Pension Schemes Bill [HL]

Baroness Stedman-Scott Excerpts

Committee stage & Committee: 1st sitting & Committee: 1st sitting : House of Lords
Monday 24th February 2020 Grand Committee

[Lord McKenzie of Luton (Lab)]

My Lords, in moving Amendment 1 I will speak also to Amendment 34. The latter seeks to insert into the regulations’ objectives the promotion of DB schemes. Amendment 1 adds as one of the things that TPR may take into account when considering an application for a collective money purchase scheme the potential impact of such a scheme on the DB landscape. Together, the amendments are a peg on which to hang a discussion about the position of DB schemes and their future, especially outside the private sector, and to see what more might be done to sustain them for future accrual.

As the White Paper reminds us, DB schemes currently have 10.5 million members, with £1.5 trillion under management—a not insignificant component of the pensions landscape. Notwithstanding this, DB schemes continue to close to future accrual or membership. Hitherto, the alternative has been some DC scheme, and now there is the prospect of CDC schemes in the future.

In times past, DB schemes were the stalwarts of the occupational pension system. Things looked good, with seeming scope for regular improvements in benefits and with surpluses and contribution holidays available. Indeed, were there not concerns at the Treasury about the system being used for tax shelters? These halcyon days have diminished through a combination of factors: more realistic actuarial assumptions; increasing longevity of members; impacts of inflation; falling asset prices; and, probably, less effective collective bargaining.

Much of the content of the Bill is about maintaining and building confidence in the DB system, but with a stronger regulator, and improving scheme funding rules. We support this approach. It is a pity that the Bill did not include a framework for consolidation but we note that this is to come. Perhaps the Minister will give us a timeline on that.

Although DC schemes remove longevity risks from employers, they are generally characterised as having lower contribution rates, doing nothing for our chronic undersaving. The Minister in the other place has declared that he does not want to see the advent of CDC as being a channel to further closures of DB schemes. In particular, he clarified that the Bill’s proposals do not provide a back door to converting DB rights into CDC rights and are not intended to encourage public service and/or DB schemes to convert their accrued benefits.

Can the Minister say how this intention is manifesting itself in the Bill? The data that have been presented to us show that CDC schemes can generate a pension income significantly above that of a DC arrangement, but of course this is not guaranteed. The question arises as to whether the lure of higher returns could be a catalyst to more DB schemes closing to future accrual. There are restrictions that make this difficult, at least at the moment—single or associated company arrangements being but one. Can the Minister say what mechanisms might be contemplated to deflect such moves, if it is the business of government to do so?

The briefing makes it clear that an employer remains within its rights to close an existing DB scheme to new accruals and to offer pensions on a different basis going forward. We know that it has become common for employers to close DB schemes and to open DC schemes in their place, but the briefing note says that CDC schemes should be seen in this context, as a new option for employers looking to develop their pension offering. Closing DB schemes could indeed be such a channel. I beg to move.

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

I thank the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, for tabling these amendments. Taken together, they seem to explore the Government’s response to the continuing decline of defined benefit pension provision in the UK. I will address the specifics of these amendments but, first, it may help if I talk about the Government’s approach to workplace pensions in general.

The Government’s priority is to promote pension savings for later life through workplace pensions. However, it is for employers to decide what form of provision to make. This is part of their remuneration strategy to recruit and retain quality employees. The Government’s role is not to tell employers what sort of pension to provide, but to promote workplace pensions and to set some minimum standards. That is why we require employers to automatically enrol all eligible employees into a qualifying workplace pension scheme and to make a minimum contribution to that scheme.

The majority of defined benefit schemes are now closed and, as a result, the defined benefit landscape is changing. Most schemes are maturing with fewer contributing members and more receiving pension benefits. The Government’s 2017 Green Paper and 2018 White Paper did not seek to prevent changes to the pension landscape, but to protect the interests of the large number of members who will still rely on defined benefit schemes for their retirement income. That is what the scheme funding measures in this Bill do.

Before the introduction of automatic enrolment in 2012, the decline in defined benefit pensions was not matched by increases in other types of pension. Overall, therefore, pension participation was in decline. Automatic enrolment has been hugely successful: over 10 million people have been automatically enrolled into a workplace pension and the decline in participation has reversed. The number of eligible employees participating in a workplace pension increased from 10.7 million in 2012 to 18.7 million in 2018.

Amendment 1 seeks to put a duty on the Pensions Regulator to take into account the impact on defined benefit schemes when considering an application for authorisation of collective money purchase schemes, also known as collective defined contribution—CDC—schemes. Given the term CDC is widely understood, I shall use it throughout these debates. While the Government do not think they should tell employers what sort of pension they should provide, beyond setting some minimum standards, they want to foster innovation, so that employers have real choices in the type of pension they offer.

I know that concern has been raised that CDC schemes will replace defined benefit schemes. The noble Lord, Lord McKenzie, raised this at Second Reading. I want to be clear that the Government do not see CDC schemes as a replacement for defined benefit schemes.

Royal Mail, the employer actively looking to set up a CDC scheme, does not believe that either. Indeed, it has always seen its CDC scheme as an alternative to its individual defined contribution schemes. To manage cost and risk, employers are moving away from defined benefit schemes towards individual defined contribution schemes. CDC schemes should be seen in this context. For example, Royal Mail has been working on a CDC scheme in partnership with the Communication Workers Union because both sides felt that it served Royal Mail employees better than an individual defined contribution scheme. I am sure that noble Lords will recognise what a positive message this sends about CDC schemes.

Royal Mail is not alone. There is growing evidence that many employers with defined contribution schemes want to provide their employees with a pension scheme that provides an income in retirement. CDC schemes are a new opportunity for employers and employees to choose a pension scheme that works for both. I point out that the Bill includes clear safeguards for existing defined benefit pensions: Clause 3 prohibits public service pension schemes being CDC schemes, and Clause 24 prohibits accrued defined benefits being converted into CDC benefits. Therefore, accrued defined benefit pensions cannot be put at risk by the existence of CDC pensions.

I understand the desire to ensure that members in good-quality defined benefit schemes continue to have access to guarantees from their employer, but the amendment could have unintended consequences for members. If the amendment meant that a CDC scheme could not be authorised, it seems likely that the employer would close its defined benefit scheme and offer an individual defined contribution scheme instead. It is important that the decision on whether to authorise a CDC scheme is based on the criteria and information relating to that scheme. It would not be fair on employers or employees to cloud the issue by linking the authorisation to consideration of other types of schemes. Requiring the regulator to make judgments about different types of schemes would also have implications for its role.

Amendment 34 provides for a new objective for the Pensions Regulator: to promote the membership of defined benefit schemes. The regulator exists to protect workplace pensions in the UK. It makes sure that employers put staff into a pension scheme and pay money into that scheme, and that workplace pension schemes are run properly. It does not matter whether members are in a defined benefit scheme, a defined contribution scheme or a CDC scheme—the regulator’s role is to protect their scheme.

As I said in my introduction, the Government’s priority is to promote pension savings for later life and set minimum standards for employer-provided workplace pensions. The Pensions Regulator is required to ensure that those minimum standards are met. The Government do not consider it appropriate to task the regulator with promoting particular types of pension schemes. This could undermine its role as the regulator of workplace pensions in the UK generally. It is for employers to decide what type of pension they provide; employers who provide defined benefit pensions need to be genuinely able to afford the costs and bear the risk. Promoting defined benefit pensions to employers which may be unable to do this would conflict with the regulator’s other objectives, such as protecting members’ accrued benefits and minimising the risk of calls on the Pension Protection Fund.

The noble Lord, Lord McKenzie, asked why superfunds are not in the Bill. Developing a new regulatory framework for them is a complex task. We are working hard across government and with relevant stakeholders to build consensus on the right approach. We aim to publish our response to the consultation shortly; it will set out in more detail our proposals for a future legislative framework. Once that it is complete, we will look to legislate as soon as we can.

I hope that the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, recognise that the Government’s approach is sensible and proportionate. I urge the noble Lord to withdraw the amendment.

[Lord McKenzie of Luton]

I thank the Minister for that full reply. We never intended to press the amendments anyway. As I said at the start, it is an opportunity to have a discussion about where the Government are going, particularly on DB schemes.

I am still a little unclear. I quoted one of the briefing papers which the Government provided in preparing for this debate. It referred to a new option for employers looking to develop their pension offering going forward, which seems inconsistent with what we had understood to be the commitment made earlier by the Minister: that the Government do not want CDCs to undermine the existing DB regime. There seems a risk of doing that, and that in many ways was the tenor of the reply she gave: it is not up to the Government, it is up to employers. Of course we accept that there is a role for employers, but is there not an obligation to work with employers to ensure that the best type of arrangement is available? Historically, that has been DB schemes.

Is not a test for this the extent to which we are saving enough as a nation? We do not save only through pensions but saving through pensions is clearly a very important part, particularly as the Minister instanced the auto-enrolment provisions, which we agree have been a huge success. One might just reflect for future policy that they were conceived under a Labour Government, with the legislation prepared under a coalition Government and introduced under a Tory Government. Perhaps there is an example in pensions policy of how we might better work together on other matters.

I will summarise my concerns. It is good that CDC schemes are available to provide, generally, a better return than can come from a straight DC scheme. It is not all upside, as we shall discuss in other amendments, but it is important that we do not lose sight of the benefits available under a DB regime which, apart from other things, had contribution levels way above pretty much anything that arises under a DC scheme. That should concern us all: the level of saving that is taking place.

Having said that, I do not know whether the Minister wants to come back.

[Baroness Stedman-Scott]

I thank the noble Lord for the observations he has made. I am thrilled that noble Lords agree that auto-enrolment has been a great success and a great way for people to save for their retirement. The role of government in all this is to encourage saving through automatic enrolment, pensions and other savings vehicles. The noble Lord has raised some valid points. I will take them back to officials and, if we need to write to him or meet him to talk about them further, that is what we will do.

[Lord McKenzie of Luton]

I thank the Minister for that. I stress, in agreeing about the success of auto-enrolment, that it was started off by a raw junior Minister in the DWP getting that early legislation through.

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[Lord McKenzie of Luton]

This has been a good debate. I think we are minded to support this measure. I am not very clear in my mind as to precisely how Royal Mail is tackling this issue at the moment, and if the Minister were able to deal with that in her response that would be a help. One thing that has come through from the Government’s own thinking about this is that wherever we end up on it, there must be specific rules. This should not be just a matter of trustees’ discretion; it should be clearly set out in the rules. I shall wait to hear what the Minister has to say.

[Baroness Stedman-Scott]

I thank noble Lords for tabling these amendments linked to fairness. Concerns about fairness often arise in respect of CDC. I fully understand noble Lords’ interest in this important matter. I share their commitment to ensuring that members of CDC schemes are treated fairly. However, I do not agree that the amendments proposed are necessary to protect members.

Ensuring that members are treated fairly has been a central part of our work on CDC since we began. We have been mindful of the problems that other countries have experienced—for example, in their approach to adjusting benefits—and we have learned from them. Envisaged regulations under Clause 18 will mean that scheme rules will require that there is no difference in treatment between different cohorts or age groups of scheme members when calculating benefits and applying benefit adjustments. If they are not compliant, the scheme will not be authorised.

Noble Lords have previously expressed concern that a significant number of older members might choose to leave a CDC scheme shortly before retirement and that this may pose a risk to younger members. Noble Lords will note that one of the authorisation criteria in Clause 12 relates to the soundness of the scheme design. It is intended to protect members from being enrolled in ill-considered and poorly designed schemes which are unlikely to remain viable over the long term.

It is important that due consideration is given by employers to a scheme’s viability at the design stage, including to how the benefits aspired to will be affected by significant potential events, whether this is a reduction in investment returns or in membership. Envisaged regulations to support the design requirement will aim to ensure that sufficient evidence is provided to satisfy the regulator that appropriate stress testing of the scheme’s design has been undertaken and that a suitable strategy is in place for monitoring and reacting to threats to a scheme’s viability. These are complex matters, so we will consult thoroughly on what the regulations should require in this respect and more widely. We want to ensure that the scheme design is subject to appropriate scrutiny by the regulator at the initial application stage and on an ongoing basis. I am happy to discuss the scheme design requirements in more detail when we reach the relevant clauses.

My noble friend Lady Altmann mentioned cash equivalent transfer values. We propose that a member’s transfer value will be calculated by reference to the present value of the assets currently held that are needed to pay the anticipated pension whenever that is due. That means that, if every member chose to leave at the same time, they would get the present value of their anticipated pension. Nobody would receive anything that was due to anyone else, as the valuation process means that the assets and the cost of all the anticipated pensions should always be in balance. It also means that a member transferring and a member staying always keep the present value of their rights in the scheme and nobody receives anything more than is due to them from the scheme, whether they stay or go.

The noble Lord, Lord Sharkey, asked about the impact of cross-subsidisation on younger members in CDC schemes. Such members may get less value from flat-rate contributions if they decide to transfer out of the scheme before retirement. It is important to remember that pension schemes are long-term saving vehicles, designed to deliver an income in retirement. Our focus is on the long-term benefit of a CDC pension scheme for the scheme members. While CDC benefits are money purchase benefits, a CDC scheme’s purpose is to provide a variable income for life in retirement for its members and not a transferable cash sum.

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[Baroness Bowles of Berkhamsted]

I would like to intervene at this point because a lot has been spoken about. When there is a calculation of the percentage of the value of the assets for an individual transferring out, which is done on various actuarial calculations, will those actuarial calculations be able to take into account long-term market risk so that there is an element of the fact that if you are withdrawing at a time of high markets, you may be getting more, as I said, than would have been your long-term due? If there is no such mechanism, have we learned nothing from mutual funds running on net-asset value, where there are runs and the people who are slowest to move and get their money out are the ones who are trapped with low value? We have invented things such as gating mechanisms to cope with that. There is potentially such a thing as a run on a pension fund, so how will we guard against that?

[Baroness Stedman-Scott]

The noble Baroness is renowned for her forensic abilities. I am advised that we will need to write to her on that particular question. In fact, we are meeting this week, and I hope we can get her an answer that is accurate and share it with other noble Lords, if that is acceptable.

I recognise and share noble Lords’ concerns. I assure your Lordships that the Government are not oblivious to the potential risk in CDC schemes. I hope my explanation has reassured your Lordships that our proposed legislative framework is designed to ensure that both employers and trustees are alive to these threats when designing their CDC schemes, and that the Pensions Regulator is able to undertake appropriate scrutiny both before and after granting authorisation. With that, I urge the noble Lord to withdraw his amendment.

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The effect of the amendment is to place the members in the CMP scheme in a comparable position to those in a master trust, by adding the employer to those parties to which the regulator can specify requirements to provide funding to meet the financial sustainability requirement. It is my understanding that Royal Mail, on its own discretion, intends to make a contribution to some form of financial sustainability, which is welcome if correct. The Bill, however, provides the enabling legislation for all future CMP schemes and, as such, the Pensions Regulator should be given the power to specify the requirements that an employer should meet in respect of the financial sustainability requirement. The amendment would explicitly give the regulator that power. I beg to move.

[Baroness Stedman-Scott]

I thank noble Lords for tabling the amendments. I turn first to the proposed amendments to Clause 14. The fundamental aims of the financial sustainability requirement are to avoid disruption to members through CDC schemes failing because of inadequate financial planning or resources and to ensure that, if a scheme experiences a triggering event, the costs of dealing with that and continuing to run on the scheme for an appropriate time can be dealt with. These costs may include costs of transfer and wind-up, if that arises.

