Welfare Reform

Lord Palmer of Childs Hill Excerpts

Tuesday 18th March 2025 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, I thank the Minister for repeating the Statement on these long- awaited and much-trumpeted welfare reforms. I say at the outset that the Government are right to look at our growing welfare bill, which is far too high—I think we agree on that. Without action, it will rise to £100 billion by the end of the decade. We need to increase the number of reassessments and hold more in-person assessments to ensure that only those who are eligible for welfare payments receive them.

In government, up until July, we extended employment support, and Ministers are right to continue with our Conservative legacy in the form of the tailored pathway. My first question to the Minister is: how will the £1 billion earmarked for this be measured in terms of success and meaningful results?

Above all else, we welcome the reannouncement of a host of projects and initiatives that we, the previous Government, were already undertaking, such as changing work capability assessments and creating a single assessment; merging new-style jobseeker’s allowance and employment and support allowance into a new, time-limited higher rate; and, of course, I should remind the Benches opposite, providing support for WorkWell. The Labour Party’s slow conversion to the idea that our country needs everybody who can work to do so should be welcomed today.

However, after eight months of dither and delay, the taxpayer has forked out £7 billion in extra sickness benefits, while nearly half a million more people have been signed off sick. On that note, or perhaps I should say fit notes, there is considerable surprise that the Government have scrapped them. It remains the case that there is a 94% sign-off rate, and this sits at the heart of the sickness benefit epidemic. Where is the action on people being signed off sick for the everyday ups and downs of life? Where are the steps that we need to take to bring down the number of people who are leaving work every single day? Currently, it stands at 2,000 people a day, and Ministers need to tackle this urgently. We do not blame the doctors, who are so busy. Can the Minister spell out what, after today’s announcement, the process is for assessing whether someone is fit to undertake work of any sort—while recognising, of course, that this is a key challenge for any Government?

Today’s announcement leaves more questions than it provides answers, and on the areas the Government have finally acted on, they need to be tougher. I have to say that £5 billion in savings is a drop in the ocean compared to the explosion in disability benefits, which, as I said earlier, are set to rise to nearly £100 billion by 2029. Do the Government think that this saving is sufficient, and enough to fill their fiscal black hole, which is the real reason why they are expected to take emergency budgetary steps next week? We on these Benches are unclear whether this small saving is net of the costs and commitments to extra expenditure in today’s Statement. Can the Minister tell us whether the savings announced today include the £5 billion the previous Government had already agreed with the OBR for reforming the work capability assessment? If so, today’s announcement will mean no real savings at all for the Government.

Turning to the plans to change PIP, they leave us with yet more uncertainty and will leave those most concerned about the speculation in recent weeks still in the dark. Will the Minister say why there have been so many leaks, semi-announcements and prolonged rumours over several weeks, which have caused genuine anxiety for those most vulnerable? I hope that a post-mortem is going on in the department, or even in No. 10, about this. The proposal to require individuals to score a minimum of four points raises crucial questions. Who decides how these points will be awarded, and thus is ultimate arbiter of who is deserving of the state’s support? Will there be an appeals tribunal process, with an even longer backlog? Ministers say they will consult on this. Can the Minister confirm exactly when this consultation will be completed and when she expects the new assessment system to be operational? Why did the Government cancel our PIP consultation? What is the difference between this one—the Minister referred to a review—and the previous Government’s, apart from an at least eight-month delay?

On the “right to try” initiative, can the Minister give us some more information about how this will work? For example, if someone goes on to the scheme but after, say, two weeks, they say the role is not for them, can they go straight back on benefits? What is the catch, if any? It would be very helpful to have an explanation. With today’s announcements being linked to the Green Paper, I am not clear what happens next. Is there a White Paper or is this the end of the process, but for these announcements?

There is clearly much anecdotal evidence of fraud in the benefit system. The Minister will cite the upcoming fraud Bill, which focuses, as she knows, on interventions by banks, but it is not clear whether the Bill tackles the malicious websites that direct those inclined to abuse the benefit system. Will the Minister give her view on this?

