State Pensions: UK Expatriates

Debate between Ian Blackford and Lord Harrington of Watford

Thursday 20th April 2017 Commons Chamber

[Richard Harrington]

Well, it is about the subjectivity of those words, if I may say so. I will try to address some of the points he made, but I cannot successfully answer his cricket team question. However, given that our civil servants will probably have less to do over the next few weeks than they have had to do over the last few weeks, I will formally write to him. As a child, with “Wisden” and everything else, I would probably have been able to answer his question myself, but I am afraid I cannot do that now.

As I was about to say before I was hit for six by that intervention, the United Kingdom state pension is payable worldwide, regardless of the recipient’s country of residence or their nationality. I say that formally on the record because were I a member of the public watching the broadcast of this debate or reading it in Hansard, I could quite easily get the impression, when we talk about scandals and things like that, that people were leaving the country and not getting their pension at all. The state pension is paid to people who are entitled to it when they leave the country, but increased—“uprated” is the expression in this context—abroad every year only when the recipient is in certain areas: in the European economic area, Switzerland, or a country with which the UK has a specific reciprocal agreement that allows for uprating. This is a long-standing policy that has remained consistent for about 70 years, and, as has been said, it has been the policy of consecutive Governments of all persuasions.

I recognise that this subject arouses strong opinions, and some of the language used is very concerning. Please do not think, Madam Deputy Speaker, that I think that the language used has been improper in any way, but it is very strong language about people suffering hardship and so on.

[Ian Blackford]

Does the Minister appreciate that there is clear evidence that people who have gone to live abroad have come back because they do not feel they can manage on a frozen pension? There is clear evidence that people feel that they have been affected quite significantly by that situation.

[Richard Harrington]

I do not disagree with that, but people also return for many other reasons. When people decide to emigrate and live abroad, they do it for a number of reasons. They take into consideration the cost of living generally and the cost of property, or food, drink and entertainment—whatever it may be—and the pension is part of that. Similarly, when they decide to return, part of the reason might be whether their pension increases by the rate of inflation, but I suspect that there are many other reasons as well—for example, ill health, getting older, and family issues. I could not dispute what the hon. Gentleman said—in fact, I would never try to dispute what he says—but it is part of the picture and it is not right just to pick out that particular point.

I felt it my duty when taking on this portfolio to speak to as many people as possible. In November last year, I attended a meeting at Lancaster House—a very grand venue—where there were leaders from the overseas territories. It was a big Joint Ministerial Council. I met many of the people mentioned by my hon. Friend the Member for North Thanet, from Montserrat, the Falkland Islands and elsewhere. They were very impassioned people who gave a series of speeches that were basically saying the same thing. That has been reflected in what has been said today. Several hon. Members, including my hon. Friend, referred to people not having parliamentary representation. That point was made strongly by the hon. Member for Leeds North West (Greg Mulholland). I was born and brought up in that constituency, so I accept what he said about its minority communities; I was a descendant of one of them. I could only say to the people at the conference that I was there to listen. It seemed from what they told me that Ministers of all persuasions have politely declined such an invitation before. I know that this is a very impassioned debate. People do feel very strongly about it, and it is not something that I take lightly.

Several contributors, including my hon. Friend, said that because all workers pay their national insurance contributions towards their state pension there is a moral right that they should receive an uprated state pension wherever they live. Moral rights are very subjective, but I know exactly what was meant. However, the rate of contribution paid has never earned entitlement to the indexation of pensions payable abroad. That reflects the fact that the scheme overall is primarily designed for those living in the UK, and it operates on a pay-as-you-go basis. Contributions paid into the fund in any one year contribute to the expenditure in that year. That is the way that public finance works. The contributions provide a foundation for calculating the benefits, but they do not pay for those benefits.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) mentioned the national insurance fund. It is convenient to bring this up in debates, but in reality there is no surplus in the national insurance fund because it is all used to pay contributory benefits. It is basically a system of public accounting. The £16 billion that was mentioned is two months’ expenditure. It is just an advisory level for the fund suggested by the Government Actuary because it is a prudent working balance. It is not like having a bank account where we can say, “Oh, we’ve got a surplus—let’s use it.”

[Ian Blackford]

We all understand and accept that it is a pay-as-you-go system, but that does not detract from the fact that when someone pays national insurance, it is on that basis that they are earning entitlement from that mechanism. As for the national insurance fund, the surplus is actually £30 billion, and it needs to have—the Minister is right—two months’ cashflow within it, which is £16 billion. So the point remains the same—the money is there to do this.

[Richard Harrington]

I think, as we do on many things, the hon. Gentleman and I will have to agree to disagree on that, but we both fully understand each other’s arguments, I am sure.

The point about cost has been made very coherently. The Government generally take the view, of course, that the first priority is to ensure that older people in this country have an adequate income in retirement. Uprating all state pension payments in full to the rate currently paid in the UK, regardless of the recipient’s country of residence, would cost about an extra £500 million a year, increasing significantly over time. While that may not have been specifically argued for in this debate, people in favour of the motion are talking about a moral argument, not a legal argument. Many of us are here because we believe in moral arguments generally in our political lives, and I hope in our personal lives as well. That is why many of us do the job, so please do not think that I am pooh-poohing the idea of a moral argument. However, both systems of calculating this could be seen as being based on a moral argument.

This debate has been predominantly about so-called partial uprating. I understand this to mean not to uprate fully but to uprate the current level of state pension that the person is receiving through the triple lock or equivalent from a future date, and only pay uprating going forward with no arrears. I had to look at that very carefully when I saw that we were having this debate, because partial uprating can mean different things in different contexts. It is superficially a very attractive argument to say, “We could do this because it’s a few million pounds a year—tens of millions, not hundreds or billions.” It is not like the cost involved in the case of the WASPI women; the hon. Member for Ross, Skye and Lochaber correctly mentioned that some independent research has been done on that, which I have read very carefully. That would cost billions of pounds, but this is about tens of millions of pounds, which, on the face of it, sounds like small change within the full scale of Government expenditure.

Oral Answers to Questions

Debate between Ian Blackford and Lord Harrington of Watford

Monday 27th March 2017 Commons Chamber

[Richard Harrington]

I would like to be able say that it is enough, but I do not think it is. The steps we intend to take should make prosecutions for scam cold calling much easier. If I am asked the question again in the future, I hope to be able to answer in the affirmative.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

On the issue of accurate and clear information, the Cridland report, published last week, stated:

“An increase of the State Pension age every ten years—and by only one year per decade—represents an appropriate pace of change”.

Does the Minister agree with that statement? If so, will he revisit the issue of the WASPI women, who face an increase in the state pensionable age of more than five years this decade?

Pension Schemes Bill [ Lords ] (Fourth sitting)

Debate between Ian Blackford and Lord Harrington of Watford

Committee Debate: 4th Sitting: House of Commons
Thursday 9th February 2017 Public Bill Committees

[Ian Blackford]

It is a pleasure to serve under your chairmanship, Ms Buck. I thank the Committee for its assistance in taking new clauses 11 to 13 earlier than planned.

New clause 11 would help to deal with an issue facing plumbers in Scotland. Plumbing Pensions (UK) Ltd was established in 1975 to provide pensions for the plumbing and heating industry UK-wide. The scheme is managed by a group of trustee directors appointed from nominees of the Association of Plumbing and Heating Contractors in England and Wales, the Scottish and Northern Ireland Plumbing Employers Federation and Unite the union. The scheme has more than 36,000 members and assets in excess of £1.5 billion.

