Pension Schemes Bill [Lords]

Debate between Guy Opperman and Ben Lake

2nd reading & 2nd reading: House of Commons & Money resolution & Money resolution: House of Commons & Programme motion & Programme motion: House of Commons
Wednesday 7th October 2020 Commons Chamber

[Ben Lake (Ceredigion) (PC)]

Diolch, Mr Deputy Speaker, for calling me to contribute to this very important debate, which I think has revealed quite a refreshing amount of consensus on both sides of the House. It is a pleasure to follow the hon. Member for Runnymede and Weybridge (Dr Spencer). I agree with many of the points he made in relation to the measures in clause 125.

The Bill represents a welcome step to ensuring the security and responsible use of UK pension schemes. I particularly welcome clause 124, which addresses the vital issue of climate change: the risk it represents to our long-term socioeconomic security and the role pension funds can play as key levers in the decarbonisation effort of our economy. Wales has a proud record on sustainability and climate change mitigation. A commitment to sustainable development is written into our de facto constitution and we were a world leader with our Well-Being of Future Generations (Wales) Act 2015. I know the Minister is aware of the groundbreaking work undertaken at the Centre for Alternative Technology, which is located in the constituency of the hon. Member for Montgomeryshire (Craig Williams). There is also groundbreaking work undertaken on my side of the Dyfi estuary. In particular, Aberystwyth University boasts the world-leading Centre for Glaciology, while IBERS—the Institute of Biological, Environmental and Rural Sciences—and Aberinnovation campus conduct crucial work into climate change mitigation.

[Guy Opperman]

I am grateful to the hon. Gentleman for putting on the record my knowledge of mid-Wales and support for so much of what is taking place there. I would be delighted to join him and visit the two institutions in his constituency and in that of his neighbour, my hon. Friend the Member for Montgomeryshire (Craig Williams), when we are allowed to do visits in future.

[Ben Lake]

That is a very kind offer from the Minister and I will take him up on it.

Achieving net zero emissions will undoubtedly be a difficult and expensive challenge, yet, as the past few months have shown, the state, with its unrivalled ability to borrow and invest, can effect unprecedented change to our society and economy quite rapidly when there is a desire or need to do so. With around £3 trillion invested in UK pension schemes, pensions represent an equally transformative source of investment and could support our decarbonisation efforts.

I welcome the requirements in the Bill for pension schemes to assess their exposure to climate change risk. Those requirements are necessary and well overdue. The Economist Intelligence Unit’s estimate that climate change could eliminate up to 30% of the world’s total manageable assets, along with the fact that the vast majority of UK pension schemes currently do not take climate change risk into account, offer sufficient justification for the introduction of the requirements.

Closer to home, in 2019 Welsh local authority pension funds still had more than £1 billion invested in fossil fuels. That means not only that the pension holders are exposed to future climate change risk, but that the funds are—indirectly at least—undermining collective efforts to decarbonise the economy. I therefore urge the UK Government to consider how they can better work with the Welsh Government to encourage the use of pension wealth to realise decarbonisation and productivity improvements across the four nations of the United Kingdom.

The opportunities are there. In recent years, vital projects such as the Swansea Bay tidal lagoon have gone unrealised, while the UK Government have proven themselves unwilling to finance key aspects of our carbon transition in Wales, including improvements to the Welsh railways. Simply put, we have an opportunity to make pensions work better for Wales, to achieve our climate targets and to meet our international commitments.

I welcome the Bill’s increased powers for the pension regulator and the greater urgency for funds to consider climate change risk, but the Bill could go one step further. The finance sector has already taken welcome steps not only towards divestment but in advancing the environmental, social, and corporate governance agenda. The UK Government could bolster those efforts by amending the Bill so that all default funds are required to reach net zero by 2050, at the latest. That would stimulate green investment, as well as industry development, including better reporting standards and stewardship, as mentioned by the hon. Member for Amber Valley (Nigel Mills) earlier.

Pension funds have a pivotal role to play in decarbonisation—from influencing companies’ boardrooms to invest in a green transition, to protecting pension holders from the risk of climate change. For too long, their transformative potential as investors in that regard has been underutilised, so I welcome the Bill, and particularly clause 124, and hope that the Government can consider strengthening it further so that pension schemes play an even greater part in achieving our vital climate change targets.

