Clause 51

Pensions Bill – in a Public Bill Committee at 1:45 pm on 31st January 2008.

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Scheme orders: general

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I beg to move amendment No. 26, in clause 51, page 25, line 15, leave out subsection (5).

This is a rather simple probing amendment. It is not entirely clear why such a scheme order should exclude liability for a trustee, officer or employee of the trust arising from administration or management, or provide an indemnity for such liability. It might be merely that there is a precedent and that is what happens already. However, there will, potentially, be significant liabilities for trustees, officers and employees in running the scheme, so one wonders why they should be excluded from liability. If they are not liable, who is?

Putting it another way, and looking at the analogy of non-executive directors, is there a prospect of insurance being obtained against that liability? If there is a liability, that presumably means that somebody, somewhere—the members, I guess—have lost out. If they cannot look to the trustees, officers or employees, who would they look to? That is a very long question to the Minister, which I am sure that he will answer in his inimitable fashion.

Photo of Danny Alexander Danny Alexander Liberal Democrat, Inverness, Nairn, Badenoch and Strathspey

I will not detain the Committee long, but this is an interesting issue, and I will be interested in the Minister’s response to the questions that the hon. Member for Eastbourne has rightly posed. The deregulatory review of private pensions also looked at this issue and said:

“We believe that as a quid pro quo for the increased visibility and controversy surrounding trustee duties, all pension scheme trustees should be covered, at employer or scheme expense, by appropriate indemnity insurance or assurances from the employer and/or scheme, that would at least cover the cost of litigation so long as the trustee is not found to have acted improperly.”

I thought that subsection (5) was, essentially, trying to follow the advice that there should be some degree of indemnity. While some protections already exist for trustees who have acted in good faith, there is unease as to whether the law would continue to be interpreted as it is at the moment. There seem to be good reasons for ensuring that trustees have that degree of protection to allow them to carry out the important role that the Bill allocates to them. When drafting the Bill, did the Minister read what the independent reviewers said in the deregulatory review?

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I agree with the hon. Member for Inverness, Nairn, Badenoch and Strathspey that there has been concern that trustees should not be the subject of undue liability in respect of their actions. They will retain an obligation to fulfil their fiduciary duties. However, it is anticipated that there will be an indemnity to cover them in respect of any decisions that they make that are other than flagrant and deliberate breaches. They will be fully liable for any flagrant or deliberate breach of their duty, but they should not be liable for having made decisions with which others merely do not agree. There could be all sorts of legal challenges to such decisions, and the trustees might end up having to defend themselves individually.

It is right that indemnities should cover the trustees for the costs of any such actions. PADA or, in due course, the Personal Accounts Board, should be able to pay any legal costs that the trustees incur, should they be challenged on the basis of any decisions that they have made after due consideration. As the hon. Gentleman says, the board will have a high profile and a lot of people will be interested in its decisions on investment and other matters. We do not want trustees dragged into court unnecessarily, and if there are court cases, it is right that an indemnity should cover them. Trustees are indemnified in many existing private pension schemes. There are exclusions to their liabilities. We will be broadly following such a precedent, which does not apply to all schemes, but does to a lot of them.

It is fairly straightforward and standard for trustees to have indemnities. We want to ensure that we attract high-quality trustees who are not going to feel that they will end up having to pay a lot of money in court fees because someone has challenged a decision that they made properly. That is the basis for the provision. I appreciate that the amendment is probing and I hope that I have addressed the concerns of the hon. Gentlemen.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

The Minister has not let me down. I am reassured by his answer, as I thought that I would be. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 51 ordered to stand part of the Bill.