Social Fund Winter Fuel Payment Regulations 2024

Lord Palmer of Childs Hill Excerpts

Wednesday 11th September 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I rise to speak to the Motion standing in my name, the third of the Motions on the Order Paper today. In doing so, I must stress sympathy with the sentiments spoken of so well on the Motion from the noble Baroness, Lady Altmann. However, I understand from reading the House that there is not a lot of support in your Lordships’ House for the fatal Motion—although, as I say, I have great sympathy with it.

My Motion calls attention to the most vulnerable pensioners, many of whom will lose support just as energy bills are set to rise again. About 10 million pensioners will lose winter fuel payments of up to £300 because of the decision taken by this Government, after years of Conservative mismanagement that has left the public finances in crisis. But this is the wrong answer to the challenges we face: it is clear that many pensioners rely on a winter fuel payment, which is not a luxury.

Pension Credit

Lord Palmer of Childs Hill Excerpts

Monday 9th September 2024 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, the pressures were such that some of the money had to be found in this financial year, because a series of expenditure gaps came to light in this financial year. We have already cut other capital programmes, and departments are absorbing pressures. This was a cut that could be made in-year, so it was added to it.

I am sorry to say that this is not the last difficult decision this Government are going to be forced to make, but we will try to target things appropriately. I think most Members of the House would agree that something like a winter fuel payment should not be going to the roughly quarter of pensioners who have a million pounds in assets; it should not be going to those who can manage. What we should be doing is trying to target the money at those who need it most, and that is what we set out to do.

[Lord Palmer of Childs Hill (LD)]

My Lords, the Minister has talked about encouraging people who are entitled to pension credit to claim it. Does she agree that they do not claim it for reasons of pride, or perhaps because they are unable to cope with the system? How are the Government going to encourage this large number of people to claim pension credit, because if they do not, they will not have the winter fuel allowance? I have doubts that people will actually claim it to any great degree.

[Baroness Sherlock (Lab)]

The noble Lord makes an important point and I am grateful to him for doing so. Certainly, a significant number of pensioners do claim pension credit—1.4 million have managed to claim and do get it as a result. So, our job is to get the next surge of people to do that. DWP has a big campaign on: we had a week of action last week, and we work with partners such as charities and local authorities to go out and promote the campaign. From next week, we are running a national marketing campaign on a range of channels, including national print and radio. We will be targeting people of pension age but also friends and family, who can encourage them to apply. It can be tough, but sometimes we need to make people understand that there is lots of help out there. They can call the department free of charge and get charities to help them. If people are really stuck, we have a DWP home visiting team, which will visit the vulnerable and help them make a claim. So I urge all noble Lords: by all means let us have the fight in here, but please put the word out and let us get people to claim what they are entitled to.

European Social Charter

Lord Palmer of Childs Hill Excerpts

Tuesday 3rd September 2024 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, in a sense we have indicated our support for the contents of the revised charter by signing it. Deciding to ratify it is a decision to be bound by its provisions, so it makes sense to be able even to consider ratification only at the point at which the Government have been able to do an assessment and conclude that domestic law and practice will be compliant with it.

[Lord Palmer of Childs Hill (LD)]

My Lords, as I understand the Minister’s reply, the Government want to ratify the treaty only when and if there are adequate resources. On the basis of adequate resources, can she say what steps her department has taken to maximise the take up of pension credit by all those entitled to it?

[Baroness Sherlock (Lab)]

Nice try. Just to clarify, I should say that I was not talking about resources in terms of ratification. To ratify a treaty is to agree to be bound by its provisions. If UK domestic law and practice will not meet those provisions, the UK cannot ratify a treaty only to find that it would be instantly in breach of it. That is what this is about; it is not about resources. However, on the question of pension credit, we are in the middle of a week of action in which the Department for Work and Pensions is working with local authorities and other partners to encourage pensioners across the country to apply for pension credit. We are developing new plans to go further through the winter. We want everybody who is entitled to it to get pension credit, and will be out there working to make sure that they do.

People with Disabilities: Access to Services

Lord Palmer of Childs Hill Excerpts

Thursday 16th May 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I will concentrate on access to benefits, education to some degree and work for those with disabilities. I thank the noble Baroness, Lady Hughes, for tabling this debate and noble Lords for the wealth of knowledge that has been spoken in this Chamber in just the opening speeches.

The Government announced a series of reforms in April. They are looking at reforming the fit note processes—used for people to get signed off work on sick pay as well as being evidence for PIP—and to narrow the eligibility for PIP. Regarding the fit note reforms, we oppose the changes. The person best placed to determine someone’s ability to work on the grounds of their health is a medical professional, not some partly trained amateur, a point that was made by the noble Baroness, Lady Browning. It is not the fault of people who are ill or disabled that the Government have massive NHS backlogs; that is what must be tackled. A problem of “pass the buck” exists, with local authorities desperately trying to reduce the cost of social care. We are deeply concerned that the PIP proposals will simply make life harder and push more disabled people into poverty.

