Wednesday 7th October 2020
(4 years, 1 month ago)
Commons ChamberPension Schemes Act 2021 View all Pension Schemes Act 2021 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 104-I Marshalled list for Report - (25 Jun 2020)
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
I beg to move, that the Bill be now read a Second time.
Pensions are a fundamental part of everyone’s future. They offer security later in life and can provide much-needed investment to help to build the sustainable future we need. This Bill delivers on our manifesto commitments to legislate for a new style of pension scheme, establish pensions dashboards and tackle those who try to plunder the pension pots of hard-working employees. It creates a new style of pension scheme that has the potential to increase future returns for millions of working people while being more sustainable for employees and employers alike. The Bill has consumer interests at its heart. It strengthens protections for savers by extending the Pensions Regulator’s sanctions regime—prison for pension pot pinchers will, I hope, deter reckless bosses from running schemes into the ground.
The Bill transforms the way people get information about their retirement savings, bringing pensions into the digital age by allowing people to see all their pension information in one place, at the touch of a button. Importantly, it will ensure that individual savers can be told exactly how their pensions will be affected by the increases in the global temperature and what their scheme contributes to carbon emissions.
Through the Bill, the UK will be among the very first countries in the world to put climate change reporting for pension funds into law. That is a crucial step in meeting the Government’s net zero ambition. It will ensure that pension funds play a leading role in the decarbonisation agenda.
Duncan Baker (North Norfolk) (Con)
My constituents in Norfolk are passionate about climate change. They want to have safe and sustainable investments for the future. Can the Secretary of State explain how they will be able to invest sustainably and safely, and how the Bill will help them with that?
Dr Coffey
My hon. Friend has one of the constituencies with the highest number of pensioners in the country, but for his future pensioners this is an important Bill. It will bring transparency for the first time about what is happening with individual investments. This Government are not in favour of trying to force divestment of different elements of fossil fuels and similar—I am conscious that he has Bacton in his constituency. But the Bill is about making sure that the trustees—effectively, the way in which pension funds will be used—are clear about how they can contribute to ensuring that we tackle climate change and how their investments can play a part in making that happen.
This unprecedented period that we have been experiencing has shown more than ever the need for financial resilience but also the need to focus on future resilience. Helping workers to achieve greater financial resilience for themselves for the long term is a crucial part of our economic recovery. Improving the financial resilience of the public is a personal priority for me and I am proud that the Bill is designed to help pension savers across the country. The Government have already taken action to ensure that there is support for pension contributions under automatic enrolment in the coronavirus job retention scheme. How important that policy is to us is demonstrated by the fact that we will be paying for pension contributions for kickstarters.
There are five parts to the Bill. Parts 1 and 2 set out the regulatory framework for new collective money purchase schemes, also known as collective defined contributions or CDCs. Interest in the CDC schemes is growing, as both members and employers look for options beyond the more traditional choices currently available to them to build long-term resilience. The schemes will provide employers with a new way of providing a pension where employers and employees can work together to deliver mutually beneficial outcomes.
The schemes will enable contributions to be pooled and invested, to give members a target benefit level. Investment risk is borne across the membership, rather than by individual members, delivering a good income in retirement without the cost of guarantees and without placing future liabilities on the employer. The Bill will ensure that the schemes are well run and we will require good member communications, so that members understand how their scheme works, including the risk-sharing features of CDC schemes, and that benefit levels may fluctuate.
Part 3 strengthens the powers of the Pensions Regulator. That fulfils our manifesto commitment to tackle those who think they can plunder the savings of hard-working employees. No more. The Bill introduces criminal sentences, so that the worst offenders could end up in jail for seven years, ensuring that those who play fast and loose with hard-working people’s pensions face justice. These important measures introduce the power to issue civil penalties of up to £1 million, as well as creating three new criminal offences for individuals found to be acting wilfully or recklessly.
Some concern has been expressed in the other place that the scope of the powers is too wide and might deter people from becoming trustees. Let me reassure hon. and right hon. Members in this House and the other place that our objective is not to stop or interfere with routine business activity, or to deter people from becoming trustees. We have been clear that businesses must be allowed to make the right decisions to allow them to develop and grow. These new laws underline the importance of being trusted with the stewardship of members’ retirement savings and ensure that people’s hard-earned financial resilience is protected.
Our objective is to provide a sufficient deterrent to make individuals think twice before acting in a way that puts members’ savings at risk. The key point is that the Bill makes it crystal clear that an offence is committed only if the person did not have a reasonable excuse for their behaviour or for engaging in that particular course of conduct. It will be for the regulator to prove that the act was not reasonable. The Pensions Regulator will publish specific guidance on these powers after consulting with the industry.
Part 4 of the Bill delivers on our manifesto commitment to legislate for pensions dashboards. The world of work is changing, and people now have an average of 11 jobs in their lifetime. Pension savings built up during this time are often with different providers, and many people struggle to keep track of their pensions and find it difficult to make informed decisions about their retirement. The provisions in the Bill will bring pensions into the digital age and help individuals to make informed decisions about their financial futures. Pensions dashboards will provide an online service, helping people to reconnect with their pension pots, enabling them to find lost pensions and allowing them to view all their pension information, including the state pension, in a single place.
Steve Brine (Winchester) (Con)
I welcome the Bill, and part 4 in particular, including the bit that my right hon. Friend has just outlined about pension dashboards. It is such a minefield for our constituents to find all this information in one place, although people can do so very easily, for instance, via the HMRC dashboard in respect of tax. The Bill talks about compelling schemes to participate and to provide good quality data in a timely manner. Could she just expand on that compulsion? What exactly does that mean in legal terms?
Dr Coffey
The Bill will require the pension schemes to provide all the data that they have available, so that it can be brought together to provide that information. I am conscious that this is further data, which may take a little time to come together, but this has been worked on for some time and we have made careful progress with the industry to get to this point. If my hon. Friend has any more detailed questions, my excellent Pensions Minister, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman), will be able to pursue this either in later interventions or in Committee.
Neil Gray (Airdrie and Shotts) (SNP)
We welcome this part of the Bill in particular. We support informing savers about their savings landscape, but one concern we have is that the amendment in the Lords that allows for the public dashboard to be bedded in for a year before commercial dashboards come in could be removed in Committee. Can the Secretary of State confirm now that she has no intention of watering that down? If that were to happen, it would be met with the vigorous opposition from the Opposition.
Dr Coffey
Our aim is to empower consumers through dashboards and the Government believe that they are best served through multiple dashboards. Of course we have listened carefully to the concerns expressed in the other House as well as in this place. We are still on Second Reading, and I think it is fair to say that we will be considering the contributions carefully and that any matters that may need to be looked into further can be considered in Committee.
Mr Shailesh Vara (North West Cambridgeshire) (Con)
I welcome the Bill, particularly the part that my right hon. Friend is referring to at present. Sometimes, when people have multiple pensions with various pension schemes, they wish to put them into one pot, or two or three pots, rather than having to deal with so many. When that happens, some pension schemes seek to charge administrative costs when passing the funds on. Is there any mechanism to ensure that those administrative costs can be kept to a reasonable level, rather than being extortionate, which would ultimately impact on the pension pot for the individual?
Dr Coffey
My hon. Friend is right to say that dashboards could encourage more people to consider consolidating their pension pots. There is guidance out there, and the Pensions Minister assures me that we are continuing to review the costs and charges that can happen in that regard. There is an element of administration cost that comes with such transfers, but I can assure my hon. Friend that we are on the side of the consumers who are saving to ensure that their money goes as far as possible for their future.
The Bill sets out the legislative framework for dashboards and makes provision to compel pension schemes to participate and provide good-quality data in a timely manner. The Pensions Regulator and the Financial Conduct Authority will be responsible for ensuring compliance by schemes. In the other place—this is perhaps covering a little of what has already been said—we introduced Government amendments to make it crystal clear that there will be a public dashboard, which will be overseen by the Money and Pensions Service. As I have already shared with the House, we want to ensure that we increase people’s engagement with their pensions, so it is important that the dashboards are accessible to as many people as possible. Some 52 million UK adults have pensions savings, involving over 40,000 schemes. That is why I believe that having multiple dashboards is the best option, ensuring people can easily access information to manage their financial affairs for today and tomorrow.
Part 5 covers a range of policies. Clause 123 and schedule 10 introduce new provisions with regard to scheme funding. Most sponsors and trustees work well together and use the flexibilities of the current scheme funding regime reasonably, but good practice is not universal. The scheme funding provisions seek to help trustees of defined benefit schemes to improve the way they manage scheme funding and investment. They will also enable the pensions regulator to take action more efficiently to safeguard members’ pensions and to mitigate risks to the Pension Protection Fund.
Climate risk is a key worry and concern for many people in this country. The Government are resolute in how we want to help to tackle emissions to achieve our commitment to net zero by 2050. The Bill will make the pensions system greener and support the commitment to get to net zero by 2050. Clause 124 contains regulation-making powers to require scheme trustees and managers, for the purpose of managing climate-related risks, to take climate change goals, including the Government’s net-zero target and the Paris agreement temperature goal, into account. The clause enables regulations to be made mandating pension schemes to adopt and report against the recommendations of the taskforce on climate-related financial disclosures. This will ensure that occupational pension schemes take into account climate change and the response to climate change in the Government’s risk management and investment strategy, and report on how they have done so. Such measures will ensure that occupational pension schemes take climate change into account and require that trustees disclose progress to their scheme members and the public.
Climate change is one of the defining challenges facing the planet for this and future generations, and the trillions invested in pension funds worldwide offers an enormous opportunity to build back better, greener and sustainably. I am extremely proud that we are at the forefront of efforts to effect real and lasting change. These pension measures are among the first of their kind on the international stage.
Nigel Mills (Amber Valley) (Con)
Does the Minister agree that the responsibility for pension scheme trustees goes further than just reporting having a strategy? Once they have invested, they need to engage and to monitor their investments to ensure they actually comply with their obligations to try to drive through that performance change.
Dr Coffey
I understand exactly the point my hon. Friend makes. My understanding is that the Financial Conduct Authority is changing its guidance or approach to make sure that asset managers are also getting on board. We are trying to ensure that asset managers, as well as trustees, are aware, so we have that collaborative arrangement to make sure we can make progress on this important use of pension funds.
One big concern people have relates to scams. Clause 125 further protects savers from falling victim to unscrupulous scammers when considering transferring their pension pots. The measures allow us to place conditions on a scheme member’s right to transfer their pension savings to another pension scheme. This will protect members from pension scams by giving trustees of occupational pension schemes a level of confidence that transfers of pension savings are made to safe, not fraudulent, schemes. Regulations will proscribe the circumstances where there is a high risk of a transfer to a fraudulent scheme and could require scheme members to obtain information or guidance before transferring.
Stephen Timms (East Ham) (Lab)
I welcome this measure in the Bill, reflecting changes in the other place. As the Secretary of State said, the intention is to require, in certain circumstances, savers to take advice before they move their pension savings into what might be a scam. I wonder whether she agrees with me that we should go further and allow trustees to prevent a transfer where it looks as though the savings are going into a scam.
Dr Coffey
I know that the right hon. Gentleman and his Select Committee are looking at this matter carefully, and I appreciate that he has been in discussions with my hon. Friend the Under-Secretary of State for Work and Pensions, who I believe wrote to the right hon. Gentleman yesterday. It is certainly an issue on which we want to continue to work to identify circumstances that could raise red flags, and legislate to enable trustees to act when they appear. The powers in the clause are broad enough to cover some of the scenarios about which the right hon. Gentleman is concerned.
Neil Gray
I welcome the intervention from the Chair of the Select Committee. During the passage of the Financial Guidance and Claims Act 2018, the SNP tabled a number of relevant amendments that may well have covered some of these problems, which are a hangover from pension freedoms. Would the Secretary of State and the Minister be willing to look at some of those amendments again in Committee to make sure that some of those issues, particularly in respect of advice and guidance, are tied up?
Dr Coffey
My hon. Friend the Under-Secretary of State for Work and Pensions has just told me he will share with the hon. Gentleman the letter that he sent to the Chair of the Select Committee. Generally, pensions legislation has broad support across the House, in recognition of the fact that these are long-term decisions, so of course the Government will look carefully at any amendments in Committee and any points made by the hon. Gentleman. We want to make sure that, going forward, we have conference in the long-term objectives of the changes that the Bill will bring in.
In conclusion, I pay tribute to my hon. Friend the Under-Secretary who is passionate about pensions, exceptionally assiduous and, in my humble opinion, the best Pensions Minister we have had in a very considerable period of time. I hope the House will agree that having safer, greener and better pension schemes is good for our constituents, as we encourage people to invest in themselves today to prepare for a comfortable retirement, and help to make them better informed about how their money is growing and being used for them and the planet. I commend the Bill to the House.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I am grateful to be called to speak in this Second Reading debate. Since I became the shadow Secretary of State earlier in the year, I have been carefully following the progress of the Bill in the other place and am pleased that it has finally reached this House.
First, I record my sincere admiration for and thanks to my colleagues in the other place—noticeably Baroness Sherlock, Baroness Drake and Baron MacKenzie—for their laudable work in carefully and thoughtfully amending the Bill.
In opening the debate for the Opposition, I shall outline our perspective on the Bill as it stands, as well as addressing the three areas—protecting people, protecting pension schemes and protecting the planet—in which Labour would like to see further amendments made as the Bill progresses. However, let me say clearly at the outset that my colleagues and I broadly welcome the Bill. We have been in dialogue with the Government for some time about its contents and the issues that it covers, and I am grateful to the Pensions Minister for his time this week on a number of matters. We will therefore not oppose the Bill today.
My message to the UK’s pensions industry is that it should have confidence in the strong commitment that exists across the House of Commons to a pension system that is sustainable, sufficient and able to meet the challenges of an ageing population. Although we broadly support the measures in the Bill, we believe there is more to be done to create the robust system that we want. As the Bill progresses, we will seek to make those arguments in the usual way.
A new piece of pensions legislation is always an important step. Personally, I am fascinated by pensions, but I appreciate that not all people feel the same way. For many people, retirement feels like a distant concept. The understandable financial pressures that many families experience—especially at the moment—make longer-term considerations harder to contemplate. Even in better times, talk of defined contributions or lifetime allowances can cause some eyes to mist over. I feel strongly, though, that we will not be able to address the major public policy questions we face without getting people of all ages to make a genuine connection between their future prosperity and happiness and the pension plans that they are making today.
The connection I mention is essential because the outlook for today’s young people is drastically different from that in years gone by, and that has become even more critical in the light of this year’s events. We already know that the combination of student debt, higher house prices and—most of all—the impact of the 2008 global financial crisis and the austerity that came after it has meant that for the first time there is a generation of British people who might not be better off than their parents. That is why in last week’s debate on the Social Security (Up-rating of Benefits) Bill I made the point that the triple lock is not just about the level of the state pension for existing pensioners but about how we index the state pension so that it keeps its value for future generations who are not yet retired. We also have to make sure that we have a complementary system of occupational provision in which people have knowledge and control of their savings, with strong regulations to protect consumers’ interests, and in which people can easily comprehend how the decisions they make will affect their retirement plans.
All that brings me to the contents of the Bill. First, I want people to know that their pension savings—their assets—will directly contribute to the future they want for themselves and their family. I am immensely proud of the work that my Labour colleagues did in the other place—much of it behind the scenes—to put climate commitments for pension funds into UK legislation for the first time ever. This is not just lip service, but genuine commitments, formalising the requirements of the Task Force on Climate-related Financial Disclosures and enshrining a commitment towards the Paris agreement for trustees and managers of occupational pension schemes. That is fundamental to tackling the climate emergency and it is a vital contributor to the health of pension funds. The long-term prospects of fossil fuel companies have implicit risks and it is only right that those risks are taken into consideration as part of the financial responsibility that schemes have towards their members.
The UK should be leading the way on green finance, but we have been slipping behind internationally in recent years. I want to explore ways that we can go even further to achieve that goal. The connection between people, really thinking about where their money is invested, is a key component of helping them to become more involved and more informed about their financial future overall.
The Bill also contains the blueprint for the pensions dashboard, one of the most long-awaited policy initiatives in history. We want to future-proof that dashboard, so that one day people can see in black and white an easily understandable measure that tells them how exposed to climate risk their retirement portfolio is. I know that the industry wants to make sure that we learn to walk before we start to run, and that the creation of the dashboard in itself is no small proposal, but I want us to be as ambitious as we can. Frankly, there is no time to waste when it comes to the climate emergency.
