forget what could be another group: those who have not been pensioned yet and leave it comparatively late to start saving for a pension because of debt problems at the start of their working lives. This last group may be graduates with student debt, whose earnings are generally expected to be quite high—but that will not necessarily apply to all graduates or all people with large debt problems.

Last week, we heard about the Government's plans to help women gain salary equality with men. Bravo for that, but in other fields there is clearly a long way to go before financial equality between the sexes is achieved. Women need the Government to understand how difficult it is for many of them regularly to put enough money by for a pension and why flexibility in the annual contribution limit for personal accounts is desirable, so that they have the option of making good a shortfall if their circumstances change.

To those who say that employees can find other pensions savings schemes besides personal accounts into which they can deposit any extra funds they have available, as the noble Baroness, Lady Noakes, said, research from the consumer organisation Which?, cited by the noble Baroness, Lady Greengross, shows that anyone wanting to make such contributions above the annual limit may struggle to find an appropriate pensions vehicle outside personal accounts. One reason is that the pensions industry does not offer cost-effective alternatives. Which? found that 52 per cent of people would be put off saving more by the,

“hassle of finding and opening a separate pension plan”.

Which? also makes the comment, which is worth repeating, that the Treasury, no less, was quoted as saying that those on modest earnings who leave their pension savings late should not find that they are restricted in the amount of extra contributions that they can make each year. That was in a paper entitled Simplifying the Taxation of Pensions of November 2003. Perhaps the right hand of the Government should take account of what the left hand is saying. I urge the Government to accept if not the amendment, then the spirit of the amendment.

I have listened very carefully, but I cannot pretend that I have understood every word of what has been said. I certainly get a very strong message on Amendment No. 111, which was so ably moved by the noble Baroness, Lady Hollis. What comes over to me is that certainly we do not want to have competition for the poor old insurance industry in respect of large sums of money, which of course should go to the market and get the best price. It is clear that we are not talking about those. I hope that personal account pots will be attractive to women who probably would not be saving at all but for them. Certainly, if one looks at the older woman who has had far less opportunity to save, and we look at why the women are probably poorer—because they have been saving the state huge sums of money in their caring capacity—surely we should to a certain extent look at this as compensation.

It has been strongly stressed that there is a need for flexibility, which has come up on many amendments. In this area, it is surely absolutely right that there should be the possibility of paying in some lump sum that one might inherit, or if a husband gets an extra windfall that he is prepared for it to go to his partner’s pension. As Which? has said, if above all flexibility is what is needed and is seen as important by the people who go to Which?—my goodness, it has so much basic experience of this group of people that it really knows what it is talking about—surely we should back the approach of the noble Baroness, Lady Hollis. It may not be perfect, and she has admitted that nearly all the amendments are probing amendments. I, too, have some sympathy with what I think my noble friend Lady Greengross is trying to achieve.

I hope that the Government will look very carefully at allowing greater sums of money—be they £10,000 or £15,000 or as high as £50,000—if that is not going to get everyone in a state again about doing down the poor old insurance industry. I am very much one of the usual suspects here.

I wonder whether I, as the first man to speak in this important debate, can join the usual suspects. We have been talking about the poor old insurance industry. I had a charming letter today from the Association of British Insurers thanking me for my contributions on previous days of debate. I appreciated that, but I do not think that I will be getting another letter from it on what I am about to say.

We on these Benches oppose the Conservative amendments. The noble Baroness talked about the fears of the Association of British Insurers and the industry about what I think she called a vortex, sucking in all manner of pension contributions. Frankly, if only anything could suck in more contributions from all around. Saving in this country has collapsed in the first quarter to 1 per cent of income. We should be very careful about restricting any vehicle that is efficient, low-cost and targeted to lower income people. As my noble friend Lady Thomas said, we do not really support limits as restrictive as they are here. It is a pretty open question whether there should be any limits at all on contributions into personal accounts, because we are desperately keen to encourage saving and we favour maximum consumer choice.

The noble Baroness, Lady Noakes, asked the noble Baroness, Lady Turner, why people would want to put extra money into personal accounts when they could have an ISA. As we have heard, there is the extra complication for people of doing so, but part of the argument is that personal accounts are low-cost and efficient. ISAs are quite expensive. The whole point of personal accounts is that it is a low-cost, straightforward scheme. Also, people, perhaps particularly women, might not want something that is too easily accessible. There is a certain feeling that people might want to tuck something away for their old age. Why are we restricting consumer choice here? I do not believe that the insurance companies should worry, except in so far as they are not behaving very well.

