• One half MNTs should be a requirement for all schemes preferably with an independent chairman
• MNTs should be categorised and allocated representation in accordance with the membership proportion
• Employers should not be allowed to propose alternative arrangements (opt-outs)
• Pensioner and member trustees should be nominated and selected by the members
• Employers/trustees should be required to inform pensioner members of the existence of Pensioner Associations

Mr Michael Stern, Conservative MP, tabled an Early Day Motion (EDM No 692) in early April 1996 that said: That this House notes the decision of the Sec State for Social Security to exclude pensioner members of schemes from nominating or voting under the draft regulations for the prescribed rules in the selection of MNTs: believes that pensioner involvement in every stage of the nominating and selection process is essential if occupational pensioners are to be reassured of the security of their pension schemes: is concerned that in the wake of the Maxwell affair the exclusion of pensioner members of schemes may provide a loophole for delinquent employers to avoid the independent scrutiny of a pensioner trustee: and calls on the Sec of State to reconsider his decision prior to laying the regulation before the House.

At the request of COPAS many pensioners wrote to their MPs asking them to support the Early Day Motion. As is customary in these circumstances the DSS provided all Conservative MPs with a briefing note so that they could appear to be replying individually. In the event some 150 MPs signed the EDM of whom 43 were Conservatives. The Government ignored the EDM; the Statutory Instrument was put before the House and was passed by 271 votes to 254 with only one Conservative voting against.

When the regulations concerning MNTs were eventually published they said that:

• Scheme members would have the right to choose at least one third of the scheme’s trustees. A minimum of two trustees (called Member-nominated Trustees) would have to be chosen in this way, except in schemes with less than 100 members when there would have to be at least one.
• Schemes would be able to devise their own rules for selecting MNTs. These rules would have to be approved by the scheme members under a statutory consultation procedure.
• Employers would be able to propose alternative arrangements to having MNTs. Any proposal would have to be approved by scheme members under the statutory consultation procedure.
• Schemes would be able to start procedures for appointing MNTs from 6 October 1996, if they wished. At whatever time between October 1996 and April 1997 schemes began the “MNT” procedures they would have a maximum of 12 months to complete them.

The outcome was, that contrary to the intention of the Act, over 80% of large schemes chose the alternative arrangement and opted-out.

After the new Labour Government had been in power for a while they produced a Green Paper entitled: A NEW CONTRACT FOR WELFARE: PARTNERSHIPS IN PENSIONS, dated December 1998. One part of it was about Strengthening the framework for occupational pension schemes, for which a separate consultation document was published containing a section devoted to changes to the MNT requirements. Some relevant sections from that DSS document follow:

• We believe that all funded schemes set up under trust should have member-nominated trustees. That is the way to give members a proper feeling of ownership and commitment to their scheme. We also believe that schemes with a significant number of pensioners must be given the chance to elect a pensioner trustee. The present provisions do not always achieve either. They are also very complicated both to understand and operate. We therefore propose changes that will not only provide considerable simplification, but will also ensure that member-nominated trustee provisions actually deliver member-nominated trustees. They will mean that schemes must have trustees who are nominated and elected by members and that there should be provision for a pensioner trustee in large mature schemes.
• The MNT provisions have now had time to bed down and the feedback we have received is that the requirements are too inflexible and complex, difficult and costly to implement. And many schemes still do not have trustees who have been nominated and selected by scheme members.

The document then put forward the following proposals to achieve its aims:

• employers should no longer be able to propose alternative arrangements;
• one third MNTs will be a requirement for all schemes (subject to existing exemptions); and
• large mature schemes should have a reserved place on the trustee board for a pensioner member.

It then suggested three Options as ways of giving effect to these proposals and required responses by 12 February 1999.

Although these proposals did not meet all of COPAS’s requirements they were nevertheless well received as being a great improvement on what had gone before. Most Associations requested that a statutory approach be adopted (Option 1) with the nomination and selection procedures set out in secondary legislation. Sadly experience had shown that if there were flexibility the employers would use the small print to find loopholes.

In October 1999 the DSS issued a further consultation document; Member-Nominated Trustees and Directors, with responses required by 5 November 1999. The document reversed nearly all of the previously proposed improvements. The revised proposals were developed from discussions in a Working Group that comprised DSS officials and nominees from the following organisations; National Association of Pension Funds, the Association of Pension Lawyers, the Society of Pension Consultants, the Association of Consulting Actuaries, the Association of British Insurers, the TUC and Opra.

COPAS and many of the Pensioners’ Associations responded objecting strongly to the new proposals. It was suggested that the changes had come about because of the lack of pensioner representation on the Working Group. There was however one proposed change that would have improved the current legislation and that was that all schemes would be required to have MNTs; that is that employers would no longer be able to opt-out altogether although they would have some flexibility in relation to the procedure for appointment.

For some time now we have been waiting for Regulations to be issued, which would implement these changes. These were known to be ready for publication just before Christmas. However, the Department of Work and Pensions (DWP) have announced that they will postpone the implementation of this legislation pending the outcome of the Pickering Review on pensions simplification.

On 12 February 2002, DWP issued draft regulations for consultation which extend the current regime for an interim period to assist employers and schemes whose current opt-out arrangements are due to come to an end this May. The DWP has decided to extend the period of any current arrangements from six to nine years without any requirement for action by employers or trustees.

If, after the simplification review is complete (it is scheduled to report in July 2002), the Government chooses to implement the original proposals it can do so without needing to allow the extra three years to expire. Employers wishing to change the arrangements put forward as an alternative to MNTs when the opt-out was first secured will be able to change those arrangements provided the trustees (not the members) agree.

COPAS and some of the Associations have responded expressing dismay that once again the “Pensions Industry” have been able to thwart the clear intentions of the Pensions Act 1995, this time by using the excuse of the simplification review. Until COPAS obtains representation on the relevant Working Groups this situation is likely to continue.