Pension Schemes Bill [Lords]

Debate between Debbie Abrahams and Natascha Engel

2nd reading: House of Commons
Monday 30th January 2017 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I thank the Secretary of State for outlining the content of the Bill. In addition, I pay tribute to my colleagues in the other place who have already scrutinised the Bill.

The Opposition recognise and support the need to ensure that there is adequate regulation for master trusts as they have developed since the introduction of auto-enrolment, but the point made about the missed opportunity was right.

As the Secretary of State set out, the Bill focuses on defined contribution occupational pension schemes alone, defining regulation of master trust schemes which provide centralised workplace pension funds for several companies at the same time and have largely emerged as a result of the development of auto-enrolment in pensions. It gives the Pensions Regulator responsibility to authorise those schemes that meet certain criteria. It also provides for a funder of last resort in cases where a master trust fails. Sadly, this is something we hear too much about with too many other pension schemes. Finally, the Bill gives the Pensions Regulator the ability to withdraw authorisation from a master trust and sets out the criteria for triggering such events should a master trust face difficulty.

As I said, the measures in the Bill are slightly overdue. In April 2014, it was estimated that master trusts accounted for two-thirds of people who had been auto-enrolled. Master trusts operate on a scale that is unprecedented in occupational pensions and most are run on a profit basis. Currently, however, they are not subject to the same regulation as contract-based workplace pensions. There is no requirement for a licence to operate and limited barriers to entry. There is also little guidance on who can become a trustee and no infrastructure in place to support the wind-up of a failed trust.

Given that the savings and pensions of millions of employees and their employer contributions are at risk, we cannot allow this to continue. We support the Bill, which is vital to putting the auto-enrolment system on the strongest possible footing, but we will look to strengthen it where we can, for example by building on our amendment on the funder of last resort. By protecting members from suffering financial detriment, while promoting good governance and a level playing field for those in the sector, the Bill should ensure that the system is a secure and trusted means of saving in the future.

Before I come on to specific elements of the Bill, I would like to expand on how disappointed I am, and how millions of others will be, with how limited the Bill is. Perhaps the Secretary of State will surprise us, but I think this is likely to be the only pensions Bill in this Parliament. Significant issues are already arising relating to both state and occupational pension provision. It is therefore disappointing, if we are to see no other Bill, that those issues are not being addressed.

One key issue is that of the WASPI women: the Women Against State Pension Inequality Campaign. These women, and some men, have been left behind by the Government’s poorly managed accelerated equalisation of the state pension age. Over 2.5 million women born in the 1950s made their plans for retirement only to find that their retirement age had been quietly pushed back by the coalition Government.

[Madam Deputy Speaker (Natascha Engel)]

Order. I gently remind the hon. Lady that we are discussing what is in the Bill, and not what is not in the Bill. It is quite a narrow Bill.

[Debbie Abrahams]

I am grateful to you for reminding me, Madam Deputy Speaker. It was a debating point in the House of Lords. As I said, it is not likely that there will be another pensions Bill in this Parliament, so I hope you will give me some latitude.

[Debbie Abrahams]

I am grateful to my right hon. Friend for his remarks. We recognise the importance of the Bill in tightening the regulation—or lack of it—on master trusts and the vulnerability that that lack places on the millions of people who are being auto-enrolled. It is therefore important that the Bill goes through. My point is that if it is the only pensions Bill in this Parliament, it has serious omissions. Those omissions should be on the record, as should our objection to the fact them. If I could just have a few moments to mention—

[Madam Deputy Speaker]

Order. The hon. Lady has made the point that she feels those issues have been omitted, but they are not in the Bill. If she could now move on, I would be very grateful.

[Debbie Abrahams]

I am grateful for that ruling, Madam Deputy Speaker. Although we have made significant improvements in terms of pensioner poverty, I have to say it is a disappointment that there are still outstanding problems. Under our pension system, of which we should be guardians, one in seven pensioners still unfortunately lives in poverty. We are the fifth richest country in the world, so we should be able to ensure that our pension system provides dignity and security in retirement. Currently, it does not. For me, this a significant failure of our pension system and highlights a particular failure in the Bill.

I could also talk about the missed opportunities surrounding the Cridland review of the state pension age, which has not been brought to this place, and there are lost opportunities when it comes to the defined benefit Green Paper. It was due later this year, but it has now been decided that it will not be brought to this place for scrutiny in connection with this Bill.

I will move on, Madam Deputy Speaker, because I know I am testing your patience. [Interruption.] That is a bit unkind. Closer to home and in relation to the Bill, it does very little to build—[Interruption.] Do any Conservative Members want to intervene? Okay, I will carry on.