The Daily Mail last Wednesday pointed out that:

“Tens of thousands of savers with money in old work pensions are being hammered with higher charges”,

and that two of the main companies have put up the charges from 0.4 per cent a year to 0.75 per cent and from 0.37 per cent to 0.67 per cent respectively. This is where people have moved on, have small pots left in old schemes and are in a sense trapped in those schemes. It is perfectly reasonable and it is a good competitive position that if they are being squeezed in that way and if they want to do so, they should be able to take the money out and put it into personal accounts. The insurance industry should not worry so much. Personal accounts are here to help. They maximise consumer choice and they will particularly help low-paid people and women with broken records who are not saving for a pension. We should be much more positive about them.

We have heard already, and I will not repeat, the very good points made by the members of the People’s Pension Coalition, which we support. I remind noble Lords of the report on personal accounts by the Work and Pensions Select Committee in another place, which was very much encouraging last year a more open and less restrictive attitude. I will not read them out, but there were responses from the Government at that stage looking at additional contributions and additional flexibility. I would be interested to know where the Government’s thoughts have got to on that. We are very much in favour of opening things up and de-restricting. Heaven knows any form of pension saving in this country must be made as easy as possible.

I thank everyone who has spoken in this debate; the usual suspects plus one. It has been fascinating, and it has covered a range of different views and perspectives. My role as Minister is to disappoint everyone. I say to the noble Baroness, Lady Greengross, that to quote Treasury edict to DWP Ministers is grossly unfair.

It has always been our aim that personal accounts schemes should complement rather than replace good pension provision. As noble Lords are aware, we have made a commitment to introduce a number of measures to focus the personal accounts scheme on the target market of moderate to low earners. The key measures in this respect are an annual contribution limit and a general ban on transfers to and from the scheme. To deal with the question asked by the noble Baroness, Lady Noakes, about where transfers fit in, a ban on transfers into personal accounts, subject to the exceptions, will be in the scheme order, and transfers out will be prohibited under Clause 111. Clause 61 is to do with contribution limits, and those are the mechanisms to deal with transfers.

As I said, the key measures in this respect are an annual contribution limit and a general ban on transfers to and from the scheme. Clause 61 provides for the introduction of the contribution limit and the review of that limit in the future. I have listened with great interest to the points made on all sides of the Committee. Contribution limits are clearly a key issue for all who have spoken, and I know that interest is not limited to this House. Throughout the development of the personal accounts policy, we have listened to the views of a wide range of stakeholders, and the clause is a direct response to the consultation.

The Opposition may believe that I overuse the word, but I cannot think of a better example of establishing consensus than in the development of our policy around contribution limits. The majority of stakeholders agree that a balance has been struck between, on the one hand, focusing personal accounts on the moderate to low earners and not impinging on good-quality existing provision and, on the other hand, making sure that personal accounts can cater for the needs of their members. We are committed to an annual limit of £3,600, but based on 2005 earnings, which will be uprated in line with earnings to 2012 and beyond. This gives assurance to pension providers that personal accounts cannot take the place of existing products but will enable saving beyond the minimum for the majority of personal accounts.

The Minister will be aware that other figures have been talked about by his honourable friend in another place. The pension industry is concerned about the level of that and indeed is content with £3,600 uprated in line with earnings. There is a lack of clarity. Would the Minister not consider putting this—with the appropriate formulation so that it calibrates itself correctly—on the face of the Bill?

I do not see that we need to do that. The £3,600 figure has been around now for a while. I know it started at £5,000, there was a big debate around it and there is still discussion about a one-off £10,000 contribution and a lifetime limit. I will come to that. The £3,600 has, however, been around for some time. We are committed to it. I believe stakeholders know where we stand. I cannot believe there is any misunderstanding out there. If there is, we are always happy to seek to clarify and to confirm the Government’s position. We have, however, been very clear on that for a long while.

