Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2022

Baroness Janke Excerpts

Tuesday 12th July 2022 Grand Committee

[Baroness Stedman-Scott (Con)]

The CMA found among pension schemes that there was a low level of engagement by trustees and a lack of clear and comparable information on which to assess value for money. Trustees were being steered by consultants towards their own higher-cost fiduciary management services, giving them an incumbency advantage. Ultimately, trustees were more likely to pay higher prices for these services than they should. Overall, the CMA found that this was having an adverse effect on competition for these services and likely bringing financial detriment for employer sponsors of defined benefit pension schemes and savers in defined contribution pension schemes.

It is important to note that both services were said to influence decisions affecting pension scheme assets worth over £1.6 trillion and the retirement incomes of millions of people. Any negative impact on scheme outcomes will be significant, and will accumulate and compound over the long term in which pension assets are invested. The CMA’s report proposed recommendations and remedies to encourage better trustee engagement when buying services, and better disclosure of fees and performance. The CMA made it clear that some of these remedies would be implemented by an order. That order was made in June 2019 and came into effect later that year.

The CMA also recommended that the Department for Work and Pensions take forward legislation to bring into pensions legislation the provisions of the order for two specific remedies: first, the requirement to carry out a competitive tender in certain circumstances before appointing, or continuing to use, a fiduciary manager; and secondly, the requirement to set objectives for, and review the performance of, investment consultants appointed by the trustees.

The CMA also recommended that legislation should provide for the Pensions Regulator to oversee these new duties on trustees, rather than leave long-term enforcement action against occupational pension scheme trustees to the CMA. The DWP, on behalf of the Government, committed to do this in early 2019 and consulted on its proposed legislation in summer 2019. However, because of necessary reprioritisation brought on by the Covid-19 pandemic, work on this was delayed until this year.

The regulations before the Committee fulfil the commitment the Government made in 2019 to accept the CMA’s recommendation and to integrate the requirements in the CMA’s order that apply to trustees of occupational pension schemes into pensions legislation. Subject to approval, this instrument will require trustees of occupational pension schemes to set objectives for persons who provide them with investment consultancy services, to review those objectives at intervals of no more than three years, and to annually review the performance of those providers against those objectives. This setting of objectives will enable trustees to monitor the performance of their advisers.

The regulations also require trustees to carry out a qualifying tender process when continuing to use existing fiduciary management providers, or appointing new ones, if the scheme meets the asset management threshold. The threshold is met when fiduciary managers covered by the regulations manage 20% or more of in-scope assets. The regulations also set out what the qualifying tender process is and when it must be carried out. Additionally, through the regulations the Government have defined “investment consultancy provider”, “investment consultancy services”, “fiduciary management provider” and “fiduciary management services” for the first time in pensions legislation.

The Government believe that these duties will encourage trustees to become more engaged with the way services are bought, monitored and evaluated, or to consider more efficient consolidation options. In turn, this will lead to better outcomes for scheme members and employer sponsors of schemes.

For the most part, the regulations replicate the effect of the relevant provisions in the CMA’s order. However, there are some small differences that reflect government policy. One such difference is about the type of schemes that are exempt from the requirement to set objectives. The CMA excluded trustees of schemes that are sponsored or funded by providers of investment consultancy and fiduciary management services from setting objectives for their investment consultant and from tendering for fiduciary management. The regulations bring these schemes back into scope of the requirement for trustees of such schemes to set objectives for their investment consultant. It is government policy that members of such schemes should still benefit from a well-governed, high-performing investment consultant, despite the trustees and the investment consultant being part of the same organisation.

The regulations also do not make any provision about local government pension schemes. This is a matter for the Department for Levelling Up, Housing and Communities and the devolved Administrations in Scotland and Northern Ireland to bring forward their own legislation. As such, for local government pension schemes, the CMA’s order, to the extent that it imposes requirements relating to investment consultants, will continue to remain applicable for the time being.

Finally, this instrument does not create any exceptions from the requirement to tender for fiduciary management services in cases where parties are connected only because they are participating in a joint venture. This is to avoid the risk that, where a scheme sponsor and a fiduciary manager had a joint venture, they would not be required to run, or bid for, a tender. The CMA order contains a limited exception for joint ventures. This change has been made to disincentivise firms from creating joint ventures to circumvent this duty.

As stated earlier, the regulations bring the monitoring and enforcement of these trustee duties into the regulatory remit of the Pensions Regulator. Trustees will be required to provide certain information about the use of investment consultancy and fiduciary management providers in the scheme return which they must complete each year and return to the Pensions Regulator. The information enables the Pensions Regulator to monitor compliance with the duties set out in the regulations. The regulator has said it will update its published guidance to reflect the final regulations ahead of them coming into force.

