Pension Schemes Bill [HL]

Baroness Sherlock Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 26th February 2020 Grand Committee

[Baroness Drake (Lab)]

My Lords, I support the principle behind Amendment 27, in the name of the noble Lord, Lord Vaux, but equally I have sympathy with the comments of the noble Lord, Lord Flight. When it comes to dividends, the mischief may be done regarding money leaving the sponsoring employer’s company before the regulator can mobilise its full armoury of powers. This is particularly true where the dividends are paid to parent companies overseas, where pursuing a legal route by the regulator may be difficult, even more so if we leave the EU, because jurisdictions will change—except possibly foreign-owned UK banks, where in fact the PRA has the power to intrude pre-emptively on dividends going over to the parent company. To that extent, there is an element of precedent, and the PRA would take into account the debt in the pension fund in considering the sustainability issue when it strikes a view on dividends paid to the parent company.

I give credit to the proactive approach that the regulator is now taking to red flag where there is a kind of big ratio between dividends and deficit payment. However, that must be retrospective. The issue is capturing that mischief at the point when the money leaves the company; I am particularly concerned about where it is a foreign-owned company. Therefore, if some way could be found—perhaps by the regulator working with the department—to embrace dividends in some way in the notifiable events regime, that would be helpful. It is a problem, and once the money is gone, it is difficult to chase it, particularly when you have to go to jurisdictions where the power of TPR may not be strong.

[Baroness Sherlock (Lab)]

My Lords, the Committee should thank the noble Lords, Lord Vaux and Lord Balfe, for having enabled this debate. One gets a high quality of debate on pension Bills; it is very well informed indeed.

We have been left with three questions. Is there a problem? Is it getting worse? And what are we going to do about it? I think there is a pretty much unanimous view around the Committee that we have a problem and that it is not going to disappear. As more DB schemes close, they will pay out more in pensioner payments, leaving them less to invest and reap returns, so they will start de-risking their remaining investments. This is the moment we have to address that.

We know that there is a problem. As my noble friend Lady Drake said at Second Reading, the Work and Pensions Select Committee report highlighted that half of FTSE 350 companies paid out 10 times more to shareholders than to their DB pension schemes. However, in some ways the key issue is the ratio, which was touched on by a couple of noble Lords. TPR certainly mentioned it in its annual funding statement, and it drilled down in its Tranche 14 Analysis for DB pension schemes, published last May. It looked at the FTSE 350 companies that sponsor DB schemes as the main or primary sponsoring employer and said that it found that

“The median ratio of dividends to DRCs”—


deficit repair contributions—

“has increased from 9.2:1 in 2012 to 14.2:1”,

in the latest figures available, so it has gone from nine to 14 between 2012 and last year. Clearly, this is going in the wrong direction. It noted:

“This is mainly driven by the significant increase in aggregate dividends over the period, without a similar increase in contributions.”


Therefore we have a problem. The regulator itself said in its last funding statement that it remains

“concerned about the disparity between dividend growth and stable DRCs”,

and it highlighted recent corporate failures. If the regulator is concerned, then the Minister should be concerned.

The Minister’s argument may be that the regulator already runs an internal control system, where it flags high dividend payments. A number of noble Lords, however, made the point that it is retrospective and that, depending on the valuation, it may not pick up all the areas where there is a problem. Noble Lords also cited TPR’s funding statement, which set out the key principles behind its expectations about what should happen when an employer is weak, the ratio is high, or the employer cannot support the scheme.

Can the Minister assure us that there are not more cases coming in with high ratios and long recovery plans? The TPR says it is going to stop that. Is it not a problem anymore, or is there a target for when it will not be? TPR could refuse to agree a funding strategy for a scheme in various ways but, as my noble friend Lady Drake pointed out so clearly, that is, first, retrospective; secondly, what happens if the money goes overseas? I would be grateful if the Minister could pick that up.

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I hope noble Lords will recognise that the measures I have outlined to strengthen funding, which are to be found elsewhere in this Bill, are the best way to tackle employers that do not direct an appropriate proportion of available resources to managing the pension scheme deficit. As such, I urge the noble Lord to withdraw his amendment.

[Baroness Sherlock]

My Lords, I want to pursue a couple of points. I am a simple soul compared to many around the table who can come back to the noble Baroness on the detail. However, I think that she has just said in summary that the regulator knows that some companies have a problem in this area but feels that, by and large, the current regime gives it the tools to deal with it; where there is a gap, it will deal with it by secondary legislation, which will be clearer about the requirements for an appropriate recovery plan; and that anything above that, such as notification, will be disproportionate and unnecessary. I invite her to correct me if I am wrong.