As these will be new schemes, it is possible that the up-front costs of establishing and running a CDC scheme may not be covered in full by the charges paid by members. Similarly, if a scheme experiences a triggering event, it might also find that it has insufficient resources to meet the cost of resolving that event without further recourse to members’ funds. The financial sustainability requirement is intended to protect against these risks.

It is envisaged that there will be a variety of mechanisms for financing these costs. As the noble Lord, Lord McKenzie, identified, those are likely to involve support from establishing and connected employers. We will consult on this matter before bringing forward regulations, but a range of options is likely to be available—for example, an amount held in escrow or contingent assets.

Envisaged regulations made under Clause 14(3) will ensure that the regulator has sufficient evidence to satisfy itself that the financial sustainability criterion is met and that members are protected. We intend that these regulations will require evidence of any financial commitment by the establishing employer or connected employers and that the scheme has access to the financial resources it needs, including in the event of employer insolvency. If the regulator is not satisfied that the scheme is financially sustainable, the scheme will not be authorised to operate by the regulator, so it is in an employer’s interest to ensure that its scheme meets the envisaged requirements. We do not intend to require CDC schemes to hold a minimum level of capital to meet relevant cost. If authorisation is to work effectively, the Pensions Regulator must be able to consider the risks posed by each scheme to determine whether adequate mitigations are in place. I believe that that is a fairer and more effective approach.

I turn to my noble friend Lady Altmann’s amendment. It would add to the illustrative list of what regulations may require the regulator to consider when deciding whether the processes used to run the scheme are sufficient to ensure it is run effectively. I appreciate the importance of good systems—

[Baroness Altmann]

I thank my noble friend. Before we finish on this topic, I hear what is being said but what I was trying to achieve with Amendment 5 was to avoid repeating the mistakes already extant in automatic enrolment schemes. We are setting up a brand-new system, and there seems to be nothing in the current processes which would require checks on data accuracy. The processes mentioned in Clause 16 include records management, in subsection (4)(d), while subsection (4)(b) recommends standards for IT systems’ “quality”. However, there are no processes to verify on an ongoing basis a regular audit of whether the data are correct. We know that data are currently incorrect in a large number of auto-enrolment schemes. Even the modern ones are full of errors.

I am trying to introduce something that would help us learn from experience and avoid repeating the kind of mistakes that we know have arisen. They are not intentional mistakes, but if we put in place right from the start processes which require data audits and, potentially, capital buffers as well, against mistakes that have not been foreseen, we will set up a more robust system for the longer term.

[Baroness Stedman-Scott]

I thank my noble friend for her intervention. My understanding is that CDC schemes are obviously new and will not carry any legacy data issues, which should lower the initial risk. The focus will be on not cleaning old data but establishing strong processes for loading, managing and maintaining data, with regular checks to ensure that quality is maintained. If that does not answer my noble friend’s point in the way she would like we can deal with it when we meet later in the week, if that is acceptable.

I appreciate the importance of good systems and processes. However, the proposed addition to the illustrative list is unnecessary, as we already envisage that appropriate requirements relating to the accuracy of member data and record keeping will be included in regulations. Schedule 5 of the illustrative CDC regulations provides an early indication of our thinking in respect of member records. However, we will consult to ensure that what is included in the regulations is appropriate and that sufficient scrutiny is applied. We also want to ensure that any requirements are proportionate.

In conclusion, I hope that my statements today and the illustrative regulations deliver sufficient reassurance of our commitment to ensuring that CDC schemes are financially sustainable and that systems and processes for member data are sufficient and effective. With that, I ask the noble Lord to withdraw his amendment.

[Lord Sharkey]

I should like to ask one or two questions about the buffer concept. It seemed to me that a lot of what was being described was the equivalent of a buffer in some ways, but it was not entirely clear how it would be produced, brought forward and exercised. It was not entirely clear to me whether the members of any proposed CDC scheme would be given a choice or say in whether the scheme should go ahead without buffers, as the RM scheme will, or whether it should include buffers. It seems to me that there is merit in consulting the workforce about which they prefer.

In paragraph 1.3 of the consultation response the Government said:

“We do not want to preclude or legislate against buffers in CDC schemes—there are perfectly good reasons why employers and workforces may wish to provide for a scheme that mitigates volatility in this way, and we agree that a buffered scheme could be appropriate in some circumstances.”


Those circumstances might very well include avoiding frequent and disconcerting changes in benefits but also the provision of wind-up or restructuring costs, even if that does somewhat impact intergenerational fairness. My request is for clarity about this cloud of assets or obligations that might substitute in some way for capital. I am not clear about how that will happen. It would be good idea to make sure that in any future schemes the workforce is consulted about whether or not they prefer a buffer.

[Baroness Sherlock (Lab)]

May I, too, seek clarification? I was not entirely sure what the Minister was saying about where the money could come from for a buffer. I think I understood her to say that the regulator would not approve a scheme unless the sustainability criteria had been met and that they could be met only if an adequate amount of money was placed in, for example, escrow. Is she saying that a scheme would be approved only if the regulator was satisfied that enough money had been provided up front by the sponsoring employer to fund the continuity options in the event of a triggering event? If so, why does she not simply accept this amendment? That is all it says.

[Baroness Stedman-Scott]

I shall turn first to the point raised by the noble Lord, Lord Sharkey. The funding of future inflation increases provides the headroom funding that is required. The answer to the question asked by the noble Baroness, Lady Sherlock, is yes, the money would be in an escrow account if needed.

[Baroness Sherlock]

So could it never be the case that in the event of a triggering event, such as a wind-up, an employer pulling out or an employer downsizing, money would have to come from members’ contributions to fund the continuity option? I am sorry to push this, but this kind of clarity is important.

[Baroness Stedman-Scott]

Noble Lords must forgive me for turning to my friends. This is my first Bill. The answer to that question is no, it should not be.

[Baroness Bowles of Berkhamsted]

Now I am confused. In the previous group, when we were talking in anticipation about buffers and intergenerational fairness, the Minister said that there would be headroom funding. I understood that to be up front, getting the scheme up and running, but the Minister then said that that was going to be spent. I do not think she said what it was going to be spent on, or have I got the wrong end of the stick?

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[Baroness Stedman-Scott]

Let me try to be helpful and to placate noble Lords on this: money needed to wind up should come from the employer. A scheme would not be authorised if it did not have this financial sustainability from the employer. Is that helpful?

[Lord Sharkey]

But the scheme does not include a buffer and I am still not clear about the money. If it is going to come from the employer, where does it say that they have to do that? All we are talking about is a notion of fairness, but people may disagree about what that means.

[Baroness Stedman-Scott]

I think the original question was around the consultation we are going to do on this. This will be resolved in the consultation.

[Baroness Neville-Rolfe (Con)]

I think this shows that it is important that we understand what the statutory instruments in this area are going to look like. It will obviously lead to a clearer conversation if the Government are able to move on that. The second thing is that, in my experience, things do not necessarily go the way you expect. When I sought my pension estimate before I retired, I ended up a year later getting a less generous pension than I had anticipated, perhaps because things had changed on the underlying demographics—health or whatever. We have to be quite careful to take account of the complexity of these things in the sorts of SIs that we make. Clearly, we need to consult on them for that very reason.

[Baroness Sherlock]

On a final point of clarification, if I have heard the Minister correctly—and I will read the record—I think she is trying to reassure us that she will consult and that this will be dealt with in regulations. The problem is that Clause 14(4)(b) states that regulations may include provision,

“specifying requirements to be met by the scheme relating to its financing, such as requirements,”

et cetera. All this amendment does is insert the words, “or by an employer”, because of the concern that the Bill may allow regulations to be made requiring the scheme to put money in. We want to be sure that the Bill will require the employer, rather than the scheme, to provide the money. That is why the amendment is written as it is, accepting that the Government will have to work out what is in the regulations and then what the regulator actually did as a result. Are the Government confident that the wording of the Bill will allow them to place a requirement on the sponsoring employer to do what the Minister has described?

[Baroness Stedman-Scott]

I am advised that we are confident that that will be the case.

[Baroness Altmann]

In that case, I seek clarification on what would happen if the employer became insolvent. There would still be the same problem that members’ pots would be needed to cover the costs of wind up, because they could not be got from the employer. If there is not a capital buffer up front and we rely on waiting to recover it from the employer, we may still end up with the same kinds of errors that we had in defined benefit schemes, where there was nobody to get the money from and the members ended up with potentially no pension.

[Baroness Donaghy (Lab)]

In the absence of knowledge in this area I have had to resort to listening to the debate. I think the consultation is important. We need to be clear what the headroom is, what the buffer is and whether the headroom is to take account of inflation, as the Minister says. Taking account of inflation has nothing to do with sustainability, emergency action or catastrophes of other kinds, so we need clarity about, first, what questions are asked in the consultation and, secondly, what responsibility is taken.

It is all very well saying that the regulator will look at this and make sure it is sustainable, but I am not sure that the history of the Pensions Regulator gives me a good night’s sleep. I apologise if I have got it wrong, but there seems to me to be a bit of confusion about what this headroom or buffer is for, who takes responsibility for it and how the Pensions Regulator will keep a look out. It is not clear to me that statutory instruments will do it. However, if the Minister is confident that they will, we need to see them.

[Baroness Stedman-Scott]

Our job is to give noble Lords comfort and to clarify matters, which we must do. I am advised that if there were to be an insolvency of an employer, that would be anticipated up front when the scheme was established and some provision would have to be made for the risk of it happening. It would of course be part of the ongoing monitoring.

With regard to the helpful suggestion from the noble Baroness, Lady Donaghy, about the questions in the consultation, I might be getting myself into trouble—I am very good at that—but maybe we could write to noble Lords who have taken part in this debate and ask for their opinions about what questions should be included.

Apart from those matters, if there are any other points that I have missed out, or if I have not done as good a job as I should have, we will write to all noble Lords to clarify.

[Baroness Sherlock]

Would the Minister be kind enough to write in any case, clarifying the helpful points that she has made here? They came in bits, so it might be useful to have a note setting them all out together, if that would be okay.

[Baroness Stedman-Scott]

I am happy to make sure that that happens.

[Lord McKenzie of Luton]

I beg leave to withdraw the amendment.

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[Lord McKenzie of Luton]

The noble Lord, Lord Sharkey, has made a powerful case on these provisions and we look to support him. There must at least be a strong reason to say why they cannot be pared down and need to be as wide as they are. If there is an argument for them, at least they should be pared down. In so far as whether this is doable—the noble Lord said he is not sure what the answer is—in some of these areas, I am not sure that we know what the question is, which is deeply worrying. These things need to be sorted out because, as they stand, they are going to undermine a scheme that generally has a lot of support, particularly our support, in principle. I would like to get it back on track, so that we can deal with it, deliver it and not be waylaid by these very real concerns over delegated powers.

[Baroness Stedman-Scott]

My Lords, I recognise the expressed concerns over the regulation-making powers in Part 1 of the Bill and how they might be used. There has also been comment on the principles underlying the choice of negative or affirmative procedure for some of the regulations. This is why we have shared illustrative draft regulations to help noble Lords understand how we intend to use these powers, but the secondary legislation to be made under the proposed delegated powers can be laid before this House in final form only after Royal Assent, in accordance with the procedures set by Parliament. This House will have the opportunity then to scrutinise the secondary legislation.

There are important legal principles at stake before the proposed delegated powers can be exercised properly. In many instances, the Government will wish or have promised to consult further on the technical substance, particularly in Part 1. There are instances where there may be a statutory requirement to consult because of a connection to existing legislation. There are instances where there may be a need to await the outcome of consultation being undertaken by the regulator or where consultation is needed with professional bodies. Finally, there are instances where proposed delegated powers are sought to enable the Government to react to future developments.

Where there is an intention, promise or legal requirement to consult on the substance of secondary legislation, the legal position is clear that the Government cannot prejudge the outcome. Had the Government purported to draft all the secondary legislation at the same time as drafting the Bill, that would have entailed, inevitably, prejudging the substance without the benefit of any necessary consultation or consideration of the eventual wishes of Parliament. Likewise, it is more appropriate to consult once the Bill is passed, so as not to prejudge the intentions of Parliament.

Those are the points of principle. I will now deal with the point that the provisions intended for future secondary legislation could, nevertheless, be written into the Bill, at the inevitable cost of delaying introduction. This approach is consistent with the approach to previous pension schemes Bills, recent examples being the Pension Schemes Act 2017 and the Pension Schemes Act 2015. As with those Acts, the provisions in the Bill embody the fundamental policy.

Provisions of a more technical nature, or which are by their nature liable to change, are delegated to secondary legislation. This staged approach has two benefits. First, it enables flexibility to ensure that the legal framework remains appropriately tailored to developments in the pensions industry. Secondly, it provides legal certainty more quickly and enables those affected to prepare for changes to the law. This is important for the pensions industry.

I note that comment has been made on the propriety of affirmative procedure on first use only. I take this opportunity to make it clear that the Government do not accept that the practice of specifying an affirmative procedure on first use is licence to use those provisions inappropriately at a future stage. The reason for affirmative on first use then negative is that a decision on when the scheme design is sound will be critical to the effective running of the scheme and to safeguarding members. Therefore, it is important that when first determining these matters the regulations are subject to full debate. Further use of the powers is likely to be limited to adapting matters the regulator will be required to take into account in the light of operational experience, so the negative procedure would be appropriate.

With respect, this House is called to scrutinise the scope of the proposed delegated powers and the parliamentary oversight of those powers. The Government can, of course, give this House assurance as to their future intentions in using these delegated powers. To assist the House, the Government have produced illustrative regulations relating to Part 1. I hope this illustrates both the way delegated powers in that part are intended to be used and the limitations in pre-empting their use.

Clause 18 provides for CDC schemes to be required to have rules for how the current value of CDC scheme members’ benefits must be calculated and adjusted each year and for powers for government to make provision about those rules. It is therefore a very important clause for ensuring that all members of CDC schemes are protected from inappropriate calculation methods, with all benefits calculated equitably, with no differentiation on the basis of age, gender and so forth.

The amendment moved by the noble Lord, Lord Sharkey, would significantly reduce the Government’s ability to ensure that all members of CDC schemes are treated fairly. For example, scheme rules could discriminate against certain members on the basis of age, and the Government would have limited powers to react swiftly to stop this unfairness.

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[Lord Vaux of Harrowden]

I have a question regarding the first-time affirmative point. I think the Minister said that the second use on the negative basis is likely to be limited to the uses that she talked about, but she did not say that it would be used only in those circumstances. Obviously, this could go on beyond the current Government. If she is not prepared to remove the first-time affirmative aspect, would she at least be prepared to consider limiting those secondary usages to the limited situation that she has described?

[Baroness Stedman-Scott]

I thank the noble Lord for that important point, which we will certainly consider.

[Lord Sharkey]

Before I come to the meat of the matter, may I ask what it means to “confer discretion” on a person?

[Baroness Stedman-Scott]

It would be very helpful if the noble Lord would repeat that for my officials.

[Lord Sharkey]

I am delighted to repeat it. What does it mean to “confer discretion” on a person?

[Baroness Stedman-Scott]

As I understand it, it means to delegate powers.

