Packaged Retail and Insurance-based Investment Products (Retail Disclosure) (Amendment) Regulations 2024

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Wednesday 13th November 2024 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I shall speak mainly to the instruments on listed investment companies. I first raised this issue in the House on 6 June last year, attempting to make an amendment during the passage of the Financial Services and Markets Bill. Perhaps history is now catching up with me. I thank the noble Lord, Lord Livermore, then on the Labour Front Bench, for grasping the economic importance of the matter, which he will appreciate even more as Financial Secretary, given the perhaps as much as £40 billion of lost investment in infrastructure, green energy and social buildings.

On one hand, I am pleased with the PRIIPs statutory instrument that was introduced in September, removing investment trusts from PRIIPs, and the cost disclosures part of the MiFID Org regulation and the accompanying FCA forbearance statements. Before I go further, I must flag that this was never about not reporting costs or not providing investors with a full suite of information on fees or all other corporate costs and charges. Investment trusts are listed companies and as such must provide all the transparency for investors that listing requires, including publishing full information in annual reports.

Unfortunately, after the September actions by the Government and FCA, the competitor industry to investment trusts, the open-ended funds and their organisation—the Investment Association—held a members’ meeting and agreed not to do what HMT expected, which has just been iterated by the Minister. They agreed that they would not accept that, at the share level—the investor-holding level—of investment trusts there are zero deductions from investment value.

Convening the meeting, and seeking member agreement, was confirmed by the CEO of the IA, Chris Cummings, at the Lords Financial Services Regulation Committee last Wednesday. Today, Ashley Alder, chair of the FCA, confirmed to the committee that there was no deduction to make from share value —I hope that everyone listened keenly. Chris Cummings further said last week that they did not want any changes to the current practice—the practice that has caused all the problems—until the FCA has completed its consultation and done all the new rules. They do not want any of the interim provisions. In another slide presented to the members’ meeting, it was shown that this could take until 2027. That is plenty of time for the misinformation to continue and to destroy the sector with which they compete.

There are other players assisting them in this anti-competitive effort, including the majority of large retail investment platforms, with the laudable exception of ii, although there may be others. Hargreaves Lansdown, which is the largest and also a member of the Investment Association as it is also a fund manager, spoke at the IA members’ meeting to explain how they—meaning itself and other platforms—would block retail investors from purchasing the shares of investment trusts that put “zero” in the costs to be deducted field of the European MiFID template, or EMT, which also generates the deduction from investment illustrations on platforms. After the meeting, Hargreaves Lansdown, Fidelity, and possibly others that I have not seen, sent out emails to fund managers and investment trust boards and commenced blocking operations for those investment trusts that dared to enter “zero”. Not surprisingly, many investment trust boards capitulated out of fear of being disconnected from the marketplace.

What happens as a result is a continuation of the bogus practice of telling investors they will lose large amounts off the share value of their investment—and guess what? They might buy an open-ended fund instead. For example, if, on the Hargreaves Lansdown site, you click on “How much will it cost?”, there are computations showing—wrongly—that on, say, a £5,000 investment over five years there will be management fee deductions, in some instances of well over £1,000, and even some causing losses. But that is not the case, because those costs are already reflected in the share price. It is very nice to force your competitors into a corner and keep them there until 2027 or longer, if you can continue to use your might, being 45 times larger than the competing sector you are colluding against.

That brings me on to the second pair of the SIs which, regrettably, have done nothing to address the shenanigans that have gone on for the last few years, or to prevent this vast open-ended fund sector using its size and might to continue to gaslight and bully investors—and even regulators—about the role that market share price plays in absorbing and reflecting the internal company costs, just as does the share price of any listed company. You buy the share; you sell the share—there are no deductions from your share price by the company. In fact, I would like to know what mechanism people think that could be done by.

The second SI continues to classify investment trusts as consumer collective investments, despite market-wide concerns expressed in consultation responses by some 340 respondents. The Treasury says that there will be special treatment, but it is not in the statutory instrument. All it has done is amend the old definition of a CCI in an admission that previously, investment trusts were not properly within the definition—all part of the old misinterpretation of “value”.

There has been no clarification of the circumstances in the market. It needs to be clear that investment trusts are financial instruments, like other shares. They should not be confused with savings products, and they are not covered by the Financial Services Compensation Scheme. They must be given all the recognition that derives from being a listed company, with market-set share price which is the value. Is that in the SI? No. Can you guarantee that the FCA will get it right? No. The CEO has made incorrect statements that investment trusts are savings products and muddled that costs are not zero, clearly referencing net asset value, which is not what you hold.

