Pensions Dashboards Regulations 2022
Baroness Stedman-Scott Excerpts(1 year, 11 months 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, 1 month 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
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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
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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
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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, 1 month 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, 3 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.
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 Grand Committee do consider the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, the draft Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 were laid before this House on 8 June. I am pleased to introduce this instrument. Subject to approval, these regulations will deliver a key commitment set out in Government’s Green Finance Strategy for
“large asset owners to disclose in line with the TCFD”—
the international, industry-led Task Force on Climate-related Financial Disclosures—
“recommendations by 2022”.
These measures will see the UK become the first country in the world in which trustees of occupational pension schemes are statutorily required to consider, assess and report on the financial risks of climate change within their portfolios.
The regulations impose requirements on trustees of larger occupational pension schemes, authorised master trust schemes and, once established, authorised collective money purchase schemes for the identification, assessment and management of climate-related risks and opportunities. This includes requirements relating to governance, strategy and risk management as well as requirements to select and calculate climate-related metrics and to set and measure performance against targets.
Trustees will be required to meet these climate change governance requirements, which underpin the recommendations of the TCFD, and to report on how they have done so in line with the task force’s recommendations. Details of steps that should be taken to meet the requirements are included in the statutory guidance to which trustees must have regard. The regulations also confer compliance powers on the Pensions Regulator to enforce the new requirements.
Among other requirements, trustees will need to report on the risks that affect their portfolio, on how their investment strategy—and, in the case of defined benefit schemes, their funding strategy—would respond to different temperature rise scenarios, which will include consideration of the strength of the employer covenant, on the emissions attributable to their assets, their emissions intensity and their performance against targets that trustees have set.
The largest schemes and authorised schemes will be captured from 1 October 2021. From 1 October 2022, the regulations will apply to more than 70% of pension assets and more than 80% of pension members. The Government have committed to review the effectiveness of these regulations and statutory guidance in 2023. This will include the identification of any barriers, gaps and inconsistencies, as well as an assessment of whether the regulations remain appropriate and whether they should be extended to smaller schemes. I am satisfied that the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 are compatible with the European Convention on Human Rights.
Climate change is the defining challenge of our time. Our response will determine the future health and prosperity of our world. It is a major systemic financial risk and a threat to the long-term sustainability of UK private pensions. That is why it is vital that we act now. With almost £2 trillion in assets under management, all occupational pension schemes are exposed to climate-related risks, and such risks present a significant threat to the retirement outcomes of millions of savers. This threat presents itself through the risks to investments of a warmer planet and those associated with the transition to a low-carbon economy, for which all investors must be prepared. If we do not take steps now to address the risks climate change will bring shocks and long-term sustained damage to our economy. It is therefore vital that we ensure that pension scheme governance is as robust as possible to withstand these risks in both the short and long term.
It is for this reason that the Government have sought to prioritise climate change risks and opportunities in this instrument over the broader risks associated with environmental, social and governance considerations. Climate change is unique in the severity of investment risks associated with its impact and the pervasiveness of such risks. It is also for this reason that the Government have wasted no time in consulting on these regulations and bringing them before the Committee for debate.
The instrument provides that trustees of schemes with £5 billion or more in relevant assets and all authorised master trusts will be required to meet the governance requirements from 1 October this year and to produce and publish climate risk disclosures within seven months of their scheme year end. By adopting a phased approach, which sees the requirements fall on the largest schemes first, we expect such schemes to utilise their governance expertise and capacity to set an industry standard to those with at least £1 billion in relevant assets, who will have to meet the same requirements from 1 October 2022.
The instrument requires trustees to put in place processes of governance and risk management to assess the impact of climate change on their investment strategy and, where applicable, their funding strategy. It also requires trustees to conduct scenario analysis, calculate climate-related metrics and to set and measure performance against targets. These activities are all about trustee action, and details of steps that should be taken to meet these requirements are included in statutory guidance to which trustees must have regard. They go way beyond disclosure alone and therefore do not materially overlap in intent or effect with existing ESG policy disclosure requirements.
Activities required by these regulations that rely on data from other participants in the investment chain, such as scenario analysis, calculating metrics and reporting against targets, must be carried out by trustees
“as far as they are able”,
which means that trustees should take all such steps that are reasonable and proportionate in the particular circumstances, taking into account the costs, or likely costs, to the scheme and the time required to be spent. Nevertheless, impacts from climate change are already being felt. Trustees must act now and should not wait for perfect data to emerge before taking action to manage climate-related risks and opportunities. There is more than enough data to begin work with.
