State Pension: Equalisation
Lord Stoneham of Droxford Excerpts(8 years, 7 months ago)
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Baroness Altmann
My Lords, this is about correcting a long-standing inequality. It is also about democracy. We put all the arguments to both Houses of Parliament. This issue was properly and thoroughly debated and the decision was democratically made. To be fair, most of the women affected have accepted this, as have I.
Lord Stoneham of Droxford (LD)
Can the Minister explain to the House why she is delaying the implementation of her predecessor’s policy on the portability of pension pots, given that that policy could best protect women with low pension savings?
Baroness Altmann
My Lords, the policy of merging and transferring pension pots will be addressed but, at the moment, there is a significant amount of increased regulation and changes in legislation for the pensions industry to cope with. By 2018, when auto-enrolment is fully rolled out, we will know much better what are the appropriate and required measures for automatic transfers.
Pensions: Reforms
Lord Stoneham of Droxford Excerpts(9 years ago)
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Lord Stoneham of Droxford (LD)
My Lords, I, too, congratulate the noble Lord, Lord Flight, on initiating this debate and on his remarks. I have known him for nearly 50 years, and I can honestly say that I have never agreed more with one of his speeches than the one he made today. I also join in welcoming the noble Baroness, Lady Altmann, and I look forward to her maiden speech, particularly given her experience at the consumer interface. I hope that one of the things she will concentrate on as the new Minister is that area of pension policy. I and my colleagues on these Benches, my noble friends Lord German and Lord Kirkwood, saw the legislation through the coalition Government from these Benches. It is good to see that this was actually one of the most successful parts of the coalition Government.
I join in thanking Steve Webb today for all the work that he did in the coalition. That team effort was built on his very successful working with Iain Duncan Smith and the noble Lord, Lord Freud. This produced reforms that in my view would not have happened with a single-party Government. It built—and this is another lesson for pension policy—on the reforms initiated by the previous Government and the foundations prepared by the Turner commission, whose membership included the noble Baroness, Lady Drake. Turner’s vision was of a simple state pension that adjusted to life-expectancy improvements, with automatic enrolment into private pension savings and with the full back-up of the state-sponsored scheme that is now NEST. The coalition’s achievement was really to review and then reform the structure of pension policy, which is now simpler and more coherent. However, as has been raised in this debate, we still need to cope with how to raise the actual level of saving.
Steve Webb brought huge experience of pensions and expertise into government. I was very proud to have been associated with Steve in the pension review which our own party carried out in 2003-04, which set out the case for a citizen pension. This has effectively become the higher state pension and is set at the level of pension credit. It was in our manifestos in 2005 and 2010, and it included a commitment to the triple lock. Despite the restraints on public spending that we had in the last Government, it is good that both those measures—the triple lock and the introduction of the higher single state pension—were supported.
Steve Webb had to fight hard in government to get that, particularly the single state pension, especially in the middle of the Government between 2012 and 2013, and it is right that he should be proud of that legacy. He has effectively restored the Beveridge commitments that there should be a basic state pension approaching 20% of average earnings to provide a minimum standard of living while at the same time acting as a platform on which private pension savings would be built. The triple lock stops the withering away of the relative value of that state pension, which has been going on since 1981.
A couple of other reforms were important in the coalition Government. We undertook a review of public pensions, which was conducted very thoroughly by the noble Lord, Lord Hutton. It has not been mentioned in the debate. It was not a popular thing to do, but it had to be done. The coalition, and the consensus that that report helped to introduce, helped the introduction of those reforms, which are ongoing.
Although auto-enrolment had been envisaged by the previous Labour Government, it was reviewed by the coalition. It has been well introduced and we have had success so far, but as the noble Baroness, Lady Drake, warned us, there are issues that we will need to follow up. I hope that the Minister will give us some of the latest figures on auto-enrolment, as the figures that I have seen have not been updated since last year. Contributions are still too low, but the introduction of auto-enrolment has to be phased in. It is a start, and what we need now is stability of policy-making.
Two other reforms were introduced by the previous Government. Steve Webb was always concerned about charging. He imposed a cap on the auto-enrolment schemes, which was welcomed. The Government then got into the issue, which again I support, of providing choice and the ability for people to use their pension funds more flexibly. That was almost inevitable once people began to question the returns they were getting from annuities, as the noble Lord, Lord Flight, said. We need to encourage more saving. Frankly, if people feel restrained and do not have that choice, that in itself will be a deterrent to saving.
Looking to the future, there are a number of priorities that the noble Baroness, Lady Altmann, could look at. As people have said in the debate, there is a need for stability: people need certainty that these policies will now be bedded down and continued with. I think Steve Webb mentioned this recently: if there is one area where the Government could have done more it is improving communication and education. People need to save more, and if they are to be encouraged to do that they have to have a better understanding of and confidence in the policy, which needs greater stability.