This was a chance to seize the moment and to choose work over a life on benefits, but the Government have fallen short. Our country needs everybody who can work to do so. That principle should be at the heart of our welfare system. Yet still, the fundamental question of how many people will be helped back into work, and by when, remains unanswered by this announcement.

I remind the Benches opposite that, under Parliaments going back to 2010, successive Conservative Governments helped 4 million more people into work, and we will continue to champion work as a means to bring dignity, purpose and security for individuals and their families.

I finish by acknowledging the large number of questions that I have posed to the Minister. I have great respect for the Minister; she knows that. She will know that the tone of my questions is not directed so much at her personally but is a riposte to the overtly and rather unnecessary political stance taken earlier in the other place by the right honourable Secretary of State for Work and Pensions.

[Lord Palmer of Childs Hill (LD)]

My Lords, these welfare reforms aim to reduce benefit spending while encouraging greater workforce participation. I thank the Minister for reading the Statement and the noble Viscount for the useful questions that he has raised. I have respect for both of them, as they know.

From these Benches, we want to see more people in work, including those with disabilities. While the need for reform is clear, the Liberal Democrats are concerned that the current proposals risk worsening the very issues that they intend to address. We all want to see a more efficient welfare system, but that cannot come at the expense of the most vulnerable in society, particularly those with disabilities or health conditions. Instead of focusing on short-term cuts, we must reform the system in a way that is fair and compassionate and ensures dignity for all.

Does the Minister agree that one of the main aims of this reform package is, as the Statement says, to save £5 billion—often at the expense of the vulnerable in society?

One key area of concern are the proposed cuts to benefits for people with disabilities, which could push many into poverty and greater dependence on social care. The chief executive of Citizens Advice has warned that these changes could have “serious long-term consequences”, and we on these Benches passionately agree. For individuals with severe disabilities or health conditions, this reform package may well create further barriers to employment rather than removing them. The Government’s proposal to freeze the health top- up in universal credit for existing claimants, while reducing it for new ones, will only add to the pressure on disabled individuals, undermining their ability to achieve independence and security. Why are new claimants considered less vulnerable than existing claimants? Of course, that is nonsense and worthy of Ebenezer Scrooge.

These Benches welcome the idea of merging contributory benefits and creating a new unemployment insurance, but the fact remains that we are still waiting for an overdue comprehensive overhaul of the Department for Work and Pensions. Until the Government get serious about fixing health and social care—systems that are intrinsically linked to people’s ability to work—the welfare system will continue to struggle. The social care review’s three-year timeline is hugely disappointing and highlights the lack of urgency in addressing these critical issues. If the Government truly want to cut benefit spending, they must first address the root causes, not just apply superficial, short-term fixes borne by those least able to object.

These Benches remain committed to supporting people with disabilities into employment. We agree whole- heartedly with the Government’s aim to provide a right to try to work without the risk of losing benefits. However, from history, I have a sneaking premonition that it will be more difficult, and slow, to get back on to the benefits ladder once you have tried to work. That is what has happened in the past.

The wider changes, including delays in the health top-up for young people and increasing reassessments, must be approached with caution. We need to ensure that any reforms we make are sustainable and focused on long-term support for those who are most in need. Does the Minister agree that a balanced approach is needed—one that addresses the root causes of welfare dependency and puts people’s dignity and well-being at the heart of its reforms?

[Baroness Sherlock (Lab)]

My Lords, I thank both noble Lords for their comments and questions. Maybe we can start by agreeing that we all have great respect for each other, which is both genuinely true and one of the joys of this House. We are able to have conversations and respect one another while disagreeing.

Having got that out of the way, I probably need to start by saying it is possible that some of what we are trying to do has been misunderstood. So let me summarise in my own words what we are trying to do here. First, we need to recognise that the UK has a near-record number of people who are economically inactive on health grounds. The numbers on incapacity and disability benefits are rising at an unsustainable rate, and that is not just down to worsening health. The figures and the evidence show that there are more people who say they have a disability or a long-term health condition affecting their daily lives, but the number going on disability and health benefits is going up twice as fast. So it is not just about health; there is something about the way our system works.

