Pension Schemes Bill [HL]

Baroness Sherlock Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 30th June 2020 Lords Chamber

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

My Lords, like other noble Lords, I appreciate the government amendments to make regulations by the affirmative procedure. Having thanked the Minister for that, I will move on to speak on noble Lords’ amendments.

Amendment 2, in the name of my noble friend Lord Sharkey, would delete reference to negative procedure regulations being used to change the rules around fit and proper persons. It has been laid out how that might change who becomes a fit and proper person. My question is: would it also affect who might not become a fit and proper person and potentially elaborate further if it is found that people are doing things that should disqualify them? I sense that that might be a possibility. Although, under Clause 11(3)(b), regulators can take into account other such matters as they consider appropriate—I presume that that can be in the negative sense as well as the positive—it would be useful to know whether such powers in other areas as well as this are, in general, used. I detect that regulators are often reluctant to go beyond things that they can specifically point to in regulations. If that is the case, maybe the Minister has an excuse to have these powers. That is the area that I am interested in, but it would certainly be a much more significant move for this to be made by the affirmative, rather than the negative, procedure.

The noble Baroness, Lady Altmann, has tabled an amendment about data that I support, but like her I think that it is probably best to have just one debate on data. I will make my intervention on that later.

I also support the intention of Amendment 33 on diversity. I recognise, as the noble Lord, Lord Balfe, did, that it links to the wider issue of how trustees are appointed and where from. Many trustee appointments will link back to present or former workforces and therefore carry through any historical lack of diversity for quite a long time. Despite the fact that there might be costs to professional trustees, I still think that there should be scope to ensure that there are more additional independent external trustees, without necessarily going to people who are so embroiled in the making of regulations. It should be possible to find objective people who are not necessarily charging the equivalent of full professional rates.

Finally, my Amendment 45 is a simple one that says that regulations may not create a regulator. That might not be the intention, but Clause 51(3)(a) says that regulations may

“confer a discretion on a person”.

A discretion to do what: to allow, not allow or approve certain things? What kind of things and what kind of person? That could be wide enough to allow or disallow the doing of things regarded as being a regulator, yet there are none of the constraints in the Bill that would normally appear in such circumstances. I therefore seek some clarification about what “discretion” means and what powers it might conceal or cover.

[Baroness Sherlock (Lab) [V]]

My Lords, I should declare a historical pecuniary interest as a former independent director of the Financial Ombudsman Service. I should also declare that my home is in Durham so I have often visited Barnard Castle, but solely for the purpose of visiting the wonderful Bowes Museum. My eyesight is okay for the moment. I will save my remarks on data issues until a later group, but I will briefly address the other two issues raised by amendments in this group.

On regulations, concerns were expressed on all sides in Committee about the use of Henry VIII powers and the skeleton nature of much of the Bill, especially Part 4, but I am grateful that the Minister has engaged with us throughout this process on these and other issues. I think that it will make for a better Bill in the end.

I am grateful to have had sight of the draft regulations under Part 1, even if I would have preferred to see all the remaining draft regulations before Report. I am very glad to see the government amendments clarifying the scope of some of the regulations and those which make regulations affirmative or confirmatory. If nothing else, it saves me from tabling endless Motions just to ensure adequate scrutiny. However, I will be interested to hear the Minister’s answers to the points raised by the noble Lord, Lord Sharkey, the noble Baroness, Lady Fookes, and the noble Lord, Lord Blencathra, about the retained use of the negative procedure and other matters related to delegated powers.

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[Lord Sharkey [V]]

My Lords, I will restrict my remarks to Amendment 32, which is in my name and the names of the noble Lord, Lord Vaux of Harrowden, and my noble friend Lady Bowles. I thank them for their support. In Committee, we spent a long time discussing intergenerational fairness in CDC schemes. We did this partly because we knew from the Government’s excellent briefing note that concern about intergenerational fairness was raised by many respondents to the consultation and because it seemed clear that the risk to intergenerational fairness was an almost inevitable feature of such schemes.

We pressed the Government to legislate the requirement for intergenerational fairness into the schemes. We knew that the Government themselves were deeply concerned about the issue and seemed to be choosing mechanisms for intergenerational fairness over benefit stability; but as I remarked at the time, it was hard to tell how they might work, since the mechanisms for bringing this about were not yet explicit and no real assessment of effect was possible.

In her response, the Minister made it clear that she shared our commitment to ensuring intergenerational fairness and that the mechanisms for achieving it would be introduced, after extensive consultation, by regulations under Clause 18. This will be long after the Bill has become an Act, and leaves open the question of how we will assess the success or otherwise of these mechanisms. It also leaves open the question of how the assessment of any such mechanisms will be communicated to members and potential members of the scheme.

Our Amendment 32 proposes a way of addressing these issues. It provides that, whenever TPR issues a notice requiring a scheme to submit a supervisory return, the notice must include a requirement that the trustees

“make an assessment of the extent to which the scheme is operating in a manner fair to all members.”

The amendment speaks of fairness. Intergenerational fairness is a critical subset of fairness, but there are other kinds of fairness, too. For example, there is gender fairness, and single versus married status and the fairness implicit in that, or not. The amendment makes no attempt to define fairness; it relies on the trustees to do that, as they should in the normal operation of the scheme. Their definitions and assessments will help members of all classes, and potential members, understand the working of their scheme and the success of the trustees in operating it fairly in the interests of all members.

As I mentioned in Committee, AJ Bell noted that the DWP leaves little doubt that it will not allow schemes to be skewed in favour of one cohort of members over another. I am sure that is the intention, but AJ Bell also noted that fairness could make outcomes in CDCs less predictable and raises the spectre of pension cuts. It goes on to say:

“The DWP itself notes any reductions in benefits will not be well received, and so clear communication of this – not just upfront but on an ongoing basis – will be absolutely essential.”


Our amendment will bring some communication and transparency to the balancing required to produce, and to the consequences of producing, fairness across all member cohorts.

In Committee, the Minister explained how the proposed headroom mechanism for the Royal Mail scheme would be fairer than a capital buffer. All classes of members and potential members of the scheme need to know how well this headroom mechanism or other mechanisms generated by Clause 18 are working. Our amendment will require the trustees to explain these things and to assess their success in managing the scheme fairly for all members.

Given the acknowledged risks to fairness inherent in the scheme, and that Parliament’s opportunity to influence the mechanisms that might arise in regulation will be as small as usual, it is vital that scheme trustees are open and transparent about their success in producing fair outcomes for all members. That is what our amendment would help bring about, and I intend to test the opinion of the House.

[Baroness Sherlock [V]]

My Lords, I say at the outset that Labour supports Part 1 of the Bill and the move to create CMP schemes, provided, of course, that they are not used as a means of downgrading good DB schemes. The two amendments in this group deal with different concerns that have been expressed about CMP schemes. Amendment 32 acknowledges that there may be a divergence of interests between different sets of members in a scheme of this kind. It does not prescribe any particular action but it does require trustees to surface the issue and to assess the extent to which the scheme is fair to all members.

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[Lord Sharkey [V]]

My Lords, I shall speak to Amendments 72 and 74 in this group. Neither amendment in any way alters any of the important climate change amendments in the group, except in one respect: they require the Government to make something happen.

What the amendments would do is very straightforward: they would simply impose a binding legal obligation on the trustees or managers of an occupational pension scheme of a prescribed description with a view to securing effective governance of the scheme with respect to the effects of climate change. They would also impose an obligation to include, in particular, the risks arising from steps taken because of climate change, whether by the Government or otherwise, and opportunities relating to climate change.

