Draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022

Guy Opperman Excerpts

Monday 21st February 2022 General Committees

[The Chair]

Before we begin, I remind Members to observe social distancing and Mr Speaker’s guidance on wearing masks, except when speaking and unless exempt.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I beg to move,

That the Committee has considered the draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022.

What an honour and privilege it is to appear under your chairmanship for the first time, Mr Mundell. I am sure there will be many more illustrious occasions, but as you know, today we are here to discuss the draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022, which were laid before the House on 17 January.

These are groundbreaking and game-changing regulations that take forward the nuts and bolts of sections 1 to 102 of the Pension Schemes Act 2021, which is a transformational Act of this Parliament and one of the key changes brought forward by this Conservative Government. It is the product of many years of work by a huge number of people, from the Royal Society of Arts to Department for Work and Pensions officials, who have worked tremendously hard on it, to our dearly departed friend Jack Dromey and many others who have seen this measure as a potential third way of providing pensions on an ongoing basis.

The UK pensions market currently has a defined-benefit and a defined-contribution basis. These regulations provide a middle ground—a third way. We are providing an alternative approach, whereby member and employer contributions are pooled and then invested with a view to delivering benefits at the level to which the scheme aspires. Such schemes offer potential benefits in economies of scale and the opportunity for greater investment in higher-returning assets and better contribution schemes on a long-term basis. The Government believe that this is the right way forward for many different organisations. Self-evidently, Royal Mail and the Communication Workers Union have been at the forefront and have driven forward an agreement such that they will be the first in line to take this forward, but we believe that there is potential for other schemes—on a large or smaller basis—to embrace collective defined contributions.

It is only right that employees and employers have confidence in a CDC scheme, as it is a new type of pension scheme. The regulations, which I accept are detailed, set out requirements for the process of applying for authorisation and further detail on the criteria that such schemes need to meet in order to be authorised. The criteria include that the design of the scheme must be sound, that it must have sufficient financial resources to operate, and that it must have the capacity to deal with particular issues that arise. Fit and proper persons are also required to take these matters forward. If the Pensions Regulator is not so satisfied, it cannot authorise the scheme. The regulations set out requirements relating to the regulator’s supervisory role and, in more detail, the need for a code of practice, which is currently being consulted on by the Pensions Regulator.

There was considerable interest in these matters during the passage of the Pension Schemes Act 2021, and I am happy to answer any questions that are raised. The key point of intergenerational fairness and communication to members is addressed in the regulations and in the code of practice. I commend the regulations to the Committee.

--- Later in debate ---

[Guy Opperman]

I thank colleagues for their responses and their support for these regulations. This is very much an iterative process, so I accept the point about needing to review CDCs. I am often criticised on the one hand for not bringing this forward quickly enough and on the other for going too slowly. In this case, I think the Government are doing the perfect thing of trying to navigate a course that progresses the main form of CDCs. We will move to multi-employer CDCs in the latter part of this year, going into next year, and will move at a sufficient pace that we feel is appropriate. There will definitely be an opportunity to respond to these regulations and the draft code, which I strongly urge colleagues and the industry to read.

We are inventing a brand-new way of providing pensions that is genuinely of assistance to businesses, big employers and, crucially, employees—it is very much supported by unions, for example, and gives unions a real role in supporting businesses and employees—but it will also work for multi-employer schemes on an ongoing basis.

We used master trusts as a broad base of what we were trying to do, and while that has always been the case, there is no question whatever but that this is different from master trusts. I am happy to write to the hon. Member for Reading East with a bit more detail on that, but this is certainly not a like-for-like model in any way whatever.

The hon. Member for Airdrie and Shotts rightly raised consumer protection, which is a challenge that I accept entirely. We have made great efforts to ensure proper communications. I have met repeatedly with Royal Mail and the CWU, for example, and there is no question in my mind but that Royal Mail employees, who are heavily unionised, are the most informed about this potential pension change of any employees up and down the country, because the engagement around Royal Mail post offices and postal centres around the country has been outstanding. I have been everywhere, from Norwich sorting office to Barrhead, all over the country, to meet with people, talk with them and see the work being done. However, I accept that this is an ongoing challenge.

Automatic enrolment, a wonderful Conservative/coalition Government invention that we very much continue to laud and applaud, is a transformation that has benefited 10.5 million people across all our constituencies. The hon. Lady rightly raised the 2017 review of automatic enrolment review; the Government will bring that in in the fullness of time. I also make the simple point that automatic enrolment is there to expand and enhance access to savings to so many people. Among young people and women, for example, less than 40% had an occupational pension; the figure is now well above 80%. That is a transformation since 2012, with a total of 10.5 million people benefiting.

[Matt Rodda]

Perhaps the Minister would also like to thank the previous Labour Government for its work on auto-enrolment, as it was an idea developed by Gordon Brown originally and implemented, as he said, by later Governments.

[Guy Opperman]

There is no question but that this idea started with the Turner commission and the Brown-Blair Government—not a Government, I feel, that is very supported by the present Labour party—but we are very much behind this innovative change, and obviously we welcome all converts to innovative pension change. I totally accept that this is a 20-year policy. It has a stage to go, which we will be responsible for, but it is also, like so many things in pensions policy, something that transcends parties and Governments, because we make policy for 30 to 40 years, and this a good example of that.

Question put and agreed to.

Automatic Enrolment Review 2022-23

Guy Opperman Excerpts

Tuesday 8th February 2022 Written Statements

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

Automatic enrolment into workplace pensions (AE) has been a huge success to date. Since its introduction in 2012, over 10 million people have been automatically enrolled and savings by eligible employees have increased by £28.4 billion. This has been achievable through the 1.9 million employers who have played a crucial role by enrolling their employees and paying contributions as appropriate.

An objective of this year’s annual review of the AE earnings trigger and qualifying earnings band (the AE thresholds) is the continued stability of the policy. We also want to ensure that our approach continues to encourage individuals to save towards their pensions while ensuring affordability. Our approach is designed so that everyone who is automatically enrolled continues to pay contributions on a meaningful proportion of their income. The review has concluded that there should be a freeze of all AE thresholds for 2022-23 at 2021-22 levels. This is consistent with our ambitions to build a stronger, more inclusive savings culture. The Government are considering what more can be done to enable people to have greater financial security in retirement.

The 2022-23 Annual Thresholds

The automatic enrolment earnings trigger will remain at £10,000,

The lower earnings limit of the qualifying earnings band will remain at £6,240,

The upper earnings limit of the qualifying earnings band will remain at £50,270.

The analysis supporting the proposed revised AE thresholds will be published in due course. A copy of this will be placed in the Library of the House and will be available on the www.gov.uk website, following publication.

[HCWS598]

Oral Answers to Questions

Guy Opperman Excerpts

Monday 7th February 2022 Commons Chamber

[Helen Morgan (North Shropshire) (LD)]

3. What steps her Department is taking to tackle levels of poverty among pensioners.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I welcome the hon. Lady to her place in the House of Commons, and I welcome back the hon. Member for East Dunbartonshire (Amy Callaghan). It is good to see her back in her place—I am pleased to see that.

The practical truth is that pensioner poverty has reduced under this Government. This Government increased state pension by 2.5% in 2021-22 and will uprate it by 3.1% in 2022-23. We are also spending approximately £5 billion to support 1.4 million pensioners through pension credit.

[Helen Morgan]

Pensioners across North Shropshire and the rest of the country are falling into poverty. Last week, a retired couple from Ellesmere, in my constituency, contacted me to tell me that even though they live in a modest bungalow, because of the rising costs of their food and energy bills they have been put in the heartbreaking position of having to choose between heating and eating. That is a choice no one should ever have to make.

Rural communities are being hit hardest by the energy bill price hike, and they have higher numbers of pensioners hit by the suspension of the triple lock. In Shropshire, the Conservative-led council is pushing through the maximum council tax increase this spring. What steps can the Secretary of State or the Minister take to ensure that our retired residents are not put into this dreadful position of choosing between heating and eating?

[Guy Opperman]

I refer the hon. Lady to the specific points set out by the Chancellor last week, namely the £144 million-worth of discretionary funding, the non-repayable £150 cash rebate and the £200 smoothing rebate on energy bills for all households. Those are in addition to the ability to claim for pension credit, which is, of course, a passport to many different pension awards in many different situations.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

This Government have a very good track record when it comes to protecting pensioners against poverty, not least through the state pension triple lock and the pension credit. However, will the Minister sit down with his colleagues the Employment Ministers and look at participation rates in the workforce among older workers? Some estimates suggest that there are now around 200,000 fewer older workers in the economy than there were pre pandemic. It is important that we bring out all the skills in the economy, not least to fill some of the employment gaps.

[Guy Opperman]

My right hon. Friend makes a very good point, as he should do, being a former Secretary of State and very wise on these issues. The Under-Secretary of state, my hon. Friend the Member for Mid Sussex (Mims Davies), has set out the “50 PLUS: Choices” programme and the amazing package of work that is available to people over the age of 50 who wish to return to the workplace. I am certain that if my right hon. Friend was to sit down with her, and other colleagues, there would be much that we can do in this particular space.

[Jonathan Ashworth (Leicester South) (Lab/Co-op)]

Before I start, I thank the hon. Gentleman for his very moving, very personal and very brave tribute to our friend Jack Dromey last week. It is hugely appreciated across the House.

I disagree with the Minister: pensioner poverty is increasing. As we have heard, many pensioners are facing an impossible choice between heating and eating. Pension credit and the basic state pension are being cut in real terms today. He mentioned the package the Chancellor announced. A million pensioners are on the council tax benefit reduction. Will those million pensioners who do not pay council tax get the £150 rebate automatically or will they have to apply for it? If they have to apply, will he guarantee that 100% of pensioners will get that money this April?

[Guy Opperman]

First, I thank the right hon. Gentleman for his kind comments. I wanted him to stop there, but I fully understood why he did not. On his specific point, I understand that the Department for Levelling Up, Housing and Communities is publishing guidance on that today.

[Andrew Bridgen (North West Leicestershire) (Con)]

Can my hon. Friend the Minister confirm that before this Government came into office in 2009-10, the state pension was £95 a week and that this year it will rise to £185 a week? Does he agree that this explains why there are over 200,000 fewer pensioners in absolute poverty than there were a decade ago?

[Guy Opperman]

Under the coalition and the Conservative Government there has been a record increase in the state pension. We have never spent as much as we now spend on the state pension—£105 billion. It has almost doubled compared with under the last Labour Government. The practical reality is that there is £129 billion when all the other benefits are added in. As I say, it has never been a larger figure. My hon. Friend is right: there are 200,000 fewer pensioners in poverty than there were previously.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Despite what the Minister said at the Dispatch Box earlier, his Government’s statistics show that even before the effects of the £700 energy cap kick in, pensioner poverty is at a 15-year high, with 2.1 million pensioners classed as living in poverty. The Red Book also shows that the removal of the pension triple lock is going to take £30 billion out of the pockets of pensioners over the lifetime of this Parliament. What impact assessment have the Government undertaken on the removal of the triple lock, and how many more pensioners are going to be plunged into poverty?

[Guy Opperman]

The hon. Gentleman will know that there are 200,000 fewer pensioners in absolute poverty than in 2009-10. Through the triple lock and the work that the coalition Government did and this Conservative Government have done, we have never paid pensioners more. There are also the three matters set out by the Chancellor previously. I spent some of the weekend reading “Scotland’s Future” and I see that the SNP has now abandoned its previous position on the state pension—a question that SNP Members did not want to raise today, I conclude.

[Theresa Villiers (Chipping Barnet) (Con)]

Will the Minister ensure that supporting our pensioners remains a top priority across Government? What is he doing personally to ensure that as many pensioners as possible benefit from the Chancellor’s support package on energy prices?

[Guy Opperman]

Yes, of course, is the short answer. We are doing a huge amount, particularly on pension credit, which addresses the situation of low-income pensioners. We are working with the BBC, various energy companies, Age UK and many other organisations to get greater take-up of pension credit. It is a cross-departmental initiative to ensure that there is take-up of the various things that are available, as announced by the Chancellor last week.