The £3,600 limit gives assurance to pension providers. Personal accounts, as I said, cannot take the place of existing products but will enable saving beyond the minimum for the majority of personal account members. Even somebody earning above the upper limit of the earnings band would receive about £840 per year in employer contributions and, coupled with the employee contribution including tax relief, this would increase to £2,240. This leaves ample headroom for both employers and employees to contribute more if they so choose. My noble friend Lady Hollis talked about someone on half median earnings with contributions of £1,000, which leaves considerably greater headroom.

I will now turn to the amendments on Clause 61. Amendments Nos. 111, 111C and 112 all address the issue of a lifetime contribution limit. We considered the concept of allowing a further limit to run alongside the annual limit as part of our White Paper consultation and decided that allowing such a facility warranted further consideration and discussion with PADA. Consequently we have allowed for a discretionary power on the face of the Bill. Allowing for saving beyond the annual limit has merits, as my noble friend Lady Hollis and the noble Baroness, Lady Greengross, have described, as have others. Such a facility may help women and others who take career breaks to undertake caring responsibilities who may wish to make additional contributions in later years to compensate for this shortfall. We are still considering this facility but we need to bear in mind the need to avoid additional bells and whistles when the scheme is introduced. Each additional design feature will add costs, which will be paid for by the scheme members. It is also important to remember, as I said earlier, that the annual limit provides considerable scope anyway for one-off payments.

The Personal Accounts Delivery Authority has provided us with detailed advice on the cost and operational complexity of introducing a lifetime lump-sum facility. We are considering its advice carefully and will make our decision in due course. Amendments Nos. 111, 111C and 112 would pre-empt this decision and limit flexibility to return to this important issue at a later stage—for example, as part of our 2017 review—on the basis of further evidence.

Like my noble friend the Minister, I am grateful for the number of people who have spoken today because I think that, although this is a thin amendment in some ways, it seeks to open up a core issue: how you encourage people to save and make it worth saving. This is one of many ways in which to do that; I am sure that we will revisit some of the other ways. I am grateful for the contributions of all noble Lords, irrespective—as with unisex annuities—of gender.

I want to comment on Amendment No. 111A, in the name of the noble Baroness, Lady Noakes, which is grouped with my amendment. She emphasised several times that personal accounts involved a default scheme. I am sure that she is aware that if a woman on half median earnings of £11,000—she is the figure whom we are seeking to help—were in an average DC scheme, the employer would pay, on average, 6 per cent on the whole of her earnings from £0 to £11,000. In a personal account, half that would be paid on half of her earnings. Effectively, 1.5 per cent would be paid; that is all.

Some employers, especially micro-employers, might not want to go into the market to set up a separate fund; they are currently paying, for someone earning £11,000 a year, £3 a week. The noble Baroness’s amendment would force them into paying perhaps £5 a week—£2 extra. They would be forced into the inconvenience, the hassle, the cost, the trouble and the inflexibility of going into the marketplace when they do not want to for the sake of £2 a week. I cannot believe that the noble Baroness, who is always so concerned to remind us of the burdens on business, is opposed to all burdens on business except where the employer might seek to avoid such a burden with a personal account by paying a contribution for an employee that is over the minimum. At that point, the noble Baroness would impose on the business the burden of going for a market option that it may not wish to seek. I find that, if I may say so, an extraordinary volte-face from the noble Baroness. It appears that she is so concerned with the meta-language of what may happen to the stability of bigger funds—I accept that—that she is willing to impose burdens of that size on micro-employers for £2 a week; she cannot regard that, on reflection, as reasonable.

The noble Baroness made some entirely valid comments on my amendment about NIRS2 and tracking. With personal accounts, we must, by definition, track in the contributions. We will therefore know, by definition, the years for which contributions have not been made. I do not see a problem; if you know that you are contributing from, say, 2015 to 2019, and you contribute again from 2022, by definition you know that between 2019 and 2022 you have not been contributing; the records will show that. The headspace is there and is available to be filled. NIRS2 was different.

The noble Baroness should think about how that will work in practice. Unless there is a need to know the annual build-up of the contributions within the personal accounts scheme, why would that scheme need the kind of architecture that allows this detailed tracking, year by year, which is maintained, as I outlined, for up to 60 years? Once the money is in, within a certain limit—I refer to those years for which there might be corrections—there will be no need for the personal accounts scheme to have that detailed history of how it was built up, because it would just be in an allocated pot that was accumulating. The history will be history and of no relevance. That I why I believe that additional burdens will be put on to PADA.

