Pension Schemes Bill [HL]

Debate between Lord McKenzie of Luton and Baroness Bowles of Berkhamsted

Committee stage & Committee: 4th sitting (Hansard) & Committee: 4th sitting (Hansard): House of Lords
Wednesday 4th March 2020 Grand Committee

[Baroness Bowles of Berkhamsted]

My Lords, I signed this amendment and I do not think there is a great deal to add to what the noble Baroness, Lady Altmann, has said. I am sure we are all familiar with the phrase that two wrongs do not make a right. As has been explained, this is one of those instances in which two rights have ended up making a wrong, in that auto-enrolment and raising the tax thresholds were right but have resulted in more and more people falling into this trap. If we are to believe all the things we read in the newspapers about the Budget, it may be that more right things will be done, in terms of tax thresholds, that will then trap more people in this wrong of paying more than they should for their pension. These people would be better off if they were not in the scheme but in a private pension scheme because there would be mechanisms for them to get that tax relief.

The problem could be adjusted through the tax system because it knows who they are. There are various ways in which it could be addressed. The noble Baroness, Lady Altmann, has put forward one in which it is up to employers to seek out the solution. If that is regarded as too onerous, something else must be done because this really is very bad, once again hitting the people who always seem to be at the rough end of every deal and are predominantly women. I am not quite sure how it is taken into account in universal credit—whether it asks, “Are you paying more for your pension than you should?”—but I would not mind betting that many of them will be the same people who suffer at every twist and turn. I therefore strongly support this amendment.

[Lord McKenzie of Luton]

My Lords, I, too, support this amendment. We should congratulate the noble Baroness, Lady Altmann, on the diligence with which she has persisted on this matter for quite a long while. As she hinted, she was responsible for convening an industry group that spent a lot of time digging into this to make sure its focus was right.

The reality is clear. There are two systems giving tax relief and no reason in principle why they should not both deliver the same result. One does not for low earners at the moment. Which of the two systems you are in depends on your employer’s choice. That simply cannot be right. As the noble Baroness said, there are ways of dealing with this. I understand that the Treasury has set its face against that to date. Of course, for the Treasury, the downside is that providing a bit more tax relief means having a little less revenue. However, we are talking about the lowest paid, who are being disadvantaged by this. It is about time that this was brought to a halt.

Pension Schemes Bill [HL]

Debate between Lord McKenzie of Luton and Baroness Bowles of Berkhamsted

Committee stage & Committee: 1st sitting & Committee: 1st sitting : House of Lords
Monday 24th February 2020 Grand Committee

[Baroness Bowles of Berkhamsted]

My Lords, I should have added my name to this amendment; I apologise for not getting around to it. It is important, as has been explained.

Another question triggered in my mind is: what information relating to the lifetime allowance will be provided for the member? You get information from a defined benefit scheme; you know what you are expected to get—though, as we know from the NHS, you can get into difficulties if, suddenly, you are earning a little too much. If you pay into personal pensions, or whatever they are called nowadays, you get a number for the pounds that you are likely to have as a transfer value, but what will you get here, especially as you will perhaps be at risk? For example, you may think, “Well, I’d quite like to run a personal pension alongside this just in case.” How are you going to calculate whether you are at risk of breaching the lifetime allowance? If you did breach it and then got a tax charge, but then the scheme started to pay you less pension for whatever reason, would you get that tax charge back?

[Lord McKenzie of Luton]

My Lords, I agree entirely with what has been said about the need to communicate and the basis on which to do so. I simply raise that, in 2018, we had extensive discussions on the Financial Guidance and Claims Bill, as it then was. A key point was the lack of full understanding of financial matters of the general public. I have forgotten the statistics, but there was a House of Lords review of financial inclusion, and its conclusions were stark. This is not a reason not to communicate; it is a reason to communicate even more intensively. In how we communicate, we need an understanding of how people might receive these messages and we should not assume they can operate in an environment like this—as many, we know, cannot.