Under section 75 of the Pensions Act 1995, employers may, in certain circumstances, become liable for what is known as a section 75 employer debt. That debt is calculated on a buy-out basis, which tests whether there would be sufficient assets in a scheme to secure all members’ benefits by buying annuity contracts from an insurance company. Legislation specifies that a section 75 employer debt becomes payable when an employer becomes insolvent, winds up, changes its legal status or ceases to have any active members in the scheme. Although we must be mindful that the purpose of those rules is to protect pension benefits, the way they are currently framed creates problems for some stakeholders, and we are sympathetic to SNIPEF’s concerns, which I know it has also raised directly with the Minister.

The solution is not clearcut. There are several options for the Government to consider, but each has complications for pension schemes, employers and scheme members. We urge the Government to balance employers’ interests with the need to protect benefits for scheme members. The previous Pensions Minister, who sits in the House of Lords, indicated that she would look closely at how a solution to this complex issue could be reached. We need the same assurances from the current Minister that the Government will work to find a solution for the industry. They could use the Bill to bring forward such a solution.

SNIPEF aims to achieve an amendment to the section 75 debt legislation. Its main concern is for unincorporated businesses where people risk losing their personal assets, including their homes. It wants the Government to review the actuarial methods that are used to value pension scheme liabilities, as it believes that given the current economic conditions, the calculation of section 75 employer debt on a full annuity buy-out basis is inappropriate and detrimental to non-associated multi-employer schemes.

SNIPEF argues that orphan debt in any non-associated multi-employer scheme should be excluded from the calculation of section 75 employer debt. It also suggests that, provided that schemes are deemed to be prudently funded, the Pension Protection Fund should act as guarantor of last resort for orphan liabilities. SNIPEF believes that any changes in legislation should apply retrospectively to all employers from 2005. It would be helpful to hear the Government’s view on that request.

As I mentioned, SNIPEF recently met the Minister, and it has advised several MPs that he confirmed that those objectives could be incorporated in a Green Paper, but I want to use the opportunity of the Bill to address these matters. We are eager to hear whether the Government intend to include a solution in the Bill, and I look forward to the Minister’s comments.

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

It is appropriate, given the temperature in which we are working, that plumbers are mentioned. I only wish that some of them were in the Public Gallery to make repairs so that hon. Members would not have to wear their coats.

I joke about that, but I accept that this is a serious matter. When it was brought to my attention, it was my duty and pleasure to meet representatives of not just the plumbers but others. The Government are not ignoring the issue. Although some stakeholders have run an effective public campaign, as is their right, it was the job of the Department for Work and Pensions anyway to get to grips with this, despite the fact that MPs have contacted us individually, such as the hon. Member for Ross, Skye and Lochaber—

[Ian Blackford]

Well done!

[Richard Harrington]

Thank you. I have finally got it. I shall provide tuition for other hon. Members.

This issue is important. For the record, I should remind hon. Members who are not as familiar with it as the hon. Member for Ross, Skye and Lochaber why the employer debt legislation is in place. It is to help ensure that members of salary-related occupational pension schemes receive the pensions they worked for and have been promised when their own employer cannot provide them. I think everyone would agree that that is a noble aim. Were that not a rule, it would have led to even more difficulties.

When I see representatives of those in such positions, I try to think about this key question: if they are not responsible for the debt, who is? Someone has to be responsible for it. As hon. Members will have picked up from the hon. Gentleman’s speech, people who have been working quite properly and, typically in this field, running their own businesses find themselves with—I do not know what the legal term is—a contingent liability that could be called upon. It is not as though they have received an invoice or a demand, or people have been banging on the door to repossess something, but it is understandably on their minds that that could and might happen, which is a serious matter.

[Ian Blackford]

That is exactly the point. We are talking about often small businesses that have done the right things in making sure their employees are protected and have adequate pension provision, but there is a sword of Damocles hanging over them with the worry and uncertainty, caused purely by this debt, that they may lose their businesses and houses.

[Richard Harrington]

I accept the hon. Gentleman’s point. We all agree there is a problem. I do not see how anyone could disagree with that. These people are simply in an unfortunate position, but the Government have to decide, “If not this, what?” and “What are the alternatives?” The hon. Gentleman said, as the groups involved have, that the debt should be passed to the Pension Protection Fund, which everyone would agree has been a very successful mechanism. We mentioned the Maxwell case before lunch. The PPF was intended to deal with failing schemes. It is paid for by the levy payer—by all the successful pension schemes—and I am sure they complain because it is a significant amount of money, but everyone would agree that it has been successful.

In this case, we would place an unfair burden on the PPF, because we are not talking about failing schemes. Many of them are successful and proper. That is why I mentioned a contingent liability. If it is your liability— I do not mean yours, Ms Buck, but anyone’s—it is real to you. It is not quite as real as having an invoice or a demand, but it is there all the time. I do not deny that. However, passing the debt to the PPF would place an unfair burden on the PPF and its levy payers.

Like so many issues facing defined-benefit schemes, the problem is complex and finding a solution is difficult. I accept that it is for the Government to address it. That is what we are elected and paid for. But like everything else in government, there is not an instant, easy solution. It is worth highlighting the fact that the Government have already made significant changes to the legislation in response to representations made by some employers. A number of mechanisms have been made available in employer debt regulations whereby only part of the debt or none may be payable. There are eight such mechanisms in legislation. A wide variety of circumstances can arise, because there are a lot of diverse scheme structures. The best example, which has been discussed with the plumbers and those making similar representations, is flexible apportionment arrangements, which permit an employer debt attributable to the departing employer to be shared among the remaining employers. That sounds attractive, but it is part of a triangle of previous employers, remaining employers and the PPF—it is about which of them gets kicked with this liability. Each group is obviously going to be in favour of the others getting it. I say that not to cast any aspersions or to make a value judgment, but it has to go somewhere, and in the end that is for Government to decide. On the face of it, however, that would be such a solution.

New clause 11 calls specifically for a change by regulations to the employer debt legislation in the Pensions Act 1995. It is aimed at providing protection for the owners of unincorporated businesses. Many of the plumbers who have made representations happen to be self-employed because that is the structure of their business, but they are not self-employed and running a large business. They just happen to be a business owner who is self-employed. A mandatory provision to protect one group of employers from their responsibility for an employer debt, for which there may be personal liability, again boils down to that debt needing to be met in some way by others in order to safeguard members’ pensions. It is true to say that such an approach would also conflict with existing employer debt provision that recognises the wide range of employers who participate in occupational pension schemes. It does not differentiate between different types of business structure in relation to employer debt duties.

Secondary legislation, in the form of the 2005 employer debt regulations, already includes a range of mechanisms to facilitate the management of an employer debt when an employer ceases to employ active members of a pension scheme. The regulations operate so that in some circumstances, only part of the debt or no debt may be payable. Those regulations are currently under review. We had a call for evidence about the operation of employer debt legislation in non-associated multi-employer schemes. We needed to call for evidence because there are losers and winners. It is the role of Government to try to assess interests, and some form of judgment has to be made. This area of legislation is extremely complex, and we have to check and consider things carefully.

I reiterate that we are not kicking the can down the road—it is not that we do not want to make a decision. It is a complex issue, and we are looking to consult on specific proposals in the very near future. In any case, a whole range of new proposals might come about in our Green Paper on defined-benefit schemes. If I say the release of that Green Paper is imminent, that could mean anything from tomorrow onwards, but it will be very soon.