I hope that we will use the digital facilities to help them. I will give one example. In the previous Government we tried to have better communication with people who were about to take their state pension, because there is very little communication with them. I suspect that this is the experience of others: every year I get a letter about my winter fuel allowance, telling me that it has been paid into my bank account. Frankly, that money and that communication should be used to prompt people either when they are undercontributing or when their pensions are not adequate to meet the requirements of their retirement. Just as endowment policy companies have been forced to write to people where their policies clearly were not delivering what they were meant to deliver, we should look at improving communication with regard to state pensions. It can be done more easily and cheaply digitally than by a letter through the mail, which I still get for my winter fuel allowance.
Now that the structure is in place for policy, clearly we have to look at other means of improving better saving. I support the views of the noble Lord, Lord Hutton, that we must look at the defined contribution alternatives and particularly the defined ambition schemes as a way of widening the debate to deal with the issues and people’s concern as they look at their savings and the poor returns that they could be getting from their defined contribution schemes.
Providers will be the key in the future. The confidence which consumers and potential pensioners have in the providers of their pensions is essential. There is still a lot of distrust over charges, because they are misunderstood and often hidden. If we are going to get into the whole issue of freeing up draw-down options, we must deal with the fact that every time we have had a reform in pensions and financial services, it has provided an opportunity for further fraud and mis-selling. If we introduce these things too quickly and before proper regulation is in place, we will have difficulties, and that will undermine confidence in savings. If there was a criticism, it is probably fair to say that the opening up has been done too quickly, which leads to the possibility that we will have more problems in the future.
We could have done with a few more years of Steve Webb in charge. However, I am sure that the noble Baroness will contribute to the ongoing debate in this important area, and I know that Steve Webb will be contributing to the debate outside Parliament. We on these Benches salute Steve Webb’s achievements in government and we hope that the noble Baroness, Lady Altmann, will defend and develop his legacy and that of the coalition in government.
Apprenticeships
Lord Stoneham of Droxford Excerpts(10 years, 3 months ago)
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Lord Stoneham of Droxford (LD)
My Lords, I declare my interest as chair of Housing 21, which benefits from funds for apprenticeship training in care and housing management services. I ought to begin by apologising for being churlish in calling the noble Lord, Lord Young, churlish the last time we had a debate on this subject. I think it was an initial reaction but it was also disrespectful given his deep commitment to this subject and, indeed, what he said today.
Maybe I should go on to say that the doubling of apprenticeships by this Government is one of their major achievements but it was built on the foundations laid by the previous Labour Government. All of us—such as the noble Lord, Lord Macdonald, and I—who were in the newspaper industry will remember, as the noble Lord, Lord Monks, told us, the devastation of apprenticeships in the 1980s and 1990s. One of the great achievements of the past five years is that we have recovered from that devastation. This is against the background of a 7% fall in output; in many previous recessions, we would have seen a doubling of unemployment. Youth employment was high at the time of the recession, but it could have grown even more. Undoubtedly, the growth of apprenticeships has helped in the greater flexibility of the labour market in countering some of those trends. As a country, however, we still have a lot to understand as to why that flexibility has been so successful in countering the employment trends of the recession.
Getting the number of apprenticeships up has been a major achievement for the Government, but they have also been trying to address quality issues and to ensure that we are improving the quality of the training on the ground. We have heard today in the debate about the various efforts of the Government to improve the qualification standards, the Richard committee and the initiative to drive aspirations by including a route to university standards through the apprenticeship system. It is a remarkably popular initiative, and the problem for us is that supply is still not meeting demand.
Productivity and competitiveness in the economy can be addressed only through greater skills development and business development. As we go forward, the debate has shown us today that there cannot be any complacency in the sector. It is so important to us, as the economy starts to recover; we are already aware of significant skills shortages, which often take five to six years even to address, let alone to overcome.
What areas should our debate conclude need most attention? Many have been raised already. First, there is a continuing initiative to improve the standards of qualifications and training. We have to be careful that we do not get involved in excessive regulation, but we also have to make sure that, when we allow employers to have a greater say in the training requirements, they also make sure that those requirements are wide enough to deal with the wider needs of industry and not just their own companies.
This debate is meant to concentrate on the 16 to 18 year-olds, where we have heard that there is still disappointment on the training figures. The Government have estimates of what they expect to do this year. Perhaps the Minister could tell us whether we will see an improvement. That shift is important because the major beneficiaries of the expansion have been the over-25s, which may not be a bad thing. It may be that we have not dealt with that age group well before due to the problems that I mentioned earlier, such as the destruction of that sort of training in the 1990s. However, we must certainly address the 16 to 18 year-olds.
