Pension Schemes Bill [HL]

Lord Freeman Excerpts

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

[Lord Freeman (Con)]

My Lords, I intend to be very brief indeed. Having sat through most of today’s proceedings, I am not sure that I have all that much original to say. I agree with the earlier comments of the noble Baroness, Lady Stedman-Scott: this Bill is designed to help people plan for a secure future. We make judgments about what government does in the light of that statement, which I very much agree with.

It has been far too long since we last considered pension reform in your Lordships’ House—quite a considerable time, as I recall. In my judgment, it should be much more regular. I humbly suggest that a five-year review maximum should be put in place.

I very much agree with the noble Baroness, Lady Neville-Rolfe, on the use of the dashboard. She was exactly right, and I very strongly support the use of the dashboard so that people can keep track of their savings and pension entitlements and, very importantly, understand what their financial situation is.

Finally, I will suggest one novel recommendation. Schoolchildren should also benefit from education about financial planning and entitlement, and, indeed, fund management. Many leave school without the vaguest idea about planning their financial resources. With that, I conclude my remarks and sit down.

EU: Youth Unemployment (EUC Report)

Lord Freeman Excerpts

Tuesday 17th June 2014 Lords Chamber

[Lord Freeman (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Wilson. I agree with virtually everything that he said and pay tribute to his experience and his contribution to the Select Committee. The noble Baroness, Lady O’Cathain, paid tribute to our clerk and the staff, which I very much endorse, but on behalf of my colleagues on both sides of the House I pay tribute to her as our Lord chairman for her patience for almost 12 months in dealing with many witnesses but also in bringing together an excellent report, for which the House should be very grateful.

As other noble Lords have said, we are dealing with a scarred generation, but there are some hopeful signs. In the past three months, youth unemployment in the United Kingdom has fallen by 60,000. That is a very small part of the total problem we face, but at least things are going in the right direction.

In my brief contribution tonight, I shall simply share with your Lordships two lessons that I have learnt. The first is one that I learned from my former colleague, my noble friend Lord Heseltine, in the Cabinet Office when he—and I, trying to assist in some ways—was trying to deal with issues such as unemployment, particularly youth unemployment. I think that his contribution to the debate, if he were here tonight, would be that we have to place the emphasis locally. We have seen that in Birmingham, on our visit, and certainly in Liverpool. National initiatives are fine, but very often the documents are read and discarded, or not implemented at a local level. If you focus locally, particularly where there are pockets of youth unemployment, which we saw in Birmingham and also in Liverpool, one can target effort, initiative and money, with the co-operation, obviously, of the local politicians. So, local emphasis is very important for me. That is the first lesson that I have learnt during the course of this inquiry.

The second lesson, which is probably counterintuitive for many colleagues, is the importance of looking at those 14 to 16 year-olds who will, when they leave school, in some cases join the NEETs—not in employment, education or training. It was an initiative of Gordon Brown, the then Prime Minister, to fund an organisation through the Ministry of Defence called SkillForce, which I have had the honour of chairing for the past 10 years. We have taken 50,000 schoolchildren who have been disruptive in schools through regular courses, where they are taught life skills and encouraged by former service men and women. Over the past 10 years, 85% of them have got into employment—in other words, they are not categorised as NEETs. I think that that emphasis is quite important. I am trying to encourage my colleagues in the Department for Education, and, indeed, in the Cabinet Office, to look not just at the 16 year-olds who are leaving school, but also at the category I have just referred to, who perhaps only have a single parent, are causing disruption in school and, if nothing is done to encourage them and provide some life skills, will end up unemployed and adding to our great problem.

Those are the two lessons. I promised to be brief and I am going to offer concrete action to my noble friend Lady O’Cathain. I am going to the Vote Office, I am going to buy 12 copies of the report and I am going to send them to 12 chairmen of the largest companies in this country with my encouragement that they should take action where necessary, where they have employment, factories or workforces, to help us reduce even further the level of youth unemployment.

EU Report: Women on Boards

Lord Freeman Excerpts

Tuesday 13th November 2012 Lords Chamber

[Lord Freeman]

My Lords, first, I congratulate my noble friend Lady O’Cathain on this very interesting and important debate. I will share with your Lordships my limited experience over the past 15 years in the private sector.