I am sorry to say that this SI is a poor example of what we expected when the future financial framework was proposed and consulted upon. We were promised policy guidance in the statutory instruments, and it is not here, even when there have been the direst circumstances that require it and a massive consultation response in favour of it. All that has been set aside, with nothing to show in the legislation. The only policy is saying they are still a CCI, which, after all that has gone before, is not adequate policy guidance. If you want to know what the right kind of guidance might look like, I suggest referring to my own Private Member’s Bill, which we will be discussing on Friday. I am afraid that the job is not yet done.

[Baroness Altmann (Non-Afl)]

My Lords, I too would like to address the statutory instruments relating to the PRIIPs and to the consumer composite investments. I am very grateful to the Government for laying these statutory instruments. I would also like to thank the Treasury and the Financial Conduct Authority for the statements they issued in September, and the FCA for its first set of forbearance and its subsequent additional emergency forbearance.

However, like the noble Baroness, Lady Bowles, it appears to me that, despite the clear intentions of the Government and the Financial Conduct Authority, as expressed particularly in the PRIIPs statutory instrument, some parts of the industry are not willing to accept what the Government believe and the FCA have clearly indicated is the right position. That is a particular concern to me.

The Minister rightly pointed out that the aim is to improve transparency and enable comparison between products for investors. The whole point of cost disclosures has always been to help consumers and investors—whether they are retailers, small institutions or others—understand what they are going to be paying for any investment product they buy. We know that, in the past, many of these costs were hidden. As the Minister said, investors need to better understand what they are paying for the product they buy. It needs to be accurately reflected to them, so they know the actual cost of the investments they are considering making or that they are holding.

Economic Crime and Corporate Transparency Bill

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Committee stage
Tuesday 18th April 2023 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I support what others have said. If we take these amendments as essentially saying that Clause 187 needs to be amplified, I, like the noble Lord, Lord Agnew, do not see the reason for sunsetting in 2030. It is not that far away given that, although this might commence immediately on Royal Assent, there are quite a lot of regulations and other things—and I do not know what the timescale of those will be—before everything is up and running.

As I see it, Clause 187 is about monitoring progress, getting everything up and running and seeing that it is okay, then just saying “that is fine”, but I think there is a case for ongoing monitoring to see what is changing and whether there is a need for any further update. The annual report seems to be a vehicle for that and, like others, I say that that is a good reason for it to continue, rather than being sunsetted, and if need be, perhaps to list a few more things that it will cover. Clause 187 could stay silent on that as it is quite broad, talking about

“the implementation and operation of Parts 1 to 3”.

If you took away the sunset clause, I could probably be quite satisfied.

[Baroness Altmann (Con)]

I briefly thank my noble friend for Clause 187. It is a valid attempt to achieve some of the aims of these amendments, although I wholeheartedly agree that the sunset clause is puzzling. I ask my noble friend to bear in mind that the expertise being offered by this Committee and Amendment 65 in the name of the noble Lord, Lord Coaker, as well as the amendment tabled by my noble friend Lord Agnew, are attempting to assist the Government in achieving the objectives that we all wish to see by injecting the difference between theory and practice. The Government want these measures to succeed. The Committee is trying to suggest that there are, in practice, a number of measures identified in each of these amendments—which, of course, could be combined—to guide those overseeing or producing the reports about what the important elements will be if we want to make this work well.

United Kingdom Internal Market Bill

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th November 2020 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank the Minister for some of the considerations on which he elaborated around some of the penalties, but I find it hard to accept this in principle. The information-gathering procedures in the Bill seem without any limit on them in the Bill—an unreasonable measure. To try to find a way to tackle that, I tabled three amendments. I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord Vaux, for signing Amendment 62A on the small business exemption. From among the amendments, we hoped the Minister might consider adopting that one or come forward with a version for Third Reading.

Understanding why the penalty provision is unreasonable requires analysis of the background. Section 5 of the Enterprise Act 2002 gives the CMA an information-gathering function for obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions; it does not give a fining power in order to compel businesses to respond. Such compulsion can come later, at a stage when a market study is undertaken, but the circumstances then are that some suspicion exists that businesses themselves have contributed to failures in the market. In contrast, Clause 38 of this Bill gives the CMA, in connection with reports under Clauses 31 to 34, or under Section 5 of the Enterprise Act when it concerns those clauses, the power to collect information and impose penalties on individuals and businesses in order to make them respond.

This power exceeds what the CMA can do for ordinary information gathering, and the provisions are a copy and paste of the powers that accompany the stronger measure of a CMA market study. But there has not been any corresponding copying of the other conditions that surround a market study; nor is it a comparable situation to a market study, because there is no suggestion that the things being investigated might be happening because of what businesses themselves are doing.

The powers in this Bill are about investigating regulations, which is entirely beyond the control of business, and there is no wrongdoing by business. These investigations are about circumstances created by legislatures and which legislatures wish to investigate. It is more comparable to a departmental consultation than to a market study, so what is the justification for coercing and burdening businesses, even if the Minister says there will be rules making that perhaps a bit less onerous? In Committee, the noble Lord, Lord Tyrie, said of these powers:

“The argument that they were derived from legislation the purpose of which was very different is well taken and might point to further amendment.”—[Official Report, 4/11/20; col. 726.]


