Cessation of EU Law Relating to Prohibitions on Grounds of Nationality and Free Movement of Persons Regulations 2022
Baroness Stedman-Scott Excerpts(2 years ago)
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Baroness Stedman-Scott
That the Grand Committee do consider the Cessation of EU Law Relating to Prohibitions on Grounds of Nationality and Free Movement of Persons Regulations 2022.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, this instrument was laid before the House on 20 October. It disapplies retained EU equal-treatment provisions relating to nationality and freedom of movement so that they cease to be recognised and available in domestic law in relation to access to social security, statutory payments, social assistance, housing assistance, education, training, apprenticeships and childcare-related matters.
These retained EU provisions have been redundant since the end of the transition period. The withdrawal agreement provides the necessary protections for those EU citizens who were resident in the UK before the end of the transition period and their family members. By disapplying the redundant provisions, this instrument furthers the Government’s aim of ensuring that all UK law is right for the UK. Correcting this deficiency in retained EU law will bring greater clarity to the UK statute book. I am satisfied that these regulations are compatible with the European Convention on Human Rights.
Prior to the UK’s exit from the EU, these equal-treatment provisions granted EEA and Swiss citizens rights to access benefits, services and educational entitlements on the same basis as UK nationals, if their presence in the UK was based in the exercise of specific freedom of movement rights. The UK voted to leave the EU and, as a result, freedom of movement between the UK and EEA countries came to an end on 31 December 2020. Equal-treatment provisions based in freedom of movement arrangements therefore became redundant.
Disapplying these redundant equal-treatment provisions clarifies the situation that is already in effect for EEA and Swiss nationals coming into the UK. In line with the Government’s manifesto commitment, EEA nationals are now treated on an equal basis with other non-UK nationals arriving in the UK after the end of the transition period, with the exception of those EEA or Swiss nationals granted status under the EU settlement scheme.
While the instrument does not effect a policy change for any group of EEA or Swiss nationals in the UK, I particularly emphasise that it in no way alters the rights of EEA or Swiss nationals that are protected under the EU-UK withdrawal agreement, the EEA European Free Trade Association separation agreement and the Swiss citizens’ rights agreement. They will continue to be able to access benefits and services on broadly the same basis as they did before the end of the transition period, and their rights to do so are protected by the European Union (Withdrawal Agreement) Act 2020. Additionally, we already have domestic law that protects individuals from discrimination. Retained EU provisions based on freedom of movement are therefore not only redundant but unnecessary.
In summary, this instrument is a technical correction of the statute book that will address a deficiency arising from retained EU law. I therefore commend the regulations to the Committee.
Baroness Sherlock (Lab)
No other takers—I am shocked, given that it is such an exciting instrument. I thank the Minister for her introduction to these regulations, in which I am interested. I was going to say, “and all noble Lords who have spoken”, but it is just me. I am also grateful for the briefing on the regulations from the Minister’s officials. I confess that, despite reading everything I could, I am struggling to work out what these regulations actually change, if anything.
I read a summary of this instrument done by the House of Commons Library for a colleague at the other end. It noted that Parliament has already legislated to end the underlying right of free movement for EU citizens moving to the UK. The Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 repealed the main provisions of retained EU law relating to free movement and disapplied the equal treatment obligations supporting free movement, in so far as they were inconsistent with the UK’s immigration laws. However, the note went on to say that
“these equal treatment rights ‘would continue to apply in non-immigration contexts unless disapplied’. The draft measure now disapplies those equal treatment rights in the specific areas set out in the schedule, including social security payments and housing.”
The Minister said that these rights “became redundant” as a result of the 2020 Act having ended the underlying right to free movement. I am still not clear as to exactly what rights may still exist that this instrument is disapplying. Can the Minister clarify that? I can see that the aim is to make it clear that EEA nationals who are not subject to the settlement arrangements should have the same rights as anyone else subject to the points-based immigration system going forward. I am just not clear what, if any, rights they have now that they will not have once this instrument becomes law. If the answer is none, I ask the Minister to say that categorically for the record. It may be about legal clarity; I would just like to be really clear.
I want to make two other points. Regulation 4 makes changes to Regulation (EU) No. 492/2011. I looked this up; it turns out that it amends Article 7—it prohibits different treatment of EU nationals in respect of employment, social and tax advantages—to say that this will not apply in relation to the matters in the Schedule to this draft instrument, namely: social security, social assistance, housing, education and training, and childcare. Do Article 7 rights continue to apply to any other areas?
Finally, the instrument also removes Articles 9 and 10, which provide for the rights of EU nationals in relation to social housing and to state education for their children. Are there any other rights that EU or EEA nationals still enjoy that have not been repealed? If the answer is that any such rights that exist will be swept away by the sunset provisions of the advancing retained EU law Bill, why not wait for that rather than using Section 8 powers? I look forward to the Minister’s reply.
Baroness Stedman-Scott (Con)
I thank the noble Baroness, Lady Sherlock, for her contribution and questions and congratulate her on her stamina in these matters. I will try to answer all the points raised.
The noble Baroness asked how the EU provisions to be disapplied became deficient or redundant. Prior to the end of the transition period, through the EU freedom of movement of persons rights, EEA and Swiss citizens had access to certain benefits, services and education entitlements. When the freedom of movement of EEA citizens ceased at the end of the transition period, the application of these rights became redundant, as the rights granted by these provisions have been redundant since the close of the transition period. They represent the deficiency arising from retained EU law. The regulations clarify the situation already in effect.
The noble Baroness asked what rights the provisions to be disapplied still grant. First, let me clarify that these regulations should not be understood as implying that these provisions continue to grant rights outside of the relevant matters as per Regulation 1(4). The department involved in these regulations examined the provisions as they relate to the benefits and services covered in the relevant matters and is confident that these rights are redundant as they relate to the relevant matters. We are disapplying them to clarify the position that is already in effect.
The noble Baroness, Lady Sherlock, asked what would happen if these provisions were allowed to remain on the statute book. These redundant provisions are not in line with domestic legislation on immigration and access to benefits and services. They therefore create confusion in the statute book. Not disapplying them would leave this deficiency in UK law unaddressed. It could also mean that EEA nationals who are not eligible for benefits or services could bring legal challenges against the Government to try to bypass domestic legislation by instead relying on those retained EU freedom of movement provisions. This would set back progress on implementing the public’s decision to leave the EU and end freedom of movement.
The noble Baroness asked me to clarify whether that was a change in policy. The answer is categorically no. These regulations do not effect any policy change; they are a technical rectification of the statute book to clarify the position already in effect after the end of the transition period. She asked why the regulations were being laid now. Why not let these retained provisions be sunsetted by a reform and revocation Bill? Work on the regulations was initiated independently of the Retained EU Law (Revocation and Reform) Bill under Section 8 powers from the European Union (Withdrawal) Act 2018. Those powers allow Ministers to address deficiencies in retained law. Section 8 powers expire on 31 December 2022, thereby creating a need to lay these regulations.
The noble Baroness also asked whether any rights still applied. Rights and entitlement for EEA citizens set out in the withdrawal agreement and domestic legislation still apply.
These regulations are a technical rectification to ensure that UK law functions with legal clarity. The retained EU provisions that they disapply are redundant, and that deficiency should be corrected. This instrument will not change the policy in place regarding any rights currently enjoyed by EEA nationals in the UK. However, it will bring greater clarity to the UK statute book. I therefore commend the regulations to the Committee.
Biocidal Products (Health and Safety) (Amendment) Regulations 2022
Baroness Stedman-Scott Excerpts(2 years ago)
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Baroness Stedman-Scott
That the Grand Committee do consider the Biocidal Products (Health and Safety) (Amendment) Regulations 2022.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, this draft statutory instrument was laid before Parliament on 18 October. It makes a technical change only and there are no policy changes. It relates to biocidal products, which are used to control harmful organisms and include disinfectants, insecticides and rodenticides. These products have important roles in protecting human health and critical infrastructure and it is therefore essential to society that legal supply of these products is not disrupted.
Although biocidal products are critical to society, they can pose risks to human health, animal health and the environment if used incorrectly. Therefore, to allow a biocidal product on to the GB market, a two-step authorisation process is in place. First, the active substances used in biocidal products must be approved. Approval involves a rigorous scientific evaluation to ensure safety and efficacy—a process which takes one to two years and costs approximately £180,000. If an active substance is approved, applications can be made to authorise biocidal products containing that substance.
This evaluation looks at the safety and efficacy of the formulation, a process which takes about a year and costs approximately £25,000. As noble Lords will understand, the applications are large dossiers of scientific data and require complex evaluation and assessment by a range of specialist scientific disciplines to ensure that there is no danger to human health, animal health or the environment.
The HSE operates a cost-recovery model so applicants bear the full cost of processing applications. Biocidal products are regulated under the Great Britain biocidal products regulation, which was retained following EU exit. The authorisation process in Great Britain is similar to that in the EU, except where references to the EU arrangements were replaced by domestic arrangements.
Also retained in the legislation are the legal deadlines by which applications should be processed. These legal deadlines were in place to ensure consistency across the EU over how long was given to process applications and to provide transparency to applicants. While the UK was still in the EU, a steady stream of applications was processed across EU member states although, even at that time, deadlines were often missed.
In preparation to meet our ambition for the HSE to become a world-class standalone chemicals regulator following the UK’s departure from the EU, significant investment has been made to increase the HSE’s capacity and capability and to embed new processes and procedures. Through a major transformation programme, the HSE’s headcount for its chemicals regulation division has increased by around 40%, with continued ongoing significant investment in people and IT.
As part of the EU exit preparations, transitional arrangements were put in place to ensure a smooth transition for business to the new domestic systems. These arrangements required businesses which had applications in process at the end of the implementation period to resubmit them to the HSE by deadlines in 2021 if they wanted to retain access to the GB market. Under these arrangements, biocidal products already on the GB market could continue to be made available until their application was processed. It was unknown at the time how many resubmissions would be made by applicants to access the GB market until the deadlines had passed.
However, I am pleased to report that over 70% of biocides applications seeking access to the UK market under the previous EU system have been resubmitted to GB. This clearly shows that industry has faith in the GB market and the HSE as the regulator but generates a greater workload than was originally anticipated. As a result, it is not possible to process the large one-off influx of biocidal product authorisation applications within the legal deadlines in place.
This issue has been compounded by the HSE’s loss of access to EU databases holding historical reports which contain scientific information relevant to processing these applications. A resolution should be in place by the time this information is required to process the applications. The HSE will also consider what future digital solutions may be required once a resolution has been implemented; however, the issue has caused some further delays in processing applications. Because these issues have arisen directly from the EU exit, the legal deadlines in the Great Britain biocidal products regulation amount to deficiencies in retained EU law. Therefore, the appropriate course of action available to the HSE is to make amendments through the statutory instrument under the powers to remedy deficiencies in the European Union (Withdrawal) Act 2018. The changes proposed by this statutory instrument are straightforward: the legal deadlines in place to process biocidal product authorisation applications will be temporarily extended by an additional five years. The period of five years has been derived from resource modelling from the transformation programme I referred to earlier. It represents the amount of time that the HSE forecasts it will take to address the backlog and to return to a position where applications can be processed within the original legal deadlines. I trust that it is understood that processing applications is not a rubber-stamping exercise and that it requires highly trained staff who simply cannot be brought in in large numbers at short notice.
