Pensions Dashboards (Prohibition of Indemnification) Bill

Lord Young of Cookham Excerpts

2nd reading
Friday 3rd March 2023 Lords Chamber

Moved by

[Lord Young of Cookham]

That the Bill be now read a second time.

[Lord Young of Cookham (Con)]

My Lords, in moving that the Pensions Dashboards (Prohibition of Indemnification) Bill be read a second time, I reassure noble Lords that these dashboards are totally different from the ones in the REUL Bill which have generated such excitement this week.

After gathering significant cross-party support in the other place, where Mary Robinson successfully steered the Bill through the parliamentary process, I am hopeful that it will receive a similarly positive reaction here. This is a simple yet important measure designed to safeguard the interests of those saving for their pension.

By way of background, I have a long-standing interest in pensions legislation, having spoken in the 1970s when Barbara Castle introduced the state earnings-related pension scheme, and more recently speaking about the potential benefits of the pensions dashboard during the passage of the pensions Act 2021. I see in their places today several aficionados from that debate.

With record numbers of people saving for retirement, it is more important than ever that people understand their pensions information and prepare for financial security in later life. Pensions dashboards will be digital tools available free of charge to consumers, designed to bring together individuals’ different pensions, including the state pension, in one place online. This will fundamentally change the way that people interact with their pensions, thereby helping to support more informed retirement planning.

As my noble friend the Minister will confirm, the Government continue to work closely with industry and their key delivery partners, such as the Pensions Dashboards Programme—which is part of the Money and Pensions Service—the Pensions Regulator and the Financial Conduct Authority, to progress this dashboards project. I am grateful to my noble friend for arranging meetings for noble Lords with the FCA to update us on that progress, and I am grateful to his officials for their briefing for this debate.

While it is true that millions of people are saving for their retirement, it is also the case that consumers are not generally well engaged with their different pensions. This has been highlighted by the FCA, which estimates that 53% of adults contributing to a defined contribution pension have not reviewed how much their DC pension pots are worth in the last 12 months. In addition to this, the Pensions Policy Institute estimates that over 2.8 million pension pots were considered to be lost in 2022, representing an increase of 73% since 2018. Pensions dashboards can help to address this issue by bringing together people’s various pensions, including state pension, in one place online. This will reconnect savers with their lost or forgotten pension pots, and by doing so will help people plan for their well-deserved retirement.

There is a requirement in the Pension Schemes Act 2021 for the Money and Pensions Service to provide a pensions dashboard service. This was a welcome addition to that Act which I pressed for at the time, along with other noble Lords. Moreover, it will also be possible for others to enter the market and provide dashboards, which will be bound by requirements set out in the Pensions Dashboards Regulations and regulated by the FCA. That will provide scope for innovation, helping to engage a broad range of users and meet the varied needs of the millions of people with pensions savings. Importantly, individuals will see the same information regardless of which dashboard service they use, and robust rules will be in place to ensure consumers’ interests are at the forefront of all dashboards.

The Pensions Dashboards Regulations 2022, which were approved by this House in November last year and subsequently came into force in December, place requirements for occupational pension schemes to be connected to a digital ecosystem designed by the Money and Pensions Service. These requirements include, for example, the need for pension schemes and providers to continue to comply with the connection, security and technical standards published from time to time by the Money and Pensions Service. There are also requirements relating to the provision of pensions information at the request of a pension scheme member.

Under the Pensions Dashboards Regulations, the Pensions Regulator may, if necessary, take enforcement action against trustees or managers of occupational pension schemes in the event of non-compliance. For each breach of the regulations, this could result in penalties being imposed of up to £5,000 for individuals or up to £50,000 in other cases, such as for corporate trustees. These are significant penalties, but the House may be surprised to hear that there is nothing in the legislation which prohibits the trustees or managers being reimbursed for those penalties using the assets of the pension scheme. My noble friend the Minister can confirm, but I understand that this was simply an oversight during the passage of the Pension Schemes Act 2021, and the omission escaped the eagle eyes of noble Lords scrutinising the Bill.

My Bill addresses this critical issue by making it a criminal offence for trustees or managers of occupational pension schemes to reimburse themselves from the assets of the pension scheme for penalties imposed for compliance breaches under the Pensions Dashboards Regulations. If a trustee or manager was found guilty of this offence, the Bill’s provisions would allow for a maximum sentence of up to two years in prison, or a fine, or both. This is intended to provide an effective deterrent to such unscrupulous behaviour.

The Bill does not place any new costs or requirements on occupational pension schemes but rather works by extending existing legislation which provides for a similar prohibition in a number of other areas of pensions legislation, including automatic enrolment. I hope noble Lords agree that it increases protection for pension savers from any unscrupulous persons. I look forward to working with the Minister and other noble Lords as we aim to secure its swift passage through the House. I beg to move.

--- Later in debate ---

[Lord Young of Cookham (Con)]

My Lords, I am grateful to all noble Lords who have taken part in this debate and for their support for this modest legislation. As my noble friend Lady Altmann said, the Bill is impossible to oppose, and I hope that optimistic forecast is carried out. She raised issues about penalties. My noble friend the Minister answered that, but so far as this Bill is concerned it seems to me that two years in prison is quite a severe deterrent for anyone who seeks to break the rule set out in the Bill.

The noble Lord, Lord Sharkey, fired at me four technical questions about penalties, and I am grateful to him. Fortunately, the bullets were intercepted by my noble friend the Minister, who answered them. As we have heard, if by any chance the replies do not come up to standard, my noble friend has promised to write to the noble Lord.

I am grateful to my noble friend Lord Holmes, who reminded us about the success of auto-enrolment. I agree with what he said about the need to promote early investment in pensions to get the benefit of the magic of compound interest. He also touched on a subject close to my heart; namely, digital identification and the history of the Verify programme. My noble friend the Minister dealt with that, but as I understand it, rather than wait for the Government to come up with their solution, the programme dashboard is developing an interim programme which will be compatible with the one the Government end up with.

Those who came along to listen to the longer speech of the noble Baroness, Lady Sherlock, on pensions will have been disappointed, as she decided not to deliver it. We look forward to hearing that on a separate occasion. She referred to the Written Ministerial Statement announcing a delay in the programme. I want to congratulate the Whitehall wordsmith who came up with the expression “initiated a reset”. I think the train operating companies will want to follow that example, and I look forward to hearing on Monday that Great Western Railway has “initiated a reset” to the 8.14 from Cookham to Paddington.

Finally, I am very grateful to my noble friend the Minister, who answered, I hope, all the questions that were theoretically directed at me. He reminded us of the large sum of money—£26 billion—represented by “lost” pensions and reminded us about the complexity of the plumbing involved in getting the dashboard going. I am also very grateful to him for his comprehensive reply to the debate and for the Government’s support.

Bill read a second time and committed to a Committee of the Whole House.