[Lord Sharkey]

If that is what it means, and I am sure it does, then we are giving the absolute, unrestricted authority for delegation of any power to anybody at all. That seems to me to be slightly wider than is normal.

I shall move on. I will have to read tomorrow’s Hansard very carefully to understand exactly what the Minister said, but there were several points that struck me as really quite controversial. One of those is about Clause 51. The Minister said, and she is obviously entirely correct, that you cannot set up a multi-employer CDC scheme by regulation if you remove Clause 51. Yes, that was the point of my amendment: it seemed wrong to introduce multi-employer CDC schemes by regulation. That is also exactly what the DPRRC said. It is wrong, or inappropriate, to do it that way: that was the whole point of my amendment. I do not think it is a substantive response to that to say, “Well, if we accept it, we cannot do it.” That was the point of the amendment.

I thought I also heard the Minister say that one of my amendments—I cannot now remember which—would adversely affect the ability to reduce intergenerational fairness because it would remove a delegated power. I am not at all certain, having thought about it, that it would have that effect, but in any case we have already heard very strong arguments for intergenerational fairness mechanisms being in the Bill. I did not hear in the Minister’s reply a lengthy argument against the view of the DPRRC that the powers in Clause 47 are inappropriate. I understand their absence is inconvenient, but it does not address the central argument put forward by the DPRRC that it is inappropriate to create these new schemes entirely by regulation.

To make a general comment about the framework Bill, a lot of what is going on seems to be effectively cutting Parliament out of meaningful participation in critical aspects of scheme design. I understand that there is a need for a strong element of a framework Bill when you are dealing with these kinds of pensions, but it seems wrong to deploy them so widely that Parliament itself is effectively cut out of the process. Parliament is cut out. No matter how many times we mention secondary legislation in this debate, it is clearly the case that we cannot amend and do not reject secondary legislation. It is difficult to see exactly what our participation in secondary legislation would amount to. Having said all that, I beg leave to withdraw the amendment.

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[Lord McKenzie of Luton]

My Lords, we should thank the noble Lord, Lord Young, for bringing this amendment which, as he said, mirrors other aspects of pensions legislation. I was unclear whether this sits alongside the pause and triggering events or would supersede it. I hope the former, as it would be the quickest and easiest way to deal with it. Intrinsic to the wording are challenges that have been met in other pension environments about how to deal with or define “advice”, “adequate” and all that, but it is not beyond the wit of noble Lords to cover that off.

[Baroness Stedman-Scott]

My Lords, this amendment would mean that a member of a CDC scheme would be unable to transfer their share of the collective assets to another pension scheme, with a view to acquiring flexible benefits or accessing them flexibly under the pension freedoms where this was permitted by scheme rules, unless they had taken regulated advice. I welcome the interest of the noble Lord, Lord Young, and that of my noble friend Lady Altmann, in this area and agree that taking advice can play an important part in helping to ensure pension scheme savers make informed decisions about their pension savings. This includes whether to access them flexibly under pension freedoms or transfer their savings to another pension scheme, with a view to acquiring flexible benefits.

This is why we introduced the advice requirement under the Pension Schemes Act 2015 for members with safeguarded benefits. These are benefits, for example defined benefits, that contain a promise about the rate or amount of pension income that the member will receive in retirement. The advice requirement ensures that members with safeguarded benefits worth more than £30,000 must take regulated advice before they can flexibly access their benefits under the pension freedoms or transfer their pension savings to another pension scheme, with a view to acquiring flexible benefits.

Pensions transfer advice is highly specialised, involving a full assessment of a member’s financial circumstances and a personal recommendation. This helps the member to understand the potential implications of surrendering benefits, where the amount of pension that the person will receive under the scheme is guaranteed by the employer. Pensions transfer advice can be offered only by advisers whose firms have the relevant permissions set out by the Financial Conduct Authority, along with professional indemnity insurance. This comes at a premium, because it is restricted to those prepared to take on the business, and can be expensive. By setting a financial level at which the requirement is triggered in relation to safeguarded benefits, we have sought to ensure that it is applied proportionately. It may not be cost effective for members with smaller amounts of pensions savings to take and pay for such advice.

It is also worth noting that collective money purchase benefits, as a subset of money purchase benefits, are “flexible benefits” for the purposes of the provisions of the Pension Schemes Act 2015. As such, a CDC scheme could decide to allow members to access their share of the collective assets flexibly under the pension freedoms. Before such an option is offered in the scheme’s rules, we intend for trustees to consider fully the potential impact this might have on other scheme members and on the ongoing viability and sustainability of the scheme. For example, if significant numbers of members crystallise all or some of their benefits shortly before retirement, this might impact the scheme’s viability. As part of the authorisation regime, the Pensions Regulator must be satisfied that a scheme’s design is sound, and that such impacts have been considered and appropriately planned for, so that the scheme design meets the authorisation requirements.

We envisage that regulations in support of the scheme design criterion will require evidence that there has been appropriate consideration of risks relating to pension flexibilities, and that action has been taken to mitigate such risks. The ongoing requirement for review of the scheme’s viability report should ensure the scheme monitors any impacts arising from pension flexibilities. These are complex matters; accordingly, we will need to consult thoroughly on what the regulations might require in this respect.

CDC provision is new and the nature of CDC benefits is very different from defined benefits, to which the existing advice requirement relates. As I have explained, pension transfer advice is highly specialised. As CDC schemes are new and only one employer has so far committed to establishing such a scheme, it will likely take time—until more CDC schemes are in place—before advisers consider entering this new market. It will also take time for advisers to develop the necessary expertise to offer appropriate and effective transfer advice to members of CDC schemes. We would need to work closely with the Financial Conduct Authority, which will regulate these potential advisers, to determine what effective or quality advice might look like.

As I have said, CDC is a new provision. Even if we were to set a level—for example, £30,000—at which a requirement could apply, it may take time for members’ funds to grow to this level. I can assure the Committee that my officials will monitor this situation as these new CDC schemes bed in. Once it is clearer that an advice requirement for CDC schemes is warranted, for example because members’ funds have grown significantly, we will still need to work out what the appropriate financial level is for triggering the advice requirement in CDC schemes and how that requirement would work best in practice. At that time, we will engage with the industry and stakeholders to work out these details, and we will then consult on the proposal that has been developed. Subject to the outcome of that consultation, we will seek to legislate to implement the requirements.

In the meantime, we will require CDC schemes to provide their members with appropriate information to help them to understand how their scheme works. For example, we would want the communication that the trustees send to a member who has applied for a transfer to contain the estimated value of their share of the collective assets and to outline the potential implications of transferring out of the CDC scheme before normal retirement age. Member communications at joining and near retirement will also signpost CDC scheme members to the guidance that is available from the Money and Pensions Service. The Money and Pensions Service is responsible for providing guidance to people with pensions, and that will include members of CDC schemes.

I hope my explanations have reassured noble Lords that until a CDC advice requirement is needed, members with collective money purchase benefits will still have access to information and guidance to help them to make informed choices. For the reasons that I have set out, I urge my noble friend to withdraw his amendment.

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[Baroness Bowles of Berkhamsted]

There is nothing that needs to be added; it has already been said. I just want it to be noted that I, too, support the principle behind the amendment.

[Baroness Stedman-Scott]

I thank noble Lords for raising these amendments that relate to events which can occur in an authorised CDC scheme and which must be notified to the Pensions Regulator. The amendment in the names of the noble Lords, Lord Hutton and Lord McKenzie, would require the trustees of an authorised CDC scheme to notify the regulator where a person assumed a role that was subject to the fit and proper persons assessment. This notification would be required within two weeks of the change. The regulator would be required to assess whether the new person met the fit and proper persons requirement. Where it was not satisfied, the amendment would require it to consider withdrawing authorisation from the scheme.

The fit and proper persons requirement is set out in Clause 11 and is one of the authorisation criteria. The aim is to ensure that only suitable people are involved with a CDC scheme in order to protect the interests of members. It is also worth noting that the Bill already includes a power in Clause 30 for the regulator to withdraw a scheme’s authorisation if it is not satisfied that the authorisation criteria are met. The regulator will need to be satisfied that this is the case on an ongoing basis, including that the fit and proper persons requirement continues to be met. Some events would still warrant consideration by the Pensions Regulator because they could affect the ability of an authorised CDC scheme to continue to meet the authorisation criteria.

Clause 28 covers such “significant events”, which must be notified

“as soon as reasonably practicable”

to the Pensions Regulator. The draft illustrative regulations that we shared with noble Lords, and which have been placed in the House Library, provide an indicative list of potential significant events. Noble Lords may be reassured to know that the event in their amendment is contained in the illustrative regulations. We will work with the Pensions Regulator and others to develop the CDC significant events; we will also consult on the draft regulations in due course.

Amendment 11, tabled by the noble Lord, Lord Sharkey, would mean that the decision of any employer or relevant former employer

“to withdraw from the scheme”

would automatically be considered a triggering event. It may be helpful to point out that the triggering events listed in Clause 31 are already intended to capture withdrawal events that pose a significant risk to the future of a CDC scheme. For example, the withdrawal by the employer from a single employer-established CDC scheme or the largest employer in a connected employer scheme may trigger the winding up of a scheme. The withdrawal may also have arisen as a result of employer insolvency. In this scenario, it is clear that such a decision could risk destabilising the scheme. As such, it should be treated as a triggering event and be subject to greater scrutiny and oversight by the Pensions Regulator to ensure that the trustees are taking all necessary steps to address the issue and protect members.

Not every withdrawal of an employer, however, may pose such a significant threat to the scheme. For example, the impact of a small connected employer deciding to withdraw from a CDC scheme may be minimal on the viability and sustainability of the scheme; it may not warrant a decision to wind up the scheme as a whole. Such an event would be more appropriately dealt with as a significant event. We intend that such events should still be reflected in the continuity strategy, so that the regulator is aware that this risk has been considered and planned for.

We propose that regulations would provide for such events to be a significant event, which would need to be notified to the regulator. Such a notification will allow the regulator to engage with the trustees to ascertain the impact on the scheme’s viability and continuity, and whether this should lead to a formal triggering event or other regulatory action. This approach allows the regulator to retain appropriate oversight of withdrawal decisions and resulting actions, while providing some flexibility and proportionality in approach where the withdrawal of the employer is not expected to impact significantly on the scheme. I am also pleased to advise the Committee that the regulator will engage with the scheme to look at the options before withdrawing authorisation. For the reasons I have set out, I urge the noble Lord to withdraw his amendment.

[Lord Sharkey]

I thank the Minister for her comprehensive explanation of why it may not be necessary to add what I proposed. However, I am uncertain on one thing about triggering events. It concerns the fifth of the triggering events which we have been talking about. I could not find anywhere in the Bill what the trustees must do in the event of an Item 5 triggering event apart from notifying the Pensions Regulator that such an event had occurred. I acknowledge that I may have simply missed it but I would be grateful if the Minister could say what the trustees are supposed to do after an Item 5 triggering event. What actually gets triggered?

[Baroness Stedman-Scott]

I thank the noble Lord for his question. I am advised that we will write to him with the answer.

[Lord Hutton of Furness]

My Lords, I am grateful to the Minister for her response but something is still not clear to me. She says that there is a continuing power on the Pensions Regulator’s part to vet all appointments that fall under Clause 9. I cannot find that continuing authority; I do not know where it is in the Bill. If she could, at some future point, alert me to what provision of the Bill covers that ongoing authority on the regulator’s part to make appointments, I would be grateful.

The second interesting point is that the Minister referred to Clause 28 as if it had some relevance to the point covered by my amendment. There is no definition of “significant event” in the Bill; it will be set out in future regulations. My concern may well be addressed if the Minister were to confirm that any new appointments of trustees or other persons listed in Clause 9 falls within the definition of “significant events”.

I know that my final point goes beyond my amendments; I hope that I am allowed to make it. On the assumption that the Bill becomes law—I very much hope that it does—it is striking that we have a specific set of provisions for how trustees for these collective money purchase schemes are to be appointed; they must be fit and proper persons, for example. But if one looks at the appointment process for other pension schemes, such as defined contribution and defined benefit schemes, there is no parallel provision. Under the Pensions Act 2004, those trustees must have some knowledge of pensions law and of their own scheme, but there is no equivalent provision for the appointment of trustees to other pension schemes. I wonder whether it is justifiable to have this particular provision relating just to these new pension schemes—perhaps it is—but not to have a parallel provision for other trustee and significant appointments to DB and DC schemes.

My only request to the Minister at this point—we may come back to it—is that this may be an appropriate time for us to take a wider look at overall pension scheme governance. In my view, there is nothing more important to the health and well-being of a pension scheme than the quality of the governance in place to oversee it. If it is appropriate for trustee and other appointments to these new pension schemes, of which I am very supportive, to be subject to this process, there is a convincing case, too, for an equivalent provision for defined contribution and defined benefit schemes.

[Lord Flight]

The noble Lord is absolutely right. It is extraordinary that one group has a lot of requirements when another has none. Historically—let us say 30 years ago—trustees of pension schemes were often not remunerated. Someone applying to be a CDC trustee today would not think of taking on the responsibilities unless they were remunerated.

[Baroness Stedman-Scott]

On the first point made by the noble Lord, Lord Hutton, we will write to clarify things. We have not listed “significant events” in the Bill because if members are to be protected, it is important that such events can be adapted to emerging threats as well as lessons learned through live running. We want to ensure that these events are appropriate and reflect the specific risks that may be posed by CDC schemes. We will consult with the regulator and others before laying any regulations before Parliament. We will consider the noble Lord’s final point—it was well made—about pension scheme guidance in terms of the new CDC scheme and existing schemes and come back to him on it.

[Lord Hutton of Furness]

I beg leave to withdraw the amendment.

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[Baroness Sherlock]

My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle, for raising this issue and for starting so gently with us—we look forward to seeing where she will take us in future. We do not get much excitement on pensions Bills, so we are looking forward to her giving us some.

I am glad that the noble Baroness raised diversity, because it is something that we are certainly concerned about, as most people interested in pensions should be. She is not alone in raising these concerns; the Pensions Regulator raised them, too. It published a consultation document last year on the future of trusteeship and governance, in which it made a strong case for the need to improve diversity in pension boards. It made many of the points that the noble Baroness raised about the size of the gender pensions gap, but it also flagged up the gap that those who are disabled or from a black, Asian and minority ethnic background have poorer pension outcomes than other workers.

A lack of diversity on pension scheme boards has long been acknowledged as a problem. The 2016 PLSA annual survey found that, on average, schemes had more than 83% male trustees, with one-quarter of trustee boards being all-male. We are not talking about these things not being entirely balanced. If in this day and age a quarter of trustee boards are all-male, something needs addressing.

The idea behind the noble Baroness’s Amendment 12 is that schemes should report on the action that they are taking to address diversity. It does not even mandate an outcome; it asks simply, “What are you doing about it?” In fact, TPR put that option in its consultation document. It said in response to the consultation that opinion was divided, pretty much down the middle, with half the people thinking that this was a good idea and the other half thinking that it was a bad idea. Therefore, it decided not to do it.