The amendment to these legal deadlines should have no impact on businesses, and an extension of the deadlines themselves does not provide any additional cost to the applicant. Instead, this statutory instrument provides legal certainty that where biocidal products are on the GB market awaiting the outcome of their application they can remain there, which may not otherwise be the case had the legal deadlines been missed. This, in turn, also ensures that there is no disruption to the legal supply of essential biocidal products while the backlog of applications is cleared. A small number of new biocidal products authorisation applications will also be affected by this instrument. However, these applications will be prioritised to ensure that where businesses are waiting for authorisations before they can supply their products, they will not experience any delays.
Finally, this statutory instrument also adds an additional transitional measure which was an oversight in the previous EU exit statutory instruments. This allows a type of biocidal product authorisation application called “same product applications” to transition to GB and be treated in the same way as other applications. This also does not have any impact on businesses and is a technical correction to ensure that the biocide regime is now fully functioning as intended. I can confirm that consent to make this statutory instrument has been obtained from Ministers in the Scottish and Welsh Governments, in line with normal conventions. The regulation of biocides in Northern Ireland follows separate arrangements under the Northern Ireland protocol and is not affected by this instrument.
I hope that colleagues of all parties will join me in supporting the draft regulations, which I commend to the Committee.
Baroness Brinton (LD)
My Lords, I thank the Minister and civil servants for the details in the Explanatory Memorandum. I also put on record from these Benches that we too are pleased that arrangements have been made with devolved states; there have been two or three incidents recently where trying to box and cox between those in time to get things out has been problematic, but if that has been able to happen, that is fine.
I should say from these Benches that we do not have a problem with the content of the SI; that is absolutely fine. I just say that, helpfully, the Secondary Legislation Scrutiny Committee, in its 16th report for this parliamentary year, noted in paragraph 4 that
“the Explanatory Memorandum does not indicate what progress the HSE has made in the last three years in reducing the backlog, or whether HSE is building up its own database to prevent”
the problems. I therefore want to ask two questions arising from that. The Minister referred to improvements and understanding that there were pressures so, first, it would be helpful to know whether there is a specific figure available for that backlog and how it is has been reduced. Or is it in fact worsening—which I suspect may be the case—or is it static, having worsened before it came down? On the issue of the Government not being able to access the EU databases now, is there a timescale for the alternative arrangements? That will obviously also help to speed things up.
In reading the Explanatory Memorandum, I have to offer an award to the author in that it is beautifully written and one has to look quite hard to see the problem underlying why we are asked to make this technical SI arrangement. It would be fair to say that the sentence in paragraph 3.1:
“This instrument is formally prospective but will have some retrospective effect”—
in other words—
“this temporary future change will have some effect on past arrangements”,
is glorious and worthy of “Yes Minister”. But I understand the problem. Civil servants are helpfully trying to cover Ministers’ embarrassments, which I will come on to in a minute.
I note that there is a temporary extension for a period of five years to legal deadlines. I particularly turn to paragraph 7.8 in the Explanatory Memorandum, which refers to the “temporary backlog of applications”, and paragraph 7.9, which says that the Health and Safety Executive
“will not be able to meet the legal deadlines”.
The Minister said that the Government intend for us to have a world-class chemicals industry, with world-class safety arrangements. However, the arrangements that were put in place as a result of Brexit and the transitional period mean that a very large number of organisations have had to resubmit applications. I thought it was interesting in the context of Prime Minister Truss—one Prime Minister ago—vowing to scrap remaining EU laws by the end of 2023, that many people said would risk a bonfire of rights. However, it has also created, and will create, an enormous backlog of work for the Civil Service and government agencies. The scale and complexity of the task ahead will be difficult in the context of Civil Service cuts. Can the Minister say how her department and the agencies that report to her—in this instance, I obviously refer specifically to the Health and Safety Executive—will be protected from the proposed Civil Service cuts in order to deliver the extended timescale that is now listed in this particular SI?
This is not just the past Premier’s ambition: about 10 days ago, the Daily Express had a headline
“Brexit bonfire of EU laws set to go ahead with no delay as PM confirms date for axing”
the EU legislation. Can the Minister help to explain how not just this one statutory instrument, but the many thousands of statutory instruments can be in a bonfire by the end of 2023 when we are here today talking about the practical effects on one government agency—the Health and Safety Executive—to make it workable to catch up on the backlog? That is before this Government have even redefined the datasets they were using with the EU to make this job possible.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for her introduction to these regulations, the noble Baroness, Lady Brinton, for her very interesting contribution, and officials for supplying some useful information.
As we have heard, these regulations are needed because the post-Brexit arrangements made for authorising biocidal products in Great Britain are not, shall we say, working quite as smoothly as one might have hoped at an early stage of the process. After Brexit, the process of authorising the “active substances” in biocidal products was transferred from the EU to the Health and Safety Executive. There was a three-year transition period during which products whose active substances had previously been authorised could continue to be sold in GB using the certification. These regulations propose that those products can carry on being sold in Great Britain until the end of 2027, whether or not the HSE has processed their application for authorisation—I hope I have that right; I read them several times but I would not swear to it. However, the Minister can correct me in her response if I have not.
The noble Baroness, Lady Brinton, mentioned the comments by the Secondary Legislation Scrutiny Committee, which helped us to understand that the big problem is in fact a huge backlog primarily caused by the fact that the HSE no longer has access to much of the data stored in EU databases on which previous assessments have been made. Therefore, we need this instrument to give legal certainty that at least until the end of 2027 biocidal products can continue to be sold and used legally while the HSE works its way through the backlog of applications for authorisation.
I too have some questions. First, when did the HSE know that it would not have access to the data in the relevant databases that was needed to make these assessments? Presumably, it was part of the negotiations for Brexit; did it know in plenty of time? If so, why were alternative arrangements not put in place for some time? Nobody could suggest that the Brexit process passed swiftly—I feel that it has been happening for most of my adult life, but even if it was not that long, it was not a speedy process. Was there not time to get ahead of the curve?
I would be interested in the response to the questions raised by the noble Baroness, Lady Brinton, about what the agency is doing to build up its own database and what progress it is making on reducing the backlog.
What assessment has been made of the possible risks of the HSE not having access to the data it needs to make timely and expert assessments of biocidal products? I understand that the EU was doing a rolling review of active biocidal substances, so presumably there are products awaiting authorisation that have not been reached. So their active substances had not yet been reviewed by the EU, yet, at the moment, these regs provide for them to be legally marketed until the end of 2027 without any HSE authorisation. Can the Minister therefore tell us what is the longest period a product could be on the market since either its active substances were approved either by the EU or the HSE?
What happens if evidence emerges that an active substance is not as safe as it had perhaps been thought or indeed as it was known to be when it was approved by the EU? I presume that the HSE or other bodies have powers to act if someone brings evidence to them saying, “Evidence has emerged that this product is not as safe as we thought it was.” However, since there will not be any guaranteed systematic review of the evidence for quite a long time, what if that evidence emerges elsewhere and is not drawn to the attention of the agency? Has a plan been put in place to consider the impact of that? If a product were to contain, say, two active substances which had been approved separately by the EU, how would we know if they would interact and whether the product is safe if the product is not being authorised by the HSE for, potentially, a number of years?
Finally, to follow on from the question from the noble Baroness, Lady Brinton, the HSE now has an enormous job to do. The Minister mentioned an increased head count. What I am interested in is whether she can assure the Grand Committee that her department has taken the view that the HSE has access to the numbers of people and the expertise that it needs to keep British people safe in this area. I look forward to her reply.
Baroness Stedman-Scott (Con)
I thank the noble Baronesses, Lady Brinton and Lady Sherlock, for their contributions. I shall try to answer those questions. If there are some that I cannot answer, I shall write and clarify at a later point.
First, the noble Baroness, Lady Brinton, asked about the backlog in the past three years. It is important to clarify that the HSE has been working on the backlog of biocidal product applications for only around a year. Three years is a misleading timeframe, because it fails to account for the EU exit implementation period and, after that, the time given to industry applicants to resubmit their applications to the HSE. In this year, the HSE has added the details of all resubmitted applications and associated data into their systems and initiated work on around 20% of these. This is in line with plans to clear the backlog of applications. The HSE’s operational planning assumptions are that it will commence 50 applications per year over the coming years, which means that, by the end of the five-year period, it anticipates having completed the roughly 200 applications received after the transition period or be on track to complete them with the normal timeframes in the legislation. After that, the HSE will return to operating within the existing deadlines so that the deadline extension can lapse.
The noble Baroness, Lady Brinton, also asked a question about having lost access to the EU databases. The EU databases contain certain historical information from the EU regime, which it would be too costly to recreate in Great Britain. Therefore, at the same time, the HSE is exploring options for how it can best operate the GB regime, on the assumption that this information will remain unavailable. Working on this is at an advanced stage, and appropriate solutions will be implemented as soon as they are fully developed and tested. I do not know how we would plan to communicate that once it is done, but I shall write to noble Lords.
Baroness Brinton (LD)
I am very grateful for the Minister’s response, but can I decode it as saying that the HSE is having to start again from scratch? It is not quite clear; I understand the part about not being able to use the EU databases, but do I understand that what is happening in the background is that we have had to start again completely from scratch with a completely blank sheet of paper?
Baroness Stedman-Scott (Con)
My understanding is that, with the information that the HSE has, it has to start from a very low point, but it will not be without anything—as I understand it. I am told that biocide evaluations are complex regulatory assessments involving a number of scientific specialisms, so developing solutions is inevitably taking some time. I am not sure that that answers the question that the noble Baroness has challenged us with—whether we are starting from scratch, or whether we have information with which we can start it off. In fact, I can now say that we are not starting from scratch, but I think that I owe both noble Lords a bit more on that, and I shall place a copy of a letter in the Library. They can be comforted that we are not starting from scratch, but I am not sure where we are starting from—but there we are.
The noble Baroness, Lady Brinton, asked about retained EU law. The Department for Work and Pensions and the Health and Safety Executive will continue to assess REUL to identify potential impacts. We are committed to ensuring that health and safety legislation continues to be fit for purpose and that our regulatory frameworks operate effectively following the sunset of the REUL—forgive me for not reading the term out in full.
The noble Baroness, Lady Sherlock, asked about mixing two authorised products into one—a chemistry set comes to mind when answering this question. The new product will require its own authorisation. It will not be allowed on the market until it has gone through its own risk assessment, biocidal product assessment and authorisation
The noble Baroness also asked when the Government found out that we had lost access to the EU databases. The EU withdrawal agreement provided that the UK would no longer have access to the relevant EU databases from the end of the implementation period. Since then, as I said, the HSE has been assessing a number of options to manage biocidal product authorisations, taking into account the loss of access to historical information in EU databases, such as use of publicly available information. I am sorry that it is not possible to give a timeline, but work is at an advanced stage and appropriate solutions will be implemented as soon as they are fully developed and tested.
The noble Baroness raised the issue of resources, which is important. The total budget for the HSE’s chemical regulation division has grown by 39%, from £22.4 million to £31.2 million between 2018-19 and 2022-23, reflecting the HSE’s need for increased resources for its post-EU exit responsibilities. The HSE’s current focus is on building out from our initial day one operating capacity and laying the foundations for its long-term future operation. The funding the HSE has received to date is sufficient to support that work, and I am not aware of any attempts to reduce it in the current climate.
