Pension Schemes Bill

Gregg McClymont Excerpts

Tuesday 24th February 2015 Commons Chamber

These amendments are welcome, and as far as I can see are largely technical, and I commend them to the House.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

I thank the Minister for his explanation of amendment 1 and those with which it is grouped. Let me make a number of points. There are two parts of this Bill, and we will come to the second part regarding the way it interacts with the pension budget flexibilities announced in last year’s Budget in a moment. I would like to put on record my thanks to the other place and particularly those on the Opposition Front Bench who have done such a sterling job on what is often a rather technical Bill. I also want to put on record my appreciation for the work done by Baronesses Drake and Hollis who have done so much to make this a better piece of legislation.

Let me pick the Minister up on a couple of things, particularly around clause 8. He referred in his explanation to clause 8 and the delegated powers contained therein. He will be aware that the debates in the other place focused for some time on the implications of clause 8 because, of course, it is a key and critical provision setting the definition of what are collective benefits, on which the rest of the clauses in part 2, and many of the associated delegated powers, depend. That is why it is so critical in its construct and its definition of the delegated powers associated with it.

In the other place, Baroness Drake made it clear that in her view the power to set regulations under clause 8(3)(b) should be subject to the affirmative procedure because a definition of what is or is not a collective benefit is critical to the whole scope of part 2, which deals with collective benefits. Clause 8(3)(b) would allow the Government to use regulations to avoid schemes being subject to the expense of meeting the detailed requirements set out in clauses 9 to 35 if they are deemed not to be proper collective benefits, but the clause, in granting the Government power to significantly alter by regulation the constituent benefits that are not included in the definition of collective benefits, has the ability potentially to remove members of schemes from the protection of the requirements in the other clauses in part 2.

The Minister will know that this could have considerable implications for members and the scope of the whole of part 2. The potential of this regulation to remove members from the protections they may already have by being in a designated collective benefit scheme which subsequently a change of regulation deems they are no longer in makes it in our view compelling that this should remain a power that is subject to the affirmative procedure. The Government’s reply to the scrutiny from the Opposition in the other place was to say, “Well, the affirmative procedure will be used in first use, but subsequently not,” but surely this is worth considering. I will be interested to hear the Minister’s response.

In the other place, the Government gave a detailed response to this critique. As anyone who reads the debates will see, it revolved around the fact that the first use will be by affirmative procedure, but the affirmative procedure might be used in the first instance on something quite straightforward, such as that an obvious with-profits policy arrangement is not to be included in collective benefits, but the subsequent use of the regulation under the negative procedure might go-to the heart, to something much more fundamental such as an existing collective benefit scheme. We must be aware of the possibility that regulations could be used to weaken the protections scheme members have.

In response to this specific point, Lord Bourne said in the other place that the negative procedure will still provide a measure of protection, but we know that is not the level of protection that would be provided by the affirmative procedure. This is rather technical, but it does bear upon a very important aspect, which is that moving towards a negative position rather than a positive position through an affirmative vote could be a way in which the protections are weakened—I am sure against the Minister’s inclinations and desires. I would appreciate hearing his observations on that part of the debate in the other place.

More widely, much of the debate in the other place on this part of the Bill focused on clauses relating to the duties of fiduciaries or managers of the schemes. The Minister and I have had that debate a number of times, but given all the regulatory complication of setting up the independent governance committees and giving them fiduciary responsibilities to monitor the behaviour of private pension providers while exempting the private providers themselves, this just seems an unnecessary complication. Pensions are complex enough without making them that much more complex. The responsibility should be put directly on the decision makers in the pensions industry by applying a fiduciary obligation not to them themselves, but to trustees to do the job of governance throughout.

The Minister will be aware that Professor John Kay, reporting for the Government—and particularly for the yellow-tinged part of the Government, as the Minister will no doubt be aware—was clear that everyone managing someone else’s money or advising on investment should be subject to fiduciary standards of care. I have argued on a number of occasions—and if it is exhausting for me, it must be exhausting for those listening—for extending a clear fiduciary duty to those who have discretion over the management of other people’s money. The Australians have that principle at the heart of their system, and while that system is not perfect, that aspect of it makes it clear unequivocally that conflicts of interest must be resolved in favour of beneficiaries.

I am not expecting the Minister dramatically to change course at this stage, but I would just point out that the Financial Conduct Authority’s recent investigations into the pensions industry have provided substantial arguments in favour of the proposition that I and others have been advancing. We have now had numerous reports on how the market is not serving pension scheme savers well, whether they have legacy schemes or annuities, owing to a lack of transparency, charges and many other factors.

[Steve Webb]

As the hon. Gentleman says, we have discussed these issues before. Will he just clarify which of the amendments he is referring to, so that I can respond helpfully to him?

[Gregg McClymont]

I was referring to clause 8, to which the Minister has also referred, as well as referring to that part of the Bill more widely where it pertains to governance. I am sure that the Minister will be weary of the debates that we have had on these issues, and that he will be keen to set out his current thinking on this aspect of the Bill. He will be aware that this issue is central to his ambitions for collective defined contribution. If it were not, he would not have set out the Bill in this fashion.

I should like to put on record again my thanks to the other place and in particular those on the Opposition Front Bench, including the good Baroness Drake and the good Baroness Hollis. I am grateful, too, for the constructive spirit in which the Government in the other place have approached the Bill. I look forward to hearing the Minister’s observations on the issues relating to delegated powers and, more widely, on the governance of the pension schemes that he rightly wants to make permissible under the Bill.

[Steve Webb]

I shall respond briefly to the issues that the hon. Gentleman has raised. I am grateful to him for his comments, and I should like to extend my thanks to our noble Friends in another place for bringing the Bill forward on our behalf. I also share his respect for his colleagues, Baroness Drake and Baroness Hollis, for their knowledge and their contribution to the debates.

As the hon. Gentleman says, the issue of whether the affirmative or negative procedure is used in regard to regulations in clause 8 was debated at length. He pointed out that Baroness Drake wanted the affirmative procedure to be used in all cases, while the Government originally planned always to use the negative procedure. The Government then responded to the views of the Delegated Powers and Regulatory Reform Committee and agreed that, on first use, the affirmative procedure would be used. Obviously we could say that everything should always be decided through the affirmative procedure, but there is a balance to be struck here. The Committee wanted that, but the Government do not consider that to be appropriate because we sometimes need the flexibility to act quickly if schemes are being inappropriately caught by the collective benefits definition.

There is always a trade-off in these circumstances. Sometimes in the world of pensions, things happen that we do not expect. People might be in the wrong place, for example, or their rights might be at risk or inappropriately protected, and the Government need to be able to move quickly rather than having to go through the rather lengthy parliamentary process that the affirmative procedure requires.

We accept, however, that clause 8 is a key provision and I can put on record that it is not our intention for members who are in schemes providing collective benefits, and subject to the provisions, suddenly to lose the important protection that the regulations made under part 2 of the Bill will provide. If the situation were to arise in which those protections were to be taken away, we would want to understand the situation and ensure that it was appropriate and necessary before taking action and laying regulations. As the hon. Gentleman said, even under the negative procedure there is scope for praying against the regulations if a particular concern should arise, and for a debate to take place.