Obviously, I could make an alternative argument based on those same facts, but I just want to ask the Minister: if not this, then what and when? The back-up position from TPR was that it was going to have an industry working group to look at improving the diversity of scheme boards. Will that go ahead? If so, has it launched or when will it launch? Crucially, how will we know whether it works? What would success look like? If we are not going to ask people even to report on the actions they are taking, we would want to know that the alternative will make a difference. If TPR and the noble Baroness, Lady Bennett, are of one mind in saying not only that the lack of diversity is a problem but that more diverse boards make better decisions—and they are making decisions about diverse scheme membership—this is an issue on which the Government have to take some kind of action. So if not this, then what?

[Baroness Stedman-Scott]

My Lords, the two amendments tabled by the noble Baroness, Lady Bennett, to Clauses 46 and 119, both relate to issues of diversity and protected characteristics.

I will speak first to Amendment 12. I note that the aim of Clause 46, which contains requirements relating to the publication of information concerning CDC schemes, is to drive transparency about how they operate. The noble Baroness’s amendment would require CDC schemes to provide diversity information to the Pensions Regulator on what actions the scheme has taken to ensure diversity with regard to age, gender and ethnicity in its trustee recruitment. As we heard from the contributions, particularly that of the noble Baroness, Lady Sherlock, there is work to be done on this.

We recognise the importance of diversity in trustee boards, not just for CDC schemes, but across all trust-based schemes. Indeed, the Pensions Regulator has recently published its response on the future of trusteeship consultation, which considered specifically whether there should be a requirement for pension schemes to report to the regulator what actions they are taking to ensure diversity on their board of trustees.

The response to the consultation advised that there was a lack of consensus on this issue, as has been referred to, with some respondents in favour of it and others suggesting that there were initiatives already in place or that such a reporting regime would place an unnecessary additional burden on schemes. The noble Baroness, Lady Sherlock, asked, “If not this, then what?” I can tell her only that the regulator concluded that

“it would be beneficial to create an industry working group”

to further investigate raising the profile of this important issue, with a view to developing additional guidance and supporting material to help improve the diversity of trustee boards. So, I think that will happen. As I am sure noble Lords will appreciate, I would not want to pre-empt this significant work, but we will keep it under review and consider it further as it progresses.

The Government’s focus on the trustee landscape, including for CDCs, is to ensure that trustees meet standards of honesty, integrity and knowledge appropriate to their role. I think that employers and members participating in these schemes would reasonably expect that to be the case.

Together with Clause 9, Clause 11 means that the Pensions Regulator must be satisfied that the persons involved in the CDC scheme are fit and proper persons to act in relation to it. If the regulator is not satisfied, authorisation of a CDC scheme cannot be granted. We recognise that if we want to engender confidence in CDC, and ensure that the interests of members are protected, it is vital that the schemes be managed by appropriate individuals.

On Amendment 15, relating to pensions dashboards, again the Government recognise the importance of diversity on trustee boards. However, we have had to consider what information to prioritise as being required from day one. As we set out in the Government’s response to the consultation on pensions dashboards, the intention is to start with the provision of basic pensions information. This initial information is intended to help consumers plan for their retirement, in line with our primary policy objectives.

The success of dashboards is predicated on there being a good level of coverage across pension schemes. Achieving good coverage is a complex task. There are over 40,000 pension schemes, with data varying in quality and stored to different standards. The Government expect that it will take three to four years for there to be adequate coverage, with pension schemes initially providing simple levels of information. Increasing the amount and complexity of information required from pension schemes in the early stages may significantly delay delivery. The development of dashboards will be iterative, and we will continue to consider what information is placed on them following their initial delivery to the public.

TPR has not launched the working group yet, and its timescale is not confirmed, but we will monitor the situation. For the reasons that I have given, I hope that the noble Baroness will withdraw her amendment, but I am sure that she will never let up on her campaign.

[Baroness Bennett of Manor Castle]

I thank the Minister for her response. She referred to the fit and proper persons test. I am not a legal expert, but my understanding is that the test looks at people as individuals, with the Pensions Regulator being asked to judge them as such. So far as I can see, there is no requirement on the Pensions Regulator to look at the group and ask, “Is this group appropriate to represent this body?”

On the Minister’s point about an industry working group, these can be a very good thing; however, they can also be an alternative to action. This subject has been widely researched and there is a great deal of knowledge about it, so I am not sure why we need a working group rather than action.

The Minister referred to putting high-priority information on the dashboard. I strongly suggest that what I have proposed should be high-priority information when pension participants are making decisions. However, for the moment, I beg leave to withdraw the amendment.

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[Lord McKenzie of Luton]

My Lords, I agree entirely with what has been said about the need to communicate and the basis on which to do so. I simply raise that, in 2018, we had extensive discussions on the Financial Guidance and Claims Bill, as it then was. A key point was the lack of full understanding of financial matters of the general public. I have forgotten the statistics, but there was a House of Lords review of financial inclusion, and its conclusions were stark. This is not a reason not to communicate; it is a reason to communicate even more intensively. In how we communicate, we need an understanding of how people might receive these messages and we should not assume they can operate in an environment like this—as many, we know, cannot.

[Baroness Stedman-Scott]

My Lords, I agree that, for CDC schemes to be a success, a high degree of transparency and effective communications are key. If we want to foster member trust in this new provision in the UK, the full scope of risk and benefits of collective schemes must be clearly communicated to members and others, particularly highlighting the nature of benefits, their potential fluctuations and that they are targeted. I mentioned this at Second Reading.

I have already shared with noble Lords a draft illustrative statutory instrument. Paragraph 32 gives examples of the documents and information we plan to require CDC schemes to publish. This includes documents that relate to target benefits, including the actuarial valuation and a statement informing members and prospective members that benefits may be adjusted based on the actuarial valuation and are not guaranteed. We will also require CDC schemes to publish their scheme rules, which will include details of benefit design.

In addition to those regulations under Clause 46, the existing disclosure requirements under Section 113 of the Pension Schemes Act 1993 that currently apply to money purchase occupational pension schemes will apply to CDC schemes, as they are a subset of money purchase benefits. This covers targeted individual member information, and we intend to amend the existing disclosure regulations under Section 113 of that Act to ensure that, for CDC schemes, such information includes key risk messages about benefit fluctuation; for instance, providing full details regarding the possibility of benefit fluctuation at the point of joining in scheme information; emphasising that benefits can change in the member’s annual benefit statement for active and deferred members; being clear that benefits can change during retirement in retirement information packs; and notifying members in advance of any change to their rate of benefit during retirement.

I appreciate the intention behind the noble Lord’s suggestion but, if this amendment stands, all documents and information published would need to include a risk warning message, which would not be relevant in all circumstances; for example, in the scheme’s statement of investment principles. I suspect this would also not meet the noble Lord’s intention that such messages be included in other important communications also made under existing powers. I believe that the best way to approach these concerns is to set out the required information in regulations, as I have indicated, as this would allow the Government to work with the pensions industry to ensure that relevant targeted messages are developed for each relevant document or piece of information.

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Moved by

[Baroness Stedman-Scott]

15: Schedule 3, page 131, line 18, at end insert—
“22_ The Pensions Act 2014 is amended as follows. 23_ In section 54(2) (regulations subject to affirmative procedure), omit the “or” after paragraph (e) and at the end of paragraph (f) insert “, or(g) the first regulations under paragraph 1 or 3 of that Schedule that make provision in relation to collective money purchase schemes within the meaning of Part 1 of the Pension Schemes Act 2020 (see section 1 of that Act).”24_(1) Schedule 18 (power to restrict charges or impose requirements in relation to schemes) is amended as follows.(2) In paragraph 1(1) (power to restrict charges), in each of paragraphs (a) and (b), for “a member” substitute “members”.(3) In paragraph 4 (interpretation), after sub-paragraph (2) insert—“(3) Where a pension scheme is divided into sections, each section that is a collective money purchase scheme for the purposes of Part 1 of the Pension Schemes Act 2020 (see section 1(2)(b) of that Act) is to be treated for the purposes of this Schedule as a separate scheme.””Member’s explanatory statement
This amendment ensures that regulations under Schedule 18 to the Pensions Act 2014 may be made in relation to collective money purchase schemes. The first such regulations will be subject to the affirmative procedure. The power to make regulations in relation to other types of scheme is unaffected.

[Baroness Stedman-Scott]

My Lords, we are committed to protecting members of workplace pension schemes from unfair charges. This is why we introduced a 0.75% cap on charges in the default funds of money purchase schemes used for automatic enrolment. This cap, which received cross-party support, has proved successful, with average charges in schemes used for automatic enrolment reducing by a significant margin. We want to ensure that members of collective money purchase schemes in Great Britain and Northern Ireland can be similarly protected, which is why we are tabling these amendments.

Our response to the consultation on delivering CDC schemes confirmed our intention to implement an annual CDC charge cap set at 0.75% of the value of the whole CDC fund, or an equivalent combination charge. The response also confirmed our intention that the scope of the CDC cap will be the same as the existing charge cap. Unlike the existing charge cap, which applies at member level, our intention is that the CDC charge cap will apply across the whole of the fund. This reflects the collective nature of these schemes and means that the CDC charge cap will apply to all members in the collective money purchase scheme, including pensioner members. Again, this reflects the collective nature of the schemes and the fact that the same fund will provide members with a variable pension income in retirement. We want to ensure that members of CDC schemes also benefit from other existing charge control measures, such as the member-borne commission ban and the early exit charge cap.

I will speak first to Amendment 15, which will amend the Pensions Act 2014 to ensure that the powers in that Act, under which we are able to provide for a charge cap and other charge control measures, can also be used in the case of collective money purchase schemes in Great Britain. We are amending paragraph 1 of Schedule 18 to that Act, which provides a power to prohibit by regulations certain charges in relevant schemes. This is to make clear that regulations under this power can also be made in relation to collective money purchase schemes. As with the existing default fund charge cap for DC schemes, it is appropriate to use regulations to define the details of the cap and how it will apply. We will of course engage with the regulator and stakeholders in developing these details and will then consult on the draft regulations. We aim to align the application of the CDC charge cap with that of the existing charge as far as possible.

It is entirely appropriate that members of collective money purchase schemes benefit from similar charge control protections that apply to members of individual money purchase schemes. This amendment makes clear that regulations made under the powers in Schedule 18 to the Pensions Act 2014 can provide for controls on the charges borne by members in collective money purchase schemes. The amendment to paragraph 1 of Schedule 18 to the Pensions Act 2014 means that where a scheme which provides CDC benefits has more than one section, each section offering CDC benefits will be treated as a separate scheme for the purposes of the charge cap provisions. This is consistent with other provisions about how sections of schemes offering CDC benefits are to be treated and ensures that sections offering CDC benefits do not cross-subsidise other sections of the scheme.

The amendment to Section 54 of the Pensions Act 2014 means that the first regulations under paragraphs 1 or 3 of Schedule 18 made in relation to CDC schemes will be made by the affirmative resolution procedure. Section 54 already provides for the first regulations under these paragraphs to be made by the affirmative procedure, but regulations have already been made under these paragraphs. We wish to ensure that the first regulations made in relation to charge caps for CDC schemes have the same level of parliamentary scrutiny as those regulations did. Turning briefly to Amendment 16, this makes corresponding changes to Northern Ireland legislation to provide for a charge cap for CDC schemes in Northern Ireland. This will ensure parity of member protection for members of CDC schemes across the UK. I beg to move.

[Baroness Bowles of Berkhamsted]

My Lords, I have no objection to making things the same everywhere, but last time I came across this 0.75% cap I did not ask a question, so I will now. What exactly does it cover? Compared to some SIPP investor platforms and so forth, it seems rather high. Does it cover all the trading charges as well? You can get 0.15% from Vanguard, 0.25% from AJ Bell and up to 0.45% with all your trading charges covered from Hargreaves Lansdown. I could go on. If you go to some of the insurance companies —I will go on—they tend to be greedier, up to 0.3%, but that is far short of 0.75%, so what is this paying for?

[Baroness Altmann]

I shall raise similar points. Will ask my noble friend say how the 0.75% charge cap was arrived at, given that the purpose of the CDC scheme, as I understood it, is to provide members better value than if they had their own defined contribution fund and to benefit from the economies of scale of collective management and administration, which clearly should be much lower per member than an individual defined contribution scheme?

Another point my noble friend mentioned is that that there should be no exit penalty. If that were the case, the issue we were discussing earlier about potentially reducing or applying a risk margin to transfer values would become impossible. Intergenerational fairness, which we were concerned about in our earlier discussions in Committee, may be undermined if there is an express prohibition on what may be called an exit penalty, but which to others is a risk margin or buffer against future market dislocations or changed assumptions.

[Baroness Stedman-Scott]

The noble Baroness, Lady Bowles, asked what the cap covers. This is defined in the regulations, and we will send details to all Members of the Committee. We will consult on 0.75% and the final level of the cap, as part of the regulations, so there will be more opportunity for noble Lords to influence that. The noble Baroness, Lady Altmann, raised the exit penalty. I will have to write to her on that.

Amendment 15 agreed.

--- Later in debate ---

Moved by

[Baroness Stedman-Scott]

16: Schedule 6, page 139, line 22, at end insert—
“22_ The Pensions Act (Northern Ireland) 2015 (c. 5 (N.I.)) is amended as follows.23_ In section 51(4) (regulations subject to confirmatory procedure), omit the “or” after paragraph (e) and at the end of paragraph (f) insert “, or(g) the first regulations under paragraph 1 or 3 of that Schedule that make provision in relation to collective money purchase schemes within the meaning of Part 2 of the Pension Schemes Act 2020 (see section 52 of that Act).”24_(1) Schedule 18 (power to restrict charges or impose requirements in relation to schemes) is amended as follows.(2) In paragraph 1(1) (power to restrict charges), in each of paragraphs (a) and (b), for “a member” substitute “members”.(3) In paragraph 4 (interpretation), after sub-paragraph (2) insert—“(3) Where a pension scheme is divided into sections, each section that is a collective money purchase scheme for the purposes of Part 2 of the Pension Schemes Act 2020 (see section 52(2)(b) of that Act) is to be treated for the purposes of this Schedule as a separate scheme.””Member’s explanatory statement
This amendment ensures that regulations under Schedule 18 to the Pensions Act (Northern Ireland) 2015 may be made in relation to collective money purchase schemes. The first such regulations will be subject to the confirmatory procedure. The power to make regulations in relation to other types of scheme is unaffected.

Bereavement Services

Baroness Stedman-Scott Excerpts

Thursday 13th February 2020 Lords Chamber

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

My Lords, I know that this issue is very close to the noble Baroness’s heart, and I am pleased to have been able to meet with her to discuss it. It is absolutely right that we provide people with easily accessible support to help them through the difficult period following bereavement. The Tell Us Once service was introduced to develop effective partnerships and deliver linked services across local and central government. Noble Lords will be pleased and interested to hear that a survey showed that 98% of people who used the service were willing to recommend it to others, and that 98%, again, had an overall good experience.

[Baroness Ludford (LD)]

I thank the Minister for that reply and for kindly meeting me beforehand, but I do press for real action. People who have lost loved ones—who are emotionally low and needing good, compassionate support—are too often faced with inefficient and slow services, increasing their stress at a time when many are prone to depression, as the charity Sue Ryder reports. The charities Cruse and Macmillan include in their reproaches financial firms with their disparate documentary demands, utilities firms and, I am afraid, the DWP. HMRC makes you fill out an inheritance tax form even when there is no such tax to pay. Should there not be one department or Minister to take responsibility, get a grip on all this, work with the campaigners I have cited, insist on slimming down and streamlining “bereavement bureaucracy” and deliver a much better deal for grieving people?