That takes me to my second point, on protecting people. For too long, there have been cases of unscrupulous people using the complexity of the pensions industry to exploit those using it. The dashboard, in particular, has a vital role in making information transparent and easily accessible. That includes making sure that it has the capacity to clearly spell out to people what their fees are and who they are really paying, and for what. One of the very good amendments in the other place was to protect the dashboard from private transactions for a fixed period, and I am disappointed that the Government seem not inclined to keep that.
When consumers are presented with the new information that the dashboard will provide, we would prefer to have a moratorium on how products and new services are sold and marketed until people get used to having ready access to this information. In the wake of, for instance, volatile markets brought about by the coronavirus pandemic, it would be very easy for people to panic and make decisions that might not be in their long-term interests. We want to look at how we use the Money and Pensions Service to best mitigate this, especially when it comes to transfers.
Small pension pots, as has been mentioned, continue to be a major problem. How we can use the dashboard to easily consolidate those pots with minimum hassle and cost has to be on our minds. The dashboard will bring a sense of immediacy and transparency to that, but we need to make sure that people make their decisions when they are fully informed.
The other element of this, sadly, is pension scams. Regrettably, George Osborne’s pension freedoms, exactly as was warned of, have been a watershed moment for fraudsters, who have taken advantage of such a significant change in the rules. As the shadow City Minister and now as the shadow Secretary of State for Work and Pensions, I have been made aware of some truly dreadful stories. I remember one especially bad case where the victim not only lost their pension to the scam, but was then pursued by Her Majesty’s Revenue and Customs for many years for the tax payable on that money, because they had accessed it under the age of 55, even though they had been under the impression that they were moving it to a legitimate investment for nowt. That is the kind of scam that absolutely ruins lives, and the penalties and action taken against fraudsters should be severe.
We should also take pride in the fact that there have been several substantial successes in pensions policy in the last few years. Auto-enrolment is a prime example of that—a hugely successful policy begun by the last Labour Government. Thanks to auto-enrolment, by March 2019 more than 10 million people had been auto-enrolled in a pension scheme, according to figures from the Pensions Regulator. Of course we want people to be more engaged in their pensions, but default options that are easy to set up and straightforward to contribute to are essential.
That brings me to my final point, on protecting pension schemes. What that means is ensuring a strong infrastructure so that we have a well-protected and well-functioning system. First, we will urge the Government to retain the cross-party Bowles amendment inserted in the other place. We do not want the regulation to work in a way that unnecessarily closes defined-benefit schemes that would otherwise be open for new members, and that is what we are worried will happen if open and closed schemes have to meet the same investment and maturity profiles. That is why we believe it is wrong to treat open and closed schemes in the same way, but that is another issue we intend to explore further in Committee.
Big challenges demand big answers, and that is why Labour supports the introduction of collective defined-contribution schemes as a potential way to get a better deal for workers than traditional DC schemes might offer. In doing so, we are mindful of the arguments from other countries about the need to ensure intergenerational fairness in those schemes, but we believe that those safeguards can be built in.
However, one area where we feel the Bill is silent is the creation of pension superfunds. These are very large funds of capital intended to consolidate several smaller DB schemes and run them as one large fund on a for-profit basis. Many are advertising substantial returns to potential investors. That is potentially an extremely significant development, and we do not believe it is appropriate for the Government to leave it in the hands of the Pensions Regulator to rule on this matter. The Government know the concerns that we have raised, and concerns have also been expressed by the Governor of the Bank of England and many people in the industry. I do not understand why these measures are not in the Bill, and the Opposition plan to push the Government again for more answers on this in Committee.
We believe that the measures in this Bill are important and worth while. We want well-managed, sufficient and sustainable pension provision that addresses long-term needs and is intergenerationally fair, and we want to begin the process of allowing savers to be much more engaged and in control of their assets. While the Bill does not give us everything we want, it makes solid steps towards that goal, and it is our belief that it deserves to have its Second Reading today.
Andrea Leadsom (South Northamptonshire) (Con)
First, I congratulate my right hon. Friend the Secretary of State and, in particular, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman), on their long-standing commitment to improving security for all our people in older age. My hon. Friend the Member for Hexham has shown over a lengthy period his commitment to securing older age for all in our country.
I would like to make four brief points, which I hope my hon. Friend will take into account as this excellent Bill continues its passage through both Houses. First, I would like to talk about the safety of pensions. There is no doubt that auto-enrolment has been a huge success for many, but Ministers will be aware that some people—particularly those on low pay—have been auto-enrolled into a pension scheme and found, when they tried to get information on their investment, that the company handling their pension is, in fact, a bogus firm.
I vividly recall a constituent coming to see me at my surgery. He was a delivery worker on fairly low pay. He was concerned about his auto-enrolled pension and wanted to know what was happening to his assets. He was trying to get an answer from the administrator for that firm and was simply told that the assets had decreased in value. When he tried to find out more, the firm would not engage with him. It was incredibly difficult for me, as someone who is quite familiar with the asset management sector, to get on to the ombudsman on his behalf. It was very difficult to get answers out of anyone. I urge my hon. Friend to ensure that we have the ability to clamp down hard on scams of all sorts, including by those who provide auto-enrolment schemes, and to enable people who may not be at all familiar with managing assets and their own investments to seek redress where necessary.
My second point is about the structure of pensions. I completely agree that the dashboard concept is a great idea. There is no doubt that it will transform people’s ability to hang on to all their small pension pots from the various jobs they have had. Most people these days have several jobs during their career, not just one or two, and it can be a case of people looking in the back of a drawer and trying desperately to remember the name of the company where they worked for six months. That is why we end up in a situation where lots of people have lots of little pots that they never manage to lay their hands on. I ask my hon. Friend, as he considers the next steps for pensions, to consider properly the potential for creating a lifetime pot that follows the worker. Obviously, that would be a radically different approach to the pensions dashboard that enables people to keep track of all those pots, but, actually, when individuals try to consolidate a pension, quite often the transfer value of that pension is considerably less than the pay-out value if they hang on to it. That is often why one pension pot will try to hang on to a person as one of its members and stop them going somewhere else. In my view, it would be worth while looking at a pot that follows the individual that they then keep paying into wherever they work throughout their career.
In 2014, which seems like light years ago now, I was City Minister and I was very proud to be working with George Osborne, who was Chancellor at the time, to introduce the pensions freedoms. I heard what the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) said about that being an opportunity for scammers. I completely agree that some of the measures that have been put in place have really helped with that, and that, indeed, there have been some major problems. However, I do not agree that we should not have brought in those measures, because the ability of many people to then get a decent amount of money on retirement was quite life-changing for them. It enabled some to have a great holiday. It enabled others to help their children buy their first home, or to pay off their own mortgage to give them greater security as they went into a lower income in a later stage of their life.
At that time, back in 2014, we also upgraded the Pensions Advisory Service, so that people could get good advice on how best to manage their own pension assets. In my view, this has been a positive change, but there is still a very low level of understanding of pensions among members of the public, so for many, making decisions about what to do with their pension freedom or with any kind of investing is a really worrying time. That leaves them open to crooks and scammers. I ask my hon. Friend the Minister what conversations he has had with the Secretary of State for Education about adding an applied practical element to the maths GCSE that would educate young people on issues such as pensions, mortgages, car finance schemes, and, yes, student loans. What more can be done to enable people to familiarise themselves better at a younger age, so that it is not such a mystery to them as they reach the shockingly old age of people like me—
Andrea Leadsom
Exactly, Mr Speaker—at least. I was referring to people who are starting to have to think seriously about these issues.
My fourth and final point is about investing in decarbonisation. It was fantastic yesterday to hear the Prime Minister talking about our ambition to be world-leading in clean growth. That was, in fact, the No. 1 priority that I set out for the Department for Business, Energy and Industrial Strategy when the Prime Minister first took office last year. I know that my right hon. Friend the Secretary of State and my hon. Friend the Minister are determined to help our pensions system contribute to the excellent action on decarbonisation that the Government are already taking. I totally agree with them that this multibillion-pound sector can be a real force for good, and investing in the green economy can play a part in helping us to level up across the UK.
Matt Western (Warwick and Leamington) (Lab)
I just want to pick up on those points. The right hon. Lady is making some powerful arguments, and I commend her for that. She will probably have picked up, as I did the other day, that Exxon Mobil has been surpassed in terms of the value of its business by a Florida-based renewables company. When we consider that that was the origin of the Rockefeller Foundation wealth, it just goes to show that had we invested in some of those organisations earlier and provided encouragement, through tax or other fiscal incentives, for pensions to get into that sector, we would have done extremely well.
Andrea Leadsom
The hon. Gentleman makes a good point. We should highlight the excellent work of some of the traditional high-carbon emitting companies of the past, which are really transforming themselves to become the renewables companies of the future. Some of the announcements made by BP, for example, have been incredibly welcome, especially those that show its determination to reduce its carbon footprint and to become one of the best and greenest companies of the future.
So I agree that by encouraging pension funds to invest in greener industries, we can help to improve our green economy and thereby level up across the UK and create hundreds of thousands of jobs. May I therefore ask my right hon. Friend the Secretary of State and my hon. Friend the Minister what conversations they have had with our right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy about the Government’s proposed reforms to corporate governance and audit? There is no doubt that audit reform could provide a much greater focus on what businesses are actually doing to improve their carbon footprint, and corporate governance changes could improve the incentives on company directors to prioritise carbon reduction and protecting the environment. With improved transparency and information about company performance, it will be considerably easier for pension fund managers to make investment decisions that will build security for us all in older age as well as protecting our planet, which is a top priority for so many people right across our economy.
Once again, I welcome this very important Bill, which I think is going to be quite transformative. I hope that my right hon. Friend and my hon. Friend will take my comments and suggestions in the light in which they are given, which is to try to improve and build on the excellent work that they have already done.
Neil Gray (Airdrie and Shotts) (SNP)
It is a pleasure to follow the right hon. Member for South Northamptonshire (Andrea Leadsom), who made some very interesting points that we would want to listen to, and that highlight why, on such an important issue, it is so important for Government to listen to Members across this House and work constructively on this very important piece of legislation.
The SNP broadly supports the Bill. There are key elements that we wish to see advanced, but also areas we hope to work on with other parties to help to improve. I am grateful to the Pensions Minister for his time over the past number of weeks, and in the previous Parliament, in keeping me up to date with the Bill. Similarly, I am pleased that the two main Opposition parties have been able to work together so constructively on these matters. I am grateful to the hon. Member for Birmingham, Erdington (Jack Dromey), in particular, for his approach, and look forward to maintaining that collaboration into Committee stage. I also echo the message to the pensions industry from the shadow Secretary of State. We engage regularly with it, as I am sure he does, on UK pension policy areas—and also, obviously, on looking towards pensions post Scottish independence. We are happy to see the Bill as it has arrived from the Lords advance into Committee, and we will not oppose its Second Reading, but I wish to lay down a few markers for the UK Government.
First, I want to set out our view on the key measures in the Bill. Parts 1 and 2 provide for the framework to operate and regulate collective defined-contribution schemes. There is great support for this from the Royal Mail and the Communication Workers Union. Like the shadow Secretary of State, I would be keen to have an assurance that while CDC schemes are worthwhile projects worth pursuing, they should not be a replacement for good DB schemes. We also support part 3, which provides greater powers for the Pensions Regulator that we hope would be a deterrent to any future BHS-type moment happening again.
We also support part 4, as it provides the legislative framework for the pensions dashboard—the digital platform that will enable people to see all their pension savings in one place so that they can make better decisions and informed decisions about their retirement plans. Part 5 pulls together a number of other provisions that we support—specifically clauses 123 and 124—and other areas such as climate change reporting. It is incumbent on all of us to do what we can to address the climate emergency, so we welcome these measures.
We support these measures because we see them as helping to take important steps to encourage lifetime savings and provide greater clarity and protection for people dealing with their pensions. However, we do not want the UK Government to attempt to row back on improvements to the Bill that were made in the Lords, and particularly on providing the public dashboard, with a bedding-in period, before commercial dashboards arrive. Baroness Drake’s amendment, at least, should stand. I hope the Minister will confirm, as the Secretary of State was unable to do so, that he has no intention of removing it or watering it down in Committee. We do not oppose commercial dashboards. We understand that they will be coming and they have an important part to play. We just want the UK Government to invest properly in marketing and embedding the public dashboard as the first port of call for people to seek impartial information on their pensions. If commercial dashboards are allowed to take off at the same time as the MaPS dashboard, I fully expect the usage of the MaPS dashboard to be lower than it should be. It will be a huge missed opportunity to engage and inform people about their pensions in an impartial way. If the Government are serious about empowering and informing people about their pensions—I hope that they are—they will accept the Bill as it stands in this area.
We feel that compromise can be found to resolve any concern the Government may have about the wording of amendment 71, which was tabled by Baroness Bowles, to ensure that open schemes can be treated differently. I am willing to work with the Minister on clause 123, but urge him not to remove it altogether. That would have major implications for open schemes—a point on which my hon. Friend the Member for Gordon (Richard Thomson) will elaborate in more detail later.
It is true that the Government enjoy a majority in this House, but they should not abuse that. I think that the Minister will today find unity on the Opposition Benches for protecting the amendments made in the Lords, some of which were supported by Conservative peers and former Pensions Ministers. I hope that he will be willing to work constructively, as he has been doing up to now, and as he went out of his way to do when we were first looking at the Bill in the previous Parliament, when the Government did not have the support of such a majority behind them. Matters such as those contained in the Bill should see consensual working. I hope that he will agree and listen to what he is hearing, not just from Opposition Members but from stakeholders across the industry, about protecting these amendments.
What the Bill sadly does not do is address a series of pensions injustices. The 1950s-born women are still waiting for justice, but we may have someone who is able to help. He said this:
“I have made several representations already on behalf of my own constituents who fall into this category. And I must say the answer I’ve got back from the Treasury is not yet satisfactory. But I will undertake—if I’m lucky enough to succeed in this campaign—to return to this issue with fresh vigour and new eyes and see what I can do to sort it out… But you know obviously the Treasury raise some stupefying sum that they say will be necessary to deal with it. I’m not convinced that’s necessarily true. Let’s see what we can do.”
The Member of Parliament who made that commitment last year is now the Prime Minister. Surely, the Pensions Minister will be keen to work with his leader to lobby the Treasury to honour that promise. The least it could do would be to organise an impact assessment to better understand the detriment suffered by 1950s-born women and work on recompense from there.
Another area of injustice I would expect to be discussed in Committee is plumbers’ pensions schemes. My hon. Friends the Members for Perth and North Perthshire (Pete Wishart), for Kilmarnock and Loudoun (Alan Brown) and for Gordon have been working hard on this, to their credit, and I look forward to further discussions in Committee.
Another long-standing area of campaigning for the SNP has been on the creation of an independent pensions commission. I believe that there is sympathy for such an idea in the official Opposition, and the Minister may have considered this matter in the previous Parliament. We want to see a standing pensions commission that would ensure that injustices such as those suffered by the WASPI women are not allowed to happen again. We also feel that it would take the political sting out of difficult issues needing wrestled with. We accept that such a broad standing commission may be outwith the scope of the Bill—unless the Government were willing to propose it, of course—but we hope that it could be considered in the longer term.
We also want to see much greater speed applied to the roll-out of auto-enrolment to people on lower incomes and younger people. Although we wholeheartedly support automatic enrolment, far too many have been left behind and still cannot benefit from this important measure. Now, more than ever, we need the UK Government to be more ambitious. We have called for them to lower the age threshold for auto-enrolment to 18 so that young people can benefit from saving early for retirement, remove the lower limit for the qualifying earnings band so that contributions are payable from the first £1 earned and expand contribution rates beyond the 8% statutory minimum. This would recognise the importance of starting a savings habit early, given the powerful impact that early career contributions can have on the size of retirement savings. Saving from the first £1 earned would be simpler and help low-income workers to save more.
The Association of British Insurers notes that by reducing the lower age limit to 18 and removing the lower earnings limit, a further £2.5 billion could be saved. The UK Government’s failure to act on this at speed is disproportionately affecting women. Again, the ABI reports that the average pension pot for a woman at 65 is one fifth of a 65 year-old man’s and that women receive £29,000 less state pension than men over 20 years. That deficit is set to continue, all else being equal, closing by only 3% by 2060. Extending the coverage of auto-enrolment further by reducing the earnings threshold to the national insurance primary threshold would bring 480,000 people—mostly women—into pension saving, so further delays would be unacceptable. The UK Government should set a clear timetable for their plans on the expansion of auto-enrolment.