The noble Baroness, Lady Sherlock, asked about the risks of leaving products on the market. There is a multi-regulator approach to the regulation of biocides not yet authorised under BPR using a jigsaw of legislation, including product safety law and earlier pesticides legislation. This provides proportionate powers for the appropriate authorities to take the regulatory action if products are identified that pose risk to people, animals or the environment.
The instrument will provide the necessary extension to the legal deadlines—
Baroness Sherlock (Lab)
On that last point, the question I was trying to ask—I probably phrased it very poorly—was that I realise that if information comes to the Government’s attention, by some tool or agency, a means will be found to do something about it. But it is quite possible that, for a product that has been on the market without review for a long time and is used around the world, evidence may have appeared elsewhere which has not been brought to the Government’s attention. The point about systematic reviews is that one presumably goes out looking at the evidence. Is there any concern that, the longer products are on the market, the greater the risk that some previously unclocked problem may arise?
Baroness Stedman-Scott (Con)
I will write to the noble Baroness about that. I would assume—correctly or incorrectly—that the Health and Safety Executive is keeping up with developments by other countries’ health and safety agencies, but let me write to the noble Baroness to clarify that point. If, when she gets the letter, she is still worried, she may come back to me and I will do further work on it.
To conclude, the instrument will provide the necessary extension to the legal deadlines to enable HSE to process effective biocidal product authorisation applications. This will provide legal certainty to businesses that biocidal products on the market awaiting their application to be processed can remain there. In turn, biocidal products essential to the functioning of society can continue to be made available and used. I commend the instrument.
Carer’s Allowance
Baroness Stedman-Scott Excerpts(2 years ago)
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Baroness Pitkeathley (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as vice-president of Carers UK.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
The Minister for Disabled People, Health and Work is looking forward to an early meeting with Carers UK to discuss this and its recent report. Our main conclusion from that helpful report is that carers in financial need may wish to check whether they have applied for all the benefits that they are entitled to, including means-tested benefits. That can provide them with an extra weekly income and additional help with the cost of living. For example, carers can get up to £2,000 on the carer’s element of universal credit.
Baroness Pitkeathley (Lab)
I thank the Minister for her Answer and for her personal commitment to this issue. I know she understands the economic case for supporting carers because they save the nation nearly £200 billion every year, but I wonder if the Government also understand that there is a strong political case here too. Some 84% of the general public think the Government should supply more support for carers, while only yesterday the Association of Directors of Adult Social Services said that 97% of directors thought the Government should provide more financial and practical support for carers. A top-up payment to get them through the winter and a relaxation of the earnings rule, so that they could keep more money if they managed to get a job, are modest enough demands but they would make a huge difference to carers, to health and to social care, and perhaps even give a much-needed boost to the Government’s reputation.
Baroness Stedman-Scott (Con)
I accept that the requests in the paper are modest—I really do. I must pay tribute to the work that carers do; it is much valued and respected. With regard to a top-up or an extra payment, unpaid carers can already get a top-up through means-tested benefits. I re-emphasise that we must make sure that they claim everything they should. The earnings limit for those in receipt of carer’s allowance who are able to maintain some contact with the employment market is currently £132 a week. I have no information that tells me that that is going to be changed.
Baroness Fookes (Con)
My Lords, given that many people in ordinary households are very worried about their fuel bills this coming winter, it seems highly likely that carers, often with very delicate people to support, will be even more worried. Can my noble friend offer them any crumb of comfort?
Baroness Stedman-Scott (Con)
There are two things. We understand the pressures on carers facing the cost of living crisis, especially around energy costs. They will get support through the energy price guarantee, which is supporting millions of households with rising energy costs. I am just waiting for someone to ask me about uprating. We have nine minutes to go until the Chancellor’s Statement, and I stand here in hope.
Baroness Tyler of Enfield (LD)
My Lords, carers who care for longer are more likely to be struggling to meet the cost of living crisis at the moment and are more likely to be falling into debt. The Carers UK report shows that that is particularly the case for those who have cared for over five years. What plans do the Government have to set up some sort of independent inquiry looking into the relationship between carers and poverty and to try to come up with some solutions for bringing unpaid carers out of poverty?
Baroness Stedman-Scott (Con)
My very straightforward answer is that there are no plans for a review or working group on this. Knowing how vociferous the noble Baroness is about things that matter to her, I would have thought that a letter to the Secretary of State would not be a bad thing.
Baroness Lister of Burtersett (Lab)
My Lords, this Minister and other Ministers constantly tell us that carers are well valued, yet the carer’s allowance continues to be paid at a lower rate than equivalent benefits, despite the growing evidence of the serious hardships experienced by carers. How can this state of affairs be justified? Asking carers to claim means-tested benefits is not the answer.
Baroness Stedman-Scott (Con)
We should wait and see what the Chancellor says, and I am hopeful about that. I re-emphasise that means-tested benefits can increase payments to carers quite significantly. I am sure that, when Carers UK meet the Minister for Disabled People and talk about the report, they will discuss in detail some plan to raise awareness of those benefits.
Lord Kamall (Con)
My Lords, in response to the Question from the noble Baroness, Lady Pitkeathley, my noble friend the Minister replied that carers are not always aware of all the benefits they are entitled to. Could my noble friend enlighten the House on what steps the Government are taking to make sure that more carers are aware of the benefits available to them?
Baroness Stedman-Scott (Con)
I go back to my previous answer. We have done it for pension credit, and we have had quite some impact there. I cannot commit to doing the same for carer’s allowance, but I am sure that, when Carers UK meet the Minister for Disabled People, that should be if not number one then number two on the agenda. There are other ways people can know about those means-tested benefits, including GOV.UK and through citizens advice bureaux and other organisations such as Carers UK.
Baroness Watkins of Tavistock (CB)
My Lords, is the Minister prepared to talk to the Department of Health and Social Care to see whether there could be an additional allowance to carers immediately on a relative being discharged from hospital to try to reduce delayed transfers of care?
Baroness Stedman-Scott (Con)
I ask my noble friend Lord Markham, “Shall we talk?”. I am very happy to talk to anybody to make life better for people. Maybe my noble friend can follow that through in the next Question.
Baroness Sherlock (Lab)
My Lords, the Minister is rightly encouraging people to claim the benefits to which they are entitled, but can I take her back to the question asked by her noble friend Lady Fookes? Even people on benefits may be struggling at this point. The report showed that those who are caring have extra costs which others do not. The report was incredibly moving. One person said:
“My son is incontinent … if we don’t wash him in warm water several times a day this will cause him to physically decline. So how do we pay for the gas to heat the water if we are currently at max budget?”
Another said,
“my husband has terminal brain cancer, I am worried about how I will cope over the winter months as I can’t allow him to be cold—I need him to be as comfortable as possible in his final months at home”.
Those who are on just carer’s allowance do not get any extra help with fuel. What are the Government going to do to see whether the money given to those who are caring is enough to meet the costs they encounter?
Baroness Stedman-Scott (Con)
Those who are on carer’s allowance receive the £400. Those who are on carer’s allowance but who are entitled to the carer’s element of UC, where they are not required to look for work, can get another £2,000. The Government are helping, and we are four minutes away from finding out what more they might do around energy costs. The stories and case studies that the noble Baroness read out are harrowing, but the Government are doing everything they can, within the limits of their financial position.
Lord Watts (Lab)
My Lords, have the Government given any thought to those people on carer’s allowance getting automatic increases rather than having to means test? We already know that means testing makes it more difficult for claimants to receive the money they need.
Baroness Stedman-Scott (Con)
I think the noble Lord is asking me whether people on carer’s allowance will automatically get means-tested benefits. There are other benefits which are means tested and cannot automatically be applied. I have no information that those rules are to change. I agree that the noble Lord is justified in his question.
Lord Forsyth of Drumlean (Con)
My Lords, does my noble friend not think that it is high time we had a review of the whole basis of social care? I do not know what the Chancellor is going to announce, but did we not take a wrong turn when we placed the emphasis on people not having to sell their family homes, rather than on getting the resources needed to support professional carers, as well as carers at home, and on reinforcing support where families take on that responsibility but are covered by additional help? It really is urgent, and it is one of the reasons we see ambulances parked outside hospitals and hospital beds being blocked.
Baroness Stedman-Scott (Con)
I completely agree with my noble friend that the situation is urgent. We have launched the People at the Heart of Care White Paper, which set out a 10-year vision for reforming adult social care. I do not make light of the facts; we are all aware of the extraordinary position the NHS is in with the backlogs. I am sure that my noble friend Lord Markham—I am not passing the buck—has got this under control and will be prepared to share that with noble Lords.
Pensions Dashboards Regulations 2022
Baroness Stedman-Scott Excerpts(2 years ago)
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Baroness Stedman-Scott
That the draft Regulations laid before the House on 17 October be approved.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I am pleased to introduce this instrument, which, subject to approval, will create the framework within which pensions dashboards will operate.
Pensions dashboards are digital tools that will present individuals with their pension information brought together from multiple sources. At the touch of a smart- phone, this information will quite clearly and literally be at members’ fingertips.
The Pension Schemes Act 2021 gave government the powers to create these regulations but this is a complex programme, and as such, the requirements are manifold. The regulations place requirements on registerable GB-based occupational pension schemes with over 100 active, deferred or pension credit members and specify when these schemes must connect to the Money and Pensions Service, or MaPS, as it is also known.
The department for communities is expected to make corresponding regulations for Northern Ireland and, once connected, pension schemes must follow the requirement to find pensions and send the relevant information to an individual’s chosen qualifying pension dashboard service.
The regulations provide that the Pensions Regulator may take enforcement action in relation to pension schemes that do not comply. The regulations will also cover the requirements to be satisfied for a pensions dashboard service to be a qualifying pensions dashboard service. This includes connection and functionality, display of new data, reporting and monitoring of the dashboard and enabling an independent person to audit the providers’ dashboard. Further to this, the Financial Conduct Authority has published final corresponding rules in relation to the providers of personal stakeholder pension schemes and will be consulting on a regulatory framework for qualifying pensions dashboard services later this year.
The regulations, in combination with a planned order to amend the Pensions Act 2004 will enable MaPS and the TPR to disclose information to each other in connection with dashboard functions only. This will support MaPS and the regulator in their pensions dashboard programme and compliance roles respectively, and support the secure delivery of the ecosystem and pensions dashboard services. The Data Protection Act 2018 and UK general data protection duties continue to apply to the sharing of information about an individual.
I should like to revisit why we need pensions dashboards and their potential to change people’s relationship with their pensions. We all know about the huge success that automatic enrolment had in getting people saving into a pension. Millions of people are now saving. There are about 27 million people with private pensions wealth not yet in payment. Research by Aegon found that almost three-quarters of UK adults have multiple pensions, as people move around the labour market throughout their working life, but some of those people may not know who their pension is with, what their pension is worth or, indeed, how many pensions they have.
Pensions dashboards have the power to change all that and we have conservatively estimated that reuniting people with lost pots alone could be worth £541 million to individuals over 10 years. It could be much more. The Pensions Policy Institute estimated in its most recent paper on lost pots that the total value could be up to £26.6 billion. Instead of relying on a box of paper under the stairs, pensions dashboards will help individuals find their lost and forgotten pensions quickly, easily and all in one place. The information that pensions dashboards will provide—alongside guidance or, where appropriate, advice from an FCA-regulated adviser—will help equip people to plan for their retirement and make informed decisions about their financial futures.
