Universal Credit

Lord McKenzie of Luton Excerpts

Tuesday 16th October 2018 Lords Chamber

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

My Lords, I begin by paying tribute to Baroness Hollis of Heigham, who was a Minister in this House from, I understand, 1997 to 2005. Baroness Hollis was a formidable Minister—I know because I was a shadow Minister for Social Security during some of that time. I remember her as a fantastic champion of the welfare system, women’s rights and in particular women’s pension rights. I feel privileged to have known her.

By leave of the House, I shall repeat as a Statement an Answer given to an Urgent Question in another place by my right honourable friend the Minister for Employment.

“Mr Speaker, I note the precise wording of the Urgent Question from the right honourable gentleman, for whom I have a great deal of respect. I know he cares deeply about welfare matters and is an excellent chair of the Work and Pensions Select Committee. Of course he, his committee and the whole House have a right to hold the Government to account, and that includes the Department for Work and Pensions. I do not wish to be unhelpful in my response. However, some of the matters that he may be alluding to are the subject of speculation in the media. There has been a great deal of speculation around universal credit in the last few days. I cannot comment on speculation.

When it comes to rollout, we have long said that we will take a slow and measured approach to managed migration. That is why we will continue to take a ‘test and learn’ approach, acting on feedback and improving the system as it rolls out. By December 2018 universal credit will be in every jobcentre in the country. People who are making new claims to our benefits system now apply for universal credit rather than being put on the old system. Next year we will start the wider process of moving people from the old benefits system on to universal credit. The process will begin later next year in a measured way with no more than 10,000 people moved over, to ensure that the system is working well for claimants and to make any necessary adaptations as we go. We have said for a long time now that the managed migration process will take place from 2019 to 2023.”

[Lord McKenzie of Luton (Lab)]

My Lords, I start by thanking the Minister for her kind comments about my erstwhile colleague Baroness Hollis. It is with regret that we have the absence of her voice for our deliberations today. She had unparalleled experience on universal credit. She was determined, she was passionate, and her oratory rang out across this Chamber. I fear that we will not see her like again.

Universal credit is causing severe hardship for many people claiming it. Over the past two weeks, conflicting statements from the Government have caused real confusion about the impact it will have on people who are required to move across to claim it in the next phase. First, we were told that austerity was over, then that families on low incomes are in danger of losing up to £200 a month as a result of transferring to universal credit. Next, the Prime Minister said that nobody would be worse off, but the Secretary of State contradicted her the following day. This morning, we had the BBC report—I understand the Minister’s position on that—saying that the Government are planning changes to the universal credit system that will include the end date for the rollout being put back by a further nine months. This is the sixth time since 2013 that this benefit has been recalibrated.

Is the reported delay to the start of the next phase the result of the warnings that the Government have received from right across the voluntary sector and expert organisations that their draft regulations are simply not fit for purpose? Will they now publish their impact assessment of that next phase? How will the changes reported by the BBC affect the savings that universal credit is expected to make for the Treasury? How many households currently claiming legacy benefits will be worse off between now and 2023 as a result of making a new claim for universal credit? Together with dozens of disability and advice organisations, we call for a halt to the rollout of managed migration until it is fit for purpose.

[Baroness Buscombe]

My Lords, I am grateful for the noble Lord’s questions. Let me say straightaway that we have not been recalibrating anything. He will be aware that there have been a number of PQs in the past few months. There was a Written Ministerial Statement in June this year, wherein we set out very clearly that from the beginning of next year, we want to move to managed migration in a very slow and careful way. We want to be sure that we get it right, that the right systems are in place. As we also made clear to the Social Security Advisory Committee, we will not begin to introduce managed migration, which is those who are on existing benefits—the legacy system, as we call it—rather than those who are new to the benefit system who are going on to universal credit, until July next year. That has long been the case.

We are now waiting for the end of the rollout of the system into every jobcentre by the end of December this year. We are also now in receipt of some important recommendations made by the Social Security Advisory Committee as a result of our proposals to it with regard to managed migration regulations, which we hope to lay before the House in the near future. We are now considering those recommendations very seriously and I will report to this House in the very near future.

The most important answer that I must give straightaway is that a key point for the managed migration regulations, which we will bring forward, is to protect the most vulnerable. We are not halting any rollout. Our concern is to protect the most vulnerable— those who cannot work, those with severe disabilities—through the severe disability premium and careful full transitional protection through migration on to universal credit.

Pensions: Online Dashboard

Lord McKenzie of Luton Excerpts

Tuesday 24th July 2018 Lords Chamber

Asked by

[Lord McKenzie of Luton]

To ask Her Majesty’s Government what progress they have made towards establishing an online pensions dashboard.

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

My Lords, with automatic enrolment we are delivering a complete change in the UK’s savings culture. We are currently exploring the many complex issues associated with developing a pensions dashboard. Our feasibility work is nearing completion and we will report to Parliament in due course. The Government are committed to ensuring that people are supported to plan ahead for retirement, including with automatic enrolment, existing digital services and a new single financial guidance body, launching in January next year.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for that reply. At a time when 9 million new workplace savers are being auto-enrolled and the average worker changes jobs 11 times during their working life, there is clearly a compelling public policy argument for having mechanisms to track pension pots, including the state pension, throughout life. The DWP has estimated that 50 million pension pots, with some £3 billion in savings, would be lost without a dashboard. Already one in five adults admits to having lost a pension pot.

There is widespread support for the concept of the dashboard, although there are different propositions. We believe that the Government are right to give ownership to the DWP, as a government lead is essential. Does the Minister agree that lessons from overseas show that the best way of providing a comprehensive service is to make participation compulsory? That requires legislation. Given all the work the DWP has done, why are we considering changing tack now? What can we glean when Parliament is not sitting which we cannot not glean when it is? Is there not an issue of capacity, with the universal credit debacle overwhelming the department?

[Baroness Buscombe]

My Lords, let me first say that the figure of 50 million referred to is an estimate made in 2012 of the number of dormant, not lost, pension pots by 2050. To suggest that 50 million pension pots will be lost unless a pensions dashboard is introduced is wholly inaccurate: I want to make that very clear. We are looking through the whole process and at experience overseas in order to understand more about pensions dashboards. The noble Lord knows that the whole process is very complex. We are working through the options around scheme participation in any potential pensions dashboard. The decision whether to compel participation depends on a number of issues, such as the functionality, delivery model and governance of the dashboard. We will set out the Government’s view in due course.

Occupational Pension Schemes (Master Trusts) Regulations 2018

Lord McKenzie of Luton Excerpts

Wednesday 18th July 2018 Grand Committee

[Lord Kirkwood of Kirkhope (LD)]

My Lords, it is always a pleasure to follow the noble Baroness, Lady Drake. She is an expert in these matters and we are fortunate to have her to assist our deliberations. I also support the regulations. Some of us who were involved in the 2017 legislation felt that we were taking risks in that the Government did not properly address the question of gaps. Speaking for myself, these regulations ostensibly fill those gaps. Obviously there is still a degree of uncertainty because the field is new and developing and we are dealing with a specialist set of organisations.

As has been said, the stakes in this important area of public policy are extremely high when it comes to the pension security of the 10 million members of these trusts and the amounts of money that are being invested. I agree with the point made by the noble Baroness, Lady Drake, on the systems and processes that are set out clearly in the regulations. I support the consolidation that has gone into the regulations. I sit at the feet of the noble Lord, Lord Trefgarne, who is dutifully here; he is the chairman of the Secondary Legislation Scrutiny Committee and keeps us at a very high standard. As the Minister said, it is true that we found no difficulty with the regulations. They are very extensive and clear, and an example of the kind of thing that the noble Lord, Lord Trefgarne, and I would like other departments to emulate. Having said that, I think the DWP has been an offender in the past, but it has improved its ways and the evidence is in front of us in these regulations this afternoon.