Pension Funds: Financial and Ethical Investments

Debate between Guy Opperman and Ben Lake

Wednesday 22nd May 2019 Westminster Hall

[Guy Opperman]

I am going to make some progress and then I will try to take the greatest hits—bear with me one second.

I accept that the technological changes require capital, long-term thinking and a lack of political agenda. I strongly believe that the pension industry has those attributes. I urge the House to accept that the Government’s regulations—namely the ESG regulations, which come in this year, but were passed in September 2018—which require a pension fund to update its statement of investment principles and take into account environmental, social and governance regulations, are key to the change to the strategic progress of investment.

To address the point made by the hon. Member for Norwich South (Clive Lewis), those occupational pension schemes regulations require that trustees must—the emphasis is on “must”—set out their policies on environmental, social and governance matters, including climate change, and how they engage with the companies in which they invest. Those regulations also introduced a requirement for trustees of DC schemes, where the member bears the financial risk of poor investment decisions, to report on how their investment policies are being put into action and make all of that information publicly available online.

For too long there has been a perception by too many trustees—I am happy to clarify this as a Government Minister—that the environmental practices of the firms they invest in are purely ethical concerns, which they do not need to worry about: that is utterly wrong. Aside from the ethical considerations, there are real financial risks resulting from climate change. With the long-term horizons of pension investing, trustees must now consider that when they set out their investment strategies. Trustees who do not consider those matters will be breaching their statutory and potentially their fiduciary duties not only to current but future members.

[Ben Lake (Ceredigion) (PC)]

rose—

[Guy Opperman]

I will give way to the hon. Gentleman, who has not had a chance to speak.

[Ben Lake]

There is consensus that divestment from fossil fuels makes both financial and environmental sense. Further to the point that the Minister has just made, does he think that those changes will be sufficient to ensure that the industry actually makes that transition, or does he envisage further measures in the future?

[Guy Opperman]

I will come on to some of those particular points. In terms of regulatory guidance, which has been raised by several hon. Members, there is no doubt that the Pensions Regulator is planning to publish further guidance on managing the climate change risk in advance of those regulations, which come in to place in October. A key point is that non-compliance with those regulations can potentially lead to sanctions from the Pensions Regulator, which is acutely mindful of its obligations and what it needs to do to address this particular point.

As a Government, we will respond shortly to the advice from the Energy and Climate Change Committee on the target for net zero emissions by 2050. That advice was only published two weeks ago. Colleagues will be aware of the 25-year environmental plan, which has been set out in detail. It commits to using resources from nature more sustainably and effectively, and achieving a clean air, water and wildlife approach.

State Pension: Women born in the 1950s

Debate between Guy Opperman and Ben Lake

Thursday 22nd November 2018 Westminster Hall

[Guy Opperman]

The point of having a balance between spending on state pensions and the number of people coming into receipt of the state pension is to ensure that there is a state pension in the future. With a larger number of people becoming pensioners, any Government has to make assessments, as has been shown, and that is what has happened.

[Ben Lake]

Will the Minister give way?

[Guy Opperman]

I will give way in a second. First I will address the poverty point.

The hon. Member for Washington and Sunderland West (Mrs Hodgson) raised the issue of poverty and others have raised the United Nations report. In the early 1970s, roughly 40% of pensioners were in relative poverty. That figure is now down to 16%, one of the lowest rates since comparable records began. No one disputes that more has to be done, but that is a significant improvement. Since 2010, there are 200,000 fewer pensioners in absolute poverty before housing costs. That is a record low. The reality is that we spend approximately £121 billion on benefits for pensioners, which includes the £97 billion spent on state pensions this year—2018-19. The overall trend in the percentage of pensioners living in poverty is of a significant fall over several decades. At the same stage, the basic state pension has risen by £660 more than if it had just been uprated by earnings since 2010.

[Ben Lake]

I understand the Minister’s argument about the need to ensure that the number of people entering the state pension system is equalled out, but surely if we are to readdress the matter or rebalance any imbalance, it would be far fairer to do so for those in my generation, who have decades to plan for our pension and retirement, than to punish the women who for decades worked and strove, in the reasonable expectation of retiring on a particular date.

[Guy Opperman]

That is the debate that, clearly, has to be held. I return to the point that the decision was originally taken in 1993 by my—then very youthful— right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) and was supported by a series of Governments and Ministers way more experienced than I am, who have been here over the past twenty-something years. I am merely continuing that debate and discussion about how we progress.