Pension Schemes: Guidance

Lord Naseby Excerpts

Monday 13th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

The noble Lord makes a good point. He has pointed out a few issues that were in the initial outlines. He mentioned data, which is an issue. Metrics and the use of implied temperature rises—for example, carbon offsetting and scenario planning—are definitely challenges that are being worked on domestically and internationally. As I said, we are the first country in the world to do this. It is good work, which needs to be built on.

[Lord Naseby (Con)]

My Lords, I declare an interest as a trustee of the Parliamentary Contributory Pension Fund. I hope that those who are members have received the annual report and will recognise the performance of our fund, which grew from 104.3% in April 2020 to 130% in April 2022. However, that is not really the key point. My key point is that a fair number of pensions—though not our pension—have suffered from LDI and the chaos in the financial markets in September last year. Against that background, I suggest to my noble friend on the Front Bench that all those who are affected have more than enough on their plate at this time tackling those challenges, without having any further advice from anywhere else.

[Viscount Younger of Leckie (Con)]

Well, I do not really agree with the general points my noble friend has made. The main thing is that the regulator has a particularly strong role here, and it plans to publish its findings on what we are doing soon to provide schemes with examples of good practice. The regulator has found so far that most reports were published on time. This is to do with the publishing of reports. Almost all were substantial documents showing trustee engagement. In terms of my noble friend’s point about LDI, he will know that much progress has been made, led largely by the independent Bank of England working closely with the Treasury.

Local Housing Allowance Rates

Lord Naseby Excerpts

Wednesday 22nd February 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

Again, I note the comments made by the noble Baroness. We are very aware of this, and we are aware of the juxtaposition of what central government can do and the role of local authorities. As I said earlier to the noble Baroness, Lady Lister, local authorities are best placed to understand exactly where the funds that we give them are best targeted. However, there is more than that; I mentioned the discretionary housing payments, but we also have the household support fund. There are a number of other initiatives which are important to mention as regards helping people, particularly to stay in their homes.

[Lord Naseby (Con)]

I accept what my noble friend says about the Autumn Statement, but is there not one sector of the public who are particularly badly affected? That is the people who are unfortunately unemployed and who are totally dependent on the local housing allowance and therefore disadvantaged, according to the local authorities that I have checked with.

[Viscount Younger of Leckie (Con)]

Yes, indeed, and this plays into what we spend a lot of time doing in our department, which is looking at universal credit and the benefit cap, including the need for housing. We therefore recognise the importance of safeguarding the welfare of claimants, particularly those who, I am afraid, have got into debt. Looking at how they are able to afford housing is a key part of that.

Scotland Act 2016 (Social Security) (Consequential Provision) (Miscellaneous Amendment) Regulations 2021

Lord Naseby Excerpts

Tuesday 22nd June 2021 Grand Committee

[Lord Naseby (Con) [V]]

My Lords, I recognise the antecedents of the Smith commission, itself deriving from the 2014 Scottish independence referendum, and the following Scottish Acts in 2016 and 2018. I am no expert on the details of this particular SI or social security benefits in general, and I do not know if I am right on this, so maybe my noble friend can clarify it when she speaks at the end, but it seems to me that it does not affect social legislation in Great Britain—or, that is, it affects England and Wales but not Northern Ireland.

My key concern is about the background of the importance of the union—we all know what is happening on the ground at the moment—and a recognition of what the current SNP leadership is all about. This in itself is in contrast to the powers of the Scottish Parliament. For example, it has the power to borrow over and beyond the benefits of the Barnett formula, as I understand it, so there is a double incremental benefit to Scotland as a whole.

What will be the impact on the other three nations that make up the United Kingdom? Is this just a simple implementation agreed by all four parties, with Scotland in the lead? They are doing trials in various cities. Or is it what I would call a ratchet effect, in that they take an initiative which the rest of the union then has to follow? I do not know, and I hope my noble friend can make that absolutely clear for the record when she winds up.

I will now focus particularly on Northern Ireland, and colleagues may wonder why. This is primarily because I was PPS in Northern Ireland from 1979 to 1981 and got to know that part of the UK quite well. I have deep concerns about what is happening on the ground there; they are struggling with the protocol and the aftereffects of Brexit on top of everything else. I would have thought that to have an important part of their social security affected as well—seemingly in the autumn—is just another problem and challenge for them.

I have two implementation points to make. I note that this is to be trialled in Dundee City, Perth and Kinross, and maybe somewhere else, from 26 July. It is thought that there will then be a full national rollout in the autumn. But 26 July is, in effect, the beginning of the summer, and nothing very much will happen in August, so we will really begin to have some test of this in September or October. Normally, to do a proper test, you would do it for at least three months. You would then review it for a month, because there are bound to be some elements of it that are not quite right, particularly if you have to consult the other three nations. Maybe they are not going to consult, but they should. I suggest to my noble friend that she should have a quiet word with her colleague across the border and ask if they are absolutely sure that it should be rolled out in the autumn and why it should not be rolled out from January, when people have had time to look at it, make necessary technical amendments and then implement it accordingly.

The other technical matter I would raise is that it is all very well saying that there is a 13-week change in some of the moves from Scotland to England, Wales or wherever. It never ceases to amaze one, having been a Member of Parliament, but there are families who do move around regularly when they change jobs or if something else happens—

[Baroness Scott of Bybrook (Con)]

Lord Naseby, can you hear me?

[Lord Naseby (Con)]

Right, okay, thank you.

Social Security Benefits Up-rating Order 2021

Lord Naseby Excerpts

Wednesday 10th February 2021 Grand Committee

[Lord Naseby (Con) [V]]

My Lords, I declare an interest as a trustee of the parliamentary contributory pension scheme. Looking at the detail of the Guaranteed Minimum Pensions Increase Order 2021, one has to remember that it applies only to those who retired before 6 April 2016. I looked at what would have happened if I had retired on that date and at life expectancy data. It would mean that I got 29 years: that is not a small financial commitment for Her Majesty’s Government.

I want to talk about the triple lock. If one thinks about the challenge to the Treasury—in effect, the taxpayer—it is almost a triple whammy. There is the basic state pension, based on national insurance contributions; the additional state pension, which is partly earnings-related; and all final salary schemes for public sector workers. The financial cost in the past three years has gone up by 21%, which is over £1 trillion in real money. Has not the time come for the Government to review the employee’s contribution through national insurance, and for the public sector as well? This seems fair, not least because a pension—one that is pretty old—is a really good deal. Of course, the cost of that state pension is forecast—admittedly over 50 years—to rise from 4.9% of national income to 6.9%. We need a clear positioning paper, produced by the interested parties in the Government and the pension industry, to look at the financial options for the national pension and state employee pensions.

