Draft Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018
Guy Opperman Excerpts(8 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the Committee has considered the draft Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018.
It is an honour to serve under your chairmanship for the first time, Mr Wilson.
The regulations were laid before the House on 18 December 2017, and they deliver a commitment that was made to the House on 15 September 2016 to introduce a cap for long service in the Pension Protection Fund and the financial assistance scheme.
The Government have listened carefully to stakeholders, and a stakeholder consultation took place between last September and October on the draft regulations, which apply to those with long service in a single pension scheme.
The Committee will agree that it was right for the Blair Government to create the Pension Protection Fund and the financial assistance scheme. All successive Governments have supported both schemes, which ensure that individuals who have saved for their retirement during their working lives receive assistance if their pension scheme winds up underfunded.
The regulations increase the maximum amount that an individual can receive from the financial assistance scheme if the individual has long service in an eligible pension scheme. Those who are disproportionately affected by the cap on the amount of assistance payable to an individual member because they have long service in a single scheme will have their maximum cap amount increased. The cap is currently £34,229 at age 65, and reduced if a member opts to receive their assistance early. The cap helps to limit the costs of the FAS, which is funded by the taxpayer.
Individuals accrue high pensions for two reasons. Some will have been high earners, in which case they have generally had opportunities to secure alternative savings for retirement, but others will have worked for the same employer for a long time and consequently may have little or no other private pension savings to offset the shortfall between the capped assistance and what they had expected from the pension scheme had it not failed.
This legislative change will benefit the second group by ensuring that an individual’s long service in a single scheme is not disproportionately affected by the cap. The maximum amount of assistance that is currently paid to an individual will be increased by 3%, funded by the taxpayer, for each full year of pensionable service above 20 years, subject to a new maximum of double the standard FAS cap amount. In those circumstances, I commend the regulations to the Committee.
Guy Opperman
I am grateful for the hon. Gentleman’s questions. Let me address them briefly in reverse.
On Port Talbot, the reality is that members of the British Steel pension scheme who do not opt to enter the BSPS2 opt-out will go into the Pension Protection Fund, so they will not be affected by the financial assistance scheme.
On data, the hon. Gentleman raises a fair and legitimate point that has concerned successive Governments. I know that he is a massive supporter, as I am, of the pensions dashboard, an effort from the Government and from all organisations that run pension schemes to make data accessible on a uniform platform. We have launched that initiative and the Department for Work and Pensions is taking it forward. I will happily set out more detail in writing on that point and others, but to put it bluntly, we all agree that data needs to be improved and made accessible in a single portal. We will report to the House before the end of this term with the results of the DWP feasibility study on the dashboard. We hope to take it forward in 2019.
On the assessment of the losses to members from the closure of the FAS, 10 years’ notice of the closure was given—that was widely publicised in 2016. The hon. Gentleman also raised the impact on social security benefits of failure to seek access to the FAS. I reassure him that since it is the responsibility of the scheme trustees to apply to the FAS and there is no requirement for individual members to do so, it is extremely unlikely that failure to apply to the FAS would have an impact on a member’s social security benefits.
I accept entirely that there may be some outstanding matters on which I will need to double-check that I have responded to the hon. Gentleman, and I shall do so in writing. I believe that the regulations strike the correct balance between securing meaningful income in retirement for members compensated by the financial assistance scheme and managing the cost to the taxpayer. They show that we have decided to act to fix a long-standing problem with a scheme that has long been supported—and rightly so—by successive Governments.
Question put and agreed to.
Financial Guidance and Claims Bill [Lords]
Guy Opperman ExcerptsMonday 22nd January 2018
(8 years, 2 months ago)
Commons ChamberRead Full debate Financial Guidance and Claims Act 2018 View all Financial Guidance and Claims Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 70-I Marshalled list for Third Reading (PDF, 106KB) - (20 Nov 2017)
Yvonne Fovargue (Makerfield) (Lab)
It is a pleasure to follow the hon. Member for Chippenham (Michelle Donelan). Unsurprisingly, I will talk about debt later.
I welcome the thrust of the Bill. Consolidating the three bodies into one makes sense, but the new one must be well run. It may be a little churlish, but I would point out that the Money Advice Service has rightly been criticised over the years, not least in this place, for its attempts to duplicate the work undertaken by more experienced agencies that are better known to the public. It has spent an inordinate amount on a fancy website and on television adverts—£26 million in one year—which did little to raise its profile. After all, who apart from me remembers, “What would MA say?” in its adverts? I remember that only because I used to swear at the television when they came on.
The new body has to be leaner. The thrust of its role must be to facilitate the work of others. That is where the money should go: not on promoting itself—not on fancy adverts—but on facilitating the work of others that already have brand recognition. Frontline delivery should be key, and it should not duplicate existing services, but focus on filling the gaps using existing high-quality not-for-profit providers.
I am a little alarmed that the recent contract round included for-profit providers. I worked at a debt advice charity when A4E got contracts, and I remember what a disaster it was during those contracts. Given the recent privatisation of Carillion and the problems it has had, perhaps we should focus on not-for-profit agencies that have existed for a very long time. In fact, the 80th anniversary of Citizens Advice is coming up shortly. It has existed for over 70 years with very little funding, so it—we—can manage money.
Clause 3(10) makes it clear that the new body needs to “work with others” in carrying out its strategic function. I interpret this as meaning that it should take a collaborative approach, and I hope that that will be the case. Any standards put in place should be designed in conjunction with the relevant providers and other bodies, and designed around people’s needs—those of the people who use the service and of the people who deliver it—and what works in practice. I must say that quantity does not always equal quality and good outcomes for people using the service.
There should be different channels with different funding. People may sometimes want to start on one channel and move to another. Face-to-face access can be more important, but people sometimes need an initial contact. As I always say, it used to be a black joke in the citizens advice bureau where I worked that if someone walked in with a carrier bag with unopened bills, we would say, “Aha! That’s a debt client.” If such people cannot even open their bills, they are not going to go online.
The object of the single financial guidance body is to ensure that the public have access to good-quality, free and impartial financial guidance, pension advice and debt advice. That aim is fine, but if the new body is to work well, we must ensure that its objectives and functions are clear and comprehensive; that the governance and oversight structure, under the Department to which it is responsible, is robust; and that it does not stray into trying to raise awareness of itself and conduct its own research. I want the body to have a laser-like focus on commissioning high-quality, independent services that will help more people to avoid financial difficulty and debt.
Improvements were made in the Lords to the Bill as originally drafted, and I welcome them. For example, the consumer protection function is really vital, and I hope that the Government will not to remove the provision when the Bill goes into Committee. The same goes for cold calling. That amendment gives the new body the power to advise the Secretary of State to ban cold calling for pensions.
We have heard enough on both sides of the House to be able to say that such a ban should apply across the board. There is a strength of feeling in favour of saying that cold calling is not helping consumers or anyone else. I get cold calls asking whether I have had an accident, but I have not had an accident in my car—touch wood—for 25 years. When I had such a call last week, I got the name of the company and its telephone number, and I reported it to the Telephone Preference Service, but the TPS still could not find the company—it was a shell company—and that is not good enough.
To be fair, the Minister in the other place did listen, and on Third Reading the Government introduced their own amendment to add the objective that the new body should bear in mind
“the needs of people in vulnerable circumstances”.
That is a real move forward, but it would be good to link this more explicitly with the promotion of financial inclusion, and it is a real shame that that was missed. It is a real boon to have Ministers with responsibility for financial inclusion—they are a bit like buses: we wait for one, and then two come along at once—but there is a worry that something may fall through the cracks. I believe that the Lords Financial Exclusion Committee, which looked at this issue, was right to say that there should be a financial inclusion Minister who works across the board. How many Departments have been mentioned already today? We have heard about BEIS, DCMS, the Treasury, the DWP and the Ministry of Justice. We need somebody who can look at this across all Departments and have a proper financial inclusion strategy.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I merely make the point that my hon. Friend the Economic Secretary to the Treasury and I will be hosting the financial inclusion policy forum together. Surely the whole purpose of the response to the Financial Exclusion Committee’s report was to ensure joined-up Government by the two principal Departments holding other Departments’ feet to the fire, and I assure the hon. Lady that that is what we intend most fully to do.
Yvonne Fovargue
I am very pleased to hear that, but I think financial inclusion is so important on so many levels that it needs a Cabinet position, and having one Minister responsible for it would be really helpful.
I am pleased to hear about the breathing space, for which there is cross-party support. It is long overdue, and we need to ensure that it is up and running as soon as possible. We should not really wait for the creation of the financial guidance body as is proposed in the Bill, because that will be at an uncertain date and we need a timeframe now. After all, six in 10 people, while they are waiting for advice, take out more credit while they are not protected and are being chased by creditors, because it is very easy to promise something to the last person who rings them or knocks on the door.
We have to get the scheme details right, as has been said. It should not just act as a moratorium or a freeze. It should introduce a statutory repayment plan so that debtors are protected while they repay their debts, and the period needs to be long enough for the debt solution to be put in place after seeking advice. Six weeks is not long enough. Frankly, when somebody brings in all their debts, they often forget one. When people write to creditors, some reply immediately while others delay, thinking, “If we don’t bother, we can put a bit of pressure on.” Then the person finds another debt that they had forgotten about, so they have to write again and do another financial statement. Six months is the minimum amount of time to get everything back and to work out a proper financial statement that covers all creditors. Twelve months is probably reasonable, but there should be a minimum period and an option to extend. It should be a reward for those people who are doing the right thing and seeking debt advice.
The scheme needs to include all debt, including that owed to central and local government, which have the worst record on forbearance. In fact, the utility companies, which are often derided, are often better. On council tax arrears, bailiffs are called in far too early and far too often.
It is crucial that the Government get it right when replacing the Money Advice Service. Getting effective financial guidance to people early is key to improving household finances and economic security. We need a body that recognises that people often need help before they reach crisis point. Moreover, once they reach that crisis point, they need to be able to access debt advice quickly, and they need to go to the right body. It is after they have sought debt advice and have a financial statement that they will focus on budgeting for the future, so let us give them guidance after they have had debt advice, because that is when they will concentrate on household bills and what they will do in the future.
The scheme also has to recognise that it does not take a lot to push those on low income into financial difficulty and a spiral of debt. It only takes an income shock. It does not always have to be a big thing such as divorce, job loss or bereavement. It is often something simple such as the washing machine breaking down or expensive repairs to the car they need to get to work. A little resilience and savings would help to address such issues. I want a scheme that helps people save, and the new body could play its part in that. Yes, there is the savings gateway, but, frankly, that expects people to design their lives around the savings scheme, which will not work. People on a low income regularly have small income shocks and saving every month is not always feasible.
I am keen on the work of the Behavioural Insights Team and the interesting developments it has seen on how to save. For example, some supermarket bills say, “You have saved £2 by using this supermarket”, and that money could be put into a savings scheme. People have to be able to say, “This week I cannot or can afford to save.” A regular amount is not really possible in today’s climate.
The Bill has been improved in the Lords and I hope that it can be further improved in this place, to produce a Bill that makes a real difference to people—not just those on a low income, but anyone who receives an income shock, is having problems managing their finances or needs a bit of help budgeting. Financial education in schools is really important. It is important that we teach children how to deal with their finances, but when the washing machine breaks down, speed trumps any form of lessons, interest rates and so on, and that is why the companies say—we have seen the adverts—“I can get the money to you tomorrow.”
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
It is a pleasure to follow the hon. Member for Mid Derbyshire (Mrs Latham). I particularly welcome her comments about the Dying to Work campaign, which I am supporting in my constituency, too.