[Alex Davies-Jones (Pontypridd) (Lab)]

4. What recent assessment her Department has made of the adequacy of benefits for disabled people in the context of increases in the cost of living.

--- Later in debate ---

[Mr Richard Holden (North West Durham) (Con)]

T5. Last Friday, I paid another visit to Consett jobcentre in my constituency to see the great work it is doing. This Friday, I am hosting an apprenticeships fair in my patch. Auto-enrolment in pensions has transformed the lives of millions of people in constituencies across the country, including in mine. Those aged 18 to 22, who will be attending my apprenticeships fair and going into work, will not benefit yet from auto-enrolment. Will the Minister confirm that he will look at that and do what he can to ensure that everybody in work benefits from auto-enrolment in Britain?

[Guy Opperman]

I congratulate my hon. Friend, who is also my constituency neighbour and a massive improvement on his predecessor. Auto-enrolment is a massive success as you know, Mr Speaker. I promise my hon. Friend that we will build on that work with the automatic enrolment review. I look forward to reading his Bill in great detail.

[David Linden (Glasgow East) (SNP)]

We know the benefits regime is counterproductive and punitive. In 2016, the National Audit Office told the Department for Work and Pensions to carry out its own research into benefit sanctions. The Department is now refusing to release that research, despite promises to Committees of both Houses, because it was

“unable to assess the deterrent effect”.

Why is the Secretary of State ruthlessly pushing ahead with the renewed sanctions regime if almost six years later it still cannot find any evidence that they work?

Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill (Morning sitting)

Guy Opperman Excerpts

Committee stage
Wednesday 2nd February 2022 Public Bill Committees

As I said, we support the Bill. We believe it is important to tidy up pensions legislation and make it easier for schemes to convert GMP rights into ordinary scheme benefits, but I hope the Minister will be able to provide the assurances I have asked for today, and that parliamentarians will be given proper time and resources to scrutinise any secondary legislation that may be introduced later.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

It is a pleasure to serve under your chairmanship, Mr Efford. I thank the hon. Member for Rutherglen and Hamilton West for the hard work she has put in to bring this private Member’s Bill to this stage. Introducing a private Member’s Bill is never easy. It is sometimes arcane and convoluted, but her Bill is genuinely making a fundamental difference to this country and to many of our constituents, and it applies across this country.

As I indicated on Second Reading—colleagues should take it as read that I repeat the entirety of my long speech on Second Reading, albeit I will not do so today—this is a small, discrete but very important piece of legislation and the Government definitely support it. The hon. Member for Rutherglen and Hamilton West outlined the details of the Bill, but I will briefly touch on a couple of key points that I hope will answer some of the points raised by the hon. Member for Reading East.

Clause 1 ensures that occupational pension schemes in England, Wales and Scotland have greater clarity about how to convert GMPs into other scheme benefits, which gives an opportunity to equalise their members’ pensions to correct for the unequal effect of GMPs. Colleagues will understand that Parliament moves quite slowly in some respects, but this problem dates back to 1978 and the last days of the Callaghan Government, so our resolving it is overdue. Clause 2 would achieve the same for occupational pension schemes in Northern Ireland.

Correcting for the unequal effects of GMP is necessary, fair and right. It is important that pension schemes that choose to equalise as part of a conversion exercise are able to do so as easily as possible and are confident that the requirements they are complying with are robust and unambiguous. That is what the Bill delivers.

Clause 1 makes it clear that the conversion legislation can be applied to a person who is a survivor at the time of the conversion and ensures the legislation refers consistently to this group. It also provides the means to set conditions on the survivor benefits provided by the scheme following conversion of a member’s GMP. Those changes are important because survivor benefits provide a crucial source of income to widows, widowers and survivors in civil partnerships. For many people, the knowledge that their surviving spouse or civil partner will receive a portion of their pension is highly reassuring.

Let me be very clear: we will consult on those matters. There will be a full consultation among industry to which, obviously, opposition parties and all parts of industry can make representations; there will then follow regulations, which will be debated in this House.

Clause 1 also makes important changes to the existing legislation requiring the scheme’s sponsoring employers to consent before guaranteed minimum pensions are converted to other scheme benefits. As the hon. Member for Rutherglen and Hamilton West outlined, the current legislation creates difficulties for some schemes—self-evidently so when, with the passage of time, an employer has ceased to exist. That is a significant problem. It will therefore help schemes if the legislation is amended, and we do so very much as a result of representation from schemes. Clause 1 therefore removes the requirement for the employer to consent to GMP conversion, and replaces it with a requirement for each relevant person to consent. That, with respect, is unquestionably the right way forward.

Finally, clause 1 also removes the need for pension schemes to inform HMRC when they carry out a conversion exercise. That is because the new state pension does not contain any kind of provision for contracting out, and HMRC no longer has any use for or interest in this information—indeed, it has been asking schemes not to send it in. The clause is, with respect, an excellent example of the simplification and reduction of needless bureaucracy in action—bureaucracy that otherwise would fall upon scheme members and HMRC, which is funded by taxpayers.

Clause 2 closely mirrors clause 1 to amend the law of Northern Ireland. I am devasted that the hon. Member for Strangford is not here to intervene on me, but I have raised this with him in the past and he is very supportive of the measures. It is certainly the case that these necessary changes should be made in one fell swoop across the United Kingdom. I am pleased to confirm that on 24 January the Northern Ireland Assembly passed a motion to consent to the inclusion of the provisions for Northern Ireland in the Bill.

The Bill is an excellent step towards helping pension schemes to confidently correct for the unequal effects of guaranteed minimum pensions. I suggest that the hon. Member for Rutherglen and Hamilton East has received support for her Bill in this House because it is clearly necessary.

The hon. Member for Reading East raised a number of particular points, and I will write to him with more detail. On gender inequality, he will understand that the Turner commission was set up under the Labour Government by Tony Blair specifically to address fundamental gender inequality. It resulted in the cross-party success story that is automatic enrolment, which has seen female private pensions saving go from approximately 35% in 2012 to well over 80% in 2019-20. The specific provisions on RAS—relief at source—are a matter for the Treasury, which I understand is consulting on and looking at them on an ongoing basis.

I repeat that these matters will all be consulted on in the appropriate way, and that there will be regulations that will be debated by the House in the usual way. It is unquestionably the case that this will be treated like a normal Act of Parliament, with all due representations.

I thank colleagues for the collaborative way in which they have addressed a long-standing problem that is technical but necessary to resolve, and that impacts so many of our constituents up and down the country.

Finally, I was asked whether the Bill means some people will lose money. The specific answer to that is no: no one will see their pension rights reduced when their pension is corrected for the effects of the rules around GMP. Pension schemes will correct for the effects of GMP rules only by increasing people’s pensions to the higher amount.

With that, I thank the hon. Member for Rutherglen and Hamilton West. I look forward to following the Bill through its remaining parliamentary stages in the other place and back in this place.

Automatic Pension Enrolment

Guy Opperman Excerpts

Wednesday 26th January 2022 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to speak on these matters, and it was especially a pleasure to hear the hon. Member for Grantham and Stamford (Gareth Davies) set the scene so well. We are here to endorse his words, and we look to the Minister for a response on the issues that still concern us and on which we wish to see action taken. It is also a special pleasure to say that I am one of those who bought into a pension at an early age, and I want to emphasise the importance of pensions to young people who do not fully understand the necessity or the benefits of having one.

I am pleased to see the Scottish National party shadow Minister, the hon. Member for Kilmarnock and Loudoun (Alan Brown), and the Labour shadow Minister, the hon. Member for Reading East (Matt Rodda), but I am especially pleased to see the Minister in his place. I had the opportunity to have him visit my constituency some two and a half years ago, before covid. That visit was to the local credit union. George Proctor was the manager, and the staff were there. We are very pleased to have them there. We were also very pleased to welcome the Minister, and we invite him to come back and get an update, if at all possible—if he has space in his diary.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

It is an honour and a privilege to be able to intervene on the hon. Gentleman, who is a legend in this House for the fact that he intervenes every single night in the Adjournment debate. I well remember the trip in July 2018, I think it was, to Newtownards Credit Union. It is particularly memorable—colleagues will understand about ministerial visits—because when I arrived I was presented with a ginormous slice of home-made lemon drizzle cake, made by one of the team there. In my view, that is how all Ministers should be greeted.

[Jim Shannon]

I think I can say on behalf of Newtownards Credit Union that when the Minister does return, the slice of lemon drizzle cake will be even bigger than the last one he had. I will send today’s copy of Hansard to the staff and let them know what his expectations are. Joking aside, the Minister understands these issues and is always keen to address the concerns we have. Before we have any debates, he will always come and say to me personally, “Is there anything at all you want to bring forward today?” and then he tries to address those issues, which is something I especially appreciate. I wish all Ministers were the same, but I congratulate this Minister on doing that.

Provisions in the Pensions Act 2008 placed a responsibility on employers to automatically enrol job holders into, and contribute to, either a qualifying pension scheme or a new personal account scheme. Those duties apply to all businesses, regardless of size, which I for one welcome because it is the right thing to do. In his introduction, the hon. Member for Grantham and Stamford encapsulated the thoughts of us all about the growth of pension enrolment and how it benefits people. It is crucial that those eligible to put small amounts of money aside into a pension pot, whether they work in a small local café or in a large mechanical chain company, do their bit.

That legislation has reversed the decline in workplace saving. There has been a drastic increase in the total membership of defined contribution occupational schemes, from 2.1 million in 2011 to an outstanding 21 million in 2019—if that does not take Members’ breath away, I do not know what else would. I am of pension age, but at approximately the age of 20, I remember my mother saying to me, “Jim”— or James, as I am on my birth certificate—“we need to go and start a wee pension for you.” I said, “Oh, Mum, I’m too young to deal with that. I am not going to bother.” Mum insisted, and whenever your mother insists, you do not have any choice. We trotted down to the local place and I enrolled in a pension, some 45 years ago. At the time, I may not have understood that pension, but I understand the benefits of it today as it comes to its culmination.

So often, people find that they have been paying into a couple of pensions. Only a couple of years ago, I found out that I had being paying into four different pensions along the way. It is great way of saving. I may not have seen that at the time, but I see it now.

--- Later in debate ---

[Mr Richard Holden (North West Durham) (Con)]

It is a pleasure to serve under your chairmanship, Mr Dowd. I pay tribute to my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for securing this debate. I have been trying to secure one for a couple of months, but he seems to have managed to pip me to the post.

I thank so many hon. Members for mentioning my ten-minute rule Bill to look at extending auto-enrolment. Everyone who has spoken has pointed to the success of auto-enrolment. It has been a cross-party success, as my hon. Friend the Member for Darlington (Peter Gibson) said. It is slightly sad that there are not more Scottish National party or Labour Back Benchers here to welcome that success and talk about the future, but this is something we can proceed with on the basis of those on all sides of the House coming to an agreement.

The main point, which has been made by many Members, is that an extra 10 million people are now looking to save. The reason they are saving is that for every 50p they put in, they get £1 in their pension pot, because they get the tax relief plus the employer’s contribution. That is seen as a simple and straightforward thing. For every £4 an employee puts in, their employer puts in £3 and they get £1 in tax relief. That is a simple, straightforward way of explaining it to people. It is important for us to have this debate and to look at the success and the future of auto-enrolment.

Many hon. Members made the broader point that we want people saving for themselves, their families and their futures. This is a small “c” conservative principle that cuts across working class communities across the country, including mine in North West Durham. It provides a really important stake in society when people save into a pension over time and see that money invested in UK companies, as well as in companies across the world—although my hon. Friend the Member for Darlington made the important point that if we are looking to expand auto-enrolment, we need to enable people to see the benefits of those savings in their communities.

