Pension Schemes Bill [HL]

Baroness Janke Excerpts

2nd reading & 2nd reading (Hansard): House of Lords & 2nd reading (Hansard)
Tuesday 28th January 2020 Lords Chamber

[Baroness Janke (LD)]

My Lords, the three strands of the Bill contain proposals that have been broadly welcomed across the sector and across this Chamber.

My noble friend Lord Sharkey spoke about secondary legislation and Henry VIII powers, on which large parts of the Bill are dependent. As other noble Lords have said, in this House we are suspicious of such measures. We are reluctant to delay this long-awaited Bill, but we would like assurances from the Minister that the substance of measures not included on the face of the Bill, if not the actual letter of the legislation, will be made available to us in good time. As my noble friend Lord Sharkey said, this is a skeleton Bill with random use of affirmative and negative procedures. I thank the Minister for her recognition of these issues and very much hope that the illustrative regulations she spoke about will be substantive and informative.

CDCs—collective defined contribution schemes—have been supported across the parties, and the provisions in the Bill will enable these pensions, in the first instance as requested by Royal Mail and the Communication Workers Union. The Minister suggested that other employers who still have open defined benefit schemes are watching closely. Nevertheless, she has said that the Government will wait to see how the scheme beds in. Unlike defined benefit pension schemes, there is no hard pension promise or guarantee. However, unlike a defined contribution pension scheme, there is a pension target, which makes it easier to plan for retirement. If things do not go well, everyone in the scheme suffers collectively. In retirement, longevity is pooled. As I said, there is cross-party support, and the Bill builds on legislation passed in 2015 to enable risk sharing and risk pooling in workplace pensions.

Noble Lords have raised questions about safeguarding the interests of members of the scheme, in respect of, for example, transfer of rights and the destinations of transfers in the light of poor advice. Several noble Lords raised the issue of whether this should be an opportunity to prevent fraud, for example by making such transfers conditional on advice or levels of information—the noble Baroness, Lady Altmann, and my noble friends Lady Bowles and Lord Sharkey all raised that point. Other issues include intergenerational fairness, losses caused by market fluctuations or through transfers from the scheme, and the need for a capital buffer if the employer becomes insolvent. As the ABI has said, the success of CMP schemes will depend on their financial strength, combined with robust governance and regular reporting and disclosure. Careful thought must be given to how best to communicate to scheme members the crucial difference between a guaranteed and a targeted income. These are questions that many of us will have considered when reading the Bill.

As far as increasing the powers of TPR, the question of whether those powers are strong enough has been raised by a number of noble Lords—particularly the noble Baroness, Lady Drake—as have the issues of early intervention, how TRP can become aware of issues concerning pension funds and whether there should be growing duties on the Pension Regulator to become familiar with some of these very large schemes.

On the whole business of criminality, which was raised by the noble Lords, Lord Kirkhope and Lord Hutton, and the noble Baronesses, Lady Drake and Lady Noakes, this needs to be looked at again by the Minister. On the scope, to whom do the new criminal offences apply? Is it not only directors but also trustees and any other party who may be involved in an action that could have an intended knock-on effect on a pension scheme, even though they were trying to do the right thing? Is the intention of the policy that the new criminal offences should apply to activities and events that are much wider than the “wilful and reckless behaviour” described by the previous Minister? Are they to include day-to-day business activities that get caught accidentally but which are without wilful intent? The Bill needs to be looked at again, and some redrafting needs to be done.

The noble Lord, Lord Vaux, highlighted the different treatments of the shareholders and the pension holders and whether it is appropriate to pay a dividend when there are constraints on the pension fund and questions about its viability. Noble Lords asked whether the new measures will lead to people like Philip Green facing a criminal charge. I think the general view is that it is unlikely. My noble friend Lady Bowles wanted greater penalties. I think that people would support that if it was clear that the people getting those penalties had seriously offended and, as the previous Minister said, had wilfully brought ruin or damage to the scheme.

The pensions dashboard has received a lot of attention. The noble Baronesses, Lady Neville-Rolfe and Lady Noakes, drew attention to such issues as the cost, the importance of engagement with the public and how much care there needs to be in making information available about an individual’s personal circumstances. According to the ABI, already one in five adults have lost pension pots. The DWP estimates that 50 million pension pots will be lost or dormant by 2050. People are also highly vulnerable to fraud and scams. We believed that multiple dashboards with robust regulations, as proposed within the Bill and endorsed by Which?, is the right road to take.

Obviously, consumer engagement will be key to making this work. The noble Lord, Lord Young, mentioned the whole business of accessibility and security measures—and the time that this has taken—and other noble Lords mentioned the online banking model, which has proved so successful, and whether this could be a better model.

Like other noble Lords, I wish to talk about some outstanding issues. The DWP review recommends extending auto-enrolment; the noble Baroness, Lady Neville-Rolfe, mentioned what a success this had been. The noble Baroness, Lady Donaghy, agreed that it should be extended, particularly by reducing the lower age limit to 18 and removing the lower earnings limit. This could have a powerful impact on many people.

Noble Lords, particularly the noble Baroness, Lady Bryan, have mentioned the 1950s women. Might this Bill be an opportunity for the Government to give fairness and justice to these women, who have lost out on so much as a result of government policy?

The noble Baroness, Lady Altmann, mentioned the gender pay gap, which is a matter of great importance to many of us in this Chamber. This Bill could provide another opportunity to look at that. The qualifying earnings deduction operates against workers with multiple part-time jobs, particularly low-paid workers, including woman.

The noble Baronesses, Lady Hayman and Lady Jones, mentioned the duties to climate change and the importance of investment in sustainable businesses and the duties which could be placed on pension funds, which we are very supportive of.

Finally, the noble Lord, Lord Warner, spoke about the BMA. Has the Minister considered the briefing sent to us by the BMA? Have the Government plans to address that issue as part of this Bill?

As we have all said, there is great cross-party support for the measures in the Bill but a feeling that there are opportunities for action on a broader pensions landscape which could bring significant benefit to many people. I hope they will not be missed. We support the Bill and look forward to taking some of these issues forward in Committee.