Crippling personal debt is a huge problem. The stress of not knowing what a letter contains and never being sure whether it is the bailiffs at the door can sour relationships, destroy families and make people ill. On this Government’s watch, household debt is now higher as a percentage of disposable income than at any time since 2008, and figures show that nearly 4,000 families in Hull live with problem debt. I therefore welcome the opportunity the Bill affords us to discuss such an important issue, and although it is a wide-ranging Bill, I will confine my contribution to clauses 7 and 8 on the statutory breathing space scheme.
Guy Opperman
I want gently to take issue with what the hon. Lady just said: the overall level of household debt is actually lower than it was in 2010 and 14 percentage points down in relation to quarter one of 2010, compared with quarter three of 2017. I am not sure therefore that her original comment was correct.
Emma Hardy
I do not mean that debt is higher as a proportion of income; I meant that it is higher as a percentage of disposable income, which the Minister will find it is.
The Government need to do three things with the scheme if they are properly to grant the breathing space people need. First, the scheme must be applicable to all relevant debts, including central and local government debt. To take one example, I recently met the organisation Every Child Leaving Care Matters, where I learned about the problems some care leavers face with things such as council tax obligations. After years of having these bills paid for them, they can often find themselves with mounting debt and without the support, including family support, that many of us here take for granted. That is why I was delighted when Labour-led Hull City Council announced recently that nearly 350 youngsters leaving the care system in the city would not have to pay council tax in Hull until they turned 21.
The scheme will be one of the first policies of its kind in the country when it starts next April and could mean that each of these people saves at least £900 a year. That is fantastic news for Hull but unfortunately not for the rest of my constituents in the East Riding of Yorkshire Council. We can end this unacceptable postcode lottery by supporting the Bill today. It is not just care leavers who are affected either—many people owe money to central and local government—and by ensuring that these debts are included in the breathing space scheme we can help care leavers and many others keep their heads above water.
Secondly, the scheme must make sure that the Government’s consultation, while thorough, is carried out as quickly as possible. There is a danger that the words,
“As soon as reasonably practicable”
in clause 8 will allow the Government to drag their feet in deciding whether to introduce this breathing space scheme. That must not be allowed to happen. The Secretary of State must act quickly to make sure that a scheme is put in place and that support is offered to those who need it now.
Thirdly, the scheme must ensure that the breathing space is long enough to provide time for families to stabilise their finances and that support is in place to allow them to pay their debts in a manageable way. It is no use holding back the creditors from the door for a randomly chosen six-week period if, at the end of those six weeks, the family can still not pay. If we are to set a breathing space, we must get the period right.
We must get this right. Not to do so would not be in the interests of our economy, which already struggles with high personal debt; it would not be in the interests of creditors, who, according to statistics from Scotland, collect more of what is owed to them when a payment plan is followed; and it would definitely not be in the interests of the many families in my constituency drowning in an ocean of personal debt. On clauses 7 and 8 at least, the Government find themselves in the rare position of enjoying cross-party support and with a rare opportunity to make my constituents’ lives a little easier. On their behalf, I ask the Minister and the Secretary of State to act quickly and, further to the points made by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) from the Front Bench, to take on board my points and grasp the opportunity being offered to help so many people.
Paul Masterton (East Renfrewshire) (Con)
I am pleased to speak in support of this Bill, which is of real significance to my constituents, given the demography of East Renfrewshire. I refer Members to my entry in the Register of Members’ Financial Interests. Prior to coming into this place, I spent nine years as a specialist pensions advisory solicitor and I was a member of various fun organisations such as the Association of Pension Lawyers—it is, I assure Members, as exciting as it sounds.
Part 1 of the Bill creates a single financial guidance body to replace three existing services. It is a much-needed move to make public financial guidance more accessible and more integrated. The services offered by the Money Advice Service, the Pensions Advisory Service and Pension Wise are somewhat disjointed, and there is a lack of communication and co-ordination between the three services. That is why only 3% of Pension Wise users say that they first heard about the service from the Money Advice Service, for example. As we are talking about public financial guidance services, those figures should be much higher.
That is why it is important that the three services are replaced with one body. Instead of having to contact two or more services for different aspects of financial guidance, people will be able to access one integrated and holistic service. It is absolutely critical that people across the UK can access independent, impartial and high-quality financial guidance.
It should go without saying that the ultimate measure of a guidance service is whether the guidance it provides is useful. I would, therefore, like the single body to be subject to rigorous evaluations based on consumer outcomes, not just outputs, to ensure that it is fulfilling its role. Much of the anticipated success of the new SFGB assumes that the new body publicises itself effectively. According to Which? around two thirds of people are aware of each of the three existing bodies. It is crucial that the single financial guidance body quickly achieves and then surpasses those levels of awareness, so that as many people as possible can access its services. Linking in with the pensions dashboard to give users a prompt would be a simple step.
Pension freedom and choice was mentioned earlier in the debate. It has changed the pensions landscape, but while Pension Wise is sensible Government policy, it is predicated on individuals becoming engaged investors, so it does not mitigate risks for most people. Research by the Pensions and Lifetime Savings Association found that only 22% of individuals used the Pension Wise website. That is nowhere near good enough if we are serious about ensuring people are going to provide a sustainable retirement for themselves.
In its comprehensive Financial Lives survey, the FCA identified further detail on the shockingly low levels of guidance usage among key age groups, with only 7% of all 55 to 64-year-olds using the service in the last 12 months. Perhaps it is not surprising that the PLSA found that, of the 3 million individuals between the ages of 55 and 70 with defined-contribution pots not yet in payment, 300,000 had taken no action whatever. Of those who had, 15% had used the new freedom to take more than their 25% tax-free cash lump sum. When they took that cash, 20% spent it all—what is sometimes colloquially known as the Lamborghini option.
Freedom and choice is great. I like it, but it brings with it the inherent risk of life-destroying choices, and the role of the SFGB has to be to provide guidance to try to prevent people from making those mistakes. Individuals face really complex risks when selecting how to use their pension savings. The language, concepts and risks are all unfamiliar to most people. How we use our retirement funds is one of the most important decisions we will make in our lives, and impartial, independent support to help us to make an informed decision is absolutely vital. It is clear to me at least that the new SFGB is integral to the success of freedom and choice. It has to be the anchor in terms of accessing high-quality guidance, so that people can evaluate their options and make best use of what they have saved.
Given everything I saw and experienced before coming into this place, I remain hugely attracted to the principle of default guidance, mirroring the approach taken to auto-enrolment, with statutory opt-out provisions. Clause 5(2) could be strengthened, as was recommended by the Work and Pensions Committee. The Minister has made some positive noises about that, but if we are looking for something as close as possible to a silver bullet, default guidance is probably it.
I would also question precisely how the SFGB is going to work alongside the new pensions dashboard. The dashboard is long overdue. It is a tool that brings together an individual’s pension entitlements—state, workplace and personal—and it will be really widely used. However, I have a slight worry that providers will be, and indeed are, setting up their own branded variations.
Guy Opperman
In contemplating my hon. Friend’s outstanding speech, let me help him with a couple of points. The dashboard is being proceeded with, and I will be making a statement to the House before the end of March, giving an update on the process by which these things are taking place. I will address some of the other remarks in his speech at a later stage.
Paul Masterton
I thank the Minister for his intervention. On that basis, I will move on to clause 4 and pensions cold calling.
Losses from pension scams rose to £8 million in March last year, and over £40 million has been lost to pensions liberation—something I dealt with a lot in practice —with individuals being tempted to transfer out of generous final salary schemes to access their pension pot prior to age 55, with the 55% tax charge that came with that.
Though big steps have been taken, the scammers are clever, and their approaches are becoming more sophisticated. Citizens Advice believes that around 2.4 million 55 to 64-year-olds received unsolicited contact about their pension in the year after pension freedom and choice was introduced. A cold call ban will narrow the scope for scammers, but if we have a default guidance requirement, there is more chance of the individual being alerted, before they take the option to transfer, to the risk they are facing.
Other Members have been through clauses 7 and 8 in detail. Like all things, the debt arrangement scheme we have in Scotland is not perfect, but it is a good place to start, as I think the Government recognised in bringing forward the provisions they did on Third Reading in the other place. A statutory debt management plan is a good thing, not least because it should avoid insolvency.
Under Clause 11, arrangements are introduced for the funding of debt advice in Scotland, Wales and Northern Ireland. The delivery of debt advice will be devolved, but raising a levy to fund the provision of that advice is reserved. I do have some concerns here. While I completely understand the rationale for devolving debt advice, given the other advice and guidance services commissioned from Edinburgh, Cardiff and Belfast, I am not precisely clear how this is going to work in practice.
The functions of the new single body fall into two categories: the debt advice function, under which it will provide members of the public only in England with information and advice on debt; and the strategic debt function. That strategic function is UK-wide, so we will have a situation where the single body’s functions in relation to financial capability, money guidance and the strategic debt function are UK-wide, but the debt advice function is not. That debt advice function really does have to dovetail with the UK-wide elements of the SFGB, irrespective of its delivery by the devolved Administrations, if this is going to work. I am not entirely clear how we are going to ensure that that happens.
Clauses 10 and 11 require the SFGB to set and enforce standards across the debt advice partners it commissions, because debt services are predominantly provided by service providers, many of whom operate cross-border. However, with the procurement and provision of debt advice services devolved, that role sits not with the SFGB in Scotland, Wales or Northern Ireland, but with the devolved Administrations. As was pointed out by many bodies in the consultation, that could raise issues. Of course, the devolved Administrations may want to tailor services to meet particular requirements, but there really is a strong case for ensuring that standards are aligned, both for providers who operate cross-border and for UK consumers. I ask the Minister to outline how he intends to work with the devolved Administrations to ensure that the commissioning of debt advice services is joined up as far as possible to ensure we get the dovetailing I mentioned earlier.
I am conscious of time, so I will not go into part 2 in much detail, other than to say that I am pleased that the Scottish Government have changed their position from not wanting part 2 to extend to Scotland to agreeing that it should now extend to Scotland. That, combined with some of the measures going through the Scottish Parliament at the minute, particularly around no win, no fee solicitors, will make a big difference on some of the issues around claims management companies north of the border.
The Bill has two pillars, both of which are much needed. Although the provisions allowing for a single, integrated financial guidance service are not the end of the story, they are important advances. I am absolutely delighted to support the Bill, and I thank the Minister and his team for bringing it forward. This is a really difficult area, and he has grasped the nettle—or, as we are in Burns season, the thistle—and brought to this House legislation with real intent and purpose, which will, along with the Government’s other initiatives on pension saving, make huge positive changes to how people monitor and manage their finances.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
It is a pleasure to reply to the debate on behalf of the Government. I thank the hon. Member for Birmingham, Erdington (Jack Dromey) for his kind comments. It is true that I set up a credit union and a community bank in Northumberland, which I am exceptionally proud of. As my hon. Friend the Member for Redditch (Rachel Maclean) and the hon. Member for Harrow West (Gareth Thomas) outlined, credit unions are a vital part of the financial makeup, and they will be covered by the single financial guidance body, as they are already by the Money Advice Service. There was a broad consensus in the other place, as there is in this place, that the Bill will address many of the issues that concern our constituents most deeply.
I have been delighted to listen to 21 speeches today, and to be invited to answer, by my counting, 119 separate questions, and to do so all in 10 minutes, so I will write to hon. Members if I do not manage to answer their questions this evening. I will of course write to the shadow Secretary of State on the individual matters she raised, and to the Scottish National party spokesman, the hon. Member for Airdrie and Shotts (Neil Gray). I make the fair point that the merger was sought by all three organisations concerned, and that funding to the devolved Administrations will most definitely not decrease; at the very least it will stay the same, but potentially it will go up.