All those things are word for word in the Bill except that they are all governed by the word “may”. Our amendments would replace the two references to “may” with “must”. As the Bill stands, the Government are not actually obliged to do any of those things, or indeed anything at all, in this clause. The word “may” in subsections (1) and (2) is permissive, not directive—a point made by my noble friend Lady Bowles and me in Committee.

The Minister kindly wrote to us all in response on 5 March. She confirmed that the Government intend to take action and were wholly committed to legislating for effective governance of occupational pension schemes with respect to climate change. She concluded by saying:

“Changing the legislation to ‘must’ would therefore make no practical difference, because as a Government we are committed to making regulations under new sections 41A, 41B and 41C introduced by the Government’s amendment.”


This argument works both ways, of course. What can be the basis of the Government’s objection to “must” if they are committed to doing it anyway? What possible reservations, hesitations or changes of mind are being contemplated here? What can be wrong with having legal certainty that what has been promised will actually happen?

There is a parallel in this Bill to our discussions on the MaPS pensions dashboard. The Committee asked why the provision for MaPS to provide a public dashboard was only a “may”, not a “must”. In reply, the noble Earl, Lord Howe, confirmed that the Government were absolutely committed to MaPS providing a qualifying dashboard service. Several Members, including the noble Baronesses, Lady Drake and Lady Sherlock, noted that the Government being committed to MaPS producing a dashboard is not the same thing as saying that they will ensure that there is a MaPS dashboard. The noble Baroness, Lady Drake, made the point that a little amendment—“may” to “must”—would capture the Government’s assurances

“so that the next Secretary of State does not change their mind.”—[Official Report, 26/2/20; col. GC 186.]

This argument clearly convinced the Government. They have now introduced their own amendments to make a MaPS dashboard a “must” rather than a “may”. I know that we are all very pleased about that.

Can the Government accept the same logic here? If it was right to change “may” to “must” for a pensions dashboard, why is it not right to do the same thing for climate change? I look forward to the Minister’s eager acceptance of the precedent and these amendments.

[Baroness Sherlock [V]]

My Lords, I am grateful to all noble Lords who raised climate issues in relation to pension schemes during our proceedings, especially those involved in the cross-party talks led by the noble Baroness, Lady Hayman, and my noble friend Lady Jones of Whitchurch. I also thank the Minister for listening and moving on from the broad government amendments brought forward in Committee.

This Bill has been on a journey. When it was first published there was no reference to climate change at all. Indeed, from having been given advice from the Library, I understand that climate change has never been included in domestic pensions legislation before in this country, so we are making history here today.

The Labour Benches had two priorities on this: first, to provide clarity on climate risk by ensuring that the Paris Agreement is referenced; and secondly, to ensure that trustees and managers take international climate treaties into account when making decisions. The word “account” is clearly significant. It recalls the Court of Appeal judgment that found that the Government had failed to take into account the Paris Agreement when permitting the Heathrow expansion. That was a good example of the need to make sure that positive action on the international level to combat climate change is not forgotten when Ministers make domestic policy decisions.

Our priorities are reflected in Amendments 73 and 79, but because we have secured cross-party consensus with the Government, they are also reflected in the government amendments in this group, especially Amendments 75 and 76. I will be interested to hear the Minister’s reply to the questions from the noble Baroness, Lady Hayman, about whether these refer also to the physical impacts of climate change and the impact of steps taken to transition towards a low-carbon economy, and for clarification that Amendment 76 includes the UK’s net-zero target.

However, as my noble friend Lady Jones said, we are only at the beginning of a journey to net zero. Divesting pension funds away from fossil fuels is a big challenge. The Government and the industry need to go further and quicker, with aligning investment strategies with domestic and international targets being the ultimate goal. For this Bill, we have reached a good place with broad cross-party support. I look forward to the Minister’s reply.

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[Baroness Bowles of Berkhamsted [V]]

My Lords, I declare my interests as in the register: I am a non-executive director of London Stock Exchange plc, which has a pension scheme of which I am not a member.

I have signed both amendments, which are about getting priorities right on the matter of how a company uses spare cash and the importance of paying down deficits, especially if it is over too long a time. If there is spare cash around, deficit reduction should rank ahead of share buybacks and be balanced with regards to dividends. Both those issues have already been well elaborated, especially by the noble Baroness, Lady Altmann, and the noble Lord, Lord Vaux.

The amendments would not prohibit either of those eventualities; they would make them notifiable events. The regulator could then exercise discretion about whether there were good reasons; for example, checking that, in the circumstances, the quantum of the dividend was acceptable. I am less certain about good reasons for buybacks, but if there were any, they could be discussed. I therefore support the amendment. To deem it excessively cautious would not be to take it as it is intended. Although we say that the matter would need to be investigated, we would expect the Pensions Regulator to be reasonable in all the circumstances. For example, if everybody had fallen into big deficits, obviously the situation would be different, because of what was going on in the markets, from where a company was being a laggard in making up its deficits. However, we must not forget that if those deficits are not repaid and the company is under stress, it will be the workers and the pensioners who lose out in the end. They cannot always be put at the end of the queue.

[Baroness Sherlock [V]]

My Lords, I am grateful to the noble Lord, Lord Vaux, for returning to this issue. We all know that there are some DB schemes with significant deficits and employers who could be doing more to clear them more quickly. Let us not forget the work done by LCP, which showed many firms paying out dividends 10 to 20 times their pension deficit payments, or the regulator’s annual DB funding statement last year, which raised concern about the disparity between dividend growth and stable deficit repair contributions.

The problem will not disappear. As more DB schemes have closed, they will soon be paying out more in pensioner payments, leaving them less to invest and with a need to de-risk their remaining investments.

The Covid pandemic is going to make things worse. The Pensions Regulator reports that, so far, only around 10% of schemes have agreed a temporary suspension or a reduction in DRCs post Covid, but more trustees and employers are in the process of discussing possible requests to suspend or reduce contributions. We all know that the full force of the economic storm has yet to hit us.

The noble Lord, Lord Vaux, mentioned the no-dividend rules for Covid business loans. The regulator’s Covid-19 guidance on defined benefit scheme funding and investment says that, if trustees face requests to suspend or reduce contributions, then they should seek mitigations. It gives an example, saying:

“All dividends and other forms of shareholder distribution to stop throughout the period of suspension and not to start again until the deferred or suspended contributions have been paid.”


TPR will still require trustees to report agreements to suspend or reduce contributions and provide information on the mitigations.

Ministers say that the regulator can chase employers if resources are taken out that should not be taken, but we know what the danger is if action is taken only after a dividend has been paid out. If the dividends are paid out by a UK employer to an overseas parent, it can be very difficult to get them back. It is entirely possible, in these difficult times, that if a company is in trouble and its parent company is based overseas, there may well be a move to repatriate assets to the home state. These amendments seek to tackle that problem not by stopping dividends or even buybacks where there is a deficit but by making them a notifiable event in certain circumstances.

The noble Lord, Lord Vaux, has softened his amendments, but he has still made a compelling case. Therefore, if the Minister does not want to accept these amendments, can he tell the House how he will ensure that the next BHS or Carillion scandal will not be a company with a foreign parent seeking to repatriate assets before abandoning its obligations to the pension scheme? I look forward to his reply.

[Earl Howe]

My Lords, I am grateful to the noble Lord, Lord Vaux, for tabling these amendments to Clause 109, which brings us back to an issue that we debated at some length in Grand Committee. It would be helpful to consider these amendments together, as they seek to make the declaration of a dividend or share buyback the subject of a notice and accompanying statement to the Pensions Regulator and trustees of the pension scheme. In the case of a share buyback, this notification would be required where the value of the assets of the scheme was less than the amount of the liabilities. In the case of a dividend, notification would be required if the amount of the dividend exceeded the annual deficit repair contribution and the amount of the annual deficit repair contribution was less than a percentage of the scheme’s deficit. That percentage would be specified by the Pensions Regulator.