I worry about the cleanliness of the data, as a former chair of the DC scheme for the General Medical Council’s staff superannuation. We always struggled, even with a really well-run scheme, to keep the data clean, keep the contribution levels accurate, and make sure that the investments were made and the administration carried out. We are operating in this new system at one level removed, if you like, because the employers are separate from the master trust administrators. The regulator will need to focus on making sure that the systems and processes that are eventually put in place, using technology, are sufficient for their purpose. As has been said, people can get seriously prejudiced against through no fault of their own, and without knowing that they are being prejudiced against until it is too late. That is a very important point.

Can the Minister say a word about the codes of conduct that will flow from the regulations? There has been a consultation—which I think I am confident about; I have heard no complaints about that and have no reason to believe that there are any surprises waiting for us in the code of conduct. Can the Minister reassure us that this work is in hand and that it will be available in time and will add the necessary detail to the schemes when they come into play in October this year?

While I am on my feet, it is not directly relevant to these regulations per se, but I think we are all very interested in pursuing the pensions dashboard. There have been rumours—I put it no higher than that, although my spies are everywhere—that the department is struggling to find the time or capacity to deliver on the promises that were made by former Chancellor Osborne all those years back. It is an important part of being able to allow people to assess what kind of living standards they will have in retirement or whether there is any backsliding or suggestion that the priority is being withdrawn from the development work on the pensions dashboard. Although it is not directly relevant to these regulations, I would like an assurance from the Minister that this work is proceeding at full speed and that we can confidently look forward to the dashboard playing a part, eventually, over the 10-year period of the impact assessment to help people understand their pension provision.

I hope that the codes of practice will make clear the practical steps that have to be taken by master trusts to make sure that their members are timeously and regularly advised with proper communications about what is happening to their investments and schemes. That is important in order to keep the connection flowing between the people administering the schemes and the members themselves. These are very important regulations; I think that they are sufficient for their purpose, but there is still some work to do because we are in new territory. We cannot be casual about 10 million people and £16 billion of assets. We must all maintain vigilance over the development of this scheme and we look forward to it being introduced, hopefully in a constructive way, in October this year.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for her very full introduction of these master trust regulations and for the extensive accompanying documentation made available, notwithstanding that it had to compete with tennis at Wimbledon, the World Cup and a decent game of cricket. I join my noble friend Lady Drake and the noble Lord, Lord Kirkwood, in thanking the Pensions Regulator for a briefing that provided us with an update on what is happening in the market and on what the regulator is doing to build capacity for the authorisation process.

I should say at the outset that we are, of course, supportive of the Pension Schemes Act 2017 and of the thrust of these regulations, which flow from it. We particularly support option 2 in the impact assessment, which explains, as has the Minister, the introduction of a new compulsory authorisation regime building on the framework of the voluntary master trust assurance framework.

As has been acknowledged in this short debate and previously, the growth of master trusts is associated with the success—I think “phenomenal” was the word used—of auto-enrolment, with now some 1.1 million employers automatically enrolling 9.4 million eligible workers. As of March 2017, 59% of those auto-enrolled have been enrolled into a master trust. Hitherto the regulatory regime applicable to master trusts—that applicable to DC occupational schemes—was largely designed to address risks of single employer schemes. As the impact assessment sets out, such a regime of itself is inadequate to cater for new types of business structures associated with master trusts, with changes to the relationships between key players, the introduction of the profit motive and coping with multiple employers, not to mention the scale of some of the providers. There is a need for a regulatory regime that encompasses an authorisation process, fit and proper persons requirements, financial sustainability and scheme funder requirements, a continuity strategy and an obligation to notify the regulator of significant events.

As the Minister said, we know that such a regime will hasten the process of consolidation of schemes. Indeed, this has already begun. The Pensions Regulator told us that, from a starting number of 81 schemes, some 45 are expected to go through to submit formal authorisations, although page 26 of the impact assessment refers to 87 being within the definition. Perhaps the Minister can reconcile those two numbers for us.

Some of these regulations came into force on Royal Assent, and the remainder will come into force on 1 October 2018, with the exception of Regulations 23(2)(b)(i) and (ii), which come into force on 1 April 2019. These appear to relate to the application of fraud compensation facilities. Could the Minister explain why there is this different starting date, and can she tell us under which provisions the current consolidations are proceeding? Do some precede the application of the 2017 Act and, if so, what difference does this make? Could she also say how many different master trusts have been recipients of transfers in when others have exited the market, and how these were identified? She will be aware of the discussion which took place during the passage of the Bill, led by my noble friend Lady Drake and supported by the noble Baroness, Lady Altmann, concerning a funder of last resort to manage cases where there is no trust prepared or able to take a transfer. What in these regulations will give reassurance on this point beyond what is in the Act? What is the contingency plan, where records are a shambles—the noble Lord, Lord Kirkwood, referred to those circumstances—and there are insufficient resources? When debated in the Commons, the then Minister explained that the Government were working to establish a panel of white knights. Could we have an update on progress on that?

During the passage of the Bill we debated whether it would be appropriate for the member engagement strategy to be included in the application for authorisation. Although resisted at Committee, the Government undertook to ensure that the regulator should take account of communications matters when deciding whether the scheme is run effectively. Perhaps the Minister will outline what is now proposed. She might also say something about what responsibilities might be placed on master trusts concerning communication and engagement with a pensions dashboard. I join the noble Lord, Lord Kirkwood, in probing exactly what is happening on that. Perhaps we can hear what progress is being made.

--- Later in debate ---

A number of additional points were made by the noble Lord, Lord McKenzie, to which I am unable to give full attention this afternoon.

[Lord McKenzie of Luton]

Perhaps the Minister will agree to write to me.

[Baroness Buscombe]

I am grateful to the noble Lord. I will write to him and share what I write with all noble Lords who have taken part in the debate.

I want to touch on the kind words of the noble Lord, Lord Kirkwood, in reference to my noble friend Lord Trefgarne. All too often, committees that are not on the Floor of the House or in the Moses Room are quietly proceeding on the more technical and difficult issues and we do not pay them due regard in a public manner. I want to do that now. I thank the noble Lord, Lord Kirkwood, for complimenting the department on getting it right in terms of our consideration of and the detail in the regulations. That is important because we are protecting people’s lifetime savings. We want to do this to the best of our ability while allowing many more people to take part in the scheme.

I am sure I do not need to persuade your Lordships that with millions of hard-working people now saving towards their pensions, it is only fair and proper that their savings are protected and that the schemes they are saving with are of a high quality and offer good value. The regulations will help to achieve this by bringing into effect a new regulatory regime which will ensure that schemes are well run. For the past couple of years, the Pensions Regulator has been working closely with master trusts to help them prepare for these changes. Following the introduction of the regulations, my officials and staff at the Pensions Regulator will continue to work closely with the industry—that is an important point to make—to support it in its preparations for making an application for authorisation and going forward.

I wish to thank all noble Lords again for their excellent contributions. Some of their questions were very difficult, I have to say.

Disabled People

Lord McKenzie of Luton Excerpts

Thursday 28th June 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, let me begin by offering my congratulations to the right reverend Prelate the Bishop of London on a wonderful maiden speech. That passion for the NHS will sit well with us all in this House. Perhaps I may also say that if she is tempted to exercise the calm authority of matron in this Chamber from time to time, that may not go amiss—but of course, not on these Benches.

This has been a worthy debate and I join with others in thanking the noble Baroness, Lady Thomas, for its initiation. As the debate has highlighted, and the briefings we have received confirm, the challenges facing disabled people today are many and considerable. We have heard a very full range of contributions, so I hope noble Lords will forgive me if I do not touch on all of them.