[Baroness Stedman-Scott]

I fully appreciate the impact of a bereavement on individuals; I am sure that all noble Lords have had that at some point in their lives. We have talked about the Tell Us Once service. The noble Baroness—I am saying this respectfully—in true spirit raises a challenge. It is not one that we should dismiss, although people are saying that it cannot be done. I talked to Cruse yesterday after our meeting. It has a campaign called Bereaved Customers First, and it is trying to get banks, building societies, utility companies and other organisations to collaborate and to have what my pension friends would call a dashboard. I would like to speak to Cruse further. I urge the noble Baroness to carry on with this thinking. If it would help, I would be very happy to meet with her to take that forward.

[Baroness Sherlock (Lab)]

My Lords, in the Pensions Act 2014 the Government rather controversially reformed bereavement payments to families who had lost a parent. However, last Friday they lost a case in the High Court in which the court ruled against them, saying that the policy was in conflict with the Human Rights Act because it did not extend bereavement support payments to fathers who had been living with the mother of their children for many years but were not married. I am interested in what the Government are going to do about this. They lost an equivalent case on the old system, Widowed Parent’s Allowance, 18 months ago and we have been waiting for a response to that court case ever since. Yesterday at PMQs, the Prime Minister had this case raised with him. He described the latest case as an injustice and said that

“we will do all we can to remedy it.”—[Official Report, Commons, 12/02/20; col. 852.]

When are we going to get a review both of the new bereavement support arrangements and, crucially, of the position of cohabiting couples?

[Baroness Stedman-Scott]

I am not one to contradict the Prime Minister, and I am not going to try to do that. [Laughter.] I was really trying hard not to make fun of today, given the subject matter, but noble Lords are spot on. We have the judgment on the Jackson case, and officials are considering it. The Prime Minister has said more than I have been allowed to, so let us just let what he has said stand. The McLaughlin case that the noble Baroness has referred to is a bit more complicated—this is not an excuse—and our officials are working with Northern Ireland officials to see what can be done.

[The Lord Bishop of Winchester]

My Lords, the number of pauper public health funerals has risen by 70% since 2015. Churches perform half of all funerals in the United Kingdom and offer ongoing bereavement support to all. Recognising that other faiths also offer bereavement support, will the Government commit to encouraging local public health departments to work with faith communities to improve bereavement support and ensure that every person receives adequate funeral provision that includes care for the bereaved, who are often excluded?

[Baroness Stedman-Scott]

We must pay tribute to the Church of England and faith organisations, which come into their own in these very difficult times and provide invaluable support. I will take the right reverend Prelate’s request to officials and write to him with a response.

[Baroness McIntosh of Pickering (Con)]

My Lords, will the Minister use her good offices to ensure that the public are more aware of the bereavement support payment, which I do not think is widely understood at present?

[Baroness Stedman-Scott]

Again, it is important that people understand the support that is available to them. I will go back to the policy officials and see if we cannot do something a little more robust to up the ante on the campaign.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, I congratulate the Minister on doing exactly what a Lords Minister should: listening to what Members of this House say and then taking it back to her department and asking it to consider that. Could she give some advice to those sitting around her?

[Baroness Stedman-Scott]

I learned everything that I do at this Dispatch Box from these colleagues.

[Baroness Janke (LD)]

My Lords, the noble Baroness mentioned the charity Cruse Bereavement Care. Is she aware that in October 2019, Cruse commissioned research from YouGov about people’s experiences on being bereaved? Some 44% described their experiences as time-consuming, 39% stressful, 30% upsetting, 24% complicated and 16% traumatic. In the light of this and the experience of my noble friend Lady Ludford, will the Minister commit to taking a lead on addressing the needs of bereaved people? Will she provide some form of practical support for Cruse, a charity with very limited resources, in its campaign to treat bereaved customers first?

[Baroness Stedman-Scott]

I thank the noble Baroness for reminding us of those statistics, which should give us cause for concern. I have already pledged to go with the noble Baroness, Lady Ludford, to talk to Cruse; we will take up the points that the noble Baroness raised.

Disability Employment Gap

Baroness Stedman-Scott Excerpts

Wednesday 12th February 2020 Lords Chamber

[Lord Touhig (Lab)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a vice-president of the National Autistic Society.

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

My Lords, the employment rate for disabled people stands at 53.2%, having increased by 9.8 percentage points over the past six years. The employment rate gap between disabled and non-disabled people has fallen by 5.6 percentage points over the same period.

[Lord Touhig]

I welcome, as I am sure the whole House does, the improvement the Minister just told us about, but there has been no increase whatever in the number of autistic people in work—for the last 10 years. Just 16 in every 100 people who are autistic are in full-time employment. Addressing the lack of understanding about autism across business and industry is key to trying to solve this problem. Will the Government establish an information hub, providing employers with support and information to improve recruitment of autistic people? Could I tempt her to be even more daring and perhaps consider creating an autism accreditation scheme so that participating companies get full recognition for the efforts they put in?

[Baroness Stedman-Scott]

The noble Lord makes very accurate and real points. I spoke to the National Autistic Society this morning. Some 16% of autistic adults are in work and 32% of them are in some kind of paid work, but the real statistic is that 77% of unemployed autistic adults want to work. The noble Lord rightly pointed out that we must get to that figure. The disability hub is a great idea. I will go back to the department with yet another idea—their eyes roll now when I walk in, but I will do it. I will not be put off by that. I can confirm that the Government are also working with the Supported Business Alliance and the British Association for Supported Employment to help them develop a new quality mark for supportive businesses and develop a long-term element of access to work to continue the support. However, there is no doubt that we have a lot more to do and I will take both those ideas back to the department.

[Baroness Thomas of Winchester (LD)]

My Lords, we do not have any flesh on the bones of the national disability strategy yet. There are many issues involved in closing the disability employment gap: suitable housing, adequate care and better education opportunities, to name but a few. Will the Minister consider hosting a round table with Members of this House who have expertise in this subject, so that we have as much consensus as possible going forward?

[Baroness Stedman-Scott]

How can I say no to the noble Baroness? That is another great idea. It fits very well with the national disability strategy, which will, I am pleased to say, be developed with disabled people and disability charities and organisations, and will cover the areas outlined by the noble Baroness—housing, education, transport and jobs—so that people can improve their lives. I will be delighted to go back to the department, not to suggest a round table but to say that we are having one.

[Lord Shinkwin (Con)]

My Lords, can I add another idea to my noble friend the Minister’s list? It is testament to the influence of your Lordships’ House that only last week I introduced a Bill on exactly this issue, which already has the backing of major corporates such as EY and Enterprise Holdings. They know that there must be a level playing field for rewarding and incentivising best practice. Will the Minister take this idea back not just to her department but to the Government as a whole, for incorporation in the forthcoming employment Bill, so that the mandatory gender pay gap reporting duty is extended to other protected characteristics, including disability?

[Baroness Stedman-Scott]

I am going to start singing “I’ve Got a Little List” in a minute. I congratulate the noble Lord on his tenacity in this area. His work on Able to Excel and his Private Member’s Bill were excellent. In 2018, the Government published a voluntary reporting framework on disability, mental health and well-being in the workplace, aimed at large employers—those with more than 250 employees. In November, we announced the new level 3 of Disability Confident. We must work with businesses to crack that 77% of people who want to work. Employers create jobs; we must work closely with them. My noble friend’s work will help with this. I will arrange for him to come in and do the sell on that one.

[Lord Laming (CB)]

My Lords, in following up the point made by the noble Lord, Lord Touhig, about information for employers, does the Minister agree that often we are not asking for something profound or difficult? It is just tackling basic information about the subject. We could do a great deal with very little effort.

[Baroness Stedman-Scott]

I could not agree more with the noble Lord. I was on a project recently where a young girl with bags of potential who had epilepsy thought she would never get a job because she thought that nobody would risk having her in their establishment. The people running the project found a lady who ran a business and who was epileptic. She said, “You send her down to me.” She is now employed as a legal secretary. That did not take a great deal of effort. The way for us to make headway with those statistics is by remembering that everybody is an individual and by spending time working out a strategy for the individual.

[The Lord Bishop of St Albans]

My Lords, in this important area Britain is proud to be a leader in many ways—in technology, computing and so on—and many of these projects, which are transforming the lives of some people with certain kinds of disabilities, have been run across Europe, so there are worries that some of these projects may not continue. Can the Minister assure the House that priority will be given to helping this world-leading development continue? It is making an impact on people with disabilities not only in our own country but right across the world as the technology is rolled out.

[Baroness Stedman-Scott]

Whether our people have a disability or they are well able, the jobs that we want them to get into will focus on technology in the future. I cannot give a categoric assurance that those projects will continue, but I can give a categoric assurance that we will continue to focus on the tech industry. I will go back and ask another question and, if I survive that, I shall write to the right reverend Prelate and let him know the outcome.

Universal Credit

Baroness Stedman-Scott Excerpts

Tuesday 4th February 2020 Lords Chamber

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

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given to an Urgent Question in another place on the extension to the universal credit implementation date. The Statement is as follows:

“Mr Speaker, the Secretary of State and I informed Parliament yesterday that we have revisited our forecast for universal credit and are extending its completion date to 2024. Our planning for universal credit relies on assumptions about the number of people whose circumstances will change each day, thereby naturally migrating. Our forecasts to date have relied on 50,000 households experiencing a change in circumstances each month. Based on this, we had predicted that the process of natural migration across to universal credit would be completed by December 2023.

However, the information collected on changes to people’s circumstances suggests that natural migration is happening less frequently than we expected. This suggests broad stability in people’s lives and can be attributed to a number of reasons, including the robustness of the labour market. We now estimate that 900,000 fewer households will naturally migrate between now and December 2023 than we had forecast. Given that we expect to manage around 100,000 households to universal credit each month, it necessarily follows that if we are to protect the interests of claimants and move them to universal credit safely, it will take a further nine months to complete the implementation of universal credit.

I can assure colleagues that claimants will not lose money from their universal credit award due to this forecasting change. We will always put the best interests of our claimants first and, as we move into the managed migration phase, protecting the vulnerable will be our utmost concern.”

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for repeating that Answer. Universal credit should have been rolled out by April 2017. It will now be September 2024—seven and a half years late. There have been many delays. After each one, Ministers normally get up and say something like: “We’d rather be right than on time.” At this stage, I would settle for either. We are not very close to either of these happening.

We were told in the Statement and the noble Baroness’s letter that the reason for the delay this time was that fewer people had had a change in their circumstances that meant they moved across to universal credit early rather than waiting for their benefits to be shut down. That was due to good news, like the labour market. Alongside the official Statement, yesterday the BBC—which is filming in DWP for a series on universal credit—filmed the director-general in charge of universal credit, who said this:

“We’ve got a lot of anecdotal evidence of people being scared to come to universal credit.”


This is another way of thinking about the delay.

People are scared, but in the Commons today the Minister blamed the Opposition for scaremongering, which I find disappointing. I am relieved to be in the House where I know the Minister will not try out a line like that. People are scared because universal credit is full of problems. They are especially scared because you wait five weeks for your first payment. You can get an advance, but that is just debt that gets taken off your universal credit week by week. People can only live on it as it is, so they are scared of that as well. I have only one question for the Minister: will the Government please abolish the five-week wait in universal credit once and for all?

[Baroness Stedman-Scott]

My Lords, the five-week wait is a cause for concern for many people; I am not denying that at all. I have been out on visits and spoken to various work coaches and Jobcentre Plus staff, and I am assured that if people come with the right paperwork—I accept that some do not—and need an advance there and then, they will get it. I accept that it has to be paid back. At the moment, many people are raising the five-week wait. I hope all noble Lords believe that we are listening. We are aware of the vulnerability of the client group, but our work coaches are doing a great job. We are listening and hearing.

[Baroness Janke (LD)]

My Lords, I do not know whether Ministers are aware, but Macmillan Cancer Support has observed that the five-week wait is preventing cancer patients taking up their entitlement to universal credit. It is not that they would not have a loan—of course they would—but, as a result of their circumstances, they do not have the savings and resources to pay the money back when they have to. People lose a lot of money when they have cancer. They would like to know what the Government will do to look into the causes of this delay, what they will do to look into the five-week wait, what evidence they will provide us of the need for it, and what analysis has been done on the rollout of the universal credit managed migration period altogether. I would be grateful for her answers.

[Baroness Stedman-Scott]

I accept that people with cancer have enough on their minds without having fiscal worries. If the noble Baroness could give me the details of someone at Macmillan, the best I can do is invite them to the department to have a full and frank discussion about the issues. We will incorporate the remaining questions that she raised. All I can say again and again is that the department is reviewing these matters daily. I know that it cannot come quick enough for people, but we are listening and really researching the points the noble Baroness made, which are valid.

[Viscount Hailsham (Con)]

My noble friend said that those seeking a loan have to bring the appropriate papers. Would my noble friend be good enough to say what those papers are?

[Baroness Stedman-Scott]

I am not able to give my noble friend a list off the top of my head but I am very happy to write to him. If people do not have the paperwork, they are not just sent away to get it—the work coaches actively try to help them to get it.

[Baroness Lister of Burtersett (Lab)]

My Lords, the Minister’s helpful letter to Peers ends by saying that the Government have always said they will proceed with each new phase of universal credit only when it is safe to do so. Civil society organisations working with claimants are clear that it is not safe to proceed further with natural migration because of the recurring problems with it and with universal credit itself, which might explain reports that many people are scared to move to UC. Will the Minister, who I know does listen—I am grateful to her for listening to me this morning—take the message back to the department that it should be using this delay constructively to pause, address these problems and, if necessary, delay further in the best interests of claimants to get it right?

[Baroness Stedman-Scott]

The noble Baroness knows that I will certainly take that point back to the department. However, I would like to share something with noble Lords. I have been making lots of visits and meeting lots of clients, not just work coaches. We know there are issues with resolving universal credit. That is why we are extending the period, because we are not in the business of going full blast ahead with something that will go wrong and make life more difficult for people. However, one of the things that comes up time and again—I promised that I would say this to noble Lords when I got the chance, but I did not realise that I would get it so quickly—is that work coaches are saying to us that, while there are issues, a lot is going right with universal credit. It is making a difference to people’s lives and getting them into work, it is personal and one to one, and it is really doing well, so please can you help by trying to balance the observations made about universal credit? As to a further delay—I never thought I would get that today—it is best to say that I am unable to commit to one and I jolly well hope that it will not be necessary.

[The Lord Bishop of Durham]

My Lords, can we honour the DWP staff for allowing the BBC in? Many of us look forward to seeing what comes out. They have been very brave; many departments do not do that. I understand that the Minister does listen but some of these things have now been going on since the system’s very inception. Yes, many people at food banks and people who talk locally say that the work coaches are doing a wonderful job. That is great, but it is the most vulnerable who are suffering. Could we please listen to their voice and make some changes very rapidly?

[Baroness Stedman-Scott]

I can give a commitment that we are listening to the most vulnerable. We will make changes as soon as we can, once they have been agreed. There is nothing in it to delay things or to make life worse for people. I certainly do not want to be a Minister who is known for that.