There needs to be a fair and independent process and for PIP descriptors to be reassessed in line with decisions made by tribunal judges. There needs to be an awareness of hidden disabilities. We must move on from not recognising mental health matters. I hope that my noble friend Lord Addington will expand on all this. We need to reinstate a form of the Independent Living Fund to help people who need it to live independently in their community and increase the role of local authorities in administering the support to ensure that it is properly responsive to local needs.

Every child, no matter their background, can achieve great things. Urgent action is needed to ensure that all children can access the tailored learning and support that they need. The template for the new EHCP—it is all initials nowadays; the education, health and care plan—will not be rolled out until 2025. The Department for Education and Department for Health and Social Care steering group will not complete its work until 2025, and no primary legislation is planned until at least 2025. We are concerned that other proposals in the plan intended to standardise the support available under EHCPs, such as tailored lists of SEND settings in each council area, will detract from the principle that the support that a child receives under an EHCP should be personalised to their needs, not a one-size-fits-all approach in order to cut costs, as the noble Baroness, Lady Browning, said.

Claimants for universal credit are required to undertake either activities relating to preparing for work or job searching to receive universal credit. Disabled people and those with long-term illnesses can apply for an exemption, but, to qualify, a claimant has to go through a work capability assessment. Claimants who are found unable to work are either categorised as belonging to the limited capability for work group—who are deemed able to undertake some work preparing requirements for future work—or the limited capability for work and work-related activity group if they are not thought capable of preparing for work at all.

By being placed in the LCW group, claimants and their partners have lower requirements in relation to preparing for work and they and their partners have a work allowance, which means that they can earn more before their UC payments taper off. By being placed in the LCWRA category—I am sorry for all the initials—claimants are not expected to take part in any work-related activities, have the work allowance and get an additional payment of £390 per month. The test is based on assessing various elements such as cognitive function, mobility et cetera. There is a further backstop test, where someone who fails the test can be exempt if it is considered that doing work-related activity would cause them serious harm.

There have been long-standing complaints that the assessors of the WCA do not fully understand disabled people and their needs and get decisions wrong. Government reforms apparently include short-term proposals to tighten the work capability assessment criteria on the basis that digital technology means more people can access work from home. The intention is to remove the mobility criteria from the WCA. They also intend to severely restrict the serious harm test. I hope that the Minister can address this when he replies.

We do not agree with the proposed changes to the WCA, short-term or long-term. This is not a serious solution to get disabled people into work but clearly just a way of taking vital funds away from people who already have additional costs which they struggle to meet. It is also vastly insulting to disabled people to suggest that they need to be forced to want to work. Most of them want to work.

Many disabled people rely on social care in order to live independently. It is therefore vital that we fix the broken social care system. All the research shows that it is more expensive to be disabled. Personal independence payments are meant to help pay for some of those extra costs. The PIP form is lengthy and complicated to complete. Disabled people say that it is confusing and stressful and can cause health conditions to decline.

There is an incredibly low level of trust between disabled people and DWP assessors. Assessments are often outsourced to people who are not really qualified to deal with them, and lots of mistakes are made. The assessment criteria do not work well for everybody. For example, they do not account for people with relapsing/remitting conditions such as MS or long Covid.

Much needs to be done. We need some reassurance from the Minister—and from the Labour Front Bench, one of whom who might be in his position in a few months—on what the Government are going to do, without kicking this into the long grass. The long grass certainly needs cutting, so that we can help people now, not at some time in the distant future.

Care Leavers: Universal Credit

Lord Palmer of Childs Hill Excerpts

Monday 13th May 2024 Lords Chamber

[Viscount Younger of Leckie (Con)]

The subject of relationships is very important indeed for care leavers. Judgments on the quality and breadth of a local authority’s so-called local offer for care leavers forms part of Ofsted’s inspection framework for local authority children’s services, hence the link with the Department for Education. The reports published following an inspection include a judgment on the experiences and progress of care leavers and a supporting commentary on the local offer. The Department for Education is providing £99.8 million to local authorities through the Staying Put programme to increase the number of care leavers who stay living with their foster families in a family home up to the age of 21. Again, this links into the relationship angle.

[Lord Palmer of Childs Hill (LD)]

My Lords, further to the excellent Question from the right reverend Prelate, I say that young parents are one group particularly disadvantaged by the differential rates. As many of us probably know, having a child is very expensive, and is not made cheaper for the parent by their being under the age of 25. This was reflected under legacy benefits, where the higher rate was paid to young parents. Last year, the price of nappies—that well-used product—went up by about 30%. Will the Government review the rate paid to young parents to help them to do the vital work of caring for children? I hope that the Minister will be able to give us some assurance that this disparity in allowances is under review.