In conclusion, these trustee duties concerning the way investment consultancy and fiduciary management services are bought and evaluated will facilitate good governance, which will ultimately mean services that are better value for money, benefiting members and the employer sponsors of pension schemes. Of significant importance is that the regulations bring compliance, monitoring and enforcement of the duties under the remit of the Pensions Regulator. I therefore commend this instrument to the Grand Committee and beg to move.

[Baroness Janke (LD)]

My Lords, I thank the Minister for her presentation and explanation of why the Government are introducing this statutory instrument. The Explanatory Memorandum states that it

“will encourage better trustee engagement, transparency and governance when buying investment consultancy and fiduciary management services. It will require trustees of occupational pension schemes … to set objectives for their investment consultant and carry out a tender exercise in certain circumstances before appointing a fiduciary manager. It will also enable The Pensions Regulator … to oversee the remedies which apply to such trustees and ensure compliance.”

The problem that the regulations are designed to address is focused mainly on smaller occupational pension schemes which need to take advice on their investment strategy. The investigation by the CMA of advice to pension schemes found that there was a low level of engagement with trustees, a lack of information for assessment of value for money, and that customers were steered by consultants towards their own higher cost fiduciary management services giving them incumbent advantage.

The remedies proposed by the CMA are to become part of the new regulations, with TPR ensuring compliance. We are broadly supportive of the measures in the SI but have a few issues for the Minister to address. First, can she reassure us that the new process is not onerously bureaucratic and time-consuming for small schemes? Certainly, the introduction of competitive tendering has in some cases led to a very time-consuming process, so I would like her assurances on that.

What about the cost to smaller pension schemes? The impact assessment has detailed calculations but, probably because it is very long and detailed, I did not find a great deal on the need to empower and train trustees and managers to introduce the new system.

Also, the DWP has a strong view that bigger is better as far as pension schemes are concerned. These regulations are needed to improve the quality of advice to smaller schemes with less experienced trustees. Will the Minister say how the consolidation of DB and DC schemes is going? The Minister urges consolidation and the Government are starting to put in place a “comply or explain” duty on small pension schemes to show that they are providing value for money for members or, if not, to merge into something bigger. Has this been successful? How has it been evaluated? Can she say something about what the Government are doing about the barriers to consolidation? For example, what is the cost of legal advice and consultation with members to wind up a scheme and merge into something bigger? In small schemes, costs could be high relative to the gains from consolidation, so what are the Government doing about that?

We support the proposals and look forward to best-quality advice and higher transparency for members of the scheme. I look forward to the Minister’s response to the points that I have raised.

Social Security (Special Rules for End of Life) Bill [HL]

Baroness Janke Excerpts

2nd reading
Tuesday 24th May 2022 Lords Chamber

[Baroness Janke (LD)]

My Lords, like other Members I welcome the Bill and the changes it introduces. As the noble Baroness said, it is right that we pay tribute to some of the campaigners. The Scrap 6 Months campaign, launched by the motor neurone disease charity and Marie Curie, called for urgent review of the special rules for terminal illness. The campaign identified that more than 100 people a month will die within six months of being rejected for disability benefits, spending their last weeks fighting for these. The noble Baroness, Lady Noakes, described to us the situation suffered by people with motor neurone disease, as well as their specific and intensive care needs.

Dying people were being plunged into uncertainty and a web of complexity in the process of applying for benefits under the SRTI scheme. The DWP’s failure to recognise when someone was reaching the end of their life resulted in benefits being cut, non-medically trained assessors failing to understand the severity of the circumstances suffered by some individuals and, as the noble Baroness, Lady Finlay, identified, the need for an independent procedure for appeal. DWP non-specialist clinicians challenged medical evidence provided by doctors, which resulted in delays and rejected claims or lengthy application processes and untimely decisions, even though a medical examination was not necessary under the fast track.

The APPG for Terminal Illness published a report, Six Months to Live?, which also contributed to the policy debate on reform and put forward a number of important proposals. The report highlights some of the difficulties suffered because of long and arduous DWP processes. My noble friend Lady Brinton referred to this and to the frustration of people trying to process their claims. The noble Lord, Lord Balfe, also mentioned the issue of people being able to access the claims procedure properly and identified the need for publicity. The right reverend Prelate the Bishop of Carlisle really welcomed the idea of more clarity and a simpler process that is much more easily understood by claimants.