On food banks, I have no doubt, and the previous Secretary of State confirmed it, that usage of food banks was up due in part to universal credit. I do not run away from that point. Last Thursday I sat down in a food bank in Hastings called The Pantry. I will arrange it for any noble Lord who wishes to go there, because it is a most dignified example of a food bank. I asked them: “Why do people use it?” Relationships break down, or people’s priority is to fund their addiction. When their money comes through from universal credit, they are at the cashpoint at 1 am or 2 am to get the next fix or the next drink. One person left a job on a Friday, went to a new job on Monday and by Monday evening it was all over. He found himself in a very difficult position. All credit to the food banks for what they do, but please, do not lay the increase completely at the door of universal credit.

[Baroness Watkins of Tavistock (CB)]

My Lords, are we collecting any central statistics on the increasing rent arrears for some people on universal credit? There is a real challenge, particularly for people in London, where rents are high in relation to universal credit. We are very concerned that some people are going without food in order to pay their rent.

[Baroness Stedman-Scott]

I thank the noble Baroness for raising what is another very valid point. Rent arrears is a problem, but the majority of arrears were incurred with the legacy benefits. It is not just universal credit. I am not saying that there is not a contribution, but 12% of social-rented households are on universal credit. It cannot be laid entirely at that door, but the issue is live, and we are on it.

Pension Schemes Bill [HL]

Baroness Stedman-Scott Excerpts

Tuesday 4th February 2020 Lords Chamber

Moved by

[Baroness Stedman-Scott]

That it be an instruction to the Grand Committee to which the Pension Schemes Bill [HL] has been committed that they consider the bill in the following order:

Clauses 1 to 6; Schedule 1; Clauses 52 to 57; Schedule 4; Clauses 7 to 17; Clauses 58 to 68; Clauses 18 to 23; Clauses 69 to 74; Clauses 24 and 25; Clauses 75 and 76; Clauses 26 to 30; Clauses 77 to 81; Clauses 31 to 44; Schedule 2; Clause 45; Clauses 82 to 95; Schedule 5; Clause 96; Clause 46; Clause 97; Clause 47; Clause 98; Clause 48; Schedule 3; Clause 99; Schedule 6; Clauses 49 to 51; Clauses 100 to 116; Schedule 7; Clause 117; Schedule 8; Clauses 118 to 120; Schedule 9; Clauses 121 to 123; Schedule 10; Clauses 124 to 128; Schedule 11; Clauses 129 to 131; Title.

Motion agreed.

Pension Schemes Bill [HL]

Baroness Stedman-Scott Excerpts

2nd reading & 2nd reading (Hansard): House of Lords & 2nd reading (Hansard)
Tuesday 28th January 2020 Lords Chamber

Moved by

[Baroness Stedman-Scott]

That the Bill be now read a second time.

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

My Lords, I take this opportunity to thank all noble Lords for the positive engagement and feedback they have provided over the past couple of weeks and since the Bill was originally introduced in October last year. From the conversations I have had with many noble Lords, I believe there is a genuine desire across the House to tackle the matters addressed by the Bill. It is my sincere hope that we can continue to engage in this way as the Bill progresses through this House. Should any noble Lord wish to discuss any part of the Bill between its stages, our doors are always open.

It is unlikely to have escaped noble Lords’ attention that this is not a small Bill, partly because we have also legislated for Northern Ireland. Now there is a functioning Assembly again we have been in contact with Northern Ireland Ministers to establish whether they are content in principle for Westminster to legislate on their behalf in this Bill. I believe it is important to ensure that the people of Northern Ireland also benefit from the changes and safeguards put in place for the rest of Great Britain.

Although the Evening Standard referred to the Bill in October as a morsel of “fresh legislative meat,” it is far more than that. It has been built on consensus across the pensions community and political spectrum and has consumer protection at its heart. It focuses on a range of key measures that are a priority today, not just for those who are already receiving a pension, but for record numbers who are now saving for their retirement. This Bill will help people plan for the future, provide simpler oversight of pensions savings and protect people’s savings by providing greater powers for the Pensions Regulator to tackle irresponsible management of private pension schemes.

Before I talk a little more about the measures in this Bill and why they are so important, I would like to touch on delegated powers. I know from talking to noble Lords that there are some concerns about the number of delegated powers in the Bill and how they may be used. There are a number of good reasons why we have structured the Bill the way we have, and we will respond fully to any concerns the DPRRC may have when we reply to its report. However, I have listened to what your Lordships have said to me and have asked my officials to prepare illustrative regulations under Part 1 before we reach Committee. I hope that they will help your Lordships understand the way delegated powers in that part are intended to be used and the limitations in pre-empting their use.

The measures in this Bill build on the reforms of the past 10 years, and I shall take a few moments of noble Lords’ time to explain how. On Part 1, which relates to collective defined contribution schemes, which are known as CDCs, current UK pensions law defines all private pension benefits as either money purchase, where investment and longevity risks are shouldered by the individual member, or as non-money purchase, where all risks are born by the sponsor, usually an employer or insurer. Current pensions legislation means that new types of pension schemes have to fit within those two definitions. This stifles innovation and prohibits new kinds of risk sharing.

Part 1 sets out the regulatory framework for new collective money purchase schemes. These are more commonly known as collective defined contribution schemes or CDCs. In developing these measures, I welcome the cross-party and external stakeholder support for the methodology and the legislative approach that the Government have used. The measures facilitate, and build upon, the initiative between the Royal Mail and the Communication Workers Union which have concluded that a CDC scheme would best suit their needs for the future. I put on the record our thanks for the constructive and supportive way in which both Royal Mail and the Communication Workers Union have engaged in developing these measures. It is right for us to support employers and unions working together to bring about such a positive outcome. The scheme will be the first of its type in the UK, and it offers a model for other employers and other workforces to launch their own schemes.

There has been some interest in CDC provision from other unions and large commercial master trusts. However, we believe that this new type of provision and the supporting regulatory regime need time to bed in before a decision is made on whether multiple employer, sector-specific or commercial CDC provision should be facilitated. Nevertheless, the Bill provides for us to adapt the legislation, where appropriate, to extend the framework in the future.

These new schemes will enable contributions to be pooled and invested to give members a target benefit level. They aim to deliver for members an income in retirement without the high cost of guarantees and without placing unpredictable future liabilities on the employer, and they will give employers new options for managing their pension obligations.

In its press release on the Bill’s introduction in October, the Pensions and Lifetime Savings Association said that CDC schemes

“offer employers increased flexibility and choice in how they structure schemes to benefit savers.”

Further, Hymans Robertson commented:

“Providing a framework for collective money purchase schemes … will offer the clear benefits that can be derived from pooling of these risks across individuals.”


I hope that we can all welcome these measures, which enable employers and workers to come together in a way that will benefit both.

I move on to CDCs in Northern Ireland and shall focus briefly on Part 2 of the Bill. As noble Lords know, private pensions are a devolved matter for Northern Ireland. Throughout the development of this Bill, Ministers and officials have worked closely with the Northern Ireland Office and the Department for Communities, Northern Ireland. In the absence of an Assembly, the Department for Communities has asked the UK Parliament to include provisions for Northern Ireland in the Bill. This will ensure regulatory alignment across the UK and parity for pension schemes and their members in Northern Ireland. Part 2 and other clauses embedded in each part of the Bill therefore make provision for corresponding Northern Ireland legislation.

Moving on to the Pensions Regulator, several recent high-profile insolvency cases in relation to defined benefit pension schemes have weakened confidence in the pensions system. They have highlighted that the existing regulatory regime is not always an effective deterrent to serious wrongdoing. Doing nothing will mean that more people are likely to be affected by employers not taking their responsibilities seriously, and the existing fines that the Pensions Regulator can pursue are an ineffective deterrent to more serious wrongdoing. In order to amend the existing powers and provide the regulator with new powers, changes and additions must be made through primary legislation. Not doing so will mean that the current gaps and problems continue to exist.

Part 3 addresses that and fulfils a commitment that we made in 2017. It places a requirement on those responsible for corporate transactions to set out in a statement how they will mitigate any adverse effects on the pension scheme. The measures will improve the regulator’s information-gathering powers, enabling it to enter a wider range of premises and require individuals to attend an interview. This will boost the regulator’s ability to ensure that those responsible comply with pensions legislation. There will also be new civil and criminal sanctions to punish those who wilfully or recklessly harm their pension scheme, including a maximum seven-year prison sentence and a civil penalty of up to £1 million.

I know that some noble Lords have expressed concern about the adequacy of the sentences outlined in the Bill and have advocated even tougher ones. We have set the maximum level of the financial penalty at a level similar to equivalent sanctions in the financial sector for financial crimes. However, we also recognise that there might be a need to increase this maximum amount in the future to ensure that the financial penalty continues to provide suitable levels of deterrence and punishment. The Bill therefore includes a regulation-making power enabling the maximum amount of the financial penalty to be increased if needed in the future.

Charles Counsell, the chief executive of the Pensions Regulator, said of these measures:

“Fines and criminal sanctions, combined with improved avoidance powers, have the potential to act as a strong deterrent in respect of behaviour that represents a risk to savers.”


The Pensions and Lifetime Savings Association was also clear, saying:

“While most pension schemes are well-run and managed, high-profile cases like Carillion and BHS damage confidence in the pensions system. We support new powers for the Pensions Regulator to take action sooner, impose significant fines, and have more oversight of risky corporate transactions in order to prevent reckless behaviour and protect savers’ hard-earned money.”


Cumulatively, the improvements to the regulator’s powers outlined in this Bill will help the regulator to meet its aim of being “clearer, quicker, and tougher”. In turn, this will afford increased protection for defined benefit scheme members’ savings.

Part 4 of the Bill delivers on our commitment to provide for pensions dashboards. Many savers worry that they do not have adequate information or knowledge to enable them to plan and make decisions about their saving for retirement. This can be exacerbated by the fact that it can be hard for savers to keep track of pension savings where they have had multiple jobs. Dashboards will provide an online service allowing people to view all their pension information—including state pension—in a single place.

The measures in this Bill set out the legislative framework to define what a qualifying dashboard service is, along with requirements that must be met by potential dashboard providers. Importantly, they will compel occupational, personal and stakeholder pension schemes to present an individual’s pension information to them through a qualifying dashboard service. To make sure that they do, the measures also introduce compliance powers for enforcement of this requirement through the Financial Conduct Authority and the Pensions Regulator. Finally, Part 4 also provides for the Money and Pensions Service to oversee the development of the dashboard infrastructure.

As I said earlier, there is broad support for pensions dashboards. For example, Aegon has commented:

“Millions of individuals have multiple pensions in which they’ve built up benefits over their working lives and Pension Dashboards will for the first time allow them to see all of these, online at the touch of a button. This offers a huge opportunity to help millions of individuals better engage with their retirement planning”.


I turn now to Part 5 of the Bill. The measures within this part cover four important areas. Clause 123 and Schedule 10 relate to defined benefit scheme funding. The defined benefit landscape is changing, with many schemes now closed to new members and future accrual. As more schemes reach maturity, with fewer contributing members and more members receiving their pension benefits, it is important that we act now to ensure that trustees manage their funding and investment in a way that is appropriate to the specific characteristics of their scheme.

The measures in the Bill will enable the Pensions Regulator to enforce clearer scheme funding standards in defined benefit pension schemes. They will support the regulator’s risk-based regulatory approach by introducing a requirement for trustees to have a funding and investment strategy for the scheme, and for the statutory funding objective to be achieved consistently with this strategy. The measures also require trustees to explain their approach to the regulator in a statement of strategy. The measures can require trustees to send this statement to the regulator at such occasions and intervals as may be prescribed.

These provisions seek to help trustees to improve their scheme funding and investment decisions, and to better manage potential risk. They enable the regulator to take action more effectively to protect members’ pensions, mitigate risks to the Pension Protection Fund, and take account of the sustainable growth of the employer.

Clause 124 introduces new powers to protect individuals’ pensions savings by helping trustees to prevent transfers to fraudulent schemes through restricting the statutory right to transfer a pension. This will protect members from pension scams by helping trustees of occupational pension schemes to ensure that transfers of pension savings are made to safe, not fraudulent, schemes.

Clause 125 rectifies some of the unintended outcomes of a High Court judgment. It retrospectively restores the policy intent with regard to the calculation of Pension Protection Fund compensation payments. The measure will provide statutory cover for past payments and will ensure that there is no question of vulnerable members being asked to repay any overpayments.

Clause 126 updates the definition of “administration charge” to make clear which costs are in scope of the overarching definition contained in the Pensions Act 2014.

I beg to move.

--- Later in debate ---

[Baroness Stedman-Scott]

My Lords, this has been an excellent debate with excellent contributions. I thank noble Lords for the time they have spent preparing and delivering those contributions. I thank everybody who has taken part. It has been encouraging to hear the positive responses to the measures this Bill proposes. Noble Lords have certainly laid down the challenges we need to address.

The noble Baroness, Lady Sherlock, asked me about our confidence in the Bill. We will have confidence in it if we all work together and turn every stone to make it fit for purpose. I pledge that the Government will do that, and I see no dissention from us working together to achieve that.

I shall deal first with delegated powers and the commitment I made to your Lordships that we will bring forward some examples in relation to Part 1. I do not use the word “trepidation” in conjunction with my noble friend Lady Fookes—it is quite the other way round—but I have her point about Part 3 and the point made by the noble Baroness, Lady Sherlock, about Part 4. We have a wonderful Bill team who are working incredibly hard, and if they tell me they will have them, they will have them.

I understand the concerns raised by some noble Lords in this debate that there are important legal principles at stake before the proposed delegated powers can be exercised properly. In many instances the Government have promised to consult further on the technical substance, particularly in relation in Part 1. There are also instances where there may be a statutory requirement to consult because of a connection to existing legislation. Where there is an intention, promise or legal requirement to consult on the substance of secondary legislation, the legal position is clear: the Government cannot prejudge the outcome. In opening this debate, I said that I have listened to what noble Lords have been telling me, and we are preparing illustrative regulations relating to Part 1 which will be available before Committee. I also pledge to meet noble Lords before Committee to discuss them and all the questions that I will not have time to answer. Noble Lords can see that I have them, so I am not trying to get out of doing the job.

I want to put to bed very quickly the question asked by the noble Baroness, Lady Bryan, about whether we have any plans to increase the state pension age to 75. This is not government policy. The recent independent report recommending raising the state pension age to 75 is not a government report. I hope that gives her comfort.

The multiple dashboard point was raised by numerous noble Lords. The noble Lord, Lord McKenzie, made the point that there should be a single, government-run, non-commercial dashboard to protect consumer interests. We agree that there should be a dashboard that has no commercial aspect. The Money and Pensions Service has made a commitment to deliver such a dashboard.

The noble Lord, Lord McKenzie, asked whether the CDC is just a backdoor to allow employers to close defined pension schemes and impose collective pensions. CDC schemes are unlikely to work well unless the employer and employees are comfortable with the approach. I am sure that employers with open defined benefit schemes are well aware of that. The CBI’s response to our consultation on CDC makes interesting reading. It said that CDC has advantages for both employers and employees and welcomes the opportunity that CDC presents to help fill the gap between defined benefit and current defined contribution schemes.

The noble Lord, Lord McKenzie, was very busy in this debate. He asked why we have not implemented the 2015 Act. Our approach to CDC schemes has developed since, and after much scrutiny we concluded that new primary legislation is necessary to ensure that we get the CDC exactly right for the United Kingdom.