--- Later in debate ---

[Richard Harrington]

I absolutely agree with my hon. Friend; member engagement and involvement sounds very good—it is a laudable objective—but I have been around for nearly 60 years, of which I was in business for nearly 30, and I do not feel qualified to assess an investment strategy. I say that not to insult the vast majority of people, but because, although independent financial advisers and accountants may be able to do that, it is almost impossible for an individual to do so. We have to look at a way of ensuring that the investment strategy is the correct one for the majority of members, and that the regulatory system, the supervisory system and so on are in place. Hon. Members mentioned NEST, which already has more than 4 million members and 230,000 employers. This idea is very interesting but not at all practical.

I remind hon. Members that trustees play a key role in managing assets. They have overall accountability for the investment strategy. They have a legal duty; the hon. Members for Stockton North and for Ross, Skye and Lochaber—I can just about manage to say that now—used the expression “fiduciary duty,” and the trustees have a fiduciary duty to the members.

Laudable as new clause 2 is, pensions legislation already includes requirements for investment decisions to be transparent and in the best interests of members. The Government fully recognise the possible impact of investment decisions on members’ retirement outcomes. Even without the new clause, the Bill will add to those requirements. Clause 12(4)(d) already sets out that regulations made by the Secretary of State

“may include provision about…processes relating to transactions and investment decisions”,

while clause 12(2) states:

“In deciding whether it is satisfied that the systems and processes used in running the scheme are sufficient…the Pensions Regulator must take into account any matters specified in regulations”.

The new amendment would duplicate the provisions for master trust schemes that already exist under the Occupational Pension Schemes (Investment) Regulations 2005. The regulations require trustees of all schemes with 100 or more members to set out a statement of investment principles for their scheme. That statement must be made available to members on request and

“must cover…their policies in relation to…the kinds of investments to be held…the balance between different kinds of investments…risks, including the ways in which risks are to be measured”

and other key issues. The trustees must ensure

“that the statement of investment principles…is reviewed at least every three years…and without delay after any significant change in investment policy.”

Most people who are automatically enrolled into pension schemes are likely to remain in their scheme’s default fund and will not actively engage themselves in the governance of the scheme. That is why legislation makes requirements about governance and oversight of these matters, and why most schemes, including master trust schemes, need to provide a default strategy that covers similar areas.

Finally, multi-employer schemes have a legal duty under the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to make arrangements to encourage members of the scheme or their representatives to report their views on matters that relate to the scheme, including areas about which the new clause proposes that the trustees should consult scheme members.

[Ian Blackford]

I am listening carefully to the Minister, and I broadly agree with him. Obviously there will be ongoing reviews of investment strategy, which should be communicated to members where appropriate. One way in which that could be done, as a matter of best practice for these schemes, would be for a statement of investment principles to be mailed to members as part of the annual report. That would give more clarity on the direction of travel of the fund’s investments.

[Richard Harrington]

As usual, the hon. Gentleman makes a very sensible suggestion, which should be considered. However, I believe that everything in the new clause is already included in legislation and that it is therefore unnecessary, so I urge the hon. Member for Stockton North to withdraw it.

Pension Schemes Bill [ Lords ] (Third sitting)

Debate between Ian Blackford and Lord Harrington of Watford

Thursday 9th February 2017 Public Bill Committees

[Richard Harrington]

The hon. Gentleman is correct, but of course it is at the discretion of the regulator, which will be dealing with all the circumstances. It could also be a very short period—that is the intention. I hope he agrees that the regulator has to have flexibility to deal with the specific circumstances of a particular case.

The scheme would have to be in a triggering event period, which means that one of the key risk events, which I explained previously, has occurred in relation to the scheme, the obvious one being that the scheme funder has become insolvent. Alternatively, the order could be made in relation to an existing scheme if it has submitted its application for authorisation and the decision on that application is not yet final. To satisfy the criteria, further conditions must be met. The regulator has to be satisfied that if a pause order is not made, there is or is likely to be an immediate risk to the interests of members in the scheme or the assets of the scheme.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

I am listening carefully to the Minister. We all understand the circumstances that would end up with a triggering event and what he describes as the potential insolvency of the scheme funder, but we have all been keen to make sure that in those circumstances the assets of the plan holders are protected. I want to tease out with him that scenario where we believe that the funds are protected. On the basis of the fear and alarm that could be spread when people see that their pensions are not being paid, I have a predilection for making sure that both payments into funds, whether it is a new fund that is created in the short term, or payments out of funds are maintained. There is a threat to confidence in master trusts and auto-enrolment if there is a pause in payments being made. On the basis that it always should be the case that the fund assets are protected, although I understand that there are certain circumstances where the regulator may want to take particular action, we have to be careful to scope out exactly what those circumstances might be.

[Richard Harrington]

The hon. Gentleman tries to tease things out from me and I am afraid I have to tease him back by saying that it is impossible to state the particular circumstances of every case. I was going to say later, in response to SNP amendment in this group, that no one wants to cause panic among members. There are many triggering events and there will be cases where the regulator might need to issue one of these pause orders, but they will be sorted out hopefully quite quickly; that is the idea. I do not see how, in those circumstances, writing thousands of letters to people would not cause precisely the kind of panic and lack of confidence that we are all trying to prevent.

I will return to that point. As with everything in the Bill, this is not a question of one side making stupid points and the other making sensible points; this is about trying to envisage different circumstances that might arise. It is my duty and my job to make sure that the regulator has flexibility, although I quite understand the hon. Gentleman’s point of view.

[Ian Blackford]

I absolutely understand and have no reason in principle to believe that the regulator may not have to have such a power. However, I am trying to understand what kind of event might lead to such action taking place if it is the case that plan holders’ assets are protected. Is it to do with any particular costs of administration for delivering all this? I am not clear what kind of event might lead to such action having to be taken.

[Richard Harrington]

It has been mentioned that, for example, suspicions of fraudulent activity might, in extremis, be such an event. Alternatively, the regulator might not yet be satisfied with respect to the administration of the scheme. The pause order clause is intended to apply in extremis. I am certain that most things will be taken care of in the normal course of things, but we felt that the regulator needed that power in extremis. That does not necessarily mean that the sky has to be falling in. A pause order might be used to concentrate people’s minds on resolving the situation quickly. Nevertheless, the power is there. It can be used

“during a triggering event period…if…the Pensions Regulator is satisfied that making a pause order will help the trustees to carry out the implementation strategy.”

The order is designed for quite particular and limited circumstances. I know that we keep using sledgehammer and nut analogies—on Tuesday I mentioned kernels— but I really believe that if it did trigger the kind of communication that the Opposition referred to, it might cause a major panic, which is something that we have to avoid and that the system exists to resolve.

--- Later in debate ---

[Ian Blackford]

It is a pleasure to see you back in the Chair, Mr Rosindell. I know that, in the interests of brevity, we are considering this slightly the wrong way round, in that I will speak to the amendment that the Minister has already responded to.

We all share the desire to ensure that the plan holders’ funds are protected in both the accumulation and decumulation phases. We are concerned about the impact of a pause order on a member’s savings, as there are no mechanisms in place that allow ongoing contributions to be collected and held on behalf of the saver. I know that the Minister has said that there are issues about where the funds would go and what kind of protection would be given, but those are exactly the kinds of things that we have to resolve in this Committee. It is clear that any additional contributions that savers make at a time of a pause order have to be protected properly, but surely it is within our gift to architect that properly.

It is unacceptable that a member should be penalised, and in effect lose wages in the form of employer contributions, due to events that are out of their control. The Society of Pension Professionals has also said that it will be necessary to ensure that the period of effect of a pause order cannot start before the trustees receive notification of the pause order. That would mean that any contravention could occur only after the trustees are in receipt of the order. The society argues that without that notification, the trustees could be in breach of a pause order through no fault of their own if a direction is not complied with during the period between the date the regulator makes the order and the date the regulator notifies the trustees of it. That could happen, for example, if new members joined the scheme in that period contrary to a direction under clause 32(5)(a). The Government should clarify whether they intend to take action to protect savers.

