Afghanistan

Baroness Altmann Excerpts

Wednesday 18th August 2021 Lords Chamber

[Baroness Altmann (Con) [V]]

My Lords, of course the UK could not stand alone once US troops pulled out. However, the chaotic withdrawal means that there is no prospect of holding the Taliban back. I fear that this hasty US withdrawal has far more serious implications for the West than the Vietnam exit, which was not a real threat to Britain or the US itself. This is an unmitigated disaster and proves that global Britain needs to partner with like-minded countries such as our European neighbours.

US citizens were understandably tired of foreign interventions, but this catastrophic situation exposes the dangers of applying short-term populist thinking to important long-term commitments. Today’s leadership may have dangerously taken for granted the success of the West’s presence in controlling Afghan extremists’ terrorist atrocities. Can my noble friend say what assessment has been made of the implications for anti-terrorism protections in the UK and what measures are planned to counter rising narcotic dangers on our streets? The Taliban and other authoritarian regimes will no longer fear US military might or western sanctions, so domestic risks have risen inexorably. As so many noble Lords said, authoritarian regimes such as China and Russia will offer support to Afghanistan’s Government without concerns for the fate of ordinary Afghans. This means that our precious values and way of life are more fragile today than just a week ago.

I too pay tribute to the bravery and dedication of our troops, local staff and aid workers and to those Afghans who helped us. In the name of humanity we must live up to our moral debt, as the most reverend Primate stated, to all those at risk in a Taliban Sharia state: Christians, other religious minorities, journalists and BBC staff there, as well as so many brave women now at risk, including those female judges who risked their lives to uphold our vision of the law, not the Taliban’s version that is now to be imposed. What is the Government’s estimate of the numbers of people involved here?

In closing, I urge greater appreciation of our western freedoms, which are often taken for granted: freedom of religion, equality, women’s rights, respect for diversity. Most of us assume these values will always be there for us. But we are not the global norm. Having worked so hard to build and maintain these values, it saddens me that so many in our country have criticised our past. It is tragic that today’s western leaders, after encouraging other countries to adopt and aspire to our freedoms, have abandoned them too rapidly. Short-term populist thinking has meant that the US lost patience before the Afghan people were ready to live with our values. We are honour bound to help as many as we can.

Ecocide

Baroness Altmann Excerpts

Wednesday 21st July 2021 Lords Chamber

[Baroness Bloomfield of Hinton Waldrist (Con)]

I am not sure that I can go any further than my noble friend Lord Callanan did yesterday, but I take the noble Baroness’s points on board and will make sure that they are relayed to BEIS.

[Baroness Altmann (Con)]

My Lords, I congratulate the Government on all the excellent work they are doing in preparation for COP 29 and in the Environment Bill. Will my noble friend tell the House what the Government are doing to increase funding for nature-based solutions to address climate impact, especially as I understand investing in nature could provide at least one-third of the cost-effective climate mitigation solutions?

[Baroness Bloomfield of Hinton Waldrist (Con)]

My noble friend is entirely right: investing in nature-based solutions for adaptation will also help build resilience, support jobs, support livelihoods and help tackle biodiversity loss, but finance is lacking. Only 3% of global public climate finance flows was spent on nature. Noble Lords will recall that at the One Planet Summit in January 2021 the UK committed to spend at least £3 billion of our international climate finance on climate change solutions that protect and restore nature and biodiversity over the next five years.

United Kingdom–European Union Parliamentary Partnership Assembly

Baroness Altmann Excerpts

Monday 12th July 2021 Lords Chamber

[Earl Howe (Con)]

My Lords, yes, indeed, and that is why there is explicit provision in the trade and co-operation agreement for the setting up of a PPA. We were and remain enthusiastic for the kind of dialogue that the noble Lord is so keen on.

[Baroness Altmann (Con)]

My Lords, I am delighted to hear that my noble friend is keen to set up this body, and I understand that the EU Parliament itself is ready. Surely, it is very important that this Parliament get on with building mutually beneficial relationships in order to discuss important programmes such as Horizon, Euratom and others, and issues that are relevant to both EU and UK citizens. Does he agree that important ideas can be killed off by inaction?

[Earl Howe (Con)]

I agree with my noble friend’s last remark, but I can assure her that there is no inaction in this instance. I understand that a letter addressed jointly to the Speaker of the House of Commons and the Lord Speaker was received last month from the President of the European Parliament, David Maria Sassoli, confirming the recent decision of the Conference of Presidents to establish the standing inter-parliamentary delegation of the European Parliament, so the process is moving forwards at the European end as well.

Financial Services Bill

Baroness Altmann Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

FiSMA 2000 does not protect consumers adequately. The FCA is always playing catch-up. Malfeasance continues to grow and to take new forms. Redress is patchy, time-consuming and stressful. A duty of care would address these problems. That is what the FCA consumer panel recommended in its submission to the Treasury’s FSFRF review last month. A duty of care would provide a strong and clear incentive for real, lasting cultural change in our financial services industry. I hope that the Minister will be able to accept our amendment or commit to bringing an equivalent to us at Third Reading. If not, I hope that the noble Lord, Lord Stevenson, will press this amendment to a vote.

[Baroness Altmann (Con) [V]]

My Lords, I am pleased to speak to this amendment. I have worked in this industry for many years. The numerous scams, frauds and scandals that have plagued consumers are ongoing. It seems clear, as the noble Lord, Lord Sharkey, said, that the Financial Services and Markets Acts 2000 does not protect consumers. I thank the noble Lord, Lord Stevenson, for his clear explanation of why the amendment, in all its parts, is required.

A duty of care on providers to make sure that they are considering the interests of their customers would certainly help to address the asymmetry of information between the providers and the consumers. It might also assist customers in the manner that the products that are developed are offered. Too often, providers develop new products with new complexities that are clearly not user-friendly. The FCA requirements are that the risks and details of the products must be disclosed, but the disclosure documents are impenetrable to the ordinary person. Those working at the FCA and those working for the providers understand the language used—it is natural to them—but the vast majority of the public do not understand the specific product literature which the FCA has been relying on to offer this kind of protection. It is clearly not helping consumers to be faced with bamboozling jargon and many pages of legalese in the product descriptions and the terms and conditions.

The FCA consulted on this in 2017 and it released a statement in 2019, and other consultations have covered this as well. I congratulate the Government for having engaged on this issue, and my noble friends Lord True, Lady Penn and Lord Howe; I know they have all worked on this issue. But, from a practical perspective, and as someone who has worked in this industry, developed product for consumers and worked with consumers on the other side who have suffered detriment, I believe that the fears about competition are somewhat overdone. All firms, if they have a duty of care, will then have to look after customers, so the issue of competition should not really pose so much of an impediment. Markets currently function in the interests of providers rather than consumers, and regulators are reactive to problems rather than trying to pre-empt problems that have been highlighted and pointed out for two or three years before anything is actually done—by which time so many consumers have lost out.

Of course I believe that firms should not profit from exploiting the public’s lack of understanding and education when it comes to retail financial services. Successive Governments have talked about improving financial literacy, but they have not managed to achieve this. In practice, providers do not know their customers, the customers do not understand the product literature and, indeed, it seems that there is very often no requirement for the provider to even ask basic questions of the consumer before the consumer buys a particular product. There are countless examples of areas where just a basic question could have prevented a consumer buying an inappropriate product.

So I urge my noble friend on the Front Bench to take up the offer of the noble Lord, Lord Stevenson, and work with him and other interested Peers to come up with a form of words for Third Reading that can prevent a vote on this issue and can also help accelerate the important duty of care that is required. Waiting for a consultation later this year is simply not good enough when it comes to the kinds of scandals and scams that we know are going on day in and day out.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Altmann, and her powerful plea, which I hope the Government will listen to. I also speak to Amendment 1 in the names of the noble Lords, Lord Stevenson of Balmacara, Lord Sharkey and Lord Eatwell, to which I was pleased to attach my name, as I did to a very similar amendment in Committee.