I welcome all the speeches we heard today. It is hard to cherry-pick individual speeches, but my hon. Friend the Member for Chippenham (Michelle Donelan) made an outstanding contribution, showing her commitment to addressing problem debt. I can assure her that we will be proactive in this process. As she will be aware, the Bill was one of the first introduced by the new Government, having started its passage in the House of Lords. There was broad consensus in the other place that a single body is the best way forward, ensuring that people can easily access the free and impartial financial guidance they need to make effective decisions about pensions and money and to seek advice on debt.
The Government are genuinely passionate about the need to address financial exclusion. I am delighted that, as the Minister responsible for pensions and financial inclusion, I am taking the Bill forward, working hand in glove with my hon. Friend the Economic Secretary to the Treasury—we are very much co-ordinating a cross-Government approach to these issues. The Government are committed to providing people with access to the individual tools and services they need to plan their lives so that they feel included in society and avoid the unnecessary costs of financial exclusion.
I have had many dealings with the hon. Member for Makerfield (Yvonne Fovargue) on this issue, and I am delighted to be working with her on the Bill. I suspect that she will be on the Bill Committee, holding the Government to account but also taking forward these matters, which concern all of us on a cross-party basis. I utterly endorse her approach that the new body should have a laser-like focus on commissioning.
I was moved by the outstanding speech of my hon. Friend the Member for Mid Derbyshire (Mrs Latham), who offered a graphic illustration of the difficulties experienced by her constituent, Jacci. I endorse her comments. Having had cancer and recovered from it, I very much accept the points raised by Macmillan. However, there are provisions within existing legislation, and within the capabilities of the FCA—between the FCA’s principles of business and the work of Santander, which she rightly identified—that address these points and which really address the point about the duty of care.
We want people to be able to access the right guidance as a first step towards taking control of their finances. Part 1 of the Bill, which sets out the new body, will give people the opportunity to move in the right direction. It will continue to fund debt advice as well as to fund and evaluate financial capability programmes, including financial initiatives aimed at children. In this way, it will help people of all ages and backgrounds to manage their money better and make the most of the financial services and products available.
Part 2 of the Bill is equally important. It will enable the transfer of claims management regulations from the Ministry of Justice to the FCA, and it ensures that we have the transfer of complaints handling responsibility to the financial ombudsman and the introduction of new fee restrictions, with the 20% interim fee cap that many have outlined as the right way forward. We believe that these measures will genuinely tackle a range of conduct issues within the market, ensuring a tougher regulatory framework and increasing individual accountability.
My hon. Friend the Member for East Renfrewshire (Paul Masterton), in an outstanding speech—he keeps doing that—brought his professional, specialist knowledge to the debate, and I pay tribute to him for all the work he has done. Let me address the point that he and others have raised about the Work and Pensions Committee. We are certainly considering the Committee’s report in relation to clauses 4 and 5.
We support the need for default guidance for people wishing to take advantage of pensions freedoms. That is why the new body is specifically required to meet the Government’s guarantee to make free and impartial guidance available to those considering accessing their pension pots. The existing signposting regime already provides individuals with important information and encouragement to take advantage of guidance and advice before accessing a pension pot. However, the Government accept that there is merit in providing for people to receive a further nudge, and that this is the right direction of travel. To this end, my officials are reviewing the proposals put forward by the Select Committee, and we will respond to the House and to the Bill Committee in due course. On the pensions dashboard, we will respond to this House before the end of March. It is absolutely the case that we wish to take this forward.
The only discordant note in the entire debate was the speech by the hon. Member for Bristol North West (Darren Jones), who attacked my right hon. Friend the Secretary of State and sought to find out the current situation on debt. Households’ financial positions can be assessed by a number of criteria. However, the ratio of net wealth to income is at a record high, while debt interest as a proportion of income is at a record low—at 4.2% in quarter 3 of 2017 compared with 10% in quarter 1 of 2008. Total household debt as a proportion of income is down by 14 percentage points, comparing quarter 3 of 2017 and 2010, and further down compared with quarter 1 of 2008.
On breathing space, there is an endorsement from all parties that this is the right way forward. I entirely accept that there is still work to be done. However, I remind the House that there is also a statutory repayment plan, which was also in our manifesto. This Government made clear our support for breathing space in our manifesto and in the House of Lords.
With regard to the outstanding matters, a variety of points were brought before the House, and I will address them by writing to individual Members before the Committee sits.
We believe that this Bill is a sustainable legislative framework for public financial guidance. It will help to tackle a range of conduct issues within the claims management sector by ensuring a tougher regulatory framework that enhances consumer protection and professionalism. I thank all hon. Members for their contributions and look forward to the opportunity of further discussion as the Bill progresses. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Financial Guidance and Claims Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Financial Guidance and Claims Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 6 February 2018.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption that day.
(6) Standing Order No. 83B (programming sub-committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(David Rutley.)
Question agreed to.
Financial Guidance and Claims Bill [Lords] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Financial Guidance and Claims Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:
(a) any expenditure incurred in consequence of the Act by the Secretary of State or the Treasury; and
(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(David Rutley.)
Question agreed to.
Financial Guidance and Claims Bill [Lords] (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Financial Guidance and Claims Bill [Lords], it is expedient to authorise:
(1) the levying of charges under the Pension Schemes Act 1993 and the Pension Schemes (Northern Ireland) Act 1993 for the purpose of meeting expenditure relating to the single financial guidance body’s pensions guidance function;
(2) the levying of charges under the Financial Services and Markets Act 2000 for the purpose of meeting expenditure—
(a) incurred (or expected to be incurred) by the Secretary of State or the Treasury in connection with the single financial guidance body;
(b) incurred (or expected to be incurred) by the Scottish Ministers, Welsh Ministers or the Department for Communities in Northern Ireland in connection with the provision of information and advice on debt to members of the public in Scotland, Wales and Northern Ireland; and
(3) the payment of sums into the Consolidated Fund.—(David Rutley.)
Question agreed to.
Plumbers’ Pension Scheme
Guy Opperman Excerpts(8 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I commend my hon. Friend the Member for Angus (Kirstene Hair) on securing this debate on this very important subject. I assure her that I have been listening carefully to her contribution and to those of other hon. Members. I would like to try to provide some reassurance, explain some action that is being taken and answer the individual solutions that she has so sensibly set out.
Since my appointment last June, I have spoken and written to several colleagues in the House who have made representations—much as I have heard this afternoon—on behalf of their constituents. I utterly recognise that it is a worrying situation for the employers in the scheme and for the individual pensioners who are so affected. The previous Pensions Minister committed to look at this issue following previous debates, and we set out some matters in our Green Paper, which was published in 2017. As my hon. Friend outlined in her speech, we will shortly be setting out the response to that in a White Paper. Although I cannot say in advance what the White Paper will say in detail, I will address some of the issues that she has raised. I will also attempt to demonstrate the difficulties we face in what is clearly a very complex area.
Let me first address who this matter affects; there are effectively four or five parties. There are the employers, who continue to be involved with this scheme, and the trustees, who are responsible for ensuring that the pension scheme is run properly and that the members’ benefits are secure. More specifically, there are the members themselves, who have worked hard to build up a pension and deserve to have it paid in full. I should also mention the PPF, which provides vital protection to members of pension schemes whose sponsoring employer becomes insolvent. However, the PPF is funded by levy payers, which are of course other pension schemes, and their sponsoring employers. Therefore, any changes would have a wider impact on the financial levy of other pension schemes and consequences for the amounts that they would have to pay. By any interpretation, this is a complex situation, and building a consensus solution that is fair and equitable to all is extremely challenging. We have to be conscious that this scheme is one of many multi-employer schemes, and that any changes for this particular scheme—however worthy and important it may be—has consequences in some shape or form for other schemes.
It is important to remind hon. Members of the background to this issue. The original legislation was introduced to protect members’ pensions, and was then strengthened in 2005. A key principle is that employers cannot walk away from their obligations if they have promised a pension to their employees. Before they do, they must ensure that members’ pensions are paid in full. In a single employer scheme, this would be through buy-out with an insurance company. The similar arrangement in a multi-employer scheme, as we have here, is the payment of an employer debt. This helps to ensure that members receive the pensions they have worked for and been promised when their own or former employer ceases to participate in the scheme.
The current regime is also designed to protect those employers who remain in the scheme and are also a party to this problem; they would be left to pick up the shortfall left by departing employers. The Government estimate that there are about 25 other multi-employer schemes with a design similar to that of the plumbers’ pension scheme. It would be difficult to consider introducing specific legislation about one particular scheme’s problems, especially as, since 2005, many similar such schemes have paid their section 75 debts and complied with the current legislation. That includes employers who were personally liable for any debt they may have owed.
There are also nearly 1,000 “last man standing” multi-employer schemes in total. To comply with legislation, a debt should be calculated when individual employers ceased to participate in a multi-employer scheme. It is with regret that, since 2005, the trustees of the plumbers’ scheme have been unable to calculate or collect the debts, so the scheme has not been able to provide any estimates on the levels of potential debts. It is therefore absolutely important that all concerned do not create any unnecessary anxiety by speculating about the size of any potential debts before they are calculated. I am pleased that this week the scheme that we are concerned with has announced plans to consult on a methodology for calculating debts in February. That is long overdue. It is vital that that work is now done urgently so that all concerned about all aspects of the scheme, and on all sides, can work together to agree a way forward with employers affected.
I want to use this debate to try to suggest possible solutions and to answer the laudable recommendations made by my hon. Friend in her outstanding speech. Employer debt legislation applies to all schemes, not just the plumbers. The Government are fully aware of the issues that employers have faced in complying with this legislation. A significant number of changes have been made to legislation, in response to representations made by employers, whereby only part of the debt or no debt may be payable. Those arrangements are available under current legislation and are being used right now.
My hon. Friend the Member for Stirling (Stephen Kerr) and the hon. Member for Arfon (Hywel Williams), whom I know well, mentioned plumbers who may be personally liable and are genuinely worried that they may lose their homes. It is worth pointing out that the majority of employers in this scheme are limited companies and are protected through limited liability, but I turn to the situation affecting unincorporated and incorporated employers.
For those who may be personally liable, there is already legislation that could assist. The personal assets of an incorporated employer are protected. Employer debt valuation is not required for an employer to become incorporated. My hon. Friend the Member for Angus mentioned the flexible apportionment arrangement. This is already available in legislation and can be used to help unincorporated employers incorporate without triggering an employer debt. The arrangement has been used by employers in this scheme and is one of the arrangements that can be used to help unincorporated employers, some of whom have been mentioned in correspondence to me and in this debate, provided that the scheme is no worse off from a funding perspective.
I turn to my hon. Friend’s point about the funding test. The Government believe that it would be wrong to remove the funding test as it provides an important protection for both members and the remaining employers. The plumbing pension trustee has a streamlined flexible apportionment arrangement process in place to help small employers wishing to incorporate. Individuals who want more details on this arrangement should contact the plumbing pension scheme to discuss their situation and whether an FAA can help. I urge individuals worried about their personal liability to contact the scheme to discuss their situation in more detail.
Once the debts have been calculated, the scheme trustees can also use their discretion not to pursue a debt when they expect that doing so would represent a disproportionate cost to the scheme.
I turn now to the key issue of a deferred payment scheme. We have recently consulted on regulations, including a new deferred debt arrangement, that will enable employers in multi-employer pension schemes to defer the requirement to pay an employer debt in some circumstances. This is a further tool for those affected by this problem. We aim to introduce these regulations in April, which will provide valuable breathing space for employers, so that they can consider their options on how to meet their obligations.
The issue of orphan liabilities was raised, as well as those relating to members whose employers no longer participate in the scheme. I am aware that the scheme would like to exclude orphan liabilities from the calculation of employer debt. That requirement to meet a share of orphan liabilities is common to all multi-employer schemes and is an integral part of member protection. I understand that the scheme has substantial orphan liabilities from employers that have departed it, but it is important to note that these liabilities are dated from the period both pre and post-2005. Changing legislation to enable schemes to accept less money when they are underfunded simply passes more risk on to members as it moves schemes further away from being able to secure members’ benefits in full.
