State Pension: Age Increase
Lord Palmer of Childs Hill Excerpts(1 week, 2 days ago)
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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(1 week, 2 days ago)
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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(2 weeks, 4 days ago)
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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(2 weeks, 5 days ago)
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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(1 month ago)
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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(1 month ago)
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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(2 months, 1 week ago)
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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(2 months, 2 weeks ago)
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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(2 months, 3 weeks ago)
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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.