Any noble Lords who have read the Second Reading debate will note that I majored on a “duty of care” in my speech. I used what you might call an expanded definition of “duty of care” to suggest that it might not be too much to put on the face of the Bill a demand that the financial sector should not engage in reckless, fraudulent, corrupt, obviously damaging systemic behaviour, including shipping off tranches of cash into tax havens, deploying complex financial instruments that they clearly do not understand and handing over control of markets to automated systems without adequate controls—things that threaten the security of all of us. But while I believe that principle remains sound, the lawyers convinced me that, in narrow legal terms, “duty of care” could not be stretched that far.

What the amendment here clearly introduces is a duty of care to individual customers. As proposed new subsection (2)(ea) says, their

“vulnerability, behavioural biases or constrained choices”

should not be exploited. Once, perhaps, such a clause was not necessary. There was a not ideal, but certainly useful, constraining paternalism: your local bank manager would look after you, both in limiting borrowing and in making allowances for unexpected disasters, personal and business. That has long gone—as of course has, almost universally, the local bank manager and, all too often, the local bank branch—so we need the law to step in to protect people to constrain the behaviour of financial institutions. As noble Lord, Lord Sharkey, said, we are in a situation where malfeasance has just continued to grow, with technical developments being one cause of that and, as noble Baroness, Lady Altmann, said, scandals and fraud have plagued consumers.

So that is the institutional side of where we are, but we also have to think about the state that people and our society are in today and make the law fit for our modern times, for these are times of massive insecurity. The idea of saving, or of even making the incoming funds match the essential outgoings each month, was an impossible dream for millions of people even before the arrival of the SARS-CoV-2 virus.

No one can know when sudden illness might strike—this Bill has been championed by Macmillan Cancer Support, to whose work I give credit—or it could be a redundancy or a pandemic that strikes people unexpectedly. That is one side of vulnerability and care that financial institutions should acknowledge. As Macmillan highlights, almost one in three of those severely financially impacted by their cancer diagnosis had to take out a loan or credit card debt. That is a public health issue. What we have are institutions that have been making profit from customers, sometimes for decades, and they have a duty to act compassionately and fairly in such circumstances.

But I think we also need to pay a bit of attention to the elements of the proposed new clause referring to “behavioural biases” and “constrained choices”. The noble Lord, Lord Holmes of Richmond, has been a rather isolated champion in this Bill on issues around the use of artificial intelligence algorithms and issues such as their potential bias, but he has also highlighted the way in which financial companies now have a historically uniquely detailed understanding of customer behaviour and the chance to exploit that through complex, opaque mechanisms.

As the noble Lord, Lord Stevenson of Balmacara, said in introducing an amendment, there has always been asymmetrical access to information between financial sector companies and their clients, but this has been massively magnified by technology—something that is only likely to grow. To create an assumption that this inequality of arms should not be misused should, we hope, constrain the behaviour of the financial sector—or at least, if it does not do that, provide a potential route for redress should it occur. There are already many who have need to seek redress for the behaviour of financial sector companies. I spent time with some of them this morning at a meeting of the Transparency Task Force.

As noble Lord, Lord Stevenson, said, the Government are likely now to say “Wait”—but why? We know that there is already an existing massive problem and a huge risk. If the Government do not acknowledge the need to act now, I offer the Green group’s strong support for the intention of the noble Lord, Lord Stevenson, to test the view of the House.

--- Later in debate ---

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

We appear to have lost contact with the noble Lord, Lord Holmes. Perhaps we should move on to the next contributor, the noble Baroness, Lady Altmann.

[Baroness Altmann (Con) [V]]

My Lords, I have added my name to Amendment 3, moved so excellently by the noble Lord, Lord Oates. I congratulate him on his work on the issues relevant to this group of amendments.

I also commend my noble friend the Minister and his department for listening to the concerns expressed in Committee and for laying his own amendments to the Bill, which previously made no mention of climate change at all. I believe that the Government are committed to making a real difference on climate change and environmental issues, and have recognised the dangers that our precious planet faces due to climate change and biodiversity risks, as the noble Baroness, Lady Bennett, mentioned and as is in her amendment. I welcome the Government’s Amendments 43, 46, 47 and 49, and hope that the issue of climate risk will continue to move up the agenda in financial services.

I have enormous respect for my noble friend Lady Noakes and her experience in banking. She makes relevant distinctions between assets held by insurance companies, regulated by the FCA, which hold investments directly in fossil fuel or environmentally damaging firms and activities, whereas banks’ main assets are loans rather than more direct investments. Their balance sheets, as she noted, have some leasing, but, should the worst predictions of climate catastrophe materialise in a shorter timeframe than currently anticipated, there could be unexpected defaults on a number of the loans on the loan books, which also needs to be considered, I would hope, in terms of risk weightings.

In Committee, I supported the noble Lord, Lord Oates, in seeking to update the existing capital risk weightings to reflect climate change risk. Having listened carefully to the Committee’s arguments, he has taken care to adjust his amendment for Report. As we have all discussed in this group, climate change is now recognised widely as posing a significant risk to the entire global financial system and, in fact, to our expected and hoped-for way of life. Current central bank policy risks reinforcing a carbon lock-in through a systemic bias to fossil fuel investments—indeed, insurance arrangements and pension funds also have significant investments in this area. I believe we need a twin-track approach that both reports on and quantifies climate-related financial risks and, at the same time, amends prudential risk tools to reflect the risk of loss or stranding in relation to fossil fuel investments or, indeed, loan books.

Such an approach would reflect the urgency of the challenge we face and, as Andrew Bailey said in a speech last year:

“Investments that look safe on a backward look may be existentially risky given climate risks.”


The Minister’s response in Committee was that the proposed amendments would require the PRA to set punitively high risk weights against exposure to existing and new fossil fuel production and exploitation, and that these risk weights would, in effect, make it more expensive to finance such activities and thereby make them less attractive. Loans would be more expensive, potentially, to companies involved in this area. Is this not the very point that we should be seeking to achieve—to reflect the risks of carbon-intensive investments quantitatively, through higher risk weightings, and potentially through the issuing of loans to such companies?

Amendment 3 recognises the Government’s concerns and now proposes only that the PRA carry out a review of the current risk weightings applied to existing and new fossil fuel activities. In this regard, such a review may indeed confirm what my noble friend Lady Noakes suggested would be the outcome but, without such a review, I feel that we will not necessarily be taking this sufficiently seriously. I hope my noble friend can agree that this is a reasonable and prudent way to recognise the urgency of the climate change challenges we face, and that it would provide evidence to inform any necessary future changes to existing prudential rules around capital weightings, should that be found to be required.

In addition, two reports have just been published highlighting the systemic nature of climate risks. The LSE’s Grantham Research Institute report—I declare an interest as a visiting professor—Net-Zero Central Banking stated:

“Central banks and supervisors will need to take a systemic perspective, addressing both micro- and macroprudential risks over a much longer time horizon than they do now, and work to ensure that financial flows become aligned with net-zero.”


Policy Exchange’s report Capital Shift recently stated:

“Whereas international banking codes require banks to include emerging risks such as cybersecurity in capital adequacy compliance … climate change barely features.”


It recommended:

“Central banks and supervisors should introduce higher capital charges for assets at greater risk from climate and nature-related financial risks.”


I hope my noble friend the Minister can provide assurances that an urgent review of this vital area is possible and will be considered.

I speak briefly in support of the aims of Amendment 22 in the name of the noble Baroness, Lady Hayman, on climate-related financial risk reporting. I commend her for her work in this area and declare a further interest as a member of the Peers for the Planet group, which she so ably leads. Amendment 22 would require adjustments to reflect the systemic risk in the whole financial system. I hope my noble friend will commit to a future consultation, at least, on the FCA and PRA objectives having regard to net zero targets.