I therefore hope that the Government will look at ways to ensure that that patient capital can be invested more in things such as social housing projects and transport infrastructure schemes. I do think it is time to expand. I could understand why, in the past, employers were concerned about auto-enrolment, but it is great to hear from my hon. Friend the Member for Darlington, who ran his own business, that he has seen those concerns alleviated by the impact that it has had on his employees.

Let me say to my hon. Friend the Member for North Norfolk (Duncan Baker) that, as the hon. Member for Strangford (Jim Shannon) may know, Luke 15:7 states that

“there will be more joy in heaven over one sinner who repents than over ninety-nine…persons who need no repentance.”

I am glad to see my hon. Friend on board and helping to drive the agenda; as he mentioned, it is so important for those lower-paid part-time workers in his constituency and mine. I will come to that in a moment.

There are two groups that future changes could really affect. One, as my hon. Friend the Member for Grantham and Stamford said, is that younger age group. It is unbelievable to me that someone of my age—any person in this room, in fact—will benefit from the employer contribution and tax relief, but someone aged 18, 19 or 20 will not. That seems demonstrably unfair, and it is something that we really need to get a grip on. As the hon. Member for Strangford said, compound interest created by saving early makes a real difference in retirement.

Reflecting on what my hon. Friend the Member for Clwyd South (Simon Baynes) said, the statistics from before and after auto-enrolment kicks in are stark. Before it kicks in, a fifth of people are enrolled; after it kicks in, 17 out of 20 are enrolled. That is a massive change. We need to bring those figures into line, particularly for people who do not go on to university but choose a different path. As my hon. Friend also mentioned, that is a very important factor in the regional disparity of where people pursue their careers. My hon. Friend the Member for Sedgefield (Paul Howell) also made a very good point: how can it be right that those earning £50,000 or £80,000 per year get the tax relief and employer contribution, but others—particularly part-time workers—do not?

I mentioned some examples when I introduced my private Member’s Bill in the House. Women are particularly disadvantaged. Part-time workers often juggle multiple jobs around childcare or other caring responsibilities; it seems to me totally unfair that someone doing two part-time jobs that are above the threshold just does not get the tax relief and employer contribution. If we could reduce the age of auto-enrolment to 18, we would be looking £25,000 in younger workers’ pension pots. That is not going to be transformative in and of itself, but taken together, the changes will be transformative. Getting young people auto-enrolled early is crucial to allowing them to see their savings start to build early, and that is what we need to see.

In addition to what hon. Members have already said, I say to the Minister that we need to see an age reduction, we need the qualifying earnings amount to be reduced, and we need the threshold for earnings to be lowered too.

[Guy Opperman]

I thank my hon. Friend for his speech. I was ill when he introduced his ten-minute rule Bill, but I read his speech in Hansard. He will understand that Ministers are not able to respond to a ten-minute rule Bill in the normal course of events. Cleary, he is in the process of drafting his grave and weighty Bill, but am I led to believe that the intention is not to introduce the extension until the mid-2020s, which was the original intention of the December 2017 automatic enrolment review?

[Mr Holden]

Yes, it is. I think that it needs to be introduced in a phased way, exactly for the reasons that my hon. Friend the Member for North Norfolk and others have mentioned. We need to phase it in over time so that employers can be ready for the increased cost, but also so that we do not burden young employees very quickly with an enormous extra cost.

Phasing in the extension is exactly the right thing to do; that is how auto-enrolment has been such a success so far. If we had hit people by taking a large chunk of their income at one point, people would have withdrawn and auto-enrolment would not have been the success that it is. Instead, we are seeing take-up rates for full-time workers of nearly 90% now. The phased approach is so crucial. I would like to see it on that sort of timetable—phased in throughout the mid-2020s. That is where we need to be to ensure that as many people as possible take it up and can save for the long term.

We have come such a long way over the last few years. We saw the proportion of people saving for their pensions drop to around 45% before auto-enrolment was introduced. It had been between 55% and 45% for the previous 20 years or so. We have seen the proportion rise rapidly due to auto-enrolment; it is now well above 70%. If we can include part-time workers as well, as my hon. Friend the Member for North Norfolk alluded to, we could see the proportion reach 80% or 90%, which is exactly what we want. Some 6,000 employees in North West Durham are already auto-enrolled, with 1,500 employers. We need to see more people auto-enrolled to save for their retirement.

Overall, extending auto-enrolment is probably the strongest levelling-up measure that we could deliver. I want people across the country who work and play their part in our society to see the same response from the Government, with support to pay into their pensions, and support in their old age and retirement.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

It is a pleasure to serve under your chairmanship, Mr Dowd. It is genuinely hard for me to disagree with anything that my hon. Friend the Member for Grantham and Stamford (Gareth Davies), who is an esteemed member of the Treasury Committee, put forward in his outstanding speech. I thank him for bringing this matter forward for debate. Contrary to popular opinion, I am always keen to debate all matters pension. I have done this job for about 1,680 days and continue to make the case for the change that we are driving forward.

I will address in more detail the speech of my hon. Friend the Member for North West Durham (Mr Holden), my constituency neighbour, who is a vast improvement on his predecessor. He helpfully enlightened us with the fact that St Luke is the patron saint of pensions, which I did not know. I will return to his ten-minute rule Bill and private Member’s Bill in due course.

I listened carefully to the speech of the hon. Member for Kilmarnock and Loudoun (Alan Brown). It is a bit like taking an SNP horse to water and trying to make it drink; his speech started so well, with the statement that, by and large, he could not disagree with anything that had been said, but that sentiment disappeared in general criticism of the Government. He will know that the state pension is up by more than 5% in 2021-22. He will know that pension credit take-up is increasing. He will know that winter fuel payments and cold weather payments are well in excess of £2 billion. He will know that there are free eye tests worth £900 million and free bus passes of £1 billion. I could go on to address various other points he raised, but I want to focus primarily on the automatic enrolment issues raised by my hon. Friend the Member for Grantham and Stamford.

I am slightly concerned that the story of today’s debate may be, “Minister admits that in 2018 he, too, was ambushed by a cake—a lemon drizzle cake—while on a ministerial trip to Newtownards, Northern Ireland”. There are many points that the hon. Member for Strangford (Jim Shannon) made that I want to address. It was an honour and privilege to visit his local credit union. I would love to take him up on his kind offer and return to Northern Ireland. Because of covid, so much has happened as regards ministerial visits and progress on so many things. Our country has acquired approximately £400 billion on the nation’s credit card, and there are difficult fiscal choices to make, which have clearly impacted the roll-out of many economic and fiscal policies. Certainly, in 2022, provided I continue to hold this job that I enjoy, I hope to make the case across Northern Ireland. I have not visited Derry/Londonderry; the credit union there is one of the most successful in the UK and it would be a great pleasure to visit it.

The hon. Gentleman mentioned consolidation and said that he had four pensions. It is right to celebrate and laud the fact that probably the second biggest project that the Department for Work and Pensions is rolling out is the pensions dashboard. Auto-enrolment is the first, and I will come to that in more detail. The pensions dashboard will be transformational: he will be able to see his four pensions on his mobile phone, laptop or iPad. Just as people have a savings app or banking app, we will be able to take the tens of thousands of pensions out there, access that information and understand what an individual has. Crucially, so many colleagues raised the issue of awareness, and the dashboard is the key to understanding that.

There are other things that we are doing, and I could talk in detail about our plans—which will come forward this October—for what are called simpler statements, which basically amend the traditional, very complex pension statements that very few people understand, save for independent financial advisers, which some colleagues present have worked as in the past. The man or woman in the street simply does not understand those statements in sufficient detail, so we are putting them into a two-page form that tells people what they have and gives them proper information; it will do what it says on the tin. We in the DWP and, to be fair, people across industry believe strongly that that is the right way forward, in order to enlighten members, so that they have a better understanding of what they have.

The dashboard will come forward in 2023 and simpler statements will come forward in October 2022. There is much that we could say on the issue of financial education. It is a credit to my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities that he introduced financial education in secondary schools, but we need to do more to enhance awareness about all matters of finance—that does not need to be pensions: it is about all matters relating to money and the usage of money—in primary schools, and to encourage wider understanding of that among our children through their education. I would certainly support that.

The hon. Member for Strangford raised the issue of the self-employed, as did other Members. I will make a couple of points on that issue. The first is that there are already plenty of self-employed people who can perfectly properly sign up to a private pension. I am an example. I was a self-employed jockey—I was not very good at all and did not make much money—and then I was a self-employed barrister and helped to run a charity before coming to this place. However, it is much more complicated for those people, because they do not have any of the benefits of automatic enrolment.

There is a way forward, and we are working on a trial with HMRC to explore the opportunities presented through Making Tax Digital. There is a clear solution for how to change the tax system, on which we are working with HMRC and the Money and Pensions Service. It will almost certainly be a drop-down box with an automatic deduction, which will allow people to do what they can presently do on their manual tax return, and it will make self-employed automatic enrolment much easier. It is a work in progress. Today is Australia Day; it is appropriate that we laud the fact that Australia has showed us the way on so much of automatic enrolment. Certainly, the Australians have addressed the question of how to enhance self-employed take-up of automatic enrolment in a variety of ways, and I am looking at that closely through the HMRC trial. I hope to update the House and parliamentary colleagues on that point in the very near future.

Several colleagues raised the point about 8% plus, which I will come to in a second. Let me first deal with the issue of the 2017 automatic enrolment review, which is also largely the subject matter of the work in progress that is my hon. Friend the Member for North West Durham’s ten-minute rule Bill. The simple truth is that when I acquired this job, back in the dim mists of time in June 2017, I was given two primary responsibilities by the late, lamented David Gauke, who was the Secretary of State. The first was, “Get us to 8%”—bear in mind that automatic enrolment was not even at 5% at that stage. It is a massive triumph for this country, the employers, the employees—who quite clearly have not opted out—and government on a cross-party basis that we have got to 8%. The world has not come to an end and drop-out rates are really low, so without a shadow of a doubt, that is a massive success story. However, my hon. Friend the Member for Delyn (Rob Roberts) is totally right that more needs to be done, and I am going to address that point in a second.

The second thing that happened, pretty much as I arrived in the DWP as Minister, was that I received a copy of the 2017 review in the autumn of that year. We took the decision that we would support it without a shadow of a doubt. It was an independent review; we did not have to support it, and Governments often do not support them. However, we then made the decision that the measures should be introduced on a phased basis.

Clearly, events have got in the way—the past four or five years have been somewhat complicated—but the practical truth is that the Government have an unquestioned commitment to bring forward the 2017 review measures: the lower earnings limit and the 22 to 18 threshold. The way in which we do that and the phasing of it is still a matter of ongoing debate within Government.

People above my pay grade have to make decisions on that—it is dependent on other pieces of legislation and other considerations. Clearly, a consultation would have to take place, but in broad terms the timetable would involve primary legislation to introduce the primary measures and enabling powers, secondary legislation and a consultation to follow, and timings thereafter. Certainly, my hon. Friend the Member for North West Durham was seeking confirmation that the measures would be introduced in a phased approach after the next election, in the mid-2020s, and I hope that is helpful for his understanding.

It is not for me to decide what is in Her Majesty the Queen’s speech, either this year or next, but clearly there are a variety of ways in which we can progress such legislation. First, there is a private Member’s Bill. That is not impossible, but it is be complicated for Government business for primary legislation on a large matter, particularly given the timings of this Session. I welcome my hon. Friend’s ten-minute rule Bill, but it comes very late in this Session. Obviously, there will be future private Members’ Bills.

Secondly, we are clearly looking to bid for a third or fourth Session pensions Bill that can take these matters forward as normal Government business. My intention is to bring forward the legislation, subject to all the usual provisos about being a Minister with larger collective responsibility.

[Mr Holden]

In addition to this debate, which was secured by my hon. Friend the Member for Grantham and Stamford (Gareth Davies), and my ten-minute rule Bill, what more could we do to support the Minister in his bids to drive forward this very sensible agenda in Government?