Among participants in a recent Ipsos MORI survey, nearly three in five people said that they were likely to use a pensions dashboard. This is a great starting point. We are in a digital age and now is the time to make pensions dashboards a reality. We are setting up a brand-new digital service, which will connect thousands of individual pension schemes covering millions of memberships. As you would expect, a huge amount of work and thought has gone into developing these regulations. This goes beyond government. Throughout, we have worked with our delivery partners in the pensions dashboards programme: the Money and Pensions Service, the Pensions Regulator and the Financial Conduct Authority. I thank them for their expert input into this cross-cutting project. We have also gained insight from those in the pensions industry and consumer groups through the two public consultations and other fora. I thank all those who contributed and helped shape dashboards policy.
The delivery of pensions dashboards needs to be both timely and operationally manageable for both the pensions dashboards programme and the pensions industry. The regulations set out the phased approach known as staging to connect different categories of schemes to MaPS. By prioritising schemes according to type and membership, we can maximise the level of member coverage on pensions dashboards in the shortest possible timeframe. Schemes will connect to the digital architecture of MaPS—the technology that underpins dashboards—and all parties and technical services that connect to it from the dashboard ecosystem.
Pension schemes should already be considering how they intend to meet their obligations. I urge all schemes to take preparatory action immediately to consider how they will connect to dashboards, to decide how they will find savers in their records, and how they will provide pension information. I know that all of us across the House are eager to see dashboards made ready for the public. The point at which this will happen is referred to in the regulation as the dashboards available point. The Secretary of State will issue a notice at least six months ahead of this point, having considered matters such as the coverage of memberships and service levels. This notice will give the pensions industry time to prepare to answer queries resulting from people engaging with their pension information.
Once dashboards are made available to the public, what will people see? We have taken an actively cautious approach to understand behaviour and protect consumers as dashboards are introduced. This is why dashboards will present individuals with relatively high-level pension information. It will not be possible to transact—for example, transfer or consolidate—through the digital architecture. On receiving an individual’s request to find their pensions information from the dashboard’s digital architecture, schemes must provide administrative data to the individual. This includes basic information about the pension, including how an individual can contact their scheme. The individual will then see information about the value of their pension, both as an accrued value and as an illustration of a projected retirement income. State pensions information will also be displayed, giving individuals a full picture of their pensions. Contextual information and signpost data will sit alongside these values to help users understand the information displayed.
This is a digital service. As such, we must recognise the need for speed. Trustees or managers must complete matching immediately and, where a positive match is identified, immediately provide administrative data to the individual. Where values have been provided on a recent benefits statement, or where a calculation has been made using the same methodology in the last 12 months, members will also receive value data, contextual information and signpost data immediately.
To balance responsiveness with deliverability for pension schemes where there are not values from benefit statements on hand, the regulations set out that in cases where all the benefits provided to a member are money purchase benefits, information will be returned within three working days, and other types will have up to 10 working days.
I stress that this is a starting point and I would like to see the pace quicken in time. However, the speed and ease with which individuals will be able to see their pension information is a huge step forward from the current disclosure requirements, following a request for a benefits statement, which allows schemes up to two months to return information—something completely out of pace with the digital age.
Throughout the passage of the Pension Schemes Act 2021, the Government stated their commitment to protecting the users of dashboards. Consumer protection does not rest in a single place. Each element of the pension dashboard ecosystem has its part to play in ensuring that consumer protection is integral to all steps of the dashboard journey. The foundation of the design is one of consent, with users given the ability to provide and withdraw their consent at any stage, putting them in control of their data. The design of the ecosystem is such that there is no need for a central repository of users’ personal information, and the digital architecture has been built to prevent unauthorised participants entering.
The ID-verification service within the architecture will also protect consumers by reducing the risk of pension schemes releasing data to the wrong individual. Where schemes are unsure about a match, they must return a possible match and release a limited form of administrative but not personal data, encouraging individuals to get in touch. Should trustees or managers of occupational pension schemes not comply with the requirements in these regulations, the Pensions Regulator can take robust action through compliance notices, third-party compliance notices and penalty notices.
Baroness Stedman-Scott (Con)
My Lords, I know all noble Lords across the House care passionately about the success of pensions dashboards. I remember well the quality of debate during the passage of the Pension Schemes Act 2021, which I am pleased has continued today. I thank noble Lords for their contributions today. I am glad that noble Lords found the briefing and engagement sessions helpful. I reciprocate that because I found the level and detail of our subsequent engagement absolutely invaluable. I am now going to try to make the dreams of the noble Baroness, Lady Sherlock, come true by making sure that I answer all the questions. If there are any that are unanswered, I will write and ensure that a copy is placed in the Library.
The noble Baronesses, Lady Sherlock and Lady Drake, raised the issue of small and micro-schemes. It is the Government’s intention to bring them into scope and regulate for small and micro-schemes with fewer than 100 relevant members at a later date. This will be subject to further consultation. While there are nearly 30,000 schemes in this category, they account for a tiny proportion—about 0.2%—of memberships. For the vast majority of potential dashboard users, their absence is unlikely to affect coverage.
I refer to a point made by the noble Baronesses, Lady Sherlock and Lady Drake, about DAP—the dashboards available point. In the government response to the further consultation, we set out that the coverage of schemes is one of the relevant matters we expect the Secretary of State to consider when deciding to announce the dashboards available point. While we have not specified a certain level of coverage to determine when the service will go live, we plan on closely monitoring the levels of coverage at different stages as schemes begin to connect with the dashboard architecture from April 2023. According to our staging profile, we expect that over 99% of active and deferred memberships will be available to be found on the pensions dashboard by the end of September 2024. The noble Baronesses also asked how many members will not be covered. The number of members with small and micro-entitlements that will not be covered at the dashboards available point is 179,000. This accounts for just 0.26% of all active and deferred memberships.
The noble Baroness, Lady Drake, asked if all public service pension schemes are ready to stage by September 2024, given the considerable relevance of those schemes to supporting widespread use of the dashboard. Public service pension schemes cover a significant proportion of memberships and will be required to connect and provide data as part of the first wave of staging, along with other large pension schemes. The Government recognise that the cloud remedy represents a unique challenge for public service pension schemes, including significant changes to systems and processes on top of more widely shared industry constraints. This has been taken into consideration when determining their staging deadline. In deciding the dashboards available point, the Secretary of State, in consultation with our delivery partners, will consider the level of coverage, ensuring the safety, security and reliability of the service and testing the user experience.
The noble Baroness, Lady Drake, asked if it was the intention that the Government’s “One Login” solution must be available for use before the Secretary of State announces the date of the dashboards available point when the pensions finder service is made publicly available. The identity service for pension dashboards is not dependent on the Government’s “One Login” as its solution before dashboards can be launched. The pensions dashboard programme has procured an interim identity service provider with a contract running until January 2024. The service it provides is aligned with the Government Digital Service good practice guide. Presently, the Money and Pensions Service is engaging with officials in the Cabinet Office and the Government Digital Service, as well as the wider market, building on the engagement work undertaken in 2020 to identify all possible options that may comprise its new identity service model. The key focus for the Money and Pensions Service is to ensure inclusivity for individuals while meeting a verification standard that is appropriate both to government for the state pension and to wider commercial stakeholders.
The noble Baroness, Lady Drake, asked if Parliament will be kept up to date and receive the necessary assurance that the governance of the dashboards ecosystem as a whole continues to be fit for purpose, and what plans the DWP has for a programme of research and monitoring of behaviours. The noble Baroness, Lady Sherlock, also raised this. In partnership with the pensions dashboard programme, we currently deliver six-monthly updates to Peers touching on the status of delivery of the pension dashboard digital architecture.
In addition, we are exploring options for monitoring and evaluating pensions dashboards. Given the significant investment in dashboards, monitoring and evaluation is an important part of the department’s focus. A multistrand evaluation strategy is being explored. This will be developed alongside the pensions dashboard programme, the Financial Conduct Authority and the Pensions Regulator, to ensure that learning helps to further develop dashboards over time.
If noble Lords find this helpful, options being considered include a longitudinal quantitative survey to monitor outcomes from the dashboard usage, qualitative research with consumers to explore dashboard use, qualitative research with the pensions industry, estimating changes in number and values of lost pensions pots, and monitoring information provided by dashboard providers. We will use the findings from monitoring and evaluation to develop pension dashboard policy further and ensure the policy is delivering for consumers and the pension industry.
The noble Baroness, Lady Drake, asked if it is the intention to embed user testing into further development of design standards. User research by the pensions dashboard programme and findings from its various working groups have been considered throughout the development of the pensions dashboard architecture. The Money and Pensions Service will provide a dashboard service and plans to undertake user research and testing to understand what questions people have upon seeing their data on dashboards. All future developments will be informed by user testing and undertaken in the best interests of consumers.
The noble Baroness, Lady Drake, asked if there is a confidence level in respect of minimising false positives and negatives for find and view requests which must be met before the DAP is announced. In the Government’s response to the further consultation on the dashboard available point, we set out a broad framework of relevant matters that will be considered before the Secretary of State announces the dashboards available point. This will include consideration of the level of coverage, ensuring the safety, security and reliability of the service and testing the user experience. The framework we put in place will be developed through wider engagement with interested parties and be informed by ongoing testing. This will ensure that the Secretary of State’s decision to announce the dashboards available point is based on a transparent and evidence-based process. We expect to publish our progress so that it is clear to industry when the likely date for the dashboards available point will be in advance of the formal six-month notice period.
The noble Baroness mentioned insurance buyouts and asked whether such transitions to buyout will pose complexities for the operation of the dashboard service, particularly if there are differences with the FCA and MaPS/TPR rules and regulations. The FCA rules make it clear that a deferred annuity contract—including retirement annuity contracts, Section 32 buyout policies and pension buyout contracts—is included as a personal pension product for the purposes of dashboard rules. Upon transferring to a new scheme, view data for those members will not be required for three months from the date of joining.
The noble Baroness asked whether the delivery of the pensions dashboard service is now the Government’s primary policy measure for addressing the small pots problem, and whether the DWP will set hard targets for the reduction in the number of small pots in its critical success factors set out in chart 1 of the impact assessment. Our immediate priority is to deliver pensions dashboards to help individuals to access their pension information and to plan more effectively for their retirement. The first iteration of pensions dashboards will not facilitate the automatic consolidation of deferred small pots; however, the provision of all this information in one place is an important first step in helping people to make decisions. Schemes getting their member data dashboard-ready will put the industry in a better position to implement solutions aimed at tackling the proliferation of deferred small pots. The reduction in small pots is not one of the critical success factors for dashboards, and we will not therefore set targets. However, the impact of dashboards on the number of small pots may be picked up as part of our wider monitoring and evaluation activity.
The noble Baroness asked whether I would facilitate a meeting with the FCA and the PDP. My officials, and those of MaPS and the FCA, would be delighted to engage. I will ensure that this happens.
I turn now to the points made by the noble Lord, Lord Vaux. On the Explanatory Memorandum, which refers to “Monitoring & review”, the noble Lord asked what review is intended and, especially, what will be published and when. Given the significant investments in dashboards, both monitoring and evaluation are important and, as I have already said, this will be developed alongside the Pensions Dashboards Programme, the Financial Conduct Authority and the Pensions Regulator to ensure that the learning helps to develop dashboards over time. I have already explained the options being looked at.