I offer one saving: the £10 Christmas bonus. This year, after the pandemic, the Chancellor can say, “Father Christmas has run out of money and there will be no Christmas bonus for this coming year.”

Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) (Amendment and Revocation) Regulations 2020

Lord Naseby Excerpts

Wednesday 21st October 2020 Lords Chamber

[Lord Naseby (Con) [V]]

My Lords, I declare my interest as a trustee, for more than a decade now, of the Parliamentary Contributory Pension Fund, and as having previously been the chairman of the Tunbridge Wells Equitable Friendly Society, again for about 10 years.

Like my noble friend Lord Bourne, I notice that no mention is made of friendly societies or mutual building societies. Indeed, I am slightly confused about the terminology of “community benefit society” being used, other than in relation only to Northern Ireland. Is that phrase now in common use for all mutuals? Bearing in mind that in today’s world, with the blessing of our Government, the number of mutuals is increasing across a whole spectrum of activities, I wonder whether they are being treated any differently from plcs as far as the PPF is concerned.

My second point arises from the High Court ruling on 22 June of this year about the compensation cap amazingly being unlawful. From a note I have received, I understand that the court is comfortable with the PPF’s approach to making a one-off calculation, saying that it is permissible

“provided it made sure that each individual, and separately each survivor, over the course of their lifetime received at least 50% on a cumulative basis of the actual value of the benefits that their scheme would have provided.”

I ask my noble friend on the Front Bench this: is everybody happy with that as a workable solution for the rather strange ruling that it is unlawful on the grounds of age discrimination?

Several of my colleagues have rightly raised the impending problems that are likely to arise from the pandemic. The PPF’s budget this year is based on raising £620 million. Can I assume that that figure is still the current levy? Will the PPF review its requirements against the target of being self-sufficient by 2030, because of the anticipated corporate failures arising from the pandemic?

I will raise one final point. I accept it is tangential to the SI, but my noble friend will probably be aware that the Local Authority Pension Fund Forum, commonly known as LAPFF, which is an association of 87 local authority pension funds, has accused the Financial Reporting Council of supporting the revised international accounting standards, claiming that they are less than those required by UK law. Will this have an impact on the Pension Protection Fund? I quite understand that, while I informed my noble friend of some of my earlier questions, I did not inform her of that one, so I am more than happy to have an answer in writing.

Pension Schemes Bill [HL]

Lord Naseby Excerpts

3rd reading & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords
Wednesday 15th July 2020 Lords Chamber

[Lord Sharkey (LD) [V]]

My Lords, I thank the Minister for introducing the very important new amendments concerning transfer rights. In Committee, the noble Baroness, Lady Altmann, and I attempted to do, perhaps rather clumsily, what they do rather elegantly. We live in a time when scams are increasing, people are desperate for any return, online propositions are everywhere and can seem very tempting, and your money—occasionally all your money—is easy and quick to lose. These amendments will not solve those problems, but they will prove a valuable addition to the guidance armoury and to the better protection of consumers, and I welcome them.

My noble friend Lady Janke led the debate from these Benches with real insight and conviction. It is a pity that she cannot be with us today as the Bill concludes its passage through the House. She has asked me to thank, on her behalf, all the Members who have taken part in what has been a constructive and congenial process. She has particularly asked me to congratulate the Minister and her officials on their apparently unlimited patience, their evident willingness to listen and their responsiveness. I join my noble friend Lady Janke in her remarks, especially as concerns the Minister’s patience and forbearance. The Minister’s character determined the character of our discussions. I also thank all Members who joined in those discussions, especially my noble friend Lady Bowles and the noble Baronesses, Lady Drake, Lady Sherlock and Lady Altmann. Their expertise was evident throughout and greatly added to the value of the debate. I believe that, collectively, we have made a good Bill better.

[Lord Naseby (Con)]

My Lords, I declare an interest as a trustee of the Parliamentary Contributory Pension Fund. I place on record that I have spoken on this Bill, I have tracked all stages of it and I pay a major tribute to my noble friend on the Front Bench, in particular for her care and attention regarding the less obvious aspects of a major Bill like this. If this is her first Bill as Minister, she has made an extraordinarily good start.

[Lord Flight (Con)]

My Lords, I add my congratulations to my noble friend, who has managed a complex and important territory most constructively. I also thank the Opposition for collaborating in a constructive way. I could not help thinking, as we come to the end of this bit of legislation, that if we look forward 30 years, we will then be in a very different age where people will live much longer and will retire later. There will have to be an adaption of their pension saving between now and then but, for the present, this Bill has done a very good job of addressing a difficult territory.

Pension Schemes Bill [HL]

Lord Naseby Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 30th June 2020 Lords Chamber

[Baroness Fookes (Con) [V]]

My Lords, I join other noble Lords who have already spoken in saying how pleased I am to see that my noble friend the Minister has listened to many of the recommendations made by the Delegated Powers Committee, which were warmly endorsed by the committee to which I belong, the Constitution Committee. We have had two powerful committees of one mind, so I am extremely pleased by this turn of events. Perhaps I may make one or two points because I know that the chairman of the Delegated Powers Committee, my noble friend Lord Blencathra, is to come in later in this debate, and I am sure that he will want to go into much more detail than I am minded to do.

The first-time-only procedure has happily now been abandoned in Clauses 11 to 17. It is not simply that the current Administration may well want subsequently to bring forward massive changes, but that they cannot know what use a future Administration might make of them. That is all the more reason to be careful about what powers are given to any Government.

I confess to some disappointment about the negative procedure being used where urgent changes need to be made. The Government seem to be suggesting that that is absolutely essential because otherwise delay would be difficult. Have they not heard of the “made affirmative” procedure, which allows a Government to put a regulation into action immediately, and then after 40 days Parliament has the opportunity to confirm it or possibly to reject it altogether? I hope that the Government, and the departments which support them, will no longer continue to use this weak argument in favour of the negative procedures. That said, I am pleased with the way things have gone and I offer my noble friend a bouquet—a modest bouquet—for what she has done.

[Lord Naseby (Con)]

My Lords, it is entirely appropriate that I should first declare my interest. I am a trustee of the Parliamentary Contributory Pension Fund; I have been one for the best part of 20 years. I am also 83, and all I can say in reflection is that I was formerly the chairman of three financial companies, and I have been a pension trustee on two schemes prior to the one—the only remaining one—that I am on now. It is not my intention to comment too much on the Bill; rather, I see my role in the interests of the membership—I am a member and there certainly will be others in Parliament who are members—to keep a watching brief and, if appropriate, to make some comments to my noble friend on the Front Bench. I should also say to her that I was the Chairman of Ways and Means in another place and I too was not in favour of the negative procedure for really serious things. She has taken a very wise decision on Amendment 1; I am sure that it is the right one and should be applauded on all sides.