[Guy Opperman]

The fact that there is cross-party support is relevant because, quite rightly—but sometimes wrongly—Oppositions oppose many pieces of legislation. Clearly, this legislation has the support of all political parties. I cannot speak for the one Member of the Green party, but I know that the Liberal Democrats and other smaller parties support the legislation. That is very relevant and needs to be shouted from the rooftops.

This matter has an impact, particularly on low earners, in every single constituency in the country. As my hon. Friend the Member for North West Durham said in his eloquent speech, such measures would be a really good example of levelling up in low-earning communities. Clearly, people above my pay grade—whether the Chancellor, Prime Minister or others—will decide what goes into the Queen’s Speech this coming May, and I wish them all good fortune with that. Some of the clarifications that my hon. Friend made will help, as will the way in which he is trying to bring legislation forward. Airing the matter in the House helps, confirming to all parties that such measures have cross-party support. So much pension policy is so long-term that the impact of pulling a lever is not felt until three to five years later, so it makes a massive difference to have cross-party support.

I will touch briefly on a couple of other points. With regard to longer-term plans to go higher than 8%, I totally agree with my hon. Friend the Member for Delyn that 8% is not enough. Again, subject to the ability to travel in future, I hope to engage with American colleagues to look at their 401(k) and the way they deal with it. Subject to the ability to take those things forward, the next goal after the 2017 review is clearly a discussion and a debate on how much above 8% is enough.

I am wearing my Australia Day tie, which was given to me when I and my hon. Friend the Member for Daventry (Chris Heaton-Harris) triumphantly crushed the Australians in the parliamentary cricket match a few years back. The Australians have got to 12% and are doing so much, particularly in utilising the defined contribution and automatic enrolment to do the things that my hon. Friends the Members for Darlington (Peter Gibson) and for Sedgefield (Paul Howell) mentioned —namely, safely investing those savings in local communities so that individual savers can say, “That is what is happening in my area.”

I can give examples. I have set up two banks, as colleagues will be aware: Atom bank, which I was a founder member of, and the Northumberland Community Bank. Another good example is the Cambridge and Counties Bank, which utilises the pension reserve to loan on asset-backed lending to assist with investment in the Cambridge local area. There are other examples—the Sparkassen in Germany do this all the time—of only lending to local communities in that way. Such examples will proliferate, which is a good thing, because this comes to awareness. Members are then aware of what their savings are invested in and are so much more engaged, and that can apply across the country.

I accept that we need to do more on awareness. The Money and Pensions Service is clearly doing great work, and I support totally what Pension Geeks is doing with Pension Awareness Day, and what Scottish Widows is doing with its pension awareness road trip. The reason I am a supporter of the statements season is that I do not think that pensions awareness or engagement is good enough, quite frankly. We have to have a product or process whereby people are engaged, much as we do in tax or educational results, so that they understand better what they have got at a time when they can really get engaged. Obviously there is a working group on statements season, and it is a matter of discussion with the industry, but we have to do more to create greater engagement.

In my last minute or so I want to try to address some of the final points. Clearly, consolidation is a matter that we are working on, and I can happily give colleagues more on that. My hon. Friend the Member for Grantham and Stamford raised two final points about the nature of savings and what we are saving for. The traditional product has clearly been a pension, but our parents and grandparents would all have had much greater awareness of rainy day savings. We should unquestionably laud and support all the companies that are already running a 1% savings club or working with credit unions and other organisations to ensure that our employers and constituents have the capacity for rainy day money. If that was a problem pre covid, it is a particular problem post covid. There is also a wider policy issue about how we enable products to be developed to ensure that people are saving for deposits, although that is about the wider culture of saving in the longer term.

To finish, I thank the 10 colleagues who came along this morning to make the case for pensions savings and the many who support this policy and are driving it forward. Certainly, we can find very little in my hon. Friend’s speech to disagree with. I thank all colleagues for coming along and making the case and for supporting our reforms. I accept that there is more to be done, but this Government are utterly committed to ensuring that that happens.

Oral Answers to Questions

Guy Opperman Excerpts

Monday 13th December 2021 Commons Chamber

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

13. What recent assessment she has made of the effectiveness of the state pension in tackling pensioner poverty; and if she will make a statement.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

Let me take this opportunity to welcome the newcomers to the Opposition Front Bench.

The state pension is the foundation of support for older people and, under this Government, the full yearly amount of the basic state pension will be more than £2,300 higher in April than in 2010. The latest figures show that 200,000 fewer pensioners are in absolute poverty compared with 2009-10.

[Karl Turner]

Fred from east Hull was left without any income whatsoever for several months earlier this year because the Department for Work and Pensions failed to pay him his state pension, to which he was rightfully entitled. When my office intervened, he eventually got paid, but it took us several weeks to sort it out. When people such as Fred in areas like mine are already facing a cost of living crisis, fuel poverty and the effects of the pandemic, does the Minister feel that he should apologise to Fred and many others?

[Guy Opperman]

I cannot comment on the individual case, but I can say that the hon. Gentleman is right to say that there was a backlog over the summer period by reason of covid and many other factors, which we took great steps to address. A dedicated team of several hundred individuals ensured that we caught up with the backlog, and we are now operating business as usual.

[Dr Huq]

With winter biting and energy companies going to the wall, approximately 13.2% of households in Ealing Central and Acton are in fuel poverty—that is 6,864 pensioners struggling to heat their homes. Will the Minister agree with Labour and cut VAT on household heating bills during these winter months? The Conservatives have pilfered enough of our manifesto before; they could do this and make a real difference to pensioners.

[Guy Opperman]

The hon. Lady will be aware that we spend £2 billion on the winter fuel payments. There is also the cold weather payments fund, the household support fund, and the pension credit energy rebate. There are a whole host of ways in which support can be found for her constituents.

[Dr Julian Lewis (New Forest East) (Con)]

I know my right hon. and hon. Friends in the ministerial team are doing their best, but is there any encouragement they can give, perhaps in conjunction with the Treasury, to the women of the Women Against State Pension Inequality Campaign who lost out on the state pension start age?

[Guy Opperman]

With respect to my right hon. Friend, that matter has been decided in the courts on two occasions—in the High Court and in the Court of Appeal—and it is not proposed to change the policy.

[Matt Rodda (Reading East) (Lab)]

The Government have consistently failed to stand up for the interests of pensioners on modest incomes. Food prices are up, gas prices are up and electricity prices are up. The cost of living is going up. Yet despite this, the Government are refusing to cut VAT on fuel, even though they have had higher than expected VAT receipts from across the economy, which would allow them to do exactly that and offer much-needed help to pensioners. To make matters worse, the Government are also failing to increase the take-up of pension credit. When will they finally start offering real help to our pensioners?

[Guy Opperman]

That is a bit rich. When the last Labour Government were in power, the state pension was under £100; it is now going up to £185 going forward. It is almost double what it was before thanks to the triple lock introduced by this Government and the coalition Government. It is also very much the case that pension credit take-up is actually going up, not down. Over the two years of the pandemic, both the basic and new state pension will have increased by more than prices thanks to the cumulative effects of the Social Security (Up-rating of Benefits) Act 2020 and the Social Security (Up-rating of Benefits) Act 2021.

[Mark Fletcher (Bolsover) (Con)]

11. What steps she is taking with Cabinet colleagues to ensure cross-Government delivery of the national disability strategy.

--- Later in debate ---

[David Linden (Glasgow East) (SNP)]

We do not talk often enough in society about old-age poverty. Besides the inadequate state pension and the latest triple-lock betrayal, another factor is the low uptake of pension credit: about 1 million pensioners in the UK miss out on £1,600 a year on average, with single women being most affected. We have heard the Pensions Minister say countless times that the Government want to increase the take-up of pension credit, so why is the Department refusing to introduce a proper take-up strategy for pension credits and other benefits, as we have done in Scotland?

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

We are doing a huge amount to increase the take-up of pension credit. I have met repeatedly with the BBC, and we have set up a pension credit taskforce which involves energy companies, the Local Government Association, various banks, BT and others. The reality is that pension credit take-up is increasing. It is also the case that we have never spent as much money on pensioners as we do now—up to £129 billion, of which the state pension is £105 billion—and pension credit is the highest it has ever been.

[Mr Speaker]

I call Jane Hunt. Not here.

--- Later in debate ---

[Peter Dowd (Bootle) (Lab)]

This time last year, the Canadian Government asked the UK Government to enter into talks to bring about pension parity for pensioners like Royal Navy veteran Alan Wren, who was forced to work until he was 78 years of age because his pension had been frozen in Canada. The Government refused to enter into those discussions. What does the Secretary of State say to veterans such as Alan and the 492,000 other pensioners who are trapped on meagre state pensions, all because they live in the wrong country? In Alan’s case, the country is a commonwealth and NATO partner and ally.

[Guy Opperman]

As the hon. Gentleman and I have met and spoken about this matter in the past, he will be aware that the UK state pension is payable worldwide and that all veterans are treated the same as non-veterans when it comes to the payment of the UK state pension overseas.

[Ms Anum Qaisar (Airdrie and Shotts) (SNP)]

In an earlier answer, the Secretary of State mentioned that she has not sung karaoke for a number of years, but I seem to recall she was singing, “I’m having the time of my life” just a few months ago, the night before the universal credit uplift was removed. On that point, I recently visited a Trussell Trust foodbank in my constituency, where staff and volunteers raised serious concerns that the reduction in universal credit will push more and more families into poverty. Will the Department concede that the cut to the uplift will mean that more households will become reliant on foodbanks?

Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill

Guy Opperman Excerpts

2nd reading
Friday 26th November 2021 Commons Chamber

[Mr Richard Holden (North West Durham) (Con)]

I pay tribute to the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) for bringing this Bill to the House. As she mentioned, it will introduce a well overdue change. As hon. Members have reflected, given the passing of the Equal Pay Act 1970 and the fact that this matter has been highlighted as a major issue since 1990, it is not before time.

The hon. Lady said in her opening speech that the current situation seems wrong. Well, I think it definitely is wrong. I am so glad that she has introduced this legislation, because the subject of pensions is not talked about often enough in this House. The impact that pensions can have on people’s long-term prosperity is immense, especially in old age, and too many constituents in places such as North West Durham really do feel that there is a pensions divide.

Further to what the hon. Lady is doing today, I want to speak more broadly to the Treasury Bench about pensions. The change implemented through this Bill was recommended back in 1990. Several years ago, the auto-enrolment review of 2017 recommended that auto-enrolment be extended to 18 to 21-year-olds, as people are currently auto-enrolled only after the age of 22. That change would be hugely beneficial, particularly to constituents of mine, who start work at 18 at a far higher rate than the national average. Those 45 to 50 years of compound interest on four years of extra auto-enrolment could make an enormous difference to their income in later life.

Auto-enrolment schemes currently kick in only when someone is earning over £6,000 or so a year in a job. Many of my constituents, particularly women, have multiple jobs, and may work only 10 hours a week in them.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I am grateful to my hon. Friend for making that point. I will answer in a bit more detail in my closing remarks, but let me say that I endorse entirely his argument in favour of the 2017 auto-enrolment review, and the fact that expansion of automatic enrolment will unquestionably assist those in low-income areas, including those who have multiple jobs. With respect, it will be a progressive and good thing to do, but I will address the point more in my closing remarks.

[Mr Holden]

I thank the Minister for that intervention.

Some of the changes, particularly the lowering of the earnings threshold, could be introduced in secondary legislation, but primary legislation will be required to extend the auto-enrolment to 18 to 21-year-olds; I should let the Minister know that I have a date for a ten-minute rule Bill in the new year to do just that.

I very much hope that the Government will look at lowering the threshold. Low-paid women with multiple jobs in particular could be missing out on many thousands of pounds going into their pension pots. Low-paid women with multiple jobs in particular are potentially missing out on many thousands of pounds going into their pension pots due to issues around auto-enrolment. It is another inequality in the system that, as the hon. Member for Rutherglen and Hamilton West mentioned, tends to affect women disproportionately.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

It is a privilege and an honour to address the House on behalf of the Government, and to set out our position on this small but very important Bill.