If those numbers keep going up, as more people are driven into the system, fewer people are left to sustain it. One in 10 working-age people now gets a sickness or disability benefit. Before the pandemic, we spent £30 billion a year on those benefits; the figure is now over £50 billion and by the end of the decade it will be £70 billion on working-age benefits. That is not sustainable. So I say to the noble Lord, Lord Palmer, that I absolutely know where he is coming from but, if we cannot get the system on to a sustainable footing, it will not be there for the people who need it in the next generation and the one after that. We have to get the system working.

As well as being unsustainable, the system is failing those that it serves. The current system, as my right honourable friend described in the Statement, divides people into artificial binary categories: can and cannot work. Those who are deemed able to work are put out there, given support, encouraged to get a job and paid a standard allowance. Those who cannot are paid more money, left alone and given no help—the system disengages. We know that that is not the reality for most people. We know that 200,000 people on incapacity and disability benefits say they could work right now with the right support and the right job, but the system does not encourage them to do that; it actually discourages them.

Social security provides a vital safety net for those who rely on it, but we need it to be there for the future as well. Our Green Paper sets out how we will refocus the social security system towards empowering people to find work, while protecting those who most need help by supercharging the employment support with an extra £1 billion and a focus on early intervention, and by separating the link between the capability to work and extra financial support, so that everyone can work and not risk their benefits.

The noble Lord, Lord Palmer, suggested that this was simply a cost-cutting measure. I hope I have explained to him why the measure is trying to do two things. It is trying to place the whole system on a more sustainable footing and it is trying to reform it to make sure that it can support all those who can work to be able to go out there and get a job, to develop in it and to build a life in it, while absolutely guaranteeing to support those who are never going to be able to work or who have the most severe needs.

The estimate—we will get the details when the OBR does the figures for the Spring Statement next week—is that this package will save £5 billion in 2029-30. When the figures come out, I encourage the noble Viscount to have a look at them and compare them with what his Government had in mind, and we can then have a conversation about them. However, even with these changes, we are not reducing spending on disability and sickness benefits. We are spending less to try to make the system sustainable, but the numbers will keep on going up.

The noble Lord mentioned the question of people being put into poverty. One thing to stress is that anyone who is getting benefits at the moment—if they are getting PIP or the universal credit health element at the moment—will keep those benefits unless and until they have a reassessment and their eligibility changes, so this is a system for the future.

The noble Lord asks why it is different for those coming in afresh. The answer is that we have to make the system sustainable and that is the best way to do it. However, we want to support people in transition. Of course, some people will end up losing entitlement, but we want to look into how we can best support them, including possibly with transitional support to make the adjustment to the new regime.

The noble Lord asked about the DWP. One of the things that has worried us as we came into government is the lack of trust and confidence in the system, and we are really determined to address that. It is one of the reasons that we say in the Green Paper that we are going to develop a new safeguarding system for DWP to try to rebuild trust and confidence in the system. That is why, for example, we are going to move to recording all assessments by default, so that people can be clear and have confidence in the process when that is happening.

Crucially, for those on the universal credit health system who have the most severe lifelong health conditions which have no prospect of improvement, so they are never going to work, we are going to look at providing an additional premium to protect them so that they are secure. For people in that group, with both new and existing claims, we will guarantee that they will never face a full reassessment in the future.

The noble Viscount asked about WCA. I think he is aware that not only were the previous Government’s proposals to reform WCA, I am sorry to say, poorly thought out, but their consultation was so bad it was actually ruled illegal by the courts, which made it simply impossible. We had a manifesto commitment to either reform or scrap the work capability assessment. We have come to the conclusion that it cannot be reformed; we are therefore going to scrap it. Apart from anything else, that will mean that people will not have to go through two separate assessments. We think that is the way forward.