[Richard Harrington]

Mr Rosindell, before we end our debates on this clause, I would like to make a point of clarification regarding an error on my part. In previous sittings, when I was referring to the regulations generally, I said that they are subject to the affirmative procedure. However, I made a mistake in referring to clause 28 in that context, because the negative procedure applies there. I apologise for that. Obviously, it was not done on purpose. I hope that Members will forgive me.

Regarding the amendment itself, I have adequately covered the points that have been raised, and I reiterate the Government’s position that we reject the amendment.

--- Later in debate ---

[Richard Harrington]

As hon. Members will be aware, what we are now discussing is not restricted only to master trusts; the rest of our discussions today have been. It is a bit of a change. We are now talking about all occupational pension schemes.

The clause will cap exit charges and member-borne commission, which is the sort of thing we all want. Like most of the measures in the Bill, it relates to what we all accept is a problem; in this case it is exit charges—where they come from, who pays them, how they are calculated and so on. The hon. Gentleman refers to protecting members, which I perfectly understand, but that is the point of the legislation. I say that in case anybody reading about the Bill in Hansard or elsewhere thought that the Opposition were trying to protect members and the Government were not. The intention of the Bill is to protect members. I have laboured that point—I hope that the hon. Gentleman will excuse the pun on his party’s name—because it is fundamental.

The clause amends the existing legislation—the Pensions Act 2014—to allow regulations to be made that enable a term of a relevant contract on charges to be overridden if that contract conflicts with a provision in those regulations. I emphasise that the power will allow for a contract to be overridden only if it conflicts with a provision in the regulations, which will ensure that relevant contracts are consistent with regulations and will provide certainty to the parties involved.

At this point it might be helpful if I clarified that the clause is distinct from previous clauses in the Bill that refer to charges, which all relate to the proposed master trust authorisation scheme. The discussions on charges and capping before now were specific, whereas this discussion is general. We intend to use the clause alongside existing powers in the 2014 Act to make regulations clearly to cap or ban early exit charges. Those charges are any administration charges paid by a member for leaving their pension scheme early when they are eligible to access pension freedoms, which in the past they would not have faced at their normal retiring date.

I mentioned early exit charges before in a different context. Cynical commentators might say that providers impose those charges to take advantage of a situation—a kind of last hurrah—because they know they are going to lose the value of a pension. The industry’s converse argument, which I have some sympathy with, is that they calculate the value of a pension over a period of years, and early exit means that value may then be x years minus 10. That is not a ridiculous argument, but the Bill makes it clear that the Government do not have much sympathy for it.

As has been mentioned, the Financial Conduct Authority will make rules to ensure that the cap or ban on early exit charges in personal and workplace pension schemes, which they regulate, will comes into effect on 31 March 2017. That has already been approved by Parliament through amendments to the Financial Services and Markets Act 2000, which broadly allows for a contract to be overridden. The consultations we undertook on early exit charges and member-borne commission showed that the charges generally arise in contracts between trustees or managers of certain occupational pension schemes and those who provide administration services to the scheme.

Our existing powers in schedule 18 to the Pensions Act 2014 enable us to make regulations that override any provision of a relevant scheme where it conflicts with a provision in those regulations. For example, we have used that power in relation to the appointment of service providers in the scheme administration regulations. The reason we are taking this new power is that the existing power does not extend to the contracts under which these charges arise. That is why clause 42 contains a power to allow the overriding of a term of a relevant contract that conflicts with a provision of the regulations under schedule 18. What is a relevant contract? It is defined as one between a trustee or a manager of a pension scheme and someone providing services to the scheme.

The regulations that we intend to make will apply to charges imposed from the date the regulations come into force, even where these arise under existing contracts. We expect the regulations to come into force in October this year, so it is not a long difference. It is a difference for legislation reasons, but on the scale of things it is not a lot.

[Ian Blackford]

rose—

[Richard Harrington]

If the hon. Gentleman would bear with me, I will answer the question asked by the hon. Member for Stockton North before giving way, unless it is really urgent.

[Ian Blackford]

My point is in relation to new clause 8, which I have tabled. I want to be clear that the Minister is saying that there will be no exit charges for anyone exiting a master trust, whether a new saver or someone who is currently in a master trust plan. If the answer is in the affirmative, I would be happy not to press new clause 8, because it would be superfluous.

[Richard Harrington]

I will come to that point in a minute, if I may first respond to the question from the hon. Member for Stockton North—I am not ignoring what the hon. Gentleman has just said, but I think that the answer will become apparent.

There was public consultation in 2015 that concluded in August. Since then we have had various discussions with providers and other industry bodies; we are really trying to get everyone involved. Again, we do not want to be unfair to one side or to create loopholes that should have been anticipated. I think that the hon. Member for Stockton North will accept that this area is complex.

--- Later in debate ---

[Richard Harrington]

If I may, I will answer the question from the hon. Member for Ross, Skye and Lochaber concerning new clause 8 and the point about no exit charges from a master trust. I confirm that when a master trust is closing the scheme cannot levy a charge for leaving. I believe that responds to his question, unless I misunderstood it.

[Ian Blackford]

No, I do not think it does. To be absolutely specific: in any circumstances of any exit of an individual from the master trust there would be no exit fee. If the Minister is responding to that statement in the affirmative, I would happily withdraw new clause 8, if that is permissible.

[Richard Harrington]

When the master trust is closing it cannot levy a charge. That is as clear as I can be. Perhaps we can discuss the point in more detail. I am not trying to mislead the hon. Gentleman and he knows that, I hope.

The pensions market is continuously evolving and modernising and that extends to charging practices. It may be necessary to alter the charges requirements at pace to reflect any changes in the pensions market that may disadvantage members. I revert to the point I made to the hon. Member for Stockton North: that is the purpose of the whole exercise; we are doing it for that reason. That is why we intend to consult on the draft regulations later this year. I am aware that people outside the House, and sometimes hon. Members, groan when a further consultation is announced, as though the Government are doing it to kick the can down the road. I can assure them that that is not the case. We intend to get it right and public consultation is very important.

The regulations would also be subject to parliamentary scrutiny, as I have explained, through the negative procedure. The Delegated Powers and Regulatory Reform Committee was content with that approach because it would allow future legislation to be amended quickly to provide the member protection that the hon. Gentleman and I both want.

Before I conclude on this clause, I will address the point made by the hon. Member for Ross, Skye and Lochaber. I have learned the name of his constituency now and look forward to visiting. He was satisfied by my answer to his earlier question but he wants to know what happens if the master trust is not closing. In that case, the normal exit charge protections apply; there is no difference. I believe that is a clear answer to his question.

Pension Schemes Bill [ Lords ] (First sitting)

Debate between Ian Blackford and Lord Harrington of Watford

Tuesday 7th February 2017 Public Bill Committees

[Richard Harrington]

My hon. Friend makes a good point. That is very common in other systems of regulation, sometimes to the chagrin of employers and people involved, but for many companies in other financial fields there are different systems of regulation for the different products they offer. That is not uncommon. As to what we must avoid, the hon. Member for Stockton North will accept that Governments must try to think how things work in practice, which is not to say that he has not considered it. However, we must have workshops of interested parties and consult widely. How things work in practice is important.