I will listen to my noble friend’s answer on Amendment 2 because, if it is right in the round, there would need to be a specific reason for its not being appropriate in leaving out subsection (8). Amendment 33 is in this group and has been commented on. I have given my age and I think that my gender is obvious, as is my ethnicity. It is appropriate that every set of trustees should have a range of people as regards age, experience, gender and so on, but in my judgment the key issue is commitment. We are very lucky on the Parliamentary Contributory Pension Fund because the members, almost to a man and a woman, turn up regularly to meetings, ask good questions and are good advisers, so that, at the last point, as a fund we were very much in positive territory. As I say, I am not going to make too many comments, so without further ado I once again congratulate my noble friend on the Front Bench.

[Lord Holmes of Richmond (Non-Afl) [V]]

My Lords, I congratulate my noble friend on the Front Bench on the clarity with which she has introduced this Report, and I thank her and the Bill team for the time, effort, care and consideration they have taken with Members, which is best illustrated by the number of government amendments which have rightly been brought forward at this stage in our proceedings. She has clearly demonstrated what can be achieved collaboratively in the legislative process when it is approached with such openness. She and her team absolutely epitomise a truth that everyone should constantly remind themselves of: two ears, one mouth.

The pensions proposition is one of the greatest creations of civilisation, but just in my lifetime—without giving away my age, I am only slightly younger than my noble friend Lord Naseby—we can see that the proposition has changed, not so as to be unrecognisable but significantly. It started out with a commitment by employers to have defined benefits where they would take the risk. The fund was rightly separated from the employer under the governance model of a trust. That clear separation of powers was eminently sensible because something as significant as someone’s retirement nest egg should be separated from the corporate entity so that if, God forbid, anything should happen to the corporate entity, the pension fund would remain. What has occurred in recent years is an extraordinary shift of that risk, if not a wholesale one, from the employer to the employee, hence the explosion of defined contribution schemes. In reality, neither position is where an individual, a group or even a society would wish to be, given that so much of the risk falls on to one or other of the parties. That is why CDCs have a lot to recommend them, not just in the combining of resources and the pooling of risks, which is a great advantage, but in the positive implications that the initials “CDC” have in other areas of our lives. Let us consider the Commonwealth Development Corporation and the United States Centers for Disease Control and Prevention. We should take something from the positivity of the acronym because it has a lot to recommend it.

This would certainly not be necessary had we not seen some of the changes, not least to how schemes were funded and how the funds were treated, particularly from the taxation point of view. That was one of the biggest nails in the coffin of defined benefit schemes. However, that is water long under the bridge. CDC schemes will become increasingly significant to pension provision as we go forward. They are a positive contribution to this area and I wish this Bill a speedy passage through your Lordships’ House, and its equally speedy consideration and passage through the other place.

--- Later in debate ---

[Baroness Janke [V]]

My Lords, I support Amendment 8 but I will address my remarks to Amendment 32. The amendment seeks to ensure fairness for all members of CDC schemes, especially between different generations who may stand to gain or lose from future circumstances, as noble Lords have already referred to.

In Committee we debated this issue at length and a number of issues emerged. The Bill states that the scheme provides for intergenerational fairness among its members, specifically in connection with the amount of benefits paid to pensioners, proposed adjustments to annual benefits and cash-equivalent values provided to members wishing to transfer out of the scheme. A requirement of collective money purchase schemes requires outperformance or underperformance to be reflected in the benefits paid to all members. However, there is usually a reluctance to deliver pension cuts, as in the Netherlands example that the noble Lord, Lord Vaux, described in Committee: when the Government intervened temporarily to avoid a cut in pensions, younger members of the scheme lost out as pensions were kept higher than the scheme could afford.

CDC schemes are required to agree a pension target rather than a firm outcome, and the expectation of pensioners may be different in the event of the underperformance of investments over time. So unless pensions were to be cut, which is a decision that is largely avoided, younger members of the scheme could lose out in the interests of existing pensioners. In the instance of a large number of people choosing to cash in their pensions, as others have said, there is a risk to new and younger entrants to the scheme, particularly if the value of the scheme is significantly reduced.

Our Amendment 32 seeks to press the Government into being more explicit and much clearer in their commitment to fairness across the board to all members of the scheme by requiring the trustees to make an assessment of the fairness of the scheme. The amendment addresses the interests of transparency and fairness and the welfare of all members of the scheme, and I support them.

[Lord Naseby]

I think the amendments have been extremely well aired and I await the response from my noble friend on the Front Bench.

[Lord Sharkey [V]]

My Lords, I will restrict my remarks to Amendment 32, which is in my name and the names of the noble Lord, Lord Vaux of Harrowden, and my noble friend Lady Bowles. I thank them for their support. In Committee, we spent a long time discussing intergenerational fairness in CDC schemes. We did this partly because we knew from the Government’s excellent briefing note that concern about intergenerational fairness was raised by many respondents to the consultation and because it seemed clear that the risk to intergenerational fairness was an almost inevitable feature of such schemes.

We pressed the Government to legislate the requirement for intergenerational fairness into the schemes. We knew that the Government themselves were deeply concerned about the issue and seemed to be choosing mechanisms for intergenerational fairness over benefit stability; but as I remarked at the time, it was hard to tell how they might work, since the mechanisms for bringing this about were not yet explicit and no real assessment of effect was possible.

In her response, the Minister made it clear that she shared our commitment to ensuring intergenerational fairness and that the mechanisms for achieving it would be introduced, after extensive consultation, by regulations under Clause 18. This will be long after the Bill has become an Act, and leaves open the question of how we will assess the success or otherwise of these mechanisms. It also leaves open the question of how the assessment of any such mechanisms will be communicated to members and potential members of the scheme.

Our Amendment 32 proposes a way of addressing these issues. It provides that, whenever TPR issues a notice requiring a scheme to submit a supervisory return, the notice must include a requirement that the trustees

“make an assessment of the extent to which the scheme is operating in a manner fair to all members.”

The amendment speaks of fairness. Intergenerational fairness is a critical subset of fairness, but there are other kinds of fairness, too. For example, there is gender fairness, and single versus married status and the fairness implicit in that, or not. The amendment makes no attempt to define fairness; it relies on the trustees to do that, as they should in the normal operation of the scheme. Their definitions and assessments will help members of all classes, and potential members, understand the working of their scheme and the success of the trustees in operating it fairly in the interests of all members.

As I mentioned in Committee, AJ Bell noted that the DWP leaves little doubt that it will not allow schemes to be skewed in favour of one cohort of members over another. I am sure that is the intention, but AJ Bell also noted that fairness could make outcomes in CDCs less predictable and raises the spectre of pension cuts. It goes on to say:

“The DWP itself notes any reductions in benefits will not be well received, and so clear communication of this – not just upfront but on an ongoing basis – will be absolutely essential.”