Let me be clear: these measures do not direct trustee decisions or seek to increase pressure for blanket divestment of pension schemes from high-carbon sectors. It is not for the Government to direct trustees to sell or buy certain assets, and these proposals do not create any expectation that schemes must divest or invest in a given way. I reiterate that these measures require trustees to identify, manage and assess climate-related risks. Ultimately, trustees retain primacy in any investment decisions they make following that assessment, whether it be the targets they set out or their wider investment strategy.
The effects of this instrument will be significant and transformative. By the end of 2023, the risks and opportunities climate change poses to £1.33 trillion-worth of pension savings will be assessed and published for all to see. Critically, this develops a system of accountability that we have never had before, and trustees will be required to show how climate change is likely to affect their portfolio.
To conclude, these measures cement the UK’s leadership in green finance. We were the first major economy to pass a net-zero emissions law, and now these measures on climate change risk and pensions are the first of their kind globally. I am sure noble Lords will agree that it is only right that pension scheme trustees take action to address climate change-related risks and protect the retirement savings of hard-working people. I commend this instrument to the Committee, and I beg to move.
Baroness Stedman-Scott (Con)
My Lords, I sincerely thank the noble Lord, Lord Davies, and the noble Baronesses, Lady Janke and Lady Sherlock, for their positive and direct questions on these regulations. I also start with an apology: it was remiss of me not to acknowledge the excellent cross-party work that got the pensions Bill on to the statute book. It was a very good example of how the House works well together. I hope that it will continue.
I say to the noble Lord, Lord Davies, that I am very happy to meet and to hold discussions on discretion. My office will seek to organise that.
I will try to deal with some of the questions raised. The noble Lord, Lord Davies, asked about the UK’s statutory commitment to net zero, and said that it needs to be reflected in pension scheme policies. The UK signed up to the Paris Agreement and to net zero, and to making the necessary changes in taxation, spending and regulation to achieve that target. We are making the changes to achieve that. We have not signed up to mandating every organisation and household to set net-zero targets, but we are encouraging organisations to commit to net zero in a way that works for them and to publish a plan to do so.
The noble Lord, Lord Davies, also asked what TPR’s strategy will be to ensure compliance with these new measures. TPR must issue a mandatory penalty in cases where the TCFD report is not published on a publicly available website that is accessible free of charge, as required by the regulations. In all other cases where TPR believes requirements are not being met, it has a range of enforcement options, including the discretion to issue a penalty notice. TPR also has the opportunity to publish the names and details of any breaches, which can be a powerful deterrent. TPR today published its consultation and compliance penalties. The consultation will be up for response until 31 August.
On to the homework set for me by the noble Lord, Lord Davies, on the issue of the hyphen. I will go away and find out. I will write to the noble Lord and place a copy in the Library.
The noble Baroness, Lady Janke, asked about the register of green investment options. Again, I will need to write to her on that issue.
The noble Baroness also asked about the status of the statutory guidance, and asked why there is also non-statutory guidance. In complying with the requirements in this instrument, trustees are required by new Sections 41A and 41B of the Pensions Act 1995 to have regard to statutory guidance prepared by the Secretary of State. This requirement does not apply to the trustee knowledge and understanding provisions, which will be made under different powers; the guidance accompanying those provisions is therefore not statutory guidance but is intended as best practice. Trustees are not required to have regard to it but they are encouraged to do so. Trustees of other schemes may also find the statutory guidance helpful when implementing climate change risk governance and reporting on a voluntary basis.
The noble Baroness, Lady Janke, talked about the lack of available data and reporting standards. The present data coverage does not prevent schemes taking steps to assess their exposure to climate risks, and the quality is improving. Our TCFD reporting requirements, as well as the requirements of others—including the Financial Conduct Authority and BEIS—will accelerate this progress significantly.