The noble Baroness, Lady Thomas, spoke about the extra costs for independent living that disabled people face, and about DFGs and the aspiration to have 1 million more people in work—it was a very full contribution. The noble Lord, Lord Holmes, and the noble Baroness, Lady Wyld, spoke about the importance of disabled people and public appointments. I wish the noble Lord success in his review. The noble Lord, Lord Bruce, and the noble Baroness, Lady Howe, talked about the challenges for deaf people and the need for cohesion and specialist education. The noble Lord, Lord Patel, spoke about palliative care for children and the unfair funding of children’s hospices. The noble Lord, Lord Shinkwin, spoke about the generosity of the taxpayer. It depends quite where you stand on that as to who gets the benefit and who takes the hit. The noble Baroness, Lady Brinton, spoke about the Equality Act and short-term care support; the noble Baroness, Lady Masham, about the blue badge scheme; the noble Baroness, Lady Eaton, about the Global Disability Summit; the noble Baroness, Lady Ludford, about accessibility in public places; and the noble Lord, Lord Low, about challenges that I will come on to and strike common cause with him on in a moment. The noble Baroness, Lady Uddin, spoke about changes to address the position of vulnerable individuals and sexual predators; the noble Lord, Lord Addington, about dyslexia and using assistive technology more effectively; and the noble Lord, Lord Luce, about the proposals from Dame Carol Black—proposals I worked with her on a long time ago, when I was in a different role. I do not think we have ever cracked it, because I do not think that occupational health has ever been part of the National Health Service. With the benefit of hindsight, I think that we might have done something different there.

Independent evidence of the challenges facing disabled people can be found in an examination of the UK’s report to the UN’s Committee on the Rights of Persons with Disabilities—to which the noble Lord, Lord Low, and the noble Baroness, Lady Jolly, referred—following an investigation under the optional protocol. The committee expressed concerns about extensive evidence which shows that disabled people in the UK face significant challenges to enjoying their rights across all areas of life, including inaccessible housing, transport and information; barriers to achieving justice; inappropriate long-term placements for people with learning disabilities or autism, and the lack of provision for supported decision-making. The briefing from Scope refers to the challenges of accessing social care and employment, and the briefing from Sense refers to the longer-term planning and funding needed for the 1.7 million disabled people supported by their friends and families and the fear of what will happen when family carers are not able to provide that support on an ongoing basis.

Concerns have been raised in particular over three areas of rights for disabled people: an adequate standard of living and social protection, work and employment, and independent living. In my limited time, I want to say something on the first two. As for standards of living, as the noble Lord, Lord Low, mentioned, we now have the benefit of a cumulative impact assessment of tax and benefit changes between 2010 and 2018 commissioned by the EHRC. The conclusion that households with one or more disabled members will face large and disproportionately negative impacts from the changes is to be deprecated, and let us not forget that for most of this period we had a coalition Government who were complicit in these matters. Households with at least one disabled adult and a disabled child could face annual cash losses of more than £6,500.

These changes result mainly from the changes to the benefit system, including the freezing of working-age benefits, changes to disability benefits and reductions in universal credit rates. Concerns should focus not only on the structure of the key benefits—PIP, ESA and universal credit—but on how they are administered. The abolition of working-age DLA and its replacement by PIP was announced without any prior consultation and with the express aim of cutting expenditure by 20%, a deliberate hit on disabled people. We know that the implementation of PIP has been little short of a disaster, with the Government just having had to announce a fifth review of benefits for disabled people to identify those entitled to back payments.

Disability Rights UK, which has been pursuing statistics on the DLA-to-PIP move, reports that half of DLA claimants who were in receipt of the higher mobility rate were refused it on moving to PIP, with many losing their right to join the Motability scheme. The introduction of the 20-metre rule has been particularly damaging. Both PIP and ESA have been bedevilled with poor administration from application to assessment to decision-making and to challenge. Surely it is time to bring it all in-house and not to renew contracts, on a short-term basis or otherwise.

New claimants of ESA have lost entitlement to a work-related activity component. The application of sanctions continues to be problematic and the bedroom tax continues to bite—more than two-thirds of households subject to the tax include a disabled family member. Statistics in the NAO report on universal credit, published recently, reveal that while 20% of initial payments for universal credit claims overall are not made in full and on time, two-thirds of claims involving a limited capability for work element are not. The report also said that overloaded DWP staff are finding it difficult to identify vulnerable claimants, such as those with a mental health condition, for instance, and that the case load for work coaches is set to increase fourfold, and that of managers by sixfold.

If the benefit system is failing disabled people, how are they being helped into employment? The Conservative pledge to halve the disability employment gap has been watered down to getting 1 million more disabled people into work. Perhaps the Minister can tell us how all this is going. Recent figures show that the disability employment gap remains stubbornly at about 30%.

The Work and Pensions Select Committee has pinpointed that funding for specialist employment support for disabled people will fall from about £1 billion under Work Choice and the Work Programme to about half of this over the lifetime of the Work and Health Programme. It seems that the majority of employment support for disabled people will be by general rather than specialist support in the future.

We believe in a social model of disability—a society which strives to remove the barriers that restrict opportunities and choices for disabled people. There is much to do if we are to make progress, given the austerity years. One of the most depressing pieces of information provided in our briefings came from Scope and its new research report, The Disability Perception Gap. It found that negative attitudes and prejudice remain a major problem for disabled people, the data having hardly shifted since 2009. If we could put the same effort into addressing this as we do and have done on Brexit, we might at least make progress in tackling prejudice and discrimination.

Automatic Workplace Pension Enrolment

Lord McKenzie of Luton Excerpts

Monday 25th June 2018 Lords Chamber

Asked by

[Lord McKenzie of Luton]

To ask Her Majesty’s Government what steps they intend to take to address the issues arising from the 2017 review of automatic workplace pension enrolment; and what is the proposed timetable.

[Lord McKenzie of Luton (Lab)]

My Lords, I welcome the opportunity to open this short debate about the progress of auto-enrolment and its future development, particularly in light of the 2017 review, sub-titled Maintaining the Momentum. Our starting point must be to acknowledge the undoubted success of this policy, which has enabled some 9 million individuals to have been automatically enrolled into a workplace scheme by their employer. In topical parlance, perhaps, it has been a game-changer.

As we have debated before, this success has been built on a political consensus, thorough research of the data, stakeholder engagement and a robust analysis of the state of pension provision in the UK. This was underpinned, of course, by the intellectual rigour of the Pensions Commission. The commission’s work focused on the consequences of rising life expectancy, a highly unequal distribution of pensioner incomes and the dispersion of private pension provision, along with a state system with gaps in provision for those with interrupted working lives and caring responsibilities, especially of course women. That was no basis for a sustainable pension system in which people could have confidence to save. The settlement proposed that the foundation of our pension system should be reform of the state pension to make it easier to understand and less means tested, and an earnings-related private pension which moves on from voluntary provision but stops short of full compulsion. It acknowledged the challenges of funding such a system and the logic of raising the state pension age—as it put it, the “unavoidable long-term trade-off” between public expenditure and state pension age—notwithstanding the need for fair notice of changes.

Hence we have come to a national pension saving scheme for those not otherwise covered by adequate pension arrangements. The participation is not mandatory but the obligation of employers to enrol employees and use the power of inertia was anticipated to be a significant nudge; so it has proved. There are of course mandatory minimum contribution levels for employers and employees. Sitting alongside this is a low-cost defined contribution scheme with a universal service obligation, NEST. Other providers have also engaged; specifically, we have seen the growth of master trusts and the consequent need for regulation.

With total contributions of 8% of earnings above the LEL threshold, including tax relief, the commission estimated that a median earner would eventually secure a pension at retirement of about 15% of median earnings, on top of an estimated 30% from the state system. For lower earners, the replacement rate would be higher because of the proportionally higher amount coming from the state pension. There was an assumption that further private saving would bridge the gap to support higher individual aspirations but this has not happened.

The Government’s review can rightly claim that auto-enrolment is transforming saving habits. This year, the rollout of automatic enrolment to employers will be completed. Minimum contribution rates increased to 5% from April this year and will increase to 8% in 2019. It remains to be seen what the effect of any of this is on opt-out rates and, perhaps more importantly, the rate of attrition where individuals subsequently withdraw from the scheme. However, workplace pension participation has increased from 55% to 78% in the four years to 2016. For the private sector, participation among eligible employees has risen to 73%. Annual contributions into workplace pensions amounted to £87 billion in 2016. So far, opt-out rates have apparently remained lower than anticipated, at approximately 9%, but rates of attrition have been twice this. Perhaps the Minister would confirm that.