That is the view of the recent, former chair of the CMA.

One of my amendments would delete the penalties clause, which is really what I think should be done, although I see little hope of persuading the Minister. My second attempt, Amendment 63B, tried to recreate some of the circumstances of a market study, but as the Minister recently confirmed that only regulations can be investigated, not business cases, it does not fit and it does not work. So my third attempt—Amendment 62A—concentrating where it really matters, exempts small businesses from the penalties. It uses the small business definition from the Companies Act, expanded to cover non-company structures. The Companies Act recognises that small businesses should have a lesser public interest burden by exemption from some filings and it recognises that in primary legislation—it does not rely upon regulations or codes of conduct. Why not apply similar logic here?

Small businesses do not all have the wherewithal to respond to onerous consultations, although many will help when they can, but the information requirements in this Bill can require work to be done or attendance at a given place, both causing financial loss. There is no compensation save travel expenses. Yes, there is a “without good reason” defence, but the smallest businesses cannot afford a legal challenge even if they knew of the defence.

Perhaps the CMA will be reasonable itself in setting its code of practice. The Minister hopes so, but there is no certainty, and a notice detailing applicable penalties is a frightening thing. Of course, it belongs to another culture, in which the CMA’s core functions require confrontation with business and suspicion that businesses and companies are doing wrong.

In Committee I asked the Minister what would constitute a reasonable excuse, giving a wide range of examples relative to small businesses. I got no reply, nor have I had a written reply despite having asked for one—although I know the Minister is very busy, not least writing to colleagues.

This is a huge encroachment on civil liberties and the freedom to conduct business. I hope that, at this 11th hour, the Minister will listen and come back with something at Third Reading to put in the Bill that reinforces the statements he has made. But, if there is not that prospect, this is a matter of deep principle—and I speak as somebody who ran a small business for 30 years—and I must give notice of my intention to call a vote on Amendment 62A if negotiations cannot proceed at Third Reading.

[Baroness Altmann (Con) [V]]

My Lords, I am delighted that my noble friend has listened to many of the concerns raised in Committee. I also welcome his saying that the Government will consult carefully on penalties, and the penalties will be limited. I thank him for saying that the needs of small businesses will be taken into account as well.

However, I cannot help but continue to support the amendment in the name of the noble Baroness, Lady Bowles, which I have added my name to, alongside the noble Lord, Lord Vaux, because the points she made seem most persuasive. She has clearly explained that the proposed penalty regime is not comparable with that of the current CMA, despite my noble friend indicating that it is.

The penalties under the CMA would apply in cases where firms are suspected of wrongdoing or unfair competition or practices. But it has already been acknowledged by my noble friends Lord True and Lord Tyrie that the Bill is concerned here merely with data gathering itself, such as would occur in consultations or calls for evidence, rather than information requests that follow from suspected failures. Therefore, I urge my noble friend the Minister to reconsider the position that many small businesses could find themselves in if information is demanded of them under these powers. It would take scarce corporate resources away from operating the business and is likely to pose significant difficulties for firms that do not have lots of employees available to comply with such an information request.

I point out to my noble friend the Minister from these Benches—as a member of a party that has always been the friend of small business and has promoted the value and virtue of people starting up businesses and running small firms themselves—that there is a significant risk here of imposing unreasonable burdens. I echo the call from the noble Baroness, Lady Bowles, for a meeting with him before Third Reading to see if we can find a form of words that the Government could accept, to avoid the need for a vote on Report.

I hope my noble friend understands that this is about a fear that the Bill imposes unreasonable and abnormal demands. For example, on pensions, the Pensions Regulator has not previously had the power to demand information from schemes unless it suspected wrongdoing. I hope we can find a way in this Bill to exempt small businesses from this burden and the potential threat of penalties.

Business and Planning Bill

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 13th July 2020 Lords Chamber

[Baroness Bowles of Berkhamsted [V]]

My Lords, I have two amendments in this group and thank the noble Lord, Lord Stevenson, the noble Baroness, Lady Altmann, and my noble friend Lord German for their support. These amendments follow up on points I made at Second Reading about whether it was right to suspend all of Section 140B of the Consumer Credit Act or, as my Amendment 46 suggests, only where it is related to affordability and terms required by the Bounce Back Loans Scheme.

In this context it is important to note that neither Section 140B on court remedies nor Section 140A defining the scope of an unfair relationship is limited to, or specifically mentions, matters of affordability. The court can take all matters into consideration and, if truth be told, there should be no need for any waiving of the section as the government terms for bounce-back loans would be taken into consideration.