Most of my experience has been from the Opposition Benches, and during the passage of primary legislation, the Opposition always seem desperate for everything to be conducted under the affirmative procedure while the Government want nothing, but many of the affirmative statutory instruments that the hon. Gentleman and I have dealt with, over the past however many years it has been, have been over in 10 minutes. We get very exercised about the need for affirmative scrutiny, but when we get to that scrutiny, it can occasionally border on the desultory. I hope that we are striking the right balance in recognising that these are important matters and providing affirmative protection on the first use and further parliamentary scrutiny on any subsequent use through the normal processes.

--- Later in debate ---

[Steve Webb]

This group of amendments relates primarily to the new pensions freedoms announced by the Chancellor in the Budget last year, which will generally come into effect on 6 April this year. I shall begin with the pension guidance and guarantee, now known as Pension Wise, covered by amendment 10 and amendments 66 to72. The Government intend that all those who stand to benefit directly from the new pensions flexibilities provided by the Taxation of Pensions Act 2014 should have access to guidance. The amendments to clause 47 and schedule 3 are technical amendments to ensure that that is the case.

The amendments adjust the definition of pensions guidance in new sections 333A and 137FB of the Financial Services and Markets Act 2000 to extend pensions guidance to survivors of members who have flexible benefits, rather than just the members of pension schemes. This is needed because in some circumstances pension schemes may provide benefits to survivors of members of the scheme other than insurance-based products or cash lump sums—that is, flexible benefits—without their becoming members of the scheme.

Amendments 11 to 18 and amendment 50 provide advice safeguards. Clauses 48 and 51 were amended in the Lords via Government amendment. These contain the provisions creating the advice safeguard, which requires schemes to check that financial advice has been received before an individual exchanges their safeguarded rights for those that can be taken flexibly. Clause 48 makes provision for Great Britain, while clause 51 makes corresponding provision for Northern Ireland. Amendments 11 and 15 improve the drafting of clauses 48 and 51, while amendments 12 and 16 ensure that the requirement to take advice also applies when a member takes an uncrystallised funds pension lump sum from benefits that are safeguarded.

On Report in the other place, a second group of amendments to those clauses were made in response to the recommendations of the Delegated Powers and Regulatory Reform Committee. Amendments 13 and 17 specifically provide for the only exception to the advice requirement that is intended to be in effect by 6 April—namely, an exemption from checking that advice has been received in the case of those with safeguarded wealth of £30,000 and below. Amendment 50 provides that regulations creating this exception are subject to the negative procedure, while regulations creating any other type of exception are subject to the affirmative procedure.

Amendment 14 provides more detail on the nature of the “appropriate independent advice” that is to be required under the safeguard. It provides that “appropriate independent advice” must be given by an “authorised independent adviser”, who has permission under the Financial Services and Markets Act 2000 to carry out a regulated activity specified in regulations. The Financial Conduct Authority sets out the standards for regulated activities in its rules, and that will allow it to set the standards for advice provided under the advice safeguard. Amendment 18 makes corresponding provision for Northern Ireland.

Let me now deal with amendments 19 to 21, 23 to 25, and 38 to 43, which are amendments to clauses 55 and 56, consequential on the Taxation of Pensions Act 2014. They allow a person to leave any remaining money purchase funds to a nominee or a successor. Schemes will be able to offer both nominees and successors a drawdown fund, so they need to be included in the clauses which deal with such arrangements. Amendments to clauses 60 and 61 do the same thing for legislation covering Northern Ireland, while amendments to clauses 72 to 74 make small changes to the definitions of terms used in part 4 of the Bill.

Let me now deal with amendments 22, 26 and 73 to 116, which are technical amendments to reflect the extension of the statutory right to transfer benefits and to ensure that the transfer process continues to operate smoothly after the requirement to take “appropriate independent advice” comes into force in April. Without these amendments there is a risk that the new transfer rights would not operate as intended after the new flexibilities come into force. Schedule 4 of the Bill amends the existing transfer rights provisions contained in part 4 of the Pension Schemes Act 1993 to give scheme members a statutory right to transfer a particular category of benefits, and gives scheme members with flexible benefits a statutory right to transfer these rights up to and beyond their scheme’s normal retirement age. Amendments 73, 92, 94, 96 and 115 would make consequential amendments to reflect numbering changes made elsewhere in schedule 4.

Amendments 22, 82 and 83 ensure that clause 55 and regulations under clauses 56 and 57 override any pension scheme rules which conflict with the statutory right to transfer overriding provisions for the purposes of the definition of “scheme rules”. These provisions amend the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004, while amendments 26, 105 and 106 make corresponding provision for Northern Ireland. Amendment 75 replicates existing powers in the 1993 Act and will be used to preserve the effect of existing regulations under those powers, while amendment 98 makes identical provisions for Northern Ireland legislation.

Amendments 76 and 78 provide powers to extend the period within which a member who has received a statement of entitlement must take the cash equivalent of their accrued rights, and for the right to take the cash equivalent to lapse. Amendment 80 provides a power to extend the time in which the trustees of a scheme must do what the member requires. Amendments 88 and 89 make similar provision to extend time for pension credit members, and for trustees to act on members’ instructions. Amendments 99, 101, 103, 111 and 112 make similar amendments to the corresponding Northern Ireland legislation.

Amendments 79 and 102 make changes to section 98(1) of the 1993 Act and clarify that a member’s right to take a cash equivalent falls away where the trustees’ duty to carry out the member’s wishes is extinguished because they have been unable to confirm that the member has taken appropriate independent advice. Amendments 81, 86, 93 and 95 ensure that the definitions of scheme rules in the 1993 Act and the 2004 Act work for personal pension schemes. Amendments 82, 83 and 105 ensure that the definitions of “scheme rules” in the 1993 and 2004 Acts also apply for personal pensions, while taking account of any provisions that override these rules. Amendments 104, 109 and 116 do the same for Northern Ireland. Amendment 87 inserts a power to disapply the right of a pension credit member to transfer their pension credit rights in relation to prescribed descriptions of persons. Amendment 110 makes a similar amendment to Northern Ireland legislation. The remaining amendments in this group make a number of drafting, technical and consequential amendments to schedule 4 of the Bill.

Amendments 27 to 37 relate to public service scheme transfers. These are technical changes to improve drafting and ensure that the new safeguard applies where it should. The remaining amendments 45 to 48 and 51 to 55 are general amendments to part 6 of the Bill and are what are often known as the “back of the Bill” provisions. Amendments to clauses 80 and 81 would extend provisions to Northern Ireland, while the amendment to clause 84 would ensure that pension flexibilities provisions come into force at Royal Assent. I hope that what I have said has been helpful, and I commend the amendments to the House.

[Gregg McClymont]

The Minister raced through his text, much to the chagrin of the whole House I am sure, as we were enjoying it so much. Let me pick up on a couple of issues. We are dealing with the part of the Bill that has created some complexities because, to put it politely, it dovetails with the 2014 Act. If we were being less kind, we would say that some tensions are created because we cannot examine this Bill while, side by side, scrutinising that Act. I put that point on the record, although it has been discussed previously.