The changes themselves are welcome: the extension of the definition of “terminal illness” to 12 months and the benefits to be fast-tracked being extended to DLA, attendance allowance and PIP. As many Members have mentioned, consistency with the NHS is also to be welcomed. However, being diagnosed with a terminal illness is already difficult and distressing, not only for the person but for their loved ones. From what I have read, it seems that the benefits system should better support people in that situation, not exacerbate their distress or place unreasonable burdens on medical professionals. There are other things that could change that could make things easier and apply a much more compassionate approach.

Unfortunately there is plenty of evidence of the lengthy, complicated and often repetitive procedures and practices of the DWP, which obstruct people who have other major pressures in their lives. My noble friend Lady Brinton asked how long the process will take and hoped that the 12-month extension will not lengthen the process and make it more inaccessible. In the light of this evidence, will the Minister say how DWP processes will enable faster decision-making? Will the Government consider some form of special unit to be sure that the additional six months will not result in more delay to decisions on claims? The points my noble friend Lady Brinton raised about eligibility for benefits for children is an area that needs to be examined, and the noble Baroness, Lady Finlay, mentioned the need for more extensive examination of centrally held data to provide a background to policy-making.

The report of the APPG for Terminal Illness makes a number of recommendations that would improve the system. One is that a person who is diagnosed with a terminal illness based on the clinical judgment of a registered medical practitioner should be able to claim benefits through the special rules from the time of their diagnosis. What is the Minister’s response to that? When will the Government consider this more compassionate approach? Given the circumstances at the end of life, when doctors are reluctant to provide evidence that is distressing for the individual and their loved ones, this approach is far more flexible and compassionate.

The report further recommends that the DWP should adopt the same approach as it has taken for severe conditions, with a light-touch review of benefit awards under the special rules for terminal illness only after 10 years. This would provide a more flexible approach and would dispense with the constant need for reassessment and reapplication, which happens in too many cases.

Lastly, it recommends that the DWP ends the practice of non-specialists DWP assessors challenging and rejecting the medical evidence provided by clinicians to support a benefit claim under the special rules. This is another aspect of DWP working that needs review. Will the Minister respond on this?

Will the Minister assure us that there will be a review of DWP practices in the light of this legislation? It will be essential if the fast-track system is to work effectively, so that people at the end of life with special, intense and often costly needs receive the benefits on which they depend in a timely and compassionate way.

Senior Citizens: Means-tested Benefits

Baroness Janke Excerpts

Monday 23rd May 2022 Lords Chamber

[Baroness Stedman-Scott (Con)]

When the benefit uprating comes, based on the September figures for that year, the triple lock will be restored.

[Baroness Janke (LD)]

My Lords, what has been done to improve the application process for pension credit and make it simpler and more easily accessible to many pensioners, particularly those on their own and older pensioners who may not have easy and quick internet access?

[Baroness Stedman-Scott (Con)]

The noble Baroness’s question prompts me to go back and have a look at the application process. Perhaps I can come back to her on that. I am not sure that I can answer her other question about the internet, but I will go back and see what we are doing in particular to encourage and help people to claim via that.

Universal Credit (EAC Report)

Baroness Janke Excerpts

Wednesday 23rd March 2022 Grand Committee

[Baroness Janke (LD)]

My Lords, I too thank the noble Lord, Lord Forsyth, and the Economic Affairs Committee. As the noble Lord, Lord Kerr, said, it is a very august and illustrious committee, as I am sure it was when he was a member of it. It is of great encouragement to me, and I am sure to the noble Baroness, Lady Lister, and others, that we have this support for major changes to universal credit. I have to say that in the past we have not had a great deal of support for the kinds of changes proposed in the report, many of which we have raised. But I am encouraged today, and I hope that we have two people here who will see some of these fundamental changes through and campaign for them. I know the Minister; she is also a campaigner, and I know she will be very good at understanding the issues raised in the report and their effect on the people they apply to.

An effective safety net must provide realistic and accessible support for anyone who falls on hard times, whether through loss of a job, bereavement, relationship breakdown or other personal catastrophes. Any of these could happen to all of us in periods of our lives; they often do. The current system manifestly does not do this, as the report evidences.

The report identifies and analyses a range of familiar problems, as well as the lack of confidence, failure to understand how the scheme works and general feeling of powerlessness experienced by people who try to use the scheme, and gives practical recommendations. As many noble Lords have said, there is a need for a fundamental revisiting of the scheme’s finances. I know from reading the book Clashing Agendas by the noble Lord, Lord Freud, about the pressures in place when the Government tried to establish the scheme and set it on its way. As the report says, now is a timely moment to look at the fundamental financing of the scheme.

All noble Lords mentioned the crisis we face in energy and prices. The sticking plaster today in the form of an increase in the household support fund seems to show contempt for the suffering of so many people. As I said, I am grateful for the report because it does so much to analyse with the committee’s rigour and bring forward firm proposals that are deliverable, so I am hopeful.