We have heard that the figures are still very disappointing in construction and engineering. I shall read the report of the noble Lord, Lord Best—I am glad for that prompt—but, although construction is a cyclical industry, we know that there are huge skills shortages that need to be addressed.
I welcome the suggestion in the Budget that there is to be further help for small employers. However, as the noble Lord, Lord Young, told us, there is huge capacity there; with the small number of firms taking up this initiative, there is a great potential to publicise and extend what we are doing.
Finally, we have heard about the importance of raising aspirations in our schools and the standing of apprenticeships. The noble Baroness, Lady Prosser, said that we need to give more attention to careers guidance. I hope that the progression to university-level qualifications through the apprenticeship system will provide an alternative route to self-improvement and career progression. The Government have made major inroads, but they must keep up the pressure to do much more.
Olympic and Paralympic Legacy Committee
Lord Stoneham of Droxford Excerpts(10 years, 3 months ago)
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Lord Stoneham of Droxford (LD)
It was one of the most pleasurable and immensely interesting experiences of my three years in the Lords to take part in this Select Committee, ably and expertly led by our chair, the noble Lord, Lord Harris, and very well served by our excellent committee staff and our advisers. Above all, we all got on incredibly well. I wondered why that was and I think that, fundamentally, it was because we were discussing and examining something that was successful and we all had great determination that we were not going to lose the legacy of that success.
I think that there are four principal elements of this legacy. There is the ongoing sporting success which we want to lead to increased participation in our sport and to better lifestyles and health—we are, after all, a nation of great lovers of sport and it is always more enjoyable when we are good at it. The second legacy that we were interested in is the boost to business, which was so successfully involved in the running of the Olympics—the construction, the involvement of our creative sector, the event organisers, the logistics experts and sporting businesses. Thirdly, there was the huge success of delivery by government agencies, assisted by private sector expertise. We must learn the lessons from that and the best practice that was employed through that success. Finally, the most important thing going forward is the whole regeneration of the East End of London, which was at the heart of our original Olympic bid.
We have discussed a number of issues tonight, but I want to draw on a number of examples of people whom we met and people whom we visited to draw out lessons for the legacy. I want to start with the issue of elite sport. The medal tally was outstanding. There was, however, a huge advantage to the home team. We must have lower expectations in Brazil, because I fear that there will be a spiralling down of performance, as happened with Australia, which simply continued after Sydney through Beijing to London. That is a warning to us.
There were two evidence sessions which left a mark on me. The one has already been mentioned, with Sir Clive Woodward. Sir Clive Woodward was exceptional as a witness and he clearly played a key role in our athletes’ success. We know what happened to English rugby when he left that scene. We know also that he told us that there was a huge organisational effort behind the scenes to achieve success in the Olympics, where the margins between success and failure at this level are so narrow. He said that it would be very difficult to replicate that away from home, and the team has largely disassembled since. He gave us a warning also about the lack of encouragement to key underperforming team sports and said what we should do about it. It is most difficult to win in those sports, which is one reason why they are not targeted, but we know that they have large public participation benefits. We have to understand, obviously, the rigour in competition for encouraging success at elite sports. It puts pressure on improved performance.
However, we have also to admit that UK Sport has ignored our advice—it has done that this week. If it does not want to consider compromising on the basis of elite funding, somebody—I suppose that that is going to be Sport England or other organisations—has to provide parallel, complementary funding for community sports to encourage sports where there is high participation potential, even if elite success finds it very difficult to qualify for elite sport funding.
The second meeting which impressed me was that with Ian Drake, the chief executive of British Cycling—modest, professional, supremely successful in what he has achieved—setting out his original objectives. Twelve years ago, he told us, they had to advertise for athletes to be Olympic cyclists. The strategy that they adopted matched their elite performance success in Beijing and London, with target rates of public participation improvement. Now they choose from 50,000 competitive cyclists for their success at the senior level.
The approaches outlined by Clive Woodward and Ian Drake contrasted, as we have already heard from the noble Baroness, Lady Billingham, with the complacent approach of more wealthy major sports such as football and tennis. I hope that Greg Dyke will shake up football in England at national and community level and answer the questions: does Germany’s success depend much more on its community football structure, with twice as many volunteer qualified coaches than we have; and are training facilities and processes for players and coaches simply not rigorous enough?
As my noble friends Lord Holmes and Lord Moynihan said, elite sport success has been built on John Major’s initiative with the Lottery. Over £300 million goes into the current Olympic cycle for elite sport funding. However, others in the world will copy what we do and have achieved. They will poach our know-how and skills so that it will become much more difficult for us. We cannot stand still or be complacent. We must seek out enhanced, competitive advantage and, ultimately, focus on increased participation and better training pathways than other countries can produce.