Lords amendments 13, 14, 17, 18 and 50 refer to the much-discussed guidance that those eligible to access their pension pots from April will be offered. The Minister mentioned Government amendments being tabled in the other place. Of course, the amendments are welcome, both as a necessary second line of defence and because they show that the Government are listening to the Opposition in this place and in the other place, and to the campaign led by interested pensions organisations outside the House. Why is it so important to have that second line of defence? As the Government accept, it is simply because it is one thing to offer guidance online from gov.uk, in person from citizens advice bureaux and by telephone through the Pensions Advisory Service, but what happens when an individual discusses buying a product from a provider is another thing entirely.

Much of the debate on this Bill and other pensions Bills in this Parliament has revolved around that issue. According to the FCA studies and a variety of sources, decisions often end up being much more in the interest of those selling the product than those buying it. The Government have recognised that when someone comes to consider buying a product, the provider must check that they have received the appropriate guidance, either from the services I mentioned or from other sources. It is welcome that they have accepted the argument of the Opposition and others on putting in place a second line of defence, which the Minister calls the “advice safeguard”.

That brings us to one question that relates to part of the 2014 Act, as well as this Bill: how do we ensure that individuals are equipped to make what at times are complex financial decisions about what to do with their retirement income? Much of the legislation pertaining to this important aspect lies in the 2014 Act and, on one level, is outwith the bounds of what we are discussing today. But it is important to put on the record that significant questions remain about how the guidance guarantee will work from April. That view has been heard repeatedly from those in the pensions world and I am sure that the Minister, if he is not having sleepless nights about it, is paying close attention to it.

The impact of the new flexibilities, which will be introduced from April, on eligibility for means-tested benefits was the subject of much discussion in the other place. This pertains to the guidance amendments and, more widely, to the 2014 Act, which of course goes hand in hand with the Bill. Baroness Hollis asked a series of important questions of the Minister in the other place and the Government about how this new system of pension flexibilities will work in harness with existing eligibility for benefits and, more widely, with Department for Work and Pensions benefit rules. I have to say that it is not that reassuring to hear from the Minister in the other place that all will be revealed before April. As things stand, there is still no clarity over how the new flexibilities will interact with DWP benefit rules, which will concern the whole House.

Allied Steel and Wire (Pensions)

Gregg McClymont Excerpts

Tuesday 10th February 2015 Westminster Hall

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Sittingbourne and Sheppey (Gordon Henderson) on bringing the issue of FAS pensions to the attention of the House once again.

As the hon. Gentleman set out eloquently, this has been a burning issue for some time. He made it clear that the Pensions Action Group will continue to campaign to see the full value of their pensions restored. No one who walks the pensions road or takes the pensions brief can be unaware of the strength of feeling about the issue. Over the past few years, as shadow Pensions Minister, I have met representatives of the Pensions Action Group and of trade unions—including Community, which I met last week, and Unite, a significant number of whose members were affected by the collapse of the steel workers’ pension scheme.

Let me say a little about where I think the issue has come from and where it stands. The previous Government took action and put in place a system to ensure that those who lost their pensions received 90% back, with a cap at just under £30,000. I have the sense that, particularly in the past 18 months or so, there has been growing anger among campaigners about promises that they think were made before the previous election by parties who came to power but did not meet those promises.

Members of the Government parties have been outspoken about the failure to meet the promises that were made. The hon. Member for Cardiff North (Jonathan Evans) was clear that the indications given to pensioners—that the missing element would be restored to them on a change of Government—have not materialised. He said that in a polite and decorous way, but that was his point.

One of the campaigners in the Pensions Action Group, John Benson, went as far as to say that the group had been betrayed by the coalition. I do not know whether that is true, as I entered this House in 2010, but it speaks to the difficulties that the issue raises.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I pay tribute to the hon. Member for Sittingbourne and Sheppey (Gordon Henderson) for securing this debate. I must declare an interest, as I am a member of the Community trade union and I was a former regional industrial officer for it, although I did not work in the areas where Allied Steel and Wire were based. We were part of a large campaign, and the previous Government were challenged in the European Court of Justice. Perhaps my hon. Friend wishes to comment on the fact that the Government have not applied article 8 of the European insolvency directive, which the European Court of Justice said would entitle the steel workers to full compensation.

[Gregg McClymont]

No one can doubt the attention that Community has paid to making that case for its members, who suffered great detriment as a result of the collapse of these pension schemes.

I know from the discussions that I have had that there was a strong sense that there would be further action, given the promises made by the parties that are now in government. Actually, given the current situation, the previous Government’s substantial intervention stands as the signal contribution from the state to alleviating the detriment suffered by members of those schemes. Since 2010, there has been no advance on the agreement reached under the previous Government. Of course, that agreement has virtues—up to 90% is a lot more than nothing. It is a big difference.

Community and Unite have acknowledged to me that the previous Government’s intervention made a substantial difference. Of course it did. Those who lost their pensions now receive up to 90% and a cap at approximately £29,300—I cannot remember the precise number; I think it is £29,348. That is a significant advance, but those people had a strong feeling that they would get more if there was a change of Government; perhaps that speaks to the differences between opposition and government. None the less, promises were made, and those who made them should account for why they have not been fulfilled.

[The Minister for Disabled People (Mr Mark Harper)]

I am listening carefully to the hon. Gentleman. He may be getting to this, so he will have to forgive me if I am jumping the gun. Given the tone of what he is saying, is he making a commitment on behalf of the Opposition to make a significant financial improvement to what is on the table?

[Gregg McClymont]

That is the difference between what a responsible Opposition do and what appears to have happened before 2010.

[Mr Harper]

So it is just words.

[Gregg McClymont]

The Minister says it is just words, but the words that those campaigning for the parties that are now in government used have not materialised into any action. The difference between the Government parties and Labour is not only that the previous Government actually acted, but that we are a responsible Opposition and we will not promise things that we do not intend to deliver.

[Tom Blenkinsop]

The perfect example of that, to which the Minister must pay attention, is the difference between the Conservative party’s pre-election promises about Equitable Life and what was delivered. We need to bear that in mind because it is an ongoing case, much like this one. We are talking about the lives of individual workers who laid down their deferred income on the understanding that they would receive it.

[Gregg McClymont]

Yes. We are dealing with individual workers’ lives, and it is incumbent on political parties not to promise things in their search for votes that they do not intend to deliver. That is the big difference between the Government and the Opposition.

I have met a number of times with the pensioners affected by this issue, and the impact on people’s lives is enormous. The previous Government acted—it was not just words. Understandably, that action has not met all the expectations of those whose pensions disappeared. A significant part of their pensions has been restored, but not all. Understandably, those affected feel an enormous sense of injustice, but it is incumbent on us all to use words carefully, to make sure that actions speak louder than words and to take on board the points made today.

The hon. Member for Sittingbourne and Sheppey, who rightly brought this issue before the House, mentioned the Pension Protection Fund, comparing it with the FAS. The PPF is another welcome development: it ensures that if someone is saving into a company pension, they can have confidence that that pension promise will be met, whatever circumstances the company finds itself in. He was right to draw a distinction between the financial assistance scheme approach and the PPF.