We know that the banks want belt-and-braces protection and I would give them that on affordability, but it is wholly wrong to remove every protection, giving banks belt and braces while stripping small businesses naked against other overbearing activity; charges and default procedures immediately spring to mind.

The Minister explained in reply at Second Reading—I can agree with this—that the Government have put conditions to the loan that are intended to ensure it is sustainable, limiting to 25% of turnover with fixed, affordable interest as well as the 100% guarantee. I also agree that the businesses need to take responsibility. Despite that, defaults will inevitably happen because it is unpredictable what the effects of coronavirus will be.

The question then becomes: what governs subsequent behaviour? On the one hand—I am sure this worries the Treasury—what incentives are there for banks to try very hard to get repayment, especially if they get too tough and people like me make a fuss and cause them reputational harm? Is it not easier for them to just rely on the government guarantee? On the other hand, the relationship between a lender—or a lender pressed by government—and a small debtor is inherently one of the powerful against the weak and can be abused.

In the Commons, Kevin Hollinrake said that as co-chair of the All-Party Group on Fair Business Banking he supported

“the suspension of the Consumer Credit Act 1974 with regard to bounce-back loans due to affordability issues,”

and asked:

“but does the Secretary of State agree that it is vital that lenders still comply with the requirement to treat customers fairly in the collection process or if there are debt issues later on and that forbearance is applied?”

The Business Secretary replied:

“my hon. Friend raises an incredibly important point. Yes, forbearance is part of these measures, and we would expect that very much to apply.”—[Official Report, Commons, 29/6/20; col. 52.]

At Second Reading last week the noble Lord the Minister said that the Government were convening workshops with lenders to discuss how they will seek to recover loans where feasible, but none of that guarantees or restrains what lenders will do.

Although the lender cannot require security over personal property, security over the assets of the business is still possible, which may well be the essential tools of the trade, so carefully put out of reach during moratorium in the recent insolvency Act. What is to stop that at the first sign of default? As noble Lords have frequently reminded the Government, it is not the friendly local bank manager who deals with defaults; they go to the hard-nosed recovery units, where even the existing consumer protections seem to have held little sway, because small businesses cannot afford to take the matter to court and the FCA is reluctant to intervene in contracts, one-sided though they may be.

None of this, however, justifies removal of the last-stand method of redress of the courts for matters that are an improper use of unequal power: no protection against gouging behaviour over charges as soon as there is any default; no protection for excessive demands over security of a business’s assets; no preventing the use of the bounce-back loan default to trigger other eventualities, perhaps to force unfavourable loans or restructuring, which might then include instances where personal guarantees have been given. All those possible actions, of types seen in the past, seem to be outside the spirit of the bounce-back loans and the assurance given by the Business Secretary in the Commons, but how will they be prevented or rectified?

Disapplying the court remedy is removing a safety net available in all other circumstances. Why should it not apply here? Further, it seems that corresponding FCA discipline may also be disapplied, and other consumer credit matters have already been disapplied through statutory instruments. Returning to the matter of the workshops with lenders, will the outcome of those workshops be shared with Members of this House or the public?

It is not that I am necessarily expecting the worst behaviour, but the law must be able to address the worst. Therefore, I have put forward two amendments. Amendment 46 is exactly what Kevin Hollinrake said, and states that the disapplication should apply only

“insofar as such an order would relate to affordability or terms of the credit agreement required by the Bounce Back Loan Scheme.”

Amendment 47 says that:

“Repayment, rearrangement, fees or other new requirements may not be imposed on Bounce Back Loans in consequence of terms in or trigger events in other financial agreements with the lender.”


This is to prevent the kind of reach-through that I have mentioned previously.

Finally, I must mention that I understand Amendment 48, in the name of the noble Lord, Lord Stevenson, and his anxiety to get at the statistics of bounce-back loans. I add that, in a year’s time, I will start to become anxious to have statistics on repayments, defaults and forbearance. I beg to move.

[Baroness Altmann (Con) [V]]

My Lords, I support Amendment 46, to which I have added my name, and congratulate the noble Baroness, Lady Bowles, on her vigilance with respect to small businesses that are in a weakened financial state due to the Covid-19 restrictions; and her efforts to assist them in facing the large banks that may be trying to recover bounce-back loans, or penalise struggling firms in ways that were never intended by emergency legislation. I also congratulate the Government on their bounce-back loans initiative. However, I believe that this amendment is necessary to potentially address the asymmetry of power, which is a significant potential threat to the future of many hard-hit SMEs.

SMEs could face draconian recovery tactics, such as were employed by the infamous Global Recovery Group after the 2008 financial crisis, whether in the form of excessive fees or the taking over of business assets. The noble Baroness, Lady Bowles, is right that a court remedy is essential, not least to avoid giving a potential carte blanche to some of the less scrupulous bank executives.