The noble Baroness, Lady Sherlock, asked whether trustees will be reliant on data from others to do proper analysis. She also asked whether the same requirements are being applied across the investment chain. The Government have already announced their intention to make TCFD-aligned disclosures mandatory across the economy by 2025, with a significant portion of mandatory requirements in place by 2023. This will produce regulatory alignment through the investment chain, which will capture asset managers, workplace personal pension schemes, UK-registered large private companies, insurance companies and banks by the end of 2023. This will increase the flow of data, which is vital for trustees to embed effective climate risk governance. The DWP has worked closely as part of a cross-government task force to ensure consistent climate-related financial disclosures up the investment chain.
The noble Baroness, Lady Sherlock, said that lots of schemes have not taken action. Actually, 85% of DC pension savers are in a scheme that has set a net-zero target.
The noble Baroness asked why we have limited the threshold for being in scope at £1 billion. All savers have the right to benefit from effective governance and the reporting of climate change risk, regardless of the size of the scheme, but the Government do not wish to impose disproportionate burdens on trustees. Schemes with £1 billion or more in assets have the resources in place to allow them to implement and report on the range of governance and assessment measures set out in the regulations to a high standard, with a high probability of overall benefit to the members. The largest schemes can set an industry benchmark, drive demand for products, improve data flow and, ultimately, drive down costs for smaller schemes seeking to do TCFD reporting in future. The Government have committed to reviewing the effectiveness of the TCFD requirements in the regulations and statutory guidance in 2023. This will assess whether the regulations remain appropriate and whether they should be extended to smaller schemes.
The noble Baroness also asked what smaller schemes not in scope should be doing to manage their climate risk. Trustees do not need statutory requirements to begin meaningful action. They have a fiduciary duty to protect their members’ interests, and everyone should act now. As well as the statutory guidance, the DWP played a key role in producing and publishing the Pensions Climate Risk Industry Group guidance, which is a useful resource for all trustees whether they are in the scope of the new requirements or are just starting out.
The noble Baroness talked about the requirements announced in the Chancellor’s Mansion House speech. We will write to her on those.
Of course, the important issue of cost was discussed; indeed, it was mentioned by the noble Baroness, Lady Sherlock. We will monitor and review the cost, including in terms of what support is needed by trustees to fulfil their obligations.
Finally, the noble Baroness, Lady Janke, said that too many trustees do not have the necessary skills and asked what we are doing about it. Subject to the approval of this instrument, we intend to make regulations requiring trustees to have sufficient knowledge and understanding of the identification, assessment and management of climate-related risks and opportunities to enable them to exercise their functions properly. Those regulations were published in draft alongside our consultation response in June.
The noble Lord, Lord Davies of Brixton, reminded us that this is just the start. It is. I am sure that we will work together to put these regulations into action and review them as time goes on.
I conclude by reiterating the effect of this instrument. It will ensure that the largest occupational pension schemes, as well as authorised master trusts and authorised collective defined contribution schemes, have measures in place to identify, assess and manage climate-related risks and opportunities. The better management of climate risk will be in our interests, whether as pension savers or as pension takers and whether our interests are financial, environmental or social. I commend this instrument to the Committee.
Covid-19: Work-related Cases
Baroness Stedman-Scott Excerpts(3 years, 4 months ago)
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Lord McKenzie of Luton
To ask Her Majesty’s Government what assessment they have made of the report by the Trades Union Congress RIDDOR, Covid and underreporting, published on 23 May; and what steps they plan to take in response to the finding that work-related cases of COVID-19 leading to deaths have been underreported.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
RIDDOR requires responsible persons, usually employers in relation to employees, to report certain Covid-19 cases to the relevant enforcing authority. Over 33,000 cases have been reported since 10 April 2020. Not all cases of Covid-19 involving employees are reportable, only those where there is reasonable evidence that an occupational exposure at work led to infection. The Health and Safety Executive has reviewed the TUC report and is considering what, if any, additional action is required.
Lord McKenzie of Luton (Lab) [V]
My Lords, RIDDOR should play an important role in collecting data on work-related injury and death as well as dangerous occurrences. It is not an optional arrangement. The mechanism requires a layer of accountability on employers and is a public record of works relating to offices and fatalities. However, matters are not proceeding as they should; it is not working well. There are various accounts of underreporting. I think the Minister has just accepted that this underreporting has been around for some time, and perhaps we can be told why action has not been taken previously. I welcome the news that the HSE is going to get involved and look further at this issue.
Baroness Stedman-Scott (Con)
Given the complex system in which transmission of the virus occurs, it is extremely difficult to accurately identify the actual transmission point for any individual, and no one system—for example, RIDDOR—enables this attribution to be made.