The Bill does very little to build on the success of Labour’s auto-enrolment policy by ensuring that saving into master trusts is accessible and encouraged for a number of groups currently excluded from auto-enrolment provision. I recognise that the Government have announced a review of auto-enrolment, but again, why is this not in the Bill?

Let me speak briefly about the issue of low-income savers’ access to saving in master trusts. Under the policy of auto-enrolment developed by my party, working people would be automatically enrolled in a master trust scheme once their earnings hit the trigger of just over £5,000. The logic of this proposal was that people would begin to save towards an occupational pension at the same earnings level at which they began to pay national insurance contributions. The coalition Government increased this earnings threshold to £10,000, denying millions of low earners the automatic right to save towards a relatively low-cost occupational pension through a master trust. Given the generational crisis developing in our pension system, we believe that more needs to be done to include low earners in savings provision and encourage retirement planning.

That is also true for the self-employed. Self-employed people currently make up to 15% of the workforce, and since 2008 have accounted for over 80% of the increase in employment. There is much evidence to suggest that the self-employed are not saving as much as other sectors of the workforce. Research by the Association of Independent Professionals and the Self-Employed found that four in 10 self-employed people did not have a pension. Despite that worrying evidence, there is little obvious means by which a self-employed person could begin to develop a savings pot within a master trust. Once again, this is not sorted out in the Bill. There are other examples, such as people with multiple jobs and carers, of those who do not have access to, and the benefit of, an occupational pension scheme.

The Secretary of State has just announced that there are gaps in the Bill, relating to its failure on a number of different issues. We are shocked by the vast amount of detail missing from the Bill, when that detail is necessary to achieve what the Government have set out to do. The Secretary of State mentioned that secondary regulations will not be laid before the end of the year. Once again, the Government are, in respect of some important protections, presenting a skeleton Bill, with much of the detail left to secondary legislation.

Although we generally support the Bill, despite its narrow scope, there are a few aspects that we will look to strengthen and a few gaps that we believe need to be plugged. These can be considered broadly under three themes: improved governance, strengthened member engagement and greater transparency. The Bill includes a number of clauses that provide a framework for the effective governance of master trusts. We welcome, in particular, the authorisation criteria set out in the Bill. However, it does not address a number of core principles, the first being scheme member representation.

Unlike defined benefit schemes, defined contribution schemes provide for the risk of saving and investment to be borne by the scheme member. On that basis, we believe that scheme members should be represented among the trustees of master trust pension funds. It is, after all, their money, and they have a direct interest in ensuring that a sound and sustainable investment strategy is delivered at good value. That surely stems from the basic democratic principle that those on whose behalf decisions are being made should have a say in those decisions. It would also be a necessary step towards greater transparency in the pensions system, which the Under-Secretary of State for Pensions himself confirmed that the Government would pursue following Labour’s campaign.

Furthermore, providing for a certain number of member-nominated trustees would not be a particularly new or unique arrangement. Mandated member representation already exists in the pensions system: trust-based pension schemes are required to ensure that at least a third of the board of trustees is member-nominated. Why should master trusts not be subject to the same requirement, especially in the light of the increased risk borne by scheme members?

Let me say something about transparency. For too long, people have been encouraged to put their faith—and, perhaps more important, their money—in a distant savings pot, and have been given very little information about where the money is invested, the performance of their savings, and, importantly, how much the investment is costing, in terms of the costs and charges that they will incur. Neither the scheme trustees nor the scheme members have been able to ascertain adequately whether they are getting value for money. I remember that in 2015, the former Financial Secretary to the Treasury promised the Work and Pensions Committee that if there was not openness about costs and charges, the Government would introduce legislation. Well, it has come a little bit late. Why has it taken so long?

In almost any other market, people wishing to purchase goods or services are given basic information about performance and costs before they do so. That basic principle is a necessary requirement to ensure that they receive value for money, but it is not operating in our pensions system. The Financial Conduct Authority has therefore published an interim report, which recognises a number of significant failings in the competitiveness of the asset management market. Its recommendations have important implications for the transparency of pension funds, especially in relation to the costs and charges being extracted from pension savings by investment managers.

We are pleased to see that part 2 of the Bill attempts to prevent excessive fees from being applied should a scheme member wish to take advantage of the Government’s pensions freedom reforms. However, the Bill does not refer to transaction costs, the charges applied by asset managers when they are making new investment decisions. There is a great deal of work to be done to tackle the problem of opaque and excessive costs and charges being extracted from workers’ savings by investment managers. Currently, the Bill merely scratches the surface. It must become a stronger vehicle for change in this regard.