I understand where the noble Lord is coming from, but I will address his concern with an explanation of Clause 109. The purpose of the clause is to make sure that the Pensions Regulator and trustees of a defined benefit pension scheme have prior knowledge about corporate transactions or events of which they would otherwise have been unaware and that pose a risk to the scheme and ultimately the Pension Protection Fund. The clause would also ensure that the trustees work with employers to mitigate the effect of such risks.

The Pensions Regulator and the trustees of the pension scheme are able to access information about dividends and share buybacks already. There are well-established processes whereby the regulator is able to get the information that it needs on dividends and similar payments as it assesses covenant strength and the ability of the employer to make contributions to deal with any deficit. Adding additional notifications of the kind that the noble Lord is suggesting is unlikely to be of any help. What it would certainly do is put an unnecessary burden on both employers and the regulator.

The regulator simply would not have the resources to deal with these additional notifications. That is not a trivial point: let us remember that it is a risk-based regulator and must focus its resources where it can do most good. We think that this focus is best directed at ensuring that recovery plans are robust. That is the best way to ensure that schemes are treated fairly. It is the strength of the recovery plan that is key here. Of course there will be occasions when dividends are paid without the regulator’s knowledge, but even if the regulator had been able to prevent that from happening, that would not help the scheme. That is because there is no requirement for the sponsoring employer to pay anything into any scheme deficit other than what is set out in the recovery plan.

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[Baroness Janke [V]]

My Lords, I support Amendment 52. I also support the other two amendments tabled by the noble Baroness, Lady Altmann, as a result of the matter being much debated in Committee, I am very grateful to the noble Baroness, Lady Drake, for her clear analysis of the issues involved.

Many would say that pensions dashboards are long overdue. They enable people to plan their future finances taking account of existing pensions, and to take a long-term view of future financial provision. However, the challenge of producing a dashboard that will adequately cover the complexity of the pensions landscape should not be underestimated. We are talking about millions of people, and the enormous number of lost pensions that we hear about shows both the need for and scope of the task. Given the level of complexity, the scope for scams and fraudulent actions increases and it is therefore essential that members of the public are sufficiently protected.

As many noble Lords have said, the vulnerability of many people means that they can be much more susceptible to scams and bogus claims and apparently attractive offers from the commercial sector. The additional factor that digital literacy and access can be problematic for some people also needs to be considered. That and the lack of sound advice can lead to bad decisions and life-changing, irreversible mistakes, as we heard from the noble Baronesses, Lady Drake and Lady Altmann, in Committee.

Pensions is a complicated subject; it is not easily accessible by everyone. Lack of engagement, which has already been talked about, is a result and, as the noble Baroness, Lady Drake, said, people often take the line of least resistance and take wrong decisions that they are unable to change. I hear the arguments made by the noble Baroness, Lady Neville-Rolfe, about innovation. Certainly, it is an important factor, but I feel that the protection of pension holders is more important. Measures to provide full protection should be the subject of further primary legislation rather than secondary legislation, as indicated in the Bill.

[Baroness Sherlock [V]]

My Lords, I will deal first with the data issues. There are known to be problems with data quality in many pension schemes that need to be addressed. The regulator has rightly been pushing trustees to improve the accuracy of their data and to evidence that they are doing so. But as we move to a world of pension dashboards, with a consumer’s savings all being displayed in one place and the expectation that behaviour will be influenced by it, data accuracy and standards are key, so I hope the Minister will take to heart the issues raised today.

On transactions, done well, a pensions dashboard can be a really useful service, helping savers to locate lost pots and see all their different pensions in one place—state and private—and work out if they are saving enough for retirement. But there are big risks, especially because the Bill leaves almost every aspect of the dashboard service wide open. In Committee, we tried to put some boundaries around this. We tabled an amendment to insist that there must be a public dashboard from the outset, and I am delighted to see the government amendment now requiring that. Another of our amendments required the FCA to regulate the provision of dashboard services; again, Ministers confirmed that that would happen. Another of our amendments proposed that using the dashboard to see your own data must be free, and Ministers confirmed that it would be. We have come a long way and I am really grateful to the Government for engaging with our concerns.

But two important issues are still outstanding, and they are addressed in this and the next group. As my noble friend Lady Drake explained so well, Amendment 52 would stop delegated powers in the Bill being used to authorise commercial dashboards to engage in transactions. We simply believe that the risks of this are such that Ministers should have to come back to Parliament and seek further authorisation before going down that road. Remember, we still do not know how many dashboards there will be, who will run them or what information can be put on them. We do not know where liability will lie for each link in the chain or how consumers will be compensated if they lose out. We do know that there will be a public dashboard and that the Government want commercial dashboards running alongside it from the start.

But let us think for a moment. If a company cannot charge to look at a dashboard, why would they create one, unless they can profit from it in some other way? How might that be? Could a company show a consumer their data and say, “Look, you’ve got all these different pots. Wouldn’t it be tidier if your brought it all over into this fund here, which my firm happens to run?” Could they fund it by taking advertising? Could a consumer log on to a commercial dashboard and see an advert popping up, inviting her to connect with an adviser, or saying, “Have you ever thought about equity release?” There are even risks just in presenting data in a way that could privilege some kinds of assets over others, depending on who is running the scheme.

This is a risky market—a point that my noble friend made very well. Those who sell complicated pension products generally know and understand a lot more about them than those who buy them. Let us remember the history of financial services mis-selling—from personal pensions through to endowment mortgages, to the PPI scandal, as a result of which, firms are likely to end up repaying up to £50 billion to consumers. The average pension pot is worth rather more than the average PPI policy. The dashboard project could extend to some 22 million people. It is a powerful tool.

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[Baroness Sherlock [V]]

My Lords, this has been another interesting debate. Before I address the question of the dashboard, I pay tribute to the noble Lord, Lord Young, who has been deploying his considerable stores of intellect and wit as he has politely but determinedly pursued Ministers on the matter of verifying and identity verification. I look forward to hearing the Minister’s response to him yet again.

I am delighted that Ministers have now agreed to ensure that there will be a public dashboard and that it will be available from launch. I welcome the government amendments in this group, but Amendment 63, in my name and that my noble friend Lady Drake and others, aims to push the Government an extra step further: to put in place an essential safeguard that the MaPS public dashboard must have been in operation for a year, and the Secretary of State have laid a report before Parliament on the operation and effectiveness of the service, before commercial dashboards are authorised by the FCA to enter the market.

I am sorry to hear that the noble Baroness, Lady Neville-Rolfe, regards this amendment as inappropriate, and that she somehow seems to think that people were using the Bill as an opportunity to bring in other things. The only reason that we have had to table amendments to place safeguards is because the Government have brought forward proposals without adequate safeguards in the first place. I have certainly never voted while on a garden bench and I have more confidence that my fellow Members of the House of Lords are listening to the arguments and able to make an intelligent judgment. I hope that they will feel able to support us on this amendment, as they did on the last.

I am, however, grateful for the support of the noble Lords, Lord Vaux and Lord Sharkey, the noble Baronesses, Lady Altmann and Lady Janke, and the kind words of the noble Lord, Lord Young of Cookham. The case for this amendment has been made overwhelmingly by my noble friend Lady Drake and other speakers, so I will not rehearse it in detail, but I was struck by her summary of the many complexities and challenges still to be dealt with in the dashboard project. These are building the architecture, sorting out the liability model, deciding how to compensate consumers for a detriment, managing data standards and data-sharing risks, identity verification and security, and behavioural responses. Basically, there is a lot yet to be decided, designed, operationalised and tested. The Government’s plan is to do all this with a public dashboard and commercial dashboards running alongside each other from the launch. It is our contention that that simply unnecessarily increases the risk.