I await the White Paper, but the Government’s provisional view is that it would not be right or fair to pass this burden on to the PPF and its levy payers, which are, of course, other pension schemes, and their sponsoring employers, who have no connection with, or responsibility to, the scheme. The legislation only requires departing employers to pay an employer debt when there are insufficient funds in the scheme to secure members’ benefits in full.
Several people talked about the funding of the scheme. In 2014, as an ongoing technical provision, the scheme was funded to the tune of 101%, but on a buy-out basis, it was deficient by 25%, hence the difference in the valuation and difference of comprehension on that point. That also answers the question from the hon. Member for Kilmarnock and Loudoun (Alan Brown).
It is accepted entirely that this is a very complex area in which there is no quick fix; no solution is pain free. It is only right that any changes should be carefully thought through, proportionate and justified. The Green Paper explored many of the issues facing defined benefit schemes. In particular, consolidation could provide a long-term solution for schemes currently unable to afford a full buy-out. Further work is being done on this, and it would not be right to pre-empt the outcome, but the White Paper will be delivered in the fullness of time, relatively shortly.
Alan Brown
I appreciate the fact that the Minister says the White Paper will come shortly. Will he say how soon and what the timescale will be for legislation after that? That is the important thing. Also, I am bringing forward a 10-minute rule Bill on this issue, and I would be happy to work with the Government on aspects of it, if he is willing to do that.
Guy Opperman
The hon. Gentleman asked me three questions. I will write to him with a bit more detail, because the time available to me is limited. The White Paper will be delivered at some stage this spring. Spring is an elastic term in the House of Commons, as he will understand, but it will certainly be delivered before the summer period. I look forward to his ten-minute rule Bill.
To be fair to my hon. Friend the Member for Angus, she has set out a number of positive solutions, some of which we have been able to take forward. I am aware that there is an all-party parliamentary group and I am happy to meet the group to discuss the matter in more detail. I will certainly write to individual colleagues with more detail on what we have discussed today.
I congratulate my hon. Friend on bringing a very important matter to the House. I want to make it absolutely clear that we accept that this is a complex but very upsetting situation for many of our constituents. We have all had individuals attend upon us with a file of papers and say, “Please help me sort this out.” I appreciate that problem and welcome the fact that she has taken the time to bring her constituents’ concerns to the House. I hope that I have provided some comfort about what we are doing now, some aspiration about what is coming in April and the opportunity to address the problems raised by individual constituents, because we take this matter very seriously.
Question put and agreed to.
Oral Answers to Questions
Guy Opperman Excerpts(8 years, 4 months ago)
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Alan Brown (Kilmarnock and Loudoun) (SNP)
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I receive a variety of representations, whether that is orally, in correspondence in writing, or in debates.
Alan Brown
I thank the Minister for that non-answer. Figures I received from the House of Commons Library show that tax giveaways on things such as inheritance tax and corporation tax will cost the Treasury over £60 billion by 2025. Should a caring Minister and Secretary of State not argue that, instead of giving money to the rich, they could use it for transitional arrangements and ending austerity?
Guy Opperman
I refer the hon. Gentleman to two particular points. The first is that we have differing views on taxation. The Government believe that cuts to corporation tax assist job creation—the jobs we need to pay for the public services we have. Secondly, I refer him to the fact that, under the letter of 22 June from Jeane Freeman, my opposite number, the Scottish Government have powers in terms of working-age people and to take action on the specific points that he keeps raising, but that the Scottish Government fail to do anything about.
Stephen Lloyd (Eastbourne) (LD)
As the Minister will be aware, it was clear in last week’s debate that a number of colleagues behind him on the Government Benches supported the call from a lot of colleagues on the Opposition side of the House for the Government to look at transitional arrangements for WASPI women. I therefore ask the Minister, as I did last week, why not call a binding vote so that the House can advise him to do the right thing for WASPI women?
Guy Opperman
In days gone by, the Liberal Democrats were a party of fiscal discipline. In 2011, when this matter last came before the House for debate, the hon. Gentleman and I accepted the need to take the decisions that were made, and he joined me in the Lobby to vote for them. It is a shame that he has forgotten those views now.
Kevin Foster (Torbay) (Con)
Luke Graham (Ochil and South Perthshire) (Con)
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
Since 2012, 7,000 employees in Ochil and South Perthshire have benefited from a workplace pension through automatic enrolment. Our thanks are also due to the 820 local employers. State pension has risen by £1,250 since 2010, but we want to do more. We are extending auto-enrolment to 18 to 21-year-olds in his area, where we also have targeted interventions for the self-employed that I believe will be of assistance.
Alex Cunningham (Stockton North) (Lab)
The Secretary of State will be aware of the crisis engulfing members of the British Steel pension scheme, with advisers cashing in by persuading them to sink their pensions into all manner of dodgy, high-cost schemes, and he will be aware of the Financial Conduct Authority’s apparent failure to deal with the situation effectively. He will know that today the negotiations on the future of the universities superannuation scheme are coming to a head, with the threat of industrial action—something that should be interesting the Government. I am surprised that he is simply sitting back and leaving these matters to those who are directly involved. Surely, he can tell us today how he is going to get involved and take action to protect members of both schemes.
Guy Opperman
The position in relation to both matters is that they are worked through with the Pensions Regulator and the Pension Protection Fund, particularly in relation to British Steel, to ensure that members get information on the effect on their pension rights of staying with BSPS or moving to BSPS II. That includes newsletters, a website and bespoke option packs. The Financial Conduct Authority has also stepped in and banned a variety of organisations, and it is providing proper advice.
Henry Smith (Crawley) (Con)
Julian Knight (Solihull) (Con)
Does the Minister agree that auto-enrolment has been a success to date and it is right to lower it to the age of 18, but that politicians—of all hues—and the pensions industry must work together to meet the savings and pension challenges facing this country?
Guy Opperman
I could not agree more with my hon. Friend. I am delighted with the fact that we now have 9 million people signed up to auto-enrolment, utterly transforming workplace pension savings. In his constituency, 8,000 employees and 680 employers have signed up—and great credit to them.
Naz Shah (Bradford West) (Lab)
Pension Equality for Women
Guy Opperman Excerpts(8 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
The hon. Member for Kilmarnock and Loudoun (Alan Brown) will be aware that in 2007, after 10 years of a Labour Government, the then Government considered all matters of pensions legislation and passed the Pensions Act 2007. During their 13 years in power Labour Members had total capacity to do something about what they now say is not appropriate. With respect, there is a legitimate point to answer.
Several hon. Members rose—
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I congratulate my good friend the hon. Member for Easington (Grahame Morris) on securing today’s debate on the state pension age and the 30-odd colleagues who have spoken.
The decisions by successive Governments concerning the rise in the state pension age were reached by reason of equality legislation, increased life expectancy and sustainability of the state pension. Since world war two, we have seen huge changes in life expectancy. Thanks to a better NHS, changes in the job market and improvements in medicine, there have been improvements for men and women such that they are living longer, staying healthier for longer, and leading far more active lifestyles, regardless of age. People living and staying healthier for longer is to be welcomed, but the Government must not ignore the fact that it also brings enormous financial and demographic pressures. The key choice that a Government face when seeking to control state pension spend is to increase the state pension age or pay lower pensions, with an inevitable impact on pensioner poverty. The only alternative is to ask the working generation to pay an ever larger share of their income to support pensioners, as my hon. Friend the Member for Bury St Edmunds (Jo Churchill) made clear in her speech.
In July 2017, the Government published their first review of the state pension age, which set out a coherent strategy targeted at strengthening and sustaining the UK state pension system for many decades to come. It accepts the key recommendation of John Cridland’s independent review, which was to increase the state pension age from 67 to 68 between 2037 and 2039.
The review is clear about increasing life expectancy and the challenges it poses. People are living longer. Almost 6,000 people in the UK turned 100 in 2016, compared with 3,000 in 2002. By 2035, there will be more than twice as many people over 100 as there are now.
Stephen Lloyd
What does the Minister have to say about my two specific asks? First, the Government should give us a meaningful vote on this, because I know there is a lot of support on the Government Back Benches. Secondly, rather than giving one year of the corporation tax cut to business, I think business will be happy to give the money to WASPI women.
Guy Opperman
The hon. Gentleman and I both voted for the 2011 Act to increase the state pension age, with the circumstances that apply, after much consideration of the variety of options that had been proposed. He and I, and certainly the Scottish National party and the Scottish Government, have differing views on taxation, such as on whether it should support Trident, but, with respect, the tax reduction he proposes would reduce the job-creating power of the businesses upon which we rely for the jobs and public services we all wish to support.
Debbie Abrahams
Will the Minister acknowledge that, two days before John Cridland’s report was released, data showed that life expectancy at 60 is actually going down and life expectancy at birth is flat-lining? This is the only developed country where that is happening.
Guy Opperman
I am grateful to the hon. Lady for raising that specific point, because I genuinely believe she is scaremongering—[Interruption.] Oh, yes. On the issue of life expectancy, there are two fundamental sources. The first is the ONS, which has repeatedly made it clear that life expectancy is rising across the board. We cannot get away from the fact that the ONS reported only this month that life expectancy continues to rise.
The Labour party manifesto sought an independent review of all aspects of the state pension age. Well, the Government did that with the Cridland report, which makes it critically clear that life expectancy has increased. Life expectancy at birth in 2016, for example, was 91 years for females and 89 years for males. In 50 years’ time, by 2066, life expectancy at birth in the UK is projected to rise to 98 years.
Healthy life expectancy has also been increasing in recent decades. Healthy life expectancy at 65, as a proportion of total life expectancy, has been relatively stable since 2000. Healthy life expectancy at 65, according to the latest ONS statistics, has been increasing in Scotland in recent years, as has disability-free life expectancy.
Guy Opperman
If the hon. Lady will bear with me, I will answer her point.
In relation to specific areas of Scotland, the long and short of it is that I do not have the life expectancies for specific constituencies, as has been asked for, but in the Glasgow city area, for example, life expectancy at birth, according to the December 2017 ONS figures, has increased by more than four years for men. Life expectancy at 65 in Glasgow city is 15 years for men and 18 years for women, an increase on 2001 to 2003. [Interruption.] The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) asserts from a sedentary position that I am using the wrong data. The data I am using is what the Office for National Statistics has said and from the Cridland report.
Guy Opperman
I am conscious of your restrictions on the length of time available to me, Madam Deputy Speaker, so I will come back to the hon. Lady in a moment, if she will allow me.
The state pension was initially addressed in the 1995 Act. The need to do so arose because of life expectancy changes and the anticipated increase in the number of pensioners in the years to come. As I have said, the Labour Government introduced the Pensions Act 2007, which again increased the state pension age. I should point out that the Labour party has now resiled from that position and seeks to argue that both the Blair and Brown reforms were wrong.
The Government listened to concerned voices during the passage of the 2011 Act, as I indicated to the hon. Member for Easington. The proposed two-year acceleration was reduced to 18 months, benefiting more than a quarter of a million women, with the concession being worth more than £1 billion. Going as far as some campaigners have argued—he mentioned early-day motion 63 and what he described as “full compensation”—would represent a cost of more than £70 billion to the public purse. With respect, the requirements those changes would make in relation to taking into account the difference between men and women would require new legislation, meaning that an ongoing inequality would potentially be created between men and women.
Patricia Gibson
Perhaps the Minister could offer me some assistance. He talks about life expectancy increasing, and I do not want to argue the toss about whether it is or is not. I am curious about something, and I hope he will be able to explain this to me. Just because people are living longer, I do not understand why this particular generation of women should pay the price, given that they expected to receive their pensions at 60. The argument about life expectancy might be one about reforming pensions in the future, but we are talking about this particular group of women, who feel very let down and cheated because at 60 they have not got their pension.
