All Jonathan Reynolds contributions to the Pension Schemes Act 2021

Mon 16th November 2020
Pension Schemes Bill [Lords]
Commons Chamber

Report stage
3rd reading: House of Commons
Report stage
Report stage: House of Commons
Department for Work and Pensions
11 interactions (2,334 words)
Wed 7th October 2020
Pension Schemes Bill [Lords]
Commons Chamber

2nd reading
2nd reading: House of Commons
Money resolution: House of Commons
Programme motion: House of Commons
2nd reading
Department for Work and Pensions
3 interactions (1,823 words)

Pension Schemes Bill [Lords]

(Report stage)
Jonathan Reynolds Excerpts
Monday 16th November 2020

(11 months ago)

Commons Chamber

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Department for Work and Pensions
Nigel Mills Portrait Nigel Mills
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I agree, and I was coming on to that argument. I am not sure that achieving net zero can be pushed down to individual pension schemes and individual investment advisers. I suspect we will have to accept that between now and 2050, there will be some businesses out there that are bad for the environment but we are still going to need their products and services. We will need some of those even after 2050. We will achieve net zero by having other businesses that are more positive for the environment, with some still being bad for it. I am not sure that we can require every individual pension scheme to be a net zero investor. Otherwise, there will be a load of things that they just cannot invest in, as they cannot achieve that strategy.

I fully agree with the sentiment and agree that the industry needs to do more. I said on Second Reading that what we do not need are posh written documents that sit there with nice-sounding promises that never get implemented. We need pension schemes and their investment managers to be much more—

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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I will not address this in detail because I will have my own opportunity to do so, but I make it very clear that the amendment does not enforce or mandate pension funds to be net zero. It would ensure that they have an investment strategy, including a stewardship strategy, that is consistent with those objectives. It is drafted specifically to address those concerns and hon. Members have nothing to worry about in that regard.

Nigel Mills Portrait Nigel Mills
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I am grateful to the hon. Member, but I am not sure what the amendment would achieve then. If we say to a pension scheme, “You need to make sure that your overall investments are consistent with the nationwide net zero strategy”, they can just say, “Of course we are because there is a nationwide net zero strategy and we are just investing in legal businesses”, which we would presumably put taxes or carbon levies on to make sure we push this. It becomes a circle that would presumably mean only that the trustees have to produce a strategy and occasionally review it. It would not actually drive a great deal of different behaviour. I think I would want to see much more activist investment from pension schemes and their investment advisers to ensure that the businesses that they are investing in are sticking to their obligations and strategies on how they can reduce their impact on the environment, making sure that those promises are being kept on a management level rather than setting trustees an impossible target, which I am not sure would even mean what hon. Members seek to make it mean.

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Neil Gray Portrait Neil Gray
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16 Nov 2020, 12:02 a.m.

I was—I have it right here. We took some comfort from that statement from the Minister, but I have to emphasise the word “inappropriate” in respect of that de-risking journey. For the avoidance of doubt, will the Minister confirm that unless schemes started to move towards significant maturity, there would not be any appropriate de-risking journey? Will the Minister further confirm that he has no intention of insisting that all open schemes progressively de-risk their investments if any remain sufficiently far from significant maturity, and that he will ensure that the regulations do not have that effect? If so, how will they ensure that? We also ask the Minister to accept amendment 7, but if that does not happen, we will support the Liberal Democrat amendment 1.

On amendments 9 and 10, we return to the treatment of vulnerable customers and the need to better define the difference between guidance, advice and information. We touched on this in Committee and the Minister accepted the principle of where we were coming from with our amendments but could not accept them into the Bill. I ask him to look at that again. The SNP have tabled amendments to require that specially trained advisers and guidance are made available to people in vulnerable circumstances, including but not limited to persons who suffer long-term sickness or disability, carers, persons on low incomes and recipients of benefits. Circumstances of those types can have a significant impact on people’s finances and long-term savings plans. It is also the case that people in difficult financial circumstances may be more likely to utilise new pension freedoms, but at a cost to their long-term savings.

