Pension Schemes Bill

Lord Bradley Excerpts

Thursday 5th February 2015 Lords Chamber

[Baroness Turner of Camden (Lab)]

I will support very briefly what my noble friend Lady Hollis said in her introduction of this admirable amendment. We have discussed this during the progress of the Bill through this House, and have made the point on a number of sides that it is necessary that people should be fully informed of what they are doing. It is up to the Government to make sure that those arrangements are available for people to become properly informed of what they are doing. It has to be understood, of course, that people are making decisions about their future and what may happen if they make the wrong decision. It is very necessary that the appropriate choices are made by the people who are facing these alternatives. I therefore hope that this admirable amendment receives the full support of this House.

[Lord Bradley (Lab)]

My Lords, I will be brief, because the issues presented by this amendment have been brilliantly articulated by my noble friend Lady Hollis.

Throughout the passage of the Bill we have sought to ensure that consumers’ interests are fully protected, particularly in respect of the guidance that they will receive from the citizens advice bureau or TPAS. But the accuracy of the information for them is wholly dependent on the clarity of government policy. We are concerned that the treatment of pension funds in respect of income-related benefits and social care do not meet this test of clarity. Such clarity is particularly essential here, because the decisions that people make will have a dramatic impact on their future lives. I hope that the Minister in response will be able to give the House the assurances that we are seeking through this amendment so that there is no confusion in the public’s mind and no inconsistency across the country in the guidance that will be given on this incredibly important issue.

I thank the Minister for his letter dated 4 February, which lays out the Government’s position on how they will deal with some of these matters. But I—and, I am sure, my noble friends—remain concerned that, as they say, “the devil is in the detail”, and we have already heard this morning of cases where there has to be clarity and consistency of treatment of individuals in this respect. Clearly, we will continue to look closely at the regulations that follow and the guidance issued in association with them, to ensure that the public understand the implications of the decisions they take in respect of any entitlement to income-related benefits or social care costs.

[Lord Newby]

My Lords, I begin by thanking the noble Baroness for her amendment, which obviously addresses an extremely important issue.

This amendment seeks to place a separate and additional duty on the Treasury to provide appropriate information on the effect of pension freedoms and flexibilities on income-related benefits and social care costs. I agree that it is vital that people understand how benefits and social care entitlements interact with the new pensions flexibility and that consumers need to be aware of the impact of accessing their pension pot on their eligibility for income-related benefits and help with social care costs.

The Treasury is working to ensure that the content of the Pension Wise service includes information about entitlement and deprivation rules so that consumers are aware of these when choosing whether to access their pension savings. We are also working to ensure that people are aware of the need to plan for later life, including the risk of needing care and support and what that might mean for their choices. This will help people think about how they wish to live the rest of their lives. In response to the noble Lord, Lord Lipsey, the Care Act provides that no one is required to sell their home to pay for care. The difference in this case is that the lump sum is income in the year taken, and we agree that this will need to be covered in guidance, both on pension pots and on social care, which we will provide.

The DWP will issue clear guidance on the treatment of pension pots in income-related benefits in advance of April. This is to help people make informed decisions about accessing their pension pot. We plan to do this, as requested by the noble Baroness, by producing a leaflet which we will both print in hard copy and place online on GOV.UK. Other websites will be able to link to this information, and there will definitely be such a link from the GOV.UK Pension Wise website, which will direct those who are affected by this issue to the DWP information. Pension Wise will be a key way of equipping people with this information online on GOV.UK, on the phone through the Pensions Advisory Service, and face to face through citizens advice bureaux across the country. Alongside the new content being developed for Pension Wise, the new guidelines will also be reflected in the training programme for guidance specialists from the Pensions Advisory Service and Citizens Advice.

As the noble Baroness said, she met my noble friend Lord Bourne and me earlier this week to discuss the substantive policy issue—namely, the interaction of pension flexibilities with the benefits and social care means tests. The principal query that the noble Baroness raised is whether the distinction we make between ISAs and other savings vehicles, as opposed to pension pots, in benefits means testing remains fair after the introduction of the new flexibilities. ISAs are taken fully into account in income-related benefits, whereas we ignore untouched pension pots until someone reaches pension credit qualifying age. The noble Baroness argues that this is an arbitrary distinction now that the tax treatment of the two products is more aligned.

The Government, however, firmly believe that the difference is an important one. ISAs are for use at any time, but we specifically encourage people to save into pensions to provide for themselves in later life. We would not want to design our benefit system in such a way as to encourage people to spend their retirement savings when they are still below pension credit qualifying age. Aligning the treatment of ISAs with that of pension pots in the means test would be expensive for the taxpayer, as people with resources could secure more benefit. On the other hand, aligning the treatment of pension pots with that of ISAs would mean that claimants could lose benefits and so may deplete their pension savings before reaching their retirement. Neither outcome is desirable, and we therefore believe that the current position remains the right one.