The issue of overpayments has repeatedly been brought to my attention and adds to the agony, if I may use that word—I think it appropriate—of the situation. Not only is one’s full pension not restored, but that individual then finds through no fault of their own that they are asked to repay money because of mistakes made in calculations. Any sensible Government would look at that.

I find it curious that the Minister for Pensions is not responding to today’s debate—I do not know why he is not. We were in a Committee together earlier; perhaps he is not here because of the potential for that Committee to overrun, but it would have been nice to have him stand up and explain the Government’s approach. I looked at what he has said on this issue. He has referred to the fact that the Government are paying out £2 billion, I think, but of course that system was put in place by the previous Government. There has been no advance under the coalition.

Let me finish by making a broader point. When individuals save into a company pension scheme, it is understood that that pension will be paid out in full when individual savers retire. That is understood to be part of the compact between employers and employees. What emerged in the 1980s and 1990s really brought home the necessity of putting in place a system that protects against the non-fulfilment of that pension promise.

Although it is easier for us, as politicians, to step back a little and make this point, the system now is clearly much better than the situation in the ’90s. That, however, is cold comfort to those who have not received their full pension. Having regularly met the representatives of the Allied Steel workers, let me say that Labour understands both the necessity of continuing the campaign and the injustice felt at not receiving the full pension that is due. We will continue to listen closely to the campaigners, but we will not promise something that we are not sure we can deliver. We have learned that lesson from watching the parties who are now in government.

[Tom Blenkinsop]

I just want to add a point to my hon. Friend’s good summing up. Without industrial vigilance, this campaign would not even have started in the first place. The lion’s share of the funding for taking the legal case to the ECJ back in 2006 came from the trade union movement. Without collective bargaining in workplaces, there is no ability to be vigilant about any employer who tries to perform any sort of industrial acrobatics to get out of the payments that they owe their employees.

[Gregg McClymont]

Yes, and I want to finish by paying tribute to the campaigns run by the Pensions Action Group and the trade unions. Through those campaigns, this issue has remained near the top of the pensions agenda. I repeatedly receive submissions on it and that repeatedly results in conversations and dialogue with the various parts of the campaign.

In my understanding, and from meetings with the campaigners and those affected, that search will continue until the full payment of the pension due is realised. Although I am not going to stand here in opposition and promise something that I am not sure I can deliver, I will say that it was the last Government who put in place the system that does exist. That surely stands for something next to the honeyed words of the Government.

Post Office Card Account

Gregg McClymont Excerpts

Tuesday 16th December 2014 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

This is a welcome announcement from the Government, especially for all those who rely on Post Office card accounts. Indeed, it is the only sensible decision for consumers, pensioners and small businesses and for the Government. After all, it was this Government who promised to make the Post Office the front office of Government, to the tune of contracts worth £450 million per annum.

In the context of that promise, today’s statement raises as many questions as it answers. This is a not a new contract, but the renewal of an existing contract. What is the value of this new contract to the Post Office relative to the current contract? Where will the £27 million of efficiency savings come from? Does this mean more money for the Post Office or less? Does this statement take the Government closer to or further away from fulfilling their broken promise to the Post Office of an annual income of £450 million from the provision of Government services?

Before this renewal, Government services accounted for about £130 million of Post Office income. What is the total amount of Government income through the provision of Post Office services which will be in place following the contract renewal? Again, does this mean more money or less for the Post Office and for sub-postmasters? The National Federation of SubPostmasters urges the Government to fulfil their promise to deliver £450 million of income per year. Can the Minister be clear to the House about whether the statement takes the Government closer or further away from delivering that promise?

As the Minister knows, the Department for Work and Pensions had several pilots under way, which the Post Office was undertaking on its behalf. Will the Minister update the House on the progress of those pilots? They involved, for example, verification for national insurance and verification of documents for the Pension Service. What stage have those pilots reached, and will they contribute to closing the gap between the promise made and not delivered to the Post Office during the botched privatisation of Royal Mail?

More widely, the Minister rightly reflects on the importance of Post Office card accounts to those with disabilities and to pensioners. The Post Office Local programme is part of the network transformation and can, in some circumstances, reduce the number of counters available that provide privacy to those undertaking POCA business. What is the relationship between the post office modernisation programme and the ability of Post Office card account users to continue to enjoy the privacy that they associate with post office transactions, especially pensioners and the large number of Post Office card account holders who are over the age of 80?

The Minister referred in his statement to the number of transactions undertaken through Post Office card accounts. Does he seek to arrest the decline in usage? Is he clear that there has been a decline both in the number of people using POCAs and the number of transactions? His statement is ambiguous on that point. Finally, will he be clear about whether the Government have a strategy to increase the usage of Post Office card accounts or whether they are happy to let the decline continue?

This is a welcome announcement for all those who use post offices, but as far as we can see, it takes the Government no closer to—indeed, it takes them further away from—meeting that broken promise to the Post Office about Government services and making it the front office of Government. Can the Minister provide clear answers about the value of the contract, what it means for the Post Office’s total income and what it means for all those who care about the Post Office and Post Office card accounts?

[Steve Webb]

I am grateful to the hon. Gentleman for his characteristically enthusiastic welcome for this very important announcement that will help to safeguard the post office network. The big contrast between the past four or five years and the preceding 13 years is the hours that hon. Members are not having to spend running “Save our post office” campaigns. The hon. Gentleman talks about decline. The policy of the previous Government was to have rounds of post office closures; this Government have invested £2 billion in preserving the network. This contract will be a further fillip for postmasters.

The hon. Gentleman asks what we are doing to reverse the decline in Post Office card account use. Back in 2005 there were 4.2 million people using POCAs, and in 2010 there were 3.4 million. Under Labour the number of people using POCAs fell by 800,000, so the idea that continuing decline in the use of POCAs is a new phenomenon is news to me. What is happening is that older pensioners, sadly, die and do not use a POCA any more. Newly retired pensioners tend to be more familiar with banking, so the number of pensioners using the POCA will gradually decline, but when Labour set up the previous POCA contract, it asked the Post Office to migrate 700,000 working-age people off these accounts to save money. In fact, this did not happen. When Labour set the contract, its intention was to reduce the scope.

I made it clear in my statement that we believe we will keep the POCA over the next seven years for pensioners. People of working age, as they come within the scope of universal credit, will need a transactional bank account, so although the most vulnerable universal credit recipients will continue to have access to POCAs, we will seek to ensure that wherever possible people of working age have a transactional banking account that will allow them to benefit from direct debits, budgeting and so on. That is where they want to be.

The hon. Gentleman asked about post office locals. I am advised by my hon. Friend the Minister with responsibility for postal services that customer satisfaction, which is presumably the yardstick in these matters, is up in post office local branches. The hon. Gentleman asked about privacy. Presumably, when customers decide whether they are satisfied or not, privacy is one of the things they consider. In answering our questions, they say that they are more satisfied than they were before the investment went into these post offices.

The hon. Gentleman asked about efficiency savings in the contract. Unlike the previous Government, we do look to make those savings, but we have not reduced the price that sub-postmasters get for each transaction. We could have said to Post Office Ltd, “Save us some money—give the sub-postmasters less”, but we did not do that because the sub-post offices are our priority. He asked about the figure of over £400 million. That is not a target that the Government have set for ourselves.