I accept what the noble Baroness suggests but I find it extremely unlikely in relation to a personal account, for example, because of problems deriving from similarities of names and addresses or movements from house to house, property to property and job to job. I would be amazed if companies did not think it wise to keep those records. The noble Baroness may be right—I defer to her greater expertise on this—but it would be very rash indeed not to keep records to track, if only to avoid possible arguments about the size of the pot, the investments made and any access to following benefits.

The problem with NIRS2 was not about tracking the records but the fact that NIRS2, as I know to my bitter experience, failed to notify people of their deficient contributions. The records were tracked; the problem was with the deficiency notices.

Finally, my noble friend cheered me up slightly when he said that it was perfectly reasonable that these things were under review. He talked about the need to keep this simple and not to make PADA’s job more difficult. However, he should consider the fact that flexibility is not the opposite of simplicity; it is the opposite of inflexibility and rigidity. The requirement down the years would be to revisit something because not enough headspace was built in in the first place. I am sure that my noble friend is well aware of that. With that moral homily, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 111A to 111C not moved.]

had given notice of her intention to move Amendment No. 112:

moved Amendment No. 112A:

I want to use this debate as a hook with which to raise an issue that I am worried about. It has been raised by TPAS, whose 25th anniversary noble Lords have referred to, and I suspect that it may be a concern for many noble Lords. We may explore it more fully on Amendment No. 134ZB. It involves the issue of stranded pots and the capacity to transfer them in.

I am batting beyond my technical range here; I hope that noble Lords will forgive me if I am mistaken, but I believe that what I am saying is accurate. Let us assume that an employee in her 50s joins a personal account in 2012 and, over the next five years, puts in the maximum, which comes, in today’s prices, to £18,000. I agree that that is unlikely but it is possible. That sum could not be trivially commuted; she would be forced to annuitise it. Let us suppose that that employee already has two small personal pots, each in personal pensions, of £2,000 each. If those two small pots were based on occupational pensions, with an employer contribution or whatever, the 2008 Budget would allow her, as I understand it, to trivially commute them in addition to her £18,000 coming in from her personal account. In other words, they can essentially be ignored.

However, if her two small personal pensions are not occupational, but personal pensions, she cannot trivially commute them; she cannot annuitise them, because they are too small and, with the noble Baroness’s amendment, she cannot transfer them into her personal account. Those two £2,000 pots are completely lost; they are stranded in no-man’s land. She already has savings of £18,000 in her personal account. She has an additional £4,000. If those pots are in an occupational pension she can get at them, but if they are in a personal pension she cannot and they are totally lost. I understand that to be the case; if it is, frankly, something has to be done about it.

We can discuss this again when we get to the amendment on trivial commutation, but I am giving warning now, because I think that it is one circumstance in which problems might arise. Another circumstance is pension sharing on divorce; you may end up with a sum where the existing pension fund does not want to retain the split but the fund has nowhere else much to go. There may be cases like that where those sums need to be able to come into personal accounts. Whether that is effected through the code of practice or guidance—it does not necessarily have to be done on the face of the Bill—or through regulations, there is a bundle of such issues almost hiding under the stones, which we will uncover as we go through the Bill.

This is the issue that most grieves me. I raised it at the TPAS reception dinner last night. The chief executive of PADA and several financial advisers said that it is a real problem. I am persuaded that we should do something about it. That may not be today. My noble friend may not yet have sufficient answers; I recognise that this is primarily a matter for HMRC rather than DWP. However, I hope that noble Lords will agree with me that we cannot tolerate a situation in which modest savings are left stranded, not belonging to anybody, and just fall back to the general scheme members. Those modest savings will have been lost to somebody for whom every penny counts.

The noble Baroness is talking about stranded pots, which could be a particularly restricted, technical area. These are what some people call “zombie pots”. Many people to whom one talks, particularly those who are not well off, have little pots—£2,000 here, £3,000 there. They are hardly worth the bother and people do not know what to do with them. I talked earlier about how insurance companies are putting up charges and, similarly, this is not very economic for them. It seems to me that, for the reasons that we discussed in the debate on the last group of amendments, it must make sense to have a relaxed attitude towards letting people consolidate their little pots into personal accounts.