[Viscount Younger of Leckie (Con)]

The noble Lord makes a good point. The Government and local authorities should work in tandem, particularly in relation to care leavers who may have married young; I think that is the implication of his question. Local authority children’s and housing services should and do work together to ensure a range of suitable, move-on options, including for accommodation, because housing is often one of the key factors. Personal advisers should help young people to plan—particularly those who might be married—and agree which option is best to see them forward. This includes paying for items such as nappies.

Women’s State Pension Age

Lord Palmer of Childs Hill Excerpts

Tuesday 26th March 2024 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I am sure the House will join me in thanking the ombudsman and his staff for all their hard work on this report over a number of years. The product is a serious report that requires serious consideration. The ombudsman has rightly said that it is for the Government to respond but that Parliament should also consider its findings. As my honourable friend Liz Kendall said in the other place on this debate, we on these Benches will study the report and its findings carefully and will continue to take seriously the representations of those affected by these issues.

It was good that the Secretary of State made a Statement soon after the report was published, and it is good that the Minister is here today. The Government have said that they will provide a further update to Parliament on this matter. Can the Minister give the House some sense of the timescale? Should we expect that to happen soon after the House returns from the upcoming Easter Recess? After all, this matter has been under consideration for many years now.

The ombudsman began investigating how changes to the state pension age were communicated back in 2019. In the same year, the High Court ruled that the ombudsman could not recommend changes to the state pension age itself or the reimbursement of lost pensions, because that had been decided by Parliament. The ombudsman's final report, published last week, says that in 2004, internal research from DWP found that around 40% of the women affected knew about the changes to the state pension age. Does that remain the DWP assessment? What is the Government’s assessment of the total number of women who could receive compensation based on the ombudsman’s different options? How many of those are the poorest pensioners, in receipt of pension credit? How many of them have already retired or, sadly, died?

The Statement rightly says that issues around the changes to the state pension age have spanned multiple Parliaments, and it is important that lessons are learned from the events described in the report. The equalisation of the state pension age was legislated for in 1995, giving 15 years’ notice to those affected. In 2011, the then Chancellor, George Osborne, decided to accelerate the state pension age rises, giving much less than 10 years’ notice to many of those affected. His comment that this change

“probably saved more money than anything else we’ve done”

understandably angered many people and will not have made this debate any easier.

At that time, Labour tabled amendments that would have ensured that more notice was given so that women could plan for their retirement, which would have gone some way towards dealing with this problem. Given that the department already knew that there were problems with communicating changes to the state pension age, does the Minister think that it was wise for the Government to press ahead with the changes in the 2011 Act in the way that they did?

The Government have said that they are currently committed to providing 10 years’ notice of future changes to the state pension age. Labour’s 2005 Pensions Commission called for 15 years’ notice. Have the Government considered the merits of a longer timeframe and how they would improve future communications? Labour is fully committed to guaranteeing that information about any future changes to the state pension age will be provided in a timely and targeted way that is, wherever possible, tailored to individual needs. Will the Government make the same commitment?

Finally, the ombudsman took the rare decision to ask Parliament to intervene on this issue, clearly because he strongly doubted that the department would provide a remedy. In the light of these concerns, and to aid Parliament in its work, will the Minister now commit to laying all relevant information about this issue, including all impact assessments and relevant correspondence, in the Library, so that lessons can be learned and all Members from both Houses can do their jobs on this matter? Given the lack of confidence that the ombudsman has displayed in the likelihood of the DWP engaging to provide redress or a remedy, can the Minister say more about how his department will deal with future ombudsmen’s reports? I look forward to his reply.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for bringing the Oral Statement to the House. However, to paraphrase “Hamlet”, methinks the noble Viscount doth protest too much. It is all protest as to why he is not doing things.

From these Benches, we support the WASPI women in their campaigns, and we welcome that, after their years of work, the ombudsman has finally recommended compensation. They must be recognised as courageous women, and their persistence should be rewarded. Sadly, as the noble Baroness, Lady Sherlock, said, some have died along the way.

The noble Lord, Lord Hague, wrote a big op-ed in the Times today about why the WASPI women were not going to be paid. Basically, what he said can be summed up as “They should have known better”. At this late hour, I can think only to quote from The Hitchhiker’s Guide to the Galaxy:

“All the planning … and demolition orders have been on display at your local planning department in Alpha Centauri for 50 of your Earth years, so you’ve had plenty of time to lodge any formal complaint”.


I am afraid that what has happened is that so much time has elapsed that so many of the WASPI women have died or retired, and life has gone on.

The DWP has said, so I have read, that it will comply with the ombudsman’s decision. I would like the Minister to say how many WASPI women have died—a simple calculation, rather than the additional details that the noble Baroness, Lady Sherlock, asked for. Please will he come back to the House and say that the DWP has agreed, after consideration, that it will comply with that ruling, as the ombudsman suggested?