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[Lord Sharkey [V]]

My Lords, I strongly support my noble friend’s analysis of the one-size-fits-all regulatory threat to open schemes. I also strongly support the proposed remedy, which would ensure proper consideration of the essential differences between open and closed schemes, is proportionate and is not unduly prescriptive. I hope the Minister will respond positively.

[Baroness Sherlock [V]]

My Lords, we all believe that trustees of DB schemes should have a clearly defined funding and investment strategy for insuring pensions in the long term. However, if that is pursued in a way driven by the need to protect members in closed maturing DB schemes, then schemes with strong covenants open to new entrants risk being swept up in an approach that is wrong for them. As closed DB schemes increasingly mature, the regulator will expect them to de-risk and reduce their deficits. However, if that approach is applied in a blanket form it will force some open schemes to de-risk prematurely, putting pressure on employers and, in the railway scheme with its shared-cost basis, on employees too. Given all the concerns expressed, will the Minister accept this amendment?

[Earl Howe]

My Lords, I am grateful to the noble Baroness, Lady Bowles, for her amendment, which touches on a number of important factors to be considered in the development of secondary legislation, including the factors that it lists. I say immediately that I agree that these are all important factors to take into account when developing secondary legislation for defined benefit scheme funding. However, we do not need an amendment to do that. The amendment includes factors that are all taken into consideration during the whole process of framing policy, legislation and guidance.

One of the greatest strengths of our scheme-funding regime is that it operates on a scheme-by-scheme basis because every scheme is different, and it would be unhelpful and inflexible to treat them all the same. The measures in the Bill build on that approach, as will the secondary legislation. The existing scheme-funding legislation has been drafted to ensure that it is flexible enough to apply to all types of defined benefit scheme—for example, whether open or closed. Equally, the scheme-funding measures in the Bill are flexible enough to apply to all types of defined benefit scheme.

In the protecting defined benefits White Paper we were clear that there are a number of examples for suitable long-term objectives and that running on with employer support would be a reasonable course of action for an open scheme. Whether or not the strategy for ensuring that benefits can be provided in the long term is suitable will depend on the specific context of a particular scheme. Additionally, we entirely accept that schemes with different liquidity profiles and maturity will be able to take different trajectories. This is, and will remain, fundamental to the scheme-specific approach. So I assure the noble Baroness and the House that any regulations will also be formulated with considerations such as those outlined in the amendment in mind, where appropriate.

The big danger with an amendment of this kind is that it creates inflexibility. It remains our aim that the scheme-funding measures in the Bill do not change existing flexibilities but, rather, seek to make best practice universal and ensure that all schemes are planning for the long term. It is good practice for all schemes, including open schemes, to set a funding and investment strategy.

My noble friend Lord Young asked whether I could commit to a meeting along with officials to discuss these issues. Yes, I am happy to do that, and if schemes have concerns with what TPR is proposing they can engage with the current consultation. The Pension Regulator’s current consultation on the defined benefits funding code includes a twin-track compliance process that takes account of scheme and employer circumstances. Indeed, the current consultation has a full chapter on open schemes, and I encourage anyone interested to contribute their views.

Regulation-making powers exist precisely to allow the system to be calibrated effectively to ensure that this balance is struck. While the noble Baroness’s amendment reflects a number of factors that are considered while developing policy, we do not need to specify those in primary legislation and indeed, as I hope I have indicated, it would be unhelpful to do so. We need to leave room for the flexibility that I have emphasised; we must leave enough flexibility in the system to allow it to react effectively to future changes. Indeed, in the light of the current social and economic climate, it is very clear that the economic shape of the future is unknowable.

I hope that the noble Baroness will recognise from what I have said that the Government’s approach is fair and proportionate and that she will accept my assurance that appropriate flexibilities are, and will continue to be put, in place. On that basis I respectfully urge her, and urge her with some emphasis, to withdraw the amendment.

Universal Credit: Court of Appeal Judgment

Baroness Sherlock Excerpts

Monday 29th June 2020 Lords Chamber

[Baroness Sherlock (Lab) [V]]

My Lords, universal credit works on fixed assessment periods. But if, like NHS workers, you get paid at the end of the month, you can find two pay days falling in one universal credit period. The system then assumes that you have had a 100% pay rise and slashes your benefit, or even stops it altogether, thinking that you are now too rich to need it. We have raised this with Ministers repeatedly, but to no avail. It should not take four single mums going all the way to the Court of Appeal to have this obviously daft policy declared irrational. How will the Government find and compensate all those who have lost out? When will the system be changed to stop this happening in future?

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

I can advise the noble Baroness that, during our consideration of the outcome of the court’s verdict, we will consider any necessary retrospective payments.

Covid-19: Child Poverty

Baroness Sherlock Excerpts

Monday 15th June 2020 Lords Chamber

[Baroness Stedman-Scott [V]]

I completely understand the point the noble Baroness is making. To answer her question, I will need to go away, get the facts and write to her.

[Baroness Sherlock (Lab) [V]]

My Lords, as well as the Social Mobility Commission, the Minister could have cited the IPPR calculations that the pandemic could put 200,000 more children in poverty this year, the Trussell Trust figures showing the numbers of families with kids needing emergency food parcels twice as high as this time last year, or even the powerful open letter from Marcus Rashford today highlighting child hunger. I am sure the Minister is doing her best, but if the Government will not buy our proposals to suspend the two-child limit and the benefit cap, what is the Government’s alternative to stop more kids in Britain going hungry?

[Baroness Stedman-Scott [V]]

I am aware of the letter and the Trussell Trust figures the noble Baroness refers to, but we have put more money into helping with food poverty, as I have said before. We had an all-Peers briefing about universal credit at which the two-child limit and benefit cap were talked about at great length. I am sorry that I cannot add anything to that at the moment.

Universal Credit

Baroness Sherlock Excerpts

Tuesday 2nd June 2020 Lords Chamber

Asked by

[Baroness Sherlock]

What steps they are taking to remove the five week wait for Universal Credit payments.

The Question was considered in a Virtual Proceeding via video call.

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

The universal credit assessment period and payment structure are fundamental parts of its design. An assessment period must run its course, which includes a feed of earnings data from HMRC, before an award reflecting actual household circumstances can be calculated. This can be achieved only by having a model based on paying in arrears, and we have no plans to change that.

[Baroness Sherlock (Lab)]

I thank the Minister for that Answer. There have been 2.8 million claimants for universal credit since lockdown, and I fear many more will come. They are all being hit by the five-week wait. The Resolution Foundation found that on average, people going on to universal credit see their disposable income almost halved. All Ministers will offer is an advance, but that pushes people into debt and asks them to live on less than universal credit for a whole year to repay the debt. The Government have steadfastly resisted a deluge of calls from across the board to abolish the five-week wait or at least to turn advances into grants that do not have to be repaid. Why will they not do it?

[Baroness Stedman-Scott]

Non-repayable advances cannot be implemented without significant development of the universal credit system. No one has to wait five weeks. Advances are available urgently. The repayment schedule is to be extended to 24 months in 2021. Repayment can be delayed by three months in certain circumstances, and we removed the seven-day waiting period. This is all backed up by support from work coaches.

Unemployment: Support

Baroness Sherlock Excerpts

Thursday 21st May 2020 Lords Chamber

Asked by

[Baroness Sherlock]

To ask Her Majesty’s Government what steps they are taking to provide additional support to the increasing number of people claiming benefits for unemployment.

The Question was considered in a Virtual Proceeding via video call.