Our amendment will bring some communication and transparency to the balancing required to produce, and to the consequences of producing, fairness across all member cohorts.

In Committee, the Minister explained how the proposed headroom mechanism for the Royal Mail scheme would be fairer than a capital buffer. All classes of members and potential members of the scheme need to know how well this headroom mechanism or other mechanisms generated by Clause 18 are working. Our amendment will require the trustees to explain these things and to assess their success in managing the scheme fairly for all members.

Given the acknowledged risks to fairness inherent in the scheme, and that Parliament’s opportunity to influence the mechanisms that might arise in regulation will be as small as usual, it is vital that scheme trustees are open and transparent about their success in producing fair outcomes for all members. That is what our amendment would help bring about, and I intend to test the opinion of the House.

--- Later in debate ---

It is also interesting to note that the Northern Ireland Assembly will introduce legislation and targets for reducing carbon emissions in line with the Paris climate change accord—as specified in New Decade, New Approach, which dealt with the resumption of devolution—so why could it not take on this new pensions Bill? I tried to raise this with the Northern Ireland Assembly Bill Office and did not get much response. Perhaps the Minister can provide some clarification for me today. I support her amendments and those of the noble Baronesses, Lady Jones of Whitchurch and Lady Bennett of Manor Castle.

[Lord Naseby]

My Lords, as a trustee of the Parliamentary Contributory Pension Fund, I see it as my duty to take into account anything that may have an impact on the long-term financial performance of the fund and on Members’ pensions. I expect to communicate that to the membership in our annual report, or alternatively when requested.

I do not wish to comment on any of these amendments in detail, but I particularly warm to Amendment 75 from the Government, which seems entirely appropriate.

[Viscount Eccles (Con)]

My Lords, the noble Baroness, Lady Bennett, opened the debate on this group with a request for more detailed information from collective money purchase schemes, particularly on the environment. That is entirely right and very appropriate when we move on to Clause 124, which is quite another matter. It builds on the 1995 and 2004 Acts, which refer to injunctions on trustees to produce statements of funding. That is a wide request; one can imagine all sorts of matters that trustees would wish to put into their statements.

It is not the same thing at all, however, as focusing on the risk of climate change, which is a much more accurately aimed request. The change risk, of course, is against the background that climate change, as in the use of the English language, is neutral, but I do not think that that is what we have come to mean by climate change. We should be careful not to use language inaccurately. I think that what we really mean is man’s contribution to, or effect on, the climate and what actions the world’s population have taken that affect the climate. That is considered in general to be something about which we should be very concerned. When it comes to considering the environment, who can avoid being incredibly concerned?

In the Government’s approach to how to deal with this matter, climate change is defined in the Bill as relating to Paris, its two-degrees limit on the rise in temperature from pre-industrial periods and other climate change goals. This is potentially a demanding and widely drawn comparison with things that have applied to trustees to date. We have to take care in our expectations of what it is reasonable for trustees to decide as they carry out their role in the interests of their members. They rely very heavily on advice. Their actuaries, who are often rather disregarded figures in the world of pension management and in our debates on pensions, have a wide knowledge of what is going on in pensions as a whole and why it is the way it is.

Trustees have to take very professional investment advice, of course. Like my noble friend Lord Balfe, they may decide that trackers are the best thing for them, but in many schemes, the investment decisions will be very detailed and always based on advice. Those advisers—the investment industry as a whole—can safely be assumed to know that there are huge issues relating to climate change and the environment, so their advice will be shot through with that understanding. Of course, there is also in the life of the trustees the employer, who can also be judged as knowing what is going on and understanding how he would like to see his trustees view these complicated matters.

Noble Lords should rest assured that these are complicated matters. It has been a long time since I was a pension trustee; nevertheless, there was always a huge debate about how to balance your portfolio, what to hold in it and what not to hold. The environment is not a thing for the future, of course; it is a thing for today. It is already part of our life; it affects our daily lives, to the extent that the world is already warmer. Those effects are connected to the temperature that we experience and the environment in which we live. When we come to consider the responsibilities of trustees to their scheme members, however, we need to be a bit cautious about how far down this complicated road we expect trustees to go when their members will be much more focused on their daily lives than on the way in which the powers that be are tackling these very difficult issues.

The Government’s stall is set out in Clause 124 and Amendments 75 to 78, which contain discretionary powers. They leave the opportunity to observe events and gauge responses to the problems we face before taking too much action, and they leave flexibility, as in their reference to other climate policies.

Pension Schemes Bill [HL]

Lord Naseby Excerpts

3rd reading (Hansard): House of Lords
Monday 16th January 2017 Lords Chamber

[Lord Naseby (Con)]

My Lords, I welcome the amendment from Her Majesty’s Government, as I very much welcome the Bill. However, it still raises the outstanding problem in Clause 10, on scheme funding. The point is that a master trust can, if it so chooses, be treated as a separate legal entity and, as the Bill stands, can still transfer the risk to another entity. That remains one of the problem areas, because solvency for any of these master trusts is absolutely vital to current and future pensioners. I place on the record that although what we have heard this afternoon is an improvement, it does not solve that problem.

While I am on my feet, there is still concern from insurance companies that run master trusts that, under the Bill, they may be required to keep separate solvency requirements for the master trust element of their business when the majority must already comply with Solvency II financial regulations, which are extremely stringent and ought to be enough to cover any of the required security for their master trust business.

[Baroness Altmann (Con)]

My Lords, I echo some of my noble friend’s concerns. I welcome the Minister to his position and wish him much success.

Obviously, I welcome the Bill, which is much needed. It is vital that we protect members’ pensions and ensure that accumulated savings are safe in the event that the master trust scheme fails. Therefore, I broadly welcome the measures in the Bill. However, having engaged with Ministers to try to tidy up some important points to ensure that the Bill works as intended and needed without serious side-effects, I would like to place on record some issues that still require attention.

Pension Schemes Bill [HL]

Lord Naseby Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 21st November 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I shall speak to Amendment 2, which we have in this group. I say to the noble Lord, Lord Flight, that the intent of our amendment is not to take schemes out of the definition of master trusts but to probe where those boundaries currently are, because there is a lack of clarity in some respects.

Before I touch upon the detail of the amendment, it might be helpful if I set out the context in which we plan to approach Committee. We have already made clear our support for the thrust of the Bill and what it seeks to do, but much of the detail is missing and will depend on regulations, at least some to be informed by further consultation. There are policy gaps, as well as gaps in the operational detail. The impact assessment recites that there is still,

“significant uncertainty over the full impacts of the proposal, as costs will be determined by the details to be set out in subsequent secondary legislation”.