We consider that automatic enrolment is becoming the foundation of workplace pensions in the UK: an important component of providing millions of workers with a reasonable standard of living in retirement. But as the review and other studies have identified, challenges remain. Most significantly there is the level of contributions, which, as the review itself identifies, currently presents a significant risk that the expectations of a substantial proportion of the working-age population will not be adequately supported in retirement.

There is also a great deal of evidence that the success of auto-enrolment is less prevalent for such groups as part-time workers, women and those from ethnic minorities. This is particularly a consequence of the earnings trigger. The TUC’s research found that 4.6 million employees earn less than the £10,000 trigger, three-quarters of whom are women. The trigger has a particularly unfair current impact on some 100,000-plus workers who hold multiple jobs, which when combined would take them over the £10,000 threshold. The TUC points out that in many sectors, particularly among employers new to pension provision, the minimum contribution rates have been established as the norm, but it is understood that there is little evidence of levelling down by existing pension providers. Again, perhaps the Minister would confirm that.

The Pensions Policy Institute estimates that two-thirds of those enrolled in pensions in 2030 will be on minimum contributions. The 2017 review states that using the savings adequacy measures introduced by the Pensions Commission, 12 million individuals are undersaving for their retirement—12 million individuals who comprise 38% of the working-age population. The review proposes a number of measures with which we agree and which should help to increase savings. Lowering the age from 22, which was originally based on the national minimum wage criteria, to 18 is one. NOW: Pensions data shows that younger ages are less likely to opt out so, by inference, are keener on pensions. Perhaps the Minister can say whether this is generally the position.

The proposal to abolish the lower contribution level for a band of earnings so that contributions become payable from the first £1 of earnings would simplify things, increase the amounts brought into pensions savings and improve incentives for those with multiple jobs to opt in. It would also enable the entitled workers definition to be scrapped.

The level of the earnings trigger is the most contentious issue. The review records no clear consensus. Keeping it where it is at £10,000 amounts to a real-terms decrease in its value, which for the current year would bring another 100,000 people, 72,000 of whom would be women, within the scope of automatic enrolment. It is the trigger that ultimately determines who will be auto-enrolled. The pays-to-save analysis is complicated, but is perhaps made less so by changes to the state pension. It is also to be regretted that the tax anomaly—the different tax outcomes of net pay and relief at source arrangements—has not been resolved.

Setting the earnings trigger clearly involves judgments about a range of issues—affordability, opt-outs, provision for pensions—and the review excuses itself from a longer-term view on the basis of not wanting to pre-empt further threshold reviews. However, the Government cannot look aside for ever from the fundamental point about the levels of undersaving and the risk of poverty in retirement at current contribution levels.

Another conundrum is the 4.8 million self-employed and how they can be brought into auto-enrolment. As the review sets out, this is a group for whom pension saving is declining, notwithstanding the range of products available, including access to NEST and lifetime ISAs. This is at a time when self-employment is increasing, fuelled by the gig economy. The review suggests that many of them should already be included in auto-enrolment via agency worker and other provisions. There are also those inappropriately classified as self-employed—the bogus self-employed. This is a matter for enforcement by the regulator and HMRC, but for others the review proposes the development of nudges and prompts including through Making Tax Digital. Can the Minister say something about progress on this, especially in the light of HMRC announcements about the slowing up of Making Tax Digital to cope with the consequences of Brexit?

The third strategic problem identified by the review is that although individuals are saving more than ever before, they are not looking to take greater responsibility to plan and save more for their retirement. Policy looks to inertia to capture savings while expecting positive and proactive engagement to save more and make decisions about savings, particularly the decumulation options. There is no longer just the obligation to annuitise.

The overall pensions landscape has changed considerably since auto-enrolment was conceived. Much of this has to do with pensioner protection: advice and guidance, some mandatory; a charge cap on default funds; the prospect of regulation of master trusts; the prohibition on cold calling; and a pension dashboard. This should be conducive to an environment of engagement, but we know there is some way to go to address the general low level of financial education in the UK, which undermines effective engagement.

Despite the success of auto-enrolment, there is still much to do to address undersaving. We have no doubt that automatic enrolment should remain the bedrock through which a workplace pension can be provided. We accept the need to maintain the consensus for the proposed changes and that this should involve employers, savers and the pensions industry. However, we question why the government timeline for making positive progress seems set at the mid-2020s. Those missing out now deserve a more expeditious approach. I look forward to the Minister’s comments.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Ping Pong (Hansard): House of Lords
Tuesday 1st May 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, we are happy to support the Government on this group of amendments. Amendments 7 and 8 in particular are very important, relating as they do to pensions guidance. Amendment 7 relates to personal pension schemes, Amendment 8 is a parallel one relating to occupational schemes, and there is a further subset of provisions relating to occupational schemes in Northern Ireland.

Our earlier deliberations and those of the other place had a strong focus on consumer protection, recognised this afternoon, on pressing back against pension scams and on the risks that can arise from an imbalance in information. These issues have been heightened in significance since the advent of pensions freedom, and we are wholly supportive of the requirement on the FCA to make rules which require trustees, managers and stakeholders, when liquidating and transferring entitlements, to refer members to appropriate guidance provided by the SFGB or its delivery partners to ensure that effective explanations and/or opting-out processes are in place.

Amendments 1 and 35, which we support, enable transfer schemes under Schedule 2 to transfer staff rights properly from the Consumer Financial Education Body to SFGB and devolved authorities. It would be relevant if devolved authorities became responsible for provision of debt advice in their area. This facilitates the devolved authorities being responsible for the debt advice in their area. As the Minister explained on introducing the Bill into your Lordships’ House, the devolved authorities currently deliver a broad range of guidance services. By transferring responsibility for debt advice, there will be opportunities for joining up the commissioning of services—and we obviously support this.

As has been evidenced from the earlier discussion on this item, there has been discussion about whether the clauses are robust enough in enabling impartial advice. We know the view of the noble Baroness, Lady Altmann. It seemed to me that the Minister had dealt with this; a note provided by the Minister would appear to put that matter to rest—in particular, about the need to look at the interaction between Clauses 3 and 5. I think that my noble friend Lady Drake touched on that matter. New subsection (7) in Amendment 7 and new subsection (6) in Amendment 8 define the pensions guidance referred to in the amendments as the “information or guidance” provided in pursuance of Clause 5 of the Bill. That clause requires the new body, as part of its “free and impartial” pensions guidance functions in Clause 3, to deliver what we know as Pension Wise guidance. That seems to address the very real concern that the noble Baroness, Lady Altmann, raised.

We enter the final straight on this important Bill, and we might reflect just briefly on the journey that we have made and the changes that have occurred, with yet more to follow this afternoon. This is an important measure, encompassing as it does the creation of a single financial guidance body and its reach to cover pensions guidance, debt advice, money guidance and consumer protection functions. It is charged with developing a national strategy to improve financial capability. It further deals with the regulation of claims management services, in particular to challenge fraudulent practices and excessive charging.

Some important changes have been made to the Bill, especially in your Lordships’ House, and this can be attributed to the open-book approach of the Minister in particular, for which we thank her, as well as the engagement cross party of your Lordships around the House. Key matters now include the duty of care for the FCA, and the breathing space scheme—a very important provision. My noble friend Lord Stevenson was heavily involved in that, of course. Then there is the prohibition on cold-calling for pensions and CMCs, with enabling legislation to cover other financial products; the interim fee cap for PFI claims management; default guidance for pensions; the extension of CMC regulation to Scotland; and much more. I hope that we will have the opportunity finally to thank the Minister and her colleagues in due course, but is right that we reflect on the journey that we have made so far in the Bill.

[Lord Flight (Con)]

My Lords, I support these amendments. I put on record the fact that, in the largest area of pensions saving, occupational schemes, participants typically do not seek advice but allow their savings to go into the default fund, which typically may have taken up as much as 90% of the total savings. There is nothing wrong with that, and default funds are generally constructed very sensibly for long-term pension fund investment. However, it is the area where most money ends up and where individual beneficiaries do not really take decisions themselves.