The noble Lord spoke about impact assessment and cost. If the industry passes its costs on to pension savers in the form of higher charges, we expect the overall annual cost per member to be low—around £2 per pension pot per year. This is a nominal amount in the context of pension wealth. Between 2018 and 2022, median pension wealth was £32,700 for individuals with a pension not yet in payment. Our research shows that the benefits to members will be greater through finding lost pension pots by using the free dashboard service. Furthermore, as dashboards develop, we will further understand user behaviours, and dashboards will have the potential to increase overall engagement with pensions in the longer term. This will have potential additional benefits to pensions providers as well as to members, although those benefits have not been quantified in the impact assessment.
The noble Lord made a point about the use of data and marketing, and asked what restrictions would be put in place on the use of data. For example, could a large pension provider or consolidator create a dashboard and then use the data obtained for marketing purposes? A similar question could be asked about a large tech company, such as Google or Meta. Other than for purposes of temporary caching, no data is stored on pensions dashboards, therefore it is not possible to mass-harvest the data of individuals via dashboard technology. The questions about whether consumers should be able to export their pension data from a dashboard, including the export of data from the dashboard to the dashboard operator, is a matter that the FCA will explore in its forthcoming consultation on the regulatory framework for pensions dashboard operators.
Baroness Drake (Lab)
I am sorry to intervene, as I know that the Minister is trying to answer all the questions, but I want to ask a question on the regulated FCA authorised advisers. The whole point is that that system of authorised advisers, which has been changed several times, even on the FCA evidence is not sufficiently protecting people. The fact that it is being offered as a solution is one of our concerns.
Baroness Stedman-Scott (Con)
I note the noble Baroness’s point. This is something that we will take back with officials and to the relevant authorities, and it is something else that I shall write about and I hope give her a better answer than she has had to date.
The noble Baroness, Lady Bowles, raised the issue of risk of exploitation of data. Pensions dashboards and the technology behind them are designed to maximise data security. For example, pensions information is sent directly and securely from the scheme to the individual; it is not stored by qualifying pensions dashboard services or by the digital architecture. Individuals will always have control over who has access to their data, and will be able to revoke access at any time.
The noble Lord, Lord Jones, and the noble Baroness, Lady Sherlock, have raised to me individually the issue of British Steel pension schemes. The FCA is responsible for the regulation of the financial advice market and has looked closely at the advice provided to those BSPS members who decided to transfer out of the defined benefit scheme. It found that a very high proportion had received unsuitable advice, as has been said. The FCA has announced that it intends to take forward a scheme to provide compensation for BSPS members who received poor advice; it published a consultation on this scheme on 31 March, which has now closed. I think that the point that the noble Lord and the noble Baroness were making was that it must not happen again, and I am sure that message is understood.
The noble Baroness, Lady Sherlock, asked me to confirm when the data from personal and stakeholder pension schemes will be available to the public through the dashboard. She also asked what the position was with group personal pension plans. As set out in FCA rules, the majority of personal and stakeholder pension schemes are required to stage as part of the first cohort by the end of August 2023. That includes group personal pension plans. Until dashboards are launched to the public, schemes’ data must be available to invited users for testing purposes.
The noble Baroness raised a point about missing pots. Only a very small proportion of occupational pension scheme memberships are out of scope of the obligations to connect in our regulation and FCA rules. We expect that, at the point when dashboards are launched to the public, most individuals can be confident that all their pensions will be available to find via dashboards. When the value data for found pensions has not yet been provided—for example, if the member is new to the scheme, or when the value is still being calculated by the scheme—information to that effect will be displayed on the dashboard.
The noble Baroness asked how confident Ministers were about the quality of the data and whether the work has so far thrown up any concerns. It is critical that savers can trust the information in front of them; trustees and managers have existing legal obligations in respect of data quality, including the accuracy principle under UK GDPR, which requires that organisations ensure that data remains accurate and up to date. The Pensions Regulator set out its expectations on data quality in its record-keeping guidance; this includes that data is measured at least once a year.
The noble Baroness asked why the DWP had not set particular minimum data standards for schemes for matching and releasing data. The regulations allow for the trustees and managers of schemes to set their own matching criteria. We believe that schemes should be given discretion over which data elements they use to suitably search their records for a match. It is important that any scheme’s matching policy is appropriate to the level of confidence that they have in their own data; a uniform approach across all schemes would be likely to result in suboptimal matching.
Just to divert the House for a moment, I am conscious of how long I have been speaking, and I am keeping others from their business, but I am absolutely committed to answering these questions. With the leave of the House, I hope that I can carry on.
The noble Baroness, Lady Sherlock, asked whether I could explain for the record what would happen if the data submitted by a consumer was a partial match with data held by a firm. Schemes have the option of returning a possible match if they believe that they hold a record for an individual but are not certain. When a scheme returns a possible match, an individual will receive a limited form of administrative data that will enable them to contact the scheme to see if the possible match is in fact a match made.
The noble Baroness asked about screen-scraping. The regulations prohibit the storing of dashboards of view data, unless for temporary caching and for the sole purpose of displaying the view data in a single session. Similarly, transactions are not possible through the dashboard ecosystem. Making it possible for consumers to find information about all their pensions in a single place and requiring the consumer to undertake an identity verification check before being able to access that information significantly reduces the consumer appeal or perceived benefit of agreeing to screen-scraping. I have much more that I could say on that issue, so I shall write and place a copy of the letter in the Library of the House.
The noble Baroness, Lady Sherlock, and the noble Lord, Lord Davies, raised the point about complaints and where the liability lies if a customer makes a decision on the basis of view data that later proves to be inaccurate. As set out in our response to the consultation on the draft regulations, trustees or managers are responsible for meeting the requirements, which include receiving fine data, as well as undertaking, matching and returning the correct view data. Trustees or managers are not responsible for verifying the identity of users, and the authorisation of view requests or any processing of view data carried out by dashboards. The question of liability in the event that something goes wrong to the detriment of the individual would have to be considered on a case-by-case basis.
The noble Baroness, Lady Sherlock, raised the issue of liability and risk for trustees. The Government acknowledge that many trustees do an excellent job, often on a voluntary basis. The vast majority of trustees are in schemes with fewer than 99 members, so will be outside the scope of these regulations, unless they connected to pensions dashboards voluntarily. Although we accept that the regulatory requirements on trustees have grown a great deal over the years, this is only right, given what is at stake—we are talking about pension savings for millions of people.
The noble Baroness, Lady Sherlock, raised the issue of handling complaints and where consumers go to make a complaint. The dashboard ecosystem is made up of multiple different parts and, as such, dashboard users would potentially have complaints against a number of different parties. MaPS will therefore provide a central queries and complaints navigation tool, which qualifying pension dashboard services must direct individuals to, to help them understand their issues and know to whom they should direct their query or complaint if things go wrong, and the available routes to redress.
The noble Baroness, Lady Sherlock, raised the issue of scams and hackers and asked whether there is a strategy in place to counter the risk of scams within the system and whether this is being revisited regularly. It is crucial that dashboards give power to consumers and not scammers, which is why the dashboard ecosystem has been designed to ensure that only relevant pension schemes and authorised qualifying pension dashboard services have access. To maximise the effectiveness of the Money and Pensions Service pensions dashboard, users will have access to a retirement planning hub, which will provide onward planning journeys in a single place, supporting good decision-making. The FCA and MaPS will keep their rules and standards under review as dashboards emerge and evolve.
Baroness Sherlock (Lab)
If I can put the Minister out of her misery, I would be content from this point onward if she were to write to me with answers to the remaining questions. I just say for the record that I flagged up to the usual channels some time ago that this instrument would take rather longer than the normal time, and it would have been helpful if the planning for this evening had taken that into account. However, I am very grateful to her for having answered so fully and to have taken the time to do this—I really appreciate it.
Baroness Stedman-Scott (Con)
I appreciate that intervention and I undertake to write on the four remaining points, and perhaps offer a meeting to wash up and identify those things I have not dealt with as well as I might have.
My final point, noble Lords will be pleased to hear, is that pension dashboards will reunite individuals with their lost or forgotten pots and engage potentially millions of savers. It is important that we press ahead with this ambitious project, so that savers can realise the benefits. I therefore commend these regulations to the House.
Universal Credit
Baroness Stedman-Scott Excerpts(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I thank the noble Baroness, Lady Tyler of Enfield, for securing this debate, and I thank all those who have contributed to today’s discussion on this important question. I know how important it is, and I understand the depth of feeling.
I was pleased to hear some balance and the view that the Government had done well in supporting people through the pandemic and through their work to get people into work. The debate has been wide-ranging, and there is no doubt that the last 18 months have brought unprecedented challenges: we all had to change the way we lived and worked, and, in the face adversity, this Government provided an unprecedented response, delivering support to people right across the country in response to the crisis.
We have heard how the £20-a-week uplift to universal credit has made a difference to households facing economic shock and financial disruption as a result of the pandemic. The noble Baronesses, Lady Donaghy and Lady Tyler, the right reverend Prelate the Bishop of Gloucester and others have made reference to the £20 uplift. It was clear right from the word go that it was temporary and not going to be permanent. I remind the House that the Chancellor has always been clear that the universal credit uplift was a pandemic response. He has ensured that support was in place well beyond the end of restrictions and reopening the economy, and we are not finished supporting those who need our help. No one wants to see anyone in poverty, so I agree with my right honourable friend the Chancellor when he says that he does not accept that people will be forced into poverty because it is now right that we switch our focus to getting people back into work and improving their prospects to progress in work. Our comprehensive plan for jobs will help to deliver this.
As I have said, the £20-a-week uplift to universal credit and working tax credit was announced by the Chancellor as a temporary measure in March 2020. We took this approach in order to give those people facing the most financial disruption the help that they needed as quickly as possible. At the Spring Budget, we announced a six-month extension of the temporary £20-a-week increase, meaning that it would be in place well beyond the end of restrictions. The additional support has increased the universal credit standard allowance and working tax credit basic element by up to £1,560 since its introduction.
We have also provided other support, and we should look at that rather than just at the £20 uplift in isolation. We introduced the Covid winter grant scheme—now the Covid local support scheme—with £269 million provided to local authorities in England between 1 December 2020 and 20 June 2021 to help the most vulnerable children and families with the cost of food, utilities and other essentials. This temporary scheme has now been extended for the final time, with an additional £160 million for local authorities to help vulnerable households as the vaccine rollout continues. From April 2021, we increased the national living wage. It has always been this Government’s intention that this additional financial support and other Covid support will end once the economy has reopened. Now, as we open up and our recovery gathers pace, it is right that we switch our focus to getting people back to work and improving their prospects to progress in work.
My noble friend Lady Eaton, and the noble Baronesses, Lady Tyler and Lady Smith of Newnham, talked about dignity. In my career, I have never seen anything more dignified than someone having a job that enabled them to live and be independent. Our vacancies are currently above pre-pandemic rates, sitting just below a record high since the series began in 2018. This is a very promising sign that the economy is recovering.