I will bring her back to what is missing from that statement. First, it is pre-emptive and proactive in nature. Neither I nor the noble Baroness, Lady Drake, said that separate rules should be set up for overseas shareholders or companies with them. We were making the point that one of the reasons that it would be useful to have a notification requirement, as set out by the noble Lord, Lord Vaux, would be so that money would not be taken out and the regulator would not then have to go after it—rather, it would get advance notice that this was going to happen and could see whether it was appropriate. The point about overseas companies was simply that, if money goes overseas, it is much harder and more expensive to get it back if the regulator goes after it.

I come back to my question: why do the Government not believe that it would be useful to have some requirement that companies should notify the regulator if they declare a dividend where there was a DRC in place? Why is that a problem?

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[Baroness Stedman-Scott]

The noble Baroness makes some valid points. We consider that dividends are paid at a point in time. The regulator needs to form a picture of the employers’ ability to pay and, for a period in the future, needs to see the whole picture.

[Baroness Sherlock]

Can we try to narrow the point of difference? The Minister is often being given briefings which cover points with which no one disagrees. To interpret her last answer to me, the Government are saying that they do not want every company to tell them why they are paying a dividend because there will be too much information and it will take too much resource to process, rather than focusing on things that raise a particular problem. However, the amendment from the noble Lord, Lord Vaux, does not suggest that; it simply suggests that, in some very specific circumstances, there should be a notification of a declaration to pay a dividend. He suggested that those circumstances are that there will be a dividend, there is a deficit on the scheme, the amount of the dividend exceeds the DRC and a ratio between the different on the valuation. If the Government think that those are the wrong criteria, they could suggest alternative criteria. I am trying to get to the bottom of what is the problem of saying, “In certain circumstances where there could be a risk, it will be helpful to have a requirement on companies to notify the regulator as part of the notifiable events regime so that it can then do something about those risk situations”? Why is that a problem?

[Baroness Stedman-Scott]

The last word I would use to describe the noble Baroness is simple; that is not the case. She and other noble Lords have raised some interesting, valid and appropriate points on this issue. I believe that the best way that we can delve down into this and, I hope, give the comfort that they are looking for, is to meet to discuss it outside the Committee, which we are happy to do.

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[Baroness Sherlock]

My Lords, I do not think I will start at that point.

I will not add much. I had a lovely speech prepared, but it was much less good than some of the speeches we have heard already. Let me simply say that I am grateful to all noble Lords who have put this issue on the agenda. Like them, I am particularly delighted that the Minister was listening so carefully to my noble friend Lady Jones, the noble Baroness, Lady Hayman, and others at Second Reading. If that is what could happen over Second Reading, just think what will happen by Report, after all we have done here today. I am very excited indeed at this new responsive Government: hurrah!

I want to add just a couple of things. I hope we all now recognise that there is no way that the Government are going to hit the 2050 target, never mind Paris, without pension schemes stepping up and playing their part. In response to the noble Lord, Lord Balfe, I know it is difficult, but there is quite a lot of good thinking going on out there. I commend to him work done by the Church of England Pensions Board, which has recently developed an index, made available specially to enable funds—it is putting its own money where its mouth is—to do compatible things. I can talk to him about it afterwards. I should declare an interest: I am a Church of England priest, but my knowledge of pensions in the Church of England stops there, because I do not pay into any. There are things that can be done.

I am particularly conscious that people want to know this information. It will increasingly be the case: if we want more people to save, young people in particular will want to know where their money is going. The Government will have to find some way to address that. I will come on to talk about the dashboard, but I should be interested to know if MaPS is beginning to think about this. Is this in its consideration?

I should also be interested to know from the Minister about the amendments of the noble Baroness, Lady Hayman, and my noble friend Lady Jones to the government amendment, which raise interesting points. Is there a reason why the Government feel that they cannot apply them to all pension schemes and are they amenable to a stiffening around Paris, as opposed to generic climate change? If she could address both those questions, that would be helpful.

I should also be interested in her response to an amendment which is pushing a sense of urgency on the timescale of the task force on climate-related financial disclosures. It would be very helpful to get a sense of where the Government are going on that. It does not seem a hard ask: to run a consultation, soon after commencement, on implementing the recommendations of a task force coming back within a year would seem to be one of the easier concessions that the Minister has been asked to make, so perhaps she may look with a smile on that too.

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[Baroness Bowles of Berkhamsted]

My Lords, I support all the amendments in this group—Amendment 31 is my own. The broad principle is not to let the fines simply be a cost of doing business for the wealthy and especially large companies. Inevitably, large fines give rise to concern among those who would be the bottom end of any range of fines, with respect both to the seriousness of their offence and their resources. It is clear that proportionality is key—proportionality both to the severity of the offence and the resources of the offender. The fine must also be a sufficient deterrent, not just a cost of doing business.

