Lord Newby (LD)
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Pension Schemes Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Schedule 3: Pensions guidance
Amendment 1
Lord Bradley (Lab)
My Lords, I will be brief, because the issues presented by this amendment have been brilliantly articulated by my noble friend Lady Hollis.
Throughout the passage of the Bill we have sought to ensure that consumers’ interests are fully protected, particularly in respect of the guidance that they will receive from the citizens advice bureau or TPAS. But the accuracy of the information for them is wholly dependent on the clarity of government policy. We are concerned that the treatment of pension funds in respect of income-related benefits and social care do not meet this test of clarity. Such clarity is particularly essential here, because the decisions that people make will have a dramatic impact on their future lives. I hope that the Minister in response will be able to give the House the assurances that we are seeking through this amendment so that there is no confusion in the public’s mind and no inconsistency across the country in the guidance that will be given on this incredibly important issue.
I thank the Minister for his letter dated 4 February, which lays out the Government’s position on how they will deal with some of these matters. But I—and, I am sure, my noble friends—remain concerned that, as they say, “the devil is in the detail”, and we have already heard this morning of cases where there has to be clarity and consistency of treatment of individuals in this respect. Clearly, we will continue to look closely at the regulations that follow and the guidance issued in association with them, to ensure that the public understand the implications of the decisions they take in respect of any entitlement to income-related benefits or social care costs.
Lord Newby
My Lords, I begin by thanking the noble Baroness for her amendment, which obviously addresses an extremely important issue.
This amendment seeks to place a separate and additional duty on the Treasury to provide appropriate information on the effect of pension freedoms and flexibilities on income-related benefits and social care costs. I agree that it is vital that people understand how benefits and social care entitlements interact with the new pensions flexibility and that consumers need to be aware of the impact of accessing their pension pot on their eligibility for income-related benefits and help with social care costs.
The Treasury is working to ensure that the content of the Pension Wise service includes information about entitlement and deprivation rules so that consumers are aware of these when choosing whether to access their pension savings. We are also working to ensure that people are aware of the need to plan for later life, including the risk of needing care and support and what that might mean for their choices. This will help people think about how they wish to live the rest of their lives. In response to the noble Lord, Lord Lipsey, the Care Act provides that no one is required to sell their home to pay for care. The difference in this case is that the lump sum is income in the year taken, and we agree that this will need to be covered in guidance, both on pension pots and on social care, which we will provide.
The DWP will issue clear guidance on the treatment of pension pots in income-related benefits in advance of April. This is to help people make informed decisions about accessing their pension pot. We plan to do this, as requested by the noble Baroness, by producing a leaflet which we will both print in hard copy and place online on GOV.UK. Other websites will be able to link to this information, and there will definitely be such a link from the GOV.UK Pension Wise website, which will direct those who are affected by this issue to the DWP information. Pension Wise will be a key way of equipping people with this information online on GOV.UK, on the phone through the Pensions Advisory Service, and face to face through citizens advice bureaux across the country. Alongside the new content being developed for Pension Wise, the new guidelines will also be reflected in the training programme for guidance specialists from the Pensions Advisory Service and Citizens Advice.
As the noble Baroness said, she met my noble friend Lord Bourne and me earlier this week to discuss the substantive policy issue—namely, the interaction of pension flexibilities with the benefits and social care means tests. The principal query that the noble Baroness raised is whether the distinction we make between ISAs and other savings vehicles, as opposed to pension pots, in benefits means testing remains fair after the introduction of the new flexibilities. ISAs are taken fully into account in income-related benefits, whereas we ignore untouched pension pots until someone reaches pension credit qualifying age. The noble Baroness argues that this is an arbitrary distinction now that the tax treatment of the two products is more aligned.
The Government, however, firmly believe that the difference is an important one. ISAs are for use at any time, but we specifically encourage people to save into pensions to provide for themselves in later life. We would not want to design our benefit system in such a way as to encourage people to spend their retirement savings when they are still below pension credit qualifying age. Aligning the treatment of ISAs with that of pension pots in the means test would be expensive for the taxpayer, as people with resources could secure more benefit. On the other hand, aligning the treatment of pension pots with that of ISAs would mean that claimants could lose benefits and so may deplete their pension savings before reaching their retirement. Neither outcome is desirable, and we therefore believe that the current position remains the right one.