As for regeneration, two visits struck me and stay in my mind as showing the challenge for regeneration. We have already heard of the meeting we had with the community residents in Newham. It was depressing. They saw little benefit from the Olympics. Their perceptions were of traffic congestion, construction work, Games disturbance and no jobs while their council houses remained unpainted. Then there was the uplifting meeting we had at Gainsborough School in Hackney Wick. Some 40% of children there were from immigrant population origins and 10% came to the school not speaking English. Yet it was vibrant—a well led school in a Victorian building, with only a tarmac courtyard for play facilities. We met keen, aspirational children who had been in the opening ceremony at the Olympics. They were enthusiastic about the Olympics and their own aspirations were encouraging. The school facilities were about to be transformed by two pitches on the Olympic park by the press and broadcast centre, with their own bridge across the canal from the school to those playing pitches built by the legacy corporation.
The challenge for us in regeneration, though, is whether we can retain the optimism and aspirations of these children as they move through our educational system. Regeneration will work well only if all parts of the community benefit and housing is provided that is affordable. I picked up one word of warning as we went round the park: the first £1 million flat was for sale. Is that a warning of what will come? As we regenerate and build, the skills of the local people—as the noble Lord, Lord Best, pointed out—must be harmonised and harnessed in that process. That started a bit, as we heard, in the Westfield shopping centre, but this is an area of low aspiration that must be transformed with better educational and technical training facilities. In the response from the Government and mayor, it is encouraging that they are moving ahead with the opening of two university technical colleges, one dealing with modern methods of construction of business units and the other with design and engineering. That is a start.
As for the stadium, we had two fascinating meetings with the CEO of West Ham and the chair of Leyton Orient. We thought the dispute between West Ham and Leyton Orient was unseemly. Having seen them, we were cautious in proposing that they should work closely together—that was probably wise. But the national stadium is iconic. It is bigger than those two clubs. There was a huge cost in changing the plans for that stadium. What matters now is that those two clubs do for their communities what really needs to be done and make a success of those facilities and their presence there. They have a key role in raising expectations and achievement in those communities. That role could be immense. It is also very important that the stadium sets a standard—as I am sure the noble Baroness, Lady Grey-Thompson, will tell us in her remarks—for the quality and quantity of seating for the disabled. I was encouraged by the Government’s response to the report on that issue.
So much success in sport, business and indeed politics depends on strong confidence. The key to the Olympic legacy is not to lose the feeling of confidence that we really can achieve something in our sport, business ventures, regenerating east London and inspiring those young children we met in east London to aspire and take advantage of the Olympic legacy so that it becomes self-fulfilling.
Pensions Bill
Lord Stoneham of Droxford Excerpts(10 years, 4 months ago)
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Lord Hutton of Furness (Lab)
My Lords, I am happy to have the opportunity to make a brief contribution to the debate on this amendment. It is the first time that I have put my name to an amendment in this House. I have done so because I believe that this is a very important point in the progress of the Bill. Clause 33 is to be welcomed in principle. It is the first time that a Government have addressed the problem of the large number of small pension pots that are out there. We need a solution to that problem, so I absolutely welcome the Government’s attention to this policy. We all know that one of the by-products of auto-enrolment —it is a very good policy which clearly at this early stage is encouraging more people to save—is that we will see many more of these small pots created. It is certainly not in the interests of pension savers for these small pots simply to stay where they are.
I do not want to repeat the very able arguments put by my noble friend on the Front Bench, by my noble friend Lady Drake and, indeed, by my noble friend Lord Turner, but I will make a slightly different point. Your Lordships’ House has heard the technical arguments, which are complicated and difficult to digest. I come at this debate from a slightly different angle, having been a former Pensions Minister. There are many other former Ministers in this House and I hope that the international fraternity of former Ministers, who are represented so well in this House, will understand this point. There comes a moment in the gestation of any policy when it is necessary to take a step back to be sure about it and to satisfy yourself that the policy is the right one—particularly given the fact that, as my noble friend Lord Turner said, if we do not amend the Bill, we will make the transfer of these pension pots compulsory and run the risk that people could lose out. That is a real hazard of which we need to be aware. In my experience, the best time to take that pause is before you take that step; you should not to do so once you are committed to it, perhaps irrevocably, and when some people will lose out as a result.
I have been in this House and another place long enough to know the difference between a destructive amendment and a helpful one. I definitely would not have put my name to this amendment if I thought that it was in any way a torpedo below the waterline of the Government’s policy. It gives the Government the opportunity to take stock of the situation. There are serious concerns about the impact assessment undertaken to support the policy. Many others have spoken of their concerns about the impact assessment. It would be a misstep on the part of this House to take a decision on the basis of what we have been presented with. The impact assessment is simply not reliable enough.