It does not seem to be customary to recite proportionality in legislation, as it is presumed. For my part, I would not see it as damaging to include wording on proportionality, and anyway it would always be part of any appeal. That is why, in Amendment 31, I changed the new Section 88A fine from “£1 million” to

“twice the employer’s pension deficit or 4% of the employer’s annual global turnover (whichever is greater)”.

The fines may not be these amounts; they are the maximums. These fines can be for egregious matters that put pension funds at risk—and, therefore, the livelihood and well-being of pensioners and future pensioners—and potentially impose on taxpayers. They are fines for being a social pestilence.

I thought that the size of the deficit was relevant—maybe I should have made it three times the size, because my inspiration was US-style triple damages that can apply for monstrous offences. I have made it clear that I think doing bad things to pensions is pretty monstrous.

Turnover-linked criteria are also not new. They are in use in the UK, having been recently introduced for the Information Commissioner; that is what I have copied. They have, of course, been in play for some time for competition offences. The Information Commissioner penalties also have a numerical option, although again that is not limited to the turnover side of the penalty. I left out the number in my amendment to emphasis the proportionality point, but I would have no problem adding in the amendment of my noble friend Lord Sharkey so that we have a numerical measure in there as well.

It would seem from something that was said to me—in one of the meetings, I think—that the £1 million fine level was inspired by “similar fine provisions” by the FCA. Well, I can suggest several responses to that. First, the FCA may be the one out of line with modern thinking, the fine having been set a while ago. Also, it has perhaps been undermined because it always has to do consultations and, strangely, has to consult those who might be fined. But, as a matter of consultation, I note that the ABI has supported my amendment.

[Baroness Sherlock]

My Lords, these amendments offer a good opportunity to explore whether the penalties in the Bill are of the right kind and scale. I hope the Minister will take this opportunity to set out the thinking behind the decisions that the Government have reached. I read the DWP policy brief for the Bill; it says that, in developing the new sanctions, the main priority had been getting the right balance between increased deterrents and protection for members, minimising any negative impacts on industry, and ensuring that the new sanctions are in line with the wider statute book. So one of the questions is: has it done that?

The first question, raised by the noble Lord, Lord Sharkey, is: are the penalties set at the right place and why are they set at that place? What is the argument —why £50,000 and not £100,000? Why £l million and not £10 million or £50 million? Was this done to mirror provisions elsewhere? If so, which ones? If not, what work—what modelling—was done to lead Ministers to believe that they have landed in the right place?

Interestingly, the policy brief then says that the DWP considered the level when establishing the new penalty of up to £1 million. It says that the level had to be proportionate for local individuals and businesses of different wealth levels and appropriate for a wide range of behaviours, provide a stronger deterrent than the current regime and work alongside the new criminal offences for non-compliance, under which an unlimited fine can be issued. I need the Minister to help me here because this is not my area of expertise: if the maximum fine is £1 million, why does the maximum fine have to take account of a wide range of behaviours and wealth of individuals or businesses? Presumably, the maximum fine applies only to the people at the top of the scale, either those who have the most money or have done the worst thing. How does that balance work in setting a maximum fine? There may be a really good reason—maybe you have to be proportionate; I do not know—but could she explain it to me?

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[Baroness Stedman-Scott]

I thank noble Lords for tabling these amendments and I will do my best to answer all their questions. Clause 112 inserts new provisions for the Pensions Regulator to impose fixed and escalating civil penalties where a person has not complied with the regulator’s information-gathering powers. The level of the penalties is to be set in regulations, but the fixed penalty cannot exceed £50,000 and the rate of the escalating penalty cannot exceed £10,000 a day.

Clause 115 provides for a new financial penalty in the Pensions Act 2004 which can be issued by the Pensions Regulator, and sets the maximum amount of this financial penalty at £1 million. Amendments 29 and 30, in the name of the noble Lord, Lord Sharkey, seek to raise the penalty levels for both the fixed and escalating penalties. Fixed and escalating penalties are already available to the regulator for non-compliance with information-gathering provisions in connection with automatic enrolment and master trusts. We consider that it would be inconsistent and unfair to have a much higher maximum, as introduced by these amendments, for similar breaches connected to other types of pension schemes.

We have no evidence that these maximum levels are inadequate or not working. On the contrary, the regulator confirms that the current levels of fixed and escalating penalties provide an adequate deterrent in automatic enrolment: issuing a fixed penalty results in compliance in the majority of cases, with only a few cases resulting in escalating penalties. The noble Lord’s amendment would introduce a maximum fixed penalty of £1 million, but that is the maximum level of the financial penalty that the Bill is introducing for serious breaches of pension legislation—for example, deliberately giving the regulator false information, or conduct that puts members’ benefits at risk.