This gives rise to a second question that concerns the noble Baroness, which is whether this situation gives individuals the opportunity to move their ISAs, which would be taken into account, into their pension pots, which would not be taken into account until pension credit qualifying age. The Government have considered the matter seriously and, in the light of our analysis, we do not feel that we need to act on this matter presently. The numbers of income-related benefits claimants with substantial ISAs is relatively modest and, should people move their savings to their pension pot, the additional upfront welfare costs to the Exchequer are partly offset by welfare savings in later life as those individuals would rely less on income-related benefits as a pensioner. On this issue, we plan to monitor behaviour after April when the new pension flexibilities are introduced, and respond proportionately if we need to.
I should add that people deliberately depriving themselves of money in order to secure or increase benefit entitlement may be subject to rules on deprivation of assets that already exist in both the benefit and social care systems.
Baroness Hollis of Heigham
Is the Minister saying—he may go on to say this in the next sentence—that if you cycle your ISAs into your pensions, that would be deprivation of capital?
Lord Newby
No, I do not think I am saying that. I will make sure that I am not and correct myself if I am wrong. All I am saying is that the deprivation of assets rules which currently apply will continue to apply in respect of money taken out of ISAs.
Baroness Hollis of Heigham
That was my question. Can the Minister explain to me why, if money is taken out of ISAs and goes into pensions, that is not deprivation of assets?
Lord Newby
It is not the point at which money goes from ISAs into pensions that is a deprivation of assets. Deprivation of assets may occur if and when money is taken out of one or both of those pots.
Lord Rooker (Lab)
I have listened with care to my noble friend, and although I have not participated in the debate, I understand the issue. Surely by moving an ISA into a pension pot, the individual then does not have access to buy, sell or add to the ISA. It is just not available; it is now hidden in the pension pot. Therefore, the individual deprives himself or herself of the choice they had when they had the ISA. It is fairly simple: is it or is it not something that could be penalised? People need to know this. If we are not careful, there will be chaos in this country later in the year as regards people with small pensions and small ISA pots.
Lord Newby
My Lords, I thought I had just said that if you move money from your ISA into your pension pot that does not qualify to be treated as a deprivation of assets. You are not taking that asset as income and you are not spending it; you are moving it from one pot to another.
Baroness Hollis of Heigham
So if you have more than £16,000 in a building society, which stops you getting means-tested benefits, and you take that money out of your building society account and put it into a pension pot, is that deprivation of assets?
Lord Newby
My Lords, that is an extremely interesting question to which I do not have the answer. However, it has absolutely nothing to do with the amendment before the House, which is to do with whether the Government will give adequate guidance on the issue. The amendment is not about the detailed substance of the rules which are being dealt with not least via a series of discussions with the noble Baroness, as she said. Those discussions will continue. I will happily write to her and other noble Lords about these detailed issues but I stress that the purpose of the guidance—the point of this amendment—is to ensure that the guidance correctly reflects policy. That is what we have committed to do. We have explained how we are going to do it. We have met the noble Baroness’s perfectly sensible idea that we produce a specific leaflet to do it, and we will do that by the beginning of April.
As I explained, we have already had a number of discussions with the noble Baroness and have agreed to meet her after today and before the start of the Recess to continue our discussion on these important matters. I know that she is still unhappy about what the Government are doing with regard to the substance and some of the details of this issue. As I say, we are committed to making sure that we have the maximum degree of clarity. We are committed to having further negotiations with the noble Baroness to tease out—
The Archbishop of York
My Lords, if the Minister is assuring us that there will be information online and people will be able to understand everything, why cannot this amendment be put on the statute book so that there is a duty on the Treasury to inform people about this issue? For me the provision is so simply worded that I do not understand why it cannot be on the statute book.