We believe that, alongside member-nominated trustees, a member engagement strategy is required to ensure that master trusts are communicating properly with those whose money they are investing, and that they play their part in driving informed saver choices on a bedrock of transparent information. The Pensions Regulator’s voluntary code of practice for defined contribution schemes asks trustees to provide “accurate, clear and relevant” communications for scheme members as good practice. We believe that proper member engagement should not merely be a voluntary requirement placed upon trustees, but should form part of the regulatory framework. That would help to ensure that scheme members can make rational and informed choices about their pension savings, creating a more sustainable system.

There are other elements in the Bill whose purposes we want to strengthen or clarify: for instance, the definition of the scope of a master trust, what happens to non-money purchase benefits under this Bill, a number of issues relating to the pause clause, and the status of the scheme funder as a separate entity.

We welcome the Bill, but we see it as a wasted opportunity. So much is being introduced after the event. There will be no opportunity for another pensions Bill; the provisions will be delegated to statutory instruments.

Welfare Reform and Work Bill

Debate between Debbie Abrahams and Natascha Engel

Tuesday 27th October 2015 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Natascha Engel)]

With this it will be convenient to discuss the following:

New clause 3—Personal independence payment: timing of payment—

‘(1) Schedule 10 of the Welfare Reform Act 2012 is amended as follows.

(2) In paragraph 1(1), at start insert “Subject to paragraph ( ),”

(3) At end of paragraph 1(1), insert the following new paragraph—

“( ) Where a person in receipt of disability living allowance meets the requirements of section 82 of the 2012 Act his or her entitlement to disability living allowance shall terminate immediately and entitlement to personal independence payment shall commence on the same day.”’.

This New Clause aims to enable claimants of DLA who are transferred to PIP due to terminal illness to receive their first PIP payment immediately after being transferred. Currently claimants must wait four weeks from their final DLA payment to be made and then another four weeks to receive their first PIP payment.

New clause 4—Review of application of sanctions—

‘(1) The Secretary of State must before the financial year ending 31 March 2016 provide for a full and independent review of the sanctions regimes attached to working-age benefits, including but not limited to Jobseekers Allowance, Employment Support Allowance and Income Support, to determine whether they are effective and proportionate for meeting the Government’s objectives.

(2) The terms of reference for the review must include consideration of—

(a) the application of sanctions to lone parents with dependent children;

(b) the application of sanctions to claimants who are disabled;

(c) the effectiveness of sanctions in moving claimants into sustained work; and

(d) any other matters which the Secretary of State considers relevant.”

To provide for a full, independent review of the operation of the sanctions regimes attached to out of-work benefits, to determine the effectiveness of sanctions in moving claimants into sustained work as well as any adverse impacts on particular groups.

New clause 5—Report on impact of benefit cap reductions—

‘(1) The Secretary of State must publish and lay before Parliament before the end of the financial year ending with 31 March 2017 a report on the impact of the benefit cap reductions introduced by this Bill.

(2) The report must include an assessment of the impact on each of the measures of child poverty defined in the Child Poverty Act 2010.”

This new clause requires the Secretary of State to review impact of lower benefit cap after 12months.

New clause 7—Changes to the benefit cap—

Changes to the Benefit Cap shall not be made until the Secretary of State has carried out an assessment of the impact on its effect on poverty and laid a report before the House of Commons, The Scottish Parliament, The Northern Ireland Assembly and the National Assembly for Wales.”

New clause 9—Universal credit and carers—

Claimants in receipt of universal credit who are responsible carers for children are not subject to work focused interviews or work preparation requirements until their youngest child starts school.”

New clause 10—Changes to age of eligible claimants of housing benefit—

The Social Security Contributions and Benefits Act 1992 is amended as follows. After section 130(1) insert—

‘(1A) The Secretary of State shall not make provision about eligibility for housing benefit in respect of the age of a claimant except by primary legislation.”.”