Finally, I have added my name to Amendment 23, also in the name of the noble Baroness, Lady Hayman, whose work on environmental protection has been so powerful. I congratulate the new chief executive of the FCA, Nikhil Rathi, on the latest announcement that he is recruiting a senior role focused specifically on environmental and other ESG matters, so I suspect that this amendment may no longer be required.

Financial Services Bill

Baroness Altmann Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Sheehan, who has made powerful points. A little more than a year ago, we faced the Covid emergency and the Government moved very fast with multiple rules and regulations. The world has moved very fast and science has moved very fast. That is a demonstration of how fast the world can change in an emergency—and we are all in agreement that we are in a climate emergency.

Given that I agree with many of the comments already made on this group of amendments, I aim not to repeat them all but perhaps to take us a little bit forward. To briefly outline, I am speaking on Amendments 28 and 42 in the names of the noble Lord, Lord Oates, and the noble Baroness, Lady Kramer, as well as my name. I also express my support for the principles and direction of Amendments 31 and 32 in the name of the noble Lord, Lord Oates. In his expansive and effective introduction, the noble Lord presented a strong case for the detail contained in these amendments.

With Amendment 136A, the noble Lord, Lord Holmes of Richmond, is heading in the direction of an amendment of mine discussed last week. I spoke about introducing acknowledgment of our international obligations on biodiversity. This amendment heads in the direction of thinking in terms of the sustainable development goals, and that kind of system thinking is very much what we need. It goes a lot further than simply looking at the climate emergency. I would like to see us go further than where we are at. The full SDGs are a big step that we need to take at some point very soon.

The noble Lord, Lord Sharpe of Epsom, noted that there are other uses for fossil fuels than energy generation or transport. Many of those uses are, of course, the production of plastics, which are creating a whole different set of crises in our plastic-choked world: a pollution crisis and a crisis in the impact on animal life and quite possibly on human health.

It is pretty clear that we are already in a carbon bubble. We know from an organisation as radical as the International Energy Agency that we have to leave at least three-quarters of our known fossil fuel reserves in the ground to avoid catastrophic runaway climate change. Yet we still see money being lent, sometimes by the UK Government—the chair of COP 26—to develop and even explore new reserves. This clearly is not the way forward.

To build on what others have said, rather than simply repeat it, I refer noble Lords to an article by Semieniuk et al in volume 12, issue 1 of the journal WIREs Climate Change, published in January/February 2021, entitled “Low-carbon Transition Risks for Finance”. In the conclusion of that article, the authors say:

“Asset stranding combines with other transition costs, notably unemployment, losses in profits, and reductions in real incomes from price changes that generate significant risks for portfolio losses and debt default. Financial actors might become unable to service their own debt and obligations, creating loss propagation within the financial network. The adverse impacts of credit tightening and lack of confidence as well as the direct impact of transition costs to the macroeconomy, could lead to a general economic crisis with further risks for finance.”


They continue:

“Targeted financial policies, however, can dampen some transition risks by direct regulation of the financial sector.”


This element of the conclusion relates in some ways very closely to the debate we will be having tomorrow on the National Security and Investment Bill, but it is worth noting that, with a different cause at its base, it could be taken as a pretty fair description of what happened in the 2007-08 global financial crash.

I referred to that article, at least initially, not primarily for its conclusion but for the detailed calculations and models in its body. I suspect that one answer that we might hear from the Minister in responding to this group is that something needs to be done, but not quite yet—the Augustinian approach mentioned by the noble Baroness, Lady Hayman, in our debates last week. However, the article demonstrates that thorough work has been done and is available to the department to act now. As the noble Lord, Lord Oates, and the noble Baronesses, Lady Hayman and Lady Sheehan, all referenced, we are in a state of extreme urgency—a climate emergency.

However, the noble Baroness, Lady Noakes, gave me a further reason to draw on that conclusion. She said that she relies on the banks in calculating and pricing risk. She said, “Banks do not lend in situations where default is likely.” Well, we all know how that worked out in 2007 and 2008. The noble Baroness also said, “Carbon debt financing could be driven out of the City of London.” If we look at the costs we bore from risky lending and risky actions by the financial sector in 2007 and 2008, we see that that could indeed be a very good thing for our financial security. I do not believe that we would see a direct migration of financing shifting out of the City of London and going to other places. If the British Government were to take this action and become world-leading, as they so often tell us they want to be, that would have an impact on other financial markets around the world. Other people would say, “Well, if London is doing that, perhaps we should have a look at it, too.”

Let us look at the best possible outcome: we entirely prevent a carbon bubble financial crash. One problem, of course, is that you do not get credit for stopping things that never happened, but perhaps we would know that we had done the right thing. Even if we managed only to significantly reduce the size of that carbon bubble crash, we would indeed be world-leading. We are ready to take action: this is an emergency and so we have to take action. I commend these amendments to the Committee.

[Baroness Altmann (Con) [V]]

My Lords, I thank the noble Lord, Lord Oates, for his excellent introduction to this group of amendments and his work to try to ensure that the Bill rises to the challenge of ensuring that our financial services institutions, regulations and activities are properly concerned with the dangers of climate change. I am happy to add my support to Amendments 28 and 42 in the names of the noble Lord, Lord Oates, and the noble Baronesses, Lady Kramer and Lady Bennett—who it is a pleasure to follow—which seek to ensure that capital adequacy and credit rating agencies take account of climate risk.

I also have sympathy with Amendment 136A, in the name of my noble friend Lord Holmes, which seeks to require that fund management firms should report on their ESG compliance. My only thought on that is that it may not go far enough. Such a requirement could become just a tick-box exercise and I believe we need to go much further than that if we are to meet our obligations to today’s younger people.

Financial Services Bill

Baroness Altmann Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 24th February 2021 Grand Committee

On that point, I agree with my noble friend Lord Howe, that, as he noted earlier, in practice, good regulations are exported. We have an opportunity to craft some good regulations here and I do not believe that these amendments achieve that aim.

[Baroness Altmann (Con) [V]]

My Lords, I support all the amendments in this group. It is a pleasure to follow my noble friend Lord Sharpe, but we may have slightly different views on some of the issues he has mentioned. I also support the wide-ranging aims of the amendments in this group to ensure that our financial services sector and its regulation faces stronger requirements to take responsibility for, and consider its role in addressing, and hopefully managing and mitigating, climate change risks.

I congratulate the noble Lord, Lord Oates, on his excellent introduction to the amendments in this group and his comprehensive summary of the issues. These amendments, or a version of them, are in my view essential to the success of our financial services sector and its role as a global leader. This is not a party-political matter. It straddles the role of our country and its financial system in saving the planet from the clear and catastrophic risks faced by humanity across the globe. I declare an interest in this issue as a member of the cross-party group, Peers for the Planet, and the Conservative Environment Network.

I share the view of the noble Lord, Lord Oates, and other noble Lords that it is astonishing to see that this Financial Services Bill makes no mention of assessing, encompassing and managing the risks from climate change that have the potential to undermine the financial system. Failing to require any regulatory oversight or demands on such existential risks is surely a failing in this legislation. The noble Lord is correct that difficulties in measuring these risks cannot justify simply ignoring them. The risks are real and rising.

I understand the point just made that we cannot anticipate the weather or other climate matters before the fact, but the financial industry is surely well used to anticipating risks that have not yet arisen. I argue that the regulators can indeed require firms to conduct scenario analysis with reasonable assumptions about the risks of certain rises in temperature or other activities that are threats to the planet, just as financial firms are already required to do for interest rate or demographic and other risks.

I have added my name alongside that of the noble Lord, Lord Oates, to Amendments 14 and 35 in the name of the noble Baroness, Lady Hayman, and I thank her for all the excellent work that she has been doing in this area as well. The amendments seek to ensure that the FCA and the PRA must have regard to both our international and domestic climate change commitments. I also support Amendments 11, 12 and 13 in the name of the noble Lord, Lord Oates, supported by the noble Baroness, Lady Kramer, and I have added my name to Amendment 75, which seeks to have a board member of the FCA with responsibility for climate change by amending FiSMA 2000. As other noble Lords have said, that is already required by the SMCR, with firms having to have board members taking long-term views of risks such as climate change, so it seems eminently sensible to propose that the FCA itself has that too.