Additional costs for master trusts and for the Pensions Regulator cannot currently be determined, as the charging structure has yet to be finalised.

The Constitution Committee has also commented on the degree of delegation in the Bill. It instances Clause 24(4), which lists 15 matters that regulations must address relating to continuity option 1. It also draws attention to the wide provisions of Clause 39, which would allow the Secretary of State to adjust the range of pension schemes to which Part 1 of the Bill applies, either to extend the regime or to disapply it in whole or in part. We will come back to this extraordinarily wide provision later. This almost turns on its head the normal approach, which is to determine policy first and then to legislate. We accept the importance of having flexibility to deal with the changing models which an agile sector might bring forward, but in scrutinising this legislation we need to have the opportunity to test the boundaries of that flexibility. I think it has already been indicated that we will not get a full set of draft regulations before the Bill leaves your Lordships’ House, but perhaps the Minister will set out when we might see the drafts of key regulations, as we have requested, or at least policy notes to expand on their intended coverage. In the meantime, we will proceed with a range of probing amendments to flesh out as much detail as possible.

The purpose of Amendment 2, in my name and that of my noble friend Lady Drake, is to probe why the Bill excludes single-employer occupational schemes from the scope of its provisions and why connected employers are therefore effectively treated as one. As it stands, the Bill would leave single/connected employer arrangements regulated as at present. These arrangements sit alongside the regulation of group personal pension plans, which is within the remit of the FCA, so we will be going from two approaches to three.

We understand the reasons why the existing regulation for trust-based schemes is inadequate, notwithstanding some prospects for improvement under the assurance framework and the 2015 code. It is inadequate to deal with master trusts, which have developed new types of business structures. This can alter the relationship between members, employers, trustees and providers, with some being run on a profit basis but not all, as the noble Lord, Lord Flight, indicated. The scale of some of them is also unprecedented in occupational pensions.

Our probing amendment is designed to give the Government the opportunity to put on record the overall scope of the new regulatory environment to justify how it all fits together and that the boundaries of the system are clear and do not overlap. We accept that the master trust regime is focused on schemes with particular risks, but does there not have to be some consistency across the piece? As it stands, the definition of master trust is potentially very broad. We do not particularly have a problem with that, but it can cover those set up by unregulated businesses as well as those set up by regulated businesses, such as insurance companies or investment managers. It can also cover what are described as “white label” master trusts, which are set up by a pension provider with commercial or non-commercial partners being allowed to brand their sections of the trust. Others may have partnering arrangements with large employers where each employer gets its own section of the master trust but does not make any profit from it. Schemes can include industry-wide schemes and schemes that happen to include two or more unassociated companies and schemes in the university, charitable and religious sectors. So within the master trust definition there are a range of differing situations, and a question arises about whether the line to exclude single unconnected employer arrangements is the appropriate line to draw.

The amendment also seeks, as a probe, to delete the exclusion from the definition of a master trust those schemes which are to be used only by connected employers. I have some questions on that. What is the position where a scheme starts life as a scheme for connected group employers only, but where one of the employers enters into a time-limited joint venture which causes it to cease to be connected? Does it then have to seek approval to operate? What is the position when the joint venture has run its course and the scheme reverts to being used only by employers which are connected? How do the Government justify the juxtaposition of a connected group of employers being outside the scope of the Bill and another connected group of similar size but with just one small associated employer presumably being inside it? This is a very thin distinguishing line. Are there any circumstances currently envisaged where Clause 39 would be used to bring within the scope of the Bill a single-employer occupational pension scheme?

So far as the amendment moved by the noble Lord, Lord Flight, is concerned, it is understood that AVC-only schemes are a type of arrangement that has been developed of late, prompted by the introduction of the Pensions Regulator DC code of practice, which introduced a degree of comprehensive governance and management tests for DB schemes where the only DC benefits are AVCs. It is suggested that the new code can lead to disproportionate costs—hence the plan to remove AVCs from individual DB schemes and corral them in a master trust. As we have heard, the proposition now is to remove them from this Bill’s provisions. Presumably, this implies that the current regulatory regime, as enhanced by the April 2015 changes, would continue to operate. However, in so far as comfort is being taken from the voluntary master trust assurance framework, its future is uncertain. We wonder whether that should be relied upon. In any event, do not such arrangements—that is, AVC-only schemes—exhibit at least some of the risks which this legislation is seeking to address, such as the existence of providers, funders, the profit motive and the promotion of the scheme? In the circumstances, it is difficult to see why they should be outside the Bill, acknowledging that some may have been created specifically to take advantage of the current regime.

We have a similar position in relation to the other group of schemes to which the noble Lord referred. So far as the noble Lord’s amendment about having the power to modify the Bill is concerned, the Bill already provides that power. In fact, we think the power is too broad and do not like it. We look forward to the Minister’s comments.

[Lord Naseby (Con)]

My Lords, I support my noble friend Lord Flight in his amendments, in broad terms. The Minister will recall that at Second Reading, at col. 570, I raised the question of mutuals and the mutual movement. His noble friend on the Front Bench confirmed that since a great many of them were defined benefit pension schemes, they would be outside the scope of the Bill. However, that does not take everybody out. Since that time I have had discussions with the Universities Superannuation Scheme. It is perhaps a bit of an oddball, but it is deeply concerned about the Bill and its effect on it and its members. Its representatives emphasised to me in our meeting that they were very much behind the intention of the Bill—so it is not a question of some organisation trying to undermine the situation.

They made three particular points on why the Universities Superannuation Scheme should not be subject to the Bill. First, there is,

“the comprehensive regulatory regime already in operation for hybrid schemes, which already provides a well-established, ample level of protection for pension savers”.

Secondly,

“the protection already afforded to USS members with Defined Contribution … benefits both under statute and the scheme rules, whereby the DC benefits are underwritten by the whole fund (DB and DC) which means that the only circumstances where DC benefits could not be fully satisfied would be where the whole scheme fund (assets currently circa £49 billion) was depleted in full”.

Lastly, there are,

“the anticipated costs of compliance”—

a common thread that has been raised by noble friends across the House. The cost of compliance is estimated at,

“in the region of £10.5 million in order to satisfy the financial sustainability requirements over 2 years, plus a further £250,000 per annum for compliance with the requirements of the Bill, which would be funded from the scheme assets”.

I hope very much that the Minister will take these points on board. I do not expect a full and complete answer this afternoon, but I would have thought that schemes such as this—there probably are others that have not been brought to noble Lords’ attention—could be dealt with in secondary legislation. It certainly seems to me that they need to be addressed at some point. All I am seeking this afternoon is a reassurance that my noble friend recognises that there are some schemes out there that should not be covered by the Bill but may need to be covered in some form in the regulations. I look forward to his response.