All the amendment does is invite the Government to take another look at this policy. It does not rule out pot following member, if that is what the Government are committed to doing; it simply gives them the opportunity, without coming back to this place, to follow the path of aggregation. Many of us believe that the opportunities of aggregation have not been fairly and fully explored by the Government. We should look again at the issue of aggregation, but I do not want to mandate that as a policy for the Government. That would not be right, but it would be absolutely sensible and in the interests of millions of pension savers for us, at this very late hour, to take a step back—not to rule out the possibility that this might be the eventual path that we follow, but to allow us, and Ministers in particular, to take another look at the benefits of aggregation. I genuinely think that that would be the right course of action for Ministers to take at this moment, and I hope that the House agrees with that.
Lord Stoneham of Droxford (LD)
My Lords, it is a good thing that in this debate no one disputes the need to consolidate pension pots to ensure that savers keep track of their pension savings and get the best return with the lowest charges. Nor does anyone dispute that inertia is an accepted principle to encourage savings through auto-enrolment, and should now be followed to encourage consolidation of pension pots. Let us remind ourselves that this measure covers people who do not want to opt to do things according to their own decision. It deals with people who are not at the moment making a decision as to what to do with their pension pots and it runs the risk of leaving them stranded.
We have to make a choice between two options—pot follows member to their new employer or the aggregator system. Let us also remember that this amendment merely delays a decision in order to allow more consideration. I do not want to make a political point, but this issue should have been addressed earlier and the problem is mounting. We know that in Australia, for example, as a result of changes made 20 years ago, there are 30 million stranded pension pots. That demonstrates that the sooner we get a consolidation process in place the better.
I have spent the past couple of weeks since Committee looking at the alternatives. One thing I think that we have to challenge is the ongoing closed nature of the pension sector, which relies on passive, uninformed and, sadly, often uninterested consumers, while the providers have a self-interest in prolonging obscurity and lack of information, leading to higher charges and lower performance.
The aggregator model basically assumes that competition and greater accountability cannot open up this marketplace. However, there is no clear proposition of what the aggregator model will actually be like. Will it rely on a small number of large schemes dominating the market, or will there be an unlimited aggregator model in which any scheme that meets certain criteria on charges and governance can act as an aggregator? There is no clarity about who will be responsible for selecting the aggregator scheme for the individual’s pot as it is to be transferred on moving jobs. Would it be done by the individual’s old employer, the old scheme, the new employer, the new scheme or by some form of automatic allocation?
The aggregator model is promoted as a safe haven for accumulated pension savings, with the implication that higher governance standards and restricted charging will offer greater security than pot follows member. I have to say that there is a difference in outlook on the process of reform between the two sides of the House on this issue. The aggregator model, by breaking the link with the employer’s current live scheme, will make it more difficult for individuals to understand where their money is and to engage with their retirement savings. An aggregator model will be a further distortion of competition in the pensions sector. We know that the sector is overconcentrated at the moment; we will merely be making it worse. Size also promotes complacency and inefficiency, and could increase risk where competition is weaker. It does not seem logical to attack regulated cartels in the energy and banking sectors but promote them in the pensions sector. The aggregator model will exploit inertia, too. Once the aggregator has the worker’s first pot, it is likely to receive subsequent pots because the consumer will make no active choice and there will be no incentive to innovate or improve performance.
In the member follows pot proposal we are providing two countervailing forces. There will be greater transparency for the consumer, who will remain close to their pot and will have a greater opportunity to understand the pension provision they are making, as well as its return and its charges. The employer will also be motivated to make the best provision for their staff in order to motivate them and keep them. The pot follows member proposal would be a more natural evolution of the market. An aggregator would be an irreversible sea change, as so much money would be concentrated in aggregator schemes that you would not be able to change the consolidation model without breaking up the aggregators.
Pensions Bill
Lord Stoneham of Droxford Excerpts(10 years, 5 months ago)
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Lord Turner of Ecchinswell (CB)
My Lords, I would like to speak in support of this amendment. When the Pensions Commission addressed the issue of private pensions eight years ago, we had two absolute priorities. The first was the use of inertia through auto-enrolment to increase the number of people involved in savings schemes. I think we all agree that the degree of support for that principle across society, industry and the political parties has been most heartening, and indeed we are now seeing auto-enrolment coming through with a considerable degree of success. Our other absolute priority followed from the first one because once you auto-enrol someone into a pension, you have to make sure that there is good value. It was to bring down the extremely high costs of pension provision for people on modest or low incomes in small and medium-sized enterprises. We observed that if people went through the private competitive system, by the time they retired, 25% or even more of their entire pension pot had disappeared in cumulative charges over the years. We believed that it ought to be possible to get that figure down to something like 5% or 10%, which makes an extraordinary difference to someone’s income throughout their retirement. We are talking about people living with incomes in retirement that are 20% or so higher than they would otherwise have been.
Those extremely high costs derived from the fundamental inefficiency of the market for private pension provision. It is a system absolutely shot through with market failure where the process of trying to provide in a competitive fashion simply does not work well. We have heard already from the noble Baroness, Lady Sherlock, the quote from the Office of Fair Trading on that.