I probably have to take on the noble Viscount’s challenge here that the Government were going to do lots of things. I fully accept that, when his party were in government, they had lots of ideas, but they did have 14 years to do them. We, at this point, are nine months in. We have already made some announcements, we have a detailed Green Paper for reform, we are engaged in consultations and we are going to change the system. I understand this is hard. I know change is hard, but the system has been tinkered with for far too long. We need reform and we are doing it now.

It was of course Beveridge himself who identified the establishment of comprehensive health and rehabilitation and maintenance of employment as necessary conditions of success in social security. We need more than tinkering. We need a system that will be sustainable and will support people into work, but will protect those with the highest needs who can never work. We can do both. I welcome the contributions from both noble Lords and look forward to carrying on the conversation. We all need this change to work.

National Insurance Pension Underpayments

Lord Palmer of Childs Hill Excerpts

Thursday 13th March 2025 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, some of the cases in the LEAP exercise go back to 2006, so this is already going back a very long way, but I can reassure the noble Lord that that the exercise went back through the book. This is really complicated, as I am sure he understands, but, in summary, the exercise specifically addressed women who reached the state pension age ahead of their husbands. That was not uncommon because, in those days, the retirement age for women was 60 and for men it was 65, so the woman got to the state pension age first. If she did not have enough pension in her own right and her husband reached the state pension age, she could then have inherited more state pension from his contributions. After 2008, that should have been done automatically by the DWP. Earlier, people had to claim, but where the DWP failed to do that automatically, the department has gone back through the entire book and made payments to all those people. That is what the system has been doing.

[Lord Palmer of Childs Hill (LD)]

My Lords, there seems to be errors and more errors—a tower of errors without end. State pension underpayments have also arisen where there are errors in NI records, because of missing home responsibilities protection. The Minister mentioned pensions for women. Can she tell us how much the department has so far paid in arrears to those affected mothers? When does she expect this correction exercise to be completed?

[Baroness Sherlock (Lab)]

That was slightly different: it was about an error in people’s national insurance records. The DWP itself discovered during a fraud and error exercise that there were some historic errors in recording where people should have had home responsibilities protection in their national insurance record, which in turn would have affected their pension record. The Government have now contacted all the people they have identified as potentially missing HRP and invited them to make a claim for those missing periods. HMRC issued over 370,018 letters to potentially affected customers, and there have been approximately 493,813 hits on the GOV.UK HRP online checker. So far, the DWP has received 19,491 cases from HMRC and processed 11,694 of them, paying arrears of £42 million. I hope that answers the noble Lord’s question.

Pension Review: Phase 2

Lord Palmer of Childs Hill Excerpts

Wednesday 18th December 2024 Lords Chamber

[Baroness Sherlock (Lab)]

I fully accept that the noble Baroness may not be alone in this place in that declaration of interest. The ombudsman’s review is something to which the Government have already made their response. It was published yesterday, and I repeated a Statement in the House that was made by my right honourable friend the Secretary of State.

As noble Lords will be aware, the Government looked very carefully at the evidence that was provided to and by the ombudsman, and we concluded that while we accept the specific case of maladministration by allowing a 28-month delay in sending out personalised letters to women born in the 1950s, the Government could not accept that that created the impact the ombudsman had described and therefore could not accept the recommendation on injustice and remedy. I am also very aware of the widespread concern among many women who had hoped to retire at 60 and found that they could not, which is a mixture of the decision back in 1995 to equalise the state pension age and the decision of the coalition Government in 2011 to accelerate those changes. That was not a subject of the ombudsman’s review, and nor is it the subject of the pensions review.

[Lord Palmer of Childs Hill (LD)]

My Lords, the Minister talks about the two stages of the pensions review, which is very important. Can she confirm that the modelling by the Government Actuary—and I stress that—shows that the measures in stage 1 of the pensions review will, at best, only slightly improve member outcomes? Those are his words, not mine. Can she give me some reassurance that stage 2 will be given the priority it deserves? Can we get a timescale for when we will get to stage 2? I know the Minister cares about pensioners, and this review is necessary.