Lord Newby
My Lords, we are not suggesting that this goes on the statute book because this requirement already exists. The FCA rules on the guidance providers already require guidance to be given in respect of benefits. All we are doing now is fleshing out how we intend those existing rules—which are in the FCA rulebook, or the FCA document which has gone to the organisations providing guidance—will work in respect of benefits and social care.
The Archbishop of York
Could the Minister explain in a clear way that a simple mind like mine would understand whether you are depriving yourself of assets when you take money out of an ISA and put it in a pension fund? How can I be confident that the guidance, which will come from somewhere else, will be more erudite than what I am hearing at the moment? I for one want to say, in this week when we have seen great difficulties in social care provision and when most people are worried about their social care and their pensions, that it seems that this particular bit of legislation actually puts a duty on the Treasury to ensure that it is the one that informs people of this.
Lord Newby
My Lords, for the third time, if you move money from your ISA to your pension pot, that is not a deprivation of asset. The Treasury is in charge of the guidance process.
Lord Newby
The noble Baroness has an aversion to the Treasury—I cannot imagine why—but the Treasury has this power to provide the guidance under the Bill. The Treasury and the FCA have set out the details of what the guidance has to contain. It is already written into the FCA rulebook that it has to cover benefits. Therefore, the Government’s contention is that there is no need for a second amendment requiring this to be in the Bill when not only will it happen, but the rules saying that the guidance providers must do it are already in existence.
Baroness Hollis of Heigham
My Lords, I am grateful to all of those who have taken part. It was really helpful to try to tease out some of the very serious issues. They are serious. All of us are concerned about a rising benefit bill, particularly where there are cuts across other objectives such as the health service, education and whatever. We also want to support those services.
These proposals were imposed on the DWP. My sympathies are entirely with the DWP, which is trying to sort out the mess created by an open-handed gesture from the Chancellor of the Exchequer, which has not been thought through for its implications for means-tested benefits. That is the problem which is apparent today, from everything that we have heard. We still do not know half the answers. I am quite sure that the DWP and DWP Ministers are doing their honourable and decent best to try to make some sense out of a tangle and mess that has been dumped on them by HMT. I am not blaming any Minister personally, but that is what has happened. HMT’s pension freedoms absolutely tear up the rulebook, particularly on DWP capital, which is there to protect all of us in terms of benefit expenditure. It is only after yesterday evening that we are beginning to get some detailed information. We have been pressing for this for five weeks in this House, let alone down at the other end.
I am grateful to my noble friend Lord Lipsey, who teased out further problems with the interaction between social care and pensions. I look forward to the letter that he so rightly asked for being in the Library.
The noble Baroness, Lady O’Cathain, absolutely rightly emphasised the need for clarity. She is so right, but how can you have clarity when you have not fully sorted the policy problems behind what you are trying to explain to people? That is why we have come back with a very anodyne amendment, but behind it is the charge that the policy has not been fully sorted. I therefore hope that the actor writing that pamphlet will ensure that the policy is sorted.
I am not saying that the noble Lord, Lord Newby, gave the game away, as that sounds too frivolous, but he made the point that you cannot align ISAs with pensions, because that does not work, and you cannot align pensions with ISAs, because that does not work for people over the age of 50. So he is stuck and we are all stuck because, as far as I can tell, nobody at HM Treasury took on board the very real skills and experience of the people at the DWP who have to operate the service in practice. Talk about silo government—although we are all guilty of that; I am not saying that we are whiter than white when obviously we are not. However, here is something that will affect hundreds of thousands of people, and the two departments have not got their act together. The DWP is trying to make rules which are not rules but simply arbitrary decisions, and I am confident that at least some of them will be tested by judicial review over the years.
This is a mess but I hope that this amendment, which I will of course withdraw given the undertakings that the Minister has given today, will at least send a signal, as the most reverend Primate said, and give us the chance to get the policy clear so that the leaflets can be clear. Frankly, in order for that to happen the DWP at the highest level has to talk to the Treasury at the highest level and come up with something which is decent, fair, transparent, consistent and simple, if it can. I beg leave to withdraw the amendment.