I have also added my name to Amendment 48 in the name of the noble Lord, Lord Oates, which seeks to bring forward the 2017 TFCD recommendations to 2023, accelerating the climate-related disclosures rather than waiting until 2025. Again, I accept that the industry needs certainty, and this would be a change. However, I hope that having a bolder ambition can still be justified. This is of course a probing amendment, but I hope my noble friend will consider the issue. Indeed, I believe that the Covid-19 global pandemic, along with leaving the EU, offers an opportunity and potentially an obligation to take climate risks more seriously and recognise that there are issues that can be more important than short-term profit and quarterly reporting.

Businesses have been asked to forgo their operations and invest massive amounts in changing their practices at short notice, and have been forced to accept that they cannot continue as they have done in the past. This shows that previously unimaginable changes can be thrust on the global economy and on industries, sectors and individual firms to which they simply must adjust. I hope we can build on that to realise that forcing financial firms to live up to expectations on climate change, planetary temperature rise and associated biodiversity risks, as the noble Baroness, Lady Bennett, mentioned, is possible, even if painful. The asset management, pensions and banking industries can be encouraged to take more responsibility for driving climate-friendly operations, and regulatory oversight surely can—indeed, in my view, must—direct firms to improve their operations in these areas. So do the Government indeed intend to introduce the issue of climate change into the legislation to ensure that financial services are asked to operate more in the interests of long-term economic and climate sustainability?

Climate risk is inevitably investment risk, both to markets globally and to human beings, who are, after all, the customers of firms across the planet. Surely we have a responsibility to override the externalities that have hitherto prevented individual countries taking direct actions. So will my noble friend comment on some of these issues and the Government’s appetite to address what is clearly a view from across the House that these issues are important?

Covid-19

Baroness Altmann Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

Obviously, we continue to put out as much public messaging as possible, and we are looking at social media and other ways of getting the attention of that group of people. The other issue we need to recognise is that unfortunately, cases are now rising throughout all age groups, which is a concern. The package of measures we have put together is an attempt to stop the rise in cases while ensuring that the economy continues, albeit in a somewhat restricted fashion. We do not want another full national lockdown. We hope that, added together, this package of measures, as well as everyone sticking to the basics of social distancing, good handwashing and wearing face coverings, will help to stop the rise that we are seeing at the moment, before we have to take further and more unpalatable measures.

[Baroness Altmann (Con)]

My Lords, I declare my interests as set out in the register and apologise to the House for omitting to do so in the debates today on the two rental Motions.

What assessments have the Government and their advisers made of the evidence from Sweden, which has managed so much better by not accepting the modelling assumptions predicting significant deaths? What estimates have government advisers and the CMO made of the number of deaths from undetected or untreated other illnesses such as cancer, stroke, heart failure and suicide, which have resulted from the NHS’s seemingly singular focus on one serious illness? We may not be choosing between deaths from Covid and the economy; maybe the choice has been between deaths from Covid and deaths from other causes.

[Baroness Evans of Bowes Park (Con)]

Certainly, the Prime Minister, the CMO and other advisers have been talking to their Swedish counterparts regularly in order to learn lessons from there. Indeed, they have also been talking to other European countries such as Belgium, which have taken measures, in order to learn internationally. We are all learning the best way to deal with this virus, so I can certainly reassure my noble friend of that. As I said, we are trying to restore the NHS services that were suspended while we dealt with the initial impact of Covid. NHS England has issued guidance for the return of non-Covid health services to near normal levels, making use of the available capacity while protecting the most vulnerable from Covid. As I said, this is something that the department is very much focused on. The way to minimise disruption to other treatments is to deal with this virus as effectively as we can, so that we do not have a huge spike of people with Covid being admitted to hospital.

Civil Procedure (Amendment No. 4) (Coronavirus) Rules 2020

Baroness Altmann Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Altmann (Con)]

My Lords, the Government are absolutely right not to continue the blanket ban on repossessions. After six months, when many landlords have struggled without any government help, with tenants who have already not been paying rent since before lockdown or who are damaging the property and behaving violently, is it really right effectively to force landlords to continue to provide free social housing even to problem tenants, costing private individuals thousands of pounds? These are not rich tycoons: just under half rent out only one property. Many are pensioners relying on rent for their retirement security. A balance must be struck between protecting tenants affected by Covid and enabling a property owner to recover their losses—or, indeed, to move into their own property on return from military service or working abroad when they would otherwise be legally barred from doing so.

The Motion of the noble Baroness, Lady Grender, to annul this statutory instrument, as my noble friend Lord Taylor of Holbeach explained, would be against the conventions of our House. It would also cause chaos around the country and would damage the availability of private rented accommodation, which will be needed so much in future. There are protections for tenants, and the prioritisation of the courts will focus on anti-social or violent tenants, squatters, fraudsters and those with arrears that already go back more than one year. Homelessness is a dreadful problem; the Government must get to grips with it. I support the calls from around the House for emergency funding to support landlords and tenants where they face such problems in the current emergency. However, this blanket ban on repossessions does not seem like natural justice.

Business and Planning Bill

Baroness Altmann Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Monday 20th July 2020 Lords Chamber

The underlying message behind this deliberate and unnecessarily wide disapplication of the law, especially to debt collection, is a dire one. For that reason, I intend to call a vote. I beg to move.

[Baroness Altmann (Con) [V]]

My Lords, I have added my name to this extremely important amendment. However, I congratulate the Government on their introduction of the bounce-back loans and their enormous efforts to try to help businesses survive this crisis, which was not of their making or anybody else’s.

I am sure that my noble friend is sympathetic to the circumstances that could arise, and hope that she can reassure the House that the intention of this measure is not to change the balance of what is fair in circumstances where debts are being recovered by the lenders of these bounce-back loans. I find it difficult to understand why the Government have only really preserved the regulations relating to default and debt recovery for those loans up to £25,000, and only for micro-businesses. I would appreciate it if my noble friend could help the House in this regard. Restaurant owners and hairdressing salons which are limited companies may find that their equipment is subject to seizure when banks try to recover these bounce-back loans.

The banks do not need to recover the loans—indeed, they have expressed reservations and discomfort about being asked to take these borrowers to court. I believe there will be consultation with Ministers over the summer about how this is going to work. If they have a guarantee, they do not need, in theory, to press too hard to recover the loans. But if there are some attractive assets, it may be tempting for them to do so. I hope the Government will be able to state clearly that they want reasonable debt recovery only, and the intention is not to change the balance of fairness in these circumstances.

Forgive me if I am asking too much at this late stage of the Bill and with the emergency nature of the legislation, but I ask my noble friend to consider whether the Government might accept that they could take the power to make regulations, reapplying the Consumer Credit Act to debt recovery should that prove a popular and necessary measure, or whether they can include the range of £25,000-£50,000 in some other way so that we can avoid the reputational damage that may go along with this. Nevertheless, I welcome the bounce-back loans and I encourage my noble friend to give us some clarification.

[Lord Carlile of Berriew [V]]

My Lords, the noble Baroness, Lady Bowles, whose amendment this is—and I am very pleased to be a signatory—is a considerable expert on the subjects under discussion, as is the noble Baroness, Lady Altmann. I have enormous respect for them both, and for their skills in this area. I am but a mere lawyer and feel, to an extent, inadequate to parry on the financial details under discussion.

I have spent a lot of my time in recent decades dealing with fraud cases in which people often got themselves into financial difficulty, through no fault of their own, and were then under huge pressure from the banks. We have recently heard cases in which the Post Office prosecuted people who pleaded guilty to criminal offences which they had not committed. We have heard about the remedial action that is having to be taken, very expensively, to put those wrongs right.