In this context, extending the uplift, even by a further 12 months, would have been premature and come at a very significant cost—the equivalent of adding 1p on the basic rate of income tax in addition to a 3p increase on fuel duty—when we consider that total welfare spending in Great Britain will be £241 billion in 2021-22, with over £111 billion on working age welfare, or 4.9% of GDP. Universal credit provides a safety net but is not designed to trap people in welfare. Fundamentally, we recognise—and I support the fact—that work is the best route for individuals.
As we are aware, there have been significant positive developments in the public health situation since the extension to the uplift was announced and the vaccine rollout is now progressing well, with 80.3% of the population fully vaccinated. It is now right that the Government should shift their focus to supporting people into work and to progress in work. We have a comprehensive plan for jobs to do this.
We are spending over £7 billion, around £1 billion more than the cost of a one-year extension of the £20 uplift. This includes £2 billion on Kickstart; £2.3 billion on the number of work coaches, which we have doubled; tripling sector-based work academies; £2.9 billion on Restart; £200 million on JETS; and tripling the number of traineeships. Our work coaches will be working very hard to get people into work and to progress them.
The noble Baroness, Lady Tyler, asked about an impact assessment. The department has not completed an impact assessment on the ending of the temporary uplift as it was introduced as a temporary measure. We have no obligation to conduct an impact assessment as we are returning to business as usual as the temporary Covid uplift is expiring, as it was always intended to do. Understandably, the noble Baroness also asked us about fuel poverty. My noble friend Lady Bloomfield, who has expertise in this area, said to me that we are doing an awful lot on it. If I may, I will write to the noble Baroness to update her on what we are doing.
My noble friend Lady Eaton raised the point about a £6 billion improvement in the labour market and asked how we would spend it. I cannot answer that in detail, but I have every confidence that those discussions took place. She asked how we would use that money differently, if we could use it again. I cannot answer that, but I am sure that those discussions have taken place.
My noble friend also mentioned in-work progression. Currently, 4.2 million individuals are in low pay, and the Resolution Foundation has found that only one in six low-paid employees managed to escape low pay over the decade to 2016. There are 2.2 million universal credit claimants in work. These numbers have risen due to the impact of the pandemic. My noble friend Lady McGregor-Smith has conducted an in-work progression report, which I hope noble Lords have read. My colleague at the Department for Work and Pensions, the Minister for Employment, is busy trying to implement the things that will make a difference to people to achieve in-work progression.
The noble Baroness, Lady Tyler, also spoke about addressing poverty. Looking at the impact of poverty on an individual is complex and inherently speculative, as it requires projecting how incomes will change for every individual in society, which are affected by a huge range of unknown factors. In 2019-20, working-age adults in households where all adults were in work were six times less likely to be in absolute poverty after housing costs than adults where nobody worked.
The noble Baroness, and other noble Baronesses and noble Lords, asked why we are ignoring the comments and points that stakeholders have made. We are not ignoring them; we are listening but, at the risk of repeating myself, this was always meant to be a temporary measure. As I understand it, the Government have made their decision, but it is not just to stop it and run; they are investing in other areas where we hope this will make a difference to people’s lives.
The noble Baroness, Lady Tyler, raised the issue of planning for jobs. I could give her a running commentary on all that we are doing. Let me write to all noble Lords to tell them exactly what we are doing.
The noble Baroness, Lady Donaghy, and the noble Lord, Lord Desai, mentioned people in the creative industries who have precarious employment. These things have an impact on them when their work stops; I acknowledge that. I am pleased to say that the Minister for Employment in the Department for Work and Pensions has been working with the creative industries. We have been working with Pinewood Studios to help people into jobs there, because there are so many of them. I would be happy to arrange a briefing from the Minister for Employment for noble Lords to see how that work is progressing, and I hope that it will give noble Lords an opportunity to raise other things.
The right reverend Prelate the Bishop of Gloucester and the noble Baroness, Lady Smith of Newnham, talked about food bank usage. I pay tribute to the food banks; they are doing a great job in supporting communities. They have enabled people and communities to work together to benefit the people they are trying to help, but it is difficult to predict impacts on the use of food banks. There are many reasons why people use them, and their use cannot completely be linked to a single cause. Impacts also depend on the speed of economic recovery and how we can quickly return individuals to work.
Time has eluded me again—it does annoy me when that happens because I feel that I have not answered everyone’s questions and shown them respect—so I will conclude my remarks now. I will write to the noble Lords who asked me questions and place a copy of my answers in the Library, but let me say that I am also prepared to meet people to further this discussion, if that would be helpful.
Finally, our focus is rightly on continuing the implementation of our plan for jobs programme, which will continue to help millions of families into stability and on to the path of prosperity because a working Britain is at the heart of a Britain that works.
Pensions Regulator (Employer Resources Test) Regulations 2021
Baroness Stedman-Scott Excerpts(3 years, 2 months ago)
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Baroness Stedman-Scott
That the draft Regulations laid before the House on 21 and 28 June be approved.
Considered in Grand Committee on 6 September.
Universal Credit: People with Mental Health Problems
Baroness Stedman-Scott Excerpts(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I thank the noble Lord, Lord Davies of Brixton, for securing this important debate, and all those who have contributed to today’s discussion of this important question. In answer to the point from the noble Baroness, Lady Sherlock, I would be foolish to stand here and say that there is no problem and that everything is perfect. I am not saying that. The noble Lord, Lord Davies, made a point about meeting the group who wrote the report. I put this on the record now: I am always happy to meet, and I will meet that group. I would be happy for the noble Lord to join that meeting and for us to explore further what we could do and learn to make the system better. I have never been asked to hand out sainthoods, but nothing would give me more pleasure. I can think of few people who better deserve one.
I thank the noble Lord for bringing this report to my attention, so that I can go into further detail about the support the department provides for those experiencing mental health issues. I am pleased to say that my officials have already met the authors of the report, on 1 July 2021, and discussed its findings in great detail. They found the report very informative and helpful, partly because it confirms information of which we are already aware and know we can improve, but also because it highlighted some new problems to investigate, especially the concern that claimants without a clear method of granting permission to an informal third party to act on their behalf may be put off making a claim for universal credit. Noble Lords have made that point and it is helpful to be in continuing dialogue with them.
The department does care about the most vulnerable in society, including those with mental health issues who have barriers to accessing the universal credit service. We have a number of measures in place to support and protect our claimants. For example, our work coaches are doing their utmost to ensure that claimants with mental health issues are provided with tailored support and can manage their claim via the telephone, if they are unable to access our digital service.
The impact of a health condition on an individual—a point that was made this evening—varies from person to person. The claimant is the expert on their condition and they know how it affects them. The most important thing the work coach can do is to build trust with their claimant so that the claimant feels confident to fully explain their circumstances and needs.
We have reviewed our approach to health conditionality for those on the health journey, and work coaches are now able to utilise an approach in which claimants can start from zero mandatory requirements and build up based on their health condition and personal circumstances when setting out work commitments. This allows the claimant to move at a pace that is comfortable for them, as their confidence builds.
There are a number of key findings in the report in question which I will address. As the report focuses mainly on third party consent and recommendations to improve the process of obtaining consent, I will outline the current process. This was a point that the noble Lord, Lord Davies, and the noble Baronesses, Lady Drake and Lady Donaghy, raised. Noble Lords will be aware that there is a raft of support available for those who are unable to access the universal credit service; for example, claimants are able to grant third party consent. Universal credit is structured around an online personal account that contains all the information relevant to the claim. This includes claimants’ bank account details, savings, capital, medical history, family relationships and address information, which means that we have a responsibility to ensure that a high level of security and protection is in place and that we take all reasonable steps to protect our claimants and their data, which includes ensuring that consent is explicitly given. I know from all that has been said this evening that there are issues around this. I am very happy to talk to officials and come back to noble Lords on the specific points that have been raised.
As the amount of personal data available on universal credit is far greater than in the legacy benefit systems, any data breach has far-reaching consequences for claimants, so we need to balance consent against this risk. Therefore—as the noble Baroness, Lady Sherlock, said—a policy of explicit consent exists to help reduce the risk of fraud by ensuring that claimants’ data is kept safe from unscrupulous organisations and individuals. The emphasis here is not to hinder people receiving support but to help them make and manage their claim.
Where explicit consent is needed, it can be quickly given in different ways: over the phone or via the online journal, at any time during a universal credit claim. This is a far simpler and more straightforward process than in the legacy benefit systems. Once consent is given, we will work with claimants’ representatives. We really do want to make it as stress-free, simple and helpful as possible.
The universal credit product team are currently conducting discovery work to fully understand all the issues around why and how a claimant may need extra support with their claim, with a view to developing this further in the next phase of development, which will be next year. The findings from this helpful report will be used as part of the discovery phase. I cannot confirm to the noble Baroness, Lady Donaghy, that they are talking to Citizens Advice, but I will go away and find out—and, if not, I will encourage them to do so.
Universal credit provides personalised and tailored support for all claimants and work coaches are available to discuss any queries they may have about their online accounts. Noble Lords raised the Help to Claim service, and I am pleased to say that this service has been extended. I will take away the point that the noble Baronesses, Lady Sherlock and Lady Drake, raised, about whether it is possible to do something on a “help to manage” service. I cannot promise anything—it would be crazy to do so—but I will make sure that the point is raised.
Time is against us. With the leave of the House, because we have not had many speakers, may I just do a bit more? Can I have a few more minutes? I hear “Yes”—magic.
I cannot answer the question on managed migration right now, but I will go back to find out and write to noble Lords, as I have done on many other occasions.
The noble Baroness, Lady Donaghy, raised the point about bodies that represent people with mental health problems. We work with the operational stakeholders forum and the accessibility forum, including representatives of people with access requirements.
The issue of mental health training has been raised in relation to work coaches. Since August 2018, mental health training has been included in work coaches’ learning packages. They complete training in two sessions as regards complex needs and learning. We discuss what the claimant is struggling with and how we can best support them. A second session of training consolidates the learning from the first session.
Noble Lords raised the issue of mental health networks. As regards local networks of mental health providers, jobcentres use their flexible support fund to buy provision and support. For example, in Cornwall we have had mental health experts in our jobcentres, which is really good and has improved the situation.
The noble Baroness, Lady Donaghy, gave a good speech and raised many points, including assessment of people with mental health barriers. I have already talked about the tailored support that work coaches are able to give and we would always look to support claimants in our jobcentres, should there be an issue for a claimant who is unable to access online services. We also have vulnerable customer leads on hand to provide support. All the time we are trying to improve the service that people get. If any noble Lords know of a situation in which that has not worked, please tell me—first, because we want to get it right and, secondly, because we want to learn in order to make the situation better.
I must draw my remarks to a close, but I want to come back to the point the noble Baroness, Lady Drake, made about a help-to-manage service. It is a very good idea, and I should emphasise that I am going back to the department with it.
Again, I am grateful to the noble Lord, Lord Davies of Brixton, for providing the opportunity to set out the vital steps that the Government are taking to support those claiming universal credit who have mental health issues. I understand only too well the impact of mental health problems on individuals, I really do. I know that their situation is difficult, and we want to help them all we can. However, as I have outlined, a tremendous amount of work is going on to ensure that we continue to support all claimant groups, including the most vulnerable, in accessing our services with ease.
I know that I have not answered all the questions, but my track record is that I always write when I need to do so. We will meet with the group and it is up to the noble Lord, Lord Davies, as to who he wants to invite to that meeting if others would find that useful.
Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021
Baroness Stedman-Scott Excerpts(3 years, 2 months ago)
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Baroness Stedman-Scott
That the Grand Committee do consider the Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I am pleased to introduce this instrument, which was laid before this House on 21 June. Subject to approval, these regulations will continue the Government’s reform of occupational defined contribution—DC—pension schemes and prepare them for the opportunities that lie ahead.
With more than 10 million workers now saving for retirement in an occupational pension thanks to the success of automatic enrolment, we want these savers to achieve the best possible outcome in retirement. These regulations put improved member outcomes at the centre of the defined contribution occupational pensions market in the UK and ensure that the best interests of pension savers are driving the administration, governance and investment strategies of schemes.
By introducing a new “value for members” assessment for schemes with less than £100 million in assets and which have been operating for at least three years, we will ensure that members are not languishing in poorly governed and under-performing schemes. By requiring the trustees of certain occupational DC schemes to publish information on the performance of their investments for the first time, we will ensure that competition on overall member value replaces a narrow focus on cost.
By allowing occupational DC schemes to smooth performance fees over a multi-year period within the charge cap, we will make it easier for trustees of such schemes to pay higher fees for products where they have evidence that this will provide greater returns to members.
The Government are committed to building on the success of automatic enrolment with a consolidated, innovative, member-focused market for saving in occupational DC pension schemes. These regulations take significant action to this end. I am satisfied that the Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021 are compatible with the European Convention on Human Rights.
Occupational defined contribution schemes, or DC schemes, are the future of occupational pension saving. The Government are committed to ensuring that the DC market in this country can continue to grow and deliver the best possible outcomes for the millions of workers now saving in a DC scheme. These regulations take forward several measures which amend a number of existing sets of regulations. The first of these, which is made by Regulation 2 of this instrument, is the introduction of a new “value for members” assessment for occupational DC schemes with less than £100 million in assets. While there is currently more than £100 billion of pension savings in occupational DC schemes, this is split among more than 3,000 schemes. This system risks inefficiency and creating inequality. For example, some people, as a result of the scheme their employer chose, possibly years ago, may be getting a lower return on their savings, paying higher charges or having a worse customer experience, therefore limiting their engagement with their pension and outcomes in retirement. We aim to change this.
That is why this instrument amends the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to require trustees of relevant schemes, a term which covers most occupational DC schemes, with less than £100 million in assets and which have been in existence for at least three years to conduct an annual assessment of the value that the scheme offers to its members. The regulations specify the criteria that must form part of this assessment. They include the quality of the scheme’s record-keeping, the promptness and accuracy of administration and the extent to which existing requirements in the Pensions Act 2004 concerning trustees’ knowledge and understanding are being met.
However, the most important aspect of this assessment is the comparison between the scheme’s net investment returns, ie the performance of its investments less costs and charges, relative to three larger schemes. Larger schemes are likely to be better governed and to achieve greater investment returns than a smaller scheme with limited expertise, capacity and budget. We expect that the majority of schemes will not perform favourably in this test.
Regulation 3 of this instrument requires schemes to report to the Pensions Regulator the outcome of this “value for members” assessment. If schemes in scope determine that they do not offer value for members, Regulation 3 of the Register of Occupational and Personal Pension Schemes Regulations is amended by these regulations to require such schemes to inform the Pensions Regulator of whether they intend to wind up the scheme or to explain the reasons for not doing so and the immediate improvements that will be put in place. These measures will encourage a quicker pace of consolidation in the occupational DC pension schemes market and help members who are stuck in schemes that are delivering sub-optimal retirement outcomes for them. Scheme consolidation is a priority for DWP so that members are able to benefit from the economies of scale and access to a diverse range of asset classes that larger schemes bring.
The other measures in this instrument aim to broaden the range of asset classes available to occupational DC schemes. At present, occupational DC schemes are primarily invested in traditional assets such as listed equities and bonds. Only a small number of the largest schemes are accessing so-called illiquid assets, such as infrastructure, property, private credit and private equity. These illiquid assets have the potential both to diversify an investment portfolio and deliver greater returns. As a result, Regulation 2 of this instrument amends Regulation 23 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to require occupational DC schemes to report, for the first time, the return on investments after deduction of any charges or transaction costs, known as net investment returns. We believe that members deserve to know how their investments are performing and how they fare relative to other schemes.
This will also catalyse competition between pension providers not just on cost but on overall value. Employers, consultants and members should be able to assess a scheme based on this metric, and competition should incentivise trustees of occupational DC schemes to explore illiquid assets and other innovative investment strategies. This is essential given that net investment returns have a much greater effect on retirement outcomes than whether a scheme charges its members 0.3% or 0.4%.
Both these measures, the new “value for members” assessment and net investment returns reporting, have been introduced alongside statutory guidance entitled Completing the Annual Value for Members Assessment and Reporting of Net Investment Returns, which will help trustees of schemes that are in scope to meet these requirements.
Finally, this instrument makes additional changes to regulations to improve governance of occupational DC schemes. All occupational pension schemes will be required to report on the total assets of the scheme annually to the Pensions Regulator at the scheme year end.
The changes to regulations in this instrument will also require schemes to produce costs and charges illustrations for all funds and not just those currently available. They will exempt wholly insured schemes from some governance requirements and ensure that occupational DC schemes “with a promise”—a small number of schemes that contain a commitment to members—report on their statement of investment principles to those members.
In conclusion, the measures in this instrument offer opportunities to improve member outcomes and help prepare the occupational pensions market for the challenges that lie ahead. I therefore commend the instrument to the Committee and beg to move.
Baroness Janke (LD)
My Lords, we certainly agree with the policy aims and mechanisms of this instrument and endorse the Government’s actions to make sure that
“members do not languish in sub-optimal arrangements that do not meet governance requirements and are unable to take full use of investment opportunities, to the benefit of the end saver’s eventual retirement outcome”,
as the Explanatory Memorandum states.
As the Minister has said, paragraph 7.6 of the Explanatory Memorandum explains that Regulation 2 requires that schemes holding assets worth less than £100 million and which have been operating for three or more years are to compare charges, transaction costs and the return on investments with three other schemes. We are not clear how those schemes are to be selected and who is to select them. Is it the trustees, for example? Are there selection criteria other than that they have assets of more than £100 million and are personal pension schemes? If it is not the trustees, who selects the comparator schemes?
Paragraph 7.8 states:
“Where the trustees have reported that the scheme does not provide good value for members, they are also required to report whether they propose to wind up the scheme and transfer the members’ rights into another scheme or explain to TPR why … not … and what improvements they are planning to make.”
What happens if these improvements are not acceptable to the Pensions Regulator and what powers does the regulator have based on compliance or non-compliance with Regulation 3?
We would probably all agree that it is a good idea to encourage smaller funds to transfer rights or improve if Regulation 2 comparisons show poor performance, but what about larger funds? Should there not be a requirement for them to undertake the same comparisons and take the same actions if their schemes show poor value for money for their members? It is easy to see why small funds should be encouraged in this way but hard to see why larger firms are not similarly encouraged. I would welcome the Minister’s clarification on these points.
Baroness Stedman-Scott (Con)
I thank everybody who has taken part in this interesting debate for their contributions. I shall take some of the points that noble Lords have raised and will deal with them as they come.
I thank the noble Baroness, Lady Janke, for her positive endorsement of the regulations. The noble Baroness and the noble Lord, Lord Davies, asked how the schemes are to be selected. We would expect trustees to choose the scheme to compare their scheme to, and master trusts are likely to be the best schemes to compare against.
The noble Baronesses, Lady Janke and Lady Sherlock, asked about the Government’s plans for future DC consolidation. The Government have been very open that consolidation is key to the future of the defined contribution pension market and that the pace of consolidation must increase. Consolidation will improve governance and enable more occupational DC schemes to reach the critical mass needed to access a broader range of investments and drive down costs through economies of scale. In September 2020, DWP consulted on new regulations to require trustees of occupational DC schemes with less than £100 million in assets to justify their continued existence via a new “value for members” assessment, and this will come into force this autumn. This was phase 1, and now we turn to phase 2, which will look to drive consolidation further and faster.
The noble Baronesses, Lady Drake and Lady Sherlock, both raised a question about the call for evidence, which was launched on 21 June, being far too ambitious. We know from other countries such as Australia that scale is among the biggest drivers in achieving value for money for savers and ultimately better retirement outcomes. It is therefore important that we move quickly, and I echo the commitment made by the Minister for Pensions. However, we recognise concerns about the pace of change. That is why we have developed a phased approach, starting with occupational DC schemes with less than £100 million in assets. The call for evidence closed in July. We are currently considering the responses received and will issue a response in due course. We are exploring options for consolidation, and, as the Minister for Pensions said, this is likely to include all schemes, including master trusts.
The noble Baroness, Lady Drake, made the point that the PM and the Chancellor are calling for an “investment big bang” and that these measures could wrongly force schemes to invest in illiquid assets. The Government do not wish to direct the investments of trustees of pension schemes. Trustees must invest in line with their fiduciary duty—that is, in the best financial interest of their beneficiaries. Instead, we are seeking to remove barriers to investments in illiquid assets. The provisions in this instrument have received support from the pensions industry.
The noble Baroness, Lady Drake, raised the point that the Government believe that high charges are fair. We want to ensure that net returns are considered, which balances cost against performance. Low-charging investments can deliver value for money, but cost should not be the only factor.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
My Lords, there is a Division in the House. The Committee will adjourn for 10 minutes.
Baroness Stedman-Scott (Con)
The noble Baroness, Lady Drake, referred to the PM and the Chancellor calling for an “investment big bang” and said that these measures wrongly force schemes to invest in illiquid assets. The Government do not wish to direct trustees of pension scheme investments. Trustees must invest in line with their fiduciary duty; that is, in the best financial interest of their beneficiaries. Instead, we are seeking to remove barriers to investments in illiquid assets. The provisions in this instrument have received support from the pensions industry.
The noble Lord, Lord Davies, talked about default schemes. He is correct that almost all members save into the default arrangement. Those who self-select still receive regular information on charges and are generally engaged. He raised the subject of the threshold for “value for members” assessment being set at less than £100 million, which had increased from £10 million at consultation. He asked whether it would increase further in future. The Government increased the “value for members” assessment threshold following consultation with industry. The reason for this was to capture as many potential poorly performing occupational DC schemes as possible. We have evidence that the smaller a scheme is, the more likely it is to be poorly governed. By our moving the “value for members” assessment threshold from assets under £10 million to £100 million, more occupational DC schemes will have to undergo this rigorous new assessment. This will mean that more members will benefit from improved governance, administration and returns as a result. We will review the assets under the £100 million threshold regularly but have no plans to change it at present.
The noble Lord, Lord Davies, asked how meaningful to members the information would be. The Government are taking forward several measures—dashboards and simpler statements among others. The SI is about how these schemes are governed internally. We are intervening to prevent members languishing in poor schemes.
The noble Baroness, Lady Sherlock, raised a point about CDC. I am advised that we will write to her on that. She also asked what the instrument would mean for the future of look-through and said that the Government had said that they would advise on a policy in July. The instrument does not amend the Government’s policy on treatment of such costs. In our consultation response on improving outcomes for members, published on 21 June, we state that occupational DC pension schemes should continue to look through closed-ended funds as they would all funds of funds and incorporate such costs within their regime of charges levied on members.