Mandatory quotas in France, where I have served on a major company board, have been accepted and work. In Norway, quotas have been working, to the best of my knowledge, for five to six years now. However, I do not believe in mandatory quotas applying to the United Kingdom at this stage, for a number of reasons. The excellent and energetic work of the noble Lord, Lord Davies of Abersoch, in trying to encourage professional services firms, particularly the big accounting firms and the merchant banks in the City, to recruit more women to the board seems to working. If that does not work, I withhold judgment as to whether there should be legislation, although I am not in favour of that at present.

The public sector has got a major example to set in encouraging more women to stand for or apply for positions, whether that is on the advisory boards of different departments or serving in the other parts of the public sector. We have not done enough, and Ministers should take responsibility for what I call the “pull”. As far as internal promotion is concerned, within management below boards, that is where we are failing and I very much agree with my noble friend’s comments just now. We are seeing a glass ceiling, certainly in professional firms, which is nothing to do with women deciding to leave to have families and come back later on. It is important that they are regarded as qualified candidates to rise right to the top. However, at the moment, I am not in favour of legislation in the United Kingdom.

Pensions: Occupational Pensions

Lord Freeman Excerpts

Wednesday 1st February 2012 Lords Chamber

[Lord Freeman]

My Lords, I congratulate the noble Lord, Lord McFall, on securing this debate on a very important subject. I am bound to say that I agree with a great deal of what he has said, not only in the past but to your Lordships tonight. There is a wealth of experience from those who are to contribute to this debate. I see in his place the author of a very important report on the pensions industry, and we look forward to hearing the noble Lord, Lord Hutton.

My contribution comes from my experience as chairman of a very large pension fund, as referred to in the register. Although I speak for myself and not for my fellow trustees, my experience obviously comes from my business background and from looking at the impact of the problems of our pension fund, and indeed of other pension funds in the private sector, on the well-being of British industry.

The position is serious. The latest estimate of the actuarial deficit of British pension funds is of the order of £750 billion. It has got a lot worse in the past three to four months. For funds with an actuarial valuation date of 31 December, the position is that the stock market has fallen since the middle of the year, and due to quantitative easing, the yields on gilts and more generally have increased the liabilities because the discounting factor is much less than it would have been in the past. It is a very serious position for British industry.

As the noble Lord, Lord McFall, said, defined benefit schemes have been closed at an increasing rate. In the FTSE 100, not a single defined benefit scheme is open to future members—they are closed to new members. However, the deficits remain. The schemes may not be taking on new members but the historical legacy of the pension funds and the benefits—very generous benefits, in certain circumstances—have contributed to the serious deficits. I will quote only one example—not a FTSE 100 company. I believe that the Royal Mail is still in a 25-year recovery period to pay off the existing deficit. The introduction of mandatory indexing of the pensions of those still left in defined benefit schemes is understandable, but I should point out, as the Minister well knows, that indexing is capped in only one country—in Holland. That, of course, assists the viability of an existing pension fund.

From my personal experience I would like to congratulate the diligence, efficiency and helpfulness of the regulator, who has to look after the Pension Protection Fund. He is looking over his shoulder to make sure that not too many burdens are placed on that fund. However, the regulator’s willingness to consider longer recovery periods, and his understanding of the current problems of some pension funds, is to be applauded.

I have two concerns and will put two points to the Minister. If he does not have time to answer them in his winding-up speech, perhaps he will be kind enough to write to me. First, I echo what the noble Lord, Lord McFall, touched on: we need to increase the awareness of employees of the likely shortfall of proper provision in retirement. We need an awareness campaign, which I think only the Government, the Department for Work and Pensions, can lead. Clearly the regulator cannot do it alone. We need to appreciate that if you have a personal pension plan in addition to your defined benefit or defined contribution scheme, that may not provide enough in later life. For example, if in addition to your scheme, you save £100,000 over a lifetime of working, when it comes to drawing a pension, that may mean only £3,000 per annum. That gives you an example of what meagre addition might be entailed. We need an awareness campaign and, perhaps, even to relax the draw-down provisions in legislation to permit people to draw more money.

Finally—this is a rather radical proposal—we need to revisit trustee governance. That is an immensely complicated subject: the provision of pension funds and the advice that is given. In my experience, even with the training now provided in many pension funds for their trustees, it is becoming too complicated and we may need a new model, which is to permit trusts to wholly contract out advice. I look forward to hearing the contributions of more experienced Members than I around your Lordships' House.