[Baroness Sherlock (Lab)]

I thank the noble Lord. We share that; we both care about pensioners. This Government are absolutely committed to making sure that outcomes for pensioners from private pension savings are as good as they can be. Both phases matter. It matters absolutely that we get the pensions market working properly the first time around. The noble Lord will be aware that measures have been announced for the pensions Bill, but there are live consultations on a range of measures that can enhance both growth for the UK and outcomes for savers.

It really matters. We want to end up, as our proposal suggests, with fewer, but better and bigger, pension schemes. All the international evidence suggests that consolidation and scale produce better results for savers. That, in the end, is what will drive private pension incomes. If we can get the market working well, we can try to get people saving as much into it as they need to.

State Pension: Age Increase

Lord Palmer of Childs Hill Excerpts

Thursday 14th November 2024 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, life expectancy is increasing, but the rate of increase is slowing. Built into the Pensions Act 2014 is a requirement on the Secretary of State periodically to review the state pension age, taking into account life expectancy and a range of other appropriate factors. There have already been two of those reviews. The next one has to happen by March 2029, I think. I have no doubt that the Secretary of State will take account of precisely those matters.

[Lord Palmer of Childs Hill (LD)]

My Lords, does the Minister agree that we do not want a repeat of the WASPI women scandal? We have been here before. If individuals are not properly informed about the change to their state pension age, will the Government consider introducing a clear appeals process or a safety net to ensure that no one is financially disadvantaged due to a lack of information? From past experience, we know that there will be many people who fall through the net, and we need to have an appeals process in place.

[Baroness Sherlock (Lab)]

My Lords, it is crucial that everybody gets to know their state pension age, but the reality is that there are a lot of different ways in which people do that. I already knew that my state pension age was increasing. A lot of that was simply from information in the news and on television. One of the ironies is that, when I was first briefed about this, I was told that the department had written to everybody in that age category. I said that I had no recollection of receiving such a letter, but I was assured that it had happened. Last weekend, I moved house and, when I opened a folder of unfiled papers, what was sitting on the top but a letter dated February 2018 telling me that my state pension age would be 66 and two-thirds. The point is that different people receive information differently. I am of an age where I get most of my information on my phone, from which I am rarely parted, and from news consumption. We have to use every possible means of communicating to make sure that people get the information out there.

Social Security Advisory Committee: Winter Fuel Payment

Lord Palmer of Childs Hill Excerpts

Thursday 14th November 2024 Lords Chamber

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

My Lords, I thank the noble Baroness for her question. I am sure she is aware that the Secretary of State has replied to the Social Security Advisory Committee and has placed a copy of that on GOV.UK. She has gone through all the points raised by the SSAC and responded to them in detail, so I commend that to the noble Baroness. If noble Lords would like to ask any questions, I am happy to respond to them specifically. The department has a good working relationship with the SSAC. We welcome its observations and comments, and we always listen to the points it makes. It will be no different on this occasion.

The noble Baroness raised questions of housing benefits and costings. Final costings for the changes were certified and published by the OBR at the Autumn Budget and take account of any behavioural responses and the estimated number of people claiming pension credit in the upcoming years. I stress that if more people who are entitled to it claim pension credit, that is a good thing. It means that those people will get approaching £4,000 a year rather than or in addition to the winter fuel payment.

On the question of housing benefit, the judgment was made not to make housing benefit in itself a qualifying benefit, because it is based not only on financial circumstances but the amount of rent. As the noble Baroness will understand only too well, households that get housing benefit can go higher up the income distribution than those that get pension credit. That can be true even if they get the maximum, because of the way earned income is treated. We also have to take account of fairness between those who are renting and those who are paying mortgages. I presume that is why, when the previous Government did cost of living payments, they did not choose housing benefit as a qualifying benefit. I imagine it was for the same reasons.

[Lord Palmer of Childs Hill (LD)]

My Lords, following the Minister’s reply, the Social Security Advisory Committee recommended that the Government consider bringing forward an urgent amendment to the regulations which would, for this year only, very modestly passport those in receipt of the full rate of pensioner housing benefit on to winter fuel payments. It is a very modest request. Will the Government take that advice?