To get the costs down, it is important to ensure that there are low costs for active members in the scheme to which they are contributing, and it is also important that low charges are levied on those who have already accumulated pots, and on those pots derived from past employment. That requires two things. First, it requires measures to facilitate or require the consolidation of pots, thus removing the costs of multiple proliferation, which are of no benefit either to the industry or to the individual. Secondly, it requires measures to ensure low costs in the scheme into which we consolidate. Again, it is good that a consensus has emerged over the years on the importance of those objectives. I recognise that the pot following the member is proposed as being one way to that end, but I am concerned that while it achieves the first of the two crucial objectives of consolidation, it does not necessarily achieve the second. It does not necessarily achieve low cost in the scheme into which the person is being consolidated because there are dangers that PFM could involve people being consolidated into a scheme where they are paying higher charges than they were paying into the scheme they had been contributing to, and higher charges than necessary. I believe, therefore, that the aggregator option may be the better one and that it needs to be looked at carefully and fairly.
I agree that there are some trade-offs here, but I am not convinced that the impact assessment which has been put before us is a good and fair assessment of that trade-off. The key argument in the impact assessment is that if we go down the aggregated route, we would need to apply it only to “the smallest unprofitable pots” to ensure that the aggregator scheme did not monopolise the market. It states then that the department has interpreted that for the purposes of assessment by assuming that you would aggregate pots only up to a maximum of £2,000, because that was the figure which was suggested in discussions with providers. That compares with the £10,000 assumed when it looks at the pot follows members. Indeed, it is quite noticeable that when it looks at the PFM option, it gives us a set of impact assessments for a variety of options—£2,000, £5,000, £10,000 and £20,000—but when it turns to the aggregator model, it considers only the £2,000 maximum pot.
I accept that if it was really necessary and unavoidable that if we go down the aggregator route we apply it only to pots of up to £2,000, that might be a good argument for taking the PFM route. But I believe that there is no such necessity and that the logic in favour of it is invalid and needs to be challenged. The argument is that a higher level would interfere with the effectiveness of competition in the market and lead to dominant aggregators. However, the whole of the edifice of auto-enrolment, of NEST and of the regulations relating to value for money is based on the recognition that we are dealing with massive market failure and that we cannot rely on fair competition. We cannot therefore consider the argument that some dominant aggregators might emerge to be a valid argument against aggregation. Indeed, dominant aggregators will only emerge if they are lower cost, and that—to go back to my earlier point—is the absolutely central thing and the criteria above all on which we should focus. Will we get the costs down? Will we reduce the total reduction in yield?
I do not believe, therefore, that the danger that the aggregators may become relatively dominant in the market—which is really the only argument put forward against it in the impact assessment—is a valid argument against aggregation. I would urge that, to have a useful impact assessment, we should be considering a range of options with a higher maximum of £2,000 transfer. I see no inherent reason why we should consider having no limit; I certainly believe that if we are to have a fair comparison, we should be thinking about the same limit that applies to the PFM option. I believe, therefore, that this choice between PFM and aggregation should not be concluded at this point. It requires more flexibility and thought to enable further consideration. I am personally, in my gut, in favour of the aggregator limit option, and I think it will be favoured over time, but all that this amendment does is keep that flexibility open for future consideration without the need for later primary legislation. I certainly think that that is required.
Lord Stoneham of Droxford (LD)
My Lords, the previous two speakers have covered the main arguments that I was planning to raise, because there is concern—even from those close friends of the Minister, Steve Webb—on this issue. It is valid, therefore, to register that—there are certainly concerns in our group here this afternoon. The issues have been raised, including the issue of the inefficient market. The issue does not cover the consolidation of old pots. It considers the consolidation of the mobile or live pots. It does not raise the issue of what you do with those people in the labour force who are constantly changing jobs and the costs and the impact on their pension pots every time they do that. It also needs to address the fact that there is a smaller number of aggregators. I agree there is a problem with competition, but it is much easier to supervise them and make sure that the quality of those aggregators is adequate.
The final issue that needs to be raised is that there is a concern that without that supervision, people will be transferring into poor schemes or run the risk of doing so. They need to be protected. For all those reasons, it is right—and the noble Lord, Lord Turner, raised this point—that this is a time for reflection before we make any final decisions.
Baroness Drake (Lab)
My Lords, I will try not to duplicate some of the excellent contributions that have been made. Perhaps I could say that the areas of concern with pot follows member can basically be grouped into three categories. One is confidence in the basis for the Government’s decision to choose pot follows member; the second is differing views on what benefits the saver, and the third is the need to protect dormant pension pots that have already accrued.