I know that some noble Lords feel that the financial penalty should be higher, but we believe it is set at the right level. It would not be right for the penalty for not complying with an information request to be as high as for serious breaches of pension legislation. I should also make it clear that not complying with information requests, or obstructing an inspector, is a criminal offence and will remain so, with the potential for an unlimited fine. The intention is that these fixed and escalating penalties will be imposed for less serious breaches, where the regulator thinks a civil penalty is more appropriate than a criminal prosecution. Imposing a civil penalty is likely to take less time than instituting criminal proceedings, therefore the regulator can receive the necessary information and conclude an investigation more quickly. In the 2018 consultation on the regulator’s powers, mirroring the approach for automatic enrolment and master trusts was supported by industry representatives.

Amendment 31, in the names of the noble Baronesses, Lady Bowles and Lady Janke, and Amendment 32 in the name of the noble Lord, Lord Sharkey, seek to raise the maximum amount of the new financial penalty. We consulted on our proposals in 2018 and they were developed from the Green Paper consultation in 2017. The £1 million maximum penalty was supported by the majority of respondents. The £1 million penalty is positioned as a mid-level sanction, between the lower £50,000 penalty for acts of non-compliance by corporates and £5,000 by individuals and the new higher-level criminal offences for serious wrongdoing that has an unlimited fine. The £1 million maximum level was also deemed to be appropriate as it is comparable with the average level of equivalent sanctions for financial crimes in the financial sector issued to individuals by the Financial Conduct Authority.

The new financial penalty can be applied to a number of offences, and changing the maximum penalty to the levels in the noble Baronesses’ amendment would be inappropriate in the case of some of these offences. Moreover, the people who are within scope of these penalties vary. In some cases, the target of the penalty may not have any direct connection to the sponsoring employer’s company or to the scheme itself. It would therefore be difficult to justify why such a person should be liable to pay a penalty of up to a maximum of double the scheme deficit or a percentage of the employer’s turnover. In such cases, a maximum level of £1 million is more proportionate and provides clarity. The introduction of the new financial penalty in this clause was also an integral part of enabling the Pensions Regulator to take action more swiftly, thereby becoming a “clearer, quicker, tougher” regulator.

The new maximum penalty levels proposed in Amendment 31 in particular go against this intention, as the precise meaning of the terms “deficit” and “turnover” is uncertain, and how these are to be calculated is unclear. This leads to uncertainty for any targets of the penalty and will place an unnecessary burden on the regulator. For example, the regulator would need to interpret what is an appropriate definition of deficit to use for the purposes of the penalty and then estimate what this deficit would be. Similarly, the regulator would need to dedicate resources to estimating what constitutes the employer’s annual global turnover and what would be relevant turnover for this calculation. Further, a question arises about the time at which the deficit or turnover should be assessed. For example, should it be calculated from the time the act took place or at the point of instituting proceedings? If the act is part of a series, at which point in the series should the deficit or turnover be calculated?

Until the regulator had carried out these assessments, the maximum penalty that could be charged would be uncertain. The assumptions that the regulator would need to use would also be open to challenge by the target. This would impede the regulator’s ability to take swift action and could tie enforcement up in lengthy challenges over the penalty amount. This would also put a drain on the resources the regulator has to undertake its functions.

The clause contains a power to increase the maximum amount of the financial penalties if required. This is to ensure that the penalty remains an effective deterrent in the future and accounts for factors such as inflation.

The noble Lord, Lord Sharkey, asked why we were consulting on the level of penalties rather than putting these figures in the Bill. The maximum level of penalties is included in the Bill. The level and daily rate of the existing fixed and escalating penalties which relate to automatic enrolment and master trusts are set in regulations. These provisions mirror that approach. Feedback during the consultation on the regulator’s powers indicated strong agreement on similar fixed and escalating civil penalties, but little consensus on the detail of the exact levels. We need to consult further to ensure that the penalties are set at an appropriate level.

The noble Baroness, Lady Bowles, asked why we do not follow the method of imposing fines used by the Information Commissioner’s Office. The ICO has a fining power as required in accordance with the 2016 general data protection regulation. Article 83 of the GDPR states that the penalties must be at particular levels.

The noble Baroness, Lady Sherlock, asked what modelling or consultation took place to set the maximum financial penalty at £1 million. The Government consulted on the proposals for strengthening the regulator’s powers in 2018, which were developed from the Green Paper consultation in 2017. As I have said, the £1 million maximum penalty was supported by the majority of respondents to the consultation.

The noble Baroness, Lady Sherlock, also asked about different fines decided by the FCA rather than by averages. I am afraid that I will have to write to her to answer her question on whether others have the power to change the maximum.

I hope that I have reassured noble Lords that the Government have thought carefully about these penalty amounts and struck the right balance between protecting members and being proportionate to the business. Therefore, I urge noble Lords not to press their amendments.