I cannot for the life of me see why the insurance industry is so worried about this. If it is giving a good, cost-effective service to these people already, it should not worry. It would just be offering consumer choice. From the point of view of PADA, I do not see that this is bells and whistles. To be able to have a number of small pots coming in will, by definition, reduce your cost base because you will have a higher average pot and economies of scale. For the same reasons and principles that we were talking about on the last group, we oppose these amendments and are in favour of people having maximum flexibility to bring these little pots in.

I thank the noble Baroness for the amendment, which gives me a chance to clarify the Government’s position. I believe that we have made quite clear our commitment to banning pension transfers into and out of the personal accounts scheme. Our rationale for banning the transfers of pension funds to and from personal accounts, as with the contribution limit that we have just been discussing, is to minimise the impact on the market caused by the scheme’s introduction in 2012 and to ensure that the scheme remains focused on the target market of low to moderate earners. Furthermore, the transfer ban is designed to promote simplicity for employers, individuals and the personal accounts scheme, as transfers can involve complex financial decisions and processes for all parties.

Our policy on transfers was widely supported by our stakeholders. However, as always, we must allow the scope for some exceptions. First, we propose that there will be two exceptions to the prohibition on transfers into personal accounts. These relate to pre-vested pension rights and pension credits on divorce. These are tightly defined circumstances and we do not believe that these exceptions will dilute the focus on the target market or have a significant impact on the financial services industry. We will set out the detail of the ban on the transfer of pension funds into personal accounts in the scheme order, as I explained earlier. We plan to prohibit transfers out of personal accounts under Clause 111 of the Bill and we intend to amend the rules in the existing legislation, the Pension Schemes Act 1993, to prevent members from transferring out of the personal accounts scheme.

We recognise that the transfer-out ban could complicate the decumulation arrangements for individuals over 55 who may want to aggregate all their pension pots in different schemes into one pension fund in order to purchase an annuity. My noble friend Lady Hollis and the noble Lord, Lord Oakeshott, in particular, have touched on this. Making an exception for stranded pots is a further area that we want to consider in some detail before we introduce the transfer-out regulations. We will look at that seriously. PADA and DWP are currently working jointly on developing the likely content and approach of the secondary legislation, the scheme order, and non-legislative scheme rules for a public consultation in March 2009.

Amendments Nos. 112A and 112B would place a blanket ban on all transfers, in and out, until 2017. I have some sympathy with the idea of a bedding-in period, effectively allowing the personal accounts scheme and the existing industry to adjust before 2017, when transfers may again be permitted. Indeed, our commitment to a ban on transfers and a subsequent review in 2017 will achieve this. However, as I have explained, we cannot support the idea of a blanket ban. It is important that we allow limited scope for a number of closely defined transfers that will benefit scheme members but will not impact adversely on the pensions market.

Even in the short time between establishing personal accounts and the 2017 review we do not believe that it makes sense to prevent, for example, transfers of pension shares on divorce into personal accounts. We will keep the position on transfers under review as the personal accounts scheme evolves and the wider market impacts become better understood. The 2017 review will address this issue specifically.

In response to the question put by the noble Baroness, Lady Noakes, the current proposition is that the review will take place in 2017. It will decide what will happen to the ban: whether it will be lifted and within what timescale. I hope that the noble Baroness is reassured by my iteration of our commitment to limit transfers in all but an extremely limited range of cases and I ask her to withdraw the amendment.

I thank the Minister for that response and I thank other noble Lords for taking part in this interesting debate, which has highlighted the issues involved on both sides. I am happy with the Minister’s response. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 112B not moved.]

moved Amendment No. 112C:

Although the noble Baroness’s warnings about gobbling up all private sector saving in this country as we know it, or whatever the warnings were, do not curdle my blood and I think that they were a bit overdone, I agree with her that we do not need this extraordinary self-liquidating subsection at the end of the clause. I put it to the Minister that you can always set very high limits if you want. The Secretary of State can say that the limit is £1 million—you can have any limit you want. Therefore, I find it very odd to set out the contribution limits and then to say, “But we may just blow this whole thing up after all”. So, like the noble Baroness, I cannot see that this subsection is appropriate and I support the amendment.

As I said earlier, we have always made it clear that the personal accounts scheme should complement and not replace existing pension provision, and the annual contribution limit and transfer bands are just two of the measures designed to achieve that. We have made our position on these measures clear in various publications and statements, and the contribution limit has been extensively debated here today and in the other place.