Guy Opperman
I am conscious of Madam Deputy’s Speaker’s desire that I should end my speech speedily, so I will write to the hon. Lady with a detailed reply to the point she just raised.
I have barely had a chance to address the arguments made by my hon. Friends from Scotland, which include the point raised eloquently by my hon. Friend the Member for Moray (Douglas Ross) that Jeane Freeman, my opposite number as Pensions Minister in Scotland, has indicated that her Government have the powers to act under sections 24, 26 and 28 of the Scotland Act 2016. I stress the point strongly that there is no question but that they have this power, because this is not about dealing with pensioners as such; the provisions we are dealing with concern people who are of working age, according to the law. I rely strongly upon the words not of this Government but of the Scottish Government, as set out in her letter of 22 June.
The issue of notification was raised, and I can answer the points on that briefly. Clearly, there was massive parliamentary debate, on repeated occasions, in 1995. Thereafter, we saw multiple articles in the press and media; the distribution of a huge number of leaflets; a campaign in 2004 to educate people about their state pensions; adverts in a variety of ways; correspondence in two different ways, both prior to 2010 and after 2011; and state pension forecasts sent to 19 million people over the past 17 years.
I wish to make a couple of final points. We recognise that some men and women are forced to reduce their working hours or cannot work for reasons of sickness, disability or caring responsibilities. The Government are committed to supporting the vulnerable, and we spend about £50 billion a year on benefits to support disabled people, those with health conditions and carers, as my hon. Friend the Member for Eastleigh (Mims Davies) particularly mentioned. That equates to 6% of all Government spending. With increased financial pressures, we cannot change a policy that was implemented over 22 years ago and supported by all three political parties.
I finish with a point about life expectancy, as the hon. Member for Easington and I are good examples of that—we have both suffered from cancer. I am delighted to see that he has made a recovery from lymphatic cancer. I have made a recovery from a brain tumour. Those illnesses would have killed us both 30 to 40 years ago. There is no question but that the life expectancy changes are what has driven this approach on the part of successive Governments. With increased financial pressures, it would be unaffordable and not right, in the light of the changes we have had, to place an unfair financial burden on future generations.
Financial Inclusion
Guy Opperman Excerpts(8 years, 4 months ago)
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Jeremy Quin (Horsham) (Con)
I am grateful for the opportunity to raise the crucial subject of financial inclusion and the single financial guidance body. It has been more than two years since financial inclusion was considered by the House, in a Westminster Hall debate secured by my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd). He applied for the debate to draw Members’ attention to the invaluable work conducted by the Financial Inclusion Commission, the cross-party body on which he served. I have since had the honour of succeeding him in that role. The last two years have seen the publication of an excellent House of Lords Select Committee report into this issue.
We are approaching the halfway point to 2020 by when the commission still hopes to see a step change in financial inclusion. The commission’s report covered a wide range of recommendations and demanded that, by 2020, every adult should have access to objective and understandable advice on credit, debt, savings and pensions. Among other objectives, it also called for a specific Minister to take the lead on financial inclusion and financial capability. I am delighted that a Minister with just those responsibilities will respond to this debate, and I know that his task is to break down silos across the Government on this important issue. I congratulate the original authors of the commission’s report on achieving that objective, and I also congratulate the Minister. I know that he is deeply committed to this area and, as a former director of a credit union myself and the chairman of the all-party parliamentary group on credit unions, I recognise a kindred spirit given his extensive work supporting credit unions in his constituency.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
It is a fair to say that the work of the Financial Inclusion Commission—I have met many of its members—needs to be recognised. In relation to credit unions, it is right that we pay tribute to the work that my hon. Friend has done. Does he agree that we should laud the fact that credit unions now have 1.29 million members, that their members and loans have doubled since 2006, and that their deposits and assets have trebled? With respect, he is following on from the great work of my hon. Friends the Members for Worcester (Mr Walker) and for South Ribble (Seema Kennedy), who were outstanding chairs of the all-party group before him.
Jeremy Quin
I am most grateful to the Minister. He raises a valuable point about credit unions, although they are not the focus of this debate. I do not wish to push my luck, but I hope we will have another opportunity to discuss them in the future.
The Minister is right about the progress that has been made since 2006. The increase from 2% to 3% in the interest rate allowed for credit unions has helped to make them more sustainable. It has permitted higher dividends, while ensuring that credit unions’ borrowing rates are very competitive. Without wishing to go all Gilbert and Sullivan, there is something apt in making the punishment address the root of the crime, so I am delighted that funds recovered from convicted loan sharks will, from next year, help to pay for incentives for credit union membership in the communities on which loan sharks prey.
A financially inclusive system is one that is fit for purpose for all in society, regardless of their economic status. It is one in which individuals can participate fully and not face punitive restrictions in the financial products that they can access. It is also a system in which measures are taken to help to prevent people from falling into a downward spiral of financial hardship.
Every constituency MP knows the scale of the issues. There are approximately 1.5 million unbanked adults in the UK. According to Citizens Advice research, 13.5 million adults have difficulty managing money and making financial decisions. The ONS found that in the first quarter of this year only 2% of income was put aside as savings. The savings of those who do have them are often woefully insufficient to deal with life’s inevitable financial pressures—because of the breakdown of a washing machine or a car needed for work—through to more fundamental losses of income. The requirement for credit is therefore a given.
Financial exclusion can be further exacerbated by factors such as the high cost of credit and pay-as-you-go services. The commission estimated this poverty premium to be a cost of £1,300 a year to our poorest families. In the meantime, many from across the income spectrum lack good financial guidance at a time when the range and complexity of financial products has never been greater, and the need to make the right long-term decisions, in the light of increasing longevity, has never been more acute.
Financial inclusion is a huge topic, but the House will be pleased to hear that I intend to focus this debate on education, information and guidance. I was the a director of a credit union before entering this place, so I knew our sense of frustration—indeed, I am afraid, our sense of failure—at not being anywhere near as effective as we felt we should have been at persuading those in need of credit to use our cheaper community rates rather than accessing high-cost and high-risk lending.
The battle to ensure financial awareness has to start very early. I welcome the fact that the new national curriculum has made financial literacy statutory for the first time as part of citizenship education for 11 to 16-year-olds. I also recognise that improvements in basic maths, alongside the excellent results we have seen recently in literacy, are fundamental. However, I am afraid that focusing on secondary level may be too late. A report by the Money Advice Service found that financial habits are largely formed by the age of seven. Worryingly, a separate study by the Gambling Commission found that nearly half a million children as young as 11 are gambling weekly.
All we can do to increase financial literacy among children at primary school should be encouraged, and much can be done incrementally. I am aware that educational cartoons have been produced in Singapore and elsewhere to teach the basics of financial literacy at the very earliest ages. Simply having a single teacher in a school with the knowledge and understanding of how to teach financial literacy, who can act as a focus for provision inside that school, can be critical.
Any Member of this place knows how bewildering financial information can be to consumers. We all, in common with every citizens advice bureau in the country, are aware of the dreaded presentation at advice surgeries of a carrier bag full of financial information, much of which will be highly complex. We need to harness modern technology to help to provide our citizens with clear information about their financial position so that we help them to make educated judgments. Nowhere is this more apparent or more pressing than on pensions. All too many people suffer the scandal of lost pensions, while countless others are unaware of their post-retirement financial position until it is too late. I certainly know of examples of lost pensions from my own constituency.
It was a real pleasure to serve on the Work and Pensions Committee in the last Parliament. Our first report after I became a member of that Committee was “Pension freedom guidance and advice”, which highlighted the critical importance of the pensions dashboard for explaining clearly to consumers what they can expect and to ensure that they do not lose out.
I am delighted by the fresh impetus that the Minister has given the pensions dashboard. Bringing together data from 64 million pension pots is ambitious but necessary. Providing a single accurate and comprehensive source of pensions knowledge will be immensely useful to help to facilitate financial capability and retirement planning. I appreciate how complex a process this is and I have no wish to break the back of any camel. However, when the system is up and running, I want the concept to be extended to clarify for consumers with savings products, a mortgage or debts the full extent of their financial position, thereby helping them to plan accordingly.
On guidance, I welcome what is outlined in the Financial Guidance and Claims Bill and the Government’s plans, which have broad cross-party support, to create a single financial guidance body. This, too, is in keeping with the recommendations of the Financial Inclusion Commission’s report, and it has been welcomed by Which?, Citizens Advice and Age UK.
A lot of great work is conducted at a community level—I particularly draw hon. Members’ attention to the valuable work conducted by the Horsham debt advice service—but the scale of this issue requires support on a national level. I have witnessed at first hand the excellent work carried out by the Money Advice Service, the Pensions Advisory Service and Pension Wise. They are all superb in their different ways, but I am certain that a single body will provide a more effective means by which to impart co-ordinated and consistent guidance.
I am at one with Citizens Advice in seeing three aspects of the Financial Guidance and Claims Bill as particularly positive: the new body will support only advice that is free at the point of use and is independent; it has an objective of targeting help at those most in need; and it has a remit to support joined-up services and to fill gaps, not to duplicate current provision. I am only too aware of the other pressures on time in this Chamber, but I look forward to the Bill’s Second Reading in this place as soon as possible.
One of the Bill’s provisions begins the process of implementing the Conservative manifesto commitment to provide a debt respite scheme. Under the terms of the Bill, the Secretary of State must, within three months of the establishment of the body, seek its advice on the establishment of such a scheme. That will be an early test, and one to which a great number of us look forward to the SFGB and the Government rising.
This will be but one early example of the body’s strategic function to support and co-ordinate the development of a national strategy to improve financial capability. The SFGB will have to rise to the challenge outlined in research by Which?, which shows that only 36% of consumers use Government advisory bodies as an information source about their financial options.
Advertising and effective resourcing are key to ensuring high uptake, particularly among the groups who would benefit most from accessibility. Financial exclusion disproportionately affects lone parents, single pensioners and the long-term sick and disabled, and the active recruitment of those people requires the effective use of Government funding.
I would also like pensions guidance made much more widely available. Without wishing to be indelicate, Madam Deputy Speaker, I can say that the services of Pension Wise, determined by age as they were, are available to our excellent Minister, but not, alas, to his excellent Parliamentary Private Secretary and nor, surprisingly, to myself. The younger the age range, the more effective this service will be.
I finish where I began. The SFGB will have a role in advancing financial inclusion, as will the new financial inclusion policy forum, which will be co-chaired by the Minister and the Economic Secretary. Especially at a point when the interest rate cycle is turning, financial inclusion is of critical importance. I welcome the moves by the Government that are under way, but I welcome still more the further reforms that I look forward to the Minister progressing.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
It is a great pleasure to speak on behalf of the Government on the key issue of financial inclusion and the single financial guidance body, which we hope to bring before the House in the new year.
I thank my hon. Friend the Member for Horsham (Jeremy Quin) for calling the debate and for the contribution he made as a step-in member of the Financial Inclusion Commission, following in the footsteps of my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd). It is fair to say at the outset that I am deeply grateful to the commission’s authors, and I have met many of them, including Sir Sherard Cowper-Coles, who has been of great assistance to me in the five months I have been doing this job. He is part of the reason why we have a financial inclusion Minister at this stage.
It is an exciting time to be doing this job, in circumstances where we have over 8.5 million people automatically enrolled in a workplace pension and where we have the Financial Guidance and Claims Bill coming forward—it completed its passage through the House of Lords on 23 November, and it will come to this House in the new year. We are driving forward the points raised by my hon. Friend, whether on the pensions dashboard or the mid-life MOT.