--- Later in debate ---

[Baroness Altmann]

My Lords, I support Amendment 10A and I hope that my noble friend will be able to accept it. Of course I welcome the Bill and the concept of a ban on cold calling but I fear, as we have expressed and the noble Lord, Lord Sharkey, in particular has pointed out, that unless we ban the use of any leads that have been obtained from cold calling we will not protect consumers.

What is cold calling? It is unsolicited, direct marketing. Companies try to approach potential customers to entice them into buying products that in most cases end up being scams and on which those customers often end up losing significant sums of money.

The legislation tends to focus on this issue from the perspective of protecting people’s information and data, but this issue of banning cold calling needs urgently to be considered from a customer perspective as one of business selling practices. That is very different from the concept of protecting someone’s data. Even if there were consent in some way to cold calling, the practice that is currently prevalent—whether from overseas or within the UK—tends not to be calling people whose numbers have been found by invading their data privacy. Very often, it is random number calling from an automated device or merely trawling through telephone directories. Even those people who sign up to the Telephone Preference Service receive cold calls.

Cold calling is effectively already banned, but what the Bill seeks to do, what noble Lords were trying to do and what this amendment would help to achieve would be more than that, because we will never effectively stop someone trying to call people. However, if we ban the business reasons for which they do so we will properly protect consumers. That leads on to my plea to my noble friend to consider this from the point of view of the selling process and the customer buying process. If we ensure that the regulators in charge of the sales process do not permit the use of data that has been obtained from an unsolicited call, in any form, as we have already done for mortgages, that would be much more likely to ensure the kind of protection that I know my noble friend and the Government wish to achieve.

I thank David Hickson from the Fair Telecoms Campaign. He has tirelessly attempted to help people understand why these things are so important. The ICO is of course responsible for enforcing compliance with data protection legislation but the regulation of business practices is undertaken by the specialist regulators. In the case of pensions, it is the FCA or the Pensions Regulator. Indeed, the FCA already prohibits unsolicited direct marketing of mortgage products. The SRA prohibits unsolicited direct marketing of claims management services by solicitors, so it is possible to stop. I urge my noble friend to consider and respond to these concerns when she makes her closing remarks.

[Lord McKenzie of Luton]

My Lords, I start by acknowledging the role played by the noble Lord, Lord Sharkey, in our deliberations—particularly on cold calling, which he has been focused on. I am not sure that we are meant to, under the rules, but I also welcome the Minister from the other place, who is with us and hoping not to get the Bill back for another round of ping-pong. We will see.

The consumer protection function of the single financial guidance body is part of the armoury to build a case for banning cold calling and unsolicited direct marketing for consumer financial products. It adds to the abolition of cold calling for pensions and CMCs that is now in the Bill. As sent back from the Commons, the Bill requires the SFGB to consider the impact of unsolicited direct marketing on consumers, publish from time to time an assessment of whether such activity has a detrimental effect on consumers and advise the Secretary of State whether to make regulations under the cold calling provisions of the Bill.

The amendment in the name of the noble Lord, Lord Sharkey, seeks to add a requirement for the SFGB to additionally publish an assessment,

“not less than once every two years”.

Given where we are in the process, I frankly doubt that this requirement would add value. Surely the key is to have flexible arrangements so that the body can respond to emerging issues and report expeditiously as and when evidence of detriment is available. If the noble Lord’s concern is that the SFGB will somehow let this function lie fallow, I am sure that the Minister can put something on the record in her response.

Amendment 10A—also in the name of the noble Lord, Lord Sharkey—seeks to ban,

“the use by any person of data obtained in contravention of the prohibition”,

of cold calling for pensions and,

“determine the penalties for any such contravention”.

A further amendment seeks a parallel prohibition on data from cold calling for claims management services. It is understood that through measures in this Bill—which will be complemented by existing and forthcoming data protection legislation—where personal data is obtained through an unlawful cold call, further use of that data would be contrary to the Data Protection Act 1998. I understand that fines for such abuse are about to be raised significantly. Through the general data protection regulation and the Data Protection Bill going through Parliament, these matters will be addressed and prohibited. The issue is important and it is certainly important that we hear from the Minister on the second amendment of the noble Lord, Lord Sharkey.

[Baroness Buscombe]

My Lords, I thank all noble Lords who have taken part in this brief debate. I thank the noble Lord, Lord Sharkey, for his amendments, which give us an opportunity to reiterate some of the assurances that I hope I have already made, both through the passage of the Bill and about where we go now. It is a pleasure to echo the words of the noble Lord, Lord McKenzie: although we appreciate the sentiments of the noble Lord, Lord Sharkey, and understand where he is coming from, the Government expect—I stress this—the body to be flexible and responsive to emerging issues. We expect it to report promptly as and when evidence of consumer detriment in relation to cold calling is available. Our concern is that as soon as one says, “It’s every year” or “It’s every two years”, the situation in departments and bodies such as the new one can so easily become a box-ticking exercise. We do not want it to be that. We want to be sure that the body will be able to respond as issues emerge, particularly real evidence of consumer detriment. Having been through the process of the Bill and talked to all those currently working in the three existing bodies that will be transferred shortly into the one single financial guidance body, I have great trust that the level of expertise and experience we will be able to transfer to the new body is such that they will have a strong eye on this. I assure noble Lords that there is strong feeling in support of what we seek to do both in your Lordships’ House and way beyond. We have listened to noble Lords on these issues and we will act firmly to protect consumers where appropriate.

--- Later in debate ---

[Baroness Buscombe]

My Lords, Amendment 19 places a duty on the Law Society of England and Wales to cap fees in relation to financial services claims management activity, as well as giving a power to the Law Society of Scotland to restrict fees charged for this activity. It also gives a power for some legal services regulators in England and Wales to restrict fees charged for broader claims management services. Alongside this, Amendment 20 gives the Treasury a power to extend the Law Society of Scotland’s fee capping power to broader activity in future.

Amendments 16, 17 and 18 ensure that the interim fee cap provisions, introduced as a concessionary amendment in your Lordships’ House, work together with the fee capping powers for legal regulators. Taken alongside the fee restriction powers for the FCA that we have already agreed should form part of the Bill, these provisions will ensure that consumers are protected, no matter which type of claims management service provider they use, and whether it is regulated by the legal service regulators or by the FCA.

They will also ensure that the relevant regulators are able to adapt to any future changes in the market and that there is continuity of coverage for the interim fee cap throughout the transfer of regulation. Indeed, the honourable Member in another place Jack Dromey MP put it well when he said:

“The clauses are sensible because they go beyond claims management companies. … Of course it is about not only CMCs, but legal service providers”.—[Official Report, Commons, Financial Guidance and Claims Bill Committee, 6/2/18; col. 95.]


I hope that noble Lords will agree with this sentiment and will accept Amendments 16 to 20, as made in the other place. I beg to move.

[Lord McKenzie of Luton]

My Lords, if my honourable friend Jack Dromey is happy with these, I have to be as well.

Motion on Amendments 16 to 20 agreed.

--- Later in debate ---

[Baroness Buscombe]

I once again thank very much all noble Lords who have taken part in the many debates in your Lordships’ House on the Bill. We have come a long way and there has been huge consensus. We have improved the Bill, along with our honourable friends in another place, and I hope that all noble Lords can wish it well. In particular, on the future of the new body, I hope that we will know its name soon so that we can start calling it something in our future debates on this subject.

[Lord McKenzie of Luton]

My Lords, if it is time to say our thank yous, I will add mine to those of all noble Lords who have participated in these debates. There have been robust exchanges on what was initially quite a narrow Bill, but its coverage has been expanded, quite appropriately. I certainly thank the Bill team. I know that, on our side, we have probably put them through some misery with our questions from time to time, but when we have had the opportunity to touch base in that way, it has been really helpful to the passage of the Bill in this place. I wish the Bill well on its passage into legislation.

[Lord Sharkey]

I associate myself with the comments of the noble Lord, Lord McKenzie, and the other noble Lords who have spoken. Not only has the Bill been significantly improved but, oddly, I think we have managed to enjoy the process as we have gone through it—perhaps it is not odd at all. I thank the Minister and her officials.

Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018

Lord McKenzie of Luton Excerpts

Tuesday 27th February 2018 Grand Committee

[Lord Kirkwood of Kirkhope (LD)]

My Lords, it is getting later in the afternoon and there are some important debates following this, so I will be very brief on these two orders. The Minister is quite right to declare that the auto-enrolment provisions have been successful. She is also right to say that this year there are two, if not more, big changes and reforms in the existing system as it relates to small employers and to 3% contributions for employees and employers. We wish these changes well. These orders are perfectly sensible in promoting the agenda. She is also right to say that Maintaining the Momentum is a less than appropriate name for any kind of government report at the moment, but it was a good solid document and it gave confidence that there is a real prospect of delivering this scheme and building on the progress that has been made. Speaking for myself, I wish it well. I agree that the new opportunities for women in future are a signal and ambitious plan that we hope works in the way that the Minister set out, so I am very happy with the automatic enrolment order.

I have one or two pedantic questions about the NEST order. I spend a lot of time looking at secondary legislation. Paragraph 8(1) of the Explanatory Memorandum states:

“The Department for Work and Pensions consulted on the National Employment Saving Trust (Amendment) Order from 7 November 2017 to 27 November 2017”.


According to my arithmetic, that is a 20-day consultation. The next sentence is shorter: “It received five responses”. It occurs to me that one may be a consequence of the other. I understood that government consultations had to be slightly longer than that. Of course, it is a technical matter, I understand that, and the stakeholders involved might not be that numerous, but if it received five responses it is a bit rich to claim that, “the majority of the respondents were in favour” of the consultation as set out. Is that 3:2 or 4:1? I am being slightly facetious, but it is an important issue and consultation is an important part of getting these statutory instruments correct.

Coming to the substance, I think that the noble Baroness’s four recommended changes are entirely sensible. I am particularly interested in the revisions for research, because I have been involved as a trustee of schemes in the past and it is a struggle to keep the data up to date. Will the research function assist the trustee in being able to ensure that the data is as clean as it can be? Sometimes with some of these schemes, particularly involving bulk transfers, the data gets out of date—the members change their addresses, their occupations and their other personal details.

I did not know that there was no ability to carry out research as a trustee, but I think that making it explicit is a very good idea. Contractual enrolment is absolutely sensible, and removing empty schemes and accounts makes perfect sense as well. I think that NEST is also a success, as far as it has gone, so more power to its hand. I hope that both these orders work, and I will be watching developments, as I am sure everyone will be, in this important area of auto-enrolment over the rest of 2018 as these significant events come to pass.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Baroness for her introduction of these two orders. I shall start with that relating to auto-enrolment. As the noble Baroness and the noble Lord, Lord Kirkwood, said, auto-enrolment has, by any measure, been an important policy success. It was founded on the independent work of the Pensions Commission, legislated for by a Labour Government, first implemented by the coalition Government and sustained by the current Conservative Administration. The broad consensus and robust analytical underpinning has been key to its success thus far, along with a design and implementation approach that encompassed government, regulators, employers, payroll firms, intermediaries and the pensions industry. This does not mean that there has always been an identity of view across parties or that the job is complete. It is not.

The noble Baroness referred to the big year 2018, which indeed has some important matters to consider but, as the earnings triggers and qualifying bands analysis for 2018-19 sets out, as at the end of November last year more than 9 million people have been successfully auto-enrolled and more than 900,000 employers—possibly now a million—have met their auto-enrolment duties. By the time the staging process is complete, the government analysis estimates that around 10 million people will be newly saving or saving more.

However, we know that just as the staging process is being completed, we are entering the year when the first phased increase in minimum contributions is to take place, leading eventually to 8% minimum contributions. Notwithstanding this, the Automatic Enrolment Review 2017 refers us to the Pensions Commission work that estimated that 8% of relevant earnings, together with the state pension, would deliver about half the level of income needed for an adequate retirement income. That is, around 12 million individuals will still be under-saving for retirement and, of these, 87%—10.4 million—earn more than £25,000 a year, so 13% earn less. While the 2017 review sets out a package of reforms to address this, it does not propose to see these completed until the mid-2020s. This package will include lowering the age threshold from 22 to 18 for young people, removing the lower earnings limit to help those with lower earnings and multiple jobs, as well as seeking to improve the retirement outcomes of the self-employed. These are worthy ambitions, but why do we have to wait for so long? Why is the current review concluding that the lower limit of the qualified earnings band should be raised, while arguing for it to be removed? Are the Government to find time for a full debate on this 2017 review in fairly short order? The review came out in December and it is very important. We ought to have the opportunity to debate it in Parliament.

Family Relationships (Impact Assessment and Targets) Bill [HL]

Lord McKenzie of Luton Excerpts

2nd reading (Hansard): House of Lords
Friday 23rd February 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Tyler, and benefit from her expertise in this area. I agree with the noble Baroness, Lady Howe, that this has been an interesting debate. We should thank the noble Lord, Lord Farmer, for introducing it. Of course, the subject has been aired at both ends in recent times and the noble Lord has been true to his word in promising a Private Member’s Bill when the Manifesto to Strengthen Families was debated in November last year. In doing so, he instanced what he saw as the inadequacy of the non-statutory family test and the potential benefit of family hubs and local one-stop shops to help disadvantaged children.

As we have heard, the family test was introduced as far back as August 2014, with the enthusiastic backing of David Cameron. But, as we now know, not all of his initiatives turn out well. The test comprises five questions that policymakers need to consider, including the impact of a policy on families, their formation and their sustainability. As the noble Lord, Lord Farmer, and others have said, publication of the outcome of such tests was not mandatory and few have been published to date. This issue was the focus of attention of the noble Lord, Lord Alton, a long-standing campaigner on this matter, the noble Baroness, Lady Howe, and the noble Lord, Lord Blencathra, who took us for a brief walk down memory lane to the days when you could get 3p on a recycled bottle—I think it was a Tizer bottle; that was the premium rate you could get.

So that we can get a better assessment of the consequences of the provisions in the Bill before us, can the Minister confirm on the record how many tests have been carried out or are under way, and precisely why the outcomes could not be published? Indeed, what is the Government’s view of the future of this test?

Although the noble Lord, Lord Farmer, has previously acknowledged that Tony Blair was there first, we know that much of the current thinking on the role of the family emanates from the Centre for Social Justice. We have heard authoritatively today from the noble Baroness, Lady Stroud, who is a strong campaigner on this issue, as well as from the noble Lord himself. Their focus is on the scale of family breakdown in the UK, with the assertion that it plays a role in driving poverty and further enhancing disadvantages. It follows, they argue, that family breakdown is an issue for society itself, not just individual families, and that it is necessary to have data to begin to build a picture of this and to test policies against. I think that view was shared by many noble Lords, including the noble Lords, Lord Shinkwin and Lord Alton.

We should be clear that this is not exclusively a Conservative agenda. We on these Benches share an analysis which says that family breakdown and parental conflict can contribute to driving poverty, and that policy-making should encompass an assessment to avoid such outcomes. Where we would differ, I suggest, is in our asserting that lack of income is the fundamental cause of poverty. Research by the Tavistock Institute confirms that family separation can cause or increase family poverty and that the Government’s emphasis on improving the quality and stability of family relationships is an important anti-poverty measure to help avoid relationship breakdown, or to ensure that it is better managed when couples part. However, it says the evidence is clear that incomes matter and that poverty and lack of money is in fact a major cause of relationship breakdown, as well as a consequence of it.

The Bill’s requirements for the scope of a family impact assessment are potentially very wide and not without resource implications. Given the context of the Bill, one would have expected it to come with an impact assessment. Can the Minister say whether there is one and if not, why not? In particular, the definitions of family and families are commendably wide, including civil partners, a range of carers, children and grandparents. This begs the question of who would not be covered. Perhaps the Minister or the noble Lord, Lord Farmer, might give us a view on this.