The end product for all hon. Members is predominantly consumer protection—the Bill is a consumer protection Bill. We have different views, but we are discussing the extent of consumer protection provided. I and my officials have considered Opposition amendments respectfully. They are not spurious and have been thought through. In fact, many were quite properly put to us—it is a democratic system—by groups such as the Association of British Insurers. They are not created out of thin air. However, we have had to think about whether in practice they will add to consumer protection. That is the test. Alternatively, will they just increase the regulatory burden? We have also been lobbied about that—again, quite legitimately—by those concerned. It is the Government’s job to try to come up with something in the middle.

My hon. Friend the Member for Amber Valley, who tabled amendment 32, discussed self-employed people, and attempted to ensure that I have in fact read the Bill. I do not think I should have the arrogance to stand here if I had not, but it is perfectly proper that he should ask. I certainly accept that my hon. Friend, given his years of experience and attention to detail, has read it. I shall try to answer his general and specific points.

On the question of the role of self-employed people, not just in the master trust schemes but generally, my hon. Friend is correct to identify that the number of self-employed people has grown exponentially in the past 10 to 20 years, even more than in the days of the Turner commission, of which Baroness Drake was a member. She has been most helpful with the Bill. I acknowledge her role and that of Lord McKenzie in helping both the Opposition and the Government very constructively.

The commission perceived self-employed people as those with their own business, who, by implication, would have an accountant or, at least, an adviser or someone similar. My hon. Friend was saying that, with the big growth in self-employment over the period, the people in question are typically not very high earners. Like him, I make no comment as to whether they should be self-employed—the fact is that legally they are. They do not have an accountant and the things necessary for someone who is running a business and employing people despite being self-employed. They are at the moment outwith the auto-enrolment scheme. I know we are here to discuss that from a regulatory point of view but, as politicians, we also want those people to have pensions, because the House agrees that that is a good thing.

I want to answer the hon. Member, who is going to be cross with me again, for Loch—

[Ian Blackford]

Ross, Skye and Lochaber.

[Richard Harrington]

Have a little patience—I was going to say the hon. Member for Ross, Skye and Lochaber. Watford is much easier to pronounce, but I accept that he has a wonderful constituency that is very lucky to have him representing it. I have got it now.

The hon. Gentleman’s point was about why the review is different in timing and scope to the Bill. The main reason is statutory. We were obliged by statute to have the review in 2017, which means it cannot report until the end of 2017. In fact, 2017 is too early because we do not have enough figures to see people’s behaviour or habits since auto-enrolment came in. We are doing the review—it is being announced and will report—but we could not consider holding up this regulation until it came out.

--- Later in debate ---

[Richard Harrington]

That is up to the regulator. If the hon. Gentleman bears with me, I will get to that particular point. If he is not then satisfied, I will willingly give way.

Member engagement is a challenge in pensions both legally—that is, what should people know?—and in terms of getting them engaged in a general sense. It would be unacceptable to have a hugely expensive exercise writing tens of thousands of letters that may or may not be read, but which would confuse people. However, we accept that it is important that the members get the right communications.

A situation such as the hon. Gentleman mentioned, in which members get absolutely nothing, which the regulator would find unacceptable, would not be at all acceptable for two reasons. The first is the general point that I mentioned about getting people engaged and understanding their pension and everything that goes with it. We have all received these communications. Probably, the hon. Member for Ross, Skye and Lochaber will have always looked at his pension statements, but a lot of us have received them—very comprehensive ones, in many cases—and just put them at the bottom of the desk drawer, in the hope of reading them sometime. I hope that the hon. Gentleman is not offended by that comment; it was meant to be complimentary.

[Ian Blackford]

I shudder to think that the Minister would ever offend me, at least willingly. The regulator has a very important role to play—I think we all understand that—but there is also the fact that the trustees are responsible to the scheme members, and it is important that we ensure that trustees recognise the responsibilities they have. No one is talking about bringing in a cumbersome system that will be costly. This is about ensuring that the members have that relationship with the trustees. It is important that the trustees are answerable to the scheme members, not least because of the profit-making capability that some trusts have.

[Richard Harrington]

The hon. Gentleman is right, and this is not just a question of communication as in a formality—communication if there is a problem. We will be speaking to those points later. This is a point about communication and making sure that people know what they have, in the same way as a bank communicates, now mainly by the internet, so that people—

--- Later in debate ---

[Richard Harrington]

I can absolutely confirm that for my hon. Friend. I hope that he will agree that the fit and proper person test is quite well established across different regulatory regimes. By definition, it has to allow a certain subjectivity, because otherwise it becomes the low-level box-ticking that he fears. Having discussed this with the Pensions Regulator—both the chief executive and other people—I know that this would never happen under its regime. I hope that most people would not regard the fit and proper person test as the kind of thing to which my hon. Friend refers, but he makes a sensible point.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Financial sustainability requirement

[Ian Blackford]

I beg to move amendment 33, in clause 8, page 5, line 39, after “scheme” insert “or scheme funder”.

The financial sustainability of the scheme funder must be taken into account when assessing a Master Trust scheme’s financial sustainability.

Amendment 33, which stands in my name and that of my hon. Friend the Member for Paisley and Renfrewshire South, seeks to ensure that the financial stability of the scheme fund is taken into account when the regulator is assessing the financial stability of the scheme funder. A number of insurance companies have told us that they already hold a very significant amount of capital under the European regulatory framework for insurance solvency. In this case, it seems unnecessary for insurers to be required to hold separate or additional capital on top of this in order to meet their new obligations as master trust providers under the Bill.

It would be helpful to know more from the Government on the restrictions on the use of member funds to meet costs, which need to be more clearly defined. We have also heard from the Association of Pension Lawyers, which has called for clarity on the policy intentions behind the clause and for the detail to be fleshed out. It would be appropriate for the Government to take the opportunity to do that today.

--- Later in debate ---

[Ian Blackford]

I will not detain the Committee longer than absolutely necessary. I am relatively satisfied with the Minister’s response, particularly in the light of ongoing consultation, and on that basis I will not press the amendment to a vote just now. However, there are obviously some remaining concerns about insurance companies, particularly under the obligations, and I would like those to be highlighted today. We will move on for now. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 ordered to stand part of the Bill.

Clause 9

Scheme funder of last resort

Question proposed, That the clause stand part of the Bill.

[Richard Harrington]

The clause was introduced by the Opposition in the other place. It is intended to require the Government to make provision for a scheme funder of last resort, which would take effect if a master trust had insufficient resources to meet the costs of complying with duties arising from a triggering event and the costs of continuing to run the scheme for a further prescribed period.

Since the clause’s introduction, I have reflected a lot on how it would work. I have had formal and informal discussions with Members of the other place and have met officials, in the presence of the Opposition spokesman, the hon. Member for Stockton North, to discuss this subject. I have concluded that it is unnecessary to place such an additional requirement on the Government, and I will do my best to persuade the Committee of that view.

I think that we all agree that the Bill’s primary purpose is, quite simply, to bring in safeguards and controls for employers and employees who have opted to save through a master trust pension scheme. The Bill includes new powers for the Pensions Regulator, which will be responsible for the effective operation of a new authorisation and monitoring regime for master trusts. Schemes that do not meet or maintain the specified standards simply will not be allowed to operate. We have just discussed two of the authorisation criteria; as I explained, clause 7 sets out the requirements that those involved in a scheme must meet to be considered fit and proper persons, and clause 8 describes the financial sustainability requirements that will apply to master trusts. The remaining criteria—the business plan requirement, the scheme funder requirements, the systems and processes requirements and the continuity strategy requirement—are dealt with by clauses 10 to 13.