For people to get the most out of their savings, we need strengthened consumer protections and measures to boost confidence in the pension system. Pension freedom reforms were introduced in April 2015 by the Government to allow people to draw on their pension pots early, potentially resulting in future financial hardship for them. The introduction of pension freedoms muddied the waters further for individuals trying to understand their pensions. We voiced our opposition to the reforms at the time, highlighting that they could result in people transferring out of their pension to their detriment, and we have been shown to be correct.
It is clear that the UK Government have not put in place adequate safeguards for older people who are opting to free up funds to ensure that they will not end up in a desperate financial situation later. A pension pot should be looked at as deferred income, not a cash machine, and those with less money are more vulnerable to economic shocks in their personal finances, as well as potentially being more vulnerable to scammers who give misleading or false advice for a fee. Many people have since been given unsuitable financial advice to transfer their valuable DB pension pots into less suitable and less secure DC schemes, leading to growing compensation payments from the Financial Ombudsman Service and the Financial Services Compensation Scheme. The issue may represent a large mis-selling scandal, the full scale of which may only come to light in time, but as we fast approach an economic impact from coronavirus, I suspect that time might not be too far away.
Age UK notes that the introduction of the freedom and choice reforms in 2015 led to new opportunities for scammers, perhaps most notably people transferring out of their DB scheme, but also by people charging very high fees and selling unregulated investment opportunities to DC savers. We support measures in the Bill that will provide greater protection and reduce scams, but we hope to be able to tie up some more loose ends from pension freedoms when the Bill moves into Committee.
Given the challenges faced in so many areas, it is also disappointing that the Bill does not address pension taxation or having a more equitable spread of the benefits of the UK Government’s investment in pensions tax relief. It also does not address the issues regarding superfunds, and we hope to be able to return to those areas later as well.
In conclusion, we support this Bill’s Second Reading. As I have said, we will work with all parties to protect the Opposition amendments secured in the Lords, and we hope to be able to advance our own amendments, working with others, to make a decent Bill with necessary measures even better. Let us work together to make the most of this opportunity for current and future savers.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak in the debate on this excellent Bill, and I think that I echo most of the remarks we have heard so far by saying that there is nothing in the Bill really to oppose. It leaves most of us looking for things we would like to add to the Bill, rather than being upset with anything that is already in it.
Much as the Opposition spokesman said, there are some key challenges for pensions, and I will address how the Bill tackles those challenges. The three challenges I generally look at are how we can increase people’s engagement with what their pension means, how much they need and what they are likely to have in their retirement; how we can increase the number of people who get a decent pension in retirement, rather than just some small amount of money; and how we can protect what people have actually saved. The Bill makes progress on all three, but the key thing is engagement.
If we can get engagement right, people will understand how important the issue is, what it means and what some of the risks, consequences and benefits are. Through that, we can probably get people saving more, and we can help stop them being a victim of a scam or making a bad choice when they get to retirement.
It is tempting to think, because we have 10 million more people saving for pensions through the great success of auto-enrolment, that we have fixed the engagement problem, but the opposite is true. Auto-enrolment has not been such a success because people have engaged; they just have not chosen to opt out, and that was the whole basis for the inertia that was the reason for the adoption of auto-enrolment. We need to do more to engage people to make them understand exactly what all this means and what their retirement will look like if they carry on saving as they are.
The pensions dashboard is a key component. If we can get that right and people can go on to something and find out how much they have saved, find out what pension they would get from that, find out perhaps what ideally they would have saved by now and what their shortfall is, and then get some ideas for what action they should take over the rest of their working life and how to close that, then we can genuinely improve the outcome people will have from their saving.
The challenge we have with the pensions dashboard is that we will get those improvements in behaviour and the outcomes we want only if people actually go on the dashboard on a regular basis and find the information they need. I would be more sceptical about how advantageous a stand-alone MaPS dashboard would be, because I have a horrible feeling that if we write to people and say, “Here’s your logon and here’s your password,” some people might log on the first day and think, “This is great—it’s really useful,” but would they remember it existed next year, the year after, when they get to their mid-life MOT time and when they get to their retirement? For a whole load of people, that envelope will never get opened, or would go in a drawer and basically just be gathering virtual dust.
We need to get that information to where people are managing their finances—whether their banking app or whatever else people are using. I am not too precious about whether there is a one-year gap before we open up that data, but I think for this to work and to get the advantages we seek, we need to get it further than just one dashboard that people might look at if they remember it exists and they can find their password and their username. That is not how this will really work.
I would not support having two-way functionality. The dashboard has be about sucking out data, not a transactional dashboard. I would hate the idea that someone could go on the dashboard, click a button and do something to their pension after a few beers on Friday night. That would be a crazy thing to get into. The model we have of a dashboard that sucks out data when it is asked for it is the right one. However, we need to get people using it, not just have it gathering real or virtual dust.
The challenge we do really need to address on pensions is how we get people from saving a pretty small amount of money, which will not get them the quality of retirement that they think it will, to saving the amount that they need. That is where collective defined contribution schemes can play a really important part, if they are used as an improvement to DC, not as a weakening of final salary schemes. I think that we would all encourage employers who do want to give their staff the best possible pension to think about whether they can move from a DC to a CDC to give their staff a far better outcome.
The Secretary of State called my hon. Friend the best Pensions Minister in living memory, and I think here that is indeed true. Steve Webb may claim that prize, as perhaps the longest-serving Pensions Minister in living history, but this Minister will not just bring on to the statute book a dream of defined ambition or a third way, but actually see schemes in this space, and it will be a real achievement if we can get these schemes operating.
My only caution is that it when we are selling the advantages, we should be clear that there is no magic. There is no employer guarantee here. The reason why someone gets a much higher pension from this is that the people who, sadly, die earlier in their retirement will in effect be paying for those who have a longer life to have a higher pension. That has always been a feature of defined benefit schemes and it is a feature of annuities, but we should not let people think that somehow this extra pension comes from nowhere. People should understand that they will not have their own pots to pass on to their family if they are one of the ones who, sadly, dies young. At times, the marketing of these has been a little bit over-optimistic about what the benefits of the improved investing strategy or the reduced costs are, when most of the increased pension actually comes from the collective risk sharing.
It is a pity that the Bill has not looked at how we can expand the scope and rates of auto-enrolment. I understand why that has been done, and I know that we have set a mid-2020s timetable for further increases to the rate and changes to the age or the scope of earnings. However, the fact that we have seen opt-outs be far lower than we thought does create the scope to bring forward some of those changes in trying to get people much higher than the 8% savings ratio and nearer to the 12% that we think they really need, or to at least the 12% that we think they really need.
My final area of remarks is on how we protect people and protect what they have saved in relation to scams. There are clearly welcome measures in the Bill, but we possibly could look at how we can go further to make sure that we are putting every tool out there that can possibly be there. We heard evidence at the Work and Pensions Committee this morning from pension scheme administrators, and there is the awful situation where they suspect that the transfer being asked for might be a scam, but they cannot be absolutely sure. They have a duty to make such a transfer, but can we find a way to allow them to delay the transfer a little while so the member can have some more information and a bit of time to reflect and make absolutely sure that that is what they want to do before they go ahead? That sort of change in emphasis in relation to the powers would be really helpful in this situation.
We also need to go further in ensuring that, if people cannot afford advice, they at least take guidance from Pension Wise before they take fundamental decisions. Last time a pensions Bill came before the House—there is one every few years—amendments were tabled to try to make accessing pension guidance if not compulsory, as close to compulsory as we could get. It was suggested that before money was moved, there should be a release code from Pension Wise, to say that the person had taken guidance. The compromise at that point was to get the regulator to go away, do some work, and put measures in place to try to include that nearly mandatory use of guidance. Regrettably, however, the regulator has been incredibly slow, and three years have gone by without us seeing a great deal of action. I hope that this Bill will be clear that that is what we expect the industry to do, and the regulator should put that in place and monitor it.
We want everyone who has saved for decades not to make a horrible mistake at the last minute, and to take that free guidance. Such guidance has huge support and receives overwhelmingly positive feedback, and there is no reason for someone not to take high quality free guidance before risking thousands of pounds that they have saved. I accept that we cannot make that compulsory, but it should be as close to that as possible.
On pension consolidators, the idea of consolidation for weaker, smaller defined benefit schemes is attractive, and I welcome the market moving in that direction and the regulator’s approach so far. However, given that pensions Bills do not come before the House that often, I wonder whether we have missed an opportunity to put some of those rules on a statutory footing. Normally, I would not want the Government to include a clause that allows them to make secondary legislation, as that is not great for parliamentary scrutiny, but I wonder whether the power to introduce such rules could have been included in the Bill, should the regulator start to believe that regulation alone does not have the force or impact that we need. We would not want one of those consolidators to get any kind of market share if we are not sure that it is improving the situation for members, rather than making it worse.
Finally—I asked the Secretary of State about this—the pensions industry can be a huge force for good, and thanks to auto-enrolment it is investing billions of pounds every year. However, it should not invest passively, or just put money in, leave it there, and see what happens. When we have scandals, or corporate failures or disasters, we frequently see that large investors in some companies have not been playing an active role in ensuring the high standards that they should have expected. We must send out a loud and clear message that, where pension schemes and their asset managers are sizeable investors in some of the largest and most significant businesses in our country, we expect them to play an active role in the stewardship of those companies, and not just leave it to others. That is essential if the climate change measures in the Bill are to work. We should not just expect a report every couple of years.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I hesitate to interrupt my hon. Friend’s flow, but there is an ongoing consultation on illiquids and consolidation. I endorse what he says about stewardship. He will no doubt be aware of the consultation that closes this week, which specifically encourages active stewardship regarding the management of large funds as he describes.
Nigel Mills
I am grateful to the Minister—perhaps he will submit my views to those consultations. This is about a behaviour change. It is not enough for us to just put rules in place; we need such behaviours to become the norm for large pension schemes that are investing huge amounts. That needs to be part of the behaviour; otherwise, we will have yet another report that gathers dust and that nobody really reads. Members and savers expect such measures. They want their money to be invested well—ethically, and in businesses that will improve the climate outcome. That would be good for pension schemes and their members, and companies need to take such measures seriously.
Stephen Timms (East Ham) (Lab)
As has already been widely said, there is much to welcome in this Bill. Some important changes were made in the other place, and I pay tribute to the work that it did. I also appreciate the efforts that the Minister has made to work with my hon. Friends on the Front Bench, with me and the Work and Pensions Committee, and with others across the House to secure broad support for the measures in the Bill.
Pensions dashboards should be an important step forward in enabling savers to understand their pension position, allowing them more readily to make good decisions in planning for retirement. The Select Committee, under its former Chair, Frank Field, to whom I pay tribute, said in 2018:
“The case for a publicly-hosted pensions dashboard is clear cut”
because
“consumers want simple, impartial, and trustworthy information.”
In 2019, the Committee observed:
“A non-commercial pensions dashboard will be a welcome, if overdue, additional tool to provide transparency to individuals and help them plan how they use their pension funds.”
We have heard that it was agreed in the other place that the dashboard provided by the Money and Pensions Service should be up and running for a year, and the Secretary of State should report to Parliament on its operation, before other commercial dashboards are set up, and that commercial dashboards should not have facilities for engaging in financial transactions. Like others, I hope that those changes stay in place.
The former Committee reported in 2016 on defined-benefit pension schemes in between reports that it published on the BHS and Carillion scandals, and its recommendations at that time are reflected in the new powers provided to the Pensions Regulator in this Bill. The Committee recommended, for example, that the Government should consult on proposals to give trustees powers to demand timely information from sponsors, and I welcome the new offence created by the Bill of “knowingly or recklessly” providing false information to trustees.
The Committee also highlighted, in 2018, the attractions of collective defined-contribution pensions. I echo the observation of the hon. Member for Amber Valley (Nigel Mills), whose contribution to the Select Committee I am grateful for, that the pooling of risk offers better pensions than standard defined-contribution saving and avoids the large potential liabilities that have made defined-benefit schemes less popular than they were. I welcome the legislative framework provided in the Bill, and I hope that this new model will be widely taken up.
However, I want to focus my remarks on the issue of pension scams, echoing a number of points that have already been made. As we have heard, the Select Committee has started an inquiry on pension scams, which the Secretary of State referred to. That is the first strand of three in an assessment of the pension freedoms five years on from their introduction by George Osborne.
Losing one’s pension savings to a scam is devastating. The Select Committee has heard of lives that have been ruined by scams—of people who have worked hard all their lives and were looking forward, as they were entitled to, to a comfortable retirement, finding suddenly that their savings have all been stolen; husbands not daring to tell their wives what has happened, or of the shame or dread of the future that they are suffering.
We do not know the scale of this issue. Many scams are never reported, partly because people are ashamed of what they have done and partly because they know that the chance of ever retrieving any of the money is slim. There are grave concerns about the effectiveness of Action Fraud in investigating and ensuring the pursuit of scams, given the low rate of success in retrieving scammed pensions.
The pension scams industry group, to which I pay tribute, estimates that scams could account for anything between 0.5% and 12% of all transfers out of employer pension schemes in the last five years. If we take the middle figure—say 5%—that would mean that over the last five years £10 billion of pension savings have been stolen. There are certainly well-informed reports of named individuals living in the lap of luxury in homes in exotic locations around the world on the proceeds of pensions out of which they have defrauded hard-working savers.
I am bound to say that these awful problems should have been foreseen when pension freedoms were introduced five years ago. Indeed, as I remember well, they were foreseen, but the coalition Government did not adequately prepare for them. I do not know why—they should have done, but they did not. Charles Randell, chair of the Financial Conduct Authority, said at the 2020 annual public meeting of the FCA that
“the manner in which the pension freedoms were introduced leaves a number of lessons to be learnt, including about the importance of coordinating changes in government policy with regulatory and industry preparedness and the speed with which major changes are introduced.”
He was absolutely right—those things were not done, and thousands of hard-working people have had their lives ruined as a result.
The pension scams industry group has thought long and hard about this, and the pensions industry has every incentive to worry about the reputational damage that it suffers as a result of the impact of scams. If people cannot trust what will happen with their money they will not save. The industry group has identified red flags to assist in establishing whether the destination for a proposed transfer is likely to be a scam. It has suggested three main flags, any one of which, most people would agree, should mean that the transfer should not go ahead: first, if the receiving scheme is on the FCA warning list or some other internal list of schemes, entities or individuals of concern; secondly, if advice on the proposed transfer has been provided by firms or people who do not have appropriate regulatory permissions; and, thirdly, if the provider or self-invested personal pension operator is not registered with the FCA. The industry group has identified a number of other flags that may not in themselves show that the transfer ought not to go ahead, but do suggest that further checks need to be made before it does.
As I mentioned in my exchange with the Secretary of State, an amendment to the Bill was tabled in the other place to ensure that if a proposed transfer raised red flags it should not go ahead until the saver had taken financial advice. The problem graphically reported by the pension scams industry group is that only about a quarter of would-be scam victims would be deterred from proceeding after receiving advice telling them not to do so. The scammers win people’s confidence—they become their friends, as we heard in the Select Committee this morning. The scammers tell people, “Yes, they will say that, but that is because they do not want you to move your money.” People trust scammers until the moment they find their pension has gone.
I want to table a proposal enabling trustees to refuse to make the transfer altogether if one of the major red flags is raised. In my view—and I know that other Members support such an amendment—the statutory right to transfer conveyed in pension freedoms legislation should not apply in such cases. We heard this morning from scheme trustees not only that they had an obligation to transfer even if they knew perfectly well that the destination was a scam but that if they did not do it quickly enough they would be fined for not getting a move on under the arrangements that are in place. It is hard to argue that the statutory right of transfer should apply, for example, if the destination is a firm that is listed on the FCA warning list. If the trustees of a scheme know that a particular transfer is going to a firm that is on the warning list, they should surely not have a legal obligation, as they do at the moment, and will still have under the Bill, to hand the money over to crooks if the saver has taken advice but still, despite that advice, wants to go ahead. If the receiving firm is a above board, it must show that to the FCA and get itself off the warning list.
Guy Opperman
I am grateful to the Chair of the Work and Pensions Select Committee with whom I have had, I think, three separate meetings over the summer specifically to address this point. Clearly we are all keen to ensure that clause 125 and the powers within it address the issues that he rightly raises and that are of concern to fellow members of the Select Committee.