When it comes to confidence in the basis for the Government’s decision, the noble Lord, Lord Turner, did a splendid job in identifying the limitations in the impact assessment. I stress that there are significant barriers to overcome before the Government can be confident about the superiority of the PFM model. The consequences of getting this wrong are absolutely huge.
Pensions Bill
Lord Stoneham of Droxford Excerpts(10 years, 5 months ago)
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Lord Stoneham of Droxford (LD)
I was not going to intervene, but there is not as much difference between the two sides of the Committee on this, as earlier contributions seemed to suggest. I certainly thought that the remarks of the noble Baroness, Lady Drake, were right down the line and I was sympathetic to them. Nobody is suggesting that the Labour Government were wrong to start the debate on early retirement. Everybody knows that life expectancy is improving and there are great complexities with inequalities. I would question whether the inequalities have necessarily got worse. I will come to that in a moment, but there is also the issue of overriding affordability.
One of the problems of extended life expectancy is that it almost certainly results in higher social care costs—and, as we know, higher pension costs. We all want to see better pensions, and you cannot often have both a lower retirement age and better pensions. It has to be recognised that you have to get a balance. We have all seen the extra costs that this Government have put into pensions through the triple lock. We want to see that continue into the next Government as well, but that will add to the overriding costs.
I question the inequality issue. As someone who worked in the mining industry when there were 250,000 people working in it, having seen the consequences of early retirement on a lot of those communities and the effect that it is already having on inequalities and lifetime expectancy, I would expect to see some improvement, as we have moved away from older, heavy industries. Another argument was about boring jobs—and boring jobs in the health service. The boring jobs of my generation were in the car assembly industry. With improved technology, anybody organising cleaning jobs should certainly know that that is one of the most important jobs in the health service. It should be respected and there should be pride in it, and there are ways and means of managing that.
That takes me to my further point. You have to have a uniform state pension age and it has to be an average. There will be difficulties with certain occupations, but those have to be respected. We already have some occupational pension schemes that have a lower retirement age because of the consequences of people working in those sectors.
My final point is on the categories that we are using here and the factors that will be included in any review. Those will change over the next 20 years. You could put in the proportion of people smoking or having bad diets as factors that should be looked at specifically. In fact, there is a whole variety of factors and I do not think that the Government are saying in the Bill that there will not be a variety of factors considered in these reviews. We all have an interest in reducing the health inequalities that arise in terms of life expectancy. Under the Government’s proposals, these factors will be taken into account, but we are giving people a recognition that this will be done formally, as part of a set procedure, whenever this is looked at every six or seven years. This will give some certainty as we go forward. I doubt whether the differences between us are really very big.
Pensions Bill
Lord Stoneham of Droxford Excerpts(10 years, 6 months ago)
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Baroness Hollis of Heigham (Lab)
My Lords, I would like to ask a simple question that relates to one of the hopes that some of us had a year or so back. The greatest proportion of those claiming pension credit tend to be elderly widows—when the husband died, the pension died with him—over the age of 80 or 85. I fully understand that to bring all pensions on to this would be a big-ticket item for any Government to contemplate; that is not in doubt, as the previous speaker mentioned. However, what if we were to introduce the pension not just for people reaching pension age in 2016 but for those over 85, and then for the next decade bring the 85s down by a year, with the 65s going up a year, as they will? They would meet in about a decade for men, perhaps slightly later for women. In about a decade or so, virtually all pensions would be covered on an incremental basis. I have not been able to cost that. I was told, teasingly by the Minister in the other place, that he thought it would probably cost half a billion pounds, but whether that was per year or in total was not made clear to me. Have there been any thoughts about how we might progressively increase the coverage?
Lord Stoneham of Droxford (LD)
I would like to make three points. I hope that there will be cross-party support but, if we are now saying that the higher pension should apply to everybody, clearly we need to know the cost. I have to ask the question: why did Labour not do this in its 13 years if it does not cost money? The point has to be made. Resentment could build up among those who see younger people coming forward on larger pensions. We know that there is a problem with women in the 1951 to 1953 age group. We have to understand exactly how much this is going to cost. The noble Baroness, Lady Hollis, is absolutely right: it is not necessary for this legislation, but in the future obviously we should look—as the country can afford it—at how we can phase in for various groups of pensioners the higher rate and get rid of means-testing for them. We need to know about the money but we also have to be realistic. You have to start somewhere on this higher-rate pension, and where the Government have tried in difficult circumstances to start is the best that can be done at the moment, I think. Obviously we should look at the future at some stage, once we are aware of the cost and how we can afford it.
Lord Kirkwood of Kirkhope (LD)
My Lords, I would like to add a more operational note to the questions raised by the important amendment from the noble Baroness, Lady Turner of Camden. She makes a powerful case, but the financial circumstances suggest to me that there is more likelihood of eventually getting into the position that was explained by the noble Baroness, Lady Hollis, than she was suggesting.