[Baroness Altmann (Con)]

My Lords, I will make just a few remarks at this stage. My noble friend Lord Flight mentioned the position of the NAME schemes. There are significant problems with the DB sections of those schemes, and a number of employers have written to me who are about to go personally bankrupt because they cannot meet the obligations—and that is setting aside the defined contribution issue that we are talking about today. From the perspective of the Universities Superannuation Scheme and other schemes that may have AVC-only sections to them, it would seem to me that we cannot, given the intentions of the Bill to protect scheme members’ benefits in the event of wind-up, just assume that the money will come from somewhere if there is not any proper provision for it—and currently there is not. It would suggest—my noble friend the Minister might consider this—that there may be a case for extending the Pension Protection Fund itself, which already covers the DB benefits of those schemes, to take care of any residual risk in the AVC section.

Indeed, the capital adequacy mentioned in the Bill will not necessarily achieve the aim that the Pension Protection Fund achieves for defined benefit schemes. In the event of wind-up, with a scheme’s records in disarray, it is not clear that any initial estimate of capital adequacy might be sufficient to cover those costs. I would be grateful for some comment from the Minister on the possibility of some sort of backstop or tail-risk insurance. That could also pick up the AVC schemes that have been mentioned. I understand the points that have been made there.

--- Later in debate ---

[Lord Freud]

We will come on to discussing Clause 39 later, but I think that it will be fairly specific—sorry, no, I think that it will not be specific. It will be general types.

[Lord Naseby]

I raised a point on the specifics of the universities superannuation scheme, which is really very large. I do not expect a concrete answer this afternoon, but could my noble friend cover it for me in writing or make sure that it comes back in some form so that the universities can be reassured?

Pension Schemes Bill [HL]

Lord Naseby Excerpts

2nd reading (Hansard): House of Lords
Tuesday 1st November 2016 Lords Chamber

[Lord Naseby (Con)]

My Lords, I declare an interest as a trustee of the Parliamentary Contributory Pension Fund, which is in sound condition. I welcome the Bill immensely. I pay tribute to my noble friend on the Front Bench for all he has done in this field over the years, and what it seems he still has to do in the future.

More important than my welcome is that I read that last week a panel of master trust providers at the conference of the Pensions and Lifetime Savings Association also welcomed the Bill. That seems to be a good start. The providers also said at that conference that it should ensure that those schemes that are not sufficiently robust will have to leave the market—quite rightly so—but they even volunteered that maybe the industry should be the catalyst to look after those members who find themselves belonging to such a trust. I hope very much that by mentioning this here publicly they will do what they said they were thinking about doing.

I was also pleased to see that the Pension and Lifetime Savings Association has set up a committee solely for master trusts to help them have strategies, to move them forward and to support them in more difficult times. That can only be in the interests of the pensioners themselves, for they are the people we are most concerned about.

Looking at the Bill, of course one looks at the role of the Pensions Regulator—TPR. Will he be given real powers under the Bill to authorise and to de-authorise? Authorisation will, as I understand it, examine every aspect of a master trust, because those master trusts will become the key providers for the development of a defined contribution pension market. There is a question of whether TPR will have adequate resources for the work that is defined for it in the Bill. I hope that there will be a thorough assessment. One recognises that it is the pensioner who will pay the bill. Nevertheless, let us at least start with an analysis of whether those who are charged with these important responsibilities are to be given sufficient resources to meet them.

I have a number of questions to ask of my noble friend. First, why is there no de minimis capital requirement for any master trust entering the market? Secondly, why under the licensing scheme is it not compulsory to use the master trust assurance framework? Thirdly, your Lordships will know of my deep interest in and support for the mutuals sector. There are many schemes out there today for groups of employers in the not-for-profit sector—for churches, charities, unions, universities, credit unions and a number of others. They usually have a defined benefit scheme and as far as I can see, having been involved with the movement for many years now, almost all those are in reasonable shape. Surely it is questionable whether it is really sensible, or indeed necessary, to include them in the master trust legislation, for they are pretty safe schemes. It seems to me that the regulations will be unnecessarily onerous, complex and really quite expensive for some of these small operations. If we demand that they have to comply with them, it will create great difficulty for a sector that, as I understand it, society wants to see promoted.

My fourth question will not find much favour with my noble friend. It is on that section of Part 2 of the Bill regarding which my noble friend reiterated the Government’s intention to introduce a cap on early exit charges. As far as the media are concerned, that is a highly emotive area. However, for the poor people who are running a pension fund and doing their calculations based on the income of that fund over 20, 25 or 30 years, or whatever it may be, making it easy for the individual member to exit the fund will make it even more difficult to plan in relation to yields in the market. Are the Government absolutely sure that they want to dig away here? We certainly cannot have a situation where the early exit charge is what one might call de minimis. There has to be a disincentive against people going in and then pulling out; otherwise—as someone who has been involved with pension fund management for 25 years—my judgment is that it will be quite a challenge, and not one that I would personally wish to take on.

So much for the questioning. I think the House will know and need to recognise that we have a long way to go in the pensions market in this nation. Today, it is estimated that just one in seven of the members of DC schemes are saving enough to maintain in retirement the lifestyle that they have got used to. There is a huge challenge for all of us—for the Government of the day, the media and the industry—to explain and convince pensioners that they must do more saving for their future life as pensioners. In my judgment, that has considerable implications for Her Majesty’s Treasury in providing some incentives to make this happen.

As this is the Second Reading of a pensions Bill I would like to comment on a couple of wider aspects. First, as I understand it, there are currently 5,945 defined benefit schemes. Your Lordships will have read, as have I, that most of those defined benefit schemes are in a negative situation. The deficits amount to billions of pounds. To make it even worse, or more lurid, the Pensions Institute at the London Cass Business School has forecast that 1,000 more pension funds will enter the Pension Protection Fund. Your Lordships will know that the level of the deficit is calculated using traditional gilts plus or corporate bond yields to calculate the discount rate. As we all know, those yields are at a very depressed level and have been for a while now.

I was interested to read something that I believe reflects the situation. First Actuarial has just done an analysis of the expected returns from underlying assets held by schemes as opposed to the theoretical system using traditional gilts plus and corporate bond yields. The net result was completely different. There turns out to be a surplus of £358 billion. We need to think long and hard about whether we will stick in the longer term with the totally unrealistic discount rate that we have had over the last decades.