[Baroness Sherlock]

I realise that my questions were quite detailed, so could I ask the Minister to look at the record and write to me to answer each of them in turn? Could I encourage her to draw on the expertise behind her to answer the questions? Sometimes one gets letters after a debate and, while they relate to the general area of the questions, they are maybe not quite as well targeted as one would hope. I encourage her to do that and would be delighted to leave it at that at this time.

[Baroness Stedman-Scott]

I thank the noble Baroness for this homework. I will ensure it is delivered to her and that it is accurate.

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[Baroness Bowles of Berkhamsted]

My Lords, this amendment aims to utilise an existing provision in the Company Directors Disqualification Act 1986. Section 8(1) of that Act was broadened in 2015 so that the Secretary of State for BEIS may, in the public interest, apply to the court for a disqualification order. It used to be the case that Section 8(1) was activated by a report after certain specific investigations, one of which was an investigation by the FCA. The change in 2015 recognised that the reports did not need to be so restrictive. What I propose follows the theme of the original procedure and suggests that when there has been a serious offence committed regarding pensions, the Pensions Regulator should make a report to the Secretary of State for BEIS for the purposes of the Company Directors Disqualification Act.

The Pensions Regulator would be required to identify the person, or, if a body corporate, the directors at the time when the offence was committed, and,

“state whether the Pensions Regulator considers that, having regard to the need for public confidence in the system of pensions regulation, it would be expedient in the public interest for … a disqualification order.”

It would then be up to the Secretary of State to decide whether to refer it to the court for disqualification. The fact that I have had to explain what this is all about to others outside the Committee, and that it is already envisaged or in law, indicates that it needs a nudge to make it active and that the regulator needs to be empowered and encouraged to make reports.

My proposed new clause is constructed so that all offences can trigger such a report from the Pensions Regulator, whether criminal offences or fines. But under its subsection (4), the Pensions Regulator has discretion not to make a report if a disqualification is already proceeding, which is possible in the event of a criminal offence being decided against an individual, or if the offence is a fine rather than a criminal offence. These new provisions would be particularly relevant when a company has been found guilty. It would mean that the actions of the directors would be investigated. Again, I note that the ABI has indicated support for this amendment.

The inspiration for the amendment comes from the fact that there are certain financial instances or breaches of competition law where the directors are always investigated. Pensions is a significant social issue on which hearing from the relevant regulator should also be a matter of course. There is no automatic disqualification or even an automatic reference to the court—that is up to the Secretary of State—but at least for a criminal matter there would always be a report concerning the circumstances and an added incentive for board scrutiny of matters relating to pensions. I beg to move.

[Baroness Sherlock]

My Lords, I can add little to that careful explanation of the amendment; I know a lot more than I did five minutes ago. However, as the Minister responds, perhaps she could tell us a little more about what happens both now and when the Bill becomes law: that is, what the TPR does when someone has committed an offence, what is its understanding of to whom this should be reported, in what circumstances, and how its enforcement team works with the supervision team and with the FCA’s enforcement supervision arrangements. That is not directly the point which the noble Baroness, Lady Bowles, was making but I very much endorse her approach, which is to put the importance of pensions on a par with the importance of threats in other parts of the economy. That is interesting, and I am interested in the Government’s response to it.

[Baroness Stedman-Scott]

I thank the noble Baroness, Lady Bowles, for tabling this amendment, which would require the Pensions Regulator to provide a report to the Secretary of State for the purposes of the Company Directors Disqualification Act 1986. Director disqualification is within the remit of the Insolvency Service, which has the powers, resources and expertise to disqualify directors. As such, the Pensions Regulator does not have the power to disqualify directors, as this would be unnecessary, costly and inefficient. However, the Pensions Regulator is already able to share information with the Insolvency Service if it meets the “gateway” criteria as outlined in its restricted information regime under Section 82 of the Pensions Act 2004. The regulator can use this gateway in circumstances where the sharing of information is with a view to instigating director disqualification proceedings.

As such, the regulator is already able to share information with the Insolvency Service where it has identified persistent wrongdoing by a director or where it has already taken regulatory action. Under Section 8 of the Company Directors Disqualification Act 1986, the Insolvency Service is then able to apply to the court for a disqualification order on behalf of the Secretary of State, based on investigative material provided by other agencies or departments. Whether or not the Insolvency Service takes action to disqualify a director on the basis of information provided by others, such as the Pensions Regulator, will depend upon its assessment of the case in question. The Pensions Regulator and the Insolvency Service regularly engage with each other to discuss areas of joint interest. They continue to monitor the effectiveness of the disclosure process and are taking steps to streamline it when necessary. This will help to ensure that the organisations are able to work together to achieve successful outcomes and better protect the public.