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

Without wishing to denigrate the size of the issue that we are facing, I make the point that although we have 2 million new claims to universal credit, this does not equate to the number of people who are becoming unemployed. Some are claiming because they are on part-time hours or their pay has decreased. Government employment Ministers are engaging with all government departments, businesses, stakeholders and front-line staff, to hear their views, learn from them, listen to ideas and make sure that we can provide the best possible support in this difficult time. I can assure all noble Lords that much is going on across government and that, in time, we will update the House with our progress.

[Baroness Sherlock (Lab)]

My Lords, those 2 million claims are up 856,000 in a month, and with one-quarter of the workforce on furlough this could get a lot worse soon. I welcome the changes that the Government have made but they do not match the scale of the crisis. People are losing jobs and hours but finding that the standard rate of universal credit is only £94 a week and the JSA just £74. When will the Government remove the savings threshold for universal credit and level up legacy benefits? Crucially, what is their plan to stop rising unemployment leading to home repossessions and widespread poverty?

[Baroness Stedman-Scott]

I am unaware of any plans to change the savings threshold at present, nor indeed to level up legacy benefits. The noble Baroness is right to keep us focused on the potential size of the problem that could be coming down the road, and I assure the House that we are closely monitoring the evolving labour market and the public health situation to identify and implement the most effective way to help people to stay in work and stay close to work.

Automatic Enrolment (Offshore Employment) (Amendment) Order 2020

Baroness Sherlock Excerpts

Tuesday 19th May 2020 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for introducing these orders, and thank all noble Lords who have spoken.

I was delighted to hear the noble Baroness, Lady Anelay, mention the Mercy Ships, and the noble Baroness, Lady Fookes, talk about the important work of the Mission to Seafarers. Indeed, it has been a nice joint meeting of two clubs: those with an interest in maritime and offshore matters and those of us who dabble in and around the world of pensions. Let us come together again at some point and have another conversation.

I am also grateful for a history lesson from my noble friends Lord Blunkett, Lord McKenzie and Lord Hain, who gave us their insights into the history of this policy. As always, I am grateful to my noble friend Lady Drake for her clear analysis and for her original work on the Pensions Commission, which was so crucial.

It is clear that this crisis will have significant implications for pensions and future generations of pensioners. Pension funds face huge challenges. Today’s statistics on unemployment and benefit claims show the scale of the crisis facing today’s workers, many of whom are struggling today, even before saving for tomorrow. A report by the Resolution Foundation, as well as highlighting the lost generation of young workers, painted a challenging picture for a cohort of workers in their early 60s. I am with my noble friend Lady Drake, and other noble Lords. It is vital that Ministers do not weaken their commitment to auto-enrolment during this pandemic and that there is a focus on rebuilding pensions in the Government’s economic plan.

As my noble friend Lady Kennedy of Cradley said, auto-enrolment was a landmark achievement of the Labour Government. Although we legislated for it, the continuity of policy that has brought us to this point is welcome. Labour has consistently supported action to ensure that the coverage of the scheme is as wide as possible, so the Minister will not be surprised to hear that we support these orders. As noble Lords have heard, these instruments confirm the decision to include seafarers and offshore workers within the scope of auto-enrolment. Unlike the noble Lord, Lord Blencathra, I am glad to see the end of the sunset provision. Would it not be strange to repeatedly review only the position of seafarers and offshore workers, while maintaining auto-enrolment for all other sectors? I am also pleased that the DWP rejected the arguments to exclude this sector altogether from the auto-enrolment provisions, and its conclusion that “ordinarily working” in the UK remains the right test for eligibility for auto-enrolment for this group, as this captures a greater number of the target population of workers. In doing so, it had to reject the case made by some employers who wanted a looser definition of which workers should be eligible for auto-enrolment. I share the view of my noble friend Lady Drake and others on the vital importance of maintaining the comprehensive reach of auto-enrolment. It is vital that we do not start creating loopholes in the regulatory framework that could be used by those seeking to evade their auto-enrolment duties.

The effectiveness of auto-enrolment in achieving its policy objective of increasing savings is also determined by the opt-out rate. Like my noble friend Lord McKenzie, I would like some clarity from the Minister on how many workers the Government expect to be affected by these orders, and what the opt-out rate for them is likely to be. The impact assessment said that the opt-out rate, which it assumed in assessing costs to be 9%, was in line with the current national average. Does the DWP not know what the opt-out rate is for these sectors? I would be interested to know.

Although these decisions affect only a particular sector, they serve to reinforce the notion that auto-enrolment should achieve a mass pension-saving system through the workplace, with duties extending to all employers with eligible workers. That was how auto-enrolment was conceived and I am glad that the Government are holding to that policy. However, too many workers are still excluded from the eligible population for auto-enrolment. With other noble Lords, I ask the Minister when the Government intend to act on those exclusions. The first of these are the low paid, as raised by my noble friend Lord Foulkes. The auto-enrolment earnings trigger excludes many low-paid workers from saving for their retirement. When will the Government lower the earnings trigger to ensure as many low-paid workers as possible, including those in the maritime industries, can benefit from auto-enrolment?

I would also be interested to hear the Minister’s response to the noble Lord, Lord Wei, who raised the issue of people with multiple jobs. I was not sure whether he was talking about people with multiple sequential jobs—in which case, I guess he was asking about the pensions dashboard—or if, interestingly, he is talking about those with multiple jobs at the same time. Can the Minister confirm that if none of those is above the threshold it means that they do not enter the scheme at all?

The second group, raised by the noble Lord, Lord Hain, and others, is the self-employed. Excluding the self-employed from the benefits of auto-enrolment means that pension saving by self-employed workers is worryingly low. The Minister mentioned that share fishermen are not included in these regulations because they are self-employed. What progress have the Government made on options to remedy this situation, to ensure that share fishermen and other self-employed workers in the maritime industries are saving for their retirement as well?

The third group is the young. The age threshold for auto-enrolment excludes workers aged under 22. When do the Government plan to lower the age threshold to ensure that younger workers are saving into their pensions as soon as they begin working?

We are facing an economic crisis on a scale not seen in my lifetime. The implications will affect the pensioners of today and for generations ahead. Noble Lords have raised a range of important questions. If the Minister cannot answer them all today, will she consider making a Statement to the House about what the Government are doing to protect the pensioners of today and the pensioners and pension funds of tomorrow? That would give all noble Lords a chance to discuss the broader issues in more detail. I look forward to the Minister’s reply.

Universal Credit

Baroness Sherlock Excerpts

Wednesday 13th May 2020 Lords Chamber

[Baroness Stedman-Scott]

The noble Baroness makes an excellent point: these are very difficult times. People are struggling in all sorts of ways, and we are mindful of the impact of mental health issues. I am afraid that I am unable to make any commitments around the points that the noble Baroness made, but I will say that, in these very difficult times, nobody has to wait five weeks. Since 16 March, we have issued 700,000 advances, and the majority have received their money within 72 hours.

[Baroness Sherlock (Lab)]

My Lords, can I bring the Minister back to the point made by my noble friend Lady Lister? The Government’s argument for the benefit cap was that you can always escape it by just going and getting a job or moving to a cheaper house. But that is simply not possible at the moment. The Minister says that the Government are not going to lift the cap. Given the demand from the IFS and over 50 organisations, and given the Commons Library estimates that an extra 18,000 families are being drawn into the benefit cap as a result of the Government’s actions, can she tell the House not merely that they will not do it but why they will not do it?