As the noble Lord, Lord Forsyth, said, confidence in the scheme is extremely low. There is an overall perception of a chaotic system that is incomprehensible, inaccessible, intractable in its decisions and harshly punitive of any perceived shortcomings of claimants. I have written down some of the report’s themes that I hope the Minister will respond to, particularly the recommendations, which seem very sensible, as many noble Lords have said.

As I said, more funding is definitely needed to provide adequacy. The current level of support is quite rightly said by many to not be enough to live on. It needs to be a secure and fair scheme that provides proper support for claimants when they need it. So the recommendation that the Government should have committed

“to making the increase in the standard allowance permanent”

is very welcome. The recommendation also says:

“To avoid undue hardship and poverty it should also examine the relative levels of benefits for couples and those with children and investigate whether there are other claimant groups who do not receive adequate income.”


Many noble Lords have referred to the delays in the system. The five-week wait is ruinous for many people. I was encouraged to see that, during the lockdown, many people who would normally be in work were made aware of just how awful it is to have to wait five weeks when you have no money to put food on the table.

The inflexibility of the monthly assessment period has been fairly well documented—in fact, I think there has been a court case on it. The idea that people should be paid monthly because it corresponds to work takes no account of the way people work nowadays. It takes no account of the fact that people work on zero-hours contracts and that many need to have two jobs in order to live. Not only do they have to wait but, worse still, they have deductions made because they were overpaid because of the schedule, not because they have too much money. As I have said, for many people, it is incomprehensible that they should be put through this system.

The recommendations on conditionality, sanctions and the punitive approach are welcome. The suggestion of a written warning system is very helpful, because many claimants do not even know that they are going to be sanctioned or realise it only when they have just had their money cut. Similarly, I support the recommendation that deductions from universal credit be first subjected to an affordability assessment and made only in accordance with what the claimant can afford. I would like to see that brought in.

Some elements of the system actually increase poverty, including the two-child limit—if the right reverend Prelate the Bishop of Durham were here today, he would have a great deal to say about that—so I welcome the recommendation that the two-child limit be reinvestigated. I am not necessarily sure about the tapered allowance for large families; I would like to see the evidence that that would adequately support larger families before I agreed with it. However, we certainly support the ending of the benefit cap, which we believe is another direct cause of poverty for many people.

Many noble Lords, particularly the noble Viscount, Lord Brookeborough, mentioned that the Government’s response is not surprising. I am sure that the noble Baroness, Lady Lister, who has been campaigning on this subject for much longer than I have, was not surprised by it either. However, we are encouraged that the chilling economic circumstances described so ably by the noble Lord, Lord Bridges, might bring about some rethinking in the Government and hope that it will be an incentive. One hates to think that it needs a financial and economic crisis and a crisis in the cost of living to make the Government rethink, but if that happens, we will be very pleased to see it.

As many noble Lords have said, it is the most vulnerable who will suffer the most punishing circumstances in the cost of living crisis. The noble Lord, Lord Kerr, referred to indexing universal credit to the price of heating and lighting. That would be a welcome measure. The point on cuts in budgets over the past 40 years, made by the noble Viscount, Lord Chandos, is, again, one that we need to take into account. Comparison between the furlough and what people receive on universal credit is very telling indeed.

This has been a call to arms from the Economic Affairs Committee and I hope that the noble Lord, Lord Bridges, will take the fight forward as chair. I know that he will have plenty of people who will be willing to help him. I hope that, as a result, we might see a real advance. I again thank the noble Lord, Lord Forsyth, for his strength of purpose and his willingness to take on big challenges, and hope that he will continue to do so.

Social Security System

Baroness Janke Excerpts

Tuesday 22nd March 2022 Lords Chamber

[Baroness Stedman-Scott (Con)]

These matters are discussed in all our ministerial meetings. I can confirm to the noble Baroness that I will redouble my efforts in the department to raise these issues. The Government want to do what we can to support people in these difficult times—please do not think that we do not want to.

[Baroness Janke (LD)]

My Lords, the report provides testimony from claimants that they are not always treated with respect by DWP staff. Will the Government introduce measures to improve the relationship between claimants and the DWP; for example, by providing a single point of contact or caseworker, including people with lived experience in staff training, and ensuring that staff understand the impact of disabilities, domestic abuse and racism on claimants?