My second and more general point is about when schemes face a wind-up situation. The time has come to look at changing the law. Today, it is not in the best interests of members. If they cannot afford to meet their pension promises, the only option left to the trustees and the company is to go bankrupt. The net result is that the poor pensioners get a very meagre—certainly a substantially reduced—pension from the PPF, so they lose out, and the equity shareholders in the company lose out because they lose all their equity. Why cannot trustees be allowed to renegotiate? It would result in a reduction in benefits to the members, but not as big a reduction as they get when they have to be put in the last chance saloon of the PPF. Perhaps some combination of cutting benefits and a modified new DC scheme on top of that would be a better way forward for a number of those companies—possibly not all of them, but certainly a significant element of the thousands that the Cass Business School forecasts will be in really deep trouble. A significant element of them would be saved, and that would help pensioners.

I greatly welcome the Bill. We face many new challenges in this market. I am sure the Bill will be given a Second Reading, and I look forward to playing some role in the Committee stage as we move it forward.

--- Later in debate ---

[Lord Young of Cookham (Con)]

My Lords, the noble Lord, Lord Hunt, reminded your Lordships that he had form in this area after being a Minister in the DWP at the beginning of the century. Two can play at that game. I was a Minister in the DHSS, as it then was, from 1979 to 1981, since when there have been many changes.

We have just had a three-hour masterclass on pensions policy, much of it about master trusts but also covering much wider issues. I am grateful to all noble Lords who have taken part in a fascinating and, for me, very illuminating debate about the range of possibilities in this vital area.

Much of the debate was supportive of what we are doing, although a significant part of the discussion raised issues of concern. From the point of view of Ministers in charge of the Bill, the good news is that the supportive comments were about what is actually in the Bill and the less supportive comments were about what is not in the Bill, but those are serious concerns, which I hope to say a word or two about as we go through. I want to focus on the issues raised by what is in the Bill. I know that any of the issues that I do not have time to deal with will be dealt with in Committee.

The Bill’s midwife was my noble friend Lady Altmann, and I am very sorry that she is not winding up this debate herself, when she would be able to answer the many questions that she has posed. We are all grateful to her for her work on it, which has enabled us to provide a fit-for-purpose framework for master trusts as auto-enrolment gathers momentum.

The noble Lord, Lord McKenzie, made the case for regulation in this area and I am grateful for his support for the Bill. He asked about the timing of the Green Paper. I can go no further than “winter”. Winter is a more broadly defined target than a specific month, and winter is when we plan to publish the Green Paper.

The noble Lord raised a number of issues, including a very important one about the resources of the Pensions Regulator. Indeed, whether the Pensions Regulator would be able to resource itself up to deal with the obligations posed on it by the Bill was a theme raised by a number of noble Lords. The Government and the Pensions Regulator are working together to ensure that the regulator has the resources that are needed. The Pensions Regulator’s resourcing will flow from an annual business planning process developed with input from the DWP, and its budget reflects its agreed priorities. Work has already started on the implications of the new regime we are discussing and will continue as we develop the secondary legislation.

With regard to the initial peak as master trusts apply for authorisation, that work has been anticipated and provision has been made in the Bill to cover the costs of processing the applications for authorisation through a one-off fee. I can confirm that the pots are protected from the date that the Bill was introduced, assuming it becomes law. If a master trust fails before it is authorised, the beneficiaries are protected and there is also a cap on the charges.

The noble Lords, Lord McKenzie and Lord Hunt, and others raised the issue of communication with members. I have some sympathy with the point that has been made. I do not want to go beyond my negotiating brief, but it is important that where it is practical the beneficiaries of auto-enrolment should have some idea of what is going on, and I would like to think about how we might do that within the constraints of the Bill.

The noble Lord, Lord McKenzie, and others raised the issue of the earnings trigger for automatic enrolment. It is not actually aligned with the personal income tax threshold but we review the earnings trigger annually, paying particular attention to the impact of this on groups currently underrepresented in pension saving, such as women and low earners, mentioned by the noble Baroness, Lady Hollis. This year’s review for the trigger for 2017-18 will consider how to get the balance right between the importance of saving for the future and the affordability of pension contributions for those on lower incomes. At this stage, as noble Lords will understand, I cannot pre-empt the outcome of the review.

There was much comment about the regulations and questions were asked about when we might see them. I take on board the point that the noble Lord, Lord Hunt, has just made. The timing of formal consultation on draft regulations depends on a number of factors. At the moment, we anticipate that the initial consultation to inform the regulations may take place in autumn 2017, but I was impressed by what was said during the debate about whether there might be more involvement at an earlier stage.

A number of noble Lords raised the issue of transparency and where we are on the consultation which took place on that last year. The Government remain committed to improving transparency through the disclosure of transaction costs, and on 4 October the FCA published a consultation proposing requirements on asset managers to disclose information about transaction costs to trustees and independent governance committees. We are working closely with the FCA and await the outcome of this consultation with interest. Pending its outcome, we will then consult on the onward disclosure of costs and charges to members.

The noble Lord, Lord Stoneham, mentioned the importance of building and maintaining confidence in master trusts—a theme that ran through the debate. He made a good point about the impact of volatility in the movement of interest rates on deficits. I would like to say a word about that in a moment.

On pension advice, as my noble friend Lord Freud said when introducing the debate, we are consulting on how we get that right. Public financial guidance is an important issue for both the Treasury and the DWP. Ministers in both departments are working towards a common goal to ensure that consumers can access the help that they need to make effective financial decisions. We intend to consult later this year and that document will, as my noble friend said in his opening speech, include proposals for a single guidance body and its governance structure. In the meantime, the Money Advice Service, the Pensions Advisory Service and Pension Wise will continue business as usual.

The noble Lord, Lord Stoneham, raised an interesting point about portability. I do not have the answer but given how many people move jobs, it is an interesting question: what happens to the auto-enrolment with a particular employer which they started with? I would like to reflect on that point.

Related to what I said earlier about communication with members, member engagement has been quite a challenging area in which to legislate. We will return to this in later debates. Although they are not specified in the Bill, there are apparently existing powers in relation to communication. I would like to take that forward, as I said a few moments ago.

My noble friend Lord Naseby welcomed the Bill but asked why there was not a de minimis level of capital adequacy. The answer is that we have got to the same destination but taken a slightly different route by looking at financial sustainability. As a number of noble Lords raised this point, it is perhaps worth clarifying how the regulator will determine how much funding a scheme has to hold before it gets authorised. The regulator, taking account of members’ interests and the circumstances of the master trust as set out in its business plan, will have to be satisfied that the scheme has adequate resources available to meet its set-up costs and running costs, particularly until it reaches break-even point, and to cover the cost of complying with its continuity strategy and legislative requirements, should the scheme have a triggering event. This includes sufficient capital to cover the costs of winding up the scheme without recourse to members’ savings, if this becomes necessary. We think that is a slightly better bespoke model to adopt, rather than a one-size-fits-all model for capital requirement.