[Baroness Stedman-Scott]

I draw the noble Baroness’s attention to the fact that, in a repeated Oral Statement and at Oral Questions, the Secretary of State was absolutely clear that this benefit will not be changed. I agree with her that things are very difficult at the moment. That is why we have tried to be as flexible as we can by introducing this £7 billion package which gets to the people who are in the most difficult group, removing the minimum income floor, increasing UC, pausing deductions for historic debts, introducing statutory sick pay from day one and increasing working tax credits from over £1,000 to £3,000. I cannot give her any other answer than that, but I can make a commitment to take her question back to the department and again ask what she and others would like me to ask.

Covid-19: People Living in Poverty

Baroness Sherlock Excerpts

Thursday 30th April 2020 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, that there have been 1.5 million universal credit claims in a month shows a loss of income on a massive scale in our country. Our social security system needs a response on that scale. I will make some suggestions from the beginning.

The Government added £20 a week to universal credit and tax credits. Extend that to legacy benefits. Remove the ceilings threshold in universal credit. Crucially, scrap the five-week wait. If they cannot do that overnight, convert the advance to a grant immediately, not a loan. Abolish the two-child limit, as recommended by the right reverend Prelate the Bishop of Durham.

This crisis has revealed how much we need the safety net of our welfare state and how badly it has been eroded in recent years. People who have paid in all their lives are shocked at how little they get. Let us patch up our system now, but then let us rebuild it properly. The future should not look like the past.

Pension Schemes Bill [HL]

Baroness Sherlock Excerpts

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

[Baroness Sherlock]

I think I am right in saying that the argument for not proceeding was that there was no consensus around the aims or the remit. What attempt have the Government made to achieve consensus?

[Baroness Stedman-Scott]

The best answer I can give is that I will find out and write to the noble Baroness, because I do not have that information at the tip of my fingers.

The Bill will deliver further improvements, including strengthening consumer protections, improving scheme governance and communications, and facilitating the creation of pension dashboards. We will continue to review these improvements, including a contribution that a pensions commission could make in future. I respectfully ask the noble Lord, Lord McKenzie, to withdraw his amendment.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I want to ask a few questions on the back of that. I thank my noble friend Lady Drake and the noble Baroness, Lady Janke, for raising these issues. It is good to hear some attention being given to the fact that we have a significant problem about women and pensions. I would have liked to see the Bill take the opportunity to do something for the women born in 1950s who lost out so much when the state pension age was raised so sharply. Given that it has not done that, at least the calls for review may give an opportunity to look at the wider range of issues.

The statistics we have heard are really quite stark. If there is that huge a gap in pension wealth between men and women, the situation will only get worse. It is clearly something that the Government need to do something about.

I want to pick up on a couple of specifics. One is the issue of people with multiple jobs below the earnings threshold. This is the point at which I miss most acutely my friend Lady Hollis of Heigham, who raised this at any given opportunity. I feel that her memory is forcing me to do so now, otherwise I could not go back to my office and sit down with any peace. I ask the Minister to comment on that. We see people with multiple jobs—many are women, of course—none of whom make the threshold but who would be over the threshold if their incomes were added up, not getting into auto-enrolment. I worry that this group will keep rising as a result of part-time working and zero-hours contracts. Even the DWP, for example, encourages those on universal credit to take extra jobs to top up their hours or income. What are the Government doing about this? Do they have a sense of the scale of the problem and the direction of travel?

Secondly, I want to say a word about my noble friend’s case on carers. Clearly, women are more likely to work part-time because of caring responsibilities. That is a clear issue for public policy. A society needs women’s reproductive capabilities and their caring work. Women, in turn, deserve to be able to live adequately in retirement. I was delighted to hear my noble friend detail how we got here, not just because I probably have more of an appetite for social security detail than is strictly socially acceptable. If we do not take the time to work out how we got here, we will lose this in future. Those rights were hard-won. It took a long time, step by step, to get the caring responsibilities of women recognised in all parts of the state pension system; then they somehow got lost in the Government’s reforms. I am sure that that was not the intention and I have no doubt that the Government will come back and say, “Yes, but people will get these bigger amounts and more of them will get a full pension”, but that makes no difference. One would get those whether one was a carer or not. They have still lost any recognition of those caring responsibilities in the second state pension. Have the Government looked at the idea of a carer’s top-up, which has been around for a while? If so, what is their response to it? If they do not like it, what is their proposal for addressing this issue?

On Monday, we discussed in Committee Amendment 78 in the name of the noble Baroness, Lady Altmann. It recommended that a member of a scheme should not be allowed to use the pension freedoms to transfer out without the consent of his or her spouse or civil partner. I asked whether the Minister would go away, talk to the department, take some advice and return to it during today’s debate, which she kindly agreed to do. Can the Minister give us a reaction? Has the department established that there is an issue, and what is it doing about it? That would be really helpful.

My noble friend Lady Drake said the gender pay gap will not close until 2050 and pension parity will therefore not be reached until something like 2100. We just cannot wait that long. This is a matter of public policy, economics and societal need, but it is also a basic issue of justice. What are the Government going to do about it?

[Earl Howe]

My Lords, the amendments tabled in the names of the noble Baronesses, Lady Janke and Lady Drake, and the noble Lord, Lord McKenzie, all concern automatic enrolment into workplace pensions.

Amendment 87 would lower from 22 to 18 the minimum age at which a qualifying worker would be eligible to be automatically enrolled by making a change to the Pensions Act 2008.

Amendment 88 would require the Secretary of State to lay a report on the effectiveness of our pension reforms within six months of this Bill becoming law. That review would mandate government to consider the minimum age at which qualifying workers must be automatically enrolled, the minimum level of pension contributions and whether existing legislation offers sufficient opportunity for low-paid workers to save for retirement. The Secretary of State would then have to make a recommendation about whether to bring forward new legislation in the light of its findings.

Amendment 95 would make changes to the criteria for a qualifying worker in automatic enrolment, known as a jobholder. These would lower the minimum age for a worker to be automatically enrolled from 22 to 18, abolish the £10,000 automatic enrolment trigger and make pension contributions payable from the first £1 of earnings.

Perhaps I may begin with the proposed changes to the automatic enrolment criteria. The amendment of the noble Lord, Lord McKenzie, would abolish the £10,000 automatic enrolment trigger. The Government review the operation of the trigger annually under the statutory automatic enrolment thresholds review. That approach means that a range of factors can be assessed, including affordability for employers and whether it pays to save for individuals. Since 2014-15, we have frozen the trigger at £10,000, which has expanded coverage each year due to wage growth. In the tax year 2020-21, this will see an extra 80,000 people brought into pension saving, of whom around three-quarters will be women. This is surely one policy area where we should aim to ensure that we proceed on the basis of sound evidence. We do not have evidence at this time that would support the abolition of the trigger. So, I am afraid that the Government cannot support this amendment.

Turning to the amendments in the names of the noble Baroness, Lady Janke, and the noble Lord, Lord McKenzie, which would reduce the minimum age to 18 and require pension contributions to be paid from the first £1 of earnings, the Government’s 2017 review of automatic enrolment—Maintaining the Momentum —has already set out our next steps in this area. The core proposals are a reduction in the minimum age for being automatically enrolled to 18 and the removal of the automatic enrolment lower earnings limit.

Our review involved extensive engagement with interested parties, including consultation, and was supported by an expert advisory group. Its conclusions were robust and remain correct. However, we have also been clear that these ambitions must be subject to learning from the contribution increases and finding the right approach to implementation. The timetable cannot be forced without risking both the consensus that we have achieved and the very significant policy achievements that have, rightly, been lauded across this House. Therefore, again, the Government cannot support these amendments.