The noble Lord, Lord McKenzie, and the noble Baroness, Lady Warwick, asked why our superfund is not in the Bill. Developing the new regulatory framework for superfunds is a complex task and we are working hard across government and with relevant stakeholders to build consensus on the right approach. We aim to publish shortly our response to the consultation which will set out in more detail our proposals for a future legislative framework. Once this work is completed, we will legislate as soon as we can.

The noble Lords, Lord Sharkey, Lord McKenzie and Lord Vaux, and the noble Baronesses, Lady Donaghy and Lady Janke, raised intergenerational fairness. Fairness between age cohorts has been one of our key considerations from the beginning of our work on CDC schemes. That is why we intend to bring forward scheme rule requirements using regulations under Clause 18. This will ensure that all members, whether active, deferred or pensioner, will share the effects of investment outperformance and underperformance in the same way every year. Should a scheme’s rules not be compliant, it will not be authorised to operate by the regulator.

The noble Lord, Lord McKenzie, and my noble friend Lady Noakes asked how many employers are considering CDCs. It is true that only one company is, namely Royal Mail. However, others are interested. We want to make sure that CDCs work before any future increase.

The noble Lord, Lord McKenzie, asked about automatic enrolment and what the Government are going about the gender pensions gap. Automatic enrolment has been a great success and is already having an impact on the gender pensions gap. Participation in pension saving among eligible women in the private sector has risen from 40% in 2012 to 85% in 2018, which is equal to the figure for men. We have made great progress on that.

[Baroness Drake]

The Minister is accurate. I do not disagree with her description of what is happening with women in the eligible population for auto-enrolment, but it is the millions not in the eligible population for auto-enrolment whom we are particularly concerned about and whom those figures do not address.

[Baroness Stedman-Scott]

The noble Baroness, Lady Drake, is absolutely correct and I am glad that she pointed out the difference to me. I would like to meet her before Committee to address that issue, if she is happy to do so.

The noble Lord, Lord McKenzie, asked why the Government have not legislated for the measures in the 2017 automatic enrolment review in this Bill. The Government have set out their ambition to lower the age at which people are automatically enrolled from 22 to 18 and to abolish the AE lower earnings limit in the mid-2020s. Our approach will be to expand the coverage and increase the amounts put into retirement savings by millions of working people, focusing on younger people and lower earners.

The noble Baroness, Lady Donaghy, and the noble Lord, Lord McKenzie, raised the subject of the self-employed. The 2017 automatic enrolment review concluded that the current automatic enrolment framework is not suitable for the self-employed. They are a highly diverse group and one solution will not necessarily fit all. The Government have committed to carrying out research trials to form the evidence base and future policy.

The noble Lord, Lord Sharkey, asked what the Government are doing to tackle investment scams—an issue raised by other noble Lords. These scams are outrageous. The Government are committed to raising awareness about pensions scams to help protect consumers. As part of this, the Financial Conduct Authority launched its ScamSmart campaign to raise awareness of the steps that people can take to avoid investment scams. During the campaign, 173,000 users visited the ScamSmart site, and 376 users were warned about an unauthorised firm.

The noble Lord, Lord Sharkey, raised the need for a stronger nudge towards guidance, as provided for in Sections 18 and 19 of the Financial Guidance and Claims Act 2018. In that Act, we committed to test different approaches to providing a stronger nudge towards Pension Wise guidance. Pension Wise began this work on Royal Assent of the Act and it was picked up at the launch of the Money and Pensions Service. Trials commenced in October 2019. We are on course for those trials to finish and for qualitative work to be undertaken ready for the publication of the evaluation report in the summer.

Many noble Lords raised the question of whether there should be one dashboard or multiple dashboards, and the views on that were mixed. My noble friend Lady Fookes asked why there should not be just one, but I was interested to hear the noble Lord, Lord Sharkey, say that multiple dashboards will give consumers more choice in where they access pension information. Multiple dashboards will help to meet the varied needs of the 24.5 million people with pensions and wealth. I am sure that this is a topic on which we will have extensive discussions prior to and during Committee.

The noble Lord, Lord Vaux, made the point that the payment of dividends will not be a notifiable event. It would be disproportionate to require every dividend payment to be notified to the regulator. Hindering dividend payments could affect pension schemes, as many are shareholders in companies with DB schemes.

The noble Lord also raised the Dutch scheme. Despite communication issues in Holland, for generations the Dutch scheme worked as though it were a DB scheme. Where adjustments needed to be made, these came as a surprise. We will ensure that in communications to members, particularly at key points throughout a member’s pension scheme journey—on joining and annually, and before and during retirement—CDC schemes are clear and transparent that benefit values may go down as well as up.

The noble Lord, Lord Vaux, asked what safeguards there are to ensure that transfer values are fair. The cash equivalent transfer value represents the actual calculated cash value of providing members’ benefits within the scheme. Legislation provides a framework for the calculation of transfer values that trustees must follow.

The noble Lord also asked why companies should not be stopped from paying dividends if their pension schemes are in deficit. We do not believe that it is sensible to stop companies paying dividends to shareholders, even when a scheme is in funding deficit. Government intervention to block dividend payments could discourage investors and weaken the business, further reducing the security of the defined benefit scheme.

The noble Lords, Lord Vaux and Lord Sharkey, and others raised a lot of questions on that subject. It is not that I am not trying to give an answer; it is just that I am unable to do so at the moment, but I will get back to them.

My noble friend Lady Altmann asked what the sanctions will be for pension scheme providers who do not comply with compulsion. If a pension scheme provider fails to comply, it might be subject to penalties, including fines. The regulator will have a range of powers, including issuing compliance notices, penalty notices and fines.

My noble friend also raised the question of simpler annual benefit statements. The industry delivery group will consider the outcome of the consultation on simpler statements when making recommendations on the information to be included on dashboards.

I pay tribute to my noble friend Lady Altmann, whose tenacity on net pay allowance and tax relief is legendary. She has taught me everything that I know about it. That was a matter raised also by the noble Lord, Lord McKenzie. I am not trying to get out of anything here but it is a matter for the Treasury. However, the Government recognise the different impacts of the two systems. To date, it has not been possible to identify any straightforward or proportionate means to align the effects of net pay and relief at source. However, as announced in our manifesto, the Government will conduct a comprehensive review of how to fix this. We say that we will do it.

My noble friend Lady Altmann asked whether the new scheme’s funding requirements support the plumbing pension scheme. I am afraid that I am not able to give a response to that at the moment but I would love to meet her and give her the information that she requires, as well as making it available to other noble Lords.

I am taking a moment to look through my responses in an attempt to be fair to all noble Lords, although I do not think that I am doing a great job.

The noble Baroness, Lady Drake, raised the important point of carer’s credit and the family carer top-up. The Government recognise the valuable role of carers and the fact that they are disproportionately women. The Government Equalities Office gender equality road map, published in July 2019, set out plans to support carers. They included helping people to return to work after taking time out for caring. We are working closely with colleagues in the Money and Pensions Service to empower people to take informed decisions about saving throughout their lives. I am sure that we will revisit this very soon.

We have talked about the gender pay gap—a matter raised by the noble Baronesses, Lady Drake and Lady Bryan. As I said, automatic enrolment has helped lots of women—I have given the statistics. We want to empower them to take informed decisions about saving throughout their life, but we have made progress in bridging the gap.

The noble Baroness, Lady Drake, talked about the consumer protection regime. The Government recognise that the regulation of dashboard providers is critical to maintaining public confidence. My department has been working with HM Treasury and the FCA to decide how best to ensure that the regulatory regime is appropriate and robust.

The noble Baroness, Lady Drake, also raised the important issue of the security of data on pension dashboards. Ensuring the security of data is key to establishing consumer confidence in the dashboards. The Government are committed to ensuring that the infrastructure includes a level of identity assurance that satisfies the good practice established for national cybersecurity.

The noble Baroness, Lady Drake, and my noble friend Lady Noakes raised the subject of the Pensions Regulator. They questioned the impact of the new criminal offences and wondered whether their scope was too wide. We do not want to stop legitimate business activity, such as lenders taking security for normal financing activities. The Government are clear that businesses must be allowed to make the right decisions to allow them to develop and grow.

The majority of employers want to do right by their scheme. However, we must ensure that sufficient safeguards are in place to protect members’ pensions from the minority who are willing to put them at risk—I mention no names. The Government are committed to the Money and Pensions Service providing a dashboard, and MaPS committed to providing a dashboard in its 2019-20 business plan.

I turn to the contribution of my noble friend Lord Young. His powers of foresight are legendary; I am envious, and I am sure that many in both Houses would like to have them. The same is true of his oratory powers; he is very eloquent and his Front-Bench contributions are much missed in this House. We will meet before Committee. Time is really getting on now. I will respond directly to my noble friend Lord Young on the points he raised, and will have an answer to the point raised by my noble friend Lord Flight on equity release.

My noble friend Lady Noakes asked whether there are adequate appeal processes. The answer is yes and I would be very happy to talk her through those at a later time. Her description of a “half-baked dashboard” is interesting. We undertook a significant consultation and got more than 120 responses. These were published in April 2019 and were taken into account during the development of the legislation. We will continue to seek all views as we develop regulations.

The noble Baroness, Lady Donaghy, raised a point about holders of multiple part-time jobs. Currently, where an individual does not earn more than £10,000 per annum in a single job but earns more than the lower limit of the automatic enrolment qualifying earnings band, they can opt in to a scheme in one job and receive the mandatory pension contribution from their employer on earnings over that level.

The noble Baronesses, Lady Hayman and Lady Jones of Whitchurch, talked about climate change. This is a subject close to our hearts and I will meet with them both to talk in more detail. The Government are absolutely committed to tackling climate change and recognise the concerns that have been raised. We have already introduced legislation to require pension schemes to state their policy. In building on this, the DWP continues to work with the industry.

On dashboards, we expect that initially there will be no more information than is already available; to start with, simple information will become available. The delivery group may make recommendations for adding more detailed information as the needs and interactions of users develop.

[Baroness Neville-Rolfe]

Before the Minister sits down, would she be willing to talk to us a little more about the detail of the subordinate legislation on dashboards? She kindly said that she would do that on the first part of the Bill, but several noble Lords are interested in the subordinate legislation on the dashboard.

[Baroness Stedman-Scott]

Of course, I will do that as soon as possible. This is an important Bill with a far-reaching impact on people. We will all work together in the House to get the legislation as we want it. I extend my invitation once again to all noble Lords who may wish to discuss any further issues before Committee. Our door is always open. I thank noble Lords for their contributions today. I commend the Bill to the House and ask that it be given a Second Reading.

Bill read a second time and committed to a Grand Committee.

Low-income Families: Benefits Freeze

Baroness Stedman-Scott Excerpts

Monday 13th January 2020 Lords Chamber

[Baroness Lister of Burtersett]

To ask Her Majesty’s Government what assessment they have made of the impact on low-income families of the four-year freeze in working age and children’s benefits.

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

My Lords, the benefit freeze was designed to put welfare on a sustainable footing, incentivising work and making welfare fairer. We conducted a number of assessments at the time of the Welfare Reform and Work Act in 2016; it was estimated that 30% of households would be affected by the policy, but that no one should take a direct cash loss as a result of the freeze. We have continued to monitor the impact of our policies through publications such as the annual release on households below average income. The latest available stats show that the number of people in absolute poverty in 2017 and 2018 was lower than in 2010. The benefit freeze will come to an end in April 2020, benefiting more than 10 million people.

[Baroness Lister of Burtersett (Lab)]

My Lords, welcome as the end of the freeze—as required by law—is, it will do nothing to restore the significant losses suffered by millions in poverty, which are, on average, nearly £400 this year for families with children. Those losses have contributed to increased homelessness, reliance on food banks, and general poverty and hardship. Will the Minister, who I know cares about such matters, therefore undertake to press on the Chancellor the case for an above-inflation increase as a tangible and immediate way of making good the Prime Minister’s “one nation” election pledges to level up and help those reliant on food banks with the cost of living?

[Baroness Stedman-Scott]

I understand the points that the noble Baroness has raised—you cannot argue with them. One of the major contributing factors was that inflation was twice what we thought it was going to be. It is no excuse, but that was it. I am touched that she thinks I can influence the Chancellor; I will have a really good go and keep her posted. My door is open to talk about this further.

[Lord Farmer (Con)]

My Lords, over a decade ago the Joseph Rowntree Foundation proved that the tax credits approach to child poverty had run out of steam. How are this Government following the evidence on the root causes of child poverty, which include family breakdown?

[Baroness Stedman-Scott]

My noble friend makes a point about tax credits. While I have no doubt that they did a lot of good, some of their ramifications caused difficulty, in that we had an annual rather than a monthly reconciliation, as we are trying to have under universal credit. I believe that the monthly reconciliation under universal credit, while not perfect, is much better than waiting until the end of the year. On child poverty and family breakdown, obviously there are families who have great difficulty fiscally, and we have to try to help them, but the evidence shows that helping parents to move into and remain in work is the best option for moving them out of poverty. We want to see child poverty fall and remain determined to tackle it. My door is open for further discussion on this; I will do anything I can to move things forward.

[Baroness Janke (LD)]

My Lords, is the Minister aware that in August 2018, two-thirds of those who had benefits cut were single parents? Single parents in the bottom 20% income bracket will have lost 25% of their 2010 income by 2021-22. Ending the benefit freeze will not restore this, and half of the total number in single- parent families are in poverty. Does the noble Baroness agree that children in single-parent families are doubly disadvantaged as a result of government policies? What plans do the Government have to end this glaring injustice and to ensure that these children get a fair deal?

[Baroness Stedman-Scott]

Again, I understand the points that the noble Baroness makes. We can all recall incidents in our families—I can in my own; my niece is a single parent, and life is a challenge at the best of times. The benefit cap levels were put in place to try to restore some fairness to the system. Due to the election taking place, the levels were not reviewed in the last Parliament, but there remains a statutory duty to look at them, which will be done at an appropriate time.

[Baroness Sherlock (Lab)]

My Lords, the benefit freeze was not a reform but a straightforward cut: it simply cuts the value of certain benefits every single year, year on year, for five years. The result is that the welfare state, the point of which is to support children and families when the parents cannot earn money, is now providing a record low level of benefits compared to average wages. The basic JSA of £73 a week is just 14% of average earnings, according to the Resolution Foundation. When Beveridge started his system, the figure was 27%. We cannot have a welfare state in which, if you find yourself unable to work, you are literally thrown on to the scrapheap and become dependent on food banks. Therefore, if the Prime Minister, as he said, believes that austerity was the wrong choice, is not the logical step to accept that, since these cuts should not have been made, they should now be made good?

[Baroness Stedman-Scott]

I would not want to contradict the noble Baroness—I have the greatest respect for her—but I think the Prime Minister said that austerity must stop, and that it was necessary at the time. I do not want to go over all those arguments again. In the eight years following the financial crisis and leading up to the benefits freeze, jobseeker’s allowance grew by 21%, whereas median earnings grew by only 12%. We want a welfare state that works for people and enables them to have a decent way of life, but the legacy benefit system was unsustainable, and I am afraid we have taken very difficult decisions to try to balance it out and to make work pay for people. I know that the noble Baroness does not agree with me, but we now have more people in work than we have ever had—

[Noble Lords]

No.