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

I thank the noble Baroness, Lady Sherlock, and the noble Lord, Lord Palmer, for their comments. Some of what I will say chimes with the comments made by the noble Baroness. The Government are fully committed to supporting pensioners in a sustainable way that gives them a dignified retirement, while also being fair to them and taxpayers. We will carefully study the ombudsman’s recommendations in that respect.

I too am grateful to the ombudsman for conducting the investigation. The Government will provide an update to the House once we have considered the report’s findings; I will say a little more about the timings in a moment. Following the ombudsman’s five-year investigation —we should note that it has been five years—and his subsequent substantial report, it is right that we carefully consider his findings in full. That is work that this Government and the department are steadfastly committed to. I also make the point that the department has assisted the ombudsman throughout his investigation—which he recognises—by providing thousands of pages of evidence and detailed comments on his provisional views. As I said previously, the ombudsman’s chief executive herself has recognised that.

Something else that chimes with some of the remarks from the noble Baroness is that I well understand the strong feelings across the Chamber on these matters and the desire for urgency in addressing them. To echo points that have been made in the other place: these are complex matters, and they require careful consideration. It is therefore right that we take time to consider the ombudsman’s full findings.

There are many issues to consider, including that the courts concluded that the DWP gave adequate and reasonable notification of the state pension age changes. The ombudsman has noted in his report the challenges and complexity in laying the report before Parliament, through which he has brought matters to the attention of this House. We will provide a further update to the House, as I said earlier; but I also echo points made in the other place that it will be done with “no undue delay”.

The ombudsman is not saying that WASPI women suffered a direct financial loss, nor that all women in born in the 1950s will have been adversely affected. That adds to the complexity of the situation, which, again, is why the report requires proper and due consideration.

I turn to the points that were made. The noble Baroness, Lady Sherlock, asked about remitting to Parliament. In saying that we continue to take the work of the ombudsman very seriously, it is only right that we consider the findings of what is a substantial document. In laying the report before Parliament, the ombudsman has brought matters to the attention of the House, so it is important that it is considered very carefully.

The noble Baroness, Lady Sherlock, raised some points about the 2011 Act. The Pensions Act 2011 accelerated the equalisation of women’s state pension age by 18 months and brought forward the increase in men’s and women’s state pension age to 66 by five and a half years relative to previous timetables. The changes in the 2011 Act occurred following a public call for evidence and extensive debates in Parliament. During the passage of the Act, Parliament legislated for a concession worth £1.1 billion, which reduced the proposed increase in state pension age for over 450,000 men and women. That means that no woman will see her pension age change by more than 18 months relative to the timetable set by the 1995 Act. These reforms have focused on maintaining the right balance between the affordability and sustainability of the state pension and fairness between generations.

On the figures that were raised, I think, by the noble Lord, Lord Palmer, I will cite a few statistics that may be helpful to the House. Around 3.5 million women born in the 1950s are impacted by the state pension age, and around 2.2 million men born between 6 December 1953 and April 1960 inclusive are also impacted. At the start of 2024, there will be around 790,000 women born in the 1950s who are still to reach their state pension age of 66. On the number of women who have died, which was also mentioned, the department offers its very sincere condolences to the families of the 1950s-born women who have died before reaching state pension age.

A question was raised about the referral to Parliament and not to the DWP, as well as the question of trust. In reply, I quote what the ombudsman’s chief executive herself said on Sky News last Thursday, the day the report was published:

“The Government, the DWP, completely co-operated with our report, with our investigation, and over the period of time we have been working they have provided us with the evidence that we asked for”.


I respect the independence of the ombudsman’s office and note that he has referred this matter to Parliament. His report notes the complexity and challenges involved. In laying the report before Parliament, the ombudsman has brought matters to the attention of this House. As I have said before, we will provide a further update to the House.

The noble Baroness, Lady Sherlock, asked about considering giving 15 years’ notice. She is right that it is important to give people enough notice about state pension age changes. In the last review of state pension age, the Government committed to provide 10 years. That is intended to provide sufficient time to allow people to plan.

I will finish by stating that this Government have a very strong record in supporting all pensioners; for example, in 2023-24 we will spend £151 billion on support for pensioners, which represents 5.5% of GDP. That includes around £124 billion for the state pension. We are committed to ensuring that the state pension remains the foundation of income in retirement—now and for future generations. Just to make the point, we are honouring the triple lock, which was mentioned on Sunday by the Chancellor, and is being put into the Conservative Party manifesto. Also, we are increasing the basic and new state pensions by 8.5% from next month. I mentioned earlier in the Chamber that we now have 200,000 fewer pensioners in absolute poverty after housing costs than in 2010. I thank both Peers for their comments.

Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024

Lord Palmer of Childs Hill Excerpts

Tuesday 26th March 2024 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, these regulations were relaid before the House on 26 February. They bring in new measures that will support trustees and sponsoring employers of defined benefit occupational pension schemes to plan and manage their scheme’s funding over the longer term. The aim of the regulations is to achieve a fair and long-lasting balance between providing security for members of defined benefit schemes and affordability for the sponsoring employer.