Let me first congratulate the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) on her success in the ballot, because without the ballot she could not have presented any piece of legislation. It is important for people to understand that. I also congratulate her on the massive support—of which the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) spoke eloquently—that she has managed to garner across the sector for a piece of amending legislation to address a small, discrete but genuinely important measure, and on the way in which she introduced the debate. She is right, and the hon. Member for Gedling (Tom Randall) is right: this is not simple stuff. It is technical, but it matters tremendously. She set out, with great eloquence and fairness, the background to the problem and how her three-clause Bill will address it. She brought to the attention of the House the need for schemes to make progress with the equalisation of scheme benefits to take account of the unequal effect of guaranteed minimum pensions. She set out why this issue is of paramount importance and how the House can help to clarify the legislation, and I can confirm that the Government will support the Bill.

As we all know, there are 13 days a year on which we consider private Members’ Bills. Some of those days are interesting, to put it charitably, in that the Bills will not necessarily be supported by the Government or even the Opposition on many occasions. Points of great importance are raised but the Bills do not go forward with the will of the House. However, that is not like today. Today is a very special day, and I cannot overstate the sense of genuine achievement that Members across the House should feel about the progress of the Down Syndrome Bill. Anybody who was in the Chamber to hear what was said will have been utterly moved and taken away by the wisdom and significance of the speeches and the differences that that Bill will make. We have now come to a very different Bill, but it is no less important.

I am now—I believe—on my fifth pensions Bill, Madam Deputy Speaker. As a former Pensions Minister, you were one of the architects of automatic enrolment, which my hon. Friend the Member for North West Durham (Mr Holden) so eloquently—

[Sally-Ann Hart]

Will the Minister give way?

[Guy Opperman]

Of course.

[Sally-Ann Hart]

My hon. Friend said that he is on his fifth pensions Bill. Is it right that pensioners are better off now than they were 10 or 15 years ago?

[Guy Opperman]

In a whole host of ways, the answer is yes. The state pension, by reason of the triple lock, is now £2,050 higher than it was prior to the introduction of the triple lock in 2010. There is automatic enrolment, and it would be fair for me to give a quick history of that because we have the esteemed former Minister in the Chair. Automatic enrolment was conceived by the Labour Government and the Turner commission. It was introduced by the coalition Government in 2012. Without a shadow of doubt, it has been utterly transformational. For example, 6,000 constituents of my hon. Friend the Member for North West Durham are saving the 8% thanks to the 1,580 employers in his constituency who support that. He made a very telling point about the 2017 automatic enrolment review, and given that he raised it—not for the first time— I will finish this point on automatic enrolment and the importance of this change before I go on to GMPs.

I am proud to say that the success of the provision now means that 10.5 million employees have been automatically enrolled into a workplace pension by more than 1.8 million employers. It was specifically designed by the Labour Government and brought in by various other Governments to help groups who historically have been less likely to save, particularly women, low earners and young people—this goes to the point made by my hon. Friend the Member for Hastings and Rye (Sally-Ann Hart). It has helped many in those groups to begin to save into a pension for the very first time. Workplace pension participation among eligible employees has grown to 88% overall compared with 55% in 2012. The proportion for women and young earners was less than 40% in 2012; it is now above 80%.

There is more that we can do, and we very much hope we will, and we recognise that challenges remain. Our ambition, as my hon. Friend the Member for North West Durham set out in relation to the 2017 review of automatic enrolment, is to enable people to save more and start saving earlier. Abolishing the lower earnings limit for contributions and reducing the age for being automatically enrolled to 18 in the mid-2020s will benefit younger people, the low-paid and part-time workers as they will receive contributions from their employer from the very first pound earned. I want to stress that as a Government, we remain utterly committed to those measures. I have been clear that the implementation will be subject to the learnings that take place from the 2018 and 2019 contribution increases. That is significant and it is important that that is done.

[Mr Holden]

The Minister is being generous with his time and in his remarks about me too. The Government have said that they will bring forward legislation to make sure that that happens. Does he have a timetable for that?

[Guy Opperman]

My hon. Friend tempts me to make commitments that I am unable to make. The Government have said that they will introduce the measure by the mid-2020s. It requires primary legislation and there is no doubt that there have been issues in its introduction because of the 2018 and 2019 increases. The impact of Brexit and the pandemic also clearly makes it more complicated to introduce such changes for employers.

It is still several years until the next general election, perhaps as much as two and a half years. My hon. Friend will be aware that the Government have to go through various processes to bring forward future legislation, including a Queen’s Speech setting out the Bills that will be brought forward in the third and fourth Sessions. He makes an eloquent point, however, as he always does—I assure the House that he is a massive improvement on the previous occupant of North West Durham, my neighbouring constituency—which I am certain will be heard not just on the Treasury Bench by the assiduous Whip, who is noting down his every word, but all the way in the Treasury, where I know he is making the case.

The practical reality is that the Bill of the hon. Member for Rutherglen and Hamilton West proposes a technical change. I will try to set out the position, which genuinely dates back to the 1970s and the last days of the Callaghan Government. Guaranteed minimum pensions were introduced to help employees to save affordably for an income in retirement, which is clearly a great concept. The state pension used to be made up of two parts: the flat rate basic state pension and the earnings-related additional state pension.

The flat rate state pension was simply funded through national insurance and paid at the full rate to those with sufficient qualifying years of NI contributions or pro rata for those with a partial record. The earnings-related additional state pension, also known as the state second pension or state earnings-related pension scheme, was linked to a person’s earnings. National insurance contributions were paid by an employee and their employer and gave the employee the right to an additional earnings-related state pension.

Many employers, however, were already offering their workers company pension schemes, so many people were building up an occupational pension and an earnings-related additional state pension. That was rightly thought to be overly onerous and potentially unaffordable for employers and employees. In effect, it was seen as a double provision and immensely overcomplicated.

To clarify the situation, the Callaghan Government introduced the system of contracting out and the provision of guaranteed minimum pensions in 1978. At that time, although I realise it may be hard to believe after hearing the description in the opening speech, that was considered a simplification. How they work is not simple, but I will attempt to explain it to the House to put it on the record, particularly for usage in Committee.

Employers who sponsored a salary related scheme were allowed to contract out their occupational pension schemes from the earnings-related additional state pension. Because employees in contracted-out employment were taken out of the additional state pension, the employer and pension scheme members paid lower national insurance contributions. Salary related contracted-out occupational pension schemes were required to take on the responsibility for paying their members the GMP as part of the occupational pension from the scheme.

The intention was that, on reaching retirement age, the amount of guaranteed minimum pension that the individual member would have built up would be broadly equivalent in value to the additional state pension that they would have received. However, the guaranteed minimum pension was literally that—a minimum.

Most employees would also have built up an occupational pension, but the scheme pension could not be lower than the guaranteed minimum. In addition, widows, widowers and surviving civil partners of members with a GMP received valuable survivor benefit rights—this goes to the point raised by several colleagues about ongoing survivor rights. Some of the technical details are complicated, but the crux of the idea is simple: rather than paying additional NI to the state to build up additional state pension, people built up a similar amount of occupational pension through a workplace pension scheme. The workplace pension scheme ultimately, of course, became automatic enrolment, as the Deputy Speaker, the right hon. Member for Doncaster Central (Dame Rosie Winterton), knows. The system ran in this way from 1978 to 1997.

Although the basic idea was simple, the technical details were extremely complex. I will not take the House through all the complexities, but, for example, GMPs can be subject to both revaluation and indexation. They are revalued before coming into payment to ensure they are protected against inflation, but once in payment any GMP accrued between 1988 and 1997 must also be protected against inflation, through indexation. Although revaluation and indexation are both intended to protect against the effects of inflation, the rates of revaluation and indexation are not the same, and, as the hon. Member for Rutherglen and Hamilton West set out, the reality is that men and women with the same employment history could receive different GMPs. That is what we seek to address.

So the GMPs were abolished in 1997. The whole system of contracting out was finally ended in 2016, with the introduction by the Conservative Government of the new state pension. But of course many of the people who worked between 1978 and 1997 still have a right to a GMP. We are talking about a significant number of our constituents—this is a very large figure. Some will already be retired, but some are still working. There have been a variety of court cases on this, which I am not going to go through in copious detail, but the first key one was something that has affected this House and all matters of state pensions dramatically since 1990. I refer to the European Court of Justice ruling in the case of Barber. It ruled that pensions were deferred pay and, as such, must be treated and paid equally to men and women. The Barber judgment was not specifically about GMPs but it meant that the impact of the differing rules for men and women had to be corrected. When we have come to a decision, as we have in his House on multiple occasions, about the state pension age correction exercise and the increases from 60 to 65 and 66, it can be traced back to the Barber judgment and the equality legislation that followed thereafter.

The House has already heard that the ECJ subsequently made the Allonby judgment, which enables schemes to use a scenario to work out whether someone has lost out or not, rather than being dependent on having a member of the opposite sex in the scheme to compare against. The Government are clear that in light of the Barber judgment, and subsequent decisions, including the Allonby judgment, occupational pension schemes need to equalise pensions, taking account of the effect of GMPs. Subsequently, the UK passed the Equality Act 2010, which also requires equal treatment between men and women for all pension accrued from the date of the Barber judgment. As has been said on several occasions, the Department for Work and Pensions has attempted, under successive Governments, to try to fix this problem without primary legislation. It is totally right that that there was a consultation, following which guidance was published. However, as the hon. Lady rightly set out in opening, it is simply not the case that all schemes can proceed on the basis of the guidance that has been prepared. The reality therefore is that schemes need to equalise the amount of pension their members receive to correct for the problems caused by the complex rules and the differences in retirement income these rules produce. This process is known as “equalisation”. How an occupational pension scheme corrects members’ pensions is up to the individual scheme, provided it is done properly. There are various methods of equalising that occupational pension schemes can use. However, the process can be very complicated and is specific to the individual scheme, and there are a lot of schemes. Some schemes have already felt very nervous and they have been concerned not just by the costs and the complexity, but by the judicial process that could follow and the perceived uncertainty about exactly how to undertake the process and be sure that they have met their legal obligations. As a result, as she set out, many schemes have still not equalised for the effects of GMPs.

What the Bill does is key. It makes it clear how the conversion legislation applies to people who are survivors, as well as to the earners. It also gives the Government the ability to set out in regulations the details of how survivor benefits will work for surviving spouses or civil partners of people with guaranteed minimum pensions. As my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont)—who represents a constituency across the Border from me that includes Jedburgh and Galashiels—said, it is a piece of legislation that applies throughout the United Kingdom, and clause 2 includes specific regulations in relation to Northern Ireland that were requested by the Stormont Government.

Clauses 1 and 2 both clearly state that converted schemes must provide survivor benefits. One of the key purposes of the Bill is to make it easier for pension schemes to know the right amount that survivor benefit schemes using the conversion legislation must pay. The Bill also gives the Government the ability to set out in regulations details about who must consent to the conversion of guaranteed minimum benefits. Finally, the Bill removes the requirement to notify HMRC once a scheme has converted its guaranteed minimum pensions.

I opened by saying that debates on private Members’ Bills can be significant and serious days, and I genuinely appreciate the contributions that we have heard from a variety of colleagues. I thank my hon. Friend the Member for Stourbridge (Suzanne Webb) for her enthusiastic but pithy support, and my hon. Friend the Member for Hastings and Rye for an eloquent speech that set out in great detail her grasp of the issue. As always, my hon. Friend the Member for North West Durham is never backwards in coming forward on so many different issues, including his passion for automatic enrolment.

My hon. Friend the Member for Dover (Mrs Elphicke) raised a number of points and spoke with great experience. I am not of the view that this very specific Bill on very specific points would address the individual problems that she raised regarding her constituent, but I am happy for her to write to me about the issue and I will give her a detailed reply to confirm whether it is within the scope of the Bill. I suspect that it is not, but I want to be absolutely sure when I reply to her, which I will do prior to our entering Committee so that the House can be clear.