I am particularly passionate about the need to address people’s financial inclusion and capability. If I may briefly digress and talk about my personal circumstances, I co-founded a local community bank in my constituency, in the north-east. Our community bank was launched in November 2015 by the Archbishop of York, John Sentamu. It was specifically tasked with trying to compete payday lenders out of business, as asked for by the Archbishop of Canterbury, Justin Welby. It has a small staff and an incredible team of local volunteers. It is fully accredited, with significant amounts of money deposited, and it makes low-cost loans to those who need them most.
I am no longer personally involved, because my ministerial role prevents me from doing so, but I do, as a Minister, want it to be my mission to champion such locally led positive solutions and to evangelise for savings and pensions. I pay tribute to all the staff who have helped so much in that institution.
The second institution I think it fair to thank is the Lords Committee that prepared a very detailed report in the 2016-17 Parliament on tackling financial exclusion. That was responded to by the Government recently. I pay tribute to the work the Committee has done addressing this issue. I also pay tribute to the Money Advice Service, the Pensions Advisory Service, Pension Wise and all their staff, because we would not be where we are today without their efforts. However, more particularly, those three organisations are particularly enthused by the opportunities that lie ahead with the single financial guidance body to address the issue we are all so keen to tackle: financial inclusion.
We are working very closely across the Government on this. It is sometimes argued—not, I accept, under this Government in any way whatsoever—that we exist in silos and that Departments do not necessarily speak to each other. I am particularly encouraged that the Economic Secretary to the Treasury and Ministers in other Departments are equally committed to addressing financial inclusion, and that we have a forum coming together to be co-chaired by the Treasury and the Department for Work and Pensions. That shows that we are jointly addressing this key issue.
We need to provide people with access to the tools and services that they need to plan their lives and to avoid the unnecessary costs that come with financial exclusion. It is also important, however, that people are confident that the financial system itself will work for them—that there is responsible capitalism, that they will be protected from practices that are a threat to their finances and that they can make financial decisions themselves that are appropriate throughout their lives. The single financial guidance body will be the key addresser of financial capability in the United Kingdom. We realise that not enough people know how to manage their money effectively. This body will ensure that those people, especially those who are struggling, are easily able to access free and impartial guidance to help them to make more effective decisions about their pensions and their money and to seek advice on their debt.
There has been widespread support for the measures contained in the Bill, which passed on a cross-party basis in the House of Lords after significant amendment and improvement. It is a credit to the Houses of Parliament that a Bill that started out as 19 clauses emerged from the House of Lords with 31 clauses, considerably amended but with great support from individual peers on all sides, as was borne out by Lord Stevenson noting that the Bill was strengthened
“not because of any particular line or argument in a political or wider sense but because…as a result, the lives of people right around this country would be improved.”—[Official Report, House of Lords, 21 November 2017; Vol. 787, c. 83.]
Jeremy Quin
I am grateful to the Minister for quoting Lord Stevenson, another member of the Financial Inclusion Commission, but I would like to bring my hon. Friend back to the importance of ensuring that this financial advice reaches those who need it most. I referred, for example, to the disabled, lone parents and single pensioners. It will be absolutely critical, as we measure the success of this body going forward, that it does reach the hardest-to-reach people who need its support the most.
Guy Opperman
It is interesting that my hon. Friend raises that point, because it was specifically addressed by their lordships in some detail. He will be aware that the new financial guidance body will simplify the existing public financial guidance landscape, making it easier for all people to access information and guidance.
Let me briefly address the statutory objectives and functions, because I think that that will reassure my hon. Friend on the point about those in society who are vulnerable. The single financial guidance body will have a number of statutory objectives: to improve the ability of people to make informed financial decisions; to support the provision of information, money and pensions guidance and debt advice in areas where it is specifically lacking; to ensure that information, guidance and debt advice is clear, cost-effective and not duplicated elsewhere; to ensure that information, guidance and debt advice is available to those most in need, particularly people in vulnerable circumstances; and to work with devolved authorities.
I stress that the chief executives of the three organisations—Michelle Cracknell, Jamey Johnson and Charles Counsell—all agree that bringing these organisations together and harnessing the product of the whole will enable specific opportunities to address this point. That is particularly appropriate given that one of the functions of the body is not only the protection of individuals as consumers but a strategic approach to ensure that this guidance is there. I hope that my hon. Friend is reassured that that is something that we massively support.
My hon. Friend raised financial education. The strategy behind the creation of the guidance body is to develop evidence that clearly shows which projects are successful and which are not. The Government want the body to prove what helps people to make better financial decisions throughout their lives, and then to deploy that understanding actively in its efforts in the area and share the knowledge as part of best practice.
The Government want the body to maximise the positive impact of financial education for children and young people, so that they are better prepared. We definitely see the guidance body taking forward the issue that my hon. Friend raises, to ensure that children are better prepared for financial challenges at any age. That strategic function is underpinned by the premise that, although Government bodies, industries, charitable functions and the voluntary sector are already doing excellent work, if they work together the impact will be that much greater.
I want to take the opportunity to celebrate the LifeSavers project, which I am pleased to say exists in my constituency. The organisation provides at primary level exactly the sort of thing that my hon. Friend described. The community bank of which I was a part is the provider of six LifeSavers programmes, which are supported by the Church of England and Virgin Money. There is literally a bank in the school, educating children about the importance of finance, loans, deposits and long-term saving, which is the way ahead.
A large number of schools are part of that project, and we are evaluating its impact. It is Treasury-supported to a limited degree. I have visited participating schools, such as Hexham East First School in my constituency, and the difference that the programme makes is off the charts. My hon. Friend will be aware that my right hon. Friend the Chancellor has provided a great deal more money for maths education, more maths teachers and support across the curriculum to ensure that that key point is addressed on an ongoing basis.
Briefly, I will mention other areas of the Bill that address some of the points that my hon. Friend raised. I believe that we all accept that problem debt is an issue for too many people. The Conservative party manifesto set out the commitment that the Government would adopt a breathing space scheme, to allow someone in serious problem debt to apply for legal protection from further interest charges and enforcement action for a period of up to six weeks. The Financial Guidance and Claims Bill will enable the Government to introduce such a scheme.
The breathing space scheme builds on the local work of organisations such as those that my hon. Friend mentioned in Horsham. It sounds as though they are approaching the matter in an interesting way. The Bill will build on the existing work of the Financial Conduct Authority, which has instituted rules. Also relevant is the fact that in October, the Treasury published a call for evidence on breathing space, and evidence is still being taken on the best and most appropriate way forward. My hon. Friend the Economic Secretary to the Treasury, officials and I have met the people behind the operation of the scheme in Scotland, which has already introduced a debt respite scheme and breathing space scheme.
The key to inclusion is access to engagement with savings and pensions. Surely, the game-changer on that over the past five years is the development of auto-enrolment, as part of a cross-party approach down many years. It is one of the unseen success stories of successive Governments, and it has engaged individual consumers and members of the public to an astonishing degree and reversed generations of decline in savings and pensions. The statistics bear some contemplation. We are about to approach the point at which 9 million people are auto-enrolled in a workplace pension. Hundreds of thousands of individual employers have signed up to the scheme, and it has not only totally stopped the rot in relation to pensions but reversed a long-term decline.
We are conducting an auto-enrolment review to assess where we are with the programme, and we will be considering a number of key areas. Those include the existing coverage, how to achieve the right balance between enabling as many people as possible to save and ensuring that it makes economic sense for them to be included, how we can improve engagement and how to strengthen the evidence base around contributions to support future decisions on contribution rates. I will report the findings to Parliament before the end of the year. We hope that the review will provide a clear sense of direction as part of the ongoing conversation.
I want briefly to talk about the pensions dashboard, which is an important part of the conversation about how we can better use technology. Just as the private sector has reformed the travel industry, insurance and so many other business, such that we now go online to access information, so we believe that the same will bring pensions into the digital age. The dashboard is an opportunity to give people access to their pensions data in a clear and simple form by bringing together savings information in one place online. It is an opportunity to give more people a sense of ownership and control over their pensions. This is a complex process, but I look forward to a massive meeting of stakeholders on Monday, to which hon. Members are most definitely invited. The good news is that the Department for Work and Pensions is taking this forward. We are utterly committed to the ongoing feasibility study and believe that by placing consumers at the heart of our approach, the Government, working closely of course with industry, regulators and other interested parties—notably, consumer organisations —can achieve the goal of such accessibility.
I want to make a brief final point about the mid-life MOT. It has struck me in this job that although we address individual issues, in relation to our health and our ongoing status quo as human beings—my GP regularly, and rightly, contacts me with ways to improve my health—we do not address our finances in a similar way. The concept of the mid-life MOT, as pioneered by John Cridland in his outstanding state pension review, published earlier this year, could enable us to better encourage and support people in preparing for later life and retirement in a holistic way. I encourage all private sector companies, through their human resources departments, to conduct mid-life MOTs— organisations such as Aviva are leading the way—and I certainly hope that the public sector will address those points as well. We believe that it is unquestionably a promising idea worth detailed scrutiny. Individual workers or employers could be provided with holistic advice and guidance to prepare for the gradual transition to retirement—whether at 45, 47 or 50—and it is something that the Government should be progressing.
It is often asked what brings us into politics. Social justice and financial inclusion are among the things that brought me into politics. When talk about the achievements of this Government and the coalition since my hon. Friend and my colleagues at my side—my hon. Friends the Members for Calder Valley (Craig Whittaker) and for North Devon (Peter Heaton-Jones)—first entered the House of Commons, and when we talk about extending free childcare, improving schools results, introducing the national living wage, creating 3 million jobs, reducing income inequality and record high household incomes, we should remember that they are not just statistics, but steps towards tackling injustice and spreading opportunity. I believe passionately that the Bill will enable us to tackle financial inclusion. I welcome the work of those who have taken us this far on the journey, but I also welcome the opportunity to report to the House on the progress we have made and the opportunities that lie ahead to tackle this fundamental issue of social justice.
Question put and agreed to.
State Pension Age: Women
Guy Opperman Excerpts(8 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
Since world war two, we have seen a dramatic change in life expectancy. We are living longer, staying healthier, fighting diseases that previously would have killed us and leading a more active lifestyle, regardless of age. Faced with demographic pressures and increased life expectancy and costs, successive Governments have acted. We must be realistic about the demographic and fiscal challenge that these changes create for us as a society.
Taking forward-looking action is critical to protecting the long-term sustainability of the state pension not only for today’s taxpayers, but for future generations. In July, the Government published their first review of the state pension age, which sets out a coherent strategy targeted at strengthening and sustaining the UK state pension system for many decades to come. It accepts the key recommendations of John Cridland’s independent review, which consulted a variety of people and organisations, including the Scottish National party—the bringing forward to 2037 to 2039 of the increase in state pension age from 67 to 68.
Julian Knight (Solihull) (Con)
Will the Minister explain to the House the potential debt impact on future generations of spending up to £39 billion reverting to the 1995 timetable, as well as of Labour’s plan to freeze any increases in the state pension age, which would cost hundreds of billions?
Guy Opperman
I am grateful to my hon. Friend for his intervention. I recognise that he has more than 25 years’ experience of working in the pensions industry through his previous journalistic work. The reality is that if the Pensions Acts 1995 and 2011 were to be revoked, it would cost well in excess of £70 billion. If we were to follow the path set out in the Labour party manifesto, which would keep the state pension age at 66, it would cost approximately £250 billion compared with the itinerary set out by the independent review commissioned by the Government and produced by John Cridland.
The Cridland review is very clear on that point. It says:
“In 1917 King George V sent the first telegrams to those celebrating their 100th birthday. 24 were sent that year. In 2016 around 6,000 people will have received a card from Her Majesty the Queen. In 2050, we expect over 56,000 people to reach this milestone.