I start by giving a bit of background. The UK has the third-largest pension system in the world, with assets of around £2 trillion held in both defined contribution and defined benefit schemes. The pensions sector is an integral part of the UK economy. I will focus on defined benefit pensions and these regulations. Over the last decade, across the Organization for Economic Cooperation and Development, the UK has seen the greatest improvement in defined benefit funding.

There are around 5,000 defined benefit schemes in the UK, and around 9 million people who depend on these pensions when they retire. Defined benefit pension schemes, often referred to as DB schemes, are a promise that scheme members will receive a guaranteed income in retirement, usually paid monthly, for the rest of the member’s life. Between them, UK DB schemes have around £1.4 trillion of assets under management.

Most DB schemes are closed either to new members or to new accruals. This means that they have an increasing number of members who are retired or close to retirement, and either a decreasing number of members or no members at all who will make contributions to the scheme. This is referred to as “maturing” and will change the funding requirements of the scheme. It is therefore extremely important that employers and trustees work together to manage maturing schemes to ensure they can continue to pay members’ pensions.

DB funding levels have improved in recent years through a combination of employers supporting schemes and, more recently, changes to interest rates. The Work and Pensions Committee report on its DB schemes inquiry, published today, recognises the new opportunities and challenges this brings. But financial markets and economic conditions are changeable and funding positions can quickly deteriorate. The Government will respond to the Work and Pensions Committee report in due course, but I reassure noble Lords that these regulations are designed to provide a solid foundation across current and future economic and market environments. This is good news for schemes, members and sponsoring employers, and for the UK economy.

The majority of DB schemes are well managed and supported by their sponsoring employers, but some schemes are not as well run, or are taking an inappropriate level of risk in their approach to investment and funding. This can lead to funding problems developing. Over a quarter of all DB schemes are in deficit on a technical provisions basis. This means that they have a deficit which will need to be repaired to ensure that members get their promised pensions when they are due to be paid—hence the regulations we are debating today.

The regulations build on the current funding regime for DB schemes, embed good practice and provide clearer funding standards. This will help ensure that all DB members have the best possible prospect of getting the benefits they have worked so hard to build paid in full when they fall due.

The consultation attached to these regulations built on extensive discussion, engagement and consultation with the pensions industry going back as far as 2017. This joined-up working is ongoing, with the development of the Pensions Regulator’s draft code of practice through to its most recent consultation on the statement of strategy. We had good engagement with the consultation: 92 responses from a wide variety of organisations across the pensions industry. The industry broadly welcomed the draft regulations but expressed some concerns that they were too prescriptive and could be improved for schemes open to new accrual. We listened, and the regulations before us today take account of that.

A key aspect of this work was the importance of balancing, on the one hand, clear standards for both open and maturing schemes that reflect the best practices that most schemes already follow and, on the other, ensuring that individual schemes have the flexibility to make funding decisions that best suit their own unique circumstances. Also, schemes must continue to be affordable for their sponsoring employers and to pay out all pensions as they fall due. Importantly, we aim to promote better collaboration between sponsors and trustees in the formulation of an overall journey plan. This includes an investment approach that reflects the scheme’s circumstances.

The Pension Schemes Act 2021 introduced new scheme funding requirements for DB schemes and requires DB scheme trustees to prepare a statement setting out the scheme’s funding and investment strategy, which must be submitted to the Pensions Regulator. These regulations are principle-based and set out detailed requirements for the funding and investment strategy. Better information and clearer funding standards will help address the problems the Pensions Regulator has faced in the past and will enable it to be more effective, efficient and proactive in carrying out its statutory functions.

As part of this strategy, all DB schemes will be required to set out their plans for how pension benefits will be paid over the long term. For example, this could be through buyout with an insurer, by entering a superfund or by running on with continued employer support. The strength of this employer support is fundamental. For the first time, these regulations introduce key principles for assessing the strength of the employer covenant. This is an assessment of the financial ability of the employer in relation to its legal requirements to support the scheme.

Schemes are required to have a clear plan along their glide path to maturity and low dependency, so as not to need further employer support by the time they are significantly mature. Schemes are required to reach low employer dependency in reasonably foreseeable circumstances. This embeds existing good practice that funding risks taken by a scheme before they reach maturity must be supportable by the employer, while providing explicitly for open schemes to support more risk, because there is more time for them to address any funding shortfalls.

The best possible protection for a DB member is to be supported by a strong and profitable employer. That is why we have made it clear that recovery plans are to be put in place as soon as the employer can reasonably afford, but this does not mean that the employer must put every free penny into the scheme to the detriment of its growth and other commitments. We believe that this sets an appropriate and sustainable balance while ensuring that schemes get a fair share of available resources.