I cannot stress what a wonderful campaigner and asset to the House my hon. Friend the Member for Gedling is. He has made a tremendous impact through the work that he has done. It is great to see him here, and an honour and privilege to answer some of his points.

The hon. Member for Stalybridge and Hyde and I have clashed before—I think that this is our fourth Bill—but it is great that he and the House are in full support of this one.

The Department for Work and Pensions is attempting to make pensions safer, better and greener. We are doing a huge amount, including: the Pension Schemes Act 2021, with collective defined contributions, which will provide the third way of pensions; the pensions dashboard, which will be like a banking app that brings our pensions to our mobile phones, iPads and laptops, so that we have total access and knowledge of what we have; the reforms and support of defined benefit; action to prevent the investment scams that we know are out there and are trying to stop; the huge work that we are doing to develop on the environmental, social, and governance reforms that we introduced after the 2017 elections; and putting pensions at the heart of climate change by building on the work of COP26, and being the first country in the world to introduce climate-related financial disclosure, giving consumers—all our constituents —full understanding of what is being invested in on their behalf through pensions.

With respect, although this is a smaller Bill than the 125 clauses of the Pension Schemes Bill that we took through the House earlier this year, it affects a significant number of our constituents and I am genuinely keen to progress it. I can therefore confirm that it is with pleasure that I give the Government’s backing to the hon. Member for Rutherglen and Hamilton West, her Bill and the work that she has done. Excellent points have been made in debate that I will discuss in more detail in Committee. If I have missed any particular points, I will endeavour to write to colleagues in the intervening period. The Government support the Bill. We wish it well in Committee. I want to take the time to thank the hon. Lady, because it is not easy dealing with a highly technical and difficult Bill such as this. She should be very proud of the way she ensured that she got cross-party support and then introduced the Bill and outlined its provisions with great eloquence. I thank her for all the work that she has done.

Social Security (Up-rating of Benefits) Bill

Guy Opperman Excerpts

Consideration of Lords amendments
Monday 15th November 2021 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I beg to move, That this House disagrees with Lords amendment 1.

[Madam Deputy Speaker]

With this it will be convenient to consider the Government motion to disagree with Lords amendment 2.

[Guy Opperman]

The Social Security (Up-rating of Benefits) Bill is a one-year Bill by reason of the pandemic. Last year, as you will be aware, Madam Deputy Speaker, we changed the law for one year to increase state pensions by 2.5% at a time when average earnings had fallen and consumer price inflation had increased by half a percentage point. If we had not taken this action, state pensions would have been frozen.

This year, average earnings growth is estimated to be unusually high, distorted by the cumulative effects of a natural economic reaction to the coronavirus pandemic and the response to the supportive measures introduced by the Government to protect livelihoods. The figure for average weekly earnings from May to July—the measure used for uprating earnings-linked benefits—has grown at 8.3%, which is over two percentage points higher than at any time over the past two decades. Recognising this covid-related distortion, the Government are setting aside the earnings link for one more year, 2022-23, and continuing the double lock of at least inflation or 2.5%. The triple lock will be applied again in the usual way for the basic and new state pensions from the following year.

[Stephen Timms (East Ham) (Lab)]

Of course I understand why the Government have decided not to increase the state pension by 8%, but is it still their intention that the value of the state pension should, over time, at least keep track with earnings?

[Guy Opperman]

The right hon. Gentleman will be aware that we remain committed to the triple lock. This is a one-year-only Bill. This will be a continuation of the policy that the Government introduced as part of the coalition in 2010 and have continued to pursue on an ongoing basis since then. There is no intention to change that.

[Stephen Timms]

rose—

[Guy Opperman]

I will make some progress.

It is right that I address these Lords amendments, Madam Deputy Speaker, because, as you rightly outlined, they engage financial privilege in that they interfere with the financial arrangements made by the elected House of Commons. That alone, I respectfully submit, is sufficient reason to disagree with the Lords amendments. However, it is also right that I address directly the point that was made by the House of Lords that invites the Secretary of State to measure earnings as if they were not actually growing by 8.3%. I assure the House that there is no robust way of calculating them as if they were not.

The independent Office for National Statistics has responsibility for producing economic statistics to the highest possible standards. ONS experts investigated whether it was possible to produce a single robust figure for underlying earnings growth that stripped out impacts from the pandemic, and concluded that it was not possible. Alongside the actual earnings growth figures, the ONS suggested a possible indicative range of 3.6% to 5.1%. These figures do not have national statistics status. Indeed, the ONS itself includes heavy caveats on the issue and advises caution in approaching it. The Bank of England also cast doubt on identifying a figure that could be relied on. The ONS said:

“There are a number of ways you can try to strip out these base effects, but no single method everyone would agree on. We have tried a couple of simple approaches…Neither approach is perfect…Our calculations of an underlying rate are there to help users understand base and compositional effects, but…there remains a lot of uncertainty about how best to control for these effects.”

It said that the statistics therefore “need to be” treated “with caution”.

We believe it would be reckless in procedure and in law for this or any other Government to set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus. That is why the Government have decided to suspend the earnings link in this year of exceptional and anomalous earnings growth. Instead, we decided to apply a double lock underpinned by the established consumer prices index published and approved by the ONS. This approach was also recommended by the Social Market Foundation and other commentators, and very strongly by this House on Second Reading, Report and Third Reading. That is the legislation that this House passed to the Lords, and that is the legislation I would urge this House to send back to the Lords.

I remind the House that over the two years of the pandemic the Government will have ensured that the pensions covered by this Bill will have increased by much more than prices, by reason of the 2.5% increase last year and the link to CPI this year. In those circumstances, I commend this House to reject the House of Lords amendments and agree that we proceed with this one-year Bill by reason of the pandemic.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Whatever else could be said about the House of Lords, it is a place that genuinely contains a great deal of expertise on the subject of pensions. We are fortunate to have that expertise in Parliament and we should be prepared to listen to it. Having studied the exchanges in the Lords, I feel that the Government’s positions on this matter have not held up well under scrutiny, and the debate has moved on considerably since we last discussed it here.

Labour will therefore vote to accept the amendment put forward by the former Conservative Pensions Minister Baroness Altmann, which was well argued and handsomely carried, but which also most closely reflects our own position on these matters. That is to say, we accept, as I have said clearly and repeatedly, the Government’s case that the true figure of earnings growth in the UK is not 8.3%. It would be absurd to maintain that that is what is happening to our constituents’ wages right now. Labour supports the triple lock. We believe the Government’s manifesto commitment should be binding and that the connection to earnings in the uprating decision for this year should remain.

In her remarks, Baroness Altmann made it clear that she was not proposing a specific uprating figure by proposing this amendment. That is important. It seems to me that all Conservative MPs could vote for this amendment, honour their own manifesto commitment, and still address the problem of how the pandemic has distorted the earnings data. It would just require the Government to effectively make an assessment of whether real wage growth is higher or lower than CPI inflation, and, if higher, use that figure.

When we last held a debate on this in the Commons, the Government said that that would not be legally sound, but the Lords debate knocked that down fairly easily. As Baroness Altmann said, for a judicial review to occur, the figure the Government used would have to be found to have been brought about by the Government acting irrationally. That is something we can never rule out with this Government, but it should be more than possible to avoid that. If I may say so, one of the reasons the Government lost this vote so badly in the Lords was their tendency to rely on short-term, inconsistent arguments to bounce from one day’s headlines to another’s.

[Guy Opperman]

The hon. Gentleman criticises the Government for not coming up with a solution, when he is unable in any way to come up with a solution or figure himself, as are the Office for National Statistics, the Bank of England and all other reputable organisations. In fact, the House of Lords did not come up with a figure, so what, pray, if he would enlighten the House, is the precise figure that he would see pensions increase by?

[Jonathan Reynolds]

I am grateful for the Minister’s intervention. I am about to explain why he has got himself and the Government into this position.

[Guy Opperman]

What figure?

[Jonathan Reynolds]

With respect, the Minister just needs to listen to this point. He stands at the Dispatch Box and, like all Ministers, tells us that black is white. For instance, when the Government reacted to the crisis of their own making—when we saw the pumps run dry and the shelves go sparse—they claimed to the country that this was a secret masterplan towards a high-wage economy that they had had all along. Now, we are having to see the Minister and the Government tie themselves in knots again, because he has been sent here to make the case, which we have heard him put very well, that the figure is too distorted and therefore we need this primary legislation, yet—and this is the problem, Minister—according to the Prime Minister, wages are up, workers have never had it so good and that is why the Government can cut £20 a week from universal credit. They are making two completely opposing arguments. We do not even know whether the Government believe that wages are rising faster than inflation. I politely say to the Minister that they cannot expect to have it both ways.

I will repeat a number of points that colleagues may have heard me say before, but I feel they need to be repeated in light of some of the media comments on the Bill. The uprating of the state pension is relevant to millions of pensioners in this country, but it is wrong to present it as an issue of intergenerational unfairness. That is because these decisions are also fundamentally about how we ensure that the state pension is indexed and retains real value for people who are in work today when they come to retire. This Government have been grossly unfair on people of working age, but frankly that is due to the burden of taxes they have inflicted on workers, rather than through the operation of policies such as the triple lock.

I hope the Minister took on board the comments made about pensioner poverty in this House and the other place. The Government’s use of what they call absolute poverty, which in reality is a measure of poverty relative to a fixed line in 2010, is unsatisfactory because not only does it ignore the statistical evidence, which is that pensioner poverty is now rising after it fell considerably under Labour, it also limits a serious debate on the drivers of that rise. The big picture is that the OBR predicts that as a country we will be spending an extra £6 billion a year, year-on-year, on pension-age benefits every year up until 2024-25. That is the year that the forecasts in the welfare trends report go up to, so it will likely continue to rise after that. Pensioner poverty is going up as spending rises substantially. We should be having a much more substantive debate about that, looking at housing costs, energy prices, food and access to good financial and investment advice. The way in which the Government present their own progress means that any real wage growth over the last decade allows them to claim that poverty has declined, so when the Minister says that 200,000 pensioners have been lifted out of poverty since 2010, the reality is that that is a very poor level of performance compared with all previous Governments. Poverty is always relative, because it is a measure of whether someone has the means to live a fulfilling life in the society of which they are a member. That is not just a left-of-centre viewpoint, but one that until recently was accepted by Conservatives, too.

However, to return to the matter at hand, the House of Lords has sent us an amendment that should genuinely command the support of the whole House. It requires the Government to maintain the earnings link in their manifesto promise, while still making allowance for the pandemic. This Government have dragged politics through the gutter in recent weeks, with stories of sleaze, corruption, contracts for donors and second jobs from Caribbean islands. I could go on, but the point is that public trust in this place matters. When the Government muddy our democracy in the way that they have, they cannot then turn to the public and ask voters to simply take them at their word. For public trust to return, the first step has to be for the Government to keep their promises. Today, Labour will therefore support the amendment that would allow the Government to keep their promise on the pensions triple lock.

The Lords have sent us a very reasonable set of measures, and frankly I see no logical reason not to support them if we want to protect the link between earnings and pensions. If the Government are unable to do so, they should admit what is really going on: they are using the pandemic as a smokescreen to scrap the triple lock and pocket the savings. They should cut the obfuscation, keep their promises and vote for the Lords amendments.

--- Later in debate ---

[Guy Opperman]

rose—

[Stephen Timms]

I will gladly give way to the Minister. Hopefully he will clarify the position.

[Guy Opperman]

I think the right hon. Member misheard or misunderstood me. This is a one-year-only Bill; after that, we revert to the current legislation and state pensions will increase at least in line with earnings. That is what I thought I made clear.

[Stephen Timms]

The Minister did indeed say that in response to my intervention, but that does not answer the question. The question was: do the Government intend the value of the state pension, over time, at least to keep track with earnings? I was hoping that he would reaffirm that. I do not think that is controversial—it is a policy long held by the Labour Government, the coalition Government and this Government—and I hoped that he would say that that was still their intention, even though in the current year, for reasons that we all understand, the value of the state pension will fall significantly behind the increase in earnings.