[Baroness Sherlock (Lab)]

My Lords, I think I have answered the point about housing benefit and explained why the Government took the decision we did. However, we are determined to do everything we can, so we are directly contacting approximately 120,000 pensioner households that may be eligible for pension credit, to encourage them to make a claim. We are also writing to all pensioners to make sure they are aware of the changes coming forward and to link them to where they can claim pension credit if they are entitled to it.

Health-related Benefit Claims

Lord Palmer of Childs Hill Excerpts

Tuesday 5th November 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, does the Minister believe that the reason for health-related benefits claims is the state of the health service, including people’s access to their GP for a face-to-face appointment? If we do not deal with that, we will not deal with health-related benefits. What are the Government doing to pursue those aims?

[Baroness Sherlock (Lab)]

My Lords, the noble Lord points out another of the contributory factors. A complex web of things brings people to this point. As far as we understand it, a number of contributory factors are driving the rise in health-related benefits. Disability has gone up in prevalence over the last 25 years, including a rise in mental health issues. Also, longer NHS waiting lists are thought to increase claims for benefits before people are treated, because they are waiting longer, and potentially after they are treated, because they have poorer outcomes as a result of problems in the National Health Service.

This Government are absolutely committed to fixing our NHS. We have seen record investments, and the plans that came out in the Budget mean that we are absolutely committed both to engaging directly in supporting the NHS and to tackling some of these problems. As part of “Get Britain Working”, we will have trailblazer areas across England and Wales bringing together health, employment and skills services. In three of those areas, money will go to the NHS to develop evidence on how the health system can prevent ill-health-related economic activity. We are going to sort this.

Pension Credit

Lord Palmer of Childs Hill Excerpts

Monday 4th November 2024 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, on that final point, which, obviously, I cannot let go, the poorest pensioners are protected because those on pension credit will still have access to the winter fuel payment.

On the bulk of the noble Baroness’s question, we continue to operate good service levels. Around 500 additional staff have now been brought in to support processing during the recent surge in pension credit claims. Processing times may increase; we have advised customers who apply that it could take nine weeks to process their claims. However, anyone who applies before the deadline of 21 December can have their application backdated, which means not only that they will get winter fuel payments but that they may well get pension credit on top of that.

[Lord Palmer of Childs Hill (LD)]

My Lords, I compliment the Minister on the work being done to make people claim pension credit they should have claimed before, in order to try to make up for the rather strange removal of the winter fuel allowance. Can she tell the House when—if we have not reached this point already—the amount of pension credit that was not being claimed before is going to exceed the amount notionally saved from the winter fuel allowance? If that point has not yet been reached, when will it be reached?

[Baroness Sherlock (Lab)]

My Lords, I was so with the noble Lord for the first 20 seconds—all the way. I am grateful for his congratulations to the department, and I shall take them back to my colleagues, who are doing a brilliant job on this front. We have written to around 12 million pensioners about the change to the winter fuel allowance, so a lot of work has been done out there to encourage people to apply—and it is having an effect. We have seen a 152% increase in pension credit claims received by the DWP in the eight weeks following the announcement on the winter fuel payment compared to the eight weeks before, and that will be updated towards the end of the month.

On the costs at the end, obviously, a lot of these claims have to be processed and we will not know for some time down the road. However, it is very clear that the DWP wants everybody who is eligible to do so to claim pension credit. As I have said before, if we end up with more people claiming the money to which they are entitled, that is a good thing. Pensioners deserve the money to which they are entitled.

Child Poverty: Benefit Cap

Lord Palmer of Childs Hill Excerpts

Tuesday 22nd October 2024 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, the Secretary of State is currently in the process of reviewing the levels of social security benefits that are uprated annually, and a statement will be made in due course. When the benefit cap was introduced by the coalition Government in 2013, the legislation required that it be reviewed every five years. The next review is due by November 2027. However, I hear my noble friend’s comments about the challenges facing many families in poverty. The child poverty task force, which is getting to work already, is determined to use all available levers to drive forward short-term and long-term actions across government to reduce child poverty. It is taking evidence from families, activists, local government and people across the country, and I will make sure that her comments are conveyed to it.