The funding and investment strategy must be reviewed and, if necessary, revised, alongside each scheme valuation, which is usually every three years. When submitted to the Pensions Regulator, these valuations will be accompanied by a statement of strategy. This will articulate the trustees’ approach to long-term planning and management, as well as their assessment of the implementation of the funding strategy, key risks and mitigations and any lessons learned. Depending on circumstances, the Pensions Regulator now has the flexibility to ask for less detailed information from the schemes to improve long-term planning and avoid unnecessary burdens.

These regulations help drive the Government’s vision to encourage schemes to invest in ways that are productive for the UK economy. They make it clear that schemes have significant flexibility to choose investments while meeting the low-dependency principle. This will help support trustees in reacting to changing circumstances while investing in the best interests of their members.

The pensions industry has welcomed these revised regulations, which are explicitly more accommodating of risk taking, where supported by the employer covenant. They increase the scope for scheme-specific flexibility, including allowing open schemes to take account of new entrants and future accrual when determining when the scheme will reach significant maturity. The Pensions and Lifetime Savings Association recently commented that this is

“a significant set of ‘win’”

for its members.

I move on to the timing of these regulations. They will come into force on 6 April 2024 and a scheme must have a funding and investment strategy within 15 months of the effective date of the first actuarial valuation obtained on or after 22 September 2024. We intend that the Pensions Regulator’s funding code will be laid before Parliament this summer. The regulations, the code and guidance will work in partnership. These regulations will encourage the widespread adoption of existing good practice and help the regulator to intervene more effectively to protect members’ benefits.

I am confident that the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 will support schemes and employers to make long-term plans and enable the Pensions Regulator to take effective action when needed. This will help ensure that scheme members get the retirement they have contributed towards and rightly expect. In my view, the provisions in these regulations are compatible with the European Convention on Human Rights. I commend the regulations to the Committee and beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the noble Viscount very much for his normal exposition. I am sure that we will hear a lot more detail from other participants. I will confine myself to some questions rather than go through this large document, which the noble Viscount did not go through in great detail.

First, is there a disproportionate governance burden for small firms? I was worried about how small firms will be able to cope with these new regulations. Secondly, the resolutions will add to the duties of defined benefit schemes. Can the noble Viscount elaborate on how these duties will be dealt with? Thirdly, will the regulations help set out long-term objectives? I was a bit worried about comments that these schemes are all coming to an end and that we are just relying on people sitting in place on the schemes and very few new people, if any, coming in.

Is there a conflict—I could not answer this myself—between the beneficiaries and the employers? The noble Viscount used the phrase “fair balance”. I am not sure that this conflict shows a fair balance. On the duty of trustees to protect the interests of the beneficiaries, can we rely on all these trustees to do so, especially when the schemes are, in effect, stationary and being wound up? Also, there is the impact of the fund being hived off to insurance companies. These funds are hived off so often; will the beneficiaries’ interests really be protected? I think that will be their worry.

Finally, the noble Viscount talked about actuarial valuations. So often they mean that funds keep moneys in reserve, probably more than a commercial firm would have to. Can he comment on that? It is very nice and careful that they do so, but sometimes that might have a negative impact on the beneficiaries. I hope he can give me some answers to those numerous questions.

Household Support Fund: Children’s Bed Poverty

Lord Palmer of Childs Hill Excerpts

Thursday 21st March 2024 Lords Chamber

[Viscount Younger of Leckie (Con)]

I am well aware of the sensitivities if decisions are made for that particular time. We will have to wait and see. But as inflation falls, as in the good news yesterday with the fall to 3.4%, and with evidence of some price falls and, as the Prime Minister said yesterday, some evidence of some green shoots, notably with energy prices coming down as well, the Government will want to take careful stock over the next few months. Of course, any decision on the future of the household support fund after 30 September will be a matter for the Chancellor when he deems the timing to be right.

[Lord Palmer of Childs Hill (LD)]

My Lords, it is vital that the household support fund continues, but the sad reality of children’s bed poverty is that it stems from systemic problems with our benefit system, which keeps people in deep poverty. Does the Minister agree that the most efficient and effective means of reducing child poverty is to lift the two-child limit? It is not just the right thing to do to end hardship now but the best route in which to end the cycle of poverty for future generations.

[Viscount Younger of Leckie (Con)]

We are very alert to the issue of child poverty. Tackling child poverty is incredibly important, and we have set out a clear and sustainable approach based on evidence of the important role that parental employment plays in reducing the risk of child poverty. But it is more than that. The Question focuses on bed poverty, and it is good to mention that the household support fund can be used to ameliorate bed poverty. There are some examples that the noble Lord may know of, particularly in Bolton and Oldham.

UNICEF: Child Poverty Rankings

Lord Palmer of Childs Hill Excerpts

Wednesday 28th February 2024 Lords Chamber

[Viscount Younger of Leckie (Con)]

The noble Baroness will have heard me say this before, but we believe that the best route out of poverty is through work. We are committed to a sustainable long-term approach to tackling child poverty in particular—the subject of this Question—and supporting people on lower incomes to progress in work. She will know that in April 2023, we uprated benefit rates by 10.1%, and working-age benefits will rise by 6.7% from April 2024, in line with inflation. But we are very aware of the pressures that quite a few households are experiencing.

