These two probing amendments are designed to elicit information from the Government. They deal with the fees and costs of the trustee appointed by the regulator. I am sure that we shall have a broad debate later in our proceedings about where the cost of expert advice should fall and how we should deal with a situation in which professional fees are eating into the resources of a scheme, something that we have all come across.
Under subsection (2), the regulator can decide to charge an employer or a scheme—or both—for the costs of trustees. That is a change from the 1995 Act. Will the Under-Secretary explain the reason for that change? It could mean that considerable direct costs fall either on the scheme or on the employers, who may not be culpable for the problems of the scheme, yet may be required to pay significant costs. In the long run, the cumulative effect of that would be to discourage employers from offering final salary schemes, which we all accept is a trend and a problem. I tabled the amendments so that the Under-Secretary could explain how the expenses and fees of trustees appointed by the regulator will be paid, how the determinations of who should pay will be made and whether the decisions can be appealed against. What check will be made that the trustees are not charging unreasonable fees and that the regulator has not gone for the most expensive City firm to employ the most expensive trustees when they are not necessarily the people who are needed?
The amendments raise the important issue of who meets the costs of some of the regulatory burdens. The hon. Member for Tatton said that the employer might not be culpable, as indeed he might not; but he might be. The amendments would remove the power of the regulator to apply any cost, in whole or in part, to the employer. I think that essentially the hon. Gentleman was saying that it should not necessarily always be the employer who pays the whole amount; however, it does not follow that the employer should never pay any of it. For that reason I would not support amendments Nos. 185 and 186.
I assure the Committee that there are plenty in the pipeline.
The hon. Gentleman raised another, serious, issue; I may risk inducing another intervention when I say that I find it slightly startling to find a Conservative Member worrying about the ravages of the free market, and worrying about competition in trustees leading to a fiercely competitive market, where there was minimum cost but where trustees might somehow exploit schemes or employers.
It is not clear to me, with respect to the clause or the amendments, whether we are dealing with cases in which, for example, a trustee is prohibited or suspended and the regulator replaces him with someone else, or with cases in which a scheme is to be wound up and the regulator appoints an independent trustee to see to that.
That brings me back to the issue to which a satisfactory response was not received on Tuesday: the way in which trustees' costs mount up. A response that was mentioned on the Labour Benches on Tuesday was to nationalise the process. I have on occasion mooted the idea that there should at least be a not-for-profit option for the process of winding up a scheme or of acting as an independent trustee.
Very often, there is not enough money in the funds in question, and it seems immoral that that should be the chance for someone to make a fast buck. If there is a public sector body—the regulator—appointing a trustee, I cannot see why that should be an opportunity for someone to make a profit. The private sector having gone wrong, and the regulator having put in a trustee as a result, it would seem that the state should ensure that the process is properly undergone. The trustees should thus, for example, act on the regulator's behalf—perhaps even as employees of the regulator, although I do not know whether that is consistent with the spirit of the Bill.
Whoever were to pay in such a case—employer or scheme—I should be worried if they had to line the pockets of a trustee who was in it for the money. Once things have gone wrong with a scheme and there is not enough money for the pensioners and the workers anyway, everything possible should be done to minimise the call on the fund. I ask the Minister for reassurances that the regulator would adopt that approach.
As I am sure the Under-Secretary knows, workers and pension scheme members really become irate when independent trustees charge exorbitant sums of money for answering proper letters from workers who simply want to find out what has happened to their pension, and when those trustees take huge chunks of money out of pension schemes that are in wind-up. The spectacle of such exorbitant fees being accepted has caused great and understandable anger among workers whose pensions are at risk.
I have always felt that there is a problem in the market for independent trustees. Very few firms offer that service and there seems to be little competition and a great deal of collusion between those companies. We are told that a high degree of specialism and expertise is necessary.