[Baroness Stedman-Scott (Con)]

I am very disappointed to hear that there are claimants who feel they are not treated properly. I can confirm that the single point of contact—the one person—is the work coach. We have been expanding their role and training them to deal with the issues that the noble Baroness raises. We are giving them reasonable case loads and we are making sure that they address and help people with the dignity that they should receive. One of the most important points the noble Baroness made was on including first-hand experiences. It is in speaking to clients and spending time with them to find out how their experience has been that we are able to learn and make changes to the system.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2022

Baroness Janke Excerpts

Wednesday 23rd February 2022 Grand Committee

I am required to confirm that these provisions are compatible with the European Convention on Human Rights, and I am happy to do so. I commend the increase of the payment scales for these schemes and ask approval to implement them.

[Baroness Janke (LD)]

My Lords, I thank the noble Baroness for her presentation of the uprating of benefits to sufferers of mesothelioma and pneumoconiosis and for her description of the measures that the Government have taken to address some of the needs of these sufferers during the pandemic.

However, I feel that the key issue here is whether the Government really consider a 3.1% increase in any way adequate, with inflation predicted to reach 7.25% by the time people receive the uplift—the Bank of England expects inflation to peak at 7.25% in April and to average around 6.2% over the course of 2022. According to the latest DWP statistics, in the year from October 2020 to September 2021, £39 million was paid out through the pneumoconiosis scheme and £8.4 million through the mesothelioma scheme. There were 220 and 30 claimants respectively in September 2021. These figures show that uprating the payments by 3.1% rather than 6.2% risks a real-terms cut of £1.2 million for pneumoconiosis claimants and £260,000 for mesothelioma claimants—a hugely unfair cut during a national cost-of-living crisis. I wonder how people will cope with this crisis of funding, particularly if they are severely ill.

There has been a 56% increase in the cost of energy, as we heard in an earlier debate. Not being able to afford heating is particularly punitive for sick people and further penalises them in relation to healthy people. What special measures will the Government introduce to support people who are sick, often gravely ill and dependent on care? How will people afford the necessary care in the financial crisis ahead? How will their families manage? This is particularly important as many lung diseases are diagnosed only when beyond treatment, with many sufferers having only a short time to live and a high need of care.

The Minister mentioned the fact that the Government have put more money into research on the causes of and cures for lung disease. However, lung disease accounts for 20% of all deaths yet research funding lags well behind other better-known diseases. I hope that this might change in light of the current circumstances. The British Lung Foundation campaigns for more research and supports sufferers and families. I pay tribute to its work but given the fact that the diseases are caused by dust, which is present still in large numbers of buildings—many containing vast amounts of asbestos—are we really taking adequate action to address these unhealthy circumstances? It is particularly distressing that so many sufferers are mystified as to how they contracted such a fatal condition. More research on lung diseases is needed, as the Minister said, and I hope that that might attract more funding as a result of the pandemic, when lung disease has been such a major killer.

The Health and Safety Executive estimates that occupational lung disease accounts for 12,000 deaths a year—still. This is not a disease of the past, as many people seem to think. I will therefore put the following questions in conclusion. What additional support will the Government provide in the light of the inadequacy of this uprating to support sufferers of mesothelioma and pneumoconiosis and their families? What is the Government’s position on automatic uprating to give confidence to sufferers and families, which is urgently needed in the light of economic uncertainty? Will the Government look again at equal treatment for sufferers and families to reassure them that the families will not suffer? Will she raise with the Government the need to ensure more realistic funding for research into lung disease? I look forward to her response.

[Baroness Wilcox of Newport (Lab)]

My Lords, I thank the Minister for introducing these regulations to the Committee and I am pleased to hear her references to additional support for people during the Covid-19 pandemic, which may otherwise have left them severely disadvantaged. However, more can always be done.

We have heard that the Government have decided to increase the amounts set out in the mesothelioma lump sum payments regulations by 3.1%, the rate of inflation as measured in September 2021 by the CPI. I will not repeat the figures quoted by the noble Baroness, Lady Janke, but I concur with her points regarding the gaps between this uprating and the exponential increases in the cost of living. This is an extremely vulnerable group of people in our society. I urge the Minister to look again.

Current high death rates among males aged 70 and above reflect the fact that this generation had the greatest potential for asbestos exposure in younger working life during the period of peak asbestos use in the 1950s, 1960s and 1970s. Death rates among those under 65 have now been falling for some time. The most recent deaths in this younger age group are among the generation who started working life during the 1970s or later, when asbestos exposures were starting to be much more tightly controlled.

These kinds of diseases are a result of our industrial past and today I am proud to put in the official record the name of one south Wales miner who toiled underground man and boy to bring wealth and prosperity to the whole UK from the 1950s to the 1980s, until the year-long miners’ strike put paid to future employment for him and many like him. He was my dear late stepfather, Terrence John Howells, who luckily escaped the wrath of lung disease but was taken early by ischemic heart disease after a lifetime of working hard in the harshest of conditions underground, his face and hands covered in blue scars that were the permanent reminders of the toll that that industry left upon its workers.