Baroness Eaton (Con) [V]
What contribution does RIDDOR make in understanding workplace transmission?
Baroness Stedman-Scott (Con)
RIDDOR provides an important source of intelligence about occupational exposure to coronavirus in the workplace but is not the only source of intelligence that the HSE relies on. In addition to RIDDOR in the reporting of occupational cases of Covid-19, Public Health England is the lead government body for monitoring infection rates and the scale and spread of infections more widely, both in the community and in workplace settings. The HSE has worked and will continue to work closely with Public Health England throughout the pandemic.
Lord Hendy (Lab)
My Lords, does the Minister agree that underreporting may be a consequence of HSE advice? Regulation 9 requires a case of Covid in the workforce to be reported if
“attributed to an occupational exposure”.
The HSE advice is that employers
“do not need to conduct extensive enquiries in seeking to determine whether a COVID-19 infection is work-related. The judgement should be made on the basis of the information available.”
That advice surely misleads. The regulation requires some investigation, at least into whether the worker, her colleagues or the safety rep attributes Covid to work.
Baroness Stedman-Scott (Con)
The Health and Safety Executive guidance, with advice from the Government Legal Department, does not exclude the reporting of cases of workers whose job involves dealing with the public. RIDDOR places a duty to report on the employer, and they must make a judgment based on the information they have. The Health and Safety Executive has never publicly stated that Regulation 9(b) or its supporting guidance has been misapplied.
Baroness Janke (LD) [V]
Does the Minister recognise that the severe cuts to the HSE have led to fewer inspections and, as a result, more underreporting? What plan do the Government have to reinstate the HSE budget?
Baroness Stedman-Scott (Con)
I am pleased to say that the Health and Safety Executive has had additional funding throughout the year along with enormous staff increases. This will continue to be worked on, and the HSE and the DWP continue to review and revise the resourcing arrangements as necessary.
Baroness Wilcox of Newport (Lab)
My Lords, may I press the Minister a little further on her previous reply? The TUC report found that there was likely to have been significant underreporting in the number of work-related Covid deaths, arguing that it was just not credible that only 2.5% of working-age Covid deaths were down to occupational exposure. Does she believe that funding cuts of 46% to the HSE over the past decade, notwithstanding the short-term fix of a one-off payment, have impacted on reporting under RIDDOR as well as affecting the process of investigation?
Baroness Stedman-Scott (Con)
There have been cuts to the budget in the past. That has been rectified and an increased budget has been put in place, as has an increased resourcing budget. As of the end of April, it had 2,670 staff. There has been an extra £14.2 million available to the HSE on top of its regular government funding. Additional funding has enabled it to continue to inspect significantly more workplaces.
Baroness Altmann (Con)
My Lords, I welcome the extra funding for the HSE. I hope that noble Lords will recognise the difficulty, with a widespread pandemic, of identifying whether a particular infection is caused in one setting or another. Therefore, I would be grateful if my noble friend might give a little more information on the role that the HSE has played during the pandemic.
Baroness Stedman-Scott (Con)
The HSE has been really busy and proactive during the pandemic in three key areas: regulating, by targeting businesses and organisations, to prevent workplace transmission; working with other government departments, developing, assisting and promulgating policy guidance and research; and providing other workplace regulatory functions, including market surveillance to ensure a safe supply chain.
Baroness Donaghy (Lab) [V]
My Lords, Covid-19 infections in food factories could be more than 30 times underreported. The HSE said that the figure lacked credibility. In transport, there were 608 Covid deaths among workers and only 10 notifications during a similar period, a rate of just 1%. These are shocking figures. Second only to Romania, we have had the highest level of cuts to inspectors since 2010, and many of these industries have extremely poor sickness absence pay. This lets employers off the hook and the Government are complicit in this appalling level of underreporting. What further action will the Government take to deal with this?