It is clear that the UK Government had not put in place adequate safeguards to ensure that older people who opt to free up their funds would not end up in a desperate financial situation later. Those with less money are more vulnerable to economic shocks in their personal finances, as well as being potentially more vulnerable to scammers who give misleading or false advice for free. That is why we have re-tabled amendment 10 to ensure that customers who use the pensions dashboard are made more aware of the difference between information, guidance and advice, which are very different things. People who expect advice as to what route they may be able to take may be disappointed to receive only various pieces of information. Likewise, there may be issues with exactly what the body is allowed to advise and to what extent it is able to advise on the options available. It is a simple amendment but would be extremely helpful in taking the issue forward.

As on all these issues, we have tabled amendments in good faith to try to improve the legislation. We look forward to hearing what the Minister has to say in his response to the debate.

Jonathan Reynolds Portrait Jonathan Reynolds
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16 Nov 2020, midnight

I place on record my thanks to all Members who participated today and in Committee. In particular, I thank my shadow Work and Pensions team for their diligence and hard work. I also place on record our thanks to the Minister and our colleagues from the SNP for the open dialogue that has been maintained throughout the Bill’s passage.

The Opposition did not vote against the Bill on Second Reading, and it is not our intention to vote against Third Reading later. We agree with the broad aims of the Bill and believe that it adds a series of worthwhile improvements to our pension system. However, we have continually sought, as is the role of the Opposition, to improve the Bill further to make it the best legislation that it can possibly be. On Second Reading, I laid out how we wanted to achieve this, with additional measures to protect pensions, people and the planet. Although there was thoughtful debate in Committee, it is disappointing that the Government removed some critical parts of the improvements that were made in the Lords. That is why we have brought back two groups of amendments today, as well as seeking a new amendment, which is an opportunity to make a historic step forward in tackling climate change. I will address each in turn.

First, on protecting pensions, a well-regulated pensions system is vital to give people confidence that it will be there for them in their retirement. Pension funds are not just any financial product. They are usually the sole means of looking after someone in old age, and are responsible for their financial security for an entire phase of their life. Today’s retirement landscape is challenging. The Labour party does not oppose the pensions industry in finding new ways to meet those challenges, but we strongly believe that any innovation must be well regulated, which is why we have introduced new clause 6. We introduced that provision in Committee, to ask the Government to introduce proper regulation of so-called pensions superfunds, which are profit-making consolidation vehicles for defined-benefit pension schemes. At present, they are subject only to an interim regulatory regime announced by the Pensions Regulator in the summer.

That is a substantial change, as these funds currently advertise high rates of return to pension investors. We believe that, as a minimum, those products need a proper and robust regulatory regime, underpinned by legislation, that is on a level playing field with the rest of the industry. We are not a lone voice on that. The Governor of the Bank of England has written to the Secretary of State to raise concerns about the potential risk to financial stability and to scheme members. The Opposition would like to hear a commitment today from the Minister that legislation for a full regulatory regime will be forthcoming before the market begins to develop seriously.

Moving on to other matters, the adequate funding of defined-benefit schemes is critical to their future. We were disappointed by the removal in Committee of clause 123, which related to the funding requirements of open and closed defined-benefit schemes. That point has just been made, and I shall not quote the Minister directly again. However, we understand that he has relied frequently on the regulator’s bespoke option in the draft defined-benefit funding code to provide reassurance for open schemes that they will not be required to follow the funding and investment strategies of closed schemes. However, there is a long list of people who have expressed doubt about that option, and who believe that it risks the premature closure of otherwise healthy schemes, including the Pensions and Lifetime Savings Association, the Institute and Faculty of Actuaries, Lane Clark & Peacock, the Trades Union Congress, the Confederation of British Industry, and even one of the Minister’s predecessors as pensions Minister, Baroness Altmann. I recognise that there is no disagreement between the Minister and Opposition parties on the desired outcome, but we still believe that there is virtue in reintroducing the clause. If amendment 7 or amendment 1 is pressed to a vote, that will be done with our support.