Pneumoconiosis, in particular—also known as dust or black lung—was another industrial disease known as a silent killer, clogging and destroying the tissue of lungs and robbing thousands of men in particular of their futures. It was more prevalent in south Wales than anywhere else in the UK because of the young age at which mining was embarked on there. It ensured that families would see their fathers, husbands, brothers and sons fade through slow and painful illness. These compensation measures we are discussing must never be spoken about without remembering the context of the suffering of so many families and the consequences of these dreadful industrial diseases.

As well as reflecting on our industrial past and what people gave and endured in working in heavy industry, we must also reflect on the negligence towards health and safety matters. We need a strong Health and Safety Executive, but the number of health and safety inspectors has dropped by a third under this Government. There were 1,495 inspectors with the Health and Safety Executive in 2009-10, but just 978 in 2017-18, after falling every year in a row. Funding was slashed from £239 million to £136 million over the same period. Can the Minister tell us how confident she is that the HSE is sufficiently well resourced both to manage the risks to employees as we move out of the pandemic and to be mindful of the health risks we may encounter in the future, so that future generations will be better protected than my dear stepfather and his comrades were in their working lives?

In her speech on this matter last year my noble friend Lady Sherlock raised several important issues with the Minister that remain unaddressed a year later, so I will reiterate them on her behalf. There is a lack of parity between the levels of compensation being offered to sufferers and to their dependants, and we look forward to hearing a restatement of the Government’s rationale for this decision. Similarly, will she address the impact of disparity on women, who are often the dependants? Is there a cost estimate of providing equal payments? I look forward to the Minister’s response to these questions.

Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022

Baroness Janke Excerpts

Wednesday 23rd February 2022 Grand Committee

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

My Lords, this statutory instrument will implement the authorisation and supervisory regime for collective money purchase schemes. These are commonly known as collective defined contribution, or CDC, pension schemes. These will be the first schemes of their type in the United Kingdom pensions market. A further statutory instrument, the Occupational Pension Schemes (Collective Money Purchase Schemes) (Modifications and Consequential and Miscellaneous Amendments) Regulations 2022, will be laid shortly to implement further consequential amendments required for existing pensions legislation to accommodate CDC schemes. These further regulations will be laid using the negative procedure.

Before I move on to the detail of this instrument, I will remind noble Lords of the purpose of this new type of pension. The United Kingdom pensions market we see today has been built around defined benefit schemes, where the employer underwrites the pension benefits paid to employees, or defined contribution schemes, where individual members bear all the investment and long-term risks and where there are no employer guarantees regarding what the member might receive at retirement.

CDC schemes provide an alternative approach in which member and employer contributions are pooled and invested with a view to delivering benefits at the level to which the scheme aspires. They offer potential benefits in economies of scale and the opportunity for greater investment in higher-returning assets than are usually associated with defined contribution occupational pension schemes. Their collective nature means that investment and longevity risks are shared across the whole membership, and as these schemes provide an income for pensioner members there is no need for members to make complex financial decisions at the point of retirement. The Government believe that this new type of pension provision will be more sustainable for employees and employers alike, and has the potential to offer better outcomes for pension scheme members.

I turn now to the statutory instrument itself. Noble Lords will appreciate that this is a necessarily detailed set of regulations. As a new type of pension scheme, it is critical that employees and employers can have confidence in CDC pension schemes. These regulations set out requirements for the process of applying for authorisation and further detail on the criteria that need to be met by CDC schemes in order for them to be authorised to operate.

The authorisation criteria include that the design of a CDC scheme must be sound and that it has sufficient financial resources to operate and deal with particular issues that may arise. There is also a requirement that only fit and proper persons are involved in particular capacities to do with making key decisions about the scheme. If the Pensions Regulator is not satisfied that all the authorisation criteria are met, it cannot authorise the scheme.

These regulations also set out requirements relating to the Pensions Regulator’s supervisory role. It can withdraw authorisation if it is no longer satisfied that the authorisation criteria are met. The regulations set out further detail on information to be provided to the regulator while the scheme is running, which will help it consider whether it is satisfied that the authorisation criteria for schemes continue to be met.

These regulations also provide more detail about the actions trustees must take if a scheme experiences a “triggering event”. These are certain events, set out in the primary legislation, that can pose a threat to the future of the scheme and the interests of members. If a triggering event occurs, the trustees must take certain actions or continuity options. A triggering event may lead to a scheme being wound up. Schedule 6 provides a detailed framework for winding up a scheme.