The Bill’s later clauses define the events that, when experienced by a scheme, will trigger a series of specified actions and additional requirements that must be undertaken by the scheme and the regulator. The nature of such events may mean that a scheme is operating under increased risk. Those additional requirements will ensure that increased scrutiny and controls are put in place until the new risk has been dealt with and nullified, or the scheme is wound up in an orderly manner and the interests of employers and members are successfully transferred out to a new scheme.

In addition to the new regulatory framework, the regulator is working closely with individual master trust schemes. That work provides us with insight into the scale of current risk, which the clause has been designed to guard against, and may be followed by the publication of new supporting data by the regulator. In addition, the indications are that market forces are operating effectively prior to the new regulatory regime coming into force. For example, some master trusts have left the market and transferred their members without issue.

As I have explained in previous debates, it is very attractive for existing successful master trusts—the vast majority of them—to take on members from smaller master trusts that might appear to be failing in their administration, since that allows them to add members without adding very much to their costs. I realise that is commercial rather than structural, but I believe that will happen, as it has in other regulated areas of financial services. New, larger schemes are also now entering the market. Such schemes are on a sound financial footing and will actively seek to increase their market share. All that further supports our belief that the risk of scheme members being left stranded is absolutely minimal.

Hon. Members might continue to be concerned that, were a master trust to fail, the members of that scheme might be left stranded. I perfectly understand their thinking, but we consider the risk to be negligible. However, we recognise that we cannot completely rule it out, which is also recognised by the pensions industry. We are currently working with the Pensions and Lifetime Savings Association, which is exploring establishing a panel of “white knights.” That panel would aim to guarantee that, if a master trust was required by the regulator to leave the market, the affected master trust scheme members would be transferred to a new scheme. That happens all the time in other regulated fields of the financial services market.

I believe, after consideration, that as drafted clause 9 does not work as intended. If I may expand on that, a couple of illustrations might help. The clause does not contain a power, such as a regulation-making power, enabling the Secretary of State to make further provisions relating to the scheme. That would include provisions relating to the scheme’s procedure and operations. The clause provides that the Secretary of State should consider only the resources held by a master trust and not the scheme funder.

Given the imprecise nature of the clause, I am concerned that it could lead to perverse behaviour, with schemes shifting funds about, knowing that the taxpayer will pick up the bill. We are also concerned that, given the clause’s lack of clarity regarding funding of a Government-backed scheme of last resort, stable master trust schemes might be concerned that they are at risk of paying for failing master trusts and, as a result, opt to leave the market. For the reasons outlined, I call for the clause not to stand part of the Bill.

Pension Schemes Bill [ Lords ] (Second sitting)

Debate between Ian Blackford and Lord Harrington of Watford

Tuesday 7th February 2017 Public Bill Committees

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

It is a pleasure to serve under your chairmanship today, Ms Buck. This morning seems a long time ago, but when we adjourned I had just risen to confirm to the hon. Member for Ross, Skye and Lochaber that members’ savings are not at risk. The hon. Member for Stockton North might have given the impression of mixing up members’ savings and the funders of the scheme. Though I am sure he knows this, I want to be clear. There are various protections around the savings invested—in trust law, in occupational pensions law and through the regulation of investment managers.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

It is a pleasure to serve under your chairmanship, Ms Buck. When the Minister rose at the end of this morning’s sitting, I had actually concluded, so I will now resume my seat.

[Richard Harrington]

The hon. Member for Stockton North made various points, and I would like to briefly rebut them. I have already made my first point, in response to the hon. Member for Ross, Skye and Lochaber. The Bill adds to the protections by prohibiting increased or additional charges that could be levied on members for the cost of winding up or transfer during a triggering event period, so members’ savings are safe. As was discussed extensively in the other place, the clause addresses the situation where the scheme does not have sufficient funds to pay for the transfer of accrued rights or the wind-up of the scheme during a triggering event period. The Bill provides that a master trust scheme must have resources available to pay for those costs.

The hon. Member for Stockton North asked me a clear question: how frequently will the Pensions Regulator monitor this? To be clear, the supervisory measures allowed for in clauses 14 to 20 state clearly that the regulator is under a duty to authorise these schemes. That is a new approach for the regulator, which will be working with all the master trusts, both before and after authorisation. The regulatory regime is therefore an active process, which rightly focuses the most attention on the highest risk schemes, while maintaining regular contact with all master trusts in the market. It is based on a case management approach, which is not random or ad hoc because it is underpinned by the existing reporting and regulatory framework and activities. Those in turn are strengthened by the new supervisory return and significant events negotiation requirements, which the hon. Gentleman will be familiar with.

The hon. Gentleman seemed to imply that the Government have not made any provision to pick up the pieces if a scheme fails. I maintain that that is not the case. The triggering event regime outlined in the Bill means that the regulator will be closely involved with how the scheme proceeds to resolve its difficulty or close—it has to do one of the two. The regulator already has powers that can be used to support a failing scheme. A good example is the power to appoint a trustee to get into a scheme and act as a trustee—so it can impose a trustee on a scheme and help to sort it out.

The hon. Gentleman also suggested that if the risk is so minimal, the clause does no harm as a back-up measure. He used the sledgehammer and nut analogy, which I think Lord Freud used in the House of Lords, so it is a cross-party analogy. If it is a nut, it might be a small nut, but what is going to happen to the nut? That is not said in a very Hansard-like way, but I think we know what it means. I would say that that underestimates the impact of having an unspecified government intervention of this nature.

--- Later in debate ---

[Richard Harrington]

I apologise if I put words into the hon. Gentleman’s mouth. It is currently unspecified; I agree it could be specified with compensation. The core point and, excuse the pun, the kernel of the nut is that it would still be a Government scheme, with moral hazard.

Secondly, the hon. Gentleman has probably heard significant players in the master trust industry voice serious concerns to us about clause 9. They believe that it could give rise to a rush to exit the market by otherwise successful schemes thinking, for example, that, not unusually in this field, they would have to pay a significant levy over not very much. The hon. Gentleman’s points are all valid in their way but Government have to make a judgment. That is why there is a respectable disagreement over clause 9. We have all thought about it carefully.

I believe the Bill strikes a delicate balance between prevention and self-regulation and Government intervention —something that is very hard to do. The clause would disrupt that balance and confuse the regulatory approach. I do not believe that it is a harmless catch-all. I accept the point, as shown by the banking crisis, Equitable Life and other incidents, that such things happen—I would not say it was because it was a Labour Government during the banking crisis or another Government with Equitable Life that those issues arose. It is not possible to give absolute guarantees, but we can reduce risk to the lowest possible level and that is what the Bill aims to do.

In our view, the risk level is already very low for this type of master trust scheme. That is backed up by the Pensions Regulator’s current information about the very small number of schemes that are in trouble. That will be published but is not quite ready. To create a Government-backed scheme would perversely create a moral hazard, as I have explained.

[Ian Blackford]

I am trying to find a helpful way out of this because I can understand why there is a disagreement. We can all accept that the risk we are talking about is to the master trust itself, not to the underlying assets; that is understood. I can understand the Government’s position on giving a commitment to this, but might there not be another approach? The Pensions Regulator would take the responsibility after a triggering event and it would have the power to step in. We have the power for the regulator to appoint a trustee; perhaps the regulator might have powers in extreme cases to intervene in the short term to ensure that there is a smooth transition. I know that is not directly within the clause but there might be another way to effect this where we can give guarantees.

[Richard Harrington]

I thank the hon. Gentleman for his positive intervention. The regulator has a huge number of powers, and the Bill gives a lot of powers that I think would prevent the problem he is talking about.