The right hon. Gentleman will be aware that I wrote to him yesterday and have given evidence in a more detailed document to the Work and Pensions Select Committee. With his permission, I will put both those documents in the Library of the House, so that all colleagues, including the hon. Member for Airdrie and Shotts (Neil Gray), have an opportunity to be aware of them. I am very happy to continue working with the right hon. Gentleman, and he will be well aware that the view of my Department is that the matters he raised can be addressed fundamentally by clause 125. The FCA has particular views of the red-flag list warning list point, but I am sure we can continue the dialogue.
Stephen Timms
I am extremely grateful to the Minister for those points and for the work that he has done, the responsive way that he has looked at the issue over the past couple of months and for the information that he has now provided. I will be very keen to hear from the Pensions Scam Industry Group whether it feels that the proposal that the Minister has now tabled will meet the points that it has been raising. However, I am grateful for the progress that we have been making on this issue and that will no doubt be further explored in Committee in the weeks ahead.
The determination by the pensions ombudsman in 2015 allowed trustees to decline a transfer request when there were concerns about a scam but the Hughes v. Royal London court case in 2016 overturned that determination and established that the trustees do have an obligation to go ahead even when they know the receiving scheme is a scam. That must be changed, and I am very encouraged by the Minister’s point that he believes that it will be possible to bring forward regulations under the Bill as it stands to have that effect. It is important that that change is made.
Mr R complained to the pensions ombudsman about the decision of the London Pensions Fund Authority and Newham Council, which is my local authority, to allow him to transfer his pension to the Gresham pension scheme. That transfer went ahead and he has lost his entire pension valued at £64,000. He has been awarded £1,000 in compensation since then. His view now is that the trustees should have refused to make that transfer but, under the 2016 Hughes v. Royal London decision, the trustees are legally obliged to go ahead with the transfer in a case of that kind. I think Mr R is right that the transfer that he requested should have been blocked by the trustees, and I very much hope that in future that will be possible. Very few people would today argue that the pension freedoms should be repealed but pension savers are entitled to expect protection. The change that I have described is designed to provide it.
My final point has been touched on by the shadow Secretary of State. Clause 123 was amended in the other place. As the Minister knows, there is very strong support for the amended clause on the part of current defined-benefit schemes, such as the railways pension scheme and the BT scheme, that remain open. If that amendment were to be removed, those schemes fear that they would be treated unfairly by the regulator and in the same way as schemes in very different circumstances. Their future would be threatened as a result. It could be the final blow for private sector defined-benefit schemes. There is great nervousness about the Minister’s intentions on that clause, as he well knows, and about the fact that if he removes the amendment, he may make those schemes unsustainable. I wonder if, in closing the debate, he might comment on his intentions on clause 123.
Gareth Davies (Grantham and Stamford) (Con)
It is a great pleasure to follow the Chair of the Work and Pensions Committee. This is an incredibly important debate because we know that our population is growing in age. By 2024, it is projected that 24% of our population will be over the age of 65, and in my constituency, 31% of our population is already over the age of 65. One of the key challenges that we face in this place is determining the best way to ensure that older people have safety, dignity and comfort in their retirement. They have paid their taxes, contributed to our economy and raised the next generation. But let us be clear: ultimately, the surest way of ensuring that people have safety and security in their retirement is through economic growth. No pension fund reform will be as effective if we do not have economic growth, because through economic growth, people earn more money and save more money
It is clear that our pension system simply has not progressed to meet the needs of a modern economy. That is why I warmly welcome the Bill for its clarity for pensioners and the protections that it brings. I would like to focus my speech on the dashboard provision, which is one of the most interesting aspects of the Bill, and I have three points to make: first, on why I believe the dashboards are needed; secondly, on concerns from the industry about the commercial provision; and thirdly, on concerns about the cost to pension plans.
In terms of why the dashboards are required, pension provider LV= estimates that a typical worker in Britain changes job every five years. As the Secretary of State said, a British person today can have as many as 11 jobs throughout their career, going from job to job and collecting pension plans along the way. It is hard to keep track of those pension pots, and people forget or lose them. The Pensions Policy Institute has outlined that around 1.6 million pension pots, worth a staggering £19.4 billion, are lost today. That works out at around £13,000 per lost pension plan. By 2050, it is estimated that there may be as many as 50 million lost pension pots.
These dashboards are incredibly important because, as the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) rightly pointed out, an additional 10 million people have been put into workplace pension plans in the last eight years alone. To ensure that all pension pots are included in the dashboards and to harness the very best of British FinTech, we need a commercial provision, and that brings me to my second point.
While some in the industry have suggested that commercial dashboards open pensioners up to mis-selling, I put it to the House that this mistrust is unfounded. I looked at Denmark and Israel, which both have pension dashboards alongside commercial transactions, and not once has there been a case of mis-selling. We have one of the greatest financial regulators in the world in the Financial Conduct Authority, and I have tremendous faith in its ability to ensure that mis-selling does not occur.
Thirdly, I want to address the comments made about cost to pension plans by others in the industry. A dashboard is only as good as the data put into it. I would expect pension plans to already have their house in order and to have been practising data hygiene for many years. Anybody who has worked in a senior position in the investment industry, as I have, will know that data science is one of the fastest growing parts of any business today, and not least pension or investment businesses. Those businesses should have been practising strong data hygiene for many years. I think we can all agree that the many benefits that are brought to millions of pensioners up and down our country, across these lands, will far outweigh any cost to pension plan providers.
I also want to highlight—it was mentioned by my hon. Friend the Member for Winchester (Steve Brine) who is no longer in his place—the provision to compel pension providers. I want to emphasise it, because I think it is under-appreciated just how important that is. If we look at what happened in Denmark and Sweden, which had a voluntary provision to provide data, it took between 10 and 13 years for those dashboards to be fully operational and fully comprehensive; if we look at Australia, which had similar provisions to this Bill, it took a fraction of the time. That is an under-appreciated point that deserves recognition.
Guy Opperman
To address that point, the Government were clearly waiting for the industry to volunteer the provision of the data to create a pension dashboard, but upon that not being done on a voluntary basis, it was inevitably the conclusion of both industry and advisory bodies that we should proceed to compulsion. Hence, the Bill, following consultation, requires such data to be provided. I accept the international examples as totally correct, and that is why we are proceeding as we are.
Gareth Davies
I am grateful to the Minister for clarifying that and, again, I welcome the provision to compel pension providers. It allows the dashboards to be as effective as possible as quickly as possible.
Finally, let me address clause 124, requiring pension fund managers to include climate change risk. Again, I would expect pension fund managers already to be incorporating climate considerations in their investment process—climate change is clearly a risk for all pension pots. I am disappointed that we have to include it in the Bill, but I welcome it none the less and highlight how it emphasises, once again, this Government’s commitment to green finance.
It would be remiss of me, however, to stand up in this Chamber without mentioning my long-standing call to the Government to issue a Government green gilt, which would help to raise literally billions of pounds to fund some of the announcements that have been made this week. That would follow Germany, Netherlands, France and many countries around the world in tackling UK pension fund assets, some of which—many of which—have already been funding other countries’ bond issuances around the world. I would welcome any comments that the Minister has on that point.
In conclusion, this is an excellent Bill. I welcome the clarity that it brings to pensioners, as well as the powers for the regulator that will give a lot of comfort to many. It will clearly help bring our pension system into the modern world.
Nick Smith (Blaenau Gwent) (Lab)
Pensions are often the biggest pot of money that anyone will have. They hold the promise of future financial security and are hugely important to millions, but they are also complex and more needs to be done to support people in understanding this crucial topic. Increasing choice through pension freedoms has had a big downside, in particular for those moving out of defined-benefit pension schemes.
In 2017, the British Steel pension scheme was being reconfigured. Steelworkers were being circled by pension sharks to encourage pension transfers. One steelworker family from Blaenau Gwent was approached by a rogue financial adviser while they were away at their caravan on a family holiday, and he sweet-talked them into a bad deal. Such rogue advisers are often propped up by completely unregulated introducers, who are still not being properly investigated by the Financial Ombudsman.
Our Parliament’s Work and Pensions Committee, in its report on this long and sorry tale, concluded that steelworkers were “shamelessly bamboozled” and that the industry’s response has often been “too little, too late”. It is a scandal that continues to have a devastating impact on steelworker families in my constituency and on thousands more across the country. The case study shows a slowness to respond by regulators. Predatory behaviour is all too common, and more action is needed to tackle it. Rates of genuine criminal enforcement against rogue advisers is low, and advice to steelworkers remains confusing, so it is vital that the Bill brings forward the protections that should have been in place for steelworkers three years ago.
I welcome the Bill’s commitment to strengthening the powers of the Pensions Regulator when it comes to enforcement and penalties; that is overdue. However, I think the Bill still leaves consumers vulnerable to being ripped off through a new market that could be created by the dashboards that have been mentioned. If the Government reject Labour’s amendments in the other place, I urge them to provide some answers to the following key questions.
Has the Minister had conversations with the FCA and other agencies about putting in place proper measures for the regulation of any new dashboard market? The FCA, in particular, seems more concerned about what happens in the City of London than what happens in the kitchens of consumers across our country. What accountability measures will be put in place to ensure that regulators protect and prioritise consumers first? People who have issues with their pensions too often face an alphabet soup of different agencies and regulators. What steps will be taken to ensure that regulators’ responsibilities are clearer for the consumer?
The Government say that this Bill will ensure that pension schemes are fit for the future. To make sure that that is the case, they must also reflect on the mistakes that have been made in the past. Protecting consumers must always be our top priority. The British Steel pension scandal may have been unique to the south Wales valleys and other steel towns across our country, but the issues that it represents can equally be found in our country’s suburbs and cities. I hope that the Government will learn the lessons of the recent past and ensure that consumers and pensioners are protected for the future.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
The measures in the Bill could transform how we view and engage with pensions, and I welcome the huge progress that that represents. Pensions are technical and complicated, and decisions about saving for our future, and about what to do with all our savings, are incredibly important. Naturally, the Pensions Schemes Bill is incredibly detailed and technical, but its overarching aim is clear: it is about protecting and empowering consumers.
Today I will talk about the tension that arises between giving savers the power to make the best choices, while protecting them from those who seek to scam or exploit them. Across quite a lot of what we do in politics, and in many of the decisions that we make as a nation, there is a tension between supporting free choice in decision making and ensuring that there is a safety net and some degree of protection.
Changes to workplace pensions and the introduction of pension freedoms has meant that individuals now take more decisions about, and responsibility for, their pensions. Free choice and autonomy are dependent on several things, however, including access to the correct information and the ability to understand it; freedom from coercion, either implicit or explicit; and not being duped by scammers. The Bill rightly focuses on those areas.
On access to information, the introduction of a pensions dashboard will lead to real improvements in accessibility and consumer confidence in planning for retirement. For too long, finding out about and understanding one’s pension and savings has been excessively complicated, and information has been inaccessible. The measures in the Bill to require pension funds to provide data represent a huge step in addressing the issue. To achieve the maximum benefit, however, we must work to ensure that full state pension data is included, as well as a means of tracking all small pension pots that an individual may have accrued.
As many hon. Members have said, gone are the days when people had a job for life. Most of us will do many jobs throughout our careers, and I suspect that those in the House are very mindful of that. That leads to people having many small pension pots, adding further complexity and confusion to planning for retirement. The ability to track pension pots and bring all that data together will give individuals the information and the power to make the best decisions for themselves.
It is not sufficient for the information simply to be there; people have to want to access it, know that it is there and be able to use and understand it. Not everyone will have the confidence or ability to review their pensions data. Arguably, those who are most engaged with their pensions are those who need the least support. We must therefore ensure that, alongside the pensions dashboard, communication to individuals is clear and that support around it is available to help everyone to build confidence in their ability to manage their financial affairs. Probably for most people at the moment, thinking about their pensions in 20 or 30 years’ time and delving into planning for the future is the last thing on their minds, but it is a crucial thing that all of us must do and do early on. It is how we get that message across and ensure that when people think, “You know, I’m going to see where I am at and have a think about how much I’m saving,” there is an easy route to getting that information, processing it and starting to make sound financial decisions.
Of course, when people go on that journey, out come the crooks. Sadly, when it comes to scamming, there are many crooks in the world. The Work and Pensions Committee heard harrowing evidence of the scale and impact pension scams can have on people’s lives; in some cases people lost their life savings just as they were planning to retire, with no ability to get back into employment to recoup them—the worst possible situation. We know that in times of economic stress, such as the current pandemic, the rate of scams increases. I therefore especially welcome the additional powers for the regulator, the greater sanctions on employers or trustees who do not fulfil their obligations, and the measures in clause 125 to protect individuals from scams. The ability to introduce conditions on a member’s right to transfer their pension means safeguards can be added to prevent money being sent to scam accounts, but the scammers will not go away and we must strive to do more.
There is clearly a difficult balance to be struck between enabling an individual’s freedom of choice and protecting those who may be vulnerable to exploitation. The Bill introduces many positive changes and safeguards. It will improve access to data and improve confidence. It also lays the foundation for a vast improvement in how we can engage with pensions and savings, but I remain concerned about those who are vulnerable to exploitation. I therefore urge Ministers to continue to explore ways to identify those who are most vulnerable to exploitation, to crack down on fake webpages, to pursue international crime gangs who are responsible for a lot of such offences, and to work closely with industries, charities and the social care sector to ensure that we can protect and support those who are most at need. People should be able to choose to do what they want with their pension and plan for their future free of the threat of being a victim to a pension scam.
Ben Lake (Ceredigion) (PC)
Diolch, Mr Deputy Speaker, for calling me to contribute to this very important debate, which I think has revealed quite a refreshing amount of consensus on both sides of the House. It is a pleasure to follow the hon. Member for Runnymede and Weybridge (Dr Spencer). I agree with many of the points he made in relation to the measures in clause 125.
The Bill represents a welcome step to ensuring the security and responsible use of UK pension schemes. I particularly welcome clause 124, which addresses the vital issue of climate change: the risk it represents to our long-term socioeconomic security and the role pension funds can play as key levers in the decarbonisation effort of our economy. Wales has a proud record on sustainability and climate change mitigation. A commitment to sustainable development is written into our de facto constitution and we were a world leader with our Well-Being of Future Generations (Wales) Act 2015. I know the Minister is aware of the groundbreaking work undertaken at the Centre for Alternative Technology, which is located in the constituency of the hon. Member for Montgomeryshire (Craig Williams). There is also groundbreaking work undertaken on my side of the Dyfi estuary. In particular, Aberystwyth University boasts the world-leading Centre for Glaciology, while IBERS—the Institute of Biological, Environmental and Rural Sciences—and Aberinnovation campus conduct crucial work into climate change mitigation.
Guy Opperman
I am grateful to the hon. Gentleman for putting on the record my knowledge of mid-Wales and support for so much of what is taking place there. I would be delighted to join him and visit the two institutions in his constituency and in that of his neighbour, my hon. Friend the Member for Montgomeryshire (Craig Williams), when we are allowed to do visits in future.
Ben Lake
That is a very kind offer from the Minister and I will take him up on it.
Achieving net zero emissions will undoubtedly be a difficult and expensive challenge, yet, as the past few months have shown, the state, with its unrivalled ability to borrow and invest, can effect unprecedented change to our society and economy quite rapidly when there is a desire or need to do so. With around £3 trillion invested in UK pension schemes, pensions represent an equally transformative source of investment and could support our decarbonisation efforts.
I welcome the requirements in the Bill for pension schemes to assess their exposure to climate change risk. Those requirements are necessary and well overdue. The Economist Intelligence Unit’s estimate that climate change could eliminate up to 30% of the world’s total manageable assets, along with the fact that the vast majority of UK pension schemes currently do not take climate change risk into account, offer sufficient justification for the introduction of the requirements.
Closer to home, in 2019 Welsh local authority pension funds still had more than £1 billion invested in fossil fuels. That means not only that the pension holders are exposed to future climate change risk, but that the funds are—indirectly at least—undermining collective efforts to decarbonise the economy. I therefore urge the UK Government to consider how they can better work with the Welsh Government to encourage the use of pension wealth to realise decarbonisation and productivity improvements across the four nations of the United Kingdom.
The opportunities are there. In recent years, vital projects such as the Swansea Bay tidal lagoon have gone unrealised, while the UK Government have proven themselves unwilling to finance key aspects of our carbon transition in Wales, including improvements to the Welsh railways. Simply put, we have an opportunity to make pensions work better for Wales, to achieve our climate targets and to meet our international commitments.