To the extent that individuals and relationships are not included in this wide definition, we would need to be satisfied that their exclusion does not disadvantage them and that by focusing on some, others should not be allowed to slide into poverty. But we should be clear that we do not see these approaches as overriding the need to address income poverty—the fundamental issue, in our view. The Bill espouses lofty ideals of how families can be supported; at the same time, the Government have visited horrendous cuts on a range of social security provisions. The Bill is about impact assessment but we have struggled to get from government a cumulative impact assessment of a decade of cuts to social security on the incomes of families with children. How have these matters featured in the family test so far? To what extent are the “Targets for family stability” required by Clause 3 to have an income component?

The CPAG has looked at these matters and concluded that the cuts to the legacy social security system—benefits and tax credits—and the effects of universal credit will lead to alarming losses, which will damage the life chances of hundreds of thousands of children. Families already at greatest risk of poverty will lose most; I think the noble Lord, Lord Kirkwood, alluded to this. This is not just lone parents but families already on low incomes, larger families, families with young children and families where someone is disabled. It calculates that families with four or more children will be more than £4,000 per year worse off because of the cuts to the legacy benefit system, and more than £5,000 worse off following the cuts to universal credit.

Just consider some of the policy changes since 2010: the health in pregnancy grant abolished; child benefit frozen for three years; uprating of most working-age benefits restricted to 1%, and then frozen for four years; restrictions on the Sure Start maternity grant; the baby element of child tax credit abolished; the benefit cap introduced and then reduced; the two-child limit introduced; local housing allowances cut; and much more.

What possible countervailing policies to promote strong and stable families could wipe away the negative effects of all this? The Bill proposes that the Secretary of State must publish a report no later than six months from the coming into force of the legislation setting out the costs and benefits of extending the requirement for a family impact assessment to local authorities. Will the Minister say whether central government would be prepared to fund such engagement by local authorities should there be a decision to proceed? She will be aware that no new money was made available for public services in the recent local government settlement and that local authorities face a £5.8 billion shortfall by 2020. Of particular concern is the need for £2 billion to plug the gap in the shortfall in children’s services, again needed to support the most vulnerable.

The Bill invites the Secretary of State within nine months to set out objectives and targets for promoting strong and stable families, and proposals and policies for meeting them. Should that come to pass they should presumably be informed by a consultation exercise. My noble friend Lady Massey produced some valuable insights for us from her experience, the lesson being the need for early consultation before designing any intervention for children and families and the necessity to cross barriers if change is to be delivered. In responding, perhaps the noble Lord, Lord Farmer, will share with us what he considers should feature in those objectives and targets.

On previous occasions the Government have declined to accept that family impact assessments should be put on a statutory basis. Given the passion displayed by the noble Lord, Lord Farmer, and others, we look forward to hearing whether the position of the Government has changed.

Personal Independence Payments

Lord McKenzie of Luton Excerpts

Tuesday 23rd January 2018 Lords Chamber

[Baroness Buscombe]

I hear what the noble Lord is saying. This is one of the reasons why the immediate response of my colleague the Minister for Disabled People—and indeed the Secretary of State—was not only to decide not to question the judgment but to do everything we can to help claimants. That is why we have already had early meetings with stakeholders and organisations who can help us think through how to ensure that we do not make mistakes going forward. It is important to say that the 2017 amending regulations did not represent a policy change. The distinction was based on the considered advice of highly qualified medical advisers, and the activities considered in PIP are used as a proxy for assessing a claimant’s overall level of need in daily life, which is what we were focusing on.

[Lord McKenzie of Luton (Lab)]

My Lords, the Minister on several occasions used the term “generous” in describing the Government’s position. By what yardstick is “generous” measured in these terms?

[Baroness Buscombe]

The noble Lord will understand that since 2010, spending on the main disability benefits comprising PIP, DLA and attendance allowance has risen by £4.2 billion. Disability benefits are at a record high this year. Indeed, as a share of GDP, the UK’s public spending on disability and incapacity is higher than in all other G7 countries bar Germany.

It is important to focus on the components in terms of spending on PIP and the DLA equivalence, which of course was what we had under the Labour Government. As at October 2017, 66% of PIP recipients with a mental health condition received the enhanced rate daily living component, compared with 22% receiving the highest rate DLA care component as at May 2013. Some 31% of PIP recipients with a mental health condition get the enhanced rate mobility component as at October 2017, compared with 10% receiving the higher rate DLA mobility component as at May 2013. I could go on with more figures. If one compares the percentage of spending by this department with other departments within the Government’s budget, we are, as we should be, strongly focused on how we can help those with physical and with mental health conditions to do a very dynamic thing that PIP stands for: have the independence to cope with their lives, whatever their condition.

Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018

Lord McKenzie of Luton Excerpts

Monday 22nd January 2018 Lords Chamber

In conclusion, we remain committed to the principle of providing protection for members of pension schemes in the event of employer insolvency. The Government have listened carefully to stakeholders and the pension industry, and these regulations show that we are meeting our commitment to protect pension scheme members and make reforms where necessary. In my view, the provisions of the Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018 are compatible with the convention rights. I commend these regulations to the House.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Baroness, Lady Buscombe, for her clear introduction to these regulations. As we have heard, they will amend the legislation to allow the Financial Assistance Scheme to pay a higher amount of assistance to capped FAS members who have long service in a single pension scheme. They allow an increase in the cap by 3% for each year of pensionable service over 20 years up to a maximum of double the standard cap. This is in addition to the inflationary increase in the amount of the cap. As we have heard, a parallel change has been made to the PPF, although not by the use of regulations, with effect from April 2017 in line with the policy to align the two systems and following a government Statement on 15 September 2016.

FAS and its follow-up, the PPF, have been important mechanisms—I think this is a view that we share—to improve confidence in defined benefit schemes. They protect some 11 million in the UK who belong to such schemes. For FAS to be involved, a scheme must have commenced wind-up between 1 January 1997 and 6 April 2005; after these dates, individuals would look to the PPF. We introduced these schemes when in government and continue to support them.

FAS would generally meet 100% of entitlement for those having reached retirement age when wind-up commences; for those who have not done so, members would generally receive 90% of the expected pension accrued at the point that the scheme began to wind up, subject, of course, to the cap. From recollection, the expected and actual pension amounts for these purposes would not always coincide with scheme definitions. Could the Minister comment on how they might diverge at the current point?

Notwithstanding the 6 April 2005 date, we know that there can be a considerable lead time between commencement of wind-up assessment and entry into FAS. According to the most recent accounts—the Minister might be able to confirm this—in the year to 31 March 2016 there were still some 23 schemes that completed wind-up, with a total of £141 million of assets transferred to the Government. Incidentally, could the Minister remind us how the receipt of scheme assets, employer contributions and FAS payments are dealt with in the government accounts?

As we have heard, the PPF took over responsibility for the management of FAS in 2009. By the end of 2015-16, it had completed the transition of 1,027 schemes, with 155,000 individuals entitled to FAS assistance. This is an impressive level of support, without which thousands of individuals would have received or be entitled to little or nothing at retirement. At a time when we are debating in general the merits or otherwise of outsourcing, FAS is a worthy example of the state stepping in to support failures of private pension provision.

It was announced that, in 2016, FAS would be closed to new applications. While this would keep the scheme open some 10 years longer than originally planned, have the Government made any assessment of the number of individuals who would lose out as a result of such a decision and what the Government’s saving would be? Failure to access FAS might be laid at the door of trustees or scheme administrators, but any loss would be suffered by members. Is that fair? Would failure to seek access to FAS cause any restriction on access to social security benefits?

We have seen a copy of the Government’s response to the consultation on the increased cap proposals. One issue arising is whether there should be a definition in the regulations of pensionable service, as it would help avoid confusion where service was under another scheme and would be disallowed. The Government say that they are content to rely on information from trustees about pensionable service based on the definition of pensionable service contained in individual scheme rules, but one bugbear of the scheme, at least initially, was the poor quality of some of the data held by various schemes. What is the current situation in this regard, and what confidence is there across the board that scheme data are now more robust? In how many cases has the FAS scheme manager had to issue guidance to individual schemes, and on what points?