The hon. Gentleman asked about other services. We are exploring the use of identity-related services at the post office. We run a cross-government service called Tell Us Once for customers to report births and deaths, and we are looking at whether that can be carried out at the post office and linked with ID verification. There is plenty of potential for new services. Driver and Vehicle Licensing Agency counter services have gone into post offices, as has Check and Send, an excellent service from the Passport Office. The crucial thing about this seven-year agreement is that it allows plenty of time for new services to be developed so that our post offices have a long and prosperous future.

Oral Answers to Questions

Gregg McClymont Excerpts

Monday 8th December 2014 Commons Chamber

[Steve Webb]

I agree with my hon. Friend in the sense that if one were designing a system from scratch, one would not necessarily design the one that we have arrived at over the course of 50 years. He will be aware, however, that paying for this indexation would cost some half a billion pounds a year, and I do not believe that any party in this House has committed to such an increase in public spending.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The state pension and associated benefits are very important to UK pensioners. Will the Minister therefore explain why, following last week’s uprating statement, 1.6 million pensioners will see their state pension income rise by just 87p?

[Steve Webb]

I am surprised that the hon. Gentleman did not raise this point last Thursday when I made an oral statement on this issue; perhaps he heard about it on “Money Box” on Saturday. As he knows, not all pensioners receive the full rate of the state pension. Many people—many women, particularly older women—receive a reduced rate, and, as has always been the case, the increase is proportionate to the rate of pension they receive. They get the same percentage increase; it is lower if they get a lower pension.

Pensions and Benefits Uprating

Gregg McClymont Excerpts

Thursday 4th December 2014 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Every year the Minister comes to the House and declares to what is supposed to be a grateful nation that the wisdom and generosity of the Government is reflected in the uprating of pensions and benefits. Sadly, the reality is rather different. The Minister said at the end of his statement that “no one is left behind”, and he rushed through the Government’s changes to working-age benefits. How do those who are working or looking for work feel about the fact that the benefits they rely on are being raised by only 1%? It is the price of economic failure. Those individuals are the same individuals who are suffering the consequences of the hated and ludicrous bedroom tax. Let us get this in context: the Government are not treating people equally. The statement makes that clear.

Some £25 billion extra has been spent on social security since 2010 because of the Government’s failures. In the end, Government spending on the most vulnerable in our society—pensioners, those looking for work and those who rely on other benefits—depends on how the economy is performing. The Government have borrowed £219 billion more than they predicted they would in 2010. Is it any surprise that those in need are not seeing the benefit?

May I pick the Minister up on his wonderful use of the term “over-indexing”? In the context in which he uses the term, “over-indexing” means simply that earnings growth has been so weak and paltry under the Government that, to ensure that those relying on benefits that would have been uprated by average earnings have some sort of reasonable increase, he is forced to increase benefits by a measure other than average earnings. That was an Orwellian use of the term “over-indexing”.

Let us put the statement in context. The Government expect the nation to be grateful for their generous and munificent benefits uprating, but they are working within a narrow economic framework imposed by their own policies. People who depend on help to get into work and help to make ends meet will not be grateful for the paltry increases.

Interestingly, universal credit is included in working-age benefits in the statement. The Chancellor claimed yesterday that the welfare cap will be met, but is that because of the excessive delays in the introduction of universal credit rather than because the Government have got to grips with the underlying drivers of welfare spending—high rents drive up costs and low pay drives up tax credit claims? The welfare cap is related fundamentally, among other things, to the progress of universal credit. Will the Minister comment on that?

The context of the statement is that the Government have been forced to borrow much more than they believed they would have to borrow. Their failing economic policy means that those in most need are paying the price. The Minister trumpets the increases to pensioner benefits and the state pension, but let us not forget—[Interruption.] From a sedentary position, the Minister says, “Questions.” The question is this: why has his economic plan failed so badly that those who depend on help from the Government are not getting it?

The context is clear: the Government’s economic plan has failed, Government borrowing is so much higher than they expected, and, in the end, those who pay the price are those most in need.

[Steve Webb]

The House is not clear whether the hon. Gentleman is saying that we should spend more or less on welfare. As far as I could tell, he was arguing for both at the same time.

The hon. Gentleman referred to a failed economic policy. Is that an economy that is growing faster than any other developed economy in the western world, and an economy in which unemployment has fallen for 24 consecutive months? If that is failure, I am not sure what success looks like.

The hon. Gentleman asked about getting to grips with underlying economic issues. Worklessness is, of course, the most fundamental underlying economic problem, and worklessness is down substantially on 2010. Unemployment is down. Full-time and part-time work are up. Those are the things that helped us to announce yesterday that welfare spending is lower than had previously been forecast.

The hon. Gentleman mocked the term “over-indexing”, which means putting something up by more than one is legally obliged to. We have done that for the poorest pensioners. I am not sure whether he opposes or supports that, but I can tell the House one thing: we have looked at what the Opposition would have done had they been in our position and had put the state pension up in line with their announced policy. We assume their policy would have been RPI until 2012 and earnings thereafter, as that is what their manifesto said. We have discovered that had Labour been in office the state pension would now be £7 a week lower than the coalition is paying. I do not think we have any questions to answer from the Opposition.

Oral Answers to Questions

Gregg McClymont Excerpts

Monday 3rd November 2014 Commons Chamber

[Mr Duncan Smith]

Of course, we always keep in close contact with social landlords to ensure that they do what they are meant to do and do not overcharge. The Homes and Communities Agency’s latest figures show that arrears have fallen in the same period from last year and rent collection among housing associations is stable at around 98%, so I think that it is safe to assume that the under-occupancy penalty has had little effect on housing association arrears.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The bedroom tax surely has a claim to be the most wrong-headed and iniquitous policy introduced by any Government in recent memory. The Government’s justification for this cruel tax was that putting it on social housing tenants would incentivise families and individuals to move into smaller homes, but the policy has one fatal flaw: the absence of homes for those families and individuals to move into. Surely the Secretary of State must today concede that the policy has been an abject failure and scrap the tax immediately.

[Mr Duncan Smith]

Apart from the rhetoric, the reality is that the hon. Gentleman is wrong. It was his Government who started the process in the first place. I remind him that when they introduced the local housing allowance, they refused to allow anybody who accepted that benefit to live in a house that had extra bedrooms, because that would be unfair on those who were in that accommodation. We have restored that fairness. That is the right thing to do, and it saves £500 million a year.

Pension Schemes Bill

Gregg McClymont Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

It was striking to hear the Minister refer to a “revolution” and a “war”—not terms one usually associates with Liberal politicians. Clearly, the excitement of pensions has overwhelmed his Liberal temper.

This is the third pensions Bill of this Parliament, and I note that the Minister spent the first 15 minutes of his half-hour speech talking about the first and second pensions Bills, and the fourth one still to come. There is no doubt that much has changed in the pensions landscape, but let me first pick up the Minister on some of the things that he suggested. He painted a picture of a pension policy—a revolution, indeed—that is coherent in every respect and said that the first pensions Bill begat the second, the second begat the third, and of course the fourth is still to come. There is, however, another way to look at aspects of the Government’s pension policy, and I ask the Minister to reflect on these points.