In summary, the amendment is looking to introduce a process which is already in place. The Pensions Regulator and the Insolvency Service continue to work closely together to streamline this disclosure process and ensure that both organisations have a good working knowledge of each other’s remits. On that basis, I urge the noble Baroness to withdraw her amendment.

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[Lord Sharkey]

My Lords, I strongly support the amendments in this group and have signed Amendment 70 in the name of the noble Lord, Lord Young. I signed it because I was extremely puzzled by the use of “may” in this context. I had thought that the Government had publicly committed to establishing a public, free-to-use dashboard under the aegis of MaPS. Can the Minister say whether that commitment stands? If it does, surely “must” has to replace “may”, as suggested by the amendment?

[Baroness Sherlock]

My Lords, my noble friend Lady Drake has made a compelling case for the importance of this issue as well as giving us a helpful strategic overview of the state of the long-term savings industry and the impact of this dashboard on it. Done right, a dashboard could in time offer a useful service to savers. It would offer a chance to locate lost pots, to view in one place all the different bits of pension, state and private, and to make a realistic assessment whether someone is saving enough for retirement. But equally, the risks are huge, particularly given the scale if, as my noble friend said, data for more than 22 million people are to be channelled through this platform.

This becomes a public good only if it is designed and delivered in the right way, with transparency and all the necessary safeguards. As my noble friend Lady Drake said at Second Reading,

“public good cannot be traded off against commercial interests.”—[Official Report, 28/1/20; col. 1367.]

Labour would prefer this to be a public service, but if the Government are determined to go down the road of commercial dashboards, it is clearly essential that there be one “public good dashboard” owned, controlled and governed by a public body. My noble friend has given us a frankly staggering list of organisations supporting this that are right at the heart of the industry, including the CEO of the Pensions Regulator, who told the Work and Pensions Select Committee on 26 June 2019 that

“there must be the public dashboard”.

It is really very simple: the public should not be required to use a commercially owned dashboard to access their own data, especially in a market so susceptible to consumer detriment.

It is quite extraordinary that there is nothing in the Bill saying that there should be a public dashboard, when I think everybody had assumed this was going to happen. The Minister said at Second Reading

“MaPS committed to providing a dashboard in its 2019-20 business plan.”—[Official Report, 28/1/20; col. 1414.]

However, a Minister telling us that an NDPB has plans to do something is not the same as legislating that it must happen, so our amendments simply require that there be a public good dashboard.

The MaPS business plan said:

“It is envisaged that there will be multiple dashboards connected to the infrastructure, but also that there is merit in a consumer facing dashboard provided by a non-commercial and impartial organisation. The Money and Pensions Service, as part of its business as usual function to provide impartial information and guidance, will begin the development of a noncommercial consumer facing dashboard.”


There is not exactly a sense of urgency there; it contrasts quite markedly with what the noble Lord, Lord Young, has described as the ABI champing at the bit to get going and hoping to have it done by last year, or at the very latest this year.

That is the second point. Even if Ministers seek to assure us that MaPS is committed to producing a public dashboard, we want to know that it will be up and running before any commercial dashboards are allowed to start operating. That is what Amendment 48 is designed to ensure. I cannot see why this should be controversial. If Ministers are confident that MaPS is on target, no doubt they will accept the amendments from the noble Lord, Lord Young, and reassure the Committee that a good public dashboard will be set up. Would it not be obviously sensible to have that up and running to test the architecture and infrastructure before allowing private companies to set their own up dashboards, with the additional risks that will bring?

I suppose it is possible that Ministers are not confident that MaPS will have its public dashboard running any time soon. They could easily dispel that thought by accepting the amendments from the noble Lord, Lord Young, or indeed ours. I believe MaPS has said only that it hopes to be one of the first. The state’s recent track record with large-scale IT projects, as those of us covering DWP know to our cost, has not been fantastic. If multiple dashboards are to be allowed to be set up all at once, and if MaPS is to take its time in doing it, there could potentially be a considerable period in which consumers will be able to access their data only through a commercial dashboard. That does not seem to be in line with what we understood the Government intended to do.

Our amendments are simply designed to ensure three things: that there is a dashboard which is publicly owned, controlled and governed; that it is free to use and does not display advertising; and that if Ministers are to go down the route of commercial dashboards, they do not do so until the public dashboard has been operating for at least a year, and the Secretary of State has been able to report to Parliament on its structure and effectiveness.