The bounce-back loans are of course very welcome, but they bring a whole new cohort of people into, what is for them, often very substantial borrowing. Many of the businesses we are talking about do not have substantial overdrafts in the ordinary run of things. They are able to live on a cash balance, albeit often small, and they do not have to enter into sophisticated agreements with banks. This applies particularly to family businesses, which have either been created recently or are long established. The debt picture and the debt threats for such companies are frighteningly great compared to the time before coronavirus.

Therefore, over the years, there are plenty of examples, as mentioned by the noble Baroness, Lady Bowles, of banks being sometimes very oppressive towards customers who are put out of business without understanding what redress they may have against those banks. Unfortunately, these provisions remove some of that redress, which they might discover they have against the banks.

In my view, some simple legal remedies with flexibility are needed, so that if, for example, a company defaults on a loan but can demonstrate that, within a couple of years, it can haul itself back to not only profitability but the ability to repay the loan, we would be in a much better position. Surely that would be a far better outcome. The amendment we are considering is one solution to that problem, and that is why I support it.

I am grateful to the noble Baroness, Lady Penn, with whom I have exchanged emails, at her instigation, about this amendment. I said to her yesterday in an email that the Government really should produce some kind of arbitral procedure which would enable loans in the range we are debating to be discussed, a solution to be found that would satisfy the banks in the long term, and the businesses concerned to carry on trading. These loans have of course been introduced in an emergency, but it is actually less of an emergency for the banks than for the people who take out the loans, and about whom we are talking. Unless something better is offered, this amendment would rebalance fairness so that there is a level playing field between the lender and the borrower.

Pension Schemes Bill [HL]

Baroness Altmann Excerpts

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Monday 2nd March 2020 Grand Committee

I reiterate: the dashboard project potentially can extend to the whole UK workplace pension system, embracing many millions of people. The impact on public good outcomes is in danger of being lost in the debate. Parliament has a right, and indeed the responsibility, to put them centre stage.

[Baroness Altmann (Con)]

My Lords, I will make a few observations about this suite of amendments. It strikes me that the demands to add even more to the current proposal for the dashboard are fraught with danger from the customer perspective. I agree that, from a strategic, overall macro perspective, if one is looking to plan one’s retirement income, it will be most helpful to have as many sources reflected in any dashboard that will contribute to that income. However, the problem we face in getting this dashboard up and running is that there are so many different types of pension and of scheme that we already face a monumental task in just trying to list people’s pensions and make sure that the dashboard reflects all the elements attached to them over the many decades: the different tax regimes they have been under; whether they have a guaranteed annuity or protected tax-free cash; a guaranteed return of some kind; whether benefits have to be taken at specified ages, otherwise certain things are lost; whether there is any extra insurance in there that might be attached to the pension from old-style schemes; protected rights, and so on. And that is just for defined contribution, before we even get on to the defined benefit records.

Equity release has significant dangers for any consumer who is considering it. My worry is that, if consumers look at this information on a dashboard, they will not understand those dangers and will think that the money is available. Recently I have seen very many cases where individuals or their families have taken out an equity release loan for something like 25% of the value of the equity of their home, with an interest rate rolling up at 6% per annum for 20 or 30 years, meaning not only that, if they were to pass away, no value would be left in the home but, more worryingly, if they needed to sell the home and move to a smaller one—if they took out equity release in their 50s or 60s and, in their 80s, needed to downsize for reasons of care or convenience—they would be unable to do so because there would be no equity left for them to use.

Therefore, I caution significantly against trying to go more broadly. I think that we have enough of a challenge in trying to get pensions alone on to a dashboard. I completely agree that it is important to have the state pension on there and, in that regard and in speaking to amendments in the name of my noble friend Lord Flight to which I have added my name, we want people to be able to see what their projected state pension will be. However, we will need an electronic system so that people can go online to check their state pension. If Verify is not the gateway to that, we will need to develop an alternative secure gateway. We need to make sure that the dashboard has a standardised protocol and standardised systems so that every pension provider has to use the same IT structure that can then be securely fed to a dashboard.

[Lord Flight]

With the state pension, you already get from social services advice on what your pension will be about a year before you draw it, so it strikes me that the state pension information is just sitting there waiting to be used by the dashboard.

[Baroness Altmann]

I thank my noble friend. Of course, he is absolutely right but the point of the dashboard is that much younger people can plan their future pension income. The current procedure is to encourage people to log on to the state pension checker, where they can verify their future predicted state pension income so that, as they get into their 50s and closer to retirement, they will be able to make more meaningful financial planning. However, as my noble friend Lord Young pointed out, there are significant security concerns with the current gateway system that allows you to find out what your state pension is. Therefore, if we want the state pension to be on the dashboard, we will need a certain level of security.

The aims of the amendments are correct. We want to be able to see the state pension and a comprehensive list of pensions, but I caution against trying to go more broadly. I also caution against commercial dashboards which might use their own IT systems that lock people out of checking their pensions on other providers’ systems and which try to encourage people to merge their pensions. Indeed, we have seen that the systems of some pension providers do not always flag up the guarantees that can be very valuable for individuals. If people are being not advised but merely guided, or if it is merely information and they are not aware of the guarantees, they could lose out and have no comeback.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I was not intending to speak to these amendments, but it has been quite an interesting debate to listen to. In some ways, I have changed my mind during the course of the debate. I found the notion of having everything all in one place, as put forward by the noble Lords, Lord Young and Lord Flight, an interesting idea. Of course, it can already be done, but for historic reasons—because I have been self-employed for most of my life, as has my husband, and we have quite a lot of pension schemes around—I am well versed on various different platforms. Yes, I do a lot of mystery shopping, as I call it, on these things. I have loaded up information and practised telling lies as well—putting in overvaluations of my house or saying what other things I have—to see how a platform projects what my income will be, so it is difficult to get right. I wonder about the house valuations that people might be tempted to put in, because there is a tendency to be optimistic when it comes to that.

In this last week, I was looking at one platform, thinking, “Where is the sell-all button for absolutely everything?” I could not do it; I had to go through several times, so I very much take the point made by the noble Baroness, Lady Drake, that you will take the path of least resistance when there is something that you think is urgent. If I can fall for that kind of wanting something to be there, others will too, but when I went through everything and had to think, “Do I really want to sell that or don’t I?”, I made different decisions from those I might have made if I had had a sell-all, transfer-all button. Given that I like to think that I know a thing or two about these things, I would rather err on the side of caution, as the noble Baroness, Lady Drake, pointed out. I do not want to interfere with people’s freedoms, but it has to be good to have a certain number of hurdles to give people a pause to think.

I tend to agree that equity release will have to be a big part of the future, and I wonder whether some of the people already taking out lump sums are thinking that way as well. Perhaps that is safer left until we can more broadly investigate what is going on there and make a rather safer and better environment, though I acknowledge that that there have been improvements that I have not tested yet.

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Moved by

[Baroness Altmann]

41: Clause 118, page 105, line 9, at end insert—
“( ) Requirements prescribed under subsection (2) must require that the provision of pensions dashboard services is an activity regulated by the FCA.”

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[Baroness Altmann]

My Lords, the amendments in this group stand in my name and those of my noble friend Lord Flight, the noble Baroness, Lady Sherlock, and the noble Lords, Lord McKenzie and Lord Hutton. A number of us have tabled amendments in this group on similar themes. I will leave other noble Lords to talk specifically to their amendments but the main concern that we are trying to address is that there should be proper protection for consumers when using these dashboards. What is proposed in different formats is that the Financial Conduct Authority should oversee any dashboards—particularly the commercial ones—as a regulated activity. We have not seen that specified in the Bill and feel that clear regulatory protection for any consumers using a pensions dashboard needs to be on the face of the Bill.