Protecting people in schemes is vital, which is why we have introduced three changes, to try to strengthen the consumer protections in the Bill, with amendments 11 to 15. We all agree that the pensions dashboard, when it arrives, will be an incredible opportunity for people to see all their pensions information in one place for the first time, but safeguards must be built in to prevent hasty decision making and consumer exploitation. The last thing we want is for people to make bad choices, prompted, for example, by market disruptions or unscrupulous operators, until they are more accustomed to that level of access. We believe that we can tackle both those things by giving the public dashboard a protected head start and keeping commercial transactions off the dashboard until further legislation is introduced in line with our amendments.

We also believe that there must be accessible and transparent fee information on the dashboard. For too long, it has been possible to rely on the opacity and complexity of pensions to obscure the real lifetime cost of transactions. Greater transparency would surely be welcome.

I spoke on Second Reading about the scourge of pension scams. People can become particularly vulnerable to scams in the years immediately before retirement. We have heard throughout the debates on the Bill terrible stories, such as the one articulated by my right hon. Friend the Member for East Ham (Stephen Timms), about people falling victim to fraudsters who rely on confusion about pension freedoms, and not only take people’s lifetime savings but leave them with a huge tax liability. No punishment is severe enough for those who commit those crimes. We all agree that further action is needed, so we support the amendments tabled by my right hon. Friend, who chairs the Work and Pensions Committee, as they would create an opt-out system for speaking with Pension Wise in the five years before retirement.

Finally, I have spoken about protecting pensions and protecting people, and now I want to talk about protecting the planet. Our colleagues in the Lords worked hard with the Government to bring in requirements in the Bill on the assessment and disclosure of climate risk in pension investments. This is a historic step: the first time it has ever been included in UK pensions legislation, and we all should and do celebrate that fact. However, we know that, with the climate emergency getting even more serious, it is possible to go even further. Amendment 16 would allow regulators to mandate occupational schemes to develop a clear investment strategy that is aligned with net zero greenhouse gas emissions at the pace the science demands.

The Paris agreement of 2016, which committed to efforts to limit global warming to 1.5° was a groundbreaking and critical step forward in global co-operation to beat climate change, but I believe we do not do enough to explain to the public and our constituents that the changes we need will only be delivered by starting to influence how vast amounts of private capital are allocated, alongside direct Government decisions on, for instance, decarbonising power and transport. I have to say that I would have thought that argument would garner more sympathy with Conservative Members of Parliament.

UK pension funds represent trillions of pounds, and steering more of that towards our climate goals, yes, would be radical, but this amendment is not just about where capital is allocated. It is about the stewardship that we need to see from all asset managers over the companies they have investments in. This is not a divestment amendment, nor does it limit the choices available to fund managers. The hon. Member for Grantham and Stamford (Gareth Davies) said that the ESG data is patchy, and he is right, but he will appreciate that asset managers demanding better data have been a fundamentally important driver in making that better, and the E—environmental—is actually the most robust part of ESG data. It does not make sense to me to say that the data exists for the Government to issue a green bond, but not for a pension fund to formulate a Paris investment strategy.

We, as the Opposition, ask the Government to deliver a green economic recovery from the pandemic by investing to support the creation of at least 400,000 new jobs, but achieving progress on climate change demands change in every part of our economy, and despite what we have heard from Government Members today, the industry is already showing us what is possible. Aviva, one of the UK’s biggest pension providers—it supports this amendment —has recently announced that its auto-enrolment default funds will aim to achieve net zero by 2050. That is £32 billion of capital, which is actually going beyond the scope of this amendment. In October this year, the BT Pension Scheme set a goal of net zero by 2035 for its entire portfolio, worth £55 billion. There is also a great deal of good practice in public sector DB schemes, such as the Local Government Pension Scheme.