Many banks wish to behave well, but this amendment is aimed at those who may not do so and is trying to anticipate and deter some of the practices that we have seen before. Bounce-bank loans are surely intended to help as many businesses as possible bounce bank, especially SMEs, rather than to offer a heads-you-win, tails-you-lose opportunity to lenders at the expense of business owners who were forced by the Government to suspend or curtail their business’s activity.

I also support the aims of Amendments 47 and 48 and hope that the Minister will listen carefully and agree to bring back amendments on Report that address this potential issue.

Pension Schemes Bill [HL]

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Committee stage & Committee: 4th sitting (Hansard) & Committee: 4th sitting (Hansard): House of Lords
Wednesday 4th March 2020 Grand Committee

[Baroness Bowles of Berkhamsted]

My Lords, in Committee there has been broad resistance by the Government to positive amendments suggesting what could be put in the Bill to give reassurance about many of the issues raised. The Government claim that that needs to be the case to preserve flexibility, but that does not get over the fact that there are very broad delegated powers in the Bill, as pointed out by my noble friend Lord Sharkey on the first day in Committee and by the Delegated Powers Committee. There is no certainty about how far those broad powers will be used. They are not called Henry VIII clauses for nothing, although delegated powers nowadays put Henry VIII in the shade. I believe the noble and learned Lord, Lord Judge, elaborated on that last year.

This amendment goes the other way. Instead of making suggestions to clarify what needs to be done, it clarifies five things that the Government may not do under the delegated powers. It is, of course, a probing amendment. I could have made a longer or different list, and a couple of matters are in it specifically to enable further discussion. However, despite the probing nature of the amendment, its form is not novel. It has appeared in other legislation, and I believe it appears several times in the withdrawal Act. It is a known way of addressing issues of concern in skeleton legislation. I may have helped it into a few pieces of legislation, but I consider that such a clause should always exist.

I shall take each of my points in turn. Proposed paragraph (a) states:

“Regulations under this Act may not … create a new criminal offence”.


That provision has been used before to constrain broad powers in legislation. A new criminal offence should always come to Parliament in such a way that it can be amended or rejected. I believe there are examples of finding a new criminal offence within a set of regulations with no amendment possibilities; indeed, I have been on one of the Secondary Legislation Scrutiny Committees, and there were examples. That should not happen. It would be a disproportionate use of delegated power—that has been suggested when I have run such a proposed clause—yet it has been used and therefore it is reasonable to suggest that it should not be. In the instance of pensions, and despite the fact that I have argued on this Bill that the criminal offences are not drawn wide enough, so I am certainly not a dud with regard to them, I do not believe that it would be reasonable to make new ones by regulation. The relevant clauses in the Bill are easily wide enough to do that.

Proposed paragraph (b) is about not creating a regulator. There appears to be a strong danger of that here because the wording that enables powers to be conferred on any person could enable the creation of a regulator. I think the wording is “discretion”, but my noble friend Lord Sharkey inquired as to what it meant and the reply came back that it could be any powers to any body, therefore it would enable the creation of a regulator. There is an example of that in Clause 51. If the person who is designated is already a regulator which has been set up under primary legislation, it is not a problem to expand its powers appropriately, but if a new regulator is created, that would be wrong. So why are there clauses in the Bill that are wide enough and of a description that would enable that? My wording here does not capture all the wrongs that could happen under any power to any person provisions, but at least it draws a line.

Proposed new paragraph (c) prohibits the creation of a multi-employer collective money purchase scheme through regulations. I refer back to issues that have already been discussed with regard to problems in the plumber pension scheme. There are other examples of difficulties caused by withdrawals from collective DB schemes. It can come around in particular when large and small employers are put together. Our discussions with regard to collective money purchase schemes have already made it clear that there are issues on which we are still uncomfortable in the context of the employee risk, even in a single CDC scheme. The Post Office scheme is not an everyday case; they will start out with some advantages. There will be even more unknowns in the multi-employer scheme. For example, the pool for risk-sharing is larger, which might seem attractive, but the risk of a larger group leaving is then an awfully large matter for the remaining pensioners to take on board.

Proposed new paragraph (d) is not to

“significantly restrict the powers of trustees”.

I do not mean to override the powers the regulator has to sanction trustees for improper behaviour. I put this point in because there has already been discussion as to whether some of this Bill’s provisions are encroaching on the day-to-day decision-making of trustees—for example, with regard to investment policies. There are noble Lords here who have far more experience of pension trustees than I do, and I particularly value thoughts on the usefulness of this provision. I want to be clear: I am not suggesting that this is anything to do with preventing regulators having the right balance of powers to do things. It is where they would intervene on day-to-day matters.