I would like to ask the Minister some specific questions. They are really easy—not A-level questions but low-grade SATs questions, which I have no doubt should be in her brief somewhere. I shall read them really slowly. First, when does DWP expect the MaPS dashboard to be up and running? Secondly, when does it expect the first commercial dashboard to be up and running? Sorry, I was looking at the wrong Minister. Thirdly, how many dashboards do the Government think we will have? How many do they know of that are being tested or in the pipeline? Fourthly—this is a biggie—will commercial dashboards be allowed to charge consumers for using them? Fifthly, and this may be at GCSE standard, I understand that alongside any dashboard developed by MaPS, a liability model will need to be developed. We do not have any guarantee that the liability model will be ready before commercial dashboards become available, even if the MaPS dashboard is not ready. Is there any way that there could be a gap between people using commercial dashboards and the liability model being ready? That matters because, of course, if detriment is created then we need to know how it is to be managed and where responsibility lies.

I remain very worried about what the Government may be creating without considering all the implications, and its unintended as well as intended consequences. I look forward to the Minister’s reply to our amendments and to those tabled by the noble Lord, Lord Young. I hope the Government can reassure us that they will in fact be committed to having a high-quality, public good dashboard established before the industry is allowed to get into a free-for-all.

[Earl Howe (Con)]

My Lords, I thank the noble Baronesses, Lady Drake and Lady Sherlock, my noble friend Lord Young and the noble Lord, Lord Sharkey, for their valuable contributions to a debate on what I am the first to acknowledge is a significant set of topics. This group of amendments explores how privately operated dashboards will work alongside a public dashboard provided by the Money and Pensions Service. They also explore whether a public service dashboard will be delivered.

I want first to reassure the Committee that the Government are absolutely committed to the Money and Pensions Service, or MaPS, providing a qualifying dashboard service. Let there be no doubt about that; it was clearly set out in our consultation response Pensions Dashboards: Government Response to the Consultation published in April last year. The MaPS business plan for 2019-20, also published last April, subsequently confirmed its commitment to deliver a dashboard.

Furthermore, to pick up the sense of Amendments 47, 48 and 70, we entirely understand the importance of having a dashboard run by a public body without any commercial interest. One of the core functions of the Money and Pensions Service under the Financial Guidance and Claims Act 2018 is to provide free and impartial information and guidance about occupational and private pensions. Read together with Clause 122, that ensures that MaPS has the legal powers to provide a pensions dashboard that includes state pension information. To be clear, I say that accessing the information on dashboards will remain free, regardless of whether a dashboard is provided by MaPS or another organisation.

MaPS will be able to include signposting to free and impartial guidance on its dashboard, as will other organisations, as that supports its pensions guidance function. However, MaPS will not be able to host any income-generating advertising. MaPS has no revenue-raising powers under the Financial Guidance and Claims Act 2018.

I turn to ownership. We expect MaPS to provide a dashboard on an ongoing basis. However, it is important for there to be flexibility in how that function is carried out in line with changing technology and consumer interests. Here I am talking about the medium to long term. We also want to maximise the Government’s ability to ensure that ownership of the dashboard is in the right place in the longer term.

On Amendment 71, I very much share my noble friend Lord Young’s desire for a dashboard to be delivered in a timely manner to help people plan for their retirement. However, setting a date in legislation may be counterproductive. It risks creating a situation where decisions are taken simply to meet a legislative deadline, regardless of outcomes, rather than to meet the needs of individuals. To my mind, more important here is that we ensure that the service is accurate, secure and consumer focused. Developing a service that gives consumers a single point of access to their pensions information is complex. There are 40,000 schemes of differing types, covering around 25 million people with private pension wealth. The staged onboarding of thousands of pension schemes covering millions of separate records will raise issues that are not currently apparent, it is safe to predict. That tells us that dashboards should be delivered only when the Government and MaPS are confident that they are ready, so that consumers can be confident in the service offered. I hope that the noble Baroness, Lady Sherlock, in particular agrees, given her apposite references to computer systems that perhaps have not quite lived up to expectations.

Through Amendments 37 and 48 the noble Baronesses, Lady Drake and Lady Sherlock, also probe the question of introducing multiple dashboards alongside a MaPS dashboard. Having the potential to offer multiple dashboards at launch maximises the possible reach of this policy from the outset and could help to meet the differing needs of the many people using them. User research completed as part of the Government’s feasibility study and consultation showed that individuals may prefer to use a dashboard provided by an organisation with which they already have a relationship—for example, their employer—due to higher levels of familiarity and trust. It is a case of one step at a time, however.

I hope that the Committee is reassured that the information shown on all dashboards, public or private, will be the same, and based on user testing. We also intend all dashboards to start with a limited functionality until we better understand how individuals interact with their information.

A majority of respondents to the government consultation were supportive of multiple dashboards, provided sufficient consumer protections were in place. The Government have considered how to ensure that consumer protection, and accordingly we shall be introducing a new regulated activity under the Financial Services and Markets Act 2000 to reflect the provision of dashboard services. As I am sure noble Lords are aware, we will cover this issue in more detail later.