I welcome the Bill’s increased powers for the pension regulator and the greater urgency for funds to consider climate change risk, but the Bill could go one step further. The finance sector has already taken welcome steps not only towards divestment but in advancing the environmental, social, and corporate governance agenda. The UK Government could bolster those efforts by amending the Bill so that all default funds are required to reach net zero by 2050, at the latest. That would stimulate green investment, as well as industry development, including better reporting standards and stewardship, as mentioned by the hon. Member for Amber Valley (Nigel Mills) earlier.
Pension funds have a pivotal role to play in decarbonisation—from influencing companies’ boardrooms to invest in a green transition, to protecting pension holders from the risk of climate change. For too long, their transformative potential as investors in that regard has been underutilised, so I welcome the Bill, and particularly clause 124, and hope that the Government can consider strengthening it further so that pension schemes play an even greater part in achieving our vital climate change targets.
Shaun Bailey (West Bromwich West) (Con)
It is a pleasure to follow the hon. Member for Ceredigion (Ben Lake) and to hear about all the fantastic work that my former university is doing in the green sector.
This is an important debate. We are talking about something that is often overlooked and under-discussed: the bedrock of people’s futures. The hon. Member for Blaenau Gwent (Nick Smith) summed it up well when he said that this is not about financiers in the City of London; it is about people in their kitchens. It is about people in Tredegar or Tipton—their futures and their livelihoods. It is about making sure that they have a sustainable future for their retirement, and the Bill is vital to ensuring that that can continue.
For people of my generation, in their ’20s, pensions are not something we really think about, to be honest. As my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer) summed up well, quite often the issue is information. As the data shows, many people now have numerous jobs. As my hon. Friend the Member for Grantham and Stamford (Gareth Davies) pointed out, some people have up to 11 jobs in their lifetime. It is about the slip in the drawer—the final notice that people get when they leave but then forget about it, and it goes to the back of their mind.
My first point, then, is about my support for pension dashboards. It is vital that we can ensure that people make informed decisions about their futures. I support the pension dashboard provisions in the Bill, because it is absolutely right that we ensure that, as people come to make decisions about their livelihoods and their future and how they are going to ensure it is sustainable, they have the information available. It has been interesting to hear, as a member of the Work and Pensions Committee, how that work has progressed. There is still more to do in this space, though, and that is recognised across the board. Nevertheless, I think we can all agree that it is vital that savers have the freedom to make choices in an informed way.
I want to turn to scams, which has been an overarching point today, particularly in relation to protecting the most vulnerable. I have some sympathy with the right hon. Member for East Ham (Stephen Timms), the Chair of the Work and Pensions Committee—perhaps I can call him my right honourable friend—when he talks about the red flag approach. We have heard evidence, summed up by my hon. Friend the Member for Runnymede and Weybridge, of the disastrous effect that these scams have on ordinary working people and how people can lose their livelihoods as a result of someone who comes across as their friend and says to them, “Ignore the warning signs. Of course they are going to say that to you. Of course they are going to tell you not to do it, but it is a risk. Go on—do it.” I absolutely support, and we cannot stop, the freedom of savers to make that choice because I am fundamentally of the view that the person who knows best how to run their own life is the individual themselves, but ensuring that the safeguards are there is vital. I am heartened that the Minister is in a listening mood on this point and I hope that, as the Bill progresses, that listening mood continues. I am sure, from his comments today, that it absolutely will.
We have heard today some interesting evidence about what happens when the scams are finished. The right hon. Member for East Ham made a really good point about Mr R, who lost all that money and now has £1,000 compensation. When it comes to recovery funds and compensating people who have lost out, it is difficult. Ultimately, a lot of the time we are hearing that people are still left in absolutely dreadful positions, so I am heartened by the Minister’s approach. I look forward to hearing, as the Bill progresses and work continues, about the work that the Government will do more widely on this point, because that does not stop here with this Bill. We have all acknowledged that work to protect consumers from these scams and discussions with regulators will carry on as we continue.
I am supportive of and really heartened by the regulatory enforcement and the increased penalties, increased sentences and custodial sentences that are in place. That is absolutely right, because it is important that people cannot be seen to be allowed to get away with this, and they should not be. We need to support consumers who, at the end of the day, are relying on us getting this right.
I briefly want to touch on the point about climate change. My right hon. Friend the Member for South Northamptonshire (Andrea Leadsom), who is not in her place, made the point about ensuring that we encourage funds to invest in new green technology. Green technology is going to be a vital part of what I call the “industrial flourishment”, particularly in an area such as mine in the Black Country. I am really fortunate to have in my area groups such as the midland housing group that has been pioneering fuel cell—battery cell—technology some 23 years before it has actually been used, and it is investment in technologies such as that that will power through the economic revival as we come out of this pandemic and crisis.
I want to keep my comments relatively brief today, because we have had some fantastic, very well-thought-out contributions. Broadly, I am really happy with the cross-party support for the Bill. I definitely think that there are some probing discussions to be had as a result of the debate today, not least on scams and how we protect some of the most vulnerable consumers. In communities such as mine, particularly in areas such as Wednesbury, Tipton and Oldbury, we have some of the most vulnerable individuals who rely on some of these schemes. They are not wealthy people. They are not people who can ignore their pension pots. They are people ultimately who rely on their savings to get them through their later life, so we need to make sure that we protect my constituents in those areas, and I look forward to working with the Government particularly on that point.
Steve McCabe (Birmingham, Selly Oak) (Lab)
This is the first time that I have seen the Pensions Minister since his sad loss. I just want to say that it is very good to see him back in the Chamber.
I start with clause 123. Like others, I think that schemes that remain open to new members should be treated differently from those that are closed. It is important that this is reflected in the legislation and in the Pensions Regulator’s codes of practice. Schemes that are open to new members have different needs and I hope the Minister will consider supporting the amendment that was put forward in the other place.
If these defined benefit schemes are treated the same as closed schemes, they will simply become unaffordable. They do not have the same de-risk needs that the regulator is seeking to tackle for closed schemes. In fact, the White Paper itself acknowledged this, as it acknowledged that they would have reasonably longer-term objectives. One very good example—in fact, an almost perfect example—is the railway pension scheme, which is a shared cost arrangement, with a 60:40 split between employer and member. Huge hikes in contributions would simply make this scheme unaffordable for both employers and members and it is worth remembering that, however much we think that defined benefit schemes may be on the way out, they still account for over 20% of the UK pension sector, so it is important that we try to look after them.
There is another unintended consequence. There is a danger that, if we go down this route, we could end up with the Pensions Regulator virtually setting pension policy, rather than simply regulating it, because it would be their actions that would determine how pension policy unfolds in the year ahead. I am not against the regulator, but everyone here will know that it is a body that has in the past come in for criticism. There is a danger here that, if it were to adopt too cautious an approach, partly through a desire to protect its own interests, it may well end up acting against the interests of people who are investing in pension schemes. I do not think that the regulator is seeking to do that or that the Government are seeking to do that: it may be an unintended consequence of giving this power to the regulator to treat these schemes as if they are the same thing. It will end up directly influencing policy in relation to defined benefits schemes in a way that I do not think anybody here really wants. My point is simple: we should do everything that we can to ensure that one of the consequences of the Bill is not to dismantle and effectively force the closure of perfectly viable existing open defined benefit schemes. I hope the Minister will reflect on that.
I welcome part 4 of the Bill relating to the dashboard. I agree that the first dashboard should be a single non-commercial product, hopefully hosted by MaPS, but I also welcome a choice of platforms with the establishment of commercial dashboards, which need to be properly regulated. I am not so sure about the timescale—about whether there should be an absolute timescale before one is established and others can come along. It seems to me that that might be an issue about personal choice and demand to some extent. There does seem to be some evidence that particular age factors will influence who will use what type of dashboard. There may be other characteristics that would influence that. There is a possibility that a relatively small number of people might use a MaPS dashboard, which is a persuasive argument for at least encouraging some sort of choice and variety in the field. It is also important that the state pension is included in the dashboard. That, for me, is a given.
In terms of the green agenda, I welcome what the Bill offers, but there is a persuasive argument for saying that default pension funds should support Government net zero targets. There is about £3 trillion invested in UK pensions, and that could make a real difference in achieving low-carbon investment. The Economist Intelligence Unit estimates that climate change could wipe $43 trillion off the global economy—about 30% of the world’s manageable assets. So trustees pursuing net zero targets would inevitably be respecting their fiduciary duty to protect members’ interests if they were to go down that road. It is not about a choice between being green and their members’ interests: it is about recognising what the green challenge is and how we could use those assets to get much closer to what the Government are seeking.
Gareth Davies
The hon. Gentleman is making some very good points that I would like to add to as someone who has dealt with many of our country’s pension funds. There is a disconnect between what the pensioners and the trustees believe: they would like to see much more investment in climate change initiatives and funds, but most of our pension funds are advised by a handful of consultants who are often a blockage to investment in, for example, ESG—environmental, social and governance—funds. Does he have any thoughts as to how we unblock the consultants aspect of this?
Steve McCabe
That is a good point. I think surveys have been undertaken that show that younger people from the 25-plus age group—there is an age divide in this—are much more concerned about where their pension investments go. As with most other things, if you are putting the money in, you should have a voice in where it is directed. That seems perfectly reasonable.
Guy Opperman
Let me try to clarify the legitimate point raised by the hon. Gentleman and also the flipside in terms of the argument by my hon. Friend the Member for Grantham and Stamford (Gareth Davies). The Department for Work and Pensions has driven pension trustees forward to embrace ESG and the path of net zero, and asset managers have been lagging behind. I want to put on record the good work done by the FCA, which I accept has been criticised legitimately in the past. Only last week, Chris Woolard and his team specifically issued guidance that accelerates the asset managers to put them on a parallel path to the pension trustees so that we basically ensure that the original investor, and then the actual manager of the money, are working off the same hymn sheet.
Steve McCabe
I am grateful to the Minister and acknowledge the points that he has made. I just think that there may be permission to go a bit further in this regard, and that is the point that I want to emphasise.
I support directed advice, particularly where there is any question of a scam. I welcome a power for trustees to intervene. I am happy to support the proposal from my right hon. Friend the Member for East Ham (Stephen Timms). In my view, it might be better to give the Money and Pensions Service a role in offering limited advice rather than just the guidance so that we try to bridge the gap between guidance and advice. The fundamental difficulty seems to be that, unless people have a particularly big pot and can afford advice, they are denied it, and guidance is not sufficient to protect them or steer them in the right direction. There is an argument for something to bridge that gap, and it might be worth looking at a role for the Money and Pensions Service in doing that.
Finally, I want to go back to where I started and share my concerns that the Bill might be giving too much power to the Pensions Regulator. I was not entirely convinced by the Secretary of State’s comments at the outset. There is a legitimate fear that clause 107 has the potential to criminalise a much wider group of people than can possibly be necessary or sensible. I ask the Minister to look at that again and see if we can be absolutely certain that the net has not been cast too wide.
Harriett Baldwin (West Worcestershire) (Con)
I welcome the Bill, which is a milestone in the country’s journey to a safer, better and greener financial future, in which more people are saving for their old age. I echo the warm words spoken by the Secretary of State about the work of the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman)—the Pensions Minister—who has a true passion for improving the future not only of his constituents in Hexham but of all our constituents.
This has been an incredibly well-informed debate and I hesitate to add anything, but I do want to bring my perspective, as someone who used to work on the dark side as a pension fund manager, and to make the obvious point that there are three main things that ensure that people have a good pension in old age. The first is starting as young as possible. I was interested to hear Members arguing about starting as early as 18. I certainly think that the Government should seriously consider such a provision, if people meet the earnings criterion. The second thing that makes people’s pensions better over the long term is tax breaks and employer contributions. The earlier that people can pay in the maximum before tax that they are allowed to and get the employer matching that amount, the better off they are going to be in retirement.
The third thing that makes people better off through their pension is lower charges. This subject has not yet come up during this debate, but it is incredibly important to put on the record. The charges in this incredibly competitive industry, in which the UK leads the world, can vary dramatically. I hope that the powers in the Bill will enable our constituents to see much more clearly on their pensions dashboard what they are being charged and for what. As someone who used to work in the industry on the receiving end of the charges, there is no question but that the compounding effect can have a meaningful impact on the final outcome of people’s pensions.
Will the Minister comment in his closing statement on the charges that the National Employment Savings Trust levies on our constituents? NEST is the body that was set up because, through auto-enrolment, there will be some very small and uneconomic pots that the industry will not want to take on. I recall from my time on the Select Committee on Work and Pensions that NEST itself charges really quite vicious amounts to people who are putting their money into a NEST scheme. I seem to recall that it was something like 1.8% up front and then an ongoing annual charge of 0.3%, which sounds low, but is not actually that competitive these days. Despite that, I understand that NEST has not been able to make enough money to repay the loan that the taxpayer gave to establish it. I would be interested in an update and in the Minister’s thoughts on how we can ensure that people who are using NEST do not end up paying particularly onerous charges.
Let me turn to climate change risk. The Treasury Committee, on which I serve, is currently doing an inquiry into green finance, and it is clear that the UK has a huge opportunity to make the most of our leadership—not only on climate generally, but also as a financial centre—to be the go-to place for green finance, green investment and green bond insurance. I heartily endorse the call of my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for the UK to show the way not just by being the place where other countries come to issue green bonds, but by being the country that issues green bonds itself to invest in greening our economy.
I want to highlight something that we heard clearly in evidence this week. The former Governor of the Bank of England, Mark Carney, has repeated that the cost of climate risk is not being priced into our stock market. There is quite a significant risk that investments in some large companies that form a large part of the index in this country—we should bear in mind how much investment goes into indexed funds—are held as assets that could end up being trapped in value.
Guy Opperman
I am grateful to my hon. Friend for what she is saying, but on what Mr Mark Carney has said, she will be aware that he is a member of the Task Force on Climate-related Financial Disclosures. Under the Bill, the UK will be the first G7 country to bring that into statute. The advantage of that is that the very aspect that she has highlighted as a problem—FTSE 100 companies are not aware of what the risk is from climate change to the way in which they do business—will be tackled, as they will now be forced to disclose that on an ongoing basis to the wider market and individual consumers with pension investments. I believe that the issue raised by Carney, the Treasury Committee and others is addressed in the Bill and the consultation that accompanies it.
Harriett Baldwin
I welcome what the Minister says, and I did not want in any way to undermine the provision in the Bill and the incredible progress that it represents on our journey to a greener financial future. I welcome those steps wholeheartedly, but I wish to highlight that those risks, although disclosed, will be there. Many of our constituents, every month in their payroll, put investments into index-based funds in which those risks are inherent. It is incumbent on us all to recognise that that could be a big driver of UK returns, given that a significant portion of the index consists of carbon-based industries in the UK.
I make that point, and I make the point about charges, because the pension dashboard will play a vital role in showing people what they are paying for those returns in an environment where interest rates are virtually zero, where the index has quite a lot of climate-affected assets, where charges can be as high as those from NEST, the state-backed provider, and where investment returns could be lower for a protracted period as we recover from the pandemic. It is worth flagging the fact that giving information on charges in particular and the way in which they compound over a lifetime will be a powerful part of the very many welcome changes that we can see in this excellent piece of legislation.
Richard Thomson (Gordon) (SNP)
As my hon. Friend the Member for Airdrie and Shotts (Neil Gray) set out earlier, there is a great deal in the Bill that the SNP can welcome, including pension dashboards, allowing trustees to take cognisance of the environmental impacts of the investments under their control, legislation to help avoid the unsuitable transfer of funds and allowing the Pension Protection Fund to continue. Those are all good and welcome improvements to the regulatory and administrative landscape in which pensions operate.
When it comes to dealing with pensions—as Members have said, in many cases, that is the most significant investment that many of us make—it is crucial that we are aware of unintended consequences. As a cautionary tale, I remind Members of what happened when the ability of funds to benefit from advance corporation tax was removed. While Treasury coffers have swelled as a consequence, that sounded the death knell for many excellent final salary pension schemes. Those on the Treasury Bench may not care terribly much for that comparison, but it is the sort of cautionary tale with which we would wish to approach this to make sure we are doing our level best to avoid similar mistakes arising from past legislation and the present legislation, and it is on that note that I wish to focus my remarks.
The first issue I wish to concentrate on is one addressed by the hon. Member for Birmingham, Selly Oak (Steve McCabe) in relation to clause 123 and funding requirements for defined benefit schemes. It is obvious why we would all wish to be assured that schemes are funded to meet the liabilities they have, but if we are to insist on being able to demonstrate that too rigidly, there is a very grave risk that the resulting investment policy that needs to be enacted will become so conservative that it focuses on meeting current liabilities at the expense of delivering future benefits for members within the scheme.