The Minister referred to auto-enrolment. As is characteristic of him, he took all the credit, leaving aside the fact that—as was pointed out by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), the Chair of the Work and Pensions Committee—auto-enrolment emerged out of the Turner commission and the consensus built by the last Labour Government, and was rightly taken on by the Pensions Minister. Leaving aside that lack of generosity in the Minister’s reflections on auto-enrolment, there is a more fundamental point. The Turner consensus, which the Labour Government built and the Minister has continued, operated on the assumption of pensions being complex, long-term and difficult to navigate for anyone other than a financial professional. That necessitated a default-based approach whereby individuals employed without a pension were defaulted into a pension scheme. They did not exercise a choice to go into a pension scheme; they were defaulted into a good pension.

That was the Turner commission’s judgment and the consensus taken on by the last Labour Government, and indeed the Minister. However, the Government’s policy on budget reforms is predicated on a different approach and the assumption that at the point of retirement, when individuals come to turn their pension pot into an income—the whole point of a pension is to get as great a pension income as possible—they will be able to navigate that jungle of financial products successfully and maximise their retirement income. There is surely a tension between those two aspects of pension policy, and the Government’s approach to building up a pension pot and to turning a pension pot into retirement income.

That tension must be reflected on by the House, not because the Government’s policy for retirement income stage is necessarily wrong, but because there is a tension between the two poles of policy. If auto-enrolment policy was correct to assume that individuals need to be guided, helped and encouraged into better pension decisions, why do we no longer think that is the case at retirement? That is absent from the Government’s pension policy. The Minister would have us believe that everything fits together neatly, but it does not in that regard.

[David Mowat (Warrington South) (Con)]

The shadow Minister’s point would be stronger if in the past when people purchased annuities that had been done with the correct annuities and financial advice being given. We know, however, that 80% of people were buying the wrong annuities. At least in the model now coming in, there will be some compulsory advice, which is a step forward from what existed previously.

[Gregg McClymont]

The hon. Gentleman is a doughty fighter for better pensions and I respect that, but I ask him to reflect on what he has just said. The annuities market was broken because people did not shop around. They found annuities confusing and complex, and they defaulted into the option offered by their insurance company. Why do we think that that behaviour will suddenly change in a system that continues to be predicated on individuals making a choice?

[Guy Opperman]

rose—

[Gregg McClymont]

I will give way to the hon. Gentleman in a moment. Let me make the point again in case it has been misunderstood by Government Members. The annuities market was broken because individuals did not exercise choice effectively. Why do the Government believe that individuals will now exercise choice effectively in a complicated marketplace? That is presumably why the Government put such emphasis on the guidance guarantee. They are right to do that because if this scheme is to work effectively, guidance must be of the highest quality. The hon. Member for Warrington South (David Mowat) mentioned advice, but this is not advice; it is guidance. There is a significant difference and the Government must reflect on that.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

rose—

--- Later in debate ---

[Gregg McClymont]

I will give way to the hon. Member for Hexham (Guy Opperman) and then to the Secretary of State.

[Guy Opperman]

I am grateful to the hon. Gentleman for allowing me to intervene before the Secretary of State, but he is dancing on the head of a pin because he has not indicated whether he approves or disapproves of this measure, which I take implies implicit approval. Does he agree with my constituent whom I met barely a month ago and who said:

“I am delighted with these reforms. It’s my money. I saved it. Why do I have to give it away in annuities and charges for low returns?”

[Gregg McClymont]

I will come back to the hon. Gentleman’s point after letting the Secretary of State come in.

[Mr Duncan Smith]

I have become a little confused about the Opposition’s position, so perhaps the hon. Gentleman could clear something up. I was listening carefully to what he said. There was confusion when the Budget announcement was made, but finally the shadow Secretary of State said the Opposition supported the proposal. From what the shadow Minister has said today, however, it sounds like they do not support it and now neither support nor oppose it. Will he clarify their position? Do they support the idea of people choosing what to do with their own money when they come to buy their annuity?

[Gregg McClymont]

Given that Labour in opposition led the way in calling for reform of the annuities market, we welcome greater flexibility. However, because the Government have not yet introduced legislation, we do not know what the guidance guarantee will amount to, so surely any sensible Opposition doing their job would probe the Government on these points. That seems to be our constitutional role.

The constituent of the hon. Member for Hexham (Guy Opperman) is right that the annuities market did not work. I am asking the hon. Gentleman, who unfairly accuses me of dancing on the head of a pin, and others to reflect on the following point: if the annuities market did not work because individuals did not exercise the open market choices they were offered, how can we expect these reforms to be more successful, if the guidance is not cast iron of the highest quality and as expansive as possible? He looks puzzled, but it is a straightforward point, and it goes to the heart of the tension in the Government’s pensions policy. The building up of pension pots is based on a default opt-in, with choice exercised only if an individual chooses to opt out of the pension scheme the Government have put them in; yet it is suddenly suggested that, on retirement, individuals alone can get best value for money in what is a complex market known for mis-selling.

[Several hon. Members]

rose—

[Gregg McClymont]

I will make a little more progress and then let in hon. Members from all parts of the Government Benches.

The Minister glosses over the tension in Government policy, suggesting that everything is coherent, but I strongly believe that that is not the case. He spent 15 minutes talking about things other than this pensions Bill, in which, more widely, the Government are attempting—we welcome the attempt, not least because we have been arguing for it—to pool and share risk long term across generations. In doing so, they are reflecting a developing political consensus around the importance of sharing risk as widely as possible in the pension sphere. The corollary is that the bigger the pension scheme—appropriately governed—the greater the returns to scheme members. Put simply, the bigger the pension scheme—appropriately governed to share risk as widely as possible—the larger the pensions for people in those schemes. I think that there is a developing consensus that that is a good thing, and in so far as it promotes collective defined contributions, the Bill is welcome.

[Steve Webb]

Will the hon. Gentleman clarify the evolution of the Opposition’s thinking? In government, six months before the last general election, the Labour DWP produced a report rejecting CDCs. When did they change their mind?

[Gregg McClymont]

I would like to take all the credit, of course— having not been in the previous Parliament—but in my opinion and that of the Opposition Front-Bench team, there is a very good case for encouraging collective provision. Politics involves evolution. I am kinder at times than the Minister, so I will not give him chapter and verse about how he has chased our tail on pensions policy, but whatever the origins of the policy, surely the point is to get the best possible outcomes.

The Minister alluded to other parts of the pension scheme in the Bill. Its provisions reflect the knock-on consequences of the flexibilities at retirement announced by the Government, evidenced by the fact that this is being shared between the Treasury and the DWP. It redefines the type of workplace schemes that can be set up so that a third form of scheme—neither DB nor individual DC—can be created. It also prevents the transfer out of most public service defined-benefits schemes, except to other DB schemes, which makes sense given the basis on which these Treasury-funded schemes proceed.

Currently, on the insolvency of an employer, the Pensions Regulator can employ an independent trustee from a register that it maintains. Conversely, when it uses its general powers of appointment to replace a trustee found not to be fit and proper, it does so using flexible procurement panels. The Government’s response allows the alignment of both procedures on the second, which seems to make sense. And of course the Bill will allow the Secretary of State to make payments into the Remploy pension scheme. These are all sensible policies supported by the Opposition.