Obviously there are different ways in which the FCA may impose regulatory protection. However, if this is meant to be an activity that benefits consumers, then, given all the experience that we have had in pensions and the issues that have arisen for consumers from time to time when there is an asymmetry of information and pension providers, and providers of different products are able to take advantage of the fact that consumers are not always totally au fait with the information on their pensions that they are presented with, it is really important, for example, that the FCA makes sure that the information is clear and that there is a recognised standard for a dashboard so that it cannot be misleading for consumers in some way, as might sometimes be the case. Sometimes providers do not intentionally try to mislead consumers but the language that they use every day is natural vernacular for them, although it does not mean a thing to a consumer. A provider might think that they have explained something very clearly for anyone who knows all about pensions but, on reading it, the customer might get totally the wrong idea or not understand what is being presented and perhaps take an incorrect conclusion from it.

Amendment 68 suggests that the provider of a pensions dashboard should have a fiduciary duty to the user of the dashboard. There is merit in our considering that as an extra layer of protection so that, once again, the provider of the dashboard is required to consider what the consumer might understand and need, and the provider therefore has a duty to help them rather than take advantage of them in some way, whether intentionally or not.

I am not sure that I need to take up the time of the Committee any further. That is the thrust of the intent behind these amendments, and I look forward to hearing from other noble Lords on this issue.

[Lord Flight]

My Lords, the point that I want to make is that there are four cases where the FCA is the regulator but no reference is made to where the Pensions Regulator will provide the regulatory task. It might be readily understood by the industry why regulation is divided but there is a question mark over whether citizens will automatically know to go to the FCA for certain things and to go to the Pensions Regulator for others. I am sure that there are sound reasons for it but I would be interested to hear the Government’s view on what the regulatory model should be.

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Turning now to the need for dashboard providers to act in the best interests of their customers, I agree that the needs of customers must be taken into account, but not through fiduciary duties as proposed in Amendment 68. The FCA has an existing framework to ensure that authorised firms, which will include dashboard providers, take the interests of customers into account. This includes the principle of paying due regard to the interests of customers and treating them fairly. Fiduciary duties arise out of fiduciary relationships —those of trust and confidence—mainly in relation to prudently taking care of money or other assets for another person. Providers of dashboards will not be in a fiduciary relationship with dashboard users as they are merely an intermediary facilitating access to information about people’s pension savings.

[Baroness Altmann]

I thank my noble friend for his very thorough response to this group of amendments. Is it not possible that without a comprehensive, overarching regulatory framework for all dashboard activities, consumers could fall between different cracks, and the provider of the dashboard that has provided them with misleading or incorrect information could then say, “Well, it was the person who gave us the data who was misleading: it wasn’t us. We are just providing information.”? Or could this activity in some way be related to unregulated lead generation, which is part of the pensions landscape and has been so damaging to consumers? Therefore, what I hoped we might achieve with my amendment was an overarching regulated activity for anybody participating in or providing data to the dashboard and for the dashboard provider providing the data to a customer.

[Earl Howe]

We come back to the question of a liability model. I might as well deal with that now. We set out in the consultation response that we expect the industry delivery group to make recommendations on a robust liability model that ensures that there are clear roles and responsibilities and a clear process for dealing with complaints. The point made by my noble friend that there is a risk that something might fall through the cracks is a very good one. The best that I can do at the moment is to say that, as the service is developed, the detail of where liability exists will emerge. She will agree with me that we are not dealing with new data or with new financial transactions, but yes, potential service risks might emerge. The IDG will, as I have said, recommend robust liability models, and the framework of any new liability arrangements will be set out in regulations. That is one of the reasons why we need delegated powers in this area.

I think that the industry delivery group is the best forum to build a liability model to which all parties are signed up and that takes into account good practice and lessons learned from open banking. While I realise that there are many differences, there are certainly lessons that we can draw from that sphere.

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[Earl Howe]

I will certainly go away and consider that point, even if “fiduciary” is not the appropriate word, and look in conjunction with my officials at whether there is a mechanism that would achieve that aim without inventing some new legal status. I am grateful to the noble Baroness and the noble Lord, Lord Hutton, for their points.

The question posed by the noble Baroness, Lady Drake, boils down to this: if MaPS or another specified person sets the data standards, how will they be accountable to Parliament? As I said, the regulations enable parliamentary scrutiny and debate on any specific future proposal as they come forward.

We need to ensure that dashboards are fit for purpose over the longer term. That cannot happen in a summary way. Delegating the ability to set and update standards and technical specifications support through secondary legislation will, in our view, ensure that dashboards remain beneficial and relevant to consumers.

Our approach recognises that ownership of the dashboard infrastructure and the responsibilities for the setting of standards may need to change over time, but I reiterate that, taking into account the good practice that exists, the industry delivery group will develop and make recommendations on a robust liability model to ensure that there are clear roles and responsibilities in the event of a breach. That includes a clear consumer redress mechanism. In answer to the noble Baroness, Lady Sherlock, the policy intent is that the FCA should authorise dashboard providers and that this should be achieved by order.

The FCA takes seriously the need to consult the public. It has a general duty to consult the public by publishing draft rules. This duty will apply equally in this case. The FCA will also consult the Secretary of State and Her Majesty’s Treasury prior to public consultation on draft rules. That will ensure that the rules have regard to the regulations that place obligations on trust-based schemes, which will provide a consistent and coherent approach.

We have covered quite a lot of ground, but I hope that I have effectively explained the role of the FCA in protecting consumers and provided the assurance that noble Lords are seeking that we will bring dashboard services within the FCA’s scope. If I have not covered all the ground, I hope that I can rely on meetings with noble Lords following Committee so that, by Report stage, I am able to come up with any further and better particulars that they seek. With that, I hope that for the time being the noble Baroness will feel comfortable in withdrawing the amendment.

[Baroness Altmann]

I thank my noble friend for his detailed response and the broadness of his willingness to consider the points that we have made on this important issue. I am delighted that he agrees that we all seem to have the same aim, which is to protect the consumer. However, I would be grateful if he went back to the department and perhaps wrote to me and other interested noble Lords about this. We all aim to have consumer protection but, if that is to be put in via a series of regulations with a liability model that we do not yet quite have, would there be any specific harm in putting in the Bill the regulatory framework and the requirement for FCA authorisation and protection for consumers, so that there is a comprehensive, overarching framework?

My concern is that, although this is portrayed as an information dashboard, we know that the provision of guidance and information has no consumer protection whatever—it is a matter of caveat emptor. If, for example, those dashboards carry advertisements that may be perceived as enticing people to buy products but they do not fall under such a regulation in FCA terms, we might be well advised at this stage to place an overriding emphasis from the consumer perspective on regulatory protection and authorisation for the entire framework, rather than relying on liability being proven later and redress being provided to the customer after a problem has occurred. For the moment, however, I beg leave to withdraw the amendment.

Amendment 41 withdrawn.

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Moved by

[Baroness Altmann]

54: Clause 119, page 111, line 45, at end insert—
“238FA Accuracy of occupational pension scheme informationRegulations must impose requirements on the trustees or managers or administrators of a relevant occupational pension scheme to ensure that information held in respect of each member which may be submitted to a pensions dashboard service is regularly checked for accuracy and any errors are corrected within six months.”Member’s explanatory statement
This amendment aims to ensure that those running pension schemes must check data for accuracy and any errors are corrected regularly to prevent incorrect and misleading information appearing on a user's pensions dashboard.

[Baroness Altmann]

My Lords, I rise to speak to Amendments 54 and 65, both of which are on the same topic. I beg the Committee’s indulgence. This is such an important issue that I want to expand on some of the areas involved and my reasons for tabling these amendments.

Accurate and complete member data is surely an essential prerequisite for the success of any pensions dashboard. I was struck by the Minister remarking that pension information is the lifeblood of the dashboard, which is absolutely right. These are probing amendments; I do not claim that they are the perfect answer to the issues that I am raising, but I have tried to insert into the Bill specific requirements that must be imposed on trustees, managers and administrators of occupational pension schemes to ensure that the information submitted to the dashboard has been checked regularly for accuracy. I have suggested that errors must be corrected within six months. That may not be a reasonable timeframe, but it is a start. That is Amendment 54.