These regulations amend the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 to allow for an alternative automatic enrolment quality requirement for CDC schemes. They also amend the Occupational Pension Schemes (Charges and Governance) Regulations 2015 to implement an annual charge cap set at 0.75% of the value of the CDC fund, or an equivalent combination charge. Finally, they amend the chair’s statement requirements in the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to reflect that CDC schemes will not have a default arrangement.

I now wish to acknowledge the considerable interest expressed in both Houses on CDC schemes during the passage of the Pension Schemes Act 2021. Many valuable contributions were made at that time regarding aspects of CDC schemes. A key concern was ensuring that CDC schemes treat their members fairly and, in particular, respect the interests of different generations. To help achieve this, Regulation 17 sets out requirements for CDC scheme rules to ensure that there is no difference in treatment when adjusting benefits between different cohorts or age groups of scheme members, or between members who are active, deferred or receiving a pension.

The importance of good communications to members of these new schemes was debated here and in the other place. Concerns were expressed that members should be given access to enough information to give them confidence to make informed decisions about their savings. Much of this is provided for in the negative regulations which have been published in draft and will be laid shortly. Alongside the regulations we are debating today, these will provide for transparency to allow for scrutiny of how a CDC scheme is operating.

The forthcoming negative regulations package will set out the disclosure requirements for scheme providers, with requirements to provide information relating to target benefits, including the actuarial valuation and a statement informing members and prospective members that benefits may be adjusted based on the actuarial valuation and are not guaranteed. CDC schemes will also be required to publish their scheme rules, including details of benefit design.

Debates on the Act also covered the powers of the Pensions Regulator to specify the requirements that should be met in respect of the financial sustainability of the scheme. Schedule 3 to the regulations sets out in detail the financial sustainability requirements for new 213CDC schemes, including the information required on application for authorisation and what the regulator must take account of in deciding whether it is satisfied that a CDC scheme has sufficient financial resources to meet the costs of establishing and operating the scheme, as well as sufficient resources to deal with the costs, as required by the Act, if a triggering event occurs.

Finally, concerns around the diversity of trustee boards, and what may be done to improve diversity, were raised during the passage of the Act. The Pensions Regulator has published a draft code of practice, which sets out that trustee boards should have policies on diversity and inclusion, including objective selection criteria, and that they should demonstrate that they have the ability to capture and monitor data on diversity and inclusion. I beg to move.

[Baroness Janke (LD)]

My Lords, I thank the Minister for her presentation, which was clear and to the point. I would like to raise two issues for consideration.

The first is the possibility of widening the scope for CDCs to smaller companies and how the Government view that. The current legislation has been written very much with Royal Mail in mind but if the CDC scheme goes well, others might want to follow suit, including smaller employers. But they would want to join something bigger; for example, a multi-employer or industry-wide CDC scheme or master trust CDC scheme. Will this require new primary legislation to allow multi-employer schemes, or does the Pension Schemes Act give the DWP sufficient power to do this? If it would require new secondary legislation, how long does the Minister think this might take? Does she share the view that multi-employer schemes are key to unlocking CDC? Not everyone has the resources or scale of the Royal Mail to do it for themselves. Please can she explain the process for multi-employer CDCs?

Secondly, can the Minister say something about retirement-only or decumulation CDCs and the position of the DWP on these? One of the discussions over the new pensions freedoms is that individuals take all the risk of managing a DC pot for themselves, including the longevity risk. In a pooled CDC retirement scheme, this is shared with others, so it is an attractive option for people to join at retirement. What is the scope for these and what is the position of the DWP on this? NEST has hinted that it might be prepared to look at it, but it would be helpful to know whether the Government look on these suggestions favourably. I look forward to the Minister’s response.

[Baroness Drake (Lab)]

My Lords, I refer to my registered interests: I am trustee of the Telefonica pension scheme and the People’s Pension master trust. I thank the Minister for her helpful presentation of the regulations, and the DWP staff who kindly took the time to answer my many queries. My contribution is rather long. The only consolation is that it would have been even longer had I not had that discussion with colleagues.

Collective defined contribution schemes are clearly a welcome addition to the pensions landscape, whereby employees can, in effect, share their investment and longevity risks and remove some complexity from individual decision-making. But with only one employer committed to date, there is a risk that the regulations are bespoke for the Royal Mail scheme but may need adapting for others set up subsequently.

There is considerable uncertainty over the fuller impact of the CDC proposal, which is reflected in the detail of the regulations and the draft code. The code contains a list of matters more likely to satisfy the Pensions Regulator, but some lack a qualitative feel or benchmarks or triggers. Take the example of trustee governance. The draft code says that the regulator is

“more likely to be satisfied”

if there is clarity as to

“who decides in a scenario where both the employer and trustee have an interest”,

but it does not express a view on good practice in such scenarios.