I turn now to Amendments 90 and 91, tabled by the noble Baroness, Lady Drake, and Amendment 96, tabled by the noble Baroness, Lady Janke. They relate to the gender pensions gap and automatic enrolment. Since the introduction of automatic enrolment, workplace pension participation for all women employed full-time in the private sector— not only those eligible for automatic enrolment—has increased from 35% in 2012 to 83% in 2019. This is now the same as the participation rate for men, compared with 2012 when the participation rate for men was six percentage points higher. Our aim remains to increase the level of retirement saving across all groups. The 2017 review ambitions strengthen the framework of workplace pension saving for lower-paid workers, many of whom are women working part-time. As I have already made clear about the implementation, we will remain guided by evidence.

Amendment 90 would require the Secretary of State to undertake a review within six months of passing the Bill. The review would consider how to legislate to provide automatic enrolment contributions to people with caring responsibilities as parents or carers, with reference to a target group.

The new state pension system—introduced for people who reached state pension age from 6 April 2016 onwards—took forward the existing national insurance crediting arrangements. These included the credits brought into effect by Section 23A of the Social Security Contributions and Benefits Act 1992. The majority of people providing care and those who build a qualifying year for their state pension through the carer’s credit are women. The design of the new state pension means that, on average, women, those in lower-paid work and self-employed people receive higher outcomes than under the previous system.

More than 3 million women stand to receive an average of £550 more per year by 2030 as a result of the recent reforms. Women benefit most from the new state pension. Average weekly state pension payments for women are £152.44 under the new system, compared with £135.24 under the previous system. Outcomes are projected to equalise with those for men more than a decade earlier than they would have done under the previous system.

Under the system that operated from 2010 to 2016, people who were caring for more than 20 hours a week could claim the carer’s credit for additional state pension in addition to building qualifying years of the state pension. The full rate of the new state pension is more than £40 a week higher than the full basic state pension. As a result, unless someone had received carer’s credits for the majority of the 35 years of national insurance needed for the state pension, it is unlikely that they would have been in a better position than they will be now under the new state pension.

A key objective of the new state pension was to increase outcomes for women and lower-paid earners, accelerating the equalisation of state pension outcomes for men and women. The new state pension is successfully achieving these objectives. The settlement made in 2016 is building a clearer, simpler foundation for people’s private pension saving and we do not intend to reopen it.

I understand that the noble Baroness, Lady Drake, is concerned that parents and carers who are not working will miss out on automatic enrolment. Most parents and carers will work before or after periods of caring, or will combine part-time work with caring. The introduction of automatic enrolment has helped workers to build on the foundation of the state pension, while implementation of the 2017 review measures will enable them to build up more savings when they are working, improving their financial resilience in retirement. The amount being saved would be transformative: a national living wage earner with a 10-year career break could see an 88% increase in their pot size at retirement.

Amendments 91 and 96 would require the Secretary of State to conduct a review within six months of the Bill becoming law, concerning the sex equality impacts of the current framework. I always read amendments carefully but, if I may speak on a slightly lighter note, Amendment 91—tabled by the noble Baroness, Lady Drake—shows how important it is to read to the end of every sentence. When I first looked at it, I thought that it sought to ensure that the Secretary of State conducts a review of differences between men and women, which, it struck me, could be rather a lengthy exercise—but that is not the case at all. If one reads the amendment in full, it is a model of clarity in referring to a number of specified groups and I want to be serious in addressing it.

Amendment 91 would require the Secretary of State to make recommendations on how legislation and policy could correct any inequalities in automatic enrolment. Amendment 96 relates to the impact of public policy regarding pension schemes on women and the action being taken by government to close the pensions gap between men and women, with recommendations for possible further legislation.

The Government already carry out and publish a range of analysis and evaluation in relation to these matters, and benefit from valuable external evidence. The department currently evaluates the gender impact of changes to automatic enrolment policy on participation—in our annual thresholds review, for example, where this year we estimated that three-quarters of the employees made eligible by the freezing of the trigger were women. We measure and publish statistics on participation rates by gender. We carry out regular monitoring of the rates of stopping saving by gender. We also draw on a wide range of evidence across and outside government on the gender pensions gap, while working closely with the Government Equalities Office.

All that should, I hope, indicate to noble Lords that this is not a matter that we will just let drift and then monitor at some point in the future. We do so regularly as we go along, and in some detail. Outside of DWP’s evaluation of automatic enrolment—AE, if I may call it that—data and analysis of the gender pensions gap is produced from various sources across government. We will continue to draw on this evidence alongside our developing evaluation of AE, post phasing, to assess the impact of AE on the gender pensions gap.

--- Later in debate ---

[Earl Howe]

I hope that the noble Baroness will not go away with that impression. We are aware that there is a gap to be bridged. The key point I would ask her to reflect on is that, despite the desire to go faster in this area, there is a risk in doing so. We have learned lessons from the phased approach that we have already adopted. It was the right approach. The gradual approach brought everybody on side. We gathered evidence in the process; we are still gathering that evidence, and the evidence-based approach is the other watchword to bear in mind.

[Baroness Sherlock]

I will follow up a couple of questions that I asked the Minister: one was about mini-jobs, and I do not think that he responded to the other—I am sorry if I missed it—on the issue of spousal consent and pension freedom sharing. In Grand Committee on Monday, we were having a conversation about this. The Minister pushed back quite hard. I suggested that she go back to the department to establish whether there was a problem, and the noble Baroness, Lady Stedman-Scott said:

“The suggestion made by the noble Baroness, Lady Sherlock, is very helpful. I would be happy to do that before we come back to this on Wednesday”—[Official Report, 2/3/20; col. GC245.]


The reason I suggested that is that I knew we were going to have a debate on women’s pensions and therefore we could have it informed by some information. There is not much point in our having assurances if they do not happen. Is there anything to be said on that?

[Earl Howe]

I understand from officials in the Ministry of Justice that there has been a relatively small number of cases where the pension scheme member has taken advantage of the pension freedoms to act in a way that frustrates the intention of an attachment order. However, I would like to establish what evidence there is of the scale of the wider problem, as outlined by my noble friend Lady Altmann and the noble Baroness, Lady Drake, in our debate on Monday, before deciding on the appropriate government response. I can tell the noble Baroness that my officials will work with others across government to gather the available evidence.

--- Later in debate ---

[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.

[Baroness Sherlock]

My Lords, I, too, share the aspiration of the noble Baroness, Lady Bowles, to constrain somewhat the use of the extensive powers that the Government are blessing themselves through this Bill. I will not, however, reopen that debate in any great detail, although there is a temptation to say “We have another whole hour of Committee, we can debate this at great length”. The danger of a list is that some noble Lords will have concerns about particular aspects, such as constraining trustee power, while some will be in favour of multi-employer collective money purchase schemes. Most of us, however, would have reservations about the ability to amend primary legislation.

Although it may not feel as though Bills come along in super abundance, in the field of pensions it feels like they come along all the time like the number 19 bus, but I take the point. In fact, if we are going to have a list I would like to add to it: I would start with not allowing dashboards to do transactions without covering that in primary legislation. I have a long list in my notes which I will develop at length should we return to this. What might be helpful is if the Minister, in replying, would tell Committee whether the Government intend to do any of these things.

[Baroness Stedman-Scott]

My Lords, the question of delegated powers has already been extensively discussed in relation to the relevant clauses. My noble friend Lord Howe has already eloquently covered the Government’s position on these powers. As I said before to this Committee, the use of secondary legislation to set out more detailed technical matters, or to amend primary legislation for specified purposes, is consistent with the general approach in pensions legislation.