New clause 11—Entitlement to housing costs element of universal credit for 18-21 year olds—

‘(1) Entitlement to the housing cost element of Universal Credit shall not be restricted for those 18 to 21 year olds who fall into the following categories—

(a) those who have previously been in work;

(b) a person who lives independently;

(c) those with a disability or mental health problem receiving Employment Support Allowance or Income Support;

(d) those with dependent children;

(e) pregnant women;

(f) those who are owed a rehousing duty under—

(i) section 193 of the Housing Act 1996;

(ii) section 9 of the Homelessness etc. (Scotland) Act 2003;

(iii) section 73 of the Housing (Wales) Act 2014;

(g) those who are homeless or at risk of homelessness who are being assisted by local authority housing teams;

(h) those who are living in statutory or voluntary sector homelessness accommodation;

(i) those who have formerly been homeless and have been supported by voluntary or statutory agencies into accommodation;

(j) those who have formerly been homeless between the ages of 16 and 21;

(k) a person without family or whom social services have found that a home environment is not suitable for them to live in; care leavers and

(l) those leaving custody.

(2) Within three months of section [Entitlement to housing costs element of universal credit for 18-21 year olds] of this Act coming into force, the Secretary of State must, by regulation, provide definitions of—

“a person who lives independently”;

“risk of homelessness” and

“a person without family”.”

New clause 12—Review of application of sanctions—

‘(1) The Secretary of State must on commencement of this bill, commence a full and independent review of the sanctions regimes attached to working-age benefits, including but not limited to Jobseekers Allowance, Employment Support Allowance and Income Support , to measure the impact on—

(a) to lone parents with dependent children;

(b) claimants who are disabled;

(c) moving claimants into continuous work;

(d) homeless;

(e) protected characteristics;

(f) long term health conditions;

(g) claimants with mental health disorders and

(h) any other matters which the Secretary of State considers relevant.”

Amendment 35, in clause 6, page 8, line 39, leave out subsection (2)

Amendment 36, in clause 7, page 9, line 2, leave out “£23,000 or £15,410” and insert “£26,000 or £18,200”

Amendment 37, page 9, line 3, leave out “£20,000 or £13,400” and insert “£26,000 or £18,200”

Amendment 38, page 9, line 15, leave out paragraph (a)

Amendment 39, page 9, line 17, leave out paragraph (b)

Amendment 40, page 9, line 19, leave out paragraph (c)

Amendment 41, page 9, line 21, leave out paragraph (d)

Amendment 42, page 9, line 27, leave out paragraph (f)

Amendment 43, page 9, line 39, leave out paragraph (k)

Amendment 44, page 9, line 41, leave out paragraph (l)

Amendment 45, page 9, line 44, leave out paragraph (n)

Amendment 46, page 9, line 46, leave out paragraph (o)

Amendment 47, page 9, line 48, leave out paragraph (p)

Amendment 48, page 10, line 1, leave out subsection (6)

Amendment 56, page 14, line 15, leave out Clause 13

Amendment 29, in clause 13, page 14, line 26, at end insert—

‘(3A) The Secretary of State may not lay an order under section 31 to bring the provisions of subsections (2) and (3) into force until he has laid before both Houses of Parliament a report giving his estimate of the impact of those provisions on persons who would otherwise be entitled to start claiming the work-related activity component of employment and support allowance.

(3B) No order bringing subsections (2) and (3) into force shall be made unless a draft of the order has been laid before and approved by a resolution of both Houses of Parliament”.

Amendment 31, page 14, line 29, at end insert—

‘(5A) The Secretary of State must make provision for additional personalised and specialist employment support in connection with the changes made by subsections (1) to (3).

(5B) The Secretary of State must issue guidance on the following—

(a) the forms of personalised and specialist employment support;

(b) the means by which a diverse market of suppliers for personalised and specialist employment support can be developed in local areas; and

(c) information for local authorities seeking to improve local disability employment rates.”

Amendment 20, page 14, line 39, leave out Clause 14

Amendment 57, page 14, line 39, leave out Clause 14

Amendment 58, page 15, line 1, leave out Clause 15

Amendment 59, in clause 15, page 15, line 4, leave out paragraph (a)

Amendment 60, page 15, line 4, leave out paragraphs (a) to (c) and insert—

“(a) in section 19(2)(c) for the words “under the age of 1” substitute “who has not yet started primary school””

Amendment 61, page 15, line 9, after “2,”, insert “3 or 4”

Amendment 62, page 15, line 10, leave out paragraph (c)

Amendment 63, page 15, line 13, leave out paragraph (a)

Amendment 64, page 15, line 13, leave out paragraphs (a) and (b) and insert—

“(a) in regulation 91 (claimants subject to work-focused interview requirement only), for the word “3” substitute “5 or when the child starts primary school”;

(b) in regulation 91A (claimants subject to work preparation requirement) for the words “3 or 4” substitute “who has not yet started primary school”;”

Amendment 65, page 15, line 15, leave out paragraph (b)