Obviously, that could mean a change in investment strategy away from equities to secure but potentially lower yielding investments, such as bonds, fixed interest investments, property infrastructure and similar, rather than balancing that mix with other types of investment, which might be expected to deliver higher returns over the longer term, and that danger is very real. Paragraph 210 of the consultation the Pensions Regulator is undertaking says:
“We consider that trustees’ focus should be to ensure the security of members’ accrued benefits rather than to ensure the provision of future benefits.”
An estimated 21% of defined benefit scheme members in the UK belong to schemes that are still open to new members, and if the approach that seems to be favoured by the Pensions Regulator is followed for schemes that are open to new members, then as surely as night follows day, scheme investments will begin to ossify in favour of those preserved benefits, at the expense of the ability of these schemes to absorb new members, and that is something that will slowly be closed off to the detriment of those potential new members.
Clause 123 recognises the difference there needs to be in an investment strategy between schemes that are closed to new members and those that remain open. I do not believe that it is or should be the intention of guidance to close down such schemes to new members, but I think that is a danger this will have. Enshrining in legislation the ability of trustees to reflect the characteristics of the schemes that they manage in their investment strategies would help to avoid such an adverse and presumably unintended consequence. I encourage the Minister to ensure that such a clause or something that has similar effect is included in the final legislation.
The second point on which I wish to focus relates to something that is not addressed in the Bill at present. It relates to the treatment of multi-employer industry pension schemes, and I would like to cite the example of the Plumbing & Mechanical Services (UK) Industry Pension Scheme. I state for the record my interest as a member of the all-party group on plumbers’ pensions. For Members who are not familiar with it, this scheme is an industry-wide occupational scheme that provides defined benefits. It has over 35,000 members and has, over its life to date, had about 3,500 employers involved in the scheme. The scheme opened in 1975, and it closed to future accrual of benefits from the end of June 2019, with about 350 employers participating in it at that point in time. One of the issues here is the size of the scheme relative to the remaining employers, many of which are small businesses.
Employer debt legislation contains a number of statutory easements, which are available to many employers facing a section 75 debt under pension legislation—the Pensions Act 1995—when they close their businesses. However, those statutory easements do not cover all situations, such as where an employer has retired or has ceased trading, where the overall amount of the liability in relation to the scheme is small in comparison with the scheme’s size or where an employer has triggered a section 75 debt prior to the closure of a pension scheme to future accrual. In this particular instance, the trustee has been able to apply some existing easements allowed for in legislation, but there are a number of particularly sensitive cases where easements cannot be applied. As a result, individuals face personal bankruptcy, and companies that would otherwise be financially viable face being forced into insolvency.
I want to go into further detail about this case. The trustee currently has 72 employers to consider pursuing for payment where existing easements may not apply. Of those, 43 are incorporated and 29 are unincorporated. Of the 29 unincorporated employers, 20 have retired, and the existing statutory easements cannot apply where the employer has ceased trading. In these cases, there is no ongoing business, but because those employers were unincorporated, they have personal liability to the scheme, which means that their personal assets can be seized by the trustees and used to settle the employer’s debt to the scheme. The trustees advise that, under section 75, these 20 employers collectively have a liability to the scheme of £7 million. Even if each of those employers was made personally bankrupt, only a fraction of that £7 million is likely to be recovered.
I spoke this morning over the telephone to a member of a small local plumbing business in my constituency. He had written to me at the start of the year, and I will give the House a flavour of what he said, because his experience is sadly not untypical. He said:
“I am approaching retirement age, but retiral will trigger my section 75 debt as the law stands at the moment. My father started our employees on the… pension scheme almost forty years ago, long before it was mandatory to have a pension scheme. When I told him about this section 75 issue, my dad burst into tears and said ‘What have I done to you’. I said it was not his fault as he was only doing what he thought was a good thing for our employees by entering them into a pension scheme. Surely after almost 40 years paying into the scheme, all the payments that were due, it can’t result in me losing my house, my office building and my own personal money, which is by no means substantial, and being declared bankrupt.”
There are two methods that could be used to address that, and my party will table amendments on this in Committee. One is the introduction of a trustee discretion to allow trustees not to pursue a section 75 debt when it is below a de minimis threshold. The other is the alteration of deferred debt arrangements to permit employers in a scheme closed to future accrual to apply for a deferred debt arrangement, providing they meet other statutory tests.
That is exactly the sort of thing that I mean by unintended consequences, because I cannot believe for one moment that anyone would have deliberately set up a scheme or put in place a law of that nature with these sorts of outcome in mind. I hope that my party’s amendments in Committee will be accepted and incorporated, because the Bill provides the best opportunity that many will have to get these issues resolved and ease that burden on their minds.
On the whole, this is a good Bill, and we find much in it to support. It gives opportunities to improve the pensions and retirement savings landscape, and I hope that the Government will remain open to further suggestions on how the Bill might be improved as it progresses and heed the warnings, so that we can avoid these unintended consequences.
Aaron Bell (Newcastle-under-Lyme) (Con)
It is a pleasure to follow the hon. Member for Gordon (Richard Thomson), who made a lot of important points. It is also a pleasure and a novelty for me to speak without a time limit, but I will try not to test the House’s patience too much.
This is a very important Bill that delivers on our manifesto commitments and has consumer welfare at its heart, and I am glad that it largely enjoys cross-party support. I welcome the speeches from around the Chamber. I particularly welcome the fact that colleagues from the 2019 intake are speaking in the debate, and I see that there are another three of them yet to speak. Either we are not as young as we look, or we have taken the advice to heart that it is never too early to start planning for retirement.
As a member of the all-party parliamentary group on pension scams and someone who has a general interest in these matters, I am pleased to speak in favour of the important work that the Government have been undertaking. This important legislation will benefit members of the public and help people to plan for their future. It will have an important impact on people saving into pensions for their retirement and ensure that reckless bosses cannot gamble with people’s savings. It will transform the way that people get information about their retirement savings, and it will empower the Pensions Regulator by making it tougher and making its guidance clearer.
We have come a long way on pensions in the last decade, and particularly on automatic enrolment, which most colleagues welcome, but in some ways, we are still in the 20th century. Some pension schemes still provide once-a-year statements. That might well reflect the view that pensions are a long-term investment, and we do not want people to panic as their value goes up and down week by week, but when those statements are frequently being sent to old addresses, it is a problem. People have an average of 11 jobs throughout their career, and with automatic enrolment, they are now likely to have nearly as many pension pots. We really need to bring this into the digital age. At present, these information failures make it harder for individuals to get a holistic view of the pensions they are building up, even if they have the help of a financial adviser. Control over our pension provision, which is often our largest financial asset, is hugely important, and the pension dashboards will be a huge step forward for consumers.
Just to pick up on something my hon. Friend the Member for West Worcestershire (Harriett Baldwin) said, making charges more visible to everybody would be a huge benefit, because sunlight is often the best disinfectant. It will drive out schemes that are not competitive and push people into better-value schemes. Also, the recent reforms we have made mean that individuals can choose to bear more responsibility for risk and decision making, so it is right that they should have access to the information they need to make those informed choices. That will let them plan better for retirement and enable them to have good financial wellbeing as they get older.
I have heard the concerns from the hon. Member for Airdrie and Shotts (Neil Gray) and others about the dashboards, but I would say to him that I think regulation and legislation in all fields must go where the consumer is. A paragraph from the Which? report of February 2018 on dashboards states:
“It is clear that even if the government was to decide that there should only be a single government-run dashboard, other private sector dashboards would continue to develop outside of the regulated market. These may rely on screen-scraping or other potentially unsecure forms of transmitting customer data. They would even be able to screen-scrape data from the official government-run dashboard. If there were any problems with private sector dashboards then the consumer would have no easy method of obtaining redress, as they would remain outside regulation and outside the remit of the Financial Ombudsman Service”.
I cannot really put it better than that. Private sector dashboards are inevitable. Indeed, there are commercial products out there are already, looking at consolidation and so on. Drawing on my own experience in FinTech, these private sector solutions are likely to be more innovative and more responsive to consumer needs than the Government-driven solution.
Neil Gray
I take what the hon. Gentleman says, and I do not disagree. I understand that commercial dashboards are coming; that is not where the dispute is. What I and others across the House are looking for is for the Government to invest in and have a period to allow the Money and Pensions Service dashboard to bed in as the default position for consumers to go to, where they know they can get trusted impartial information about their pensions, and then to allow the commercial dashboards to go from there. That is the very reasonable position that the Lords took, and I think that we should agree to it in Committee. I ask the hon. Member to reflect on that.
Aaron Bell
I thank the hon. Gentleman for that intervention, and I ask the Minister to comment on that in his summing up, but I reiterate that we have to go where the consumer is. I understand the point he is making. We need clear supervision and a robust regulatory framework, as provided for in the Bill, and we need a non-commercial service, but we have to be realistic: people are going to go to these services first, and they are already springing up. We cannot be constantly trying to catch up. In this regard, I note the earlier intervention from my hon. Friend the Member for North West Cambridgeshire (Mr Vara), who is not in his place at the moment. These dashboards will encourage consolidation, and that may or may not be a good thing in specific cases, so we must continue to ensure that consumers have access to appropriate advice and that any administration fees are reasonable when consolidation takes place.
Turning to scams, in recent years there has been a significant increase in the number of members of the public being scammed out of their pensions. The FCA and the Pensions Regulator report that in 2018, 180 people reported to Action Fraud that they had been victims, losing on average £82,000 each. A total of nearly £31 million has been reportedly lost to pension scammers since 2017, according to complaints filed with Action Fraud. I therefore welcome the measures in clause 125.
To personalise the scams issue for a moment, a couple of my Newcastle-under-Lyme constituents contacted me about their experience in this area earlier this year. They have had to make very unwelcome changes to their retirement plans as a result. They, together with thousands of others, were convinced by commission-driven sales people to move their money into a scheme called Dolphin Trust, which is now called the German Property Group. The Minister might be aware of the scheme. It was set up to buy derelict listed German buildings in prime locations and redevelop them. In many cases, pension holders who invested were told, by unregulated salesmen who were paid up to 20% commission, that they would almost double their money if they left their savings in the scheme for five years. The scheme was often recommended by independent financial advisers, who advised their clients to invest via a self-invested personal pension.
As the House can imagine, the results were not as advertised. I thank the Treasury for its help with this case so far, but I would welcome further engagement with the Minister when that is possible. My understanding is that this specific case is currently with the Financial Services Compensation Scheme. That is the real human impact of retirement scams on people in my constituency, and I am sure in the constituencies of Members all around the House. I understand that the Government have already taken measures against so-called introducers, but I welcome the measures in clause 125 to strengthen consumer protection. As the Secretary of State put it in her opening speech, we need to have the option of
“prison for pension pot pinchers”.
I want briefly to touch on another couple of the elements of the Bill. I know that postmen and women, in particular, in Newcastle-under-Lyme will welcome the provisions enabling the introduction of collective defined contribution schemes. These have cross-party and industry support, and unions including the Communication Workers Union, as well as Master Trust and other pension providers, have expressed a desire to see more people benefiting from the advantages and risk-sharing that collective defined contribution schemes can bring. I think that that is broadly welcomed across the House. I will also mention the good work being done so that we use our pensions for the good of the planet, and the requirement that the Bill puts on trustees and managers, with a view to securing effective governance over the effects of climate change, and publishing information. That is not being prescriptive; it is about informing and empowering schemes and individuals to make decisions.
In conclusion, I pay tribute to the Minister for his passion for this subject and his willingness to engage with us. I also echo the remarks of the hon. Member for Birmingham, Selly Oak (Steve McCabe) about the Minister’s personal tragedy earlier this year. The sympathy of the whole House is with him.
Rob Roberts (Delyn) (Con)
As a financial planner for many years, I confirm that for a large majority of the UK population the topic of pensions is something to be avoided and put off to a later date. Looking at the sparseness of today’s call sheet and at the Benches around me, that seems also to be the case for many right hon. and hon. Members. Many UK pensions involve complicated borrowing and are hard to understand, and we cannot all be pension geeks like me and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds).
In April 2006 we went through pension simplification—a misnomer if ever there was one. That was about the time that I was becoming involved in pensions, and if what came out of pension simplification is simple, I would have hated to have worked with what came before. This does not need to be complicated. Pensions are the simplest of things—they are an investment with a tax-efficient wrapper around them. People save for their retirement, with tax benefits as an incentive to do so. It is no more complicated than that.
Other industries have adapted and evolved to suit new technologies as they come up. The banking industry is a great example of that, and it has embraced new technological advances such as online banking. More than 76% of people in the UK now use online banking regularly, compared with just a third of people back in 2007. Just as the banking industry developed to meet the needs of modern society, it is now time for the pension sector to do the same and move into the 21st century, and the Bill seems to be the first step in doing just that.
A recent YouGov survey found that three in five workers have no idea how much they have saved in their pension, and more than a quarter of working age people with a pension say that they never check what is in it. Given the United Kingdom’s increasingly ageing population, it is more important than ever that individuals plan for the future and protect their savings, but currently, there are barriers to doing that.
As I have said in other debates in the House, my main reason for being involved with the Conservative and Unionist party is one of empowerment, and of enabling people to take control of their lives, make better decisions, and shape their own futures. Once again, I am proud to be a member of the party that empowers people to have the freedom and knowledge to make informed choices about their life, and form the retirement that they want and deserve.
The Bill enables people to make better decisions about their pension by giving them access to their pension savings in one place. Like other hon. Members, I support the idea of the pensions dashboard, which will make it much easier for people to see information about their pensions online. By having all their savings in one place, people will be more likely to keep track of them and engage with their pension pot, allowing individuals to understand their pension savings and make better choices along the way.
I remain cautious, however, because a little information can be a bad thing, and I worry a little about individuals who would benefit from professional advice trying to take complex decisions on their own, rather than seeking a properly qualified financial planner. As my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) said, on average people have 11 jobs in their lifetime, and under the current auto-enrolment regime, they may have a different pension pot each time. It is therefore hard for people to monitor and keep up to date with their pension savings, to say nothing of the millions of people who have lost track of pensions from jobs they had decades ago.
The Minister and I have had many conversations about pension tracing, and I remain hopeful that because pensions have always been logged by a national insurance number, there is potential within the new dashboard system for a way to proactively inform individuals about pensions that they might have and not be aware of, without them needing to know the details of a job that might have been some significant time ago. According to the Association of British Insurers, 20% of adults admit to having lost a pension pot. The actual figure will be much higher, because some people will not even realise that it has happened. Research suggests that there is almost £20 billion in forgotten pensions; recovering that would be a massive boost for pensioners in these difficult times.
Mr L, for example, visited my office a couple of years ago wanting to access his £50,000 pension to clear the remaining balance of his mortgage and give him a little comfort. After a bit of investigation, we uncovered that he actually had £260,000, and we made a new plan not only to clear the mortgage but for him to retire seven years earlier than planned. That can be a transformative process to go through.
If we want to encourage people to engage with their pensions and their retirement plans, their pensions data needs to be readily available and we need to give them the right to choose how they engage with it, whether that is online, through an app on their phone, through the Money and Pensions Service or, indeed, via their own provider. The right to choose has already been extended to other areas of people’s financial lives. With the creation of a pensions dashboard, that right will finally be extended to pensions, and people will have the freedom to make their own decisions about their future.
I look forward to hearing the Minister’s plans for ensuring that data on multiple pensions cannot be viewed by competitor providers and that people’s personal information remains protected from predatory sales practices. I have some sympathy with the points made by the hon. Member for Airdrie and Shotts (Neil Gray) and others that the MaPS platform should be primary, but I recognise, as my hon. Friend the Member for Newcastle-under-Lyme just mentioned, that innovation often lies in the hands of private firms, normally to the benefit of the consumer.
Moving on from dashboards, the existing pension frameworks—defined-benefit and defined-contribution schemes—can create significant risk and cost for employers on one hand, and do not provide the most predictable retirement income for scheme members on the other. In addition to the dashboard, individuals in some circumstances will be provided with greater freedom of choice through the introduction of collective defined-contribution schemes, which are a better, more affordable and more reliable alternative for both scheme members and employers.
Under those schemes, savers in a company can pool their money collectively in a single fund that pays an annual pension income. By addressing the binary nature of UK pension legislation, the Bill will give individuals greater opportunities to invest in a variety of schemes that benefit them and their needs. As risk is shouldered collectively across the membership rather than by individual members, collective defined-contribution schemes will lead to greater stability and security. That is just another measure that shows that the Government are listening and working with the needs and views of both the industry and our constituents.