As with other pensions legislation, the provisions in the Bill embody the fundamental policy, while provisions of a more technical nature, or which are by their nature liable to change, are delegated to secondary legislation. This staged approach has two benefits. First, it enables flexibility to ensure that the legal framework remains appropriately tailored to developments in the pensions industry. Secondly, it enables government to provide legal certainty more quickly. This is important for the pensions industry and for member protection. It is a common feature of pensions legislation, which is by its nature very technical and can be subject to change.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

I thank the Minister for her responses. Referring to the question put by the noble Baroness, Lady Sherlock, as to which of these the Government may be doing, I think the answer has come back: all of them. I will go through them.

With proposed new paragraph (a), to

“create a new criminal offence”,

I was not focusing on fine-tuning Clause 107. We are used to how fine-tuning of an existing offence is done. If you look at some other areas, such as sanctions and anti-money laundering, you will see that it is a new criminal offence every time a new sanction is created, but the framework for what has to be done to create such a sanction is laid out in the Bill. If the right kind of policy direction is given in the Bill, you can be allowed to do more. I beg to differ with the assumption that there are no powers here, when the Government can amend any enactment. It puts no restriction on what they may do, so I do not think there is any legal certainty around not creating something that is a completely new idea of a criminal offence.

I am pleased to hear that there is no power here to enable the creation of a regulator. I would be interested to look again at the Hansard from the first day of Committee, because under the requirement to

“confer a discretion on a person”,

the person can be a body corporate and the discretion was specifically referenced as “powers”, if I remember rightly. I would be happy to accept a Pepper v Hart statement that there is to be no creation of regulators, if the Minister felt able to make one.

It has been made clear that there is the intent to create multi-employer collective money purchase schemes. This worries me greatly: having looked at it further, I am now less than certain about the general benefits and there is a risk to pensioners and employees. So many of the points put forward over the four days of Committee debates show that we have not got sufficient guidance as to what that shape will be. It worries me quite a lot that although we cannot yet work out how to do it fully for one, we are going with the more risky multi-employer system.

The requirement to

“significantly restrict the powers of trustees”

is, I suppose, a trick point. If anything does not deserve to be in the list, it is that, but I have drawn out a debate around the point, as I hoped to. Perhaps we have to be able to do that, but maybe there is some other way to make sure that it is framed with care.

My amendment then comes back to the amending of primary legislation. This is a wide power and I know that it can be used usefully, but such wide powers are never based on a single regulation. An individual regulation that could amend or revoke primary legislation would mean that Parliament could then reject it without being accused of always throwing the baby out with the bath water and losing all the other good things in the regulations. That might be a more reasonable way to approach things, but we know that that is not how it happens: we find ourselves doing something that we do not like because it is a small element of a much bigger thing. It is always done when the Government can make the case that it is urgent and that it will be a total disaster if it is booted out.

[Baroness Sherlock]

I am grateful to the noble Baroness for giving way, especially as I am about to abuse her generosity by asking a more general question. It is directed across the table, and is something that I forgot to ask in my own contribution.

The noble Baroness asked for assurance on various points. At various times during the Committee, the Minister has kindly agreed to write to noble Lords. Can the Minister confirm that those letters will come before Report?

[Baroness Stedman-Scott]

I can absolutely ensure that those letters will be with all Committee members before Report. We have debated these issues and I have listened to the concerns raised by noble Lords. We believe that all the powers are suitable and appropriate.

Guaranteed Minimum Pensions Increase Order 2020

Baroness Sherlock Excerpts

Tuesday 3rd March 2020 Grand Committee

[Baroness Janke (LD)]

My Lords, I congratulate the noble Baroness, Lady Lister, on her speech and I very much support what she said. I shall just raise a few issues that I hope the Minister will agree to consider.

After four years of the freeze in working benefits and £36 billion in cuts over that period, we of course welcome the end of the benefits freeze. However, as the noble Baroness said, the current increase does absolutely nothing to address the shortfall that has built up over the four years, especially since prices are rising for essentials such as food and children’s clothes. The benefit freeze has hit families very hard, particularly children. There are 4.1 million children in poverty—and they are in deeper poverty, further below the poverty line. The average family in poverty is now £73 per week below the poverty line, compared with £56 per week in 2012-13. Unless the Government act to restore the real value of financial support for families, things will continue to get worse. Without policy change, child poverty is projected to rise to 4.8 million, or 37% of all children, by 2023.

I hope the Government will consider what they can do to restore the situation. I know the Minister has a great interest in the welfare of children and I feel sure she will do everything she can. I hope the Government will consider ending the two-child limit on tax credits and universal credit. Continuing with these will push a further 300,000 into poverty. Will they consider lifting the benefit cap to move 100,000 children out of “deep poverty”—those living on 50% of median income before housing costs? Another suggestion is that adding £5 to child benefit would start to restore key benefits to all children.

We welcome the pensions uprating, which is particularly important to women as they live longer than men and often live alone. The pensions situation in the UK shows very significant differences between men and women, and I hope that the Minister will consider what can be done. I know we will be coming back to this issue when we discuss the Pensions Bill tomorrow, but the position as far as women are concerned needs to be looked at.

I very much welcome the fact that state pensions have become more inclusive and redistributive for those who take family caring breaks. However, for those who retired before April 2016, because the full amount of the basic pension remains nearly £40 a week below the threshold for means-tested single-rate pension credit, this improvement has had a limited effect on gender equality. As far as private pensions are concerned, among 65 to 74 year-olds the median private pension wealth is £164,700 for men and £17,300 for women. Among women aged 55 to 59, total personal income is two-thirds the income of men in the same age bracket.

Self-employment, zero-hours contracts and other precarious forms of employment have been increasing and these inequalities restrict the ability to pay either national insurance or private pension contributions. Even when incomes are similar, women’s pension saving is less than men’s, with too many women relying on their partner’s pensions. Many women are excluded from auto-enrolment because they are in low-paid jobs. Extending the coverage of auto-enrolment by reducing the earnings threshold to the national insurance primary threshold would bring 480,000 people, mostly women, into pension saving and would help to improve the gender pensions gap.

I hope that the Minister will consider what has been said. We take the opportunity to raise this issue while we can, despite the fact that nothing can be done about it today. Perhaps reforms to pensions such as revisiting care credits, a reduction in the number of qualifying national insurance years for the state pension and reducing or, indeed, removing the earnings limit so that low-paid workers, particularly women, would be eligible for private pension schemes are issues she might consider in due course.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for introducing these orders and thank all noble Lords who have spoken. First, I will speak briefly about the Guaranteed Minimum Pensions Increase Order before moving on to the Social Security Benefits Up-rating Order.

As we heard, the Guaranteed Minimum Pensions Increase Order 2020 provides for defined benefit occupational schemes that were contracted out to increase by 1.7% members’ guaranteed minimum pensions that accrued between 1988 and 1997, in line with CPI. This is a basically a routine uprating, but I want to take the opportunity to raise a specific issue. When the GMP order 2019 was debated on 14 February of that year, my noble friend Lady Drake invited the then Minister to give an update on the Government’s proposed guidance to occupational pension schemes in the light of the Lloyds Banking Group case. As the Minister will know, that case had the effect of requiring trustees to amend their pension schemes to equalise GMP benefits. In that debate, the Minister, the noble Baroness, Lady Buscombe, said:

“My department has put forward a method that schemes can use to equalise pensions which, because of its ‘once and done’ nature, should limit costs resulting from additional administration requirements. The department will provide guidance in the near future for schemes wishing to use the method upon which the department consulted in November 2016.”—[Official Report, 14/2/19; col. 1961.]

--- Later in debate ---

[Baroness Sherlock]

The Minister has read out two different things. For clarification, is she saying that we do not need to legislate, because the existing legislation allows people to follow the guidance that the Government have issued, or is she saying that they do intend to legislate and will do so in due course, rather than at the first feasible opportunity, which is now? The Minister may want to come back to me on that.