As is said, our policy on the contribution limits has been widely discussed and there is broad consensus with our stakeholders about the £3,600 level for the annual contribution limit. As part of this consensus, it has been widely acknowledged that there is a need to review the policy at some point after implementation. That is why we are committed to having a review in 2017 of two of the features of the scheme: the contribution limit and the prohibition of transfers to and from the scheme. That has been agreed by the Secretary of State and announced in previous publications. The review will enable the Government to assess whether these measures have been successful in promoting market stability as intended without detriment to individuals within the scheme.

Following the review, and if the review evidence clearly indicates that the contribution limit should be abolished, the Secretary of State may decide to remove the requirement to have a contribution limit in the personal accounts scheme. Clause 61 allows the Secretary of State to do just that. Of course, if the review evidence indicates that the limits should remain, the Secretary of State is not required to use this power and the limits can remain and be adjusted as necessary.

First, I thank the noble Lord, Lord Oakeshott, for his support for the amendment. I found the Minister’s response a little troubling. He said that a review would be held in 2017 and that it would review the limits, which is an issue for Clause 61, together with transfers, which, as he established earlier, are not an issue for Clause 61. Therefore, the issue of transfers is on one side; we are talking about limits, and in particular the limit under subsection (1).

My point is that, even if the Government carried out a review in 2017—an idea that we support—they could never realistically come to the conclusion that they should write their power out of the Act. I completely accept that they could use their power to set much higher limits if they were satisfied that no market imperfection was caused and that there was genuine consumer demand for it, but I think it is very unwise for the Secretary of State to say, “I’ll never ever need that power again”, because what the Government find in 2017 may not be what they find at some later date.

This will be a state-backed pension scheme and therefore we have to bear in mind that it will be a bit of a brute in financial importance terms, given the sheer volumes of money flowing through it. It is not responsible of the Government even to have a power to repeal the need to place limits, and therefore I hope that the Minister will look carefully at this again. It would be unsatisfactory to leave subsection (5) in the clause because it would be difficult to conceive of any situation where a Secretary of State could satisfy himself that for all time there should be no power to set the limits as described in this clause—that is, not only the annual limit but also the possibility of setting additional amounts under subsection (3). I do not know whether the Minister would like to add anything to what he has already said.

Perhaps I may make just a couple of points. The noble Baroness is taking an interesting position in that she is seeking to encourage the Secretary of State to stay involved and hang on to power. That is not what we usually hear from her. It may well be the case that the review in 2017 will say that there should be some relaxation to the limit, as that is what the evidence points to, but that there is no conclusive evidence that it needs to be abandoned for all time, in which case the Secretary of State does not need to operate under Clause 61(5). Quite how he would operate in those circumstances, given the vote that took place earlier, which abrogated our power to bring forward orders under these schemes, is another matter. Perhaps I should not press that point too far.

The noble Baroness makes a reasonable point. If at that juncture there is not sufficient evidence to say that there should never be contribution limits, it may not be a wise use of the power, but it might be clear at that point that that position is taken. Having a contribution limit at whatever level imposes a cost on the scheme and on members, because it has to be implemented, policed and compliant, even if we are at a fairly high level. I do not see why the noble Baroness should be too troubled, but it is important that there is the facility to lift those contribution limits if they are not impacting adversely on the market and if they are restricting the right of the people at whom the schemes are aimed to save more fully.

The noble Lord has suggested that the Government could not raise the limits if that was found to be appropriate. I was trying to suggest that the Government should retain the power. I do not normally argue that position, but I do so not from the position that the Secretary of State should be involved in the minutiae of the workings of the Pension Corporation, which is my normal position; it is a separate point. Having created that large state-backed financial institution with significant market power because of its size, its access to marketing budgets and so on, the Secretary of State should always retain the power to restrain the uncompetitive use of the financial muscle of that body, notwithstanding that there might be a review of limits because different limits might not be destructive to markets. We are not quite having a meeting of minds and we will not do so today, but the Minister will not tempt me to test the opinion of the House today. I will take the matter away and consider it for Report.

I am happy to reflect on the noble Baroness’s comments on the provision. I do not think that we will shift our position, but we need to think it through and I hope that one way or another we will be able to convince the noble Baroness of the reasonableness of it and why it is important to have the provision available. I hope that she will support us when we bring back an amendment to reinstate the power that she so cruelly removed from us earlier on.

