Savings (Government Contributions) Bill

Debate between Baroness Drake and Baroness Neville-Rolfe

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 12th January 2017 Lords Chamber

[Baroness Neville-Rolfe]

It is an important but esoteric point. If I may, I will write to the noble Lord. I am sure that in time I will understand these arrangements better. On his point about saving on behalf of others, individuals will pay into accounts and receive a government bonus. There will be no restrictions on what individuals do with the bonus or savings, or where the money has come from. However, HMRC will carry out additional checks on a number of accounts and will respond to any intelligence it receives from third parties where this gives rise to doubt about a person’s eligibility.

The noble Lord asked about the Government’s latest position on borrowing from lifetime ISAs. The Government continue to consider whether there should be flexibility to borrow funds from an individual’s lifetime ISA without incurring a charge if funds are fully repaid, but have decided that it will not be a feature when it becomes available in April 2017.

The noble Baroness, Lady Drake, said that the Help to Save scheme was not generous enough. On increasing the 50% bonus, our pilots for the saving gateway showed that a higher match rate of 100% made people only 5% more likely to open an account than a 50% match, and the amount of money saved into accounts was not significantly affected. On the two-year bonus period, I can make it clear that no one will be penalised for early withdrawals if they need to make any. The rationale of the scheme is to encourage people to develop a regular savings habit that will last beyond their participation in the scheme because it is valuable more generally.

[Baroness Drake]

I appreciate that this is a money Bill, but on the noble Baroness’s last point—I really do want the Help to Save scheme to work—the fact that the evidence shows that a matching contribution from the Government raises the participation rate by only 5% is not a reason not to match, because for those who are participating, their resilience is greater. A sort of apples-and-pears argument is being deployed here. A more generous match increases the resilience of those who do participate.

On the participation rate, all the behavioural evidence is that simply having good information does not necessarily deliver the level of behavioural response. More of a nudge, more of an active plan, may deliver more than a one-in-seven participation rate.

[Baroness Neville-Rolfe]

I take note of the noble Baroness’s point. There is a balance here. I have set out why we have got to where we have got to. Indeed, I look forward to debates on the statutory instruments for this Bill in the fullness of time. I am sure nobody has ever said that before.

The noble Lord, Lord Sharkey, asked about other providers. He referenced a discussion in the other place about the involvement of credit unions. We have appointed NS&I as the scheme provider to remove significant administrative and compliance costs associated with allowing different providers to offer accounts. An option where we fund NS&I to provide accounts while allowing other providers to offer accounts on a voluntary basis would not provide value for money, but—this answers his question—we shall not rule out the option for a range of providers to offer accounts as long as they deliver national coverage. We felt that the credit union did not do that. That is why the Bill has been drafted to accommodate different models of account provision, although other models are not in the current plan.

BHS

Debate between Baroness Drake and Baroness Neville-Rolfe

Monday 6th June 2016 Lords Chamber

[Baroness Neville-Rolfe]

I thank my noble friend. I am not familiar with the earlier legislation, which has of course been replaced, but I can say that we have set up, in good time, this Insolvency Service inquiry. We are hoping to get the results from the administrators around the end of July. There are powers to disqualify directors and any evidence of criminal behaviour can be referred to the relevant investigatory authority for investigation and, potentially, prosecution. We have to do the right things that we can do under the existing powers, and we are pushing ahead with that. Then, obviously, we need to reflect on whether or not those powers are the right ones. I should have said earlier that the funds made available for redundancy will come out of the Government budget rather than the administrator’s.

[Baroness Drake (Lab)]

My Lords, I declare my interest as a trustee of the Santander and Telefonica pension schemes. I welcome the Government’s commitment to assisting the workers and their families who have been impacted by the events of BHS and Austin Reed. For them, this is a real and human story. Job loss is always stressful, people are anxious and families are affected, so anything the Government can do to find these people new employment has to be a priority. As we get into the investigation of BHS, several thousand people will be anxiously wanting to know how and when they can get into employment and fund their mortgages, children, homes and everything else.

I am conscious that there are various bodies investigating the circumstances surrounding the collapse of BHS and the implications for its pension scheme. Therefore, I do not want to express an opinion on the role of any player but I will ask the Minister two specific questions. The rules of the DB pension regulatory system were written in the context of the view taken of risk at that time. Regulation can never remove all risk but the economic and commercial circumstances have changed. We live in a post-2008 world where assumptions about growth, interest rates and investment returns are more restrained, and companies frequently change hands or corporate restructurings occur. These can happen quite quickly, so the assessment of an employer covenant backing a given pension fund has to be frequently monitored and reviewed. It cannot be done and simply put on the shelf. I know from personal experience that things can move very quickly, and the circumstances that you find your scheme in can be materially quite different. Will the Government consider reviewing whether the regulator’s powers remain fully fit for purpose and are still sufficient to allow it to address threats to the funding of DB pension schemes?

The BHS events also confirm what I already knew as a trustee: that trustees have little or no powers to intervene in a corporate event, even when they anticipate it will weaken the employer covenant significantly or prejudice the scheme’s funding level. Are the Government considering a review of the sufficiency of trustees’ powers where a corporate event significantly weakens the position of the pension scheme? At the moment there is very little they can do other than report to the regulator.

[Baroness Neville-Rolfe]

I am grateful for the noble Baroness’s thoughtful comments. I, too, used to be a pensions trustee and my experience was that you lived in constant fright of doing the wrong thing and that you really did try very hard to be on top of management and to make sure your responsibilities were fulfilled—otherwise the riot act was, rightly, read to you by pension schemes’ legal advisers. You also tried to look ahead, and any suggestion of M&A was always a good opportunity to try to make sure that the pension fund always got topped up. I know that the Pensions Regulator has spent a lot of time trying to train the remaining defined benefit pension schemes to do things well.

We need to see the results of the insolvency and the Pensions Regulator investigation to see where we get to. Obviously, these kinds of arrangements are kept under review. I take the point, also made by the noble Lord, Lord Mendelsohn, that circumstances are a bit different now. Trustees have strong powers, and if you were to look at the whole situation, you would need to look at that as well. These defined benefit schemes are of course, in a way, a good thing, because the employer provides pensions for the workers so that they do not have to have state pensions. These schemes, which have now largely disappeared, can be extremely favourable for those who have them, giving them security, making them loyal to the employer and so on. It is a difficult area and I am in danger of straying into the territory of the Pensions Minister.