As I hope I made clear in my intervention, I think it is entirely reasonable not to increase the state pension by 8% this year; I completely understand the case for not doing that. It looks as though we will get an increase of around 3%, in line with CPI. The hon. Member for Glasgow East (David Linden), who spoke for the SNP, talked about the likely rates of inflation, and, depending on increases in prices and earnings next year, it is quite likely that the state pension will never catch up with earnings unless there is a catch-up initiative of some kind. The Lords amendments would provide such a mechanism. If there is not a catch-up at some point, that would be contrary to the Government’s long-held intention that the state pension should at least keep track with earnings. The fact that—as the Minister has now told the House twice—it will get back in line with the triple lock next year does not solve the problem, because there is a significant backwards move this year. Will there be a catch-up initiative at some point? It looks and sounds as though there will not.

Keeping the value of the state pension going up in line with earnings was a key pillar of the new pensions framework set out in the report by Adair Turner and his fellow commissioners John Hills and Jeannie Drake, published in 2005 and 2006. The settlement’s key elements were that the state pension should keep track with the increase in earnings over time, and auto-enrolment. It was accepted by the Government then and by every Government since.

The importance of that needs to be spelled out. It is not just about being more generous to pensioners and helpful to older people. It is important because it ensures a sound foundation for pension saving, so that people auto-enrolled into pension saving through that successful initiative, which we have all celebrated, are not being encouraged by the state into a bad deal. If the value of the state pension will no longer at least keep track over time with earnings, some people will be better off spending their money now, rather than saving into the pension pot that they are being auto-enrolled into, and later relying on the means-tested safety net of pension credit.

If the state pension slips behind earnings, modest pensions accrued through auto-enrolment will become worthless, because those who claim them in due course will not get above the means-tested threshold and they will still have to depend on pension credit for their income in retirement, and the fact that they have saved into a pension will do them no good at all. That will be a growing problem if the level of the state pension is allowed to slip behind the increase in earnings.

If that does happen, people who are looking forward and saving but are going to end up with fairly modest pensions should instead spend the money at the time they earn it, rather than save it in a pension that, in the end, is not going to take them above the means-tested threshold and so will not give them any additional income. That is why what the Minister is arguing for is such a threat to the success of auto-enrolment. Auto-enrolment will no longer be a sound basis for pension saving if the level of the state pension is allowed to drift below the level of earnings.

People must be able to trust in the state pension under the policies of the Government. They have been able to do so up to now, and now they will not. That raises a pretty fundamental question about the future of the Government’s pensions policy. There is a real danger in allowing, almost by sleight of hand albeit for reasons that we all understand and sympathise with, the state pension to fall permanently behind the increase in earnings and weakening the pension framework that, as far as we all know, is still the basis of the Minister’s policy.

We should not allow that to happen. We need either a measure, and the Minister needs to reassure us that there will be, such as a catch-up initiative to make sure that the state pension over time—not this year, but by next year or the year after—will keep track with the increase in earnings, or the House needs to accept the amendment agreed with a significant majority in the other place, because that keeps the pension framework in place and keeps it effective. There is a real worry if there is a significant falling behind. If there is a 3% increase in the state pension at a time when earnings have gone up by 8%, that will be a one-off 5% fall in the state pension behind the level of earnings. Depending on what happens to earnings growth, which will certainly not carry on at 8%, and on inflation rises next year, that fall could well be locked in for good and the pension framework will have been weakened.

I hope that I have made it clear why this is actually quite important. It is not just about whether we are being generous enough to pensioners. The question is: are we keeping in place a robust and reliable framework for pension saving based on which people can plan with confidence for the future?

--- Later in debate ---

[Patricia Gibson]

I absolutely agree with my hon. Friend that one of the so-called Union dividends is a pension that is a pithy amount compared with those in other developed nations.

There is genuine fear that this abandonment of the triple lock will lead to permanent and more damaging actions against pensioner incomes. The state pension is by far the largest source of income for millions of UK pensioners, and the triple lock has kept that secure throughout the pandemic. To break it now, as inflation creeps up and the cost of living becomes increasingly challenging, is a shocking attack on pensioner incomes, and it is part of a wider and increasingly obvious narrative from this Government. It is crystal clear, because we have the evidence. We know that women born in the 1950s had their pension age increased with little or no notice; we have seen unacceptable state pension payment delays for new retirees, causing genuine financial hardship and suffering; we have more than 2 million older people living in poverty; and with the triple lock abandoned, many pensioners are set to be £520 less well off next year. All of that will do untold damage to pensioners.

I again urge the Government to stop attacking pensioner incomes and at least keep one of their promises to the electorate by retaining the triple lock and preventing more of our pensioners from suffering hardship in old age. There is an opportunity today to do the right thing. The Government must take this opportunity, and they must take it with good grace.

[Guy Opperman]

I thank all colleagues for their contributions. The factual reality of the situation is that this Government are spending £129 billion on pensioners. That is £105 billion on the state pension and £24 billion extra on the various add-ons for pensioners, including winter fuel; free eye tests; bus passes; free NHS, obviously; pension credit—I could go on in great detail. My hon. Friend the Member for North Norfolk (Duncan Baker) asked whether the triple lock will return. I can assure him that that is the case.

[John McDonnell]

On that point, it is almost as though the state pension is a charitable donation to pensioners. They paid for it, working throughout their lives, through their taxes, their national insurance—their contributions. Some of them served on our behalf in the armed forces. They paid for this; it is not some charitable donation by the Government.

[Guy Opperman]

There is so much that I could reply to; I could genuinely take some considerable time replying to the right hon. Gentleman. Let us start with this. During the last Labour Government, in which time the right hon. Member for East Ham (Stephen Timms), who is a former Pensions Minister, another former Pensions Minister who is in the Chamber, and the right hon. Member for Hayes and Harlington (John McDonnell) were Members, did they in any way link the state pension to earnings? Not on one single occasion over 13 years. It is this Government—the coalition Government and this Conservative Government—who have linked it to earnings.

The right hon. Gentleman talks about the state pension. That is paid for by the working taxpayer on an ongoing basis. The working taxpayer is paying more for the state pension, and it is a larger state pension than ever before; £129 billion is spent—[Interruption.] A hundred and twenty-nine billion. He does not want to hear it, because it is the largest state pension there has ever been. Thirteen years of a Labour Government, and what did they do? They never linked it to earnings. I remember the 75p increase in state pension by Gordon Brown. It is astonishing, the hubris that the right hon. Gentleman comes up with.

The factual reality is that there was never a situation where the Labour Government did anything like the coalition and Conservative Governments did. I asked the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), who represents the Opposition, to come up with a figure. You can search Hansard for as long as you like, Madam Deputy Speaker; answer came there none. There was not a single figure. The factual reality is that the Opposition have no idea how they would approach this, they have not come up with an individual figure, and they are not able to do anything—

[David Linden]

Will the Minister give way?

[Guy Opperman]

I will, for the last time.

[David Linden]

With a view to trying to bring the heat down just a little, let me ask the Minister this. He mentioned the commitment that the triple lock would return next year. Would he be willing to put on the record that, if the triple lock does not return next year, he will resign from ministerial office?

[Guy Opperman]

It is in the Bill that it only lasts for one year. The hon. Gentleman should really read the Bill. It is not that difficult; it only runs to two pages and two clauses.

[Stephen Timms]

Will the Minister give way?

[Guy Opperman]

No. I have given way once already to the right hon. Gentleman, and I have answered his point on two occasions.

The Bill is for one year only. After that, it will revert to the current legislation, and state pension will increase at least in line with earnings. The triple lock will, I confirm, be applied in the usual way for the rest of the Parliament. I would point out to the House that last year, earnings fell by 1% but we still legislated to allow state pensions to be increased by 2.5%. As a result of the triple lock, as I say, the full yearly basic state pension is £875 more than if it had been uprated solely by earnings. The increase is £2,050 in cash terms.

[Stephen Timms]

Will the Minister give way?

[Guy Opperman]

No. This is a two-clause Bill introduced by reason of the pandemic. The law will last for only one year before reverting. I commend the progress made by the Government on this issue, and I invite the House to reject the Lords amendments.

Question put, That this House disagrees with Lords amendment 1.

Oral Answers to Questions

Guy Opperman Excerpts

Monday 8th November 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

2. What steps her Department is taking to tackle delays in payment of the state pension.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I am advised that all delayed claims have been processed, except for those that require further customer information. Some 70% to 80% of claims are now made digitally by Get your State Pension, with over 50% being cleared the same day. We are, however, introducing a new tele-claims service that will supplement the paper applications, which we accept have been lengthy and have incurred delays.

[Alison Thewliss]

I thank the Minister for that answer. Two of my constituents should have started receiving their state pensions at the start of August and were on the verge of destitution when I was contacted in October by the welfare rights officer at Glasgow West housing association. Following the intervention from my office, both have now received what they were due from the Department for Work and Pensions, but they are by no means the only people to be hit by this latest DWP shambles. I am really concerned for people who do not have anybody like a housing association or an MP to advocate for them, so will the Minister tell me how many people he estimates have been affected by this altogether? What more can he do to put it right and make sure that those who do not have somebody advocating for them do not get left behind?

[Guy Opperman]

We accept that there have been delays, and we have taken significant action in the form of the redeployment of 700 staff to address those. I am pleased that the cases of the two constituents that the hon. Member outlined have now been addressed. The particular problem has been in respect of the receipt of further information from particular applicants, and those matters are being addressed on an ongoing basis.

[Matt Rodda (Reading East) (Lab)]

People work hard all their lives and pay in to save for their retirement; they deserve to be paid their state pension on time. Colleagues across the House, as we have heard, are reporting more and more cases of delays in payment, some of which are as long as three months. This is a basic service provided by the Government, which we all rely on. How on earth did these delays come about? When will the Government take this seriously, and when will pensions finally be paid on time?

[Guy Opperman]

Obviously, the hon. Gentleman did not listen to my earlier answer. This matter was addressed by the end of October. The reality of the situation is that the pandemic has caused delays to state pensions, with issues relating to illness, self-isolation, caring, training, location, staffing, equipment, recruiting. I could go on, but these matters are being addressed.

[Mr Speaker]

We now come to the SNP spokesperson.

[David Linden (Glasgow East) (SNP)]

There are not just delays to the state pension, but underpayments. The British Government are also set to hammer pensioners’ incomes, with a cut of £2,600 on average over the next five years as a result of their plan to break the pensions triple lock, which the House of Lords rejected last week with a majority of 102—led, indeed, by a Conservative. Will the Minister do the right thing and U-turn on his plans to scrap the triple lock on pensions? If not, is it not the case that the British Government just cannot be trusted with pensions, and that the only way to ensure dignity and fairness in retirement for Scots is with independence?

[Guy Opperman]

I have heard it all. How on earth the Scottish Government, were they in any event to get independence, would be able to pay ongoing state pensions is a mystery that no Scottish politician has ever been able to answer. The factual reality is that the state pension, by reason of the triple lock, is up £2,000 per person, something that would never happen under an independent Scotland—that is for sure.

[Sarah Olney (Richmond Park) (LD)]

3. What steps she is taking to support families affected by the end of the uplift to the standard allowance of universal credit.

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[David Rutley]

We are going to see many people—

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

Hundreds.

[David Rutley]

More than hundreds—millions of people are going to benefit, because not only will they see the financial benefit but, as they start to get involved with their work coaches and understand what is available to them through the plan for jobs and in-work progression, they will see massive improvements in their financial situation and gain confidence in the workplace.

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[Mr Philip Hollobone (Kettering) (Con)]

10. How many people (a) receive the state pension and (b) claim pension credit in Kettering constituency.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

The most recent statistics show that 17,942 people receive the state pension and 1,888 receive pension credit in the Kettering constituency.

[Mr Hollobone]

Pension credit is a tax-free, means-tested benefit aimed at retired people on low incomes. It can be worth up to £3,000 a year and trigger extra help with heating bills, council tax, free dental care and free TV licences for the over-75s, yet, at a time when many pensioners are struggling with household bills, up to 1 million pensioners are not claiming £1.8 billion in pension credit. What can the Minister do to encourage take-up in Kettering and across the country?