The implication of the amendment is that it would extend the single-tier pension to all pensioners. I have some questions about the operational capacity of the system to deliver sensibly some of these significant changes. In the first place, the Green Paper suggested that we should be looking at this by 2017. That has been brought forward; there are obvious advantages to that but it has caused some people to raise questions with me. Some of that is informed by the current controversy about the efficacy of the systems for universal credit, which are of course of a different order in terms of the IT systems. It also has to be acknowledged that the Pension Service has a very good record of implementing some of this stuff; when pension credit came in, it was done in a way that got very high marks from the National Audit Office, as I recall. So it may be that everything is going to be fine, but if the national insurance records are not all clean data then we could be facing some serious difficulties in delivering the payment of pensions on time. There are other operational matters that I am sure are concerning people at Longbenton in Newcastle, as they should be.
Speaking for myself, I would be very pleased to get some kind of assurance at some stage in Committee that with regard to this huge and significant change, affecting a number of very vulnerable households, the department, having regard to the recent reductions in staff and all the other matters, is in place to be able to deliver this efficiently and on time in the way that is proposed.
Lord Stoneham of Droxford
With respect to the noble Lord, it is slightly unfair to criticise this document for being so long and then not get the point that the pension for 30 years is £110, and the pension for 30 to 35 years will be £123. That means that somebody is better off. That is the point, is it not? It was unfair to attack civil servants for writing that long brief to make that point, when I am not sure that the noble Lord got it. They will be better off under this system.
I should like to make two other points. If we set it at 30 years now, there is no going back. We might like it to be 30 years, but the fact is that if we set it at 30 now there will be no going back if it does not work out. If we cannot afford it, it will not go up to 35 and we will have to stay with it; whereas, if it is at 35, there is the possibility of review and it could come down.
Lord Browne of Ladyton
Clearly, my carefully constructed argument was utterly wasted. I just want to make two points to the Minister, who may well not have been intending to look at me. I am not arguing for 30 years; I am arguing for a review. I was commenting on an earlier amendment, which is not in my name and which I do not support, for a reduction to 30 years, suggesting that it opened up an interesting debate about why it is 30, not 32 or 35. That is not for me to explain. The noble Lord can be reassured that I understand the mathematics, or the arithmetic, on this. I am just arguing for a review for reasons to do with the expectations of people whom I think are entitled to have those expectations.
Lord Stoneham of Droxford
I am sorry if I lost the noble Lord’s argument in not realising that he was arguing for a review; I thought he was arguing to reduce it to 30. I think that makes my point, actually: it is easier to have the higher figure to start with and then review it down than to start with something lower that you then cannot afford.
My other point is that the additional contributions are very beneficial in their rate of return. Under the scheme, we are trying to encourage people to save. That is one of its main merits and motives.
Benefits: Sanctions
Lord Stoneham of Droxford Excerpts(10 years, 6 months ago)
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Lord Freud
My Lords, as part of the Jobseekers (Back to Work Schemes) Act we passed earlier this year, we are having a review, which is being run by Matthew Oakley. He is concentrating on precisely the issues of communication that the noble Lord raised.
Lord Stoneham of Droxford (LD)
My Lords, one of the complications of the sanctions policy could be its impact on the Troubled Families programme. Will my noble friend confirm the number of instances of second-time sanctions, and how many of them were part of the Troubled Families programme?
Lord Freud
I thank my noble friend for giving me advance notice of that question. Only a small proportion of claimants are sanctioned two or more times. For high-level sanctions, only 5% received two sanctions and 1% received a third sanction. On the specific question about the Troubled Families programme, that provision is delivered by local authorities and unfortunately we do not have the data available at the present time.
Housing: Under-occupancy Charge
Lord Stoneham of Droxford Excerpts(10 years, 8 months ago)
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Lord Freud
My Lords, as the noble Lord knows, an elaborate programme of research is going on around this measure and will take place over a two-year period. Regular reports will be provided. I believe that the first interim reports are coming out in the spring. I will, of course, be pleased to talk to the noble Lord about the research and will give a great deal of attention to what we find. If there are concerns, we will match them. As noble Lords will know, we have made changes to the discretionary housing payments system this year to reflect some of the early concerns that have developed and we have found an extra £35 million for that.
Lord Stoneham of Droxford (LD)
My Lords, I declare an interest as chair of Housing 21, a housing association. There is evidence that local authorities are not fully using the Government’s transitional support funding for ending the subsidy for under-occupied housing. What action are the Government taking to ensure that those in need get the support that the Government have provided for them?
Lord Freud
My Lords, my noble friend is right. Our very early soundings are that some local authorities are not spending all their DHP. Clearly, we provide that funding in order that vulnerable people are protected through this transition period and we have been monitoring that very closely.