The hon. Member for Stockton North is forgetting— I understand why—the general rule that the fraud compensation scheme, which applies in many fields, does and will apply to master trusts. I therefore reject his point about fraud. I am not saying fraud could not happen, but there is already a mechanism in place to deal with that.

In our view, therefore, the risk level is already very low. We are against creating a Government-backed scheme because we think it would create a moral hazard. Schemes are currently working to ensure their systems are robust and we do not want them to feel comfortable that there is an entity that will always bail them out. That would not give comfort to scheme members. Indeed, for the Government to say we feel the risk is large enough to warrant a funder of last resort would create uncertainty—in effect, creating the very problem that the Opposition honourably are saying they are trying to avoid.

Question put, That the clause stand part of the Bill.

--- Later in debate ---

[Ian Blackford]

The Minister’s amendment of 31 January —Government amendment 3—gives the Secretary of State power to make regulations providing for exceptions to the requirement that a scheme funder must carry out only activities directly relating to the master trust. We do not know what conditions will attach to the exceptions, or even if the Secretary of State will exercise that power. An indication of the Government’s intentions would be helpful. However, the indication that there will be some discretion is positive. I would welcome clarification from the Government on how and when the regulatory powers outlined in the amendment will apply, and in what circumstances they might be used.

Will the Government confirm whether they plan to consult with the insurance industry before defining “information” and “additional requirements”? Zurich has said that the approach taken by the shadow Pensions Minister in amendment 26 and the SNP’s amendment give greater certainty, which would be preferable. As far as Labour’s amendment 26 is concerned, we share the concerns about the unnecessary duplication of requirements for insurers, which already operate under stringent regulatory standards. Our amendments 34 and 35 would have a similar effect to amendment 26, as they state that the requirement need not apply to firms whose activities are already restricted by virtue of existing regulation.

The Prudential Regulation Authority’s rules mean that insurers’ activities are restricted. This will mean that the activities of the scheme funder not directly related to the master trust are transparent and do not threaten the solvency and sustainability of the master trust. Amendment 35 makes provision for the Secretary of State to define “restricted activities” in regulations, including through a list of specific activities restricted in order to minimise risk of loss by master trust scheme funders.

[Richard Harrington]

This is a very good and laudable example of Government and Opposition Members trying to achieve the same objective. I have already heard many of the arguments used today by the Opposition; the Association of British Insurers and others have made similar arguments. As I have often said before, this is not black and white. It is not as though one argument makes absolute sense and the other is absolutely stupid; that is not the case at all. The argument is legitimate. We have had to think about this following representations, and following the Lords debate. However, I do not think that the amendments would achieve the level of transparency needed for the regulator’s financial assessment of the scheme.

Amendment 26 would disapply the requirement on an FCA-regulated insurance company that is also a scheme funder of the trust to set up a legal entity. The amendment would hamper the regulator’s assessment of the final sustainability of the scheme. The matters overseen by the FCA in relation to the prudential and financial conduct of the insurance provider are not the only aim behind the clause; they are aims, but not the only aims, and are not the only aspect that the regulator needs to take into account in the assessment.

The hon. Member for Stockton North asked me to clarify quite a few points. He asked whether the FCA-regulated companies will be exempt. They will be exempt if they meet the prescribed requirements in the regulations. He asked how we will get to the regulations. We will consult on them; we are not simply going to make them up. They are not something that the Secretary of State will dream up in his office. I promise that they will be comprehensive. The intent is to ensure that there is no duplication of regulation; that is why we have created the extra flexibility of the Secretary of State’s discretion.

--- Later in debate ---

[Ian Blackford]

I will be brief. I want to pick up that issue of active versus passive fund management, because if anyone thinks that an active fund manager will not have higher costs than a passive fund manager, I am afraid that they have betrayed that they know nothing about the fund management industry. Put simply, anyone engaged in active fund management will have to deploy research and fund management skills; someone investing as a passive fund manager is exactly that, a passive fund manager.

[Richard Harrington]

Itching though I am to rebut some of the general points on transparency, I will do my best to stick to the amendment. As a point of clarification, however, the bit of the FCA review that the hon. Members for Stockton North and for Ross, Skye and Lochaber mentioned in fact makes the point not that active fund managers have more costs, but that over a period of time there is not much difference in returns. That is a totally different matter, but I think that was the point intended—I, too, read the report.

A final matter, given your instructions, Ms Buck, is to point out to the Committee that 1 trillion is 1 million million. A keen if somewhat nerdish Government Member—I am not sure who—came up with that information, of which I was not aware. I hope that the Opposition spokesperson will at least look at Hansard to see what 1 trillion is, since he missed all that.

I will not rebut the general transparency point, although I am itching to do so. However, I confirm to the Committee that I do in fact read The Guardian. That was the allegation made by the hon. Member for Stockton North. I will, however, refer only to the transparency bit of the amendment.

The amendment would insert a new subsection making it clear that regulations about the processes used to run the scheme may include a provision regarding a minimum requirement of annual reporting of administration, fund management and transaction costs. On the face of it, that takes into consideration a lot of the transparency points made by the Investment Association one way and the various lobby groups to which we have all spoken the other way—as the hon. Gentleman mentioned. The Government are taking action on that. The FCA report is an interim one and lots of things are in process. I am committed to transparency, but the question is what is relevant to the Bill.

The objective of the clause is to ensure that schemes are run effectively. It contains powers to make regulations that will specify what aspects of the scheme’s systems and processes the regulator must take into account in deciding whether they are sufficient to ensure that the scheme is run effectively. Examples of what such regulations may cover are listed in the Bill. The list already includes processes relating to transactions and investment decisions. We have been clear that the examples given are not exhaustive and that regulations may include other matters relevant to systems and processes. A guiding principle in setting the scope for the authorisation regime has been ensuring that master trust regulation is proportionate.

I should point out that existing legislative requirements already require trustees of occupational pension schemes offering money purchase benefits, including master trust schemes, to make an annual statement. The hon. Gentleman did not mention that: they are already required to make an annual statement regarding governance, which is known as the chair’s statement. It is appended to the scheme’s annual report and accounts.

The Government have an obligation under section 113 of the Pension Schemes Act 1993, as amended, to make regulations requiring transaction costs and administration charges of money purchase schemes to be published. We intend to consult, because the subject is very complex, and we are not, as the hon. Gentleman asserted, kicking it down the line. It is not that the Department for Work and Pensions does not want to do it. We intend to consult this year about how this information is published and proactively reported to pension scheme members.

Oral Answers to Questions

Debate between Ian Blackford and Lord Harrington of Watford

Monday 9th January 2017 Commons Chamber

[Richard Harrington]

The hon. Lady will be aware, because the WASPI women have been discussed in the House and I have discussed this matter personally with her on many occasions, that the changes affecting them were in the Pensions Act 1995, and that a lot of time and resources were devoted to informing them of the situation, including millions of letters being sent out from 2011.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

A happy new year to you and everyone in the House, Mr Speaker, and particularly to the WASPI women. I hope that they have a better year this year.

The leaflet entitled “Ways to save in 2017” recently published by the Treasury mentioned the junior ISA, the help to buy ISA, premium bonds, cash and stocks and shares ISAs and the new lifetime ISA, but it completely omitted to mention pensions. That is an absolute disgrace, and it confirms my fears that the Government have downgraded the role of pensions and are using the gimmick of ISAs to distract attention from pensionable savings. Does the Minister agree that pensionable saving is the best form of saving for retirement? Will he establish a pensions and savings commission to ensure that dignity in retirement is promoted and protected?