Proposed new paragraph (e) prevents amendment of primary legislation. I am aware that this is in conflict with the powers the Government have given themselves in Clause 47(5). It is a matter of principle. Pensions are a highly sensitive policy area, and it would be wrong if a Government could selectively change or revoke significant consumer protection provisions without scrutiny at the level of primary legislation. The clause says:

“Regulations under this section may among other things … amend, repeal or revoke a provision of this Part or any other enactment.”


A short while ago, when we were discussing one of the amendments from the noble Baroness, Lady Altmann, I think I heard that the Minister did not think there was the power to do certain things. Actually, the Government jolly well have it here, because they can “amend, repeal or revoke” anything they like—any enactment—so I think that was not a valid excuse, if I can put it that way.

Of course, the real problem here is that parliamentary procedures are deficient in that departments have to enter into a bidding process to get Bills and, because of time constraints, they do not come around superabundantly. The only other option, regulations, is not really democratic on the level on which they have become used. It is possible for the Government to do something about that, but it is my view that, until it is done, restraints must be placed on powers in the manner I propose—all the more so when there is lack of policy guidance.

I know we have had exchanges before on whether there is adequate policy guidance. Some of us think there is not, and the noble Earl has said it is all about implementation and the policy is there. I cited Clause 47(5), and Clause 51(3) says:

“Regulations under this Part may … confer a discretion on a person”.


When that was discussed—when the noble Lord, Lord Sharkey, raised the clause stand part debate on Clause 51—my immediate scribble was “may not create a regulator”, which was directly in response to what could be covered under “discretion”. That, therefore, is the reasoning. I could give more reasons and find many more examples of where discretion is conferred: a failure to really tie it down to the policies. Given that where helpful suggestions have been put forward that would perhaps have given more reassurance on the true nature and scope have been resisted, there is no alternative but to outline what may not be done. I beg to move.

[Baroness Altmann]

My Lords, I add my support to many aspects of the amendment from the noble Baroness, Lady Bowles. She is trying to do something very helpful for the Committee and the Bill. We have all expressed concerns about the wide-ranging powers in this Bill, which seem to go a lot further than normal for such Bills. I recognise that pensions Bills tend to have wide powers added to them, but it makes sense to identify areas where we would not wish the legislation to allow a Minister to do things that would normally come back to Parliament for our scrutiny or further legislation.

Pension Schemes Bill [HL]

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

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

[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.

Pension Schemes Bill [HL]

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 26th February 2020 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I signed the amendment of the noble Lord, Lord Vaux, and agree entirely with the principle of both these amendments. I was particularly drawn to the notion of having a threshold and notification, as provided by the amendment of the noble Lord, Lord Vaux. He circulated it for comment and therefore I signed it after some negotiations with him.

Put simply, if the deficit is large and the effort to close it is too small—smaller than the dividend—the payment of the dividend becomes a notifiable event. The sequel to that would surely be what the noble Lord, Lord Flight, has just pointed out: that it be looked at and perhaps in certain cases, though not all if there are other things that could be taken into account, the dividend payment be stopped. The point is that it is brought to the regulator’s notice, rather than the regulator potentially having to look at an awful lot of dividends and payments being made. Indeed, how will the regulator even find out about them? The amendment of the noble Lord, Lord Vaux, solves that little loop of how the regulator gets to know about them and has a reasonable number to look at rather than being overwhelmed.

In our negotiations, we tried to find a formula to keep the momentum going to close the gap, even within the five years, as a lot can go wrong in that period. I got as far as something like “the ratio of the dividend to deficit not being greater than the reciprocal of the remaining years and not conveniently commutative”. I concluded that, if I carried on in that way, I would have to put in a job application to Dominic Cummings.

More seriously—I refer here to the helpful meeting I had with the Minister and officials yesterday—I want to see some specific push in the Bill for the regulator to be tougher, including in setting the contribution schedule for paying down the deficits. As has already been explained by other noble Lords, TPR has come forward with a set of principles, but maybe it needs something to back them up and get them over the line in enforcing them.

In the meeting yesterday, it was pointed out that more powers are being given to the regulator in the Bill and that regulations will be forthcoming. That is well and good, but something has to make sure that the regulator is urged to use those powers and to be strong, especially in standing up to larger and more forceful companies and individuals. We know that the record there is not necessarily all that good. The policy impetus needs to come from government and Parliament; otherwise, there may be more power but no enforced policy shift.

We also know that boards will take advice on these kinds of matters and be told what the market norms are, or at least what other companies have done. If the dial is to be shifted, the advice has to be shifted. The way to ensure that advice is shifted is for there to be an indication of the policy in the Bill, because an adviser cannot go against that in their duty to advise the companies.

It was very good to hear that the new offences that we discussed on Monday—which seems a long time ago now—are wide enough to embrace advisers, but you have to get at what their duty is to those they are advising. There are lots of reasons to have something in the Bill to make sure that the principles already outlined by TPR have that backing to be enforced and have that effect. As I said on Monday, it should not be normal to accept overly long continuation of deficits just because a company is well capitalised.