The principal case for the Bill, however, as the Minister set out, is the recognition of the case for collective pension saving. There appears to be some appetite among the public for this kind of risk sharing. Research undertaken recently by the Institute for Public Policy Research suggested as much when it found that collective pensions were the most popular option across different income levels, life stages and ages. That makes sense given that pensions are a form of collective insurance against poverty and indignity in old age. On that basis, the debate that the Bill generates is welcome.

The Minister described how the pensions landscape had changed. DB is no longer as popular as it once was; employers do not want to take on the risks of defined-benefits schemes; and increasingly we live in a world of individual defined contribution, where the risk is entirely on the individual saver and depends on the performance of the stock market. As he suggested, finding a way to share risk is a good thing, but let me point out several aspects on which the Bill is silent—aspects that are central if collective pensions are to succeed.

The first aspect—as far as I am aware, the Minister was silent on this—is the awareness that cross-generational collective pensions can, in extreme circumstances, involve a reduction in pensions in payment. This is not something that the UK is culturally and historically attuned to. In a cross-generational collective pension fund, the smoothing of risk and reward between different generations can mean, in extreme circumstances, that the pensions being paid to pensioners are cut. That is something with which our politics is not familiar and an important point about defined-contribution collective pensions that has to be considered.

The second important point is that governance is even more important in collective pension schemes of this kind than it is in other forms of pension. Managing a rolling pension fund—one that brings together the savings of teenagers, pensioners and every generation in between and that demands that each cohort is treated equally—requires substantial technical expertise. The prize, if a fund is managed correctly, can be bigger pensions, but that demands governance of the highest quality, yet the Bill is silent on governance. The Minister mentioned it in the round, but he did not talk about the governance that he wishes to see or that, more importantly, the Bill puts in place for these pension schemes. And the Bill is silent despite the Government saying in their response to the consultation document, “Reshaping workplace pensions for future generations”:

“Collective schemes are complex and can be opaque… This necessitates strong standards of communication and governance. We intend collective schemes to be overseen by experienced fiduciaries acting on behalf of members, taking decisions at scheme level and removing the need for individuals to make difficult choices over fund allocations and retirement income products”—

not a philosophy the Government are adopting at the point of retirement via their Budget reforms. What has happened to their intention that governance be undertaken by experienced fiduciaries?

I am reminded of the fankle that the Government have got themselves into over the governance of individual defined-contribution pensions. I will not give chapter and verse now, because it would not be appropriate, but the independent governance committees that the Government intend to set up for individual defined-contribution pensions—the Minister referred to them—are neither independent, nor governance. They will be in the hands of the insurance company. The mistake that the Government appear to have made over individual defined-contribution pensions, they are now making with respect to collective defined-contribution pensions.

There is nothing in the Bill about the standards of governance that CDC pension schemes will have to meet. Everything is left to secondary legislation. I say to the Secretary of State and the Minister—who asked about the attitude of the Opposition—that so much of pensions legislation under this Government has been left to secondary legislation, making it difficult for the whole House accurately to understand the consequences and outcomes of any one pension Bill or policy.

As regards collective pensions and the second aspect of the Government’s silence—on governance—the Opposition believe that the Government should follow our lead and require the schemes to have trustees and to be based on a legal duty to prioritise the interests of savers above all others. Failure to require all schemes to have trustees—this is crucial—means that some collective DC schemes will be run by trustees and others by private firms seeking to maximise their short-term returns. That is surely not in the spirit of the collective pensions on which the Minister wishes to build. Given the complexity of managing collective, inter-generational, risk-sharing pension schemes, the highest level of governance is critical, and I urge the Government to say explicitly—either today or as the Bill goes forward—what the governance criteria and rules will be.

Beyond governance, a third crucial aspect of collective pensions remains unexamined by the Bill. The Government have left entirely to secondary legislation the question of what kind of collective pensions they wish to promote. The Minister suggests that collective DC is one sort of pension scheme, but it is not: there are different forms of collective defined contribution, so clarity about which form the Government wish to see would be useful for all parties as we examine the proposals.

Broadly, there are two kinds of collective pensions that the Government might wish to promote. One is a form of collective DC that sets a target income for each saver and a probability of the target income being met on retirement—a 95% probability, say, of that target being realised. This form of collective DC demands significant assets in reserve so as to make the probability realistic. Given the substantial assets that any scheme would need to materialise, that is what we might call a heavy form of collective DC pensions.

There is also, however, a lighter form of collective DC, which is more intra-generational than inter-generational—involving risk sharing among a particular cohort rather than between generations. That lighter form of DC collective pensions is also to be welcomed, as it would bring the advantage of scaling and pooling within a generation. Fundamentally, too—I am not sure the Minister mentioned this—the great advantage of collective pensions is that they avoid the real difficulty of having to make the decision on the spot on retirement for the rest of one’s retirement. That does not happen under either the heavier or lighter form of collective DC, as a form of draw-down applies. The pension fund never ends; it continues, so a form of draw-down is possible. As I said, an on-the-spot, once-in-a-lifetime decision about retirement income might apply under the Bill.

The Government have not stated which form of collective DC they wish to see materialise from the Bill. As with governance, the Bill is entirely silent on those points. Everything is left to secondary legislation once again, and I see a pattern when it comes to pensions legislation under this Government. They bring forward a Second Reading, take a Bill into Committee and then leave so much of the fundamental detail to subsequent secondary legislation. I am not sure that that is a sensible way to proceed if we want to make substantial and good legislation. Those are some of the issues on which I would like to gain further clarity from the Government.

The Minister spent some time talking about the budget reforms, and we have heard contributions and interventions from Front Benchers about them. The Government are silent on the issues of flexibility and the interaction with auto-enrolment pension saving. They claim that all those aspects fit together very well, but I have suggested that there is a fundamental difference in approach in the spheres of building up the pension pot, auto-enrolment and turning the pension pot into retirement income.

The three tests that the Opposition have set for these reforms are sensible. We must know first what the guidance guarantee amounts to—a fundamental point on which we still have no clarity. We expect perhaps an amendment or amendments to provide clarity on the guidance guarantee. We should remember that the Chancellor promised advice, not guidance, in his Budget statement. There is a fundamental difference between the two, and the Minister subsequently clarified that guidance rather than financial advice will be provided. We await with bated breath the details of the guidance guarantee. Without top-quality guidance, the potential for successful flexibilities will be much reduced.

Secondly, we need to know how the budget reforms will impact on the pension pots and retirement income of low and middle earners. That is important. One of the weaknesses of individual DC, from which the Minister is trying to move way, is that 10 years from any individual’s retirement, the pension fund has to move assets into low-yielding bonds to avoid any risks so close to the retirement age. There is less risk, but less return. The danger of the Government’s flexibility provisions on retirement is the interaction with pension fund asset management. It now becomes the norm that individuals will cash in their pension pot at 55, 56 or 57, which means that at the age of 45, 46 or 47 the pension fund will have to move into low-risk, low-yielding assets, reducing the pension pot when cashed in on retirement.