Let me touch briefly on charges and costs, which others have mentioned, and sound a note of caution that I hope my hon. Friend the Minister will heed. For many years, there has been a huge focus on costs and charges in pensions, and I worry that it is sometimes skewed the wrong way. I have seen a number of clients over the years who have transferred pension funds into options with much lower charging structures, only to see significantly lower growth. Something with a 1% charge that delivers a 5% return is a much better option than something that has a 0.2% charge but returns only 3%.
I am pleased that the Bill will strengthen the powers of the Pensions Regulator so that members of pension schemes have increased protection for their savings. That gives a fresh set of dentures to a regulator that previously may have lacked a little bite, and it is a welcome reform. Although TPR performs an incredibly important role in protecting workplace pensions and building people’s confidence in retirement saving, there has been a significant change in the industry since its creation in 2005, and it is time that it had some more authority, so I am glad that the Bill will update its role and powers so that it is fit to meet the needs of pensions in the 21st century.
The regulator will have greater powers to deter reckless behaviour, such as extended information-gathering powers, and new civil and criminal sanctions will be introduced. If we are to encourage people to save in their pensions for their future, it is right that they should feel confident that their savings will be protected by a robust regulatory structure. The measures in the Bill will build important trust in pension schemes and put consumer interests first.
Ultimately, the Bill showcases the heart of the Conservative and Unionist Government’s values: empowerment, freedom and choice. It will give people the freedom to make informed decisions about their future, the ability to choose where to save their pension and the confidence to make the right decision about their future and retirement, knowing that it will be protected, and I am pleased to support it.
In closing, may I also take a moment to say on my behalf—and I am sure, on behalf of hon. and right hon. Members from all parts of the House—how pleased we all are to see my hon. Friend the Minister at the Dispatch Box after his recent tragic loss? I know the whole House was devastated to hear his news, and we hope that he and his partner are doing well. Others have paid tribute to his passion and assiduity in preparing the Bill, and I add my voice to their praise.
Duncan Baker (North Norfolk) (Con)
It is an honour to follow the self-confessed pension geek and guru that is my hon. Friend the Member for Delyn (Rob Roberts). I hope that when I come to draw my pension, it is revealed, as in the story of his constituent, that it is actually five times greater than I ever expected it to be. I am sure it was all down to the wonderful advice that was given.
Rob Roberts
Past performance is no indication of future guaranteed performance. The small print says so quite clearly.
Duncan Baker
If I wrote a headline for this Bill, it would be something along the lines of, “If you want to save the planet, start a pension.” That would chime very well with my hon. Friend the Member for West Worcestershire (Harriett Baldwin), who is encouraging young people to start a pension, as I am myself, but in a roundabout way, this Bill does just that. While the thought of pensions may give rise to a tendency for many to glaze over and think about things another day, this piece of legislation is a welcome move. That is proven by the wide base of support. As the Minister has been roundly thanked, I will applaud him and add my thanks, because this is a really great piece of legislation.
While I cannot profess to having the same level of knowledge as some Members in the Chamber today, I was in a former life a finance director, and I recall feeling some dread when auto-enrolment first arrived. I remember bemoaning the scheme, which at the time was more expensive to administer than the meaningful contributions that an employee would pay in when the rates were so low. How those cynics were wrong, including me, because its success speaks for itself. We now have more than 10 million workers in an auto-enrolment scheme in this country. People did not opt out when the contributions increased. Nearly 90% of eligible employees participate in a workplace pension now.
With an ageing population, the need to save for one’s retirement is in anyone’s view vitally necessary, much like many of the constituent parts of the Bill. Auto-enrolment has created inertia to save. It trusts people to think about their retirement, but the next stage is to bring back control—this is why the Bill is so good and important—so that people know what they have and where it is. As the old saying goes, “If you cannot measure it, you cannot manage it”, and for that reason I wholeheartedly welcome the implementation of the pension dashboard in the Bill.
It is a common fact—we have heard it many times today—that people lose control of their pension pots. People move jobs many times throughout their career. We have heard it is about 11 times on average, and there is some £20 billion in pension pots that people no longer necessarily know the location of. The dashboard is a progressive and necessary step in continually improving our pension system and empowering people to know what they have and where it is, not to mention beneficial for pension companies and contributors given that we are always told how small pots are not the most beneficial or economically efficient. What is more, the Bill gives clarity, transparency and support to help make people make informed decisions.
I welcome clause 125. We have heard time and again of the dreadful and immoral scams to which people have sadly fallen victim. For many, pension savings are their largest financial asset. If someone falls victim to a scam, their loss can be just shy of £100,000. Adequate restrictions to protect consumers with a layer of due diligence and a red flag are a sensible brake, which will help to avoid such repercussions.
I welcome the introduction of collective defined-contribution schemes. CDCs create a collective pot from which everyone who owns and shares the fund can benefit, and we are already hearing welcoming noises about that. The Bill provides legislation and the regulatory framework for new collective money purchase schemes and, as such, it helps to widen the desire for alternative collective arrangements.
But back to saving the planet. Clause 124 represents a hugely significant step, and it is in tune with the speech that the Prime Minister gave yesterday. Climate change continues, quite rightly, to take centre stage in so much of our legislative agenda. This is the first pensions Bill ever to mention climate change. Pension trustees must now consider climate change as financially material to members’ investments. Under the regulations of the taskforce on climate-related financial disclosures, schemes must consider the response to climate change as both a risk and an opportunity in their governance risk management strategy, and they must publish that information.
When we think of the billions upon billions invested in pension funds, we can see that allowing pension schemes and the market to embrace the green agenda will enable people to put their own savings into helping us to achieve net zero. Perhaps for the first time ever—even if we never quite thought we would say this—saving for our retirement can now be seen as saving the planet as well.
Mr Richard Holden (North West Durham) (Con)
I will not be speaking for as long as I did yesterday in the Adjournment debate. I will just say a few words about the Minister, who is a great neighbour. He is the sort of neighbour that an MP would want to have next door, and he is always incredibly helpful and friendly. I echo the words of some of my hon. Friends about the tragedy that he and his wife, who are both personal friends of mine, have suffered. I wish them all the very best for the future. I add my name to the tributes that the Secretary of State paid to him in his role as Pensions Minister. He has been superb in government for many years. Whether he will continue in that role or be elevated—I hope he will be—who knows? He has certainly been great in his job.
I pay tribute to some of my hon. Friends from the 2019 intake who have made contributions. My hon. Friends the Members for Grantham and Stamford (Gareth Davies), for Newcastle-under-Lyme (Aaron Bell) and for Delyn (Rob Roberts) have a huge amount of personal experience in this area, and it is great to see that expertise being brought to the Floor of the House.
For many people, the two major contributions that Parliament and the Conservative Government have made to their lives will probably be the long-term positives of the last 10 years of auto-enrolment and the raising of the threshold at which people start to pay income tax. Those are probably the two largest financial measures of which they will feel the effects over a long period of their lives. The Bill builds on a lot of that great work.
The CDC scheme in part 1 is a welcome measure. I am glad that it has union support, and I know that Royal Mail workers in my constituency are looking forward to benefiting from it. On strengthening the powers of the regulator, from my conversations during the last few months with Members on both sides of the House about pensions issues that have affected their constituents over many years, it is clear that any such strengthening will be welcomed. I am glad to see that in part 3 of the Bill.
On part 5 of the Bill, we can all welcome the extra choice and empowerment delivered to our constituents by the introduction of the green initiatives that other hon. Members have mentioned.
I know that part 4 and the dashboard have been the subject of much debate today. I have had 11 jobs in the past five years, never mind a lifetime, so I very much welcome the proposal. However, I hope that the voters of Durham North West will change the habit of a lifetime and keep me in place for many years to come.
An aspect of auto-enrolment is that people go into it when they are aged 22 or earning over £10,000 a year. Many of my constituents start work at 18 and it would be good to see their circumstances considered if not necessarily by this Bill but in future, so that young people contribute as soon as they enter work. I started work at 16 and can only imagine the extra pension pot that I would have—maybe even as large as the one that my hon. Friend the Member for Delyn mentioned—if I had contributed from an even earlier age. When people start contributing early, those contributions have the greatest cumulative effect. I hope that, when the Government think of people in constituencies like mine who go straight into work at the age of 18, they will consider introducing measures that make saving from the earliest point possible even easier.
The Bill is forward thinking and builds on a lot of the good work done by Members in all parts of the House over the past few years. It strengthens protections for people and provides clarity, particularly in the proposal for a dashboard. As someone with many pension pots that I have now managed to amalgamate, I quite understand that this is an important step in the right direction for those who change jobs frequently or who are in different sorts of temporary work. I welcome the Bill.
Wendy Chamberlain (North East Fife) (LD)
First, I express my thanks to Members of the other place for introducing the Bill and for their work in bringing it to its current form. Clearly, much expertise and scrutiny have been brought to bear.
Secondly, I want to acknowledge that life expectancy is increasing and that that is good news. It also brings challenges and that is a good problem to have. Older people may now need a pension income that will last for 20, 30 or even 40 years and we should welcome that. As I said in the debate last week on the Social Security (Up-rating of Benefits) Bill, the triple-lock guarantee for pensions has never been more important. It is clear that many working-age people, and especially younger people, are not saving, and are simply unable to save enough, for their retirement. Final salary pension schemes, such as defined-benefit schemes, are increasingly closing to new entrants. This will mean that the state pension will become an increasingly important source of retirement income in the future. That makes this Bill and its consideration of how best to manage workplace pension schemes even more vital. As a result of the work in the other place, there is much to welcome.
I have had a number of jobs over my time in employment. I cannot beat 11 in five years but, at the last count, I am currently a member of four different pension schemes—both private and public sector and both defined-benefit and defined-contribution schemes. It is clear that, as work changes and more people move from employer to employer, such circumstances are more likely, and I welcome the Bill’s acknowledgment of this increasing reality for many.
I will restrict my remarks to a small number of areas. Other Members have outlined the details of parts 1 and 2 and the proposal to introduce collective defined-contribution schemes and collective money purchase schemes to allow savers to take advantage of market highs and avoid the lows. It makes sense to offer a more balanced alternative to having all the risk lying with either the sponsoring employer, as in defined-benefit schemes, or with the employee, as in defined-contribution schemes. The cross-party employer and employee support outlined in the Government’s consultation reflects that and, having outlined the importance of ensuring inter-generational fairness last week, I highlight the Lords amendment to clause 27, which would provide that, whenever the pensions regulator issued a notice requiring a scheme to submit a supervisory return, it must include a requirement that the trustees assess the extent to which the scheme is operating in a manner that is fair to all its members. I seek a response from the Minister on that amendment and on the steps that the Government are taking to ensure that such fairness is there from the outset of any CDC scheme.
On part 4, like many, I welcome the creation of dashboards that will allow people not only to see their current pension provisions all in one place but even find pensions they potentially did not know that they had. That is currently estimated to be one in five people. The burden of responsibility for risk-taking lies increasingly with the individual. They have more flexibility, but they need to have as much information as possible made available to them so they can make the best possible decisions and be protected from the scams that many Members have mentioned.
The recommendation for dashboards dates back to 2016, and I am disappointed that it has taken until now to see concrete measures. Further details on timescales for dashboards would be appreciated. In addition, I am interested in hearing from the Minister about the DWP proposals to allow a pension to follow an individual from job to job. Given the increasing responsibility of individuals, that is one way to ensure that people understand their entitlements, save accordingly and, potentially, reduce their dependence on the state pension in future.
On part 5, I want to highlight, like many, clause 123 and the amendment accepted in the other place relating to the treatment of open and closed defined-benefit schemes. I understand that the Pensions Regulator is concerned that the failure and subsequent cost to fund DB schemes is becoming a risk, but a great many DB schemes are still open. For them, being forced to de-risk would mean that they would not be able to continue to afford paying out as high a pension to their members.
In other words, DB schemes would be forced to make less risky investments, such as on Government bonds, which means that they would create less of a return on their investments, but still be required to pay out the same amount. Given that Government bonds and other low-risk investments will have very low rates for the longer term, as a result of covid, the risks to such DB open schemes’ viability becomes even more stark.
Yesterday, like the hon. Member for Birmingham, Selly Oak (Steve McCabe), I met executives of the railways pension scheme. They explained that closed schemes have a fixed end point in sight. They need readily available assets to pay pensions, and they invest in lower risk assets by default. Open-to-new-member schemes are more balanced, with new members replacing older leavers. Such schemes’ needs and objectives are fundamentally different, and they do not need to sell assets. Primary legislation is needed to recognise the different characteristics, and I hope that the Minister will indicate whether that will be supported in Committee.
Finally, the Liberal Democrats welcome clause 124—it is a welcome step—and the Minister’s comments on asset managers earlier. Beyond covid, the climate emergency remains the biggest future challenge to the UK. As I said at the outset, there is much to welcome in the Bill, but I echo the comments of the SNP spokesperson, the hon. Member for Airdrie and Shotts (Neil Gray), that it does not address previous pension injustices, including the persistence of a gender pension gap and the situation experienced by previous members of the plumbers’ pension scheme—like the hon. Member for Gordon (Richard Thomson), I am a member of the APPG and have affected constituents. I hope that those situations will be looked at further in Committee.
Jack Dromey (Birmingham, Erdington) (Lab)
Those who built Britain deserve nothing less than security and dignity in retirement. Pensions is not an easy policy area. It requires, on the one hand, careful long-term planning and management of the public finances and, on the other, the role that we play in this House in laying down the statutory framework for pensions. That is why, in government, Labour sought to establish consensus.
We introduced the Pensions Commission, which charted a new direction for United Kingdom pensions policy. Chaired by Adair Turner, it gained widespread agreement to reforms that, even at the time of the establishment of the commission, had been regarded as unthinkable. The lasting legacy of that was auto-enrolment, transforming the lives of millions, with 10 million more people now saving into a workplace pension.
I now turn to the Bill, with that spirit of constructive engagement in mind, and with a number of questions arising out of today’s debate. I begin by thanking the Pensions Minister for his outstanding work in carrying forward so much of the Bill. He is highly regarded across the House, as we heard from the right hon. Member for South Northamptonshire (Andrea Leadsom) and others.
In an unprecedented period, I am grateful to the Minister that, because of his persistence and engagement with us, because of the effective cross-party working there has been and because of the determination of those who have supported important measures in the Bill, it has finally now made it to this stage. I add just one other point: it is greatly to the credit of the hon. Gentleman that, in the most difficult of circumstances, that he has forged forward. I simply say, on this side of the House, we stand in solidarity with him and his wife.
As my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) and the Minister have said, the Bill, as first introduced in the House of Lords, focused on three key areas: first, CDC schemes; secondly, the role of the Pensions Regulator; and thirdly, the pensions dashboard. Part 5 also included provisions on DB scheme funding and transfer rights. Now the Bill contains one further key area, and the hon. Member for North Norfolk (Duncan Baker) was right when he said that it is the first time that such a measure has appeared in pensions legislation. From the outset, it was our strong view that the Bill offered an opportunity to make progress on the role of pension schemes in combating climate change. Originally, there was not a single reference to climate change or to environmental concerns in the Bill. Now, there is a set of provisions in clause 124, headed “Climate change risk”, which require those managing pension funds to take climate targets into account in their overall governance and to disclose climate change risks and opportunities.
I pay tribute to the hard work of our colleagues in the House of Lords and those who supported them on a cross-party basis for putting climate commitments for pension funds into UK legislation for the first time ever. That is a tremendous achievement of which those who successfully argued for such provisions, including Baroness Sherlock, Lord McKenzie and Baroness Drake, should be proud. I thank not only those in the Lords for their level of support, but the range of organisations outwith Parliament, including ShareAction, the TUC, and commercial companies such as Aviva, for some of the necessary measures that we now see in the Bill.
I have one further point on climate change. In exchanges on the Floor of the House earlier this year, the Pensions Minister agreed that, at the appropriate stage, we should hold a climate change pensions summit. I hope today that he will reaffirm that commitment, not least because of this excellent debate and the excellent contributions from the hon. Member for Grantham and Stamford (Gareth Davies), my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) and others who said that, during this great historic challenge of climate change, we are seeing not only the immense potential of investment by pension funds, but the extent to which that will greatly benefit pension schemes. Such a summit would be very welcome indeed.