There can be many claims on and reasons for that extra capitalisation—there may be lots of tentative reasons why they need it. There might be plans to spend it to buy another company. All kinds of things could be going on, and what looks like a good capital margin could actually be shoring up many other things as well as the pension deficit. What is the excuse to the Pensions Regulator? What excuse might be given to other sources? Some of the clever analysts may work out what is going on; the ordinary investor and the ordinary pensioner is unlikely to do so. Therefore, I support the principle of both the amendments: something should go in the Bill to push or shore up the Pensions Regulator in its actions.

[Baroness Altmann (Con)]

My Lords, I rise briefly—I have added my name to one of the amendments—to support the concept that has been so well explained already by noble Lords and to echo the warnings that this is a very important time in our defined benefit pension system, as we still have employers attached to schemes and, in some cases, members contributing. Some schemes are still not completely closed. Once a scheme has closed to new members, it will not be too long before it closes to new accruals and it will effectively be in run-off. While there are still employers with an interest in the scheme and before we get to the period, which will come in the next 10 years or so, when there is no economic interest between the employer and the scheme and it is seen merely as a major liability—with more and more companies looking for ways to get around the deficits—now is the time to be collecting as much money as possible.

Obviously, one does not want to damage the ongoing viability of the employer, but there needs to be more recognition of the fact that the pension scheme is a debtor of the company—not all companies see it in that way—and the choice between dividend payment and deficit funding should not be just between the interest of shareholders and the interest of pension scheme members. The pension deficit has people’s lives attached, so there is a higher importance here.

When one looks at the provisions of the Companies Act 2006, in particular with reference to Amendment 84, Section 830 says that a company should not be permitted to pay out a dividend if it has not made sufficient profit to cover its costs or if there are losses in the company. What is not explicit, but is made explicit in the amendment, which was originally part of my noble friend Lord Balfe’s Private Member’s Bill, is that the accounting measure of the pension deficit does not reflect the actuarial reality as estimated by a scheme actuary, or perhaps by trustees, of the true scale of the obligation—in other words, potential losses—that the company faces. Therefore, redefining the accounting measure and taking account of the actuarial measure would put the payment of dividend on a different plane. That is to be reflected in Section 830A, which would be added after Section 830, in terms of justification for payment of a dividend that might otherwise look viable.

Pension Schemes Bill [HL]

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Committee stage & Committee: 1st sitting & Committee: 1st sitting : House of Lords
Monday 24th February 2020 Grand Committee

[Baroness Altmann (Con)]

My Lords, I support all three amendments. I have added my name to Amendment 2 —so excellently moved by the noble Lord, Lord Sharkey —which intends that any CDC scheme that is applying for authorisation must have a considered strategy for the long-term intergenerational fairness considerations that we have just discussed. The scheme would need not just buffers—we will talk about buffers in the next group—these would also be required against scheme failure and scheme wind-up. In this case I would prefer to think of these as risk margins, to recognise the long-term risks to remaining members, most particularly if scheme members transfer out. That is the particular aim of my Amendment 7, which would also impose on the scheme, when calculating benefits, a requirement to consider how it will recognise the risks in future years if somebody cashes in the pension today.

The cash equivalent transfer value is not really a benefit under the scheme. If the member is in poor health, for example, they will be selecting against the scheme, because the scheme will assume a certain life expectancy. Some will have less and some more, but if all those who have lower life expectancy transfer out at full value, then clearly the pensions in payment are too high. If they take money when markets are performing well, they may receive more than if they had waited longer and there was a market correction, so the remaining members, again, will bear the cost.

Given that a CDC scheme is designed specifically to pay a pension rather than a lump sum as an alternative, without the same draconian guarantee requirements on employers, to the defined benefit system that we have had traditionally in this country—which as the noble Lord, Lord McKenzie, rightly says, is the gold standard—we would not want this to be at the detriment of defined benefit but rather as an alternative to defined contribution. However, those members who transfer out are not placing their trust in the scheme; they are not saying, “I want my pension to come from the scheme,” and they are leaving the remaining members to bear an extra risk. I remind noble Lords that we have seen this in defined benefit schemes with the minimum funding requirement, and also with the rules around scheme surpluses. In the short term it was judged that an amount in the scheme was sufficient to pay a specific level of pension over the long term and it turned out that that was not the case, because assumptions were incorrect, markets changed or demography changed. Therefore, it is wholly inadequate to assume that whatever is happening today should be reflected, for example, in cash equivalent transfer values.