[Nigel Mills]

I understand the hon. Gentleman’s point, but is there not a reverse problem when someone wants to keep their pension savings pot until long after the normal retirement age, so they would not want to move over to low-risk returns at 55 but leave it until 65 or later? The position is more complex than the hon. Gentleman suggests.

[Gregg McClymont]

I am rarely accused of making pensions less complex, so I shall take the hon. Gentleman’s comment as a compliment. I take his point, however; there are lots of unanswered questions about how income draw-down will work. The potential impact of the reforms on the asset management of individuals’ pension pots is crucial.

Thirdly, the interaction of the budget reforms with social care, for example, is an important issue. How do the Government view the position on the ability of local authorities, for example, to say that a pension pot is a realisable asset that can be brought inside the capital disregard for social care and other benefits? That is a significant question to which we still have no answers. The Opposition have lots of opinions, as the Minister says, but if the Government take so long to explain how any of their policies will work, it is no wonder that we spend a lot of time asking questions.

I have highlighted important issues and pointed to substantial unanswered questions about governance, about how the reforms will interact with the budget flexibilities and, more widely, about how a Government committed to automatic enrolment of individuals into pension saving can be equally committed to an individually focused policy for turning pension pots into retirement income.

Let me make some final observations. The Minister did not mention the National Employment Savings Trust and that is no surprise, because he has promised that the restrictions on NEST will be lifted, but since July 2013 we have heard nothing on when they will disappear. That is important because, if we are thinking about collective defined-contribution pensions, NEST is a trusted pension provider backed by the Government that could offer such pensions. In doing so, just as it has in the auto-enrolment sphere, it could constrain the pensions industry and drive up standards and quality, so that the products that the Minister, I and everyone would like to see delivered are delivered by the industry. Therefore, the restrictions on NEST are a problem. The Minister has indicated that he will lift them. Can we have some clarity on when they will be lifted, especially since they pertain to the Bill’s objectives?

More narrowly, technical drafting may prevent someone from transferring their pension pot to a CDC scheme unless they were an “earner” and their current employer was an employer in relation to the CDC scheme. I know it is a technical issue, but there would appear to be no good reason why a workplace CDC scheme should not be able to take in pots from any source if the person willing to transfer in thinks that they receive a good valuation for their contribution. For longevity risk, investment risk and lower costs reasons, an individual may prefer a steady income from CDC instead of draw-down or annuity.

More widely, the Bill contains no measures that will help to promote the scale which most independent observers believe is necessary for CDC pensions, and workplace pensions in general, to be as efficient as possible. The Opposition have long argued for measures to promote scale and we would like to see such measures in the Bill. The House of Commons briefing note on the Bill states on page 1:

“certain conditions such as large scale and strong governance, appear necessary for it”—

that is, CDC—

“to operate successfully.”

The Bill promises, offers and evidences neither. The Government have work to do to make the Bill as substantial as it should be in contributing to the developing consensus that collective-scale pensions are better. We welcome the Government’s approach while reserving our right as the Opposition to continue to press them, even when the Front-Bench team do not like it, on the lack of detail therein.

Oral Answers to Questions

Gregg McClymont Excerpts

Monday 1st September 2014 Commons Chamber

[Steve Webb]

We have made a number of changes to make sure that auto-enrolment works as smoothly as possible for the whole diversity of employment scenarios, such as the one to which my hon. Friend refers. The point about automatic enrolment is that where someone who is paid weekly exceeds the threshold once, they should be automatically enrolled. If in a subsequent week they earn below the threshold, nothing happens—no payment is due and no payment is made. If they go above the threshold again, payment is made, but there is no re-enrolment, disenrolment or leaving of the scheme. The complexity is often in perception, rather than in reality. If she is aware of individual employers who have particular problems, I would be pleased, as always, to receive details.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

May I press the Minister further on the question asked by my hon. Friend the Member for Brent North (Barry Gardiner)? The Government have changed the rules on pension flexibility at retirement, or are in the course of changing them, yet there are members of pension schemes who will face huge exit penalties if they wish to take advantage of those flexibilities. Does he think pension savers in that situation will be comforted by his saying today, “Well, they entered into a contract and they have to put up with it”? The Government are changing the rules, so surely those savers deserve to be able to take advantage of the flexibilities just as much as anyone else.

[Steve Webb]

I do not think that the hon. Gentleman in his heart of hearts really wants these flexibilities. We announced in the Budget the flexibility for people to access their money at 55, in full and in cash if they want to do so. Clearly a minority of schemes—it is important not to exaggerate the scale of this—have contractual terms that relate to the basis on which money can be withdrawn. We are not overwriting the rules of existing schemes, but we are talking to the industry to ensure that as many people as possible can access their cash.

Oral Answers to Questions

Gregg McClymont Excerpts

Monday 23rd June 2014 Commons Chamber

[Steve Webb]

We are keen to avoid discrediting automatic enrolment with trivially small amounts of money. My hon. Friend can imagine the newspaper headlines if we had required a firm to set up a pension scheme so that the employee and employer combined put 8p a week into a pension. We would have been laughed out of court. We have reformed auto-enrolment, and it is going extremely well. It has a good, strong reputation, and I want to protect it.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

What the Minister does not tell the House, of course, is that Library figures show that someone earning just below the raised threshold for auto-enrolment could save up to £20,000 over a working lifetime—quite a decent nest egg, I am sure that we would all agree. So why have the Government deliberately removed 1.5 million people—the majority of whom are low-paid women—from auto-enrolment? Although that sum is not enough to buy a Lamborghini, does the Minister agree that millions of people are losing out?

[Steve Webb]

On the contrary, the Pensions Commission—the hon. Gentleman often refers to the Pensions Commission, one of whose members is now a Labour peer—recommended that low earners needed an 80% replacement rate. Someone on the wage that he just gave gets an 80% replacement rate based on the state pension alone, so we are delivering—[Interruption.] That is after tax and national insurance. [Interruption.] They are paying national insurance at £10,000 a year, so they get about an 80% replacement rate without needing to be automatically enrolled. Setting up auto-enrolment for tiny amounts of saving is simply inappropriate.

Oral Answers to Questions

Gregg McClymont Excerpts

Monday 31st March 2014 Commons Chamber

[Steve Webb]

My hon. Friend is quite right. As he knows, we have both the Pension Protection Fund and the financial assistance scheme to help those whose sponsoring employer has become insolvent. It is important that we make sure that sponsoring employers are in a robust position and that regulation is proportionate, which is why we are changing the remit of the Pensions Regulator so that it has regard, in its actions, to the sustainable growth of the sponsoring employer.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Last week, the Minister announced that the Government were adopting lock, stock and barrel Labour’s policy on the pension cap. That is welcome news for savers, but the Minister and the hon. Member for Warrington South (David Mowat) both know that governance is key to ensuring that savers get value for money all the way through the pensions system. Does the Minister therefore agree that allowing big insurance companies to appoint independent governance committees themselves is a little like allowing the home team to pick the referee in a football match?

[Steve Webb]

The hon. Gentleman raises an important point about governance and independence. He should know that the proposed terms of reference for IGCs include requirements that providers go through open and transparent recruitment processes, and that members be appointed for fixed terms, with limited numbers of reappointments. The requirements are designed to avoid any possibility that IGC members have incentives not to challenge providers in order to remain in post.