If there are points raised by noble Lords that I have not dealt with—
Baroness Sherlock (Lab)
I am grateful to the Minister. Could she write to me with that last point, as I did not quite catch the bit about look-through funds and look-through operations of closed-ended funds? I asked two questions. First, my noble friend Lady Drake and I both asked what the Government’s optimal number of schemes is. Would it be one big or enormous scheme—would that be fine? Is it fine to have lots of schemes? Can the Minister give some idea what the centre is in that? The other thing I asked about, which I do not think she answered, was what guidance would be given to trustees or employers who might want to consolidate but were concerned that the moving goalposts would mean that they could end up simply being moved again and, potentially, again. If she did respond to that, I apologise for having missed it.
Baroness Stedman-Scott (Con)
I will write to the noble Baroness on the three points she has raised and put a copy in the Library for everybody to see. If there is anything, having looked at Hansard¸ that we have not dealt with, other than that which the noble Baroness raised, I will write to all noble Lords.
This instrument makes several different changes to several different sets of regulations. It has one theme at its core: improving outcomes for pension savers. We have a duty to ensure that those who have engaged in pension saving in their workplace as a result of automatic enrolment can rest assured that their occupational DC pension scheme is on course to deliver the best possible outcome for them. This instrument does this by tackling poor levels of governance, shifting the attention of the market from a narrow focus on cost to overall value, and removing barriers to schemes allocating to a wide range of different assets. I therefore commend it to the House and beg to move.
Pensions Regulator (Employer Resources Test) Regulations 2021
Baroness Stedman-Scott Excerpts(3 years, 2 months ago)
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Baroness Stedman-Scott
That the Grand Committee do consider the Pensions Regulator (Employer Resources Test) Regulations 2021.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I am pleased to introduce this instrument, which was laid before the House on 28 June 2021. Subject to approval, these regulations provide essential details on the new employer resources test that was introduced by the Pension Schemes Act 2021 in connection with changes to the contribution notice regime.
The new employer resources test will enable the Pensions Regulator to overcome existing challenges of assessing the “act” or “failure to act” that has affected the financial strength of the sponsoring employer, and therefore its ability to support the scheme, rather than damaging the scheme directly.
These regulations outline that the profit before tax measure will be used to assess the resources of the employer. This measure is widely known and understood by the industry and gives the most appropriate picture of net profits available to provide support for a defined benefit pension scheme. The regulations set out specifically how the value of the resources of the employer is to be determined, calculated and verified.
I am satisfied that the provisions in the regulations are compatible with the European Convention on Human Rights.
Part 3 of the Pension Schemes Act 2021 strengthens the powers of the Pensions Regulator. It fulfils our manifesto commitment to take action against those who think they can plunder the pension savings of hard-working employees. These regulations provide essential details on the new employer resources test which forms part of the Pensions Regulator’s contribution notice regime. This regime enables the Pensions Regulator to demand that money is paid into a pension scheme from those found to have caused it detriment. A recent example is Dominic Chappell, who was ordered by the Pensions Regulator to pay £9.5 million into the British Home Stores pension scheme.
The new employer resources test, which these regulations relate to, will enable the Pensions Regulator to overcome existing challenges of assessing the “act” or “failure to act” that has affected the financial strength of the sponsoring employer and therefore its ability to support the scheme rather than damaging it directly.
With these new provisions, we will also avoid the associated challenge of having to project into the future to assess the likelihood of members receiving their accrued benefits. The purpose of the employer resources test is to provide the Pensions Regulator with a tool to make a simple snapshot assessment of the impact of the act or failure to act on the employer at the time. This allows for the act or failure to act to be assessed on its own terms, relative to the employer’s current potential exposure to the scheme, rather than an assessment of what could happen in future. Assessing whether the act or failure to act has reduced the value of the employer’s resources is just one part of the wider employer resources test. The Pensions Regulator, in addition to looking at the health of the employer, also has a focus on the scheme, where it is required to assess whether the reduction of the employer’s resources was material when compared to the scheme’s estimated Section 75 liability.
On the specifics of these regulations, what constitutes the resources of the employer is determined as being the employer’s profits before tax. This is a widely known and understood measure used by the industry and gives the most appropriate picture of net profits available to provide support for a defined benefit pension scheme. How the value of the resources of the employer are determined, calculated and verified are set out in these regulations. The general approach assesses the annual profit before tax position of the employer had the act or failure to act not occurred, which is then compared to an assessment including the act or failure to act. An adjustment is then applied to the profit before tax position that represents the impact which is expressed as a pound figure. The calculated figure would then be assessed against the scheme’s Section 75 debt immediately before the act or failure to act occurred. When the employer resources test has been met, the Pensions Regulator will follow the existing contribution notice process, whereby it will consider other factors, including the reasonableness of issuing a contribution notice.
Working in tandem with these regulations is the Pensions Regulator’s code of practice, which aims to provide further clarity to the industry on how it will interpret and use the powers. The Pensions Regulator launched a consultation in May 2021 on its contribution notice code of practice, which included clear examples covering scenarios of how the different tests would apply. The consultation concluded in July, and the Pensions Regulator is reviewing the responses with a view to publishing the code later in the year.
In closing, we remain committed to ensuring that there should be no hiding place for those who put workers’ retirement savings at risk, and these regulations will play a vital role in enhancing the Pensions Regulator’s ability to take action to protect pension scheme members. I commend this instrument to the Committee and beg to move.
Baroness Janke (LD)
My Lords, enabling the TPR to use contributory notices more widely to correct any detrimental action or failure to act is very welcome. However, I have a few questions about the method chosen for defining employer resources.
The Explanatory Memorandum refers to other methods being considered— EBITDA, or earnings before interest tax depreciation and amortisation, and a holistic measure based on covenant strength—but they were dismissed. Can the Minister explain why they were rejected, particularly the holistic assessment based on covenant strength? She will be aware that in very large university superannuation schemes, the level of contributions is affected by covenant strength. Can she explain why a snapshot of net income or profit before tax provides a better approach than this? If the snapshot route is to be followed for defining employer resources, what about the strength of employer assets? What part do they play in any assessment? I also question whether it is reasonable to allow the TPR absolute discretion in determining what are or are not exceptional or non-recurring items. I would welcome the Minister’s clarification on these points.
Baroness Stedman-Scott (Con)
Again, I thank all noble Lords for their contributions. I shall start with the points raised by the noble Baroness, Lady Janke, and the noble Lord, Lord Vaux, on why we do not have a holistic measure. There is no industry consensus on how to value an employer’s covenant strength, and we believe that introducing a holistic measure would introduce a number of uncertainties. There is a statutory requirement for the regulator to consider whether it is reasonable to impose a contribution notice, which includes an obligation to take account of all relevant factors, including the broader assessment of the employer’s strength. We therefore believe that the wider regime should provide comfort to those concerned that the regulator will not take a holistic view.
The noble Baroness, Lady Janke, raised the issue of earnings before interest, tax and depreciation. I confirm that we looked very closely at the suitability of this and concluded that it is unsuitable, as it is not covered by the financial reporting standards relating to accounting practice published by the Financial Reporting Council and is therefore not audited. We think that it is relevant to have the interest charge allowed for in the figure, which earnings before interest, tax, depreciation and amortisation does not take into account, because that could be where the detriment was reflected if the company raised more debt.
The noble Baroness raised a point about why we have selected the profit before tax measure. The purpose of the employer resource test is to provide the Pensions Regulator with a tool to make a simple snapshot assessment of the impact of the act or failure to act on the employer. Profit before tax was selected for measuring the resources of an employer because it is a term widely understood by the industry and regulator. We believe that it is less subjective than other options that would be indicative of the employer’s ability to support the scheme.
The noble Baroness also raised how the Pensions Regulator would determine and remove exceptional and non-recurring items from an employer’s annual accounts. The Pensions Regulator would not ordinarily exercise its discretion in relation to exceptional and non-recurring items in audited accounts which mirror the prescribed test period because an audit process will already have examined them. When no accounts are produced, for example, non-recurring and exceptional items will be determined by the regulator, which must have regard to the financial reporting standards relating to accounting practices published by the Financial Reporting Council.
The noble Baroness, Lady Drake, raised a point about how dividends will be treated in the profit before tax test, and I am advised that we will write to clarify that and, of course, place a copy in the Library for everyone to see. The noble Baroness also raised a point about the regulator’s guidance. The Pensions Regulator launched a consultation on the revised code 12 contribution notices code of practice, which includes clear illustrative examples covering scenarios of how the different tests would apply. This would provide further clarity on how the regulator will interpret and use the new powers. The regulator has received useful feedback from stakeholders as part of the consultation which it is currently analysing, and I understand that the regulator intends to use that feedback to strengthen certain aspects of its policy and further illustrate the approach that will be taken and where its interests lie in terms of acts and conducts pending from any decisions from the courts on these points.
The noble Lord, Lord Vaux, understandably raised the question of why we selected the profit before tax measure. The purpose of the employer resource test is to provide the Pensions Regulator with a tool to make a simple snapshot assessment of the impact of the act or failure to act on the employer. Profit before tax was selected for measuring the resources of an employer because it is a term widely understood by the industry and the regulator. We believe it is less subjective than other options and will be indicative of the employer’s ability to support the scheme.
The noble Lord, Lord Vaux, also raised the issue about the new pension rules change threatening to scupper a big dividend pay-out. We do not wish to crowd out investment, nor do we wish to prevent the payment of proportionate dividends to shareholders. During the passage of the then Pension Schemes Bill through Parliament, the Government opposed and defeated opposition amendments which sought to subject dividend payments by companies with a pension scheme funding deficit to approval by the Pensions Regulator. We argued that it could deter investment and undermine employers.
The noble Lord, Lord Davies, raised the point of verification. The regulations set out that the Pensions Regulator is making a determination and must take into account all relevant information in its possession. The prescribed methodology set out in the regulations also makes it clear that annual accounts will be used which will have already been verified. In terms of verifying the regulator’s determinations, ultimately, any target can make representations to the regulator about the determination, and any decision to impose a contribution notice can also be referred to the Upper Tribunal.
The noble Baroness, Lady Sherlock, raised the question of reasonableness of statutory defence, and whether the Pensions Regulator has a way to determine if this is met. The Pensions Regulator will publish a code of practice and guidance that will illustrate how the tests will apply. The noble Baroness raised the very important issue of charities, and I am advised that we will write to her with clarification on the points she raised.
The noble Baroness also raised the issue of recovery from overseas employers. Again, we will continue to review the situation. She also asked whether this will create an influx of clearance requests and whether the Pensions Regulator is resourced to handle them. The Pensions Regulator does not expect that there will be a significant increase in clearance requests coming in but, if this is the case, the regulator is used to reprioritising its resources and activities, as it has demonstrated during the recent Covid crisis.
To confirm, the draft regulations debated today provide greater security for members’ defined benefit retirement savings by setting out the details of the employer resources test that the Pensions Regulator can use in combating acts of those seeking to avoid their responsibilities to pension schemes. I commend this order to the Committee.
Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021
Baroness Stedman-Scott Excerpts(3 years, 4 months ago)
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Baroness Stedman-Scott
That the draft Regulations laid before the House on 8 June be approved. Considered in Grand Committee on 5 July.
Lord Ashton of Hyde (Con)
My Lords, on behalf of my noble friend the Minister, I beg to move the Motion standing in her name on the Order Paper.