Baroness Stedman-Scott (Con)
I will need to look to my noble friend Lady Vere, sitting to my left, to get some information about transport and Covid reporting there; she will like me for that. Given the number of Covid clusters among food and drink manufacturing workers towards the end of 2020, the HSE organised a series of proactive high-risk sector inspections to be carried out. Inspectors carried out 531 site visits and 58 remote inspections, 62 of which resulted in written correspondence. Inspection topics included ensuring that, in the organisation of work, changing and welfare areas allowed for social distancing proportionate to the situation.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, following on from the questions of the noble Baronesses, Lady Janke and Lady Wilcox, will the Minister acknowledge that of 52,000 proactive site visits over Covid, only 12,000 were conducted by trained inspectors? This is less than a quarter: the rest were handled by outsourced contractors. Will she acknowledge that ventilation was not on the script of those outsourced contractors? Given what we know about aerosol transmission and our increasing understanding of the problem of ventilation, does she agree that this is yet another example of where outsourcing to less experienced, skilled and trained staff has really damaged the quality of service that people have received?
Baroness Stedman-Scott (Con)
I ask the noble Baroness to allow me to go back to the department to talk about her outsourcing points. I would be very surprised if we outsourced to people who were not up to the job, but I will write to her.
The Lord Speaker (Lord McFall of Alcluith)
My Lords, the time allowed for this Question has elapsed.
Child Maintenance Service
Baroness Stedman-Scott Excerpts(3 years, 4 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 Farmer, for his question, which has led to this important, albeit short, debate. I also thank all noble Lords who have participated and made many excellent points. I completely agree with the noble Baroness, Lady Sherlock—indeed, we all agree—that this is an important subject and area of work. In summing up, I will try to address as many of the points made as I can. If I cannot address all of them, I will write to colleagues in detail.
I hold surgeries every quarter with MPs from the Commons, and for all MPs who have written to me personally about cases, I have dealt with each and every one. So I commit to organising an all-Peers child maintenance session so that we have the time after this debate to get into the detail, as I know all noble Lords want to do.
My noble friends Lord McColl and Lady Eaton wanted to know that the child maintenance system is working. We continue to keep the child maintenance policy and our operational delivery under constant review. I was pleased that my noble friend Lady Eaton referred to the new digital services, such as the apply online service that has been introduced; it has reduced average application times, is available 24/7 and allows greater flexibility for separated parents to contact the Child Maintenance Service. Operational reforms such as these help to improve outcomes for children by enabling parents to set up and manage child maintenance arrangements in ways that suit their own circumstances.
The noble Baronesses, Lady Massey and Lady Sherlock, raised the National Audit Office report. I am pleased to confirm that our officials are working well with the National Audit Office—it is work in progress. It is a value-for-money study and will be completed during October and November.
On child maintenance performance and track record, I know that many noble Lords will have experience of the various child maintenance schemes—already referred to by my noble and learned friend Lord Mackay—that there have been over the years. This is an area where the Government have learned a lot. They are completely committed to ensuring that parents play their part and take responsibility for supporting their children. The child maintenance system has had a difficult history in our country, but I am sure most colleagues would agree that the Child Maintenance Service is a significant improvement. As has already been referenced, more than 750,000 children are now covered by child maintenance arrangements. In the past year—2019-20—more than £1 billion was due to be paid through direct pay and the collect and pay service. The compliance rate for parents on the collect and pay service has increased significantly, rising by six percentage points between the quarter ending December 2018 and the quarter ending December 2020.
As the noble Baroness, Lady Massey, said, during the Covid public health emergency, a number of temporary changes were made to the Child Maintenance Service. On the question that the noble Baroness, Lady Sherlock, asked me, 1,507 FTEs were redeployed in the Covid emergency to make sure that we could get money to people. I can give noble Lords a categoric assurance that they are all back and we are back in full service mode.
In December 2020, more than 40,000 paying parents on the collect and pay service had a deduction from earnings order in place, collecting more than £25 million. More than 60,000 deductions from benefits were in force and more than 3,500 deduction orders were in place, collecting a record £3.3 million from bank accounts. I am confident that we will maintain these improvements as we move forward.
My noble friend Lord Farmer and the noble Baronesses, Lady Massey and Lady Sherlock, raised the issue of enforcement powers. The Child Maintenance Service’s enforcement powers are strong and are used widely against those who consistently refuse to meet their obligations to support their children. I have been absolutely staggered at the lengths that people will go to in order to avoid paying their child maintenance. There was an absent dad who owed £80,000 in child maintenance and thought that he could avoid paying it, despite having a great lifestyle. The financial investigation and enforcement teams were right behind him and managed to get that £80,000, which was a life-changing amount of money for the receiving parent. He had £175,000 in the bank. So we are not having any of it—I can tell you that.