I should have responded to that point. When we removed the power we recognised that it was open to the Minister to bring back a power to amend subsequently. The noble Lord, Lord Oakeshott, and I, as we happily tripped through the Division Lobby, said that a power to amend would be appropriate but not the initial requirement to set up the pension scheme. We remain open to such an amendment. I am glad that the Minister is going to take away the point and review it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 61 agreed to.

Clauses 62 to 65 agreed to.

Schedule 1 [The trustee corporation]:

moved Amendment No. 112D:

I support Amendment No. 112D. It is obviously sensible, although the ultimate power is with the Secretary of State, that he should consult the chair and the corporation. I am open-minded on the other issues and I await the Minister’s answer.

Schedule 1 sets out the provisions in relation to the non-departmental public body, the trustee corporation, created under Clause 65 to run the personal accounts scheme. The amendments in the name of the noble Baroness, Lady Noakes, relate to the appointment, removal and remuneration of members of the trustee corporation as she has explained.

First, I should explain that all the appointments in the initial period will be ministerial and so must be made in accordance with the guidance issued by the Office of the Commissioner for Public Appointments. This guidance ensures that appointments to public office follow a fair, open and transparent process. We want the trustee corporation to be given as much freedom as is reasonable for a public body, to get on with the job of running the scheme. So, from the end of the initial period, the trustee corporation will be responsible for recruiting its own members as and when vacancies arise.

Amendment No. 112D requires the Secretary of State and the corporation to consult the chair of the corporation when making appointments. During the initial period, the Secretary of State will consult any previously appointed members of the trustee corporation on new appointments. This membership would include the chair of the corporation. As a sole corporate trustee, all members of the trustee corporation will have an equal voice and equal weight in decision-making. Each member is a valued participant in the administration of the scheme. The chair does not have a greater say than other members—a distinction from the role of chair that one would often see.

When responsibility passes to the corporation, it is important that the corporation as a whole satisfies itself of the suitability of the potential appointee. This would, of course, automatically include the chair of the corporation.

I thank the Minister for that reply and I thank the noble Lord, Lord Oakeshott, for his support for Amendment No. 112D. I found the Minister's response to Amendment No. 112D a little perplexing—that the chairman would have no greater say than the other members, which is unlike a normal corporation. A chairman in any situation has responsibilities to bring the organisation together, to manage business, to ensure that the board is effective and so on. That is why the chairman should be the person who has a say in the appointment of members. That is normal commercial practice. I think it is the practice in the non-profit sector and it is the practice in the majority of the public sector. I am mystified by what the Minister has said. Perhaps he could explain that further.

I can try to. I offer a distinction between someone whose job it is to chair the board, to ensure that meetings are conducted properly and so on, and a chairman of an organisation who might have some responsibility for the strategic direction of that organisation and a leadership role. That is not the role that we see for the chair of the trustee corporation; we believe they should act collectively—I can see the noble Baroness is not convinced by this. In any event, as a practical matter, the Secretary of State will consult those who are already appointed, and that would include the chair but there would be no special consultation with the chair.

Perhaps I can offer the Minister a word of advice: when you are in a hole, stop digging.

The noble Lord, Lord Oakeshott, gives good advice. I do not think the Minister has understood what the chairman of a trustee corporation does. Such positions exist already in the private sector and nowadays they are big jobs; they attract some quite heavyweight candidates. Such people are in a position of leadership because a huge number of issues need to be handled by the board. It is not a case of all members being in it together and someone drawing up an agenda and watching the clock during the meeting. Very big issues need to be dealt with. We may well look at this again.

On the other issues raised by my amendments, the Minister basically said he had no idea for how long we needed an initial period, which is what we are pretty used to in some of the responses on the personal accounts scheme. We might get tired of hearing that. On the removal of members and their remuneration, the Minister has repeated the fact that the Secretary of State wants to keep a hold on those things because it is a public body. We will think about that further, but for the moment I believe I have flagged up the fact that my serious concern is with the Government’s concept of what a chair of this organisation will do, which means they may go out and recruit the wrong kind of person. We shall find another way of exploring that on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move that the House be now resumed. In moving the Motion, I suggest that the Committee stage begin again not before 8.35 pm.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.