As the noble Lord, Lord Vaux, said, it is not just intergenerational fairness; it will select against today’s pensioners, potentially, because if over the next couple of years markets are weak, pensions will need to be reduced more to reflect people who transferred out at what seemed to be fair value two years previously. I hope my noble friend will consider the thrust of these amendments and perhaps look at whether we can introduce some requirements for schemes when members transfer out or when market values are judged to be at a certain level. Can we insert some risk margins that will protect members who rely on this scheme for their lifetime pension in the future?

[Baroness Bowles of Berkhamsted (LD)]

My Lords, like others, I speak in favour of all three amendments. In fact, I signed Amendments 6 and 7 but too late for it to show on the Marshalled List in respect of Amendment 7. I was one of the many noble Lords who mentioned intergenerational fairness, and fairness more generally, at Second Reading because, as has been explained, a significant number of members, particularly older members but not necessarily just them, transfer out after some good times for investments in the investment cycle. That leaves others bearing the brunt of later down cycles, hence the Ponzi analogy. I am actually not quite sure what “fairness among all members” actually means—it is difficult because of, for example, the different longevities between men and women—but I signed Amendment 6 because that was the closest thing to saying, “You’ve got to look widely at everything.”

I have come to the conclusion that the only way in which you can have fairness is to have some kind of buffer, which we will come to later on, or some kind of risk margin as proposed by the noble Baroness, Lady Altmann, or maybe both. In the interests of fairness, those who are transferring out should have to take their share of the risk; otherwise, if you are a good market-watcher you could perhaps spot your moment to make your move, and then that is perhaps unfair on the rest.

I, along with others, think that something must be enabled for these measures to be required. It is nice to know that something is already envisaged for the scheme, but there needs to be something for every scheme. There should at least be a requirement for that, and actually I think there should be a permission for things such as buffers and risk margins, rather than a prohibition.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

My Lords, I have no objection to making things the same everywhere, but last time I came across this 0.75% cap I did not ask a question, so I will now. What exactly does it cover? Compared to some SIPP investor platforms and so forth, it seems rather high. Does it cover all the trading charges as well? You can get 0.15% from Vanguard, 0.25% from AJ Bell and up to 0.45% with all your trading charges covered from Hargreaves Lansdown. I could go on. If you go to some of the insurance companies —I will go on—they tend to be greedier, up to 0.3%, but that is far short of 0.75%, so what is this paying for?

[Baroness Altmann]

I shall raise similar points. Will ask my noble friend say how the 0.75% charge cap was arrived at, given that the purpose of the CDC scheme, as I understood it, is to provide members better value than if they had their own defined contribution fund and to benefit from the economies of scale of collective management and administration, which clearly should be much lower per member than an individual defined contribution scheme?

Another point my noble friend mentioned is that that there should be no exit penalty. If that were the case, the issue we were discussing earlier about potentially reducing or applying a risk margin to transfer values would become impossible. Intergenerational fairness, which we were concerned about in our earlier discussions in Committee, may be undermined if there is an express prohibition on what may be called an exit penalty, but which to others is a risk margin or buffer against future market dislocations or changed assumptions.

Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019

Debate between Baroness Altmann and Baroness Bowles of Berkhamsted

Monday 18th February 2019 Lords Chamber

[Baroness Bowles of Berkhamsted]

I thank the noble Lord for that intervention. A statutory instrument on the endorsement of IFRS will be coming along from BEIS—I am already taking an interest in that. IFRS will still be a global standard, but I think there are now 144 countries that adopt and endorse them, in their own particular way. They normally go straight through, but there is sometimes a certain amount of adjustment; the Japanese have made some adjustments, as have the Australians. In fact, the EU has also done so here and there. I do not think the intention is that the UK-endorsed IFRS will differ from the EU ones, but—I say this with regret—that does not stop the EU saying that it will not recognise as equivalent those that are endorsed in the UK.

Recognising the need for continuity and stability in the financial markets, although the UK might have made rather a mess of it at the Brexit negotiation level, we probably have the high ground when it comes to how we are dealing with the conversion of legislation, given that it has to happen. However, I am just pointing out that some of the asymmetries—not these two, particularly—cause some difficulty. I think the IFRS one, such as it is, will cause more difficulty to the EU than to the UK.

[Baroness Altmann (Con)]

My Lords, I rise briefly to express my concern from these Benches that we may set some dangerous precedents in the processes that we are adopting in discussing and passing these SIs. I understand the difference between consultation and engagement on these issues but I have significant concerns. If the SI was indeed ready on 21 November, there has been time for a proper consultation, which does not seem to have occurred. It would be helpful to the House if we had more information on what engagement has taken place.

I fully accept that, as my noble friend Lord Leigh has said, industry is in favour of adopting these regulations, should we enter a no-deal scenario. However, there are reasons for us to be concerned across the House at the procedures taking place. We are being asked to approve legislation based on evidence that we perhaps feel is incomplete. I will not vote against the Government but I would like to express my concerns.