Small Pension Funds

Lord Kirkwood of Kirkhope Excerpts

Tuesday 27th November 2012 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, it is a great pleasure to follow the noble Lord, Lord Lipsey, and very reassuring to all of us to know that we have an expert in our midst in terms of giving us pension advice. If he would be kind enough to set up a surgery on Wednesday morning in the Bishops’ Bar I am sure that there will be a queue, and I will be at the front of it. It is typical of him that he spends some of his time devoting his expertise to this very important subject.

It is a very important subject and the timing of the debate is perfect. The noble Baroness, Lady Greengross, has championed this subject and, indeed, the International Longevity Centre-UK has done an amazing amount of extremely good work. That work is very professional, well thought-through and very constructive. It and she deserve some serious attention in the debate, not just this evening but in the future. I think she is right that the retail distribution review—it will be put in place next year and I do not think that any of us has any fundamental objection to it—represents an improvement but will have unintended consequences. I confess that I am only just beginning to appreciate the extent of the unintended consequences. Some of the figures that we have heard from all sides in all the valuable, interesting and positive contributions to this debate have demonstrated how deep and wide the problem could be if it were allowed to continue to 2050. Some of the figures are worrying.

The noble Baroness, Lady Hollis, in her inimitable and passionate way, argued her case, and particularly the case for women and stranded pots. This is not the first time that I have heard her make that speech but it is always worth listening to her every time she makes it. It is absolutely correct and I would encourage her to go on making it. In fact I have lifted bits of her speeches and used them in other places. I confess that that is a weakness that I have with some of the contributions she makes.

The need is urgent. There is a lot of passion and urgency but I do not think that there is much politics in this. I believe that the industry gets this problem. I have talked to people in industry and a lot of them are coming up with some sensible workarounds for some of the worst effects of this advice gap, which is the core of the debate. It is the centre that needs to be sorted. The noble Baroness, Lady Hollis, is right to say that there are a couple of pieces of pensions legislation in gestation so there might be another opportunity for us to get together once the RDR is implemented to try and get some purchase on making the improvements that are necessary.

I echo the surprise of the noble Lord, Lord Lipsey, that we did not get some briefing from the FSA. I do not think that he missed it in his earlier remarks—it will have got the point. I endorse that; the point he makes is absolutely correct. However, there is a wider problem, alluded to by the noble Baroness, Lady Greengross, which I want to reinforce. I think that there has been a bit of dereliction in duty in terms of the way in which those three main policy departments are co-ordinating their work. She is right to say that the FSA, the Treasury and the DWP, from the respective positions, should have been across this problem with some positive responses before now. I would very much like to know—although I will not ask the question because it might embarrass the Minister, who is completely blameless: she has an alibi; she was not around at the time—whether there have been any ministerial meetings on the subject across those three departments. I think that I know the answer. I do not think there have even been official meetings across the three departments. That is no longer good enough. We now need to require an assurance from the new Minister—we wish her well as she works her way into the department—that she will go back to the department and make sure that she attends a meeting talking about this subject intelligently across these three departments. Nothing less will do. If she does that, she will find ready support from the industry.

Many things are happening. There is a lot of concern out there that the ineffable complications and complexities of our pension rules and regulations are getting in the way. I cannot for the life of me understand why you get stranded pots at the end of your saving life and £2,000 here and £2,000 there. These are in DC invested schemes—the money is there—and I cannot understand why people cannot put it together collectively. I cannot see who would lose from that. It is true that the industry has the idea that it will lose business but I am unconvinced by that argument. We need to be more straightforward about this. My noble friend Lord Patten is right: the austerity that we are in means that we are constrained in what we can do, but that should not stop us introducing innovative approaches to sort out some of these matters.

Of course, I support what my noble friend Lord Stoneham said about what the Government are doing. Steve Webb has had a huge workload—successfully discharged, as far as we can see—on the NESTA front and therefore he has not been looking for things to do. I genuinely support the long-term vision he has because it is the correct one. He may say, “Well, we have been looking at issues such as pots following the member automatically when they transfer jobs”—which I think is a correct thing to do—but I would like to see the colour of that in some of the upcoming legislation before I can be certain that that was secured. Knocking small pots into fat pots—or whatever the parliamentary language is for explaining that—seems entirely possible with a little lateral thinking and a little support from the industry, which, as I say, is there.

I hope that when my noble friend replies she will at least undertake to take back some of the important, positive ideas that have been discussed this evening and see if she can press them across the DWP, the FSA and the Treasury.

My noble friend would do me a service if she would look again at the Money Advice Service, because my noble friend Lord Stoneham is right about the need for education. I am worried about the Money Advice Service. Since April it has had responsibility for debt counselling across the United Kingdom. It has a budget of £78 million. That sounds like a lot of money but when the universal credit comes into being over the next five years or so I think that it will be swamped. It may be that that should be the priority, but that is not the point that I am making. The point I am making is that if the FSA levy produces £78 million—if I have got the figure correct—it will need to be monitored quite carefully. The Money Advice Service is now in a crucially important position to help people with OMO questions and decumulation issues as they approach retirement; it is an essential co-part of its work. I do not think that it is properly resourced at the moment for the future demands that will be placed on it. I would be grateful if the Minister could go back and ask cogent questions about whether the service believes that it has the resources to discharge the important responsibilities which Parliament has put on it, and provide us with some reassurance at a future point in the debate.

This is a very important debate and I hope that the Minister goes back charged up with a new enthusiasm to get the co-ordination across the departments that is so necessary to achieve positive outcomes in this area.