The noble Baroness, Lady Sherlock, raised the issue of child maintenance and child poverty. We know that child maintenance can play an effective role in reducing child poverty and enhancing the life outcomes of children in separated families. Child maintenance helps to reduce the chances of children being raised in the lowest 20% of the income distribution, and we know that approximately 120,000 fewer children are growing up in poverty as a result of child maintenance payments.
The noble Baroness, Lady Sherlock, raised the issue of lone parents, who are much more likely to live in low-income households. Extra money coming in through child maintenance can make a real difference to these families, as it is disregarded in full in universal credit. Lone parents get to keep every pound of maintenance paid, and we encourage lone parents on benefits to make a claim for child maintenance. I am pleased to say that my very first visit as a Minister was to Gingerbread and that my colleagues and officials have a very good ongoing relationship with both Gingerbread and Families Need Fathers, and we consistently listen to the issues that they raise with us.
I come now to parental conflict, which the noble Baroness, Lady Massey, my noble friend Lord Farmer and my noble and learned friend Lord Mackay all raised. When two people fall out, the repercussions are felt far and wide by children, and we are only too aware that we have to try to intervene at the right time to reduce this conflict. That is why we have our Reducing Parental Conflict programme, and we are very pleased with the impact that it has had to date. In government, we have a cross-departmental working group on it, involving the Department for Health and Social Care, the Home Office and MHCLG.
Of course, at this point, I want to raise family hubs. We have five government departments working together on family hubs, and we hope that the Reducing Parental Conflict programme can be one of the tools in their armoury. We know that the sooner we intervene in the breakdown of a relationship, the better the outcome can be—and I would be very happy to give more information to noble Lords about that when we meet again.
Before I close my remarks today and deal with some of the other issues that were raised, I will touch on domestic abuse, which I know is a matter of deep concern to all noble Lords. It is vital that the Child Maintenance Service plays its part in supporting victims of domestic abuse. We will continue to waive the application fee for domestic abuse victims and to provide support to allow victims to set up maintenance arrangements safely. The Child Maintenance Service has ramped up domestic abuse training for front-line staff and will continue to review its ways of working to further address a culture where victims of domestic abuse are in absolute poverty—they are a priority. In that vein, I am in the process of commissioning an independent review of ways in which the Child Maintenance Service supports victims of domestic abuse.
Noble Lords raised the issue of the consultation, which we have issued and are embarking on. I give an invitation to all noble Lords: if they have other things they want us to consider, the door is open and they should let us know what those things are. I would now like to cover other important issues that have been raised.
We are grateful to SSAC for raising issues and we have had the opportunity to discuss them with concerned stakeholders. The views expressed will be used to inform future policy development. In response to the noble Baroness, Lady Sherlock, I think I have already said that the system is now fully operational, and the number of staff on child maintenance has gone from 5,500 to 4,700 due to the last CSA cases being closed. Capacity of the system is broadly at pre-Covid levels.
Noble Lords raised the issue of aligning Great Britain with other jurisdictions. We are in close contact with officials in other jurisdictions. As my noble friend Lord Farmer observed, it is hard to transplant measures from one jurisdiction to another, but we continue to monitor international developments in this field. I believe that covers the issue of the situation in Australia. Dual income adds significant complexity to a child maintenance calculation and measures that work in one place do not necessarily work in another. I am happy to continue to discuss that and keep the issue under the review.
On family-based arrangements, we recognise that conflict is harmful to children and the intent of the 2012 maintenance reforms was to try to promote collaboration between separated parents. We know that a family-based arrangement is not for everybody, so we offer people other ways of paying. I think my noble friends Lord McColl and Lord Farmer raised the issue of the appeals process and whether it works. We have made changes to the appeals process and, if a complainant is still unsatisfied with the response they have, they can escalate it to the Parliamentary and Health Service Ombudsman. Noble Lords asked me to tell them about the progress of the Government’s commitment to supporting parents to make family-based arrangements. The survey we did will be published in due course.
I am sorry to have run out of time, because this is a subject dear to my heart; I could spend all day talking to noble Lords about it and answering your questions, believe me. Please go away from here understanding that we know child maintenance is important, we are on it and we are going to make the changes we need to make to take children out of poverty so they can get the best chances in life.
The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)
Thank you, Minister. That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.