A CDC scheme is set up under an irrevocable trust by an employer. In a single or connected employer scheme, sustainability can be influenced by employer behaviour and changes to corporate control and structure. A regulator’s expectations for the governance framework and the extent of trustee discretion are therefore particularly important. I ask the Minister: is it the intention to set out good practice expectations on the governance framework and the extent of trustee discretion?

The approach to authorisation, supervision and continuity reflects that for master trusts, but there are differences. For authorisation, it is the actuary who confirms the soundness of the scheme and issues the viability certificate. There are a lot of requirements for the actuary to meet before issuing a certificate, including a novel role in considering non-actuarial matters. Is this considered a materially extended level of obligation on an actuary when compared with other forms of pension schemes?

State Pension Underpayments and Arrears for Women

Baroness Janke Excerpts

Monday 21st February 2022 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I have no idea about underpayments to men. In terms of underpayment to women, we are doing an exercise; we are going through the whole system to work out who should have had the money and we will get it to them as quickly as possible.

[Baroness Janke (LD)]

My Lords, the Government have explicitly ruled out divorced women from this exercise, yet divorced women’s pensions are really complex and the scope for error is huge. Does the Minister agree with me that to discriminate against divorced women in this way is indefensible? When will the Government act on this, as the Public Accounts Committee recommends, and put an end to such obvious injustice and discrimination?

[Baroness Stedman-Scott (Con)]

Even if somebody is divorced, their ex-husband’s contributions to NI will still be taken into account when deciding their pension award. That has always been the case and it will be the case on this.

Underpayment of Benefits: Compensation

Baroness Janke Excerpts

Tuesday 18th January 2022 Lords Chamber

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

I will go back to the department and check the first point that the noble Baroness raised. This situation is appalling and awful, and I apologise to all those affected on behalf of the Government and the department. I can confirm that Ms U has had a £7,500 compensation payment and a further payment of interest on the benefit arrears payment of £19,832. There is little more that I can say about her, other than that we have complied completely with the PHSO’s point.

On others affected—and I understand the depth of feeling on this—the department has a discretionary scheme that allows special payments to be made to customers to address any hardship or injustice caused by DWP maladministration. Consistent with other large-scale LEAP exercises, special payments under the DWP discretionary scheme will not routinely be made. There is no legal requirement to make special payments as the scheme is discretionary. However, as the Minister for Welfare Delivery said in the other place on Thursday, if anybody believes that they are a special case, they are quite free to make representation to the department.

[Baroness Janke (LD)]

My Lords, as has already been said, this woman has suffered appallingly through maladministration. The Minister did not really address the point about compensation, which the ombudsman’s report specifically asked the DWP to reconsider. Would she look at that again and perhaps come back to us on it? The report also points out that the DWP has put aside its own guidance in the remedy it is offering—so it does seem that the DWP needs to look at this report again.

The noble Baroness, Lady Sherlock, mentioned the very many others affected by these circumstances. Mention was made in the other place of the DWP not having had time to consider this report fully. Will the Minister take back the points we have made here and address in particular the point about compensation, and will she come back to us with a considered response from the DWP to the recommendations in the ombudsman’s report?

[Baroness Stedman-Scott (Con)]

I really thought that I had confirmed the situation about Ms U. She has had an unreserved apology. We made a £7,500 compensation payment. We paid the benefit arrears of £19,832.55 and gave money for interest. I think that I have been very clear about that. On the issue of compensation to others, again, it is a discretionary scheme, but I re-emphasise that if anybody believes that they have a special case, they can make representation. I think that clears the way.

State Pension Age

Baroness Janke Excerpts

Tuesday 18th January 2022 Lords Chamber

[Baroness Stedman-Scott (Con)]

I will not argue with logic; that would not get me anywhere. On the noble Lord’s point about the state pension age, I know that people are sceptical of government reviews, but I ask all noble Lords to approach it in a positive way, make their points—particularly the one raised by the noble Lord—and get them into the review.

[Baroness Janke (LD)]

My Lords, around 1.5 million low-paid workers pay a 25% penalty for their pension savings. When will the Government publish the outcome of their call for evidence on pensions tax administration to enable low-paid workers, who are typically women, to receive pensions tax relief on their contributions?

[Baroness Stedman-Scott (Con)]

Many noble Lords have made this point, including the noble Baroness, Lady Drake, and my noble friend Lady Altmann. The truth is that I do not know when they will do it, but I will go back and find out, and will write to the noble Baroness.