[Lord Palmer of Childs Hill (LD)]

My Lords, I welcome the Minister’s comments about the child poverty task force, but it is an urgent question and this idea is putting things into the long grass. We want to hear from the Minister how quickly this group will report and produce some action to stop children living in poverty in this country.

[Baroness Sherlock (Lab)]

My Lords, as I said, the child poverty task force has already started urgent work to address this, and it will publish a child poverty strategy in the spring. Given that the Government have not been in place for very long, looking across the whole of government to produce a strategy by spring reflects a real sense of urgency.

Pensions Regulator Defined Benefit Funding Code of Practice 2024

Lord Palmer of Childs Hill Excerpts

Monday 21st October 2024 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, I was not intending to speak because this is way out of my comfort zone, but I congratulate the noble Lord, Lord Davies of Brixton, on securing this debate. I spent a year in opposition as a shadow Minister trying to encourage women in particular to enter into a pension scheme. This is a classic example of how fiendishly complicated UK pensions are.

I have a number of questions for the Minister, who is quite an expert in this field having shadowed it for a number of years. I welcome her to her place in this Administration. The Secondary Legislation Scrutiny Committee says in its second report that it remains concerned about the cumulative burden of so much regulation on the schemes. While the Explanatory Memorandum states that there were two waves of consultation, it is still not entirely clear how much support for and understanding of the scheme there is.

However, my main concerns relate to paragraphs 9.3 and 9.4 of the Explanatory Memorandum, which cover the impact assessment and the schemes’ mind-boggling costs. Paragraph 9.3 states:

“Initial implementation costs, including familiarisation, could total around £36.8 million in the first year”


alone; I am not surprised, given how complicated it is. It goes on to say:

“Schemes may then face ongoing administration costs of £5.4 million per annum”.


However, paragraph 9.4 states that there will be

“an estimated increase of around £7.1 billion to around 1200 schemes over the 10-year period”.

Will there be any sort of watch to see whether those figures are final—or, indeed, whether there may be some liquidity in them? They might not represent the final cost going forward but they are eye-watering. It is right to update the code but, in view of the figures, have the Government reached a verdict on what the cumulative burden on the schemes will actually be?

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the noble Lord, Lord Davies. Indeed, I thank all the speakers for the expertise gathered in this Room on what is an unlikely subject for many people.

On the DB funding code, first, with all the expertise that has been expressed—and for those reading Hansard who have no expertise—perhaps I ought to say something basic. For the record, what is a defined benefit pension? It is a type of workplace pension that guarantees you a specific income for life throughout retirement. The amount that it pays out depends on things such as your final salary, your average salary and how long you have been a member of your employer’s scheme. I know that everyone in the Room knows that, but people outside it may not.

The DB code has been many years in the making, as the noble Lord, Lord Davies, said. It sets out in detail how defined benefit pension schemes will have to approach funding in future, including things such as how quickly they must deal with any deficit that may arise. The code was arguably written in an era of deficits, whereas the majority of DB schemes are now in surplus, but I agree that you still need a set of rules for those schemes that are short of funds.

Despite all the worthy speeches, most of the code is uncontroversial, in my view, and has my general support. The response from the industry has been broadly positive; it appears to give trustees and scheme sponsors flexibility while ensuring that they carry out proper risk management as it relates to their pension products. Numerous articles have been written on it; given the length of this debate, I will not go into them in any great detail, but I highlight an article entitled “PwC Comments on The Pensions Regulator’s New Defined Benefit Funding Code of Practice” and an article in Pensions Age Magazine headed “Industry expresses ‘relief’ as TPR confirms final DB Funding Code”. So the industry and commentators have been complimentary in general terms.