[Lord Palmer of Childs Hill (LD)]

My Lords, the figures are truly devastating and very worrying. Can the Minister tell the House whether the Government have related those child poverty figures to the mental health of young people, as referred to in a report that came out a few days ago? Is there a relationship—and what are the Government doing about it?

[Viscount Younger of Leckie (Con)]

I have given the Government’s view on this scorecard—and, by the way, it is a scorecard, not a report, we should be careful to say. But the noble Lord makes a good point. What I can say is that we are looking at a new type of measure: the Department for Work and Pensions is developing the below average resources statistics to provide a new additional measure of poverty, based on the approach proposed by the Social Metrics Commission, led by my noble friend Lady Stroud.

The noble Lord makes a very good point about children. It is very important to get the statistics accurate. The importance of children remains very much live in our minds.

Occupational Pension Schemes (Collective Money Purchase Schemes) (Amendment) Regulations 2023

Lord Palmer of Childs Hill Excerpts

Tuesday 13th February 2024 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I am pleased to introduce this instrument. Subject to your Lordships’ approval, these regulations will make two small technical amendments to the landmark Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022 to ensure that they operate in accordance with our published policy. The instrument clarifies requirements on trustees of authorised collective money purchase schemes, more commonly known as collective defined contribution, or CDC, schemes.

I will first set out the context. The Pension Schemes Act 2021 provided the statutory framework for CDC schemes in the UK. The guiding principle of our approach has been to ensure that it protects the interests of members. The Government believe that CDC schemes have an integral role in the future of pensions in this country. CDC schemes offer members a seamless transition from saving to receiving a regular retirement income.

We know that many people do not want, or feel ill equipped, to make complex financial decisions at retirement. The Government want to ensure that as many savers as possible can take advantage of the numerous benefits of CDC. By pooling longevity and investment risk across the membership, CDC schemes can shield savers from much of the uncertainty faced by members of DC schemes. This also allows the scheme actively to target higher investment returns for their members than a DC scheme through increased investment in growth-seeking assets. This in turn can lead directly to greater investment in vital UK infrastructure and the technologies of the future, such as transport and renewable energy. That is why the Government have provided the legislative framework for single or connected employer CDC schemes to be set up in the UK. The CDC regulations came into force on 1 August 2022.

Throughout the development of our policy, the Government have been engaging with stakeholders on how best to deliver CDC schemes in the UK and inviting challenge and scrutiny. In that vein, we have been helpfully advised that two areas of the current framework do not meet our published policy intent. CDC schemes can succeed only if there is confidence in this new type of provision. That is why it is important that we provide immediate clarity. This instrument ensures that, from the start, prospective schemes are set up to work as we intend.

I will now take noble Lords into the detail of this instrument. With regards to the first amendment, the existing regulations make provision in relation to the annual actuarial valuation and benefit adjustment process for CDC schemes. This means that each year benefits are reviewed and adjusted where required so that the value of assets held is in balance with the projected costs of benefits. This protects members from the need to fund a surplus and means that reductions to benefits are not deferred and stored up. Doing so would have a detrimental impact on future years and younger members, which would be unfair. It is important that CDC schemes follow strict rules around benefit adjustment to ensure that all members, without bias or favour, are subject to the same adjustments.

It is important that a balance is maintained between the value of the available assets of the scheme and the amount needed to provide the target benefits to members on an ongoing basis. If, for example, the value of the assets is lower than the amount needed to pay the benefits, the scheme may be required to make a cut to benefits to regain that balance. Conversely, if the value of the assets is more than the amount needed to pay the benefits, the trustees will be required to pay an increase to the members.

The policy intention is to provide that, where a cut to benefits must be made, the trustees of the CDC scheme can smooth the impact of the cut on members over three years. This is called a multiannual reduction. Regulation 17 currently provides that, if a subsequent annual valuation that occurs during a multiannual reduction shows that an increase in benefits is required, the trustees, having taken advice from the scheme actuary, will be required to apply that increase in addition to the planned reduction for that year under the multiannual reduction that is in effect.

I appreciate that this is quite complex, so let me provide an example of how it is intended to work in practice. In a period of extreme economic downturn where equities fall significantly in value, it is possible that a CDC scheme would have to make a cut to members’ benefits. Regulation 17 enables the trustees of the scheme to mitigate the impact of this market volatility on member benefits by spreading the overall cut over three years. To use an easy example, if the overall cut necessary were 6%—my maths is not too good, but here we go—the members’ benefits could be cut by 2% a year over the three-year period.