On CDC schemes, I welcome the work that has been done by the Communication Workers Union and its deputy general secretary, Terry Pullinger, and by those in Royal Mail to bring us to this point. I am talking about a ground-breaking pension scheme forging a new and exciting pathway to a better pension for around 130,000 Royal Mail employees. This represents a truly revolutionary milestone for the UK pensions landscape. We support the provisions in the Bill that finally set up a framework for that to happen. If one looks internationally, at the experience of the Dutch, for example, we are talking about pension outcomes that are over and above—that are 20% and 30% better than—the traditional falling back on DC savings pots for those who are members of the scheme. It is important to be clear that we will always defend good defined benefit schemes and the provisions in this Bill must not undermine existing schemes. I would welcome the Minister’s committing himself to that.
Turning to the role of the Pensions Regulator, we support the strengthening of the existing sanctions regime by introducing new criminal offences and higher penalties for wrongdoing. The pensions landscape has been troubled in recent years by scandals, including those involving BHS and Carillion, to name just a few. Beyond the newspaper headlines, the mismanagement of pension funds was catastrophic for the scheme members involved. It is right that those who intentionally or knowingly mishandle pension schemes, or endanger workers’ pensions, should face severe penalties. That is why we wholeheartedly support the relevant provisions in the Bill, which I have termed “the Philip Green” clauses.
Crucially, we need to go further and to ensure that, on this issue of scams, decisive action must be taken at the next stage. My right hon. Friend the Member for East Ham (Stephen Timms) and the hon. Member for Amber Valley (Nigel Mills) rightly said that more needs to be done. My hon. Friend the Member for Blaenau Gwent (Nick Smith) told a harrowing story about the terrible consequences of workers who fall victim to pension scams. I always remember the terrible story, from when the Financial Guidance and Claims Act 2018 went through the House, of the Port Talbot shift worker who burst into tears when he met the Pensions Advisory Service, because he had been seduced into transferring out of his good historic scheme into a far inferior scheme. He was in tears because he had seen all those he supervised on his shift follow his example and all lose out as a consequence.
There are sharks out there, and pensioners and future pensioners need to be protected against them, which is why I welcome the strong commitment to debate in the next stages. Crucially, we hope we will arrive at a framework such that if an innocent individual is being seduced into making the wrong decision, alarm bells ring and it does not go ahead—the red flags have been described in this debate.
The pensions dashboard is an innovation that we support. There were some interesting contributions in what was an excellent debate—for example, from the hon. Member for Grantham and Stamford on the nature of pensions in modern Britain. The dashboard is truly a step in the right direction. We have always supported the concept of allowing people to access information about their pension savings more easily. We also support the idea—mentioned in contributions by the hon. Members for Amber Valley, for West Worcestershire (Harriett Baldwin) and for Newcastle-under-Lyme (Aaron Bell)—that individual citizens should be able to access information, including through the dashboard, on costs and charges.
Where we appear to differ from the Government is in our strong view that the dashboard should be run firmly in the interests of the public. It should be publicly owned, free at the point of use and available to all. We have agreed to disagree on that—the path down which the Government are going is that there will be a public dashboard and commercial dashboards—but Labour secured amendments in the other place to guarantee a one-year head start for a publicly owned dashboard before commercial rivals are allowed to enter the market, and to prevent commercial transactions on dashboards without primary legislation. Given the scams and scandals that have blighted the pensions world, the dashboard should not become another tool by which savers can be targeted by commercial initiatives that may harm their savings. I am concerned by soundings from the Government suggesting they will go back on these positive amendments to the Bill, so I ask the Minister: will a public dashboard be first? What is the Government’s intention on ever allowing transactions on the dashboard at any point?
Let me turn to other areas of concern. There were powerful contributions from my hon. Friend the Member for Birmingham, Selly Oak and the hon. Members for Gordon (Richard Thomson) and for Airdrie and Shotts (Neil Gray) on the issue of open and closed schemes. As the Minister is aware, there are grave concerns about the impact of the Bill’s provisions on open DB schemes. Prior to my becoming a Member of Parliament, in my former role in the old Transport and General Workers Union and then Unite, I worked hard to defend good DB schemes, such as the local government pension scheme.
As I said earlier, I do not for one moment accept the premise that somehow DB schemes are history or are not worth protecting. DB schemes currently have 10.5 million members, with £1.5 trillion under management. Those assets can be invested in sustainable and long-term ways, such as in infrastructure projects and initiatives—including those with a positive approach to climate change—as well as generating the best possible return for the scheme members. They remain a crucial part of the pensions landscape, so it is a legitimate concern that the Bill does not adequately recognise the difference between DB schemes that are open to new members and those that are closed. The former includes many public sector schemes. By overlooking that distinction, the Bill risks imposing overly conservative—with a small c— measures on open DB schemes that may ultimately threaten their sustainability.
With that in mind, we supported in the other place clause 123, which is aimed at addressing the issue and protecting the 1.1 million ordinary members of schemes that are currently open to new members and the further 7.6 million people who are members of schemes still open to future accrual. The Minister has expressed some concerns over the wording of clause 123 but does not necessarily seem to agree with its intent. Is he willing to confirm that he is open to working with us, across party lines, on appropriate amendments for discussion in Committee?
Drawing my remarks to a conclusion, the Bill is welcome —of that there is no doubt—but there are issues it does not address. The continuing cause of grievance, absolutely understandably so, on the part of the Allied Steel and Wire steelworkers is a desperate one. Many worked for decades, paying 100% of their pensions only to find, many years later, that they may only receive half of what they are entitled to. That is despite the fact that their campaigning led to legal changes that protected the retirement funds of many other members of wound up schemes. They have been fighting for their full pensions for almost 20 years. Tragically, some have died before getting the retirement income that should have been theirs to begin with. The problem is a complex one; the injustice is clear. Is the Minister prepared to meet them to discuss potential solutions?
There is also the cause, which we have raised frequently in this House, of the WASPI women—the Women Against State Pension Inequality Campaign. It is unacceptable that the ’50s women continue to be victims of the injustice they have suffered. I warmly welcome the Prime Minister recognising that injustice. I hope that in the next stages the Department is prepared to engage with the women concerned on potential solutions, including exploring targeting help for those worst affected.
Ending on a similar note to my hon. Friend the Member for Stalybridge and Hyde, we want a pension system that is cost-effective and fair, and which guarantees working people dignity and security in retirement. In the excellent contributions made from across the House, I will single out auto-enrolment as an example of the importance of going further. I think it was the hon. Member for Amber Valley who spoke about that. The way I have often put it is that 8% cannot be the summit of our ambitions. Auto-enrolment is a huge and welcome step in the right direction, but we need to go further and faster if we are to fulfil the objective of security and dignity in retirement.
In Committee, the Opposition will push for measures we want to explore: widening auto-enrolment; better protection against pension scams, because of the urgency of a growing scandal; and ensuring that the dashboard is run in the public interest. We hope the Government will continue, as they have done thus far, to work with us and other Opposition parties to achieve wider and longer-term policies that will protect people’s pensions. I will end on the point I started with: there is a sacred duty on all of us here to always champion the cause of security and dignity in retirement. The people of Britain deserve nothing less.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
This is an important Bill for millions of everyday people: those who have already retired and those who are saving for retirement. The Bill makes pensions safer, better and greener. I thank colleagues from across the House for their support of the Bill. I am nervous when there is consensus in praise of a Bill. It is a bit like when the chairman of a football club indicates that they have confidence in the manager, and we all know how that goes in the normal course of events.
First, I would like to address some of the issues that are not in the Bill. State pensions are not a part of the Bill. The scope of the Bill makes provision for occupational pension schemes only. The points on the state pension are duly noted, but they are not within the scope of the Bill. On automatic enrolment, it is entirely true that the automatic enrolment review sets out our ambition to remove, in the mid-2020s, the lower earnings limit and the lower age threshold. That will happen, but in due course. On superfunds, I welcome the support in broad terms—I accept it is in broad terms—from the shadow Secretary of State, the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), and the SNP spokesman, the hon. Member for Airdrie and Shotts (Neil Gray). I accept that this is an ongoing process. There is an interim regime, which has been brought forward by the pension regulator. It is something we hope to take forward, but I accept that the Government do need to address it in due course. On pensions taxation, many points have been raised. I am sure the Chancellor is listening avidly and will address the matter in due course.
The importance of the Bill has been shown by the many different and thoughtful contributions by hon. Members. The House welcomed the fact that certain Members have been willing to identify themselves as pension geeks, not least the shadow Secretary of State and my hon. Friend the Member for Delyn (Rob Roberts). I thank all colleagues from the 2019 intake who have contributed so brilliantly, including my hon. Friend the Member for Grantham and Stamford (Gareth Davies), who explicitly made the case for green gilts. I also thank my hon. Friend the Member for North West Durham (Mr Holden), who is my new neighbour. All I can say about him as a neighbour is that he is an awful lot better than the previous occupant of his seat, and I welcome him to it.
This Bill matters, and, as was put best by the hon. Member for Blaenau Gwent (Nick Smith), it matters most to the mums and dads in Tredegar. My hon. Friend the Member for West Bromwich West (Shaun Bailey) said that we need to look at the impact of this legislation, whether it is on the people of Tredegar or Tipton. I will be resolute in ensuring—to the best of our abilities within the confines of the Bill—that scams are stopped. It is crucial that we drive forward real change through clause 125 and the regulations that follow. As I said, I have written to the Chair of the Work and Pensions Committee, the right hon. Member for East Ham (Stephen Timms), and given detailed evidence to the Committee. I am quite sure that we can continue the dialogue to flesh out what that will mean in the regulatory process. I am keen that the Bill is utilised to the best of our ability and that it sets out a road map to ensure that people are not scammed through their pensions. We will stop those callous crooks and ensure that transfers are carried out appropriately.
Nick Smith
It is great to hear the Minister speak up for the good people of Tredegar, my home town. I accept that dashboards and transparency should help in understanding schemes’ performance, fees and important matters that affect pensioners across the country, but, as the Secretary of State said in her introduction, we have 40 million-plus pensioners and there are 40,000 different schemes. Will the Pensions Minister please tell us more about how he is going to ensure that dashboards are sufficiently regulated so that there are no future problems with this initiative?
Guy Opperman
I will come to dashboards in more detail. I am happy to discuss this with the hon. Gentleman individually. The long and short of it is that we are keen that there is a detailed authorisation regime and that there are suitable restraints in place to ensure that the system is not open to abuse. This is different from the type of dashboard envisaged by some, which is a repository of all data. We are definitely not going down that route. With the data team, we are designing the dashboard to ensure that it is data accessed by the individual, not a pot that all parties can take data from. It is a detailed conversation and one that I would be delighted to take up with the hon. Gentleman, but I assure him that our objective is to ensure that there are no problems of the kind he raised.
Let me turn to green technology and climate change. I look forward to my visit to mid-Wales and to working with the Welsh Government. I agree with the point made that if one wants to change the world, investing in a pension is unquestionably the right way forward. I endorse the comments of my hon. Friend the Member for West Bromwich West and my hon. Friend the Member for Grantham and Stamford, and I am certain that the Treasury is listening to the idea of green gilts as an alternative vehicle for pension funds to invest in on an ongoing basis.
There is no doubt that, by including TCFDs in the Bill, we are continuing a narrative: this Government are driving forward work against climate change more than any other Government in the world. We are the first Government in the G7 to legislate for net zero. We are leading the way on environmental, social and corporate governance throughout the European Union, as is acknowledged by all our partners in the EU. We are the first Government to legislate to bring TCFDs into law in this country. Without a shadow of a doubt, this builds on the work that we have done, and on the promises and assurances made by my right hon. Friend the Prime Minister in his speech to the Conservative party conference yesterday.
I turn to CDCs, for which there is welcome support across the House. Royal Mail, and all the postmen and women who support all our constituencies up and down the country, are keen to see this measure. I have worked extensively with the Communication Workers Union, Royal Mail and the various organisations that have supported this policy. I do not want to be too Blairite in a spirit of cross-party unity, but there is no doubt that CDCs are the third way in pensions, and a way forward that provides an alternative to the current regime.
With the dashboards, we are trying to bring pensions into the 21st century. We are building on the work that has been done in other markets, whether energy, banking or savings, all of which have similar things with open banking, savings apps and the ability to change an energy provider. I can assure the hon. Member for Birmingham, Selly Oak that the state pension will be part of the dashboard. On the formulation of the dashboard and what it looks like, many people want to talk about the end product. I merely want to get the product up and running, but the end product will, quite clearly, have something about costs and charges, which addresses the point that the hon. Gentleman raised, as did my hon. Friend the Member for West Worcestershire (Harriett Baldwin). I can assure her that charges are under review on an ongoing basis. The dashboard will also, we hope, do much to provide simpler statements, simplifying something that has been very technical for very long time.
We heard about the issue of small pots and the difficulties in understanding those on an ongoing basis. It may have escaped the House’s attention, but the Department has an ongoing small pots review that is working cross-industry to try to assess exactly what the particular problems are. That will include, I assure the House, a consideration of “pot follows member”. Clearly, all that would require future regulation, but we are definitely looking at it as a Department.
We believe very strongly in the importance of a Government-backed, impartial dashboard, and we have committed to having the MaPS dashboard available from the start. We strongly believe, though, that multiple dashboards will help a consumer base with differing priorities. In launching a product, do we expect the customer to find it, or do we launch the product where the customer is? There are different customers who have different expectations and needs, and some already have a relationship with a provider. A variety of dashboards can help to evolve the project.
Neil Gray
I thank the Minister for giving way. I want to say at the outset how pleased I am to see him in his place. He should rest assured that the thoughts of my family are very much with his. Likewise, I take a moment to ask the House to remember that my hon. Friend the Member for East Dunbartonshire (Amy Callaghan) would have been here, were it not for her health issues, as the SNP pensions spokesperson.
I think it is clear that Members on both sides of the House, even those on the Government Benches, are not far apart on the issue of the dashboard. Between now and the Committee stage, would the Minister be willing to discuss his intentions with me and with Labour Front Benchers and the Liberal Democrats to see what compromise could be sought in all our interests going forward? This is a really important issue for us. I know the Minister to be someone who seeks consensus where possible, and I hope he would like to do so again in this case.
Guy Opperman
I have already engaged in extensive discussions, but I would be delighted to continue to do so both in and out of Committee. I think it is very clear that the Secretary of State and I have gone to great efforts to try to take the House with us in that dialogue and debate, and I can assure the hon. Gentleman that that will continue.
Let me move on to address the powers of the Pensions Regulator. I think it is right for me to put on record that TPR has done a good job during Covid, and, as an organisation, it is definitely improving. I accept that there have been criticisms, but it has unquestionably progressed under the supervision of its current chairman. I agree with my hon. Friend the Member for Delyn that these regulatory powers provide a fresh set of dentures for TPR to ensure that its bite is a little more substantial than its previous bark. That is a fair point well made. This builds on work that has already been done.
Several colleagues have raised the issue of open DB pension schemes. The Government continue to engage with the schemes and the Pensions Regulator, and we want to understand the concerns. I met stakeholders last Friday, and I have discussed this with Opposition Members. The measures in the Bill are designed to deliver clearer funding standards while upholding the flexibility of the scheme funding regime. There is an ongoing consultation, issued by the regulator, which looks at a potential bespoke regime. I have already discussed with the individual schemes whether the consultation is the right way forward, but I am happy to continue that dialogue, as I am on other issues.
I thank many colleagues for their kind words and support for my wife and I following the death of our twin boys. It is genuinely appreciated. This House is a special place when we are presented with adversity. It brings us together, and I think it humanises us that, while we disagree politically, we share the same problems. I echo the comments made by the hon. Member for Airdrie and Shotts and wish the hon. Member for East Dunbartonshire (Amy Callaghan) well.
We are pushing ahead with an innovative and ambitious pensions agenda that is reforming retirement. It delivers on commitments made in a manifesto backed by the people of this country in December 2019. It makes our constituents’ pensions safer, better and greener—safer by cracking down on scams and unscrupulous bosses, better by utilising new technology to develop and create a dashboard, and greener by ensuring that we get to net zero through ethical and sustainable pension investment. I look forward to further discussion, and I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Pension Schemes Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Pension Schemes Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 5 November 2020.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Michael Tomlinson.)
Question agreed to.
Pension Schemes Bill [Lords] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Pension Schemes Bill [Lords], it is expedient to authorise:
(1) the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided; and
(2) the payment of sums into the Consolidated Fund.—(Michael Tomlinson.)
Question agreed to.