Three factors are at play here: a growing population; an ageing population as the Baby Boomers retire; and an unprecedented increase in life expectancy. A baby girl born in 2017 can expect to live to be 94 years and a boy to be 91. By 2047 it could well be 98 and 95 respectively…The world of the Third Age is now a very different one, in which those lucky enough to get the State Pension will on average spend almost a third of their adult life in retirement, a proportion never before reached.”
It was clear that the Government had to act.
Andrew Selous (South West Bedfordshire) (Con)
Can the Minister tell us what specific help Jobcentre Plus is able to give older women to help them to retrain or to reskill to find age-appropriate work? That is a question that a number of older women often ask. What specific help is out there for them?
Guy Opperman
Having visited his local jobcentre, my hon. Friend will be aware that a great deal of assistance is provided by the job coaches. However, help comes not just from job coaches and jobcentres but from local job clubs, which I am sure exist in his constituency, as they do in mine; from individual flexible working arrangements; and from jobs fairs, which a number of colleagues have mentioned. I have done three myself, culminating in the last one in September, which was highly successful. There is also all manner of private sector support on an ongoing basis.
Guy Opperman
I will give way in a moment, but first let me address the issue in relation to Scotland. I was surprised that the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) refused 10 times to give way. If I were him, I would say that he was frit, but I will not go down that route.
In addition to the substantial support that the UK Government are providing, which is worth £50 billion across the country and 6% of GDP, the Scottish Government now have significant new powers available to them to tailor welfare provision to people in Scotland. Although pensions remain a reserved matter, the Scotland Act 2016 has given the Scottish Government the ability to use a wide range of new welfare provisions.
My hon. Friend the Member for Aberdeen South (Ross Thomson) correctly set out the provisions of section 28 of the Scotland Act. There are of course section 24 powers as well. I refer all colleagues, on both sides of the House, to a letter written to my predecessor by Jeane Freeman, my opposite number in the Scottish Government. She says that the power under section 26
“is limited to providing help with ‘short term needs’, and those needs must require to be met to avoid a risk to a person’s wellbeing. That would not readily allow assistance to the majority of women most affected by the acceleration of increase in their State Pension Age. Their needs and the risks to their well-being would have to be assessed individually.”
There is an acceptance in that letter that, as Scottish Conservative colleagues have said, the powers are there. Those powers commenced on 5 September 2016. It is up to the Scottish Government to determine how they will use those powers, but—
Ian Blackford
On a point of order, Madam Deputy Speaker. I am asking for your guidance about what we can do, because the Minister, perhaps inadvertently, is seeking to mislead the House. It is absolutely crystal clear in the Scotland Act 2016 that the Scottish Parliament is not in a position to introduce benefits by reason of old age. That is quite clear, and the Minister should be truthful with the people of this country. He should stop blaming the Scottish National party and the Scottish Government for a responsibility that solely lies here with Westminster.
Madam Deputy Speaker
I thank the right hon. Gentleman for that helpful advice. I suggest that we move on, because time is very limited and we do not want to delay the debate further with continuous points of order.
Guy Opperman
I fully understand, and I will move on, but I will make one single point in reply to the right hon. Member for Ross, Skye and Lochaber. I specifically read the letter of 22 June from Jeane Freeman, quoting what she said. When the right hon. Gentleman criticises me, he should be aware and conscious that he is criticising someone from his own party.
Ross Thomson
Regarding the point of order, does the Minister agree that the argument can be made that people under the retirement age of 66 are not in old age? The Scottish Government have already been in correspondence with the Department for Work and Pensions, and the DWP has accepted that very argument. The Scottish Government have the powers, they just do not use them.
Guy Opperman
The reality of the situation, given the motion facing us today, is that one has to ask what the Scottish Government are doing. My hon. Friend is entirely right.
The issue dates back to 1995, when the Government legislated after two years of debate and consultation to equalise the state pension age in order to eliminate gender inequalities in state pensions. There had been welcome increases in life expectancy, and there was an anticipated increase in the number of pensioners in the years to come.
Guy Opperman
I will give way for the last time. I am conscious that 20 Members wish to speak.
David Linden
I have come through an apprenticeship on how this works. The Minister made a point about jobcentres, but he is actually closing half of Glasgow’s jobcentres. I have a question for him about life expectancy—I asked him this 10 days ago in Westminster Hall, so he has had 10 days to find out the answer. Can he tell me the life expectancy in Glasgow East?
Guy Opperman
The hon. Gentleman will be aware that, without a shadow of a doubt, life expectancy has increased in all parts of the country and in all socioeconomic groups over the past 30 years. I refer him to the Cridland report, which accepts the situation that has existed for the past 30 years, and the change that has been made.
Developments in policy have included the Pensions Act 1995, as well as the Pensions Act 2007, passed when the Labour party was in power. It is a shame that the Labour party is now scrapping the fiscal prudence that it seemed to demonstrate with the 2007 Act by now revoking its desire to increase the pension age beyond 66. Under the coalition, action was taken in the Pensions Act 2011 to increase the pension age as a result of enhanced life expectancy.
Guy Opperman
I will not give way any more, because I am conscious that 20 Members wish to speak.
Automatic enrolment was introduced in 2012 on a cross-party basis after a considerable amount of time. The important point is that the overall participation in workplace pensions of eligible female employees in 2012 was 58% but, following the introduction of automatic enrolment, the figure increased to 80% in 2016. For males, the figure increased from 52% to 76% in the same period. The private sector has seen the largest increase in participation in workplace pensions, and there was no gender gap in participation rates in 2016.
In the circumstances, I would respectfully point out that the key choice a Government face when seeking to control state pension spend is whether to increase the state pension age or to pay lower pensions, with an inevitable impact on pensioner poverty. The only alternative is to ask the working generation to pay an even larger share of their income to support pensions.
Guy Opperman
I am not going to give way again—I am so sorry.
While increasing longevity is something to be celebrated, we must also be realistic about the demographic and fiscal challenges it creates for us as a society. Since the early 2000s, it has been widely recognised that we face big questions as a society about how we ensure economic security for people in retirement, while maintaining fairness between generations.
The Pensions Commission found in 2005 that a state pension age fixed at 65 was no longer sustainable or affordable. Between 2007 and 2014, three separate Acts of Parliament were introduced, each responding to changes in life expectancy by changing the state pension age. At the same time, the state pension has been increased, between 2010 and 2017, by £1,250 a year for an individual who is on a full state pension.
So with increasing financial pressures, as I have described, we cannot change a policy that has been implemented for over 22 years and supported by all three major political parties. The Government have to ensure that the costs of an ageing population are shared out fairly, without placing an unfair financial burden on future generations.
Alex Cunningham
I am nearly finished. Before I conclude, I would like to ask the Minister what the Department is doing in relation to the legal challenge from the WASPI campaigners, which was mentioned by my hon. Friend the Member for Easington (Grahame Morris). Has the Minister made contingencies for the day when the courts rule against the Government, as they may well do, and order that ’50s-born women be compensated? What is happening in relation to that?
Although we support the motion, I think that the House needs to be able to vote on a motion that will be binding on the Government.
Guy Opperman
I will answer two of the hon. Gentleman’s points. First, the Government do not believe that there has been maladministration by the Department for Work and Pensions in relation to the legal claim by Bindmans, and that includes in the 13 years when the Labour party was in power. Secondly, with regard to his assertions about the Scottish Government, the situation is as I said when I cited the letter of 22 June from Jeane Freeman, my opposite number in the Scottish Government.
Alex Cunningham
I am grateful to the Minister for that intervention, but he knows as well as I do that the decisions of successive Governments are overturned in the courts time and time again, and the then Government end up having to pay for it.
I want to see before the House a motion that actually means something, and that is binding on the Government to deliver some of the relief that these women desperately need. We will continue to look for that opportunity, and then we will call on the supporters of ’50s-born women, from both sides of the House, to vote for that relief and make something happen.
Draft Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) (Amendment No. 2) Regulations 2017
Guy Opperman Excerpts(8 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the Committee has considered the draft Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) (Amendment No.2) Regulations 2017.
It is a pleasure, Mr Stringer, to serve under your chairmanship. The regulations, which were laid before the House on 10 July 2017, will reduce confusion for pension scheme members and burdens for industry. They enact the conclusions of a call for evidence in 2015, on the issue of how a scheme determines whether a member is required to take financial advice before transferring their pension savings.
Plainly put, the regulations simplify how trustees and scheme managers value members’ pensions, in order to determine whether the requirement to take advice under section 48 of the Pension Schemes Act 2015 applies. The provisions form part of a wider package of changes that, as a whole, expand and simplify the protections for members with potentially valuable guarantees attached to their pensions.
The pension freedoms, introduced in April 2015, have given individuals aged 55 and over greater choice in how and when they access their defined contribution pension savings. Members who save into pension arrangements that provide potentially valuable guarantees can generally exercise these new freedoms, where necessary, by first transferring to a defined contribution scheme or converting to defined contribution savings.
These pension arrangements—safeguarded benefits—include typical defined benefit schemes as well as defined contribution arrangements, which offer safeguarded flexible benefits. Safeguarded flexible benefits are flexible, in that there is a pot, which is cash-based, meaning that the pension freedoms apply; but also safeguarded because they include a promise in relation to the secure income they may provide in retirement.
Normally, but not exclusively, safeguarded flexible benefits are personal pension contracts that include the option to take an annuity at a guaranteed rate. These are commonly referred to as a guaranteed annuity rate, or GAR. Because of the valuable guarantees offered by safeguarded benefits, section 48 of the Pension Schemes Act 2015 introduced an advice requirement alongside the pension freedoms. That requires trustees and scheme managers to check that members with safeguarded benefits have taken financial advice before transferring or otherwise flexibly accessing those benefits.
Section 48(3) provides a power to create exceptions to the requirement, and this was exercised in regulation 5 of the Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) Regulations 2015, to provide an exception for members whose safeguarded benefits under their scheme are valued at £30,000 or less. It is that legislative requirement—how pensions are valued for the purpose of determining whether it applies—that I am proposing to amend.
The Government have become aware that the methodology prescribed in regulation 5 of the 2015 regulations for valuing members’ benefits against the £30,000 threshold has resulted in firms that offered GARs having to provide two values for the member’s pension: first, the transfer value, which an individual will actually receive, and, secondly, the actuarially calculated, but ultimately notional, value against which the £30,000 advice threshold is tested.
Providers and consumer groups reported members with safeguarded flexible benefits experiencing confusion as to why they were receiving two valuations. This means that there is always a risk that members may choose to pay for advice, wrongly believing that they would be entitled to the higher actuarially calculated value, when they would receive only the lower transfer value.
Regulation 4 of the regulations that we are debating will, if approved, amend regulation 5 of the 2015 regulations so that, under paragraph (1) of that provision, trustees and scheme managers will be required to treat the value of safeguarded benefits as equal to the transfer value of those benefits when determining whether the £30,000 threshold is met. Meanwhile, those offering safeguarded flexible benefits, such as GAR, will produce only one valuation: the transfer value of the member’s benefits, determined in accordance with the legislative provisions referred to in paragraph (2) of amended regulation 5.
For most schemes, that will be the cash value of the member’s pot. That single figure is easily explained and avoids confusion for members. It is also widely used within other communications and already produced by firms. The instrument also contains transitional provisions in regulation 6 to accommodate the change from one valuation methodology to another so that members are not disadvantaged. Finally, regulation 4 makes a further amendment to the valuation methodology in regulation 5 of the 2015 regulations, removing an inconsistency in the treatment of defined benefit pension scheme savers.
In conclusion, we remain committed to the principle that pension savers choose when to access their pension savings. It is equally important that they are supported in doing so. The Government have listened carefully both to stakeholders and to those representing consumers, and these regulations show that we are meeting our commitment, made as part of a consultation exercise, not only to monitor the pension freedoms themselves, but to reform existing measures where needed. I commend the regulations to the Committee.