[Guy Opperman]

I am grateful to my hon. Friend for raising that point. We continue to make the case with the BBC, which I have met on two occasions, with the pension credit taskforce, which we specifically set up to address this matter, and with the Local Government Association and energy companies. We have put great efforts into increasing the stats. The stats on valuation and take-up are going up, but clearly more needs to be done, and I welcome his efforts in Kettering and beyond.

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[Ian Byrne (Liverpool, West Derby) (Lab)]

15. What recent assessment she has made of the effectiveness of the state pension in tackling levels of poverty among pensioners; and if she will make a statement.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

Since 2010, the full yearly amount of the basic state pension has risen by more than £2,050. Latest figures show that 200,000 fewer pensioners are in absolute poverty after housing costs compared with 2009-10.

[Patricia Gibson]

With women born in the 1950s having their pension age increased with little or no notice, with state pension payments delayed, causing real financial distress, with more than 2 million older people living in poverty, and with the triple lock abandoned with many pensioners set to be £520 worse off next year, to what extent is the Minister proud of this Government’s record of standing up for pensioners?

[Guy Opperman]

The hon. Lady will be aware that the triple lock has raised the state pension and that this year’s decision is a temporary one, for one year only. In respect of her campaign for 1950s-born women, that matter was decided in both the High Court and the Court of Appeal. If Scotland wishes to take action on this, there are various sections of the Scotland 2016 that she could address herself to.

[Ian Byrne]

Figures show that one in five pensioners in the UK are living in poverty; 1.3 million retirees are under-nourished; and 25,000 die each year due to the cold weather. With bills rising and in the teeth of a pandemic, the Government want to break a manifesto promise and scrap the triple lock on what is already one of the least supportive state pensions by international comparison. What impact assessment has the Department for Work and Pensions made of scrapping the triple lock, and how many more pensioners in Liverpool, West Derby will be living in poverty and unable to afford food as a result?

[Guy Opperman]

As you will be aware, Mr Speaker, the reality of the situation is that we have taken the state pension—which was languishing under the previous Labour Government and had not been increased in any real way whatever—and massively increased it to £105 billion, with £24 billion on top of that. It has never been higher—never, ever. There has been a £2,000 increase compared with 2010 thanks to the triple lock and the actions of this Conservative Government.

[Jeff Smith (Manchester, Withington) (Lab)]

14. What steps her Department is taking to help support benefit claimants with increased costs of living.

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[Chris Stephens (Glasgow South West) (SNP)]

T2. I refer to my entry in the Register of Members’ Financial Interests. DWP staff report that Serco telephony services are causing excessive call times because the private sector staff are poorly trained. How much is this outsourcing obsession costing the taxpayer, and is it fair on claimants who face hours hanging on the phone only to receive often questionable advice?

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

If the hon. Gentleman wants to write to me I will try to get a more detailed answer, but the bottom line is this: he will be aware that there is a regular review of all contracts put out by the DWP, and in respect of Serco the latest data was published on 24 September 2021 and is available on the gov.uk website.

[Paul Holmes (Eastleigh) (Con)]

T5. Will the Minister update me on the In-Work Progression Commission’s report and explain how this will help my constituents to earn more and progress in their careers?

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[Rob Roberts (Delyn) (Ind)]

T6. Almost exactly a year ago, I had the privilege of serving on the Bill Committee for the Pension Schemes Act 2021, which was widely appreciated by the industry as being an outstanding piece of legislation. One of the best parts of that Bill was pensions dashboards, which enable people to better understand and impact on their pension savings. Can my hon. Friend in a short time give an update on the implementation of pensions dashboards and undertake to write to members of the Committee with a more detailed response?

[Guy Opperman]

I can do that. It is a herculean IT project with 43,000 pension providers, 22 million private pensions and state pensions all coming to your mobile phone, your laptop or your device at home. It will be groundbreaking and will be ready in 2023.

[Rachael Maskell (York Central) (Lab/Co-op)]

T3. In breaking the pensioners’ promise by unlocking the triple lock, many pensioners in my constituency, where there is an extremely high cost of living, will struggle this winter with heating and food. What steps will the Minister take to ensure that they receive the money they rightly deserve and that he promised the electorate to get through this winter?

[Guy Opperman]

The hon. Member will be aware that the pension has gone up by more than £2,000 in cash terms since 2010. There will be a double lock this coming year, subject to the will of Parliament, and there is also the enhanced take-up of pension credit, which I urge her to ensure her constituents apply for.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

T7. Many sectors, as we have heard, are struggling to get the staff they need, such as social care, hospitality, janitorial services, haulage and logistics. Can my right hon. Friend tell the House what further steps she is taking to enable jobseekers to find jobs, and businesses to find the staff they depend on to remain prosperous in my constituency?

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[Andrew Gwynne (Denton and Reddish) (Lab)]

In answering an earlier question about 1950s women, the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman), referred to the High Court but not the Parliamentary and Health Service Ombudsman’s report. Given that the report explicitly urged the Government not to drag their feet and to proactively co-operate with the next stages of the investigation, will he assure me that he will break the habit of a lifetime and do just that?

[Guy Opperman]

The hon. Gentleman seems to have forgotten that the PHSO was set up under a Labour Government. It has a three-stage process. We are observing the process that his Blair-Brown Government, which he obviously now disowns, set up and insisted that we take.

[Peter Aldous (Waveney) (Con)]

Motor neurone disease is a cruel and relentless condition. Too many people with MND and other terminal illnesses are struggling to access the benefits that they need. The Northern Ireland Executive have committed to introducing legislation this month to reform the unfair six-month rule. Will the Government follow their lead?

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Guy Opperman Excerpts

Report stage & 3rd reading
Wednesday 22nd September 2021 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

It is an honour and privilege to respond at Report of this important Bill, which deals with the compensation due to many of our constituents up and down the country. I pass on apologies from the Economic Secretary to the Treasury who is on a ministerial trip to the United States on behalf of Her Majesty’s Government.

As the House will be aware, Dame Elizabeth Gloster’s report has already been taken through. It is a detailed report that deals with the regulatory failures that led to the collapse of LCF. The Government have accepted all four of the Gloster recommendations, and the FCA has committed to implementing all nine of the recommendations that were addressed to it, and to report publicly on the progress of those vital reforms.

Progress has already been made in implementing those recommendations. For example, the Treasury has consulted on proposals to regulate so-called non-transferable debt securities. In respect of regular reporting, hon. Members should be aware that the FCA report on the transformation programme takes place every six months. Its last report took place in July 2021, and the next report will be in spring next year.

Colleagues have raised a number of different matters, and I will attempt briefly to deal with them. The hon. Member for Harrow West (Gareth Thomas) recommended to Treasury colleagues that parliamentarians should hold the FCA to account directly, and I am sure my Treasury colleagues will respond to that proposal by letter. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made some comments, and it is right that the FCA needs to be more proactive. To be fair, its new chief executive, with whom I know my hon. Friend is familiar, is being more proactive, and there is proper oversight on an ongoing basis. Several colleagues mentioned the online harms Bill. I have engaged with and met Google, Facebook, LinkedIn, and Instagram, as have colleagues from other parts of Government. Those individual companies need to step up to the plate, because it is very much in their domain to make real change.

[Rehman Chishti]

I am grateful to the Minister for allowing me briefly to intervene. He said he has had conversations with those social media companies. I sat on the Home Affairs Committee when we discussed online harms. What was the response of those social media companies, and what will it take to get them to do the right thing?

[Guy Opperman]

It will take strong pressure by fantastically good constituency MPs such as my hon. Friend, and others, so that those companies realise that they have an obligation to do the right thing in respect of the many constituents we represent. Clearly, though, these are matters to be considered by the Government, and I am sure my hon. Friend will be making representations to the Secretary of State for Digital, Culture, Media and Sport.

Let me turn briefly to the amendment. A lot of the speeches made had nothing to do with the amendment, and it is important to avoid creating the misconception that the Government will stand behind all bad investments in the future, where FSCS protection does not apply. The Government will establish a scheme based on the level of FSCS compensation, capped at £85,000. We have carefully considered the issues and are satisfied that the individual circumstances surrounding LCF are completely unique. Other mini-bond firms have failed, but LCF is the only mini-bond firm that was authorised by the FCA and sold bonds in order to on-lend to other companies. As the House will know, only three Government compensation schemes have been established in the past three decades, for Barlow Clowes, Equitable Life, and now LCF, despite many firms failing over that period. This type of intervention is the exception, not the rule.

Although the amendment is legitimate and considered to be principled and practical, there is a practical reality that the FCA is already reporting and is held to account by the Treasury. With respect, I therefore ask the hon. Member for Glenrothes (Peter Grant) to withdraw his amendment.

Question put, That the amendment be made,

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[Guy Opperman]

I rise to respond to colleagues and wrap up the Bill, and I do so with great humility because this is a very serious matter. Many of our constituents up and down the country, regardless of politics, have had grievous losses. It is to the Government’s great credit that from the date of the Gloster report, we have managed to consider the report, draft and introduce legislation, consider it and progress it through the House. I am pleased to say that within six months of Royal Assent, payments will have been made. That is the assurance that the Treasury is willing to give; I most definitely support it, and I am quite sure that colleagues will hold it to account for that. It is very important that the matter is properly scrutinised.

I thank all Members, present or not, who have contributed to the Bill. Clause 1, as colleagues know, will ensure that there is parliamentary authority for the Government to pay compensation to London Capital & Finance bondholders who have not already received compensation from the Financial Services Compensation Scheme. The Government recognise that this has been a very difficult time for LCF bondholders; I hope that the compensation will offer some relief for the distress and hardship suffered and provide closure on a difficult matter.

The Government expect to pay about £120 million in compensation to approximately 8,800 bondholders in total. The Economic Secretary to the Treasury has confidence that all payments will be made within six months of Royal Assent; in the context of previous examples of the process under successive Governments, that is exceptionally fast.

This is also about justice. Having been a prosecutor for 20 years, done nine murder trials and prosecuted as an investigator for the Department of Trade and Industry, when it existed, I can assure the House that I take exceptionally seriously the principle that all people should be held to account within the due process of the law and that our constituents should feel that the due process of the law will be followed. On the comments made in respect of the Attorney General and the Treasury, I can only say that responses will be given to individual Members of Parliament.

Clause 2 will give the Secretary of State for Work and Pensions the power to provide a loan to the Pension Protection Fund for the fraud compensation fund. It will ensure that compensation reaches approximately 8,806 individuals on an ongoing basis. It follows the High Court decision in the case of Board of the Pension Protection Fund v. Dalriada Trustees Ltd on 6 November 2020. Again, we have worked very quickly—within a year—to bring consideration and legislation forward so that the fund will have the £350 million that it needs to ensure that pension claims are met. Without these measures, there would not be the capability to make this compensation; that is why we need to provide the loan to ensure that the fund can continue to make compensation for all eligible schemes on an ongoing basis.

I thank the many people who have contributed to the Bill, including the private office and policy teams at the Treasury and the Department for Work and Pensions. I also thank all Members who have engaged with the Bill. Individual Members of Parliament have made a massive difference; I pay particular tribute to my hon. Friend the Member for Leigh (James Grundy), who spoke very movingly about his amazing campaign on behalf of his constituents. He can be very proud of the way he has championed their cause, and so can my hon. Friends the Members for Gillingham and Rainham (Rehman Chishti) and for Thirsk and Malton (Kevin Hollinrake) and the hon. Member for Harrow West (Gareth Thomas).

My hon. Friend the Member for Thirsk and Malton cited Warren Buffett as the guide to all matters going forward. I would respond with Lao Tzu, who it is fair to say is not often heard in the House of Commons: the longest journey starts with the shortest step. I consider that the Government have made many steps to making proper compensation and bringing the right people some recompense for a total injustice. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.