Contribution
My Lords, Clause 6, as your Lordships have just heard, includes the powers to merge funds. It is a slim clause, so I will be briefer than you might expect, but I want to ask the Minister what the circumstances are in which these powers would be used and to what end the Minister would require the compulsory merger of funds.
On Monday, when we debated the earlier groups, I pointed out that the country’s smallest fund, the Orkney fund, has the best performance of all the funds in the LGPS. I think that there are lessons to be learned from that—and, furthermore, it has never changed its investment manager. What would happen if the two funds happen to be in different asset pools? What steps would be taken to indemnify the losing and the gaining members and taxpayers for the quite exceptional transition costs in these circumstances? You would be ramming some schemes together, having split them asunder beforehand.
In another Bill before your Lordships’ House, we will shortly contemplate local government reorganisation. I do a bit of work on this and I can certainly contemplate that mergers of councils across county boundaries could be contemplated. With Wiltshire already unitised, it is not unthinkable for Swindon to be placed either in Oxfordshire or perhaps in Berkshire. Paradoxically, the efficiencies of merging councils under LGR may result in the demerging of pension funds to different pools. What discussions have been had and what contingencies have been put in place as Ministers start to take decisions on local government reorganisation?
Going back to scheme mergers, can the Minister tell us whether similar criteria have been published, as with LGR, and how we would consider comparing the relative merits of different proposals for schemes merged? Having announced that schemes are candidates for merger, it is not unthinkable that several competing bids may come forward: “We want this particular scheme”, or rather, “We don’t want that particular scheme, for all sorts of reasons”.
What criteria might be published so that, on an evidential and neutral basis, the decisions can be justified? Are we going to consider population size, assets under management, the number of members, the cost per member, or geography? That is important, because under the earlier parts of the Bill a scheme may be a member only of a single pool, and those pools have become geographically focused, because there are provisions, if the Bill is enacted, for the schemes to connive with their local strategic authorities. You can see straightaway that there could be a mismatch between the host strategic authority and its pool, which may not be local.
This is a small clause, but with big consequences. Following a merger, how might decisions be taken as to which successor authority would be the administrating authority? That begs the LGR question of which authority will assume the pension administration if all the councils in that territory have been abolished. How will we ensure that appropriate governance structures are in place so that all parts of the disaggregated territory are appropriately represented? We see this in local government, at parish council level when two parishes come together. So that not all the members of this community council come from one parish and none from the other, there is a process of warding: the representatives on the board must be distributed from among the previous constituent authorities. What steps might be taken in that case?
I do not think that this clause has been thought through at all. If I think of the Norfolk scheme for a moment, of which I have been a board member since 2007, we have over 100,000 members and I am sure that they would all want to know who is going to be sending P60s, helping with IHT valuations and answering questions. I have previously complained about the length of the Bill, but this shortest of clauses may have the biggest impact. It will directly impact up to 6.7 million workers in our nation, so I support my noble friends because, without the detail that I, as well as the noble Lord, Lord Palmer, and other Members who have spoken, have asked for, Clause 6 is inadequate and cannot and should not stand part of the Bill as currently constructed.