In cases of such market failure, the argument for Government action and state intervention arises. I used the term ''nationalise'', which is not very popular these days, but there is a case to be made for the regulator having some of the relevant expertise in-house and being able to offer the service in question. I invite the Under-Secretary to make observations on whether that would be possible
within the scope of the Bill. Does he anticipate—as a regular occurrence—that, in cases where the wind-up was straightforward and did not require scarce outside expertise, the pensions regulator could directly solve the problem?
I understand that the hon. Member for Tatton and his colleagues have tabled amendments that are probing in their nature. However, I would observe that although the hon. Member for Northavon was correct when he said that there are occasions when the employer could be at fault, there are never occasions when the employee is at fault in those matters. We must remember that from time to time, because they are the ones who pay the price.
My hon. Friend makes an important point and we must recognise that the purpose of the Opposition amendments is to remove the regulator's power to apportion the costs between the employer and the scheme, or to require that the employer pays them. That would be a significant change, because currently in the great majority of cases OPRA requires that the employer pays the trustees' costs. The amendment would increase the anger that would be felt by members and would have a considerable impact, in the ways that have been expressed so eloquently by my hon. Friend.
In a previous intervention, I asked a question about wind-ups and the regulator. This provision deals with the regulator appointing a trustee. My hon. Friend the Member for Cardiff, West made the point that where a scheme is wound up, huge sums are often deducted for answering letters. If, within the Bill, there is not the opportunity to have the regulator involved before a wind-up, the point that he made will continue to apply. How could we overcome that?
I can tell my hon. Friend that there will be many circumstances where the regulator becomes involved before wind-up. That is part of the reason why we have been discussing the freezing order process and, indeed, the other mechanisms that the regulator can use to intervene before a winding-up process takes place, such as the improvement and the third party notices. While we do not expect the regulator to run pension schemes—it would be quite wrong to expect it to do that—we want to ensure that where schemes start to run into trouble the regulator is there to ensure that, wherever possible, winding up can be avoided.
On the point made by my hon. Friend the Member for Cardiff, West and by the hon. Member for Northavon about the cost of trustees where they are appointed when schemes have run into trouble, I can tell them that there is concern about the level of fees charged by trustees in those circumstances. The Minister will be tabling a Government amendment to deal with that issue later.
I can give the Committee the reassurance that any trustee appointed by the regulator will either be a trustee appointed from a register held by the regulator or will be a member. In the case of schemes with no trustee, a member is often appointed to reduce the overall costs of the process. That might go part of the
way towards the suggestion made by my hon. Friend the Member for Cardiff, West about in-house expertise. Trustees will be eligible to be on that register only if they agree to a monitoring of fees by the regulator. That is in recognition of the fact that so many people are concerned about the level of fees charged at the moment, and that those fees can eat deeply into the scheme funds, which may already be diminishing.
What the Under-Secretary has said is extraordinarily welcome and potentially very significant, but does that not throw into even sharper relief the comment of the hon. Member for Hamilton, South (Mr. Tynan)? He said that, when the regulator was involved, there might be a not-for-profit situation in which money was not siphoned out of a fund, but if the regulator was not involved in a wind-up, people could be victims in just the same way. Will there be a mechanism whereby people can ask the regulator to get involved as soon as they know that their scheme is being wound up?
In response to my hon. Friend the Member for Hamilton, South, regulations require regular reports to OPRA, the current regulator, when schemes are winding up. Of course, the new regulator will continue to have that role. We are not suggesting that the regulator should take one step back from that.
On the point made by the hon. Member for Northavon, the clause gives an opportunity for trustees, employers and members to request that the regulator appoints a trustee, if trustees or employers feel that they do not have sufficient expertise, or if members feel anxiety about that. At the moment, they can only informally ask OPRA to do that. If OPRA ignores them, which I am sure it would never do, there is nothing that any of those groups can do to require the request to be treated seriously. With those reassurances, I hope that the amendments will be withdrawn.
Sometimes one strikes gold with probing amendments. We have discovered that there is a whole new bit of the Bill to come. I was not aware of that. I am therefore delighted that I tabled the amendments, even if they attracted some sarcastic comments from the hon. Member for Cardiff, West—