However, I wish to raise some issues on which I would appreciate the Minister’s views. First, how far does the code truly accommodate the needs of remaining open DB schemes? This was a big topic of debate in the Lords during the passage of the Pension Schemes Act 2021. Does it allow them to take an appropriate level of investment risk for the long term, rather than having to go for lower-risk assets prematurely? This simply means that they cost more to run, as the noble Baroness, Lady Altmann, said in another way.

Secondly, how far does the code recognise the particular position of charities and other not-for-profit sponsors of pension schemes? Is there a risk of charities being forced to close deficits too quickly and, therefore, having to divert a loss of revenue income into the pension scheme? There would then be a risk of it appearing to donors to those charities that their money is not being used for front-line charitable purposes, thereby weakening the charities’ futures. I would appreciate the Minister’s comments on that.

Finally, I am sure the Minister has read the blog by David Fairs, who worked at the Pensions Regulator. It was headed: “At long last, new regulations fire the starting gun for the new funding regime”. He stresses the challenges and opportunities missed. He queries—and he is an expert—whether the new funding code will make a significant difference. I ask the Minister the same question.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Lord, Lord Davies, for giving us the opportunity to have the first pensions debate in this House since the general election. This Committee is my first experience of swapping sides with the Minister, and it gives me the opportunity to wish her well in her role with all its responsibilities, with which I am all too familiar.

This debate on the defined benefit code of practice is interesting in that, as has been said, it is not an SI but arises out of one in the form of delegated powers from the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024. It seems that every decade or so there is a requirement for a code update: there was one in 2006, leading to the current version in 2014, and now in 2024 we are debating another code of practice—number four, I believe. Updates are based on the premise that the pensions landscape changes, and of course it does, as now with the need for scrutiny of liabilities in DB schemes, the plethora of closed and maturing schemes and the need to ensure risk management, greater robustness over the longer term and optimum management of open schemes, which have been alluded to in this debate.

Ensuring that pension schemes are well managed is essential in safeguarding the incomes and welfare of pensioners. This is especially important at a time when the cost of living is high and the Government are restricting the financial support available to pensioners—more of which later. I welcome the publication of this code and its stated aim of helping trustees comply with their responsibilities under the defined benefit pension funding requirements. The focus is necessarily on supportable risk and ensuring that trustees and sponsoring employers are not caught unawares and plan well ahead, in particular where schemes are nearing maturity.

The work on the code was undertaken by the regulator under the previous Government, and I am pleased that the consultation on the code—there have actually been several, as the noble Lord, Lord Davies, and others alluded to—has been widely accepted by a broad range of stakeholders. I note that where there were concerns, such as on the need for flexible risk-taking at low dependency and not a one-size-catch-all approach, they were largely addressed and accepted in discussions with the industry.

I have listened with interest to the technical points raised by a number of noble Lords, in particular the noble Lord, Lord Davies, and I know that these points will be addressed—I say this with some relief—by the Minister. By his own admission, the noble Lord, Lord Davies, repeated some of the points made in the debate in March, such as about so-called box-ticking and the code being too prescriptive. In March he also mentioned his concern about the regulator misunderstanding its role, although I am not sure he alluded to that today.

My first question to the Minister leads on from this. It is simply: is the job done? Is the code an iterative process because we do not want another 10-year wait, or do we just accept that this is bringing it up to date and that, in effect, we wait for eight or 10 years? It does not particularly matter, I suppose.

I have some questions of my own on the code. The best-practice management of pension schemes is dependent on the effectiveness of trustees. How does the Minister regard the current landscape for recruiting trustees? There is a danger that too much guidance and steer towards adherence to codes, with the greater responsibilities attached, could act as a chilling factor.

What is her assessment about the training of trustees? This question plays into other questions, not least those of the noble Lord, Lord Davies, and the noble Baroness, Lady Drake, who quite rightly alluded to the important relationship between employers and their covenants, as well as the trustees. Who undertakes this training? This is important in assisting the chairs of trustees and, of course, the supporting employers.

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.