XN000022-1995-06-14 — Page 38

23.

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A major area of public concern has been the safety of accrued retirement benefits, and the provision for compensation in the event of losses. This is provided for under clause 16(1), which enables the Authority to establish a compensation fund to deal with benefit losses brought about by misfeasance or illegal conduct. Clauses 16(2) and 16(3) provide for a compensation fund to be financed by a levy on the assets of registered schemes, to be paid by approved trustees. Clause 16(5) allows the Financial Secretary to provide grants or loans, payable from general revenue, to the compensation fund. There will be no guarantee against losses arising from poor investment performance as this would only encourage unscrupulous investment managers to take the kind of undue risks which we would all wish to avoid.

Part IV

Clause 19 deals with scheme administration. A registered scheme, other than a master trust scheme, must be administered by an approved trustee, who could be an individual or a corporate trustee, while a master trust scheme must be administered by a corporate trustee. Trustees or corporate trustees may apply to the Authority for approval as an approved trustee of a registered scheme. Clause 20 enables approved trustees to apply to the Authority for the registration of a provident fund scheme as a registered scheme.

Clause 22 of the Bill allows the Authority to authorise a corporate trustee to be the approved trustee of a residual provident fund scheme. This would allow access to a scheme for those persons whose employers were unable to find one on the open market, serve as a receptacle for unclaimed benefits from other schemes, and facilitate the portability of benefits between schemes.

Clause 27 allows the Authority, after consultation with the Financial Secretary, to make guidelines in respect of forbidden investment practices, which, if undertaken by approved trustees, might prejudice the financial soundness of these schemes. Clause 28 requires trustees to comply with limitations or prohibitions in respect of restricted investments, i.e. loans to or investments in the employers of scheme members. Clauses 29, 30 and 31 confer power of regulation of trustees by the Authority. The Authority may require special audit reports, disclosure of information and production of documents (Clause 29), appoint inspectors to investigate the affairs of a scheme (Clause 30) and in appropriate circumstances, remove trustees (Clause 31).