My noble friend Lord Naseby also raised a theme which ran through the whole debate, about balancing the freedom of the individual to do what he or she wants with his or her money against the need to make sure that individuals do not run out of funds as they grow older. In that connection, he raised exit charges. I understand that few schemes covered by the Bill have exit charges and I will say a word or two about that in a moment. On his question about the mutual or not-for-profit sector, these are usually defined benefit schemes. As such, they are not subject to the authorisation regime in the Bill.

My noble friend also raised a point, which was raised by the noble Lord, Lord Hunt, my noble friend Lord Flight and others, about the impact that changes in interest rates have on the deficit in a pension fund. I was struck by the force of those arguments and wondered whether there was not a better way of measuring this, as my noble friend Lord Flight suggested. You can have a perfectly well-run pension fund that has consistently outperformed the index and has all the liquidity it needs to meet its immediate obligations, with a well-resourced employer standing behind it. But the way that the deficit is measured can mean that, if interest rates go down, a huge deficit may suddenly appear as if from nowhere—with the implications that my noble friend mentioned on dividend policy and investment policy. This issue needs exploring and the Government are responding to these concerns. We will issue a Green Paper over the winter, which will explore this area and seek to stimulate an informed debate on whether government intervention would be helpful, as my noble friend suggested, and whether there are other ways of measuring the deficits in pension funds.

[Lord Naseby]

If my noble friend went back in history he would find that prior to FRS 17, there was a different system. It was a system that looked at the mix a pension fund has and whether that was viable. All the recent work that has just been done— I referred to what one company had done in my speech—proves that it is probably the way forward, so it is not terribly novel. We could dust down what was there before.

[Lord Young of Cookham]

I welcome in advance my noble friend’s contribution to the Green Paper that is about to be launched.

The noble Baroness, Lady Hollis, with her background in this area raised a number of points. I think I have nine pages of briefing to deal with all her points; I hope she will understand if I do not go through all of them. She raised a serious point about those on zero-hours contracts, who may have a number of jobs and fall out of the system. There is a wide gateway at the moment to national insurance cover, with the lower earnings limit, and the threshold for access to contributory benefits, including the state pension, is set at the equivalent of less than 16 hours per week at the national living wage. Having made some inquiries as a result of the noble Baroness’s intervention, there is no evidence that this is a growing problem. The number of women working in two or more jobs has hardly changed in the last 10 years—it is around 5% of those in work—and there is always the option of buying into the national insurance scheme if, for whatever reason, you are outside it.

A number of noble Lords raised WASPI. I am only sorry that I cannot be more forthcoming on this than Ministers have been in the past. As your Lordships will know, during the passage of the Pensions Act 2011 a concession was made which slowed down the increase of the state pension age for women so that no one would face an increase of more than 18 months, compared to the increase as part of the Pensions Act 1995. To help older women remain in work, we have abolished the default retirement age and extended the right to request flexible retiring to all employees.

The noble Baroness, Lady Hollis, also raised an interesting proposition about merging ISAs on the one hand and pensions on the other. This is a very radical proposal, as ISAs and pensions have different regimes and objectives. I will need to think about that very radical proposal, with all its implications. Perhaps a debate might take place in the first instance within the Labour Party, to see whether it might mature in that environment. She implied, as others did, that one could not trust people with their pensions. I hope no one wants go back to the old days of having to take out an annuity. My noble friend Lady Altmann made the case for enfranchising people and trusting them to act sensibly with the freedoms that we have given them.

My noble friend Lady Altmann also reminded us of her record in campaigning for reform. As I said, we are very grateful for the offspring, which we are debating today. She mentioned the importance of protecting pension pots from raids. She is quite right that at the moment a pension pot could be raided for wind-up costs. As of the date of publication, assuming the Bill becomes an Act, there is protection. There is also protection from an increase in the percentage taken in charges.

A number of noble Lords asked about the interrelationship between the voluntary framework master trusts have adopted and the statutory framework we are introducing in the Bill. The Bill goes further than the framework of master trusts; it builds on it and builds in added protections. As my noble friend Lord Naseby said, the association of master trusts has welcomed the Bill, which implies that master trusts are able to come to terms with the extra measures they will have to take if they are to be authorised.

Perhaps I may skip over decumulation-only schemes and multi-employer schemes and deal with them in Committee.

My noble friend Lady Altmann asked whether the 1% cap on early exit charges will be confirmed. We are currently considering the level of the cap for occupational schemes as part of our response to public consultation on early exit charges. We intend to publish the response in the coming weeks. My noble friend asked some highly technical questions about definitions, which we can perhaps come to in Committee. She and other noble Lords asked about cold calling and scams. I understand that there will be an announcement in a few weeks’ time. At this stage, I can say no more than that, but I hope it will meet the expectations that have been aroused during this debate.

The noble Lord, Lord Monks, made an interesting point, which I had not expected to hear to from the Benches opposite, about whether NEST, a publicly promoted scheme, is unfair competition to the private sector. It is a good point. NEST is a critical partner in the successful implementation of automatic enrolment. In particular, it is playing a key role in supporting small and micro employers to meet their automatic enrolment responsibilities. It is unique in having a public service obligation. What the noble Lord, Lord Monks, said about the need to build a consensus, the need to move incrementally and the need to win public support for the reforms was spot on.

There was an interesting suggestion about whether there should be a new contribution basis for the low paid of a certain amount per pound rather than a threshold. That is also something I would like to think about.

My noble friend Lady Wheatcroft reminded us of the size of the pot people need to put on one side to cater for their old age and welcomed the impact the Bill will have on protecting the brand of master trusts and ensuring confidence in it. She asked about consolidation. I suspect consolidation is likely. Whether the regulator has a proactive role in promoting it, I am not sure. As implementation comes in in 2018 and a number of master trusts look at the authorisation process, it may well be that they decide to merge with others.

My noble friend also mentioned trustees and asked whether they should have greater powers in the event of a takeover. She will know that the DWP Select Committee is conducting an inquiry into this. We are determined that the regulator should have the powers needed, and if legislation is needed, we will legislate.

I apologise for any discourtesy in curtailing my remarks. My noble friend Lord Flight asked whether there will be an ongoing assessment of financial sustainability. Yes, there will. The noble Baroness, Lady Drake, made a number of very detailed and valuable points, which I look forward to addressing in Committee.

There were concerns about the robustness of the Bill due to its reliance on secondary legislation. I hope we have got the balance right. We have put as much as we can in the Bill—all the key elements of the scheme—and left the details to secondary legislation. I welcome what the noble Lord, Lord Hunt, said about the Bill and building trust and confidence.

The Bill builds on the radical changes made to the pension system over the past 10 years. We need to ensure that savers can be confident that their savings are being well managed. The measures in the Bill will help to protect them and to maintain their confidence. I thank all noble Lords for their contributions, and I invite the House to give the Bill a Second Reading.