Amendment 65 seeks to do the same kind of thing for personal and stakeholder pensions which Amendment 54 is seeking to do for occupational schemes. I am not sure whether I need to mention this each time I speak in Committee, but I draw noble Lords’ attention to my interests as set out in the register. Auto-enrolment has been a great success as all UK employers have set up pension schemes for their staff. Workers will be building towards a better retirement, which is a force for good, but it cannot be right that there are currently no formalised requirements that data records are verified as accurate regularly.

In the past, pensions have been plagued by data problems. Recently a number of pensioners have had to repay some of their pensions and face future pension cuts as they have been told that past errors in their pension entitlement have been discovered, many decades later in some cases. Records were not regularly updated or corrected. In the past there was manual record-keeping, which was prone to human error, and failure to ensure robust data reconciliation had been regularly carried out meant that errors were not discovered promptly, and they persisted over time without people knowing.

For any dashboard initiative to work, consumers have to be able to trust that their pension contribution records are accurate. This is a particular problem because the complexity of pension rules makes it almost impossible for individuals, especially workers enrolled in auto-enrolment schemes, to know whether the amounts being paid in on their behalf are correct. The complex calculations must calculate the employee contribution, the employer contribution, the tax relief, and potentially the national insurance relief as well. The member would naturally assume that their employer or their pension provider was ensuring that the amounts being recorded on their behalf were accurate, but unfortunately this has not been the case in the past and it is still not the case for new pension schemes. For example, a study I was involved in last year which analysed data representing more than 1 million contributions from more than 100,000 schemes—these were small employers —showed that the data had a 50% initial error rate. Some 50% of some aspects of the information was incorrect and had to be sent back for correction. Those error rates did not persist, but the data was not necessarily checked as thoroughly as it could have been.

Pension administration is the Cinderella of pensions. It is the low-margin end. It is not the sexy end. It is under cost pressure, and administrators seem to have been expected to absorb often very complex changes. Sometimes pension providers change their data requirements and their payroll software is not updated to reflect the latest version, so administrators then manually adjust spreadsheets to try to make sure that they have some data recorded. Data includes incorrect contribution amounts, contributions made for workers who did not belong to the scheme or who had already opted out, wrong identifiers for the pension scheme, inaccurate postcodes, incorrect pay period dates and so on and, for example, incorrectly believing that a pension scheme operates on a relief at source basis when it is net pay or the other way around so the amounts are simply not right.

Unfortunately there are no regulatory checks to ensure that data is verified for accuracy. What we have seen in legacy schemes is the detriment that this can cause to pensioner members, and if we have a pensions dashboard that people are relying upon to make their retirement plans, it is not good enough that administrators will just to try to make sure that by the time people reach retirement and get their pension all the errors are corrected because people will need that all along. For example, the auto-enrolment declaration of compliance does not have accuracy checks built in. Employers are asked to confirm that they have paid the right amount but nobody ensures that that is the case.

If they want to check, many pension providers currently do not collect the information that they need to verify because they are not getting the pensionable pay data sent over to them; they just get an amount of money and are told that it is correct, and that is that. We are in the middle of pensions master trust authorisation. Again, there is a risk of records being incorrect but the authorisation does not entail robust checks on data accuracy or proof that proper processes are in place to discover and correct errors.

I was trying to put into the Bill a mechanism whereby we can draw a line at a point in time and make sure that the pensions dashboard data has been through a process of cleansing and verification as a requirement for submitting the data. I am not saying that this will be simple or easy, but as more schemes emerge it will be more difficult to go back and try to reconcile past records. We have an opportunity now to put that sort of requirement into the Bill.

I quote from the Pensions Administration Standards Association, a body that oversees pensions administration and has been directly involved in some of these areas:

“Data cleansing is costly, so in low margin operations there is little appetite to invest in either clean data or in digitisation which depends on the quality of data. There is no incentive to do better than your competitor, as you are all in the same boat. Customers do not demand improvements and where they do trustees choose to ignore the calls either because of cost, resource constraints or other priorities for the scheme.”


It goes on:

“There is an expectation that introducing mandatory data provision as part of the dashboard project will act as an incentive to schemes and providers to clean up data that has been in a poor state for decades … The uncomfortable truth is that while compulsion will encourage some clean up, it will only be to the minimum level needed to show some data in a field, which essentially means that the presence of a data item will take precedence over the accuracy of it. Schemes already report 90% compliance with common data standards set by the Pensions Regulator. This should mean 90% of schemes will be able to present data that identifies an individual, but of course we know this is not reality, because it has been self-reported and not robustly checked.”


We have an opportunity to recognise the poor quality of data. This is not a blame game; it is about trying to put into the legislation a mechanism through which providers and everyone involved in the dashboard know that they can no longer rely on other people not correcting their data and no longer not attend to this themselves.

Of course, it will never be possible to ensure 100% accuracy, but having processes in place that constantly check and which allow errors to be corrected promptly is urgently required. Random regulatory checks, mystery shopping and systematic accuracy verification by an independent body would be of value and is surely a vital ingredient of any dashboard on which consumers are expected to rely.

As I said, I am not suggesting that the wording of the amendments is appropriate, in the right place or expressed correctly, but I hope that my noble friend the Minister can give us some information on and consideration of whether this could be built into a dashboard requirement. I beg to move.

[Lord McKenzie of Luton (Lab)]

The noble Baroness paints a bleak picture; I do not doubt that she is absolutely right.

Is there not a role in all this for the auditors, and a body whose feet can be held to the flames for not doing its job and not checking the systems, for example? It would not be a solution, but presumably it would contribute to an improvement.

[Baroness Altmann]

The noble Lord raises an important point which highlights that I have not necessarily covered all the areas to be dealt with on this. Including auditors and having a requirement for them to verify the accuracy of data is indeed another way of approaching the issue. I went to trustees and scheme managers widely, but auditors are another area which might be considered.

[Baroness Sherlock]

My Lords, I do not want to say very much, but I have a couple of questions on the back of what the noble Baroness, Lady Altmann, has said.

Can the Minister tell the Committee a little about what the regulators and the Government are doing to ensure that companies are ready to clean up data ready for transferring to the dashboard? Is there any intention for providers to check that members recognise the accuracy of the data at any point? Regarding what the noble Baroness described, if data had been wrong for decades, perhaps the member would not have known the details, but they might have known if they were not in a scheme, were in a different one, or if the basics were different.

The Cheviot Trust said that it was concerned that deferred members’ data would be less accurate. Is this on the DWP’s horizon? If so, what is being done about it?

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[Baroness Altmann]

I thank my noble friend very much for his response. I said that this was a probing amendment, and I recognise that, in theory, such powers appear to exist. In practice, they do not seem to be used and there seems to be rather a reliance on self-reporting, which clearly has not produced the accuracy that one might wish. I am delighted that our honourable friend the Pensions Minister has been raising the issue of the need for accurate contributions. We need to encourage pension schemes to get going on cleansing the data. They do not need to wait for any regulations or legislation. If they already have the duty, perhaps they should just get going.

I also accept, and am delighted to hear, that the industry delivery group is working on some qualitative research and data standards. I have to express my concern that in 2015, there was an agreed data standard practice; unfortunately, the industry decided not to adopt it. I hope that there will be a different attitude this time to the importance of pension scheme data.

I beg leave to withdraw the amendment but I hope that this debate has at least raised the issue. Perhaps it may encourage some schemes to get on with data cleansing and have the regulators looking more closely at it.

Amendment 54 withdrawn.

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[Lord Vaux of Harrowden]

I am staggered by the numbers on the cost of doing this that are bandied around. As far as I can see, the main work here is formatting data into a consistent format so that it can be uploaded to whichever platform it needs to be uploaded to. Frankly, the creation of a platform is pretty trivial stuff. It is not dramatically different to what happened with open banking in that respect; that was a question of formatting data and ensuring that it was in a consistent format. Do we have any idea of the open banking process costs so that we can compare them—and, if they are dramatically different, ask why?