Clause 118 provides the power to set out detailed requirements “for qualifying pensions dashboards”. It is also likely that this will be linked to the new regulated activity outlined by the Financial Conduct Authority. These are all provisions to ensure consumer protection in relation to privately run dashboards. Our job is to put that consumer protection regime in place, but, once it is in place, we do not wish to constrain the potential reach of the policy. Nor do we wish unnecessarily to limit consumer choice.

--- Later in debate ---

[Earl Howe]

That is a very constructive suggestion from my noble friend. I will take it away with me.

[Baroness Sherlock]

My Lords, that had better not happen too soon, though, because there might be nothing to see for a while. I am very grateful to the Minister for his thorough response, even if some of it disappoints me. I am grateful to him for taking his time to go through the questions.

My noble friend Lady Drake, as always, expresses it more cogently and thoroughly than I do, but my problem is that the Minister is essentially saying that the Government are committed to MaPS producing a dashboard. This is not the same as the Government saying that they will ensure that there is a dashboard. My worry is that I do not want to see this rushed. I have been an adviser in government myself, when tax credits were being developed. I realise the problems that come out and I know only too well that when you develop new computer systems, you do not know what will happen until you press the button on the first day. However, my worry is that that is precisely what could happen here. If the Government are determined to allow commercial dashboards to go live whenever they are ready, what if MaPS then takes years to get it right? What if it never does? What if MaPS itself fails on another front? We could end up never having a public dashboard, in which case the Minister would not have broken his word but none the less a public dashboard would never have come to pass. If it were in the Bill there would be an obligation on Ministers.

I take my noble friend Lady Drake’s point about new incumbents. I have been in my brief since I think 2011 or 2012. I think that I am on my seventh Secretary of State. Given that one of them was there for quite a long time, there has been an awful lot of turnover since. It is not impossible that a new Secretary of State could come in and take a radically different view from their predecessor, as they have in my time, on some aspect of policy. It is not really the kind of assurance that we would want.

My worry is that the Minister has not addressed one point: if the Government believe that there should be a public dashboard, but are relaxed about the fact there could be a long period of time where consumers would be able to access their data, which the Government had mandated the release of, through only a commercial dashboard, why do they think that there should be a public dashboard at all? Theoretically, there could be five years between the commercial dashboard and the MaPS dashboard. If the Government think that it does not matter that there will be no public dashboard for that interim period, why do they think that it matters at all?

My final point is about the fact that the Minister thinks that there are no risks at all. I would like to hear this conversation between him and the noble Baroness, Lady Altmann, but I think it should take place in this Committee. The Minister defended the skeletal nature of the Bill. We will come back to this in the next group on Monday, but the Constitution Committee was quite explicit in saying that the Government’s defence that the Bill is very complex, that we have to get on with it and that we should not worry because the regulations will be affirmative, is not adequate or an excuse for drafting the Bill in this way. Part 4 is almost a skeleton.

The combination of all this is that the Government are saying, “There should be a dashboard. We cannot tell you when the public dashboard will be up. Don’t worry, it’ll be fine because we will regulate it. We can’t tell you who will regulate it, or how, or any of the circumstances. We can’t even tell you how we’ll make sure the risks don’t come to pass”. The Minister says that the information will be the same, but can he tell me whether it will be displayed in the same way, who will decide what the information will be or what the time periods will be? None of these questions has yet been answered. We will come back to them with our next amendment.

The Minister is asking the Committee to take a huge amount on trust when we have literally no idea what the dashboard will look like. Yet, somehow, we are just meant to say that it will be fine and the risks are fine. I spent 10 years on the board of the Financial Ombudsman Service. Every year we had to read a selection of case files. I have a pretty long experience of all the things that have gone wrong in sectors where the Government were confident they were well regulated and controlled, and where things could never possibly go wrong. My goodness, they have gone wrong in ways one could never have imagined when the regulations were being framed.

I am glad that the Minister is confident that there are low risks. I do not share his confidence, but maybe I am an old cynic. I would be interested if he could respond in particular to the point about why there needs to be a public dashboard at all if the Government do not mind whether there is not one for as long as it takes for MaPS to catch up. Can he answer that point?

[Earl Howe]

I believe I am right in saying that while your Lordships’ Delegated Powers Committee had some trenchant things to say about the delegated powers in the rest of the Bill, it felt pretty relaxed about the powers in Part 4, because it recognised that it was absolutely necessary to have the kind of flexibility I referred to. We must take it that the committee looked at these matters in some depth. Clearly, it did not feel constrained in criticising the nature of the powers in other parts of the Bill. I think the delegated powers here are necessary. I do not think we should be frightened of them, but I can see that the accumulation of them might appear off-putting to noble Lords.