[Richard Harrington]

I must totally disagree with the hon. Gentleman’s analysis of the importance that the Government place on pensions. A lot of effort goes into communicating with people, on television and elsewhere, about auto-enrolment. The auto-enrolment of so many people has been one of the great successes of this Government and of the coalition, and I hope that that continues.

State Pension Age: Women

Debate between Ian Blackford and Lord Harrington of Watford

Wednesday 30th November 2016 Commons Chamber

[Richard Harrington]

I am sorry, but, for the moment, there is not time to take interventions.

Governments have to take hard decisions. The can that was kicked down the road for many years by the Labour party had to be dealt with by the coalition Government. I would just like to refer to some of the fallacies mentioned by Opposition Members. The hon. Member for Ross, Skye and Lochaber, in moving the motion, talked about the 1995 Act as if there was absolutely no communication from the Government—as if the DWP and everybody else suddenly forgot to talk about it. Well, that is not true. There were leaflets produced. There was an extensive advertising campaign. There were articles in women’s papers. In addition, millions of people, who decided they were going to sort out their pension, applied, quite properly, to the DWP; in fact, more than 14 million people applied and received full details of what their pensions were. I mention that because it would appear that there was absolutely no communication whatever. After the 2011 Act, that was a direct mail campaign, where individual letters—

[Ian Blackford]

rose—

[Andy Burnham]

rose—

[Richard Harrington]

I will not give way. I have a very short time left.

There was actually very good communication. However, I would like to mention the various contributions we have had. My hon. Friend the Member for Mid Bedfordshire (Nadine Dorries), who was among many speakers from the Government side, said that women, including herself, were not informed following the 2011 Act. In fact, as I have just shown, millions of letters were sent between January 2012 and November 2013. She said it is difficult for women over the age of 60 to find employment, and she said nobody would employ her. Actually, more than 4 million women in her age group are in employment—more than ever.

From the Opposition, we have had the argument, which I have had to deal with on many occasions, about the state pension being a contract. It is not a view but a question of fact that the state pension is a benefit, not a contract. As my hon. Friend the Member for North West Cambridgeshire (Mr Vara) said, promises are cheap. The Government have to actually deal with facts.

I have much sympathy for Members who spoke of constituents who are finding it difficult to access the benefits system. [Interruption.] Someone has shouted from a sedentary position, “What are you going to do about it?” As hon. Members will be aware, and as the Secretary of State mentioned, we have a system of helping through the benefits system people who may need looking at. We have older claimants’ champions, and we are getting more of them. We will find a way to help people to find their way into the benefits system. For any constituents who are finding this difficult, if the Department can have their name, address and national insurance number—I have asked for this on many occasions—I will be very happy to personally see what the position is and get them the help they need to get through the benefits system. We hear a lot of talk from hon. Members about their constituents, but the actual factual details I get are few and far between.

Let me move on to the famous economic report from the Scots Nats. I commend my hon. Friend the Member for Gloucester (Richard Graham), who described it as irresponsible and inaccurate. I really could not have put it better myself, because it is, as my hon. Friend the Member for North West Cambridgeshire said, raising false hopes by saying to our constituents that this is a small problem that can quite easily be dealt with. I remind hon. Members that even the SNP costs this at £8 billion, and the Department, as I have written to the hon. Member for Ross, Skye and Lochaber, has assessed it at nearer £30 billion. We have looked at every alternative. We have looked at more than 25 options that have been mentioned to us about the WASPIs, and there simply is not a viable option, either because of cost, complexity or practicality.

The luxury of opposition is promising everybody money without having to consider how to pay for it. I view this as very irresponsible.

[Ian Blackford]

I must tell the House that the figures in this report, which has been produced by Landman Economics, are based on the Institute for Public Policy Research model, which has been tried and tested. It really ill behoves the House to traduce the economists who have produced these figures based on a Treasury model. When we had the debate two weeks ago, the Minister said that the cost was £14 billion. How come we have gone from £14 billion to £30 billion? It is the Government’s figures that do not make any sense.

[Richard Harrington]

I apologise to the hon. Gentleman—I could not hear the end of what he said because of the noise. I am not disputing that this was produced by proper economists—I accept that fact—but it is about what timescale they look at, in this case going to 2021, and how they brief. But okay, fair enough: even by the SNP’s calculations the figure is £7.9 billion, which should apparently come from millionaires or from Trident. Government is not like that; these are completely separate issues. This country has a proud record on state pensions. This Government, and the predecessor coalition before it, did not have the luxury, partly because of the economic mess Labour left us in, of kicking the can down the road and ignoring these very, very serious issues.

The benefits system is available to people, and if they are not having the access to it they should, we will help them. I give an undertaking to look at every way that the benefits system can be used to help people who are in difficulty. Contrary to what some hon. Members have said, my door is open to people so I can speak to them. I hope I have shown that. I took this job to help pensioners, not to not help pensioners. It has been irresponsible to imply—

State Pension Age: Women

Debate between Ian Blackford and Lord Harrington of Watford

Tuesday 15th November 2016 Westminster Hall

[Richard Harrington]

I thank the right hon. Gentleman for his intervention, which I will attempt to answer in a moment, after I have thanked the hon. Member for Ross, Skye and Lochaber (Ian Blackford) for opening the debate and hon. Members from both sides who contributed.

I must say that this is the first time that my rather limited attempts at jurisprudence between 1976 and 1979 have been mentioned in the House. At least they will now be recounted in Hansard rather more than they are by my tutors of the time. The serious point that the right hon. Member for Knowsley (Mr Howarth) makes is that hon. Members feel that the Government have broken some form of contract, presumably non-written, with state pensioners generally or WASPI women specifically. I have heard that point made several times today, but the Government’s position is very clear: this was not a contract. State pensions are technically a benefit. I add no value judgments to that, but since he made a legal point, I felt I should place the answer to it on the record.

[Ian Blackford]

Will the hon. Gentleman give way?

[Richard Harrington]

I think I should continue, but the hon. Gentleman will have time at the end.

--- Later in debate ---

[Richard Harrington]

I know about the eight and 15 minutes, but I was asked by the Chairman to leave some time for the hon. Member for Ross, Skye and Lochaber; I was not being discourteous at all.

Benefits are a complex subject that I am sure we will have plenty of time to discuss elsewhere. Suffice it to say that the range of benefits is quite wide. If the hon. Member for Stockton North (Alex Cunningham) feels that there are gaps in the benefits system, I would be pleased to discuss them with him, but obviously not now because there is not enough time. I am trying to make progress, as you requested, Mr Nuttall.

The hon. Member for Strangford (Jim Shannon) and many other MPs shared cases of hardship, and of course I am sympathetic to them.

[Ian Blackford]

Will the Minister give way?

[Richard Harrington]

indicated dissent.

[Ian Blackford]

I will be very specific.

[Richard Harrington]

Okay.

[Ian Blackford]

The new information that I provided in my introductory speech was that a woman who was born in July 1953, who would have expected to retire in July 2013, was told by the DWP only in January 2012 that she would not be retiring until 2017. When did the Government and the Minister know of those facts? Why will they not now listen on that basis? The statement is that there will be no further changes, but these women have been seriously negatively impacted. The Minister must respond.

[Richard Harrington]

I shall respond in due course. I want to finish my point about the welfare system. The Government are spending £60 billion on supporting people on low incomes, £50 billion on supporting disabled people and £15 billion on incapacity benefits for working people. According to some of the contributions we have heard, it would appear that the Government are really not spending any money at all.