[Baroness Stedman-Scott]

We have. I am sorry—it is a fact. We have more people in work than ever before, and—

[Baroness Jones of Moulsecoomb (GP)]

Zero hours.

[Baroness Stedman-Scott]

I can answer that one too. While noble Lords will not want me to read out a shopping list of things we have done—I know that it does not go down well—I will mention three things: reducing UC debt deductions from 40% to 30%, increasing the national minimum wage and cutting income tax. I am assured by officials that that has put another £2 billion per annum into people’s pockets.

[The Lord Bishop of Durham]

My Lords, in the coming years, the main driver in increasing child poverty will be the two-child limit. Low-income families are particularly detrimentally impacted by this. It is predicted that, by 2023-24, this policy will tip 300,000 children into poverty. What plans do Her Majesty’s Government have to stem the rising child poverty levels caused by current policies, primarily the two-child limit?

[Baroness Stedman-Scott]

The right reverend Prelate has been absolutely consistent on the issues around this particular benefit. I was delighted that he could come to our office to talk about them; he put the case to the Minister for Welfare eloquently. We have to keep on, okay? I stand by the right reverend Prelate in doing that. We must also keep on looking at other benefits to make sure that we make life better.

Policy-making: Future Generations

Baroness Stedman-Scott Excerpts

Tuesday 1st October 2019 Lords Chamber

[Lord Laming (CB)]

In the absence of my noble friend Lord Bird, who cannot be here, I ask the Question in his name on the Order Paper.

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

My Lords, accounting for the interests of future generations is a core consideration within the Government’s policy-making. The Government require that all programmes, projects and policies demonstrate the costs, benefits and risks associated with the intervention over its whole lifetime, in line with the government Green Book. This includes the impact on future generations. Where the possible effects of an intervention being examined as part of an appraisal are long term and involve very substantial or irreversible wealth transfers between generations, The Green Book sets out the analysis that is required to estimate the long-term impact of the intervention.

[Lord Laming]

My Lords, I am very grateful to the Minister, who has vast experience in this area. But I ask whether the Government recognise that the budgetary cuts year on year on year have resulted in a marked reduction in family support and preventive services, especially for young people. Does she accept that there is a great deal of catching up to be done, which must involve the contribution of every government department, as is happening in Wales? How will the Government ensure that every department plays a part in this?

[Baroness Stedman-Scott]

I would be foolish to say that we have not got some catching up to do, but I assure all noble Lords that we wish to work hard to achieve this. In terms of cross-government working, I have been in the department only a short while, and I have met with people in other government departments to talk about things that we can do together to make the impact better. The principle is well understood, and I assure all noble Lords that we are completely committed to making sure that the resources we have are deployed well for the benefit of all generations.

[Baroness Sherlock (Lab)]

My Lords, the Minister referred to The Green Book as being the means by which the Government decide how to adjudicate between the interests of different generations. But The Green Book, which is a Treasury document, sets out the tool for analysing or comparing policy objectives using things like net present social value or social time preference rates; you can work out how to judge those transfers. Will the Government publish the results of those analyses in the impact assessment along with everything else? More importantly, the young people I saw in Durham on the climate strike were convinced that we are not prioritising their interests. What tools can the Government use to assess damage done to the climate and to the planet—although, of course, there is no planet against which we can compare it?

[Baroness Stedman-Scott]

Well, there is an exam question! On the question of publishing the impact assessment, I will go back and ask my boss. Do not think that that is a cop-out; I do not actually know. I will ask my boss and then write to the noble Baroness, and everybody will receive a copy of his response through the Library.

On climate change, I think that we have done really well to be the first country to legislate for long-term climate targets. Between 1990 and 2017 we reduced emissions by 42%, so we are serious about this. I hope that the efforts of young people in this respect will help them realise that they are having a great impact on the activities of the Government to make that happen.

[Lord Tyler (LD)]

My Lords, does the Minister accept that this Question has accountability to this and future generations at its core? Is there anybody in No. 10 who has any respect for our constitution and parliamentary democracy, let alone has made any assessment of the importance of our history in this respect? My ancestor, Jonathan Trelawny, was one of the seven bishops who defied James II’s royal prerogative and then precipitated the Glorious Revolution of 1688. Does the noble Baroness accept that the Executive are answerable and accountable to Parliament, not the other way around? Has that not been the central, core constitutional principle for 330 years? As this is such a minority Government—

[Lord Tyler]

As this is a minority Government and the Prime Minister represents only a tiny fraction of that minority, surely the task he refers to is representing what Parliament is saying, rather than what he wants to do.

[Baroness Stedman-Scott]

The phrase “something vexes thee” comes to mind. The noble Lord is trying to get me into the territory of another subject that I do not want to get into today; I want to stick to what we are discussing. But I do not think there is any doubt that everybody understands about accountability. I do not think I can add anything, and speak on behalf of No. 10, other than to say that I am convinced that they understand that.

[Lord Forsyth of Drumlean (Con)]

My Lords, we have all heard about the bank of mum and dad, but in considering the future of social care policy is my noble friend aware that we will rapidly move to the bank of son and daughter? When can we expect the Government to produce a response to the committee of this House’s report on social care, or indeed the long-promised Green Paper?

[Baroness Stedman-Scott]

I understand about the bank of mum and dad—and about the bank of auntie, from which deposits are drawn on a regular basis. I understand the point my noble friend is making; it is a very important issue that impacts greatly on those who need social care now. Of course, coming future generations will want to know how this is all going to be done. I do not know about the timing of the documents, but I will try to find out and write to my noble friend.

[Lord Berkeley of Knighton (CB)]

My Lords, when the Government are criticised over the lack of music in schools and on syllabuses, they point to the success of the music hubs. I salute that success, but these hubs are now financially at risk, with future funding not confirmed even for next year. Will the Minister confirm that funding will continue, and increase to cover inflation and increased costs, thus preventing the legs being cut from under music education in this country and, indeed, the Government’s own flagship?

[Baroness Stedman-Scott]

I thank the noble Lord for his question. I do not want to seem flippant, but I do have not have my chequebook with me today, so I do not think I can help him there. Again, this is something I will need to find out about, but the point he raises about the importance of music is well understood.

Pensions

Baroness Stedman-Scott Excerpts

Wednesday 13th December 2017 Lords Chamber

[Baroness Bakewell (Lab)]

My Lords, I congratulate the noble Baroness, Lady Scott, on raising this issue, and all the women who are attending the debate—and by that I imply a criticism of all the men who have decided to stay away.

One day they will make a film about this issue. It will be a British film, made on a small budget and inspired by a sense of outrage that such an unfair treatment of British women could have persisted into the 2010s. It will join a fine tradition of films which have put on record the past struggles women have had to be heard. Recent ones include the 2010 film “Made in Dagenham” and the 2015 film “Suffragette”—both subjects that the establishment of the day hoped would go away once the fuss died down. But it did not, and the protests of the women finally won out.

The WASPI women are in that tradition. Indeed, their many branches wear the suffragette colours with pride. They persist in protesting the unfair treatment that women born in the 1950s have been given by the Government’s pensions policy, as expressed with increasing severity in the Pensions Acts of 1995 and 2011. The film of their story will detail how, in trying honourably to remedy one inequality—bringing women’s and men’s retirement ages into harmony—the Government of the day perpetrated another, subjecting 2.6 million women to unexpected delays to their pension dates, with too little warning, and throwing many of them into genuine hardship.

The film will show, with perhaps only slight exaggeration, bumbling officials—I suggest Jim Broadbent or Hugh Bonneville—overwhelmed with detail about changing demographics and passing on conflicting advice to the Ministers concerned. A lead role in the film will be the Minister of State at the Department for Work and Pensions, Steve Webb, who will be shown as well-meaning but confused—a part for Hugh Grant, I think. Steve Webb was the longest-serving Minister at the DWP and effected important and successful changes, such as the triple lock on pensions that benefited many and continues to do so, and the automatic enrolment by businesses of their workers into pension schemes—all fine reforms by a man whose word we could surely trust.

That being so, Steve Webb will have written his own script for the film in June 2015, after he had left office and lost his parliamentary seat. He told the Institute for Government:

“There was one very early decision that we took about state pension ages, which we would have done differently if we’d been properly briefed, and we weren’t … we’d put an announcement out … and we just hadn’t thought through what we were doing … we had to make a difficult decision … and the implications of what we were doing suddenly, about two or three months later, it became clear that they were very different from what we thought … so that’s a decision that we got wrong”.


Those are the Minister’s own words. Incidentally, Steve Webb also spoke of the fine support he usually had from his civil servants—“very good people”, he called them—but not on this occasion.

The film will show Steve Webb going, cap in hand, to David Cameron, leader of the coalition Government in which he served, and asking for some money back from the savings that his department had made. He needed this money to soften the blow but came up against George Osborne and the steely men of the Treasury—male judgments being passed on women’s lives. He got only a third of the £3 billion he asked for and thus was the crisis launched.

Like any good film, this one will fill in the background: the genuine poverty that WASPI women are suffering because they were not given time to plan. We will see piles of brown envelopes stacked up, not delivered or left unopened at the wrong addresses. I have had arguments made to me that the news of the changes was in fact dispatched to the women concerned. Perhaps the film will show us the many ways the post can go astray and publicity campaigns be overlooked. We will see women who were facing retirement at 60 suddenly trying to extend their employment and being refused, trying at the jobcentre and suffering the humiliation which at their age is deeply distressing for them.

I can imagine the story being told of one such character—let us say she will be played by Julie Walters. She left school at 15, has worked all her life since, paying the contributions expected of her from her meagre wages, and now she is bewildered that the world is denying her the support she had always been led to believe was hers by right. We can imagine the brutal cross-examination at the jobcentre—Simon Russell Beale in a cameo role, I think—and the requirement to seek out employment before she becomes eligible for any benefit to ease her poverty.

We now live in a time that is finely tuned to the lives of women and how, simply because of their gender, their experiences of life are different from those of men in so many ways—equal pay, sexual harassment. We are increasingly conscious that simply because you are a woman you should not be singled out for particular treatment—of whatever kind. There is a groundswell of popular feeling that this should not be so. The WASPI women were born long before the equal pay legislation and well before the Equality Act. They have lived their lives under the disadvantages that were once the lot of all women. The pensions legislation perpetuates that disadvantage—no adequate notice, no time to prepare and no adequate transitional arrangements to ease any hardship. The various suggestions that have been made for transitional arrangements do not meet their needs. They now ask to meet the department to discuss and resolve this continuing and shameful situation.

Only last month there was a majority of 288 votes to none in the other place for the Motion calling on the Government,

“to improve transitional arrangements for women born on or after 6 April 1951 who have been adversely affected by the acceleration of the increase to the state pension age”.—[Official Report, Commons, 29/11/17; col. 366.]

The film poster might well read: “They were old. They were women. They were condemned to be poor”. I appeal to the Minister to make sure that this does not happen.

[Baroness Stedman-Scott (Con)]

My Lords, I respectfully remind noble Lords that this is a timed debate and the noble Baroness, Lady Altmann, is going to speak in the gap, so we need to take 30 seconds off the other speakers. If noble Lords could please stick to the time, that would be helpful.

Poverty

Baroness Stedman-Scott Excerpts

Thursday 14th July 2016 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I draw your attention to my entry in the register of interests.

I am pleased to be able to take part in this debate, on which I congratulate the noble Lord, Lord Bird. His call to action is welcome and refreshing, and his track record on this subject speaks for itself, because this is about a hand up, rather than a handout. I also pay tribute to the noble Baroness, Lady Sharp, who will make her valedictory speech later. Her passion and commitment to education—as we have already heard, education could have a major impact on the causes of poverty—have been unrelenting, and we thank her for that.

I must add my congratulations to our Prime Minister, Theresa May, with whom I have worked in the past on social justice issues. My first-hand experience tells me that her commitment to tackling the root causes of poverty in the most effective way possible has a long history, and I hope it will result in a good destiny for those we are trying to help.

This is the nub of the issue. Many on the left and the right of politics were taken aback when the Joseph Rowntree Foundation found that the Labour Government’s child poverty strategy—albeit that they had the very best of intentions—had started to run into trouble as early as 2004-05. The key turning point was well before the recession, when poverty, unemployment and property repossessions all started to rise. That child poverty strategy, based very largely on income transfers, had in place measures and targets which enabled the Government to monitor their progress. It was through reporting on their own measures and targets that it became objectively clear that a new approach was needed.

This Government are in the process of bringing about the radical change needed to tackle poverty effectively. I would be very interested to hear about progress to achieve this from the Minister. It will come as no surprise to anybody in this House that I fervently believe that one of the best routes out of poverty is to have a job which pays a decent living. We also need to embed in the education system and its curriculum the fact that we want to prepare our young people for work. We need to teach young people to learn and to earn a living—and the earlier we start this, the better, because prevention is better and more cost effective than a cure.

I was thinking about two aspects of this change process in particular. First, I am a passionate believer in this Government’s shift of focus to life chances and regret that I was unable to speak in the very good debate on this subject led by my noble friend Lord Farmer in May of this year. I believe that the much-anticipated life chances strategy was to be unveiled straight after the referendum result. Of course, the Government have had one or two even more pressing priorities since then. Can my noble friend the Minister give us some indication of when we can expect to hear about this vital aspect of their agenda, as mentioned in the Queen’s Speech and, if I understand correctly, in the outgoing Prime Minister’s last Cabinet meeting?

Secondly, and related to this, the Welfare Reform and Work Act introduced new measures on educational attainment and employment so that progress, or indeed regress, could be tracked. Income-based measures have also been retained but targets were dropped because they cannot be guaranteed to drive effective action to improve life chances. I am of course summing up hours of expert debate in this Chamber, so I hope that noble Lords will bear with my somewhat crude synopsis.

It is vital that the impacts of government and other policy and wider socioeconomic developments can be accurately discerned through measurement. However, we cannot go from simple income measures to equally simple educational and employment measures and expect to gain a sufficiently rich picture of the actual state of the lives of the very many people who are struggling with the effects of poverty in this country today. We need to develop—and continue to develop—the best indicators in these broad areas as well as in issues such as family breakdown, lack of skills, drug and alcohol addiction, poor mental health and personal indebtedness. That is a long and certainly not exhaustive list of what is increasingly referred to as social metrics.

My noble friend Lady Stroud recently set up a Social Metrics Commission with the intention of having something that, as she said,

“incentivised the right behaviours for government, incentivised the right behaviours for people in disadvantaged backgrounds, and genuinely tracked a group of vulnerable people, that we were concerned about, and who without any other form of external intervention, were not going to move”.

I believe her aim is that the commission, which is wholly independent of government, should come up with an authoritative set of indicators which will act as challenges to policymakers as to where they should focus. Can the Minister inform the House of his view on the importance of developing such a set of metrics? Will this help to drive the paradigm shift which is surely needed, if the welcome words of our new Prime Minister are to translate into the necessary action to transform our society?

There are some factors influencing poverty which we cannot measure but which, when they are missing, certainly have an impact on the poverty bottom line. I talk about financial poverty, but in my experience there are other poverties: there is a poverty of aspiration, where people just believe aspiration is for everyone else and not for them; there is a poverty of inspiration, and we have a responsibility to inspire people to believe that life can be better and that they can do it; and there is a poverty of determination—why should I bother? We should and must bother to make sure that we identify the causes of poverty and do something about it, so that people can really aspire to a better life.