This mechanism helps to reduce volatility and ensures that current and future benefits remain relatively stable. It contrasts with individual DC schemes, where there is no pension-smoothing mechanism. Members of these schemes would have experienced a significant reduction in the value of their retirement savings immediately, which for savers closer to retirement may be unrecoverable. The intention of Regulation 17 was that, where a market recovered during the period of such a reduction, increases in benefits resulting from subsequent annual valuation would offset, in whole or in part, planned cuts under a multiyear adjustment before being applied as an increase to future benefits in the normal way. This would have the benefit that any bounce-back immediately after a period of very poor performance could help to smooth outcomes and avoid cuts, which would then be unnecessary, while maintaining the principle that the costs of current and future benefits remain in balance with the value of scheme assets.

If we did not do this, the benefit of the recovery would instead be likely to go to future pensioners. This would run against our principle that, as far as possible, all members—current pensioners, those who are currently accruing benefits and those who are not contributing but have rights to a future pension from the scheme—should all share in upsides and downsides at the same time.

The instrument also makes a consequential change to Regulation 19. Any variation to a multiannual reduction as a result of offsetting an increase against must be reported to the Pensions Regulator, ensuring proper oversight.

I turn to the second of these amendments, which addresses an issue that may arise where a scheme winds up and the value of members’ accrued rights are transferred to suitable pension schemes or alternative payment arrangements. A key element of the wind-up process is calculating the share of the fund for each person who is a beneficiary at that time. The scheme rules may provide that the person may be a member or a successor of that member. Potential successors will be determined by the scheme rules, but could include a spouse, a child, a cohabitant or a person financially dependent on the deceased beneficiary. That share of the fund is applied to the scheme’s assets at the end of the winding-up to produce the beneficiary’s pot, which is then used to discharge the scheme’s obligations to the member by transfer to another scheme offering flexi-access income drawdown.

I ask noble Lords to imagine a scheme that has provided for these categories of people to be a beneficiary under its rules. If a member of that scheme dies during the winding-up process, their benefits are reallocated to the deceased’s stipulated beneficiary. They are not reallocated among the collective. The policy intention has always been that, if the beneficiary dies during the winding-up period, the pot allocated to them would not be extinguished but would instead be reallocated among their successors, where a scheme’s rules provide for that. This instrument therefore amends Schedule 6 to the regulations to ensure that the deceased member’s accrued rights in wind-up may be discharged in this way.

In conclusion, CDC schemes are an important addition to the UK pensions landscape and, when well designed and run, have the potential to provide a good retirement outcome for members. The effect of this instrument will be to provide clarity for schemes moving forward by more accurately reflecting the intent of the regulations that it is amending. I commend it to the Committee and beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the noble Viscount for his clarification of the papers, which is very welcome—as usual. This is a statutory instrument with a more than usually snappy title, which will probably be more noted than some of the things in the instrument.

This statutory instrument is good news. It helps pave the way, as I understand it, for the introduction of the UK’s first collective defined contribution pension scheme, which I believe is by the Royal Mail. Collective defined contribution schemes in various forms are common in Scandinavia, the Netherlands and Canada. Work on these risk-pooling arrangements started during the coalition years when we, the Liberal Democrats, worked collaboratively with the Labour Front Bench and the Communication Workers Union to get the Royal Mail to implement the first scheme of this sort. I believe that it has not yet gone live, although perhaps the noble Viscount can tell me more about that.

The next developments of CDC, in my view, are, first, the extension of multi-employer or industry-wide CDC—when does the Minister expect to publish the next consultation on this?—and, secondly, the development of retirement-only or decumulation-only CDC schemes, so that a person could take his or her own pot and pool it with other people’s. Any comments on that would be gratefully received.

These regulations tidy up some issues that are causing practical problems. The main part is to do with what happens each year, as the noble Viscount said, when a scheme reviews whether it has enough money to meet its target pension payouts. As things stand, if the scheme is short, it can reduce planned pensions. But what happens if, a year later, it thinks that things are better? What these regulations appear to make clear is that the first thing you do is reduce or eliminate the planned pensions cuts. I think this was covered by the Minister’s comment about “a smoothing mechanism”.

One thing that comes out of this SI is that, as so often, there seems to be a lot more valuation work for actuaries. I am sure they will be very grateful. I am very grateful for the guidance in the papers and the elucidation from the Minister. I think the principles are right and we on these Benches agree with the instrument.

[Baroness Drake (Lab)]

I thank the Minister for setting out the intent of these regulations so clearly and for arranging a briefing session with DWP officials engaged with CDC, who also provided a very helpful briefing document. It probably has reduced the number of questions that my noble friend and I have—although I suspect the Minister will take very little comfort from that observation.

The regulations amend the Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022, in two key ways. In the first instance, they amend how reductions to members’ benefits in a CDC scheme can be smoothed following a fall in the value of assets held. Given the Government’s opposition to any buffer fund in a collective DC scheme to manage volatility and assets, intergenerational fairness or cuts in benefits, clarity on how the legally permitted smoothing mechanisms operate is indeed important.