Guy Opperman
In relation to the points made by the hon. Member for Stockton North, he is right that the Financial Guidance and Claims Bill will not be debated this year. It will be coming to the House of Commons, following extensive consideration, in 2018. Secondly, after the Pension Schemes Act 2015 was passed there was a deliberate call for evidence to assess its impact. The methodology prescribed in regulation 5 of the 2015 regulations for valuing members’ benefits against the £30,000 threshold by which firms offered GARs was assessed and then addressed, so we introduced these specific regulations to address those points.
Thirdly, the cost of financial advice and the importance of people having access to affordable financial advice in these circumstances is something that both the Select Committee on Work and Pensions and the FCA have considered. The financial advice market review that launched in August 2015 explored how the financial advice market could be improved for consumers, including the market for pensions advice. I can assist the hon. Gentleman by making the point that the FCA has published guidance on streamlined advice to help firms provide advice to customers with specific needs in a proportionate way. To tackle issues of the affordability of that advice, the Government have increased the income tax exemption for employer-arranged financial advice on pensions from £150 to £500, and introduced the pensions advice allowance, which allows consumers to access £500 of their defined contribution or hybrid pension pots tax-free up to three times at any age to redeem against the cost of pensions and retirement advice. I would, with respect, make the point that the regulator and the Government have acted on that matter.
In relation to the points on the British Steel pension scheme and Tata pension scheme members, the hon. Gentleman will be aware that we have a further meeting today to discuss that with members who are affected, and I welcome the expansion that we will give on that particular point. What I can briefly tell the Committee today is that the FCA is aware of this issue and is making sure that its expectations are set out to advisers. That includes arranging to meet adviser firms in Swansea. The Government are also working with industry to prevent scams and investment fraud. He will be aware of Project Bloom and the various other things brought forward to address scams. The British Steel pension scheme has worked with the regulator to ensure that any communications to members both highlight the importance of taking professional advice and signpost where that advice can be obtained. The communications tell members how to check that advisers are approved to give the advice, and give warnings on how to look out for scams. The FCA is monitoring any scam behaviour and will, I assure the hon. Gentleman, take stringent action when something suspicious is reported.
The regulations simplify how trustees and scheme managers value members’ pensions when they are determining whether the requirement to take advice applies. They form part of a package of measures and, if approved, will come into force alongside a new requirement to send members tailored communications, ensuring that all members are told about their valuable benefits in a more timely and accessible manner. There will no longer be a cohort of individuals who are required to seek financial advice, but are often unable to locate an adviser willing to advise on their pension savings.
I hope that I have set out for the Committee the need for the regulations and have responded to the matters that have been raised. If not, I will write to the hon. Gentleman with more details. I commend the draft regulations to the Committee.
Question put and agreed to.
State Pension Age
Guy Opperman Excerpts(8 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney) on securing today’s debate on the state pension age and welcome him to what I think is his first debate here.
Since world war 2, we have seen dramatic changes in life expectancy. We are living longer and staying healthier for longer, and we are leading far more active lifestyles, regardless of our age. Although increasing longevity is to be celebrated, we must also be realistic about the demographic and fiscal challenges that that creates for us as a society. Faced with significant increases in life expectancy and compelling evidence of demographic pressures, it is right that successive Governments took action to secure the affordability and sustainability of the state pension system for current and future generations.
To answer the point raised by the hon. Member for East Londonderry (Mr Campbell), who wanted us to think long term, in July the Government published their first review of the state pension age, setting out a coherent strategy targeted at strengthening and sustaining the UK’s state pension system for many decades to come. It accepts the key recommendations of John Cridland’s independent review, which consulted a wide range of people and organisations, proposing that the state pension age be increased from 67 to 68 in the years 2037 to 2039.
The Cridland review was independent and is very clear. It stated:
“In 1917 the first telegrams to those celebrating their 100th birthday”
were sent. There were 24 that year. The review continued:
“In 2016 around 6,000 people will have received a card from Her Majesty the Queen. In 2050, we expect over 56,000 people to reach this milestone. Three factors are at play here: a growing population; an ageing population as the Baby Boomers retire; and an unprecedented increase in life expectancy. A baby girl born in 2017 can expect to live to be 94 years and a boy to be 91. By 2047 it could well be 98 and 95 respectively.”
The reality, therefore, is that the
“world of the Third Age is now a very different one”
and that those who receive the state pension
“will on average spend…a third of their adult life in retirement, a proportion never before reached.”
David Linden (Glasgow East) (SNP)
Given that the Minister has spent so long talking about life expectancy, will he do me the honour of telling the House what the life expectancy in Glasgow East is?
Guy Opperman
The reality is that life expectancy has increased repeatedly across the country—[Interruption.] It most definitely has increased across the country in all socioeconomic groups over the past 30 years, and for all constituent countries of the UK. Mr Cridland, who was independent, did extensive work on that point, concluding that a universal state pension age remained the best system, and the Government agree with that point.
James Cartlidge
The Opposition spokesman said that Labour supports a variable state pension age. Does my hon. Friend think that that would survive legal challenge?
Guy Opperman
I will make two points about that. The first is that anybody who proposes a situation involving framing new legislation that lacks equality between men and women will have to deal with the Equality Act 2010, because any new transitional provision runs the risk of creating a new inequality between men and women and being subject to challenge.
Further to the proposal made by the hon. Member for Coatbridge, Chryston and Bellshill, the Labour party’s position in its manifesto, as agreed with by the hon. Member for Paisley and Renfrewshire South (Mhairi Black) and presumably the Scottish National party, is to reject any increase in the state pension age above 66. That would involve scrapping the Pensions Act 2007, the work of the Labour Government in the Blair-Brown years. Costs have been mentioned; let me be clear that the costs of capping the rise in state pension age at 66 in 2020 would be £250 billion higher than proceeding according to the timetable set out by John Cridland.
Alex Cunningham
The Minister referred to Labour policy, but he edited it to a few words. We actually said that we wanted to freeze the pension age at 66 and set up our own commission to consider longevity and pensions issues and how we could help the more vulnerable in our society.
Guy Opperman
I will quote the hon. Gentleman’s party manifesto to him, just so we are utterly clear.
Guy Opperman
No, I will not. The manifesto says:
“The pension age is due to rise to 66 by the end of 2020. Labour rejects the Conservatives’ proposal to increase the state pension age even further.”
The hon. Gentleman will be aware that the shadow Secretary of State made it clear in July, as the hon. Member for Coatbridge, Chryston and Bellshill said, that 66 was the proposed utter limit for an increase.
Several hon. Members rose—
Guy Opperman
I want to make a little bit of progress.
I turn to the legislation passed over the last 22 years, during which time Labour, the coalition and the Conservatives have all been in government. Back in 1995, after two years of debate and consultation, the Government legislated to equalise the state pension age to eliminate gender inequalities in state pensions. That was a result of welcome increases in life expectancy, combined with the anticipated increase in the number of pensioners in the years to come.
Patricia Gibson
The Minister has talked about the number of people who are living longer, getting telegrams from the Queen on their 100th birthday and so on. That is fantastic, and I am sure that we are all happy about it, but can he not see that it does not help the women who have been told, with very little notice, that they will not get the pension they thought they would get at age 60? Telling them that they will live longer does not ease their hardship now.
Guy Opperman
Over the past 22 years, the Government have gone to significant lengths to both communicate and mitigate the nature of the state pension age changes, and that included a campaign in 2004 to educate people about their state pensions and extensive debates in the House of Commons on a multitude of occasions under a number of different Governments.
Guy Opperman
No; I am answering the question. Beyond that, over the last 17 years, the Department has provided more than 19 million personalised state pension estimates. In addition, the Department wrote to women born between 6 April 1950 and 5 April 1953, informing them of changes to their state pension age.
Guy Opperman
I am still finishing this point. Following the Pensions Act 2011, the Department wrote 5.77 million letters to the people directly affected, to inform them of changes to their state pension age. The reality of the situation is that during the passage of the 2011 Act, the two-year acceleration originally proposed was revised to 18 months. It was a concession worth more than £1 billion, which reduced the delay that anyone would experience in claiming their state pension to no more than 18 months, compared with the previous timetable from 1995.
Mhairi Black
The Minister seems to have a distorted view of history. The reality is that most women did not receive a letter, most letters that were received had incorrect information and many were sent to completely the wrong address. It is important to put that on record in the first instance.
Secondly, I have been listening to the Minister intently. He talked about birthdays and people living longer, and that is fine. He brought up Labour Governments, and I understand why he did so: it is important to remember that both Conservative and Labour Governments let this group of women down. That is why we must rise above the politics of the issue and come up with a reason. Please do not give platitudes about letters.
Guy Opperman
I feel that I have already answered the point about notice.
The proposal made by many is to revoke the Pensions Act 1995 and all subsequent Acts, which would cost the public purse more than £70 billion, to be paid for by younger people, as today’s pensions are paid for by today’s worker. It would represent a cost of more than £38 billion to the public purse in the next year alone.
Guy Opperman
No; I have a minute and a half in which to finish. If we consider that in combination with the ever-increasing demographic pressure—the number of people over state pension age is set to rise by almost one third in the next 25 years—it quickly becomes clear that we cannot afford to back away from the responsible choices that successive Governments have made. Although the state pension has risen significantly since 2010 under the coalition and this Conservative Government, and although auto-enrolment has succeeded in increasing eligible female employees’ participation in a workplace pension to 80% in 2016, the reality is that the Government face a key choice when seeking to control state pension spend: increase state pension age or pay lower pensions, with an inevitable impact on pensioner poverty.
The only alternative is to ask the working generation to pay an ever-larger share of their income to support pensioners. Although increasing longevity is to be celebrated, we must also be realistic about the demographic and fiscal challenges that it creates for us as a society. Given the increasing fiscal pressures described, we cannot and do not intend to change a policy implemented over the last 22 years and supported by all three major political parties.
Pensions
Guy Opperman Excerpts(8 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
The Government have now completed the examination of the cap that applies to member-borne charges in default investment funds within defined contribution (DC) pension schemes used for automatic enrolment (AE).w
After seeking a range of industry and consumer views and considering the findings of the recent pension charges survey, which captures data from providers covering 14.4 million scheme members, we do not feel that now is the right time to change the level or scope of the cap.
The cap is working broadly as intended, helping to drive down member-borne costs, while allowing flexibility to allow asset diversity or tailored services for members and employers. It appears some small schemes are less able to take advantage of the most competitive market rates, and we have launched proposals to simplify the scheme consolidation process. This will allow smaller schemes who cannot secure value for money in the long term to exit the market and secure a better deal for their members elsewhere.
There continues to be a lack of transparency on transaction costs, which is hindering trustees and independent governance committees’ (IGC) attempts to monitor and evaluate whether these represent value. We believe that it is vital to get disclosure right before deciding on whether a cap on transaction costs is appropriate. Recently announced DWP legislative proposals will ensure trustees have sight of these costs and can give that information to members. The FCA is developing similar rules for providers.
The Government remain committed to ensuring AE members are protected from unreasonable and unfair charges, and recognise that there is ongoing concern among consumers.
We will actively monitor the situation, by reviewing the information which trustees of DC schemes will be required to publish from April 2018, and which providers will publish in due course, to monitor whether the downward trend in charges is continuing.
That will also inform our next review. In 2020 we intend to examine the level and scope of the charge cap, as well as permitted charging structures, to see whether a change is needed to protect members. This will also allow us to evaluate the effects of the next stage of AE and the new master trust and transaction costs regimes.
While we are not pre-judging the decision, we expect there to be a much clearer case for change in 2020.
[HCWS249]