[Baroness Altmann]

I echo the words of the noble Baroness, Lady Drake. A number of elements of the expense shown in the impact assessment are elements that one would have hoped that the industry would take upon itself in any case. I sometimes need to remind providers that automatic enrolment has been an absolute gift to them. It has brought them 10 million new customers on a plate, with all the associated tax relief money. Surely they need to take an obligation upon themselves to modernise their processes and bring their IT into the 21st century. The standard answer is: “It’ll cost too much”, or, “We’ve got our own system, we don’t want to change to a new one”, but in Australia, the Government mandated a particular system that everybody had to adopt so that there was a common standard. It worked very well. My noble friend suggested that the industry delivery group is working on such a potential procedure, which would be excellent. It would incur costs but it would set the industry up for much more business in future on a long-term, sustainable basis.

[Earl Howe]

I am grateful to my noble friend for raising this important issue.

The Government published impact assessments for each measure in the Bill at its introduction. As is usual practice, we will publish updated impact assessments when the Bill is enacted, setting out the impacts of any material amendments to the Bill. I assure my noble friend that for measures where regulations that are subject to consultation are required, we will publish impact assessments when those regulations are brought forward. This must be the most beneficial time to revisit the impacts, when further policy detail is set out and we are able to apply that element of further insight to our estimates of costs and benefits. I suggest that adding another impact assessment between Royal Assent and the laying of the regulations would not provide any further transparency.

Turning to dashboards specifically, the Government are well aware of the additional costs necessary to support the set-up and maintenance of pensions dashboards. As my noble friend knows, when we published an impact assessment that accompanied the Bill, we set out initial estimates of the possible costs. However, we should recognise that many schemes already provide similar levels of information directly to their consumer through annual benefit statements or digital platforms, so not all schemes will necessarily incur significant additional costs.

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[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott)]

My Lords, Amendment 77 seeks to extend the scope of Clause 124 to include transfers from unfunded public sector schemes: those where the pension promised is underwritten by the Exchequer. This amendment ensures parity of protection for those members of unfunded public service schemes.

Clause 124 relates to cash equivalent transfer rights and amends Section 95 of the Pension Schemes Act 1993. It provides the Secretary of State with a power to make regulations that can place new conditions on a member’s statutory right to transfer their pension rights to another scheme. This amendment seeks to ensure that members of unfunded public sector schemes can exercise their statutory right to transfer only once the conditions to be specified in the regulations made under this clause are satisfied. The intention is to apply the same conditions to transfers from unfunded pension schemes as will be applied to transfers from other pension schemes. These conditions can include the member providing evidence or information about their employment link with a pension scheme or their residency overseas.

Pension transfers from unfunded public sector schemes are rare. No concerns in relation to scams were raised during the 2016 government consultation, so transfers from unfunded pension schemes were not included in the original draft clause. The Department for Work and Pensions has since been made aware of criminals trying to set up a scheme that can receive unfunded pension transfers, so we believe this amendment is necessary to safeguard members of unfunded schemes from fraud. Amendment 99 mirrors the provision for Northern Ireland in paragraph 12 of Schedule 11. It is essential to provide the same protection when transferring savings to members of unfunded public sector schemes as those saving in other pension arrangements. For these reasons, I beg to move Amendment 77 standing in my name.

[Baroness Altmann]

My Lords, I support my noble friend’s amendment and will speak to my Amendment 78, which is grouped here. I fully agree with her that it is important to protect members’ pensions on transfer, whether they come from one type of scheme or another. I am delighted to see the government amendment and its intent.

My amendment would do something that I have sought for a time, and I wondered whether we might be able to get it into the Bill. It relates to partners of pension scheme members who transfer their pension from one scheme to another. One hears so often of a divorced couple where the wife has no pension of her own and has sometimes even had a pension-sharing order. However, when the member’s pension is transferred as a cash-equivalent transfer value, there is currently no mechanism to ensure that the spouse, who clearly has an interest in potentially half that amount, is made aware that that is happening. Of course, once the money has been transferred, should the previous partner have ill intent, it is possible that the spouse—usually the wife—will be left pensionless when in fact she had expected to share the partner’s pension.

This is a probing amendment. I support my noble friend’s amendments and would be grateful to hear whether any other Members of the Committee are interested in this type of protection, which we might be able to request be inserted in the Bill, so that if somebody calls up to transfer their pension, some procedure is in place before that is done to ensure that anyone else with an interest in the pension has given their consent or has at least been informed, which does not always happen.

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[Baroness Stedman-Scott]

The suggestion made by the noble Baroness, Lady Sherlock, is very helpful. I would be happy to do that before we come back to this on Wednesday.

[Baroness Altmann]

I thank my noble friend for her reply, which does not come as a surprise to me. I also thank noble Lords for their useful contributions.

I believe that there may be an issue here. I hope that the department will consider it. As the noble Baroness, Lady Drake, specifically said, things are different now with pension freedoms, whether for DB or DC. If there is a pension-sharing order and a member transfers out of their DB scheme and takes a cash equivalent transfer value when their spouse had relied on a guaranteed pension income from half of that defined benefit pension, now that we have the freedoms, that pension could be dissipated. Certainly, a cash-equivalent transfer value, in terms of buying an annuity with an inflation protection to replace the income that could be lost, is not likely to be financially feasible. I accept that this would be an extra burden and that it would need careful consideration. I echo the request from the noble Baroness, Lady Sherlock, that the department considers this and sees whether there is a way of protecting these women. I beg leave to withdraw my amendment.

Amendment 77 agreed.

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[Baroness Altmann]

My Lords, I have added my name to this amendment, which is a very important amendment in the context of consumer protection. As the noble Lord, Lord Sharkey, has so excellently explained, the amendment is an attempt to ensure protection, particularly against scams. What we tried and succeeded in doing during the passage of the Financial Guidance and Claims Act was to pass an amendment that would automatically see people before they transfer money out of a pension—or withdraw money from a pension—receiving at least the independent, impartial guidance that was originally intended to accompany the pension freedoms. When they were introduced, the aim was for everybody to be able to have this impartial guidance so they did not do the wrong thing and understood the risks of taking money out too quickly. This is another line of defence for the consumer given that that amendment, which was passed in the Lords, did not make it into the Bill. It was taken out in the Commons.

One line of defence would obviously be if someone has an authorised adviser or can demonstrate that they have received independent advice. A second line of defence would be the providers themselves asking a few very basic, approved questions: “Are you asking to transfer out because of an unsolicited communication of some kind?”, and, “Do you know anything about the scheme you are transferring into?”. The provider could ask two or three basic questions; should those questions raise red flags, there would be an opportunity to protect the member before they transferred out. Other than that, there is a 60-day limit because, again, scams normally require you to transfer your money very quickly.

I hope that there may be some consideration of the importance of this protection and the use of Pension Wise in the way that it was originally intended. As we look to introduce a new Pension Schemes Act, we might find ways in which we can enhance the consumer protection that I know my noble friend understands is so important.

[Lord McKenzie of Luton]

My Lords, this amendment goes to the heart of protecting people’s pensions. We have touched upon a number of issues surrounding the same sort of concepts during debate on the Bill and in other legislation, such as financial guidance provisions. We should see whether we cannot get together a comprehensive note of how these things are covered. I am bound to say I am unclear as to what is and is not covered in all circumstances, so it seems that would be beneficial.

Concerning the specifics of the amendment, we clearly give it broad support. It raises practical issues, as I am sure the noble Lord, Lord Sharkey, would identify, particularly on responding to approved questions. I am not sure who is on hand when the questions are being asked. We have seen what happened with taxi licences and such things in the past. The provision could give rise to challenges but the thrust is right: it is another attempt to make sure that people are aware of the consequences of what they do, to the fullest extent possible. As I say, I am not sure whether we have a comprehensive arrangement yet across all pensions and circumstances. It seems that it would be worth some effort to try to get that into place. With those words, I am happy to it give broad support. When the Minister replies, I am sure there will be some stumbling blocks in it but if we do not keep pushing and shoving, we are not going to make progress on this.