It seems that, despite the original intent, periods of service accrued in a member’s own right are to be aggregated with those arising under pension credit arrangements in determining long service. We do not oppose this, but, for the record, perhaps the Minister would expand on the potential stumbling block referred to in the documentation should the alternative position have been adopted. Further, we support the potential inclusion in the long service cap of those in receipt of a survivor’s pension but who do not have any pensionable service of their own.

The Explanatory Memorandum draws attention to the reference to the European Court of Justice in the case of Grenville Hampshire. This is a matter engaging EEC directive 80/987 and whether in the event of an insolvency every employee should, inter alia, receive no less than 50% of their expected pension benefits. From recollection, this matter has been around for a little while. Perhaps the Minister would update the House on the current state of affairs. The risk would be where the current cap is in play and would, I presume, be ameliorated by these regulations. Should the Secretary of State or the board of PPF not prevail, what are the consequences?

The caps on both FAS and the PPF were a mechanism to limit costs and to guard against excessive risk-taking, the latter potentially arising where decisions could risk insolvency of a company where there was no chance of a diminution in executive pensions because they would be wholly underwritten by FAS or the PPF—that is, the moral hazard position. In amending this approach, we are asked by the Minister to recognise the unfairness for those whose long service has been in a single pension scheme and where, without raising the cap by length of service, they would be in no better position than someone with equivalent pension entitlement levels but who could secure additional benefits in a new scheme. We recognise that position.

It is noted that no impact assessment is offered for these regulations, although reference is made to the impact assessment for the Pensions Act 2014. Will the Minister say why no such assessment has been prepared, particularly given that, for FAS, after asset transfers and recovery the net cost is met by the public purse? Under PPF, it is met by the levy on other DB schemes. A phone call to officials suggested an annual cost of £1.2 million a year—indeed, the noble Baroness confirmed that figure—and that some 290 members would benefit. Given the stop on further FAS transfers, this is a finite population. Other things being equal, we might question whether this is a priority at the present time, but alignment with PPF, prior deliberations and fairness lead us not to oppose but to support these provisions.

Having recognised the principle, the question arises as to the quantum of the relaxation—in other words, the 3% for each full year of pensionable service over 20 years, subject to the limit of double the standard cap. Will the Minister remind us of the basis on which this 3% is computed? It should be noted that, for the PPF, the increased cap for long service could increase levy payments by some £139 million in the period to 2030. Will the Minister tell us how many recipients are likely to be involved over that period?

These regs are about FAS, but we should not let the moment pass without making a general point about the pensions environment and the PPF. Not only has it to deal with BHS but, as the result of last week’s events, also Carillion. It is to be welcomed that the PPF is in robust health, with, I think, £4.1 billion in reserve, but there is obviously a limit to the strain it can take. Subject to all this, I support the regulations.

[Lord Jones (Lab)]

My Lords, like my noble friend at the Dispatch Box, the Minister is a master of detail and I thank her for her helpful introduction. However, since they refer to Wales as well as the rest of Britain, have these draft regulations any relevance to the steel-workers of Port Talbot at the previous Tata company? Indeed, do they in any way impinge upon the pensions entitlement of the remnant of the steel industry across Britain? It is not that one expects steel pensions to be sky-high, which the cap might anticipate. If the Minister can in any way make reference to the beleaguered steel industry, and in particular those steel-workers in the great Port Talbot works who are very anxious about their pensions, that would be helpful.

--- Later in debate ---

The noble Lord, Lord Jones, asked about the impact on British Steel. There is no impact: these regulations do not impact on Tata or British Steel. The noble Lord, Lord McKenzie, also asked about the schemes left to transfer. FAS applies only to pension scheme members whose employers became insolvent before the existence of the PPF in April 2005, so the 2016 deadline still gave more than 10 years to transfer into FAS, which I hope noble Lords will agree is some considerable time.

[Lord McKenzie of Luton]

What struck me when I looked at the data was that for the last year, up to March 2016, there were still some 23 schemes transferred into FAS, notwithstanding that it was 10 years or more since the obligation to commence winding up. If I understand correctly and there were 23 schemes for that period, how many were left out of the subsequent period and have been chopped off? This is particularly an issue if the failure—if it is a failure—to pick up that detail was with the trustees or the scheme administrator, because the consequence would fall on the individual member of the scheme.

[Baroness Buscombe]

I understand the question posed by the noble Lord; indeed, when I was discussing this with officials, I was amazed that it took 10 years. To begin with, I could not understand why the scheme closed to new entrants as late as 2016. I cannot say whether the figure of 23 schemes is correct for the final year but I will check and respond to the noble Lord; I shall seek to find out how many were left out and how many individuals might thereby have lost out. I also have a little more information regarding Tata: because this provision applies to schemes wound up before 2005, it is relevant not to Tata but to the PPF scheme.

The noble Lord, Lord Kirkwood, asked why the Government have taken so long to introduce the long service cap. There have been significant reforms to pension legislation over the last few years, and the introduction of the FAS long service cap is the latest change in a programme of work to treat members of the FAS and PPF schemes more consistently. I hope the noble Lord will accept that pension legislation is complex. It was important that we consulted on draft FAS long service cap regulations to ensure that the legislation operated as intended and did not have any unintended consequences. As a result, December 2017 was the earliest that we could lay the regulations. I appreciate that members of the FAS will be frustrated by the perceived delay but we had a legal obligation to consult on the regulations. The public consultation helpfully identified some small changes that were required to ensure that the regulations operate as intended for eligible FAS members.

We also had to ensure—I think this brings us on to the next question posed by the noble Lord—that the costs were proportionate and to structure the long service cap to ensure that no further costs would be incurred. The noble Lord was very concerned about the administrative cost. I share that concern; it seems like an enormous amount of money for the relatively few people affected. At least I can confirm that the costs are less than had first been forecast. It would be fair to say from the department’s perspective that we are continually looking at where costs can be kept to a minimum, not least because those costs fall on the taxpayer.

While in the past there has been much criticism and scepticism around the introduction of digital systems to support more effective, efficient and cost-effective systems for the administration of such schemes, it is fair to say that systems are proving more robust as technology advances and becomes more understood by users. However, it is incumbent on all of us to keep an eye on that in terms of ensuring that we do all that we can to reduce costs. The trouble is that we are talking about checking records of individuals. That takes time and sometimes it is easier to do manually for such a small number of people. I accept the noble Lord’s point: in some ways, one might question whether it is simpler and more cost effective to do it manually. I take very much on board what he has said.

With regard to transaction costs, going on from what I have just said—sorry to string this out—the PPF, which administers the FAS, is currently in-sourcing member data from Capita. The FAS data is currently out of date, incomplete and often paper-based, requiring manual processing and checking, and that is not a one-off cost. We should continue to look at that and encourage those who administer the scheme to do the same, although I am sure they are cognisant of these considerable costs.

The regulations will ensure that individuals who have worked hard for a single employer for many years are not penalised by the cap. This group of savers have built up a large pension pot, not because they are high earners but because they have worked for one employer for the majority of their working lives and, as a result, will not have had the opportunity to secure additional income in retirement.

The decision to increase the total amount of assistance that this group can receive has not been taken lightly, as the Financial Assistance Scheme is funded by the taxpayer. As my noble friend Lady Altmann said, a considerable amount of consultation, lobbying, and so on, was undertaken to encourage the Government to introduce the regulations. But to leave the situation unchanged would create an inequitable situation where those with long service in the Pension Protection Fund were treated more favourably than those in the Financial Assistance Scheme and break our commitment made in another place on 15 September 2016.

I reassure all noble Lords that no new funding commitments have been or will be made in respect of the scheme. Since 2005, employer insolvencies have fallen under the jurisdiction of the Pension Protection Fund. Unlike the Financial Assistance Scheme, the Pension Protection Fund is mainly funded by an industry levy and is therefore not reliant on the public purse.

I believe that the correct balance has been struck between securing meaningful income in retirement for members compensated by the Financial Assistance Scheme and the cost to the taxpayer. I have outlined in detail the issues that the regulations will address and why the Government have decided to act. Now is the right time to correct this problem, and I ask that the Motion be approved.