This gives rise to a second question that concerns the noble Baroness, which is whether this situation gives individuals the opportunity to move their ISAs, which would be taken into account, into their pension pots, which would not be taken into account until pension credit qualifying age. The Government have considered the matter seriously and, in the light of our analysis, we do not feel that we need to act on this matter presently. The numbers of income-related benefits claimants with substantial ISAs is relatively modest and, should people move their savings to their pension pot, the additional upfront welfare costs to the Exchequer are partly offset by welfare savings in later life as those individuals would rely less on income-related benefits as a pensioner. On this issue, we plan to monitor behaviour after April when the new pension flexibilities are introduced, and respond proportionately if we need to.

I should add that people deliberately depriving themselves of money in order to secure or increase benefit entitlement may be subject to rules on deprivation of assets that already exist in both the benefit and social care systems.

--- Later in debate ---

[Lord Bourne of Aberystwyth (Con)]

My Lords, I apologise that this amendment may not be quite as highly charged as the previous one. It corrects an oversight in relation to the amendments that we made to the transfer provisions on Report and simply inserts the provision relating to when a member’s transfer rights fall away into Northern Ireland legislation.

The amendment makes a consequential amendment to the existing transfer legislation, which sets out when a member’s rights to a transfer fall away. It puts beyond doubt that the right to a transfer value falls away after either three months or any extension period granted by the legislation. This amendment and the one applying to the legislation relating to Great Britain have been made in response to industry concerns that the current situation could place trustees in a position where the right to transfer somehow still subsisted, although the trustees could not action the transfer.

I also take this opportunity to clarify the purpose of Amendment 30, which I spoke to on Report. That amendment inserted a new limb into an existing regulation-making power in Section 101F(6A) of the Pension Schemes Act 1993. It created a power to disapply, in prescribed circumstances, the right of prescribed persons to transfer pension rights acquired as a consequence of divorce. In describing that amendment, I stated that it restored an existing power. I now understand that this is in fact a new power which expands upon the narrower existing power. I hope that noble Lords will accept this new amendment to align Northern Ireland legislation, along with my clarification of the operation of Amendment 30 made on Report.

As this is the final amendment to which I will speak, before I sit down I would like to take a moment to thank the Opposition for their constructive and positive engagement in this process—I do so sincerely; their engagement has been valuable. I also thank colleagues across the House who have dedicated their time and expertise to scrutinising and improving the Bill. It has been the House of Lords at its best. I think we can all say that your Lordships’ House has done a good job in scrutinising the Bill and that it goes back to another place a much better Bill than it was before.

A significant amount of work goes into preparing a Bill and supporting its passage through both Houses, to say the very least. This Bill contains a wide range of measures and has involved a number of different policy teams from the Department for Work and Pensions, Her Majesty’s Treasury and the Ministry of Justice. They have worked unstintingly and with dedication. I am grateful to them and to the excellent draftsmen in the Office of the Parliamentary Counsel, who have worked very hard on this Bill.

I am also indebted to my noble friend Lord Newby for his considerable work and assistance on the Bill, to my right honourable friend Steve Webb, the Minister for Pensions, for his advice and help, and to my noble friend Lord Freud for his support. With that, I beg to move.

[Lord Bradley]

My Lords, I again thank the Minister for clarification of the amendments, and these are obviously acceptable. I also thank him for the clarifications he has given throughout the Bill’s passage, as well as for the courtesy that he and his fellow Ministers have shown to this House and for the help that he has given to the Opposition as we have debated the issues. I also thank the civil servants for the support that they have given to the Opposition in answering the questions that we have raised.

As we come to a close in the Bill’s passage through this House it is worth reminding ourselves that on Second Reading we considered two Bills together—this one and the then Taxation of Pensions Bill—as it had been recognised that the two were inextricably linked. That has clearly been shown to be the case during our deliberations generally and in our consideration of this amendment. The speed between the announcement of pension freedoms and flexibilities in the Budget last year and implementation of the policy in April of this year has led to a huge number of amendments and policy clarifications, with many significant regulations still to come. Let us remember that implementation is barely nine weeks away.

Although broadly supporting the policy, we have tried during these debates to ensure that the interests of the public have been paramount and properly protected. We have sought and received assurances from the Government that the policy is clear and fully thought through, including in our debate today on the treatment of pension funds for income-related benefits and care costs assessment. However, in the light of today’s debate, I remain deeply concerned. We have been assured that not only will the crucial guidance guarantee service be fully in place by April but that it will have capacity and its staff will have the expertise and be fully trained to deliver a quality service for the 320,000 people who may seek guidance in the first instance.

Obviously, we are pleased that the Government accepted our argument for a second line of defence to give the public greater protection. We will continue to monitor closely the implementation of the powers vested in these two pieces of legislation. However, we remain concerned on many issues. These issues will be closely scrutinised both inside and outside this House to ensure that the public’s interests are properly and fully thought through and protected.

Finally, I thank all noble Lords who have participated in our debates. I would particularly mention the support I have been given by my noble friends Lady Drake, Lady Hollis, Lord McKenzie and, of course, Lord McAvoy and Lady Sherlock.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord for that. Clearly, we recognise the support that we have had generally for these important pension freedoms. The noble Lord, Lord Hutton, who is not in his place, certainly spoke of this as a revolutionary measure—which it is in many ways. I accept that guidance is at the heart of it. We need to ensure that these freedoms are exercised with proper guidance and proper advice, which is where this House has been quite properly engaged, and recognise that there is still ongoing work to do, to which we will return.