What is more, today’s amendment was developed and backed by a whole host of organisations across the public and private sectors, with dozens reiterating their support in a letter to the Prime Minister last week. These include ClientEarth, Make My Money Matter, ShareAction, E3G, Christian Aid, West Yorkshire Pension Fund, Good Energy, Ecotricity, the Aldersgate Group, the Climate Coalition, the Carbon Tracker Initiative, Friends of the Earth, Greenpeace, Business in the Community and the TUC. I would like to thank all those organisations for the work they have done in getting us to this point. However, I will also say to the Minister that this is not a top-down initiative. The evidence shows that Members themselves want their funds to start taking this seriously.

In addition, the investment case makes this simply the right thing to do. The Department for Work and Pensions has itself acknowledged that considering the financial impacts of climate change is consistent with fiduciary duty. Pension funds are long-term stewards of capital. What could be more long term than the sustainability of our environment and our economy? These two objectives simply do not conflict. As is said in an excellent comment piece in The Daily Telegraph today—that in itself is a sign of the times—it

“now looks irrefutable that environmental and social factors are a clear guide to company quality and future investment returns.”

I reiterate that this is not about the Government dictating to pension funds about when and who to invest their money in, and we are not seeking to compromise trustee independence. It is simply about putting a strategy in place that considers their role in meeting our climate objectives. Trustees can maintain their total discretion over what strategy they choose to achieve that goal. Furthermore, this proposal is designed to allow the Government the flexibility to guide schemes via regulations to ensure that trustees have a strategic plan to become Paris aligned over a period of time. Any measures resulting from this amendment would be subject to extensive consultation with market participants, so that their design could take into account what works best for schemes of different types and sizes. This is written to be as accommodating as possible. The Chancellor of the Exchequer came to the House last week and outlined his ambitions to make the UK a leader in green finance. It is true that we have been lagging behind our European counterparts for many years when it comes to green bonds. As the shadow Economic Secretary in the last Parliament, I made that point frequently, and I was often given reasons why we could not do that similar to those we have heard today against amendment 16. I am tempted to say that if we wait until the end of this Parliament, even this amendment may well become Government policy.

With the new US Administration poised to rejoin the Paris agreement in 2021 under the new leadership of President-elect Joe Biden, I put it to the House that we can make this an even more historic week for tackling climate change by passing amendment 16 today. That is why we seek to include it in the Bill.

Guy Opperman Portrait Guy Opperman
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This is a hugely important piece of legislation. It is a landmark Bill. It will impact the lives of millions of people across this country and it will make our pensions safer, better and greener. I genuinely believe that the work we are doing on CDCs and the pensions dashboard, the fact that we are giving real powers to the regulator and taking the opportunity to crack down on the callous crooks who take our constituents’ pensions, the work we are doing on scams, and the fact that we have for the first time put climate change at the heart of pensions means that this will be groundbreaking legislation that we should all be proud of. I welcome the cross-party support that we have heard.

I may not be able to address all 30 amendments or the 17 separate requests for clarification, so I refer all colleagues—and those in the other place, when they consider this matter—to the two days of debate in Committee, where I expanded in great detail on many of these issues. I will happily write to individuals who asked me to address particular points. I will of course meet the ASW, as the hon. Member for Cardiff South and Penarth (Stephen Doughty) requested, and write on the Roadchef issue, but I cannot promise anything more than previous Ministers have done.

Regretfully, I will not engage with the WASPI debate, as the hon. Member for Strangford (Jim Shannon) made clear that he would. I continue to defend this Government’s position, as I defend the Government of the two former Labour Pensions Ministers sitting on the Back Benches, who supported the exact same policy during the Labour Government. I very much take forward all the work that is done on a cross-party basis. I put on the record my thanks to the Clerks, to all colleagues who have spoken in this debate and to colleagues from across the House for their work in Committee, which was of great assistance to the House.

I turn first to clause 123 and the various amendments on open DB that were raised by a variety of colleagues. We have made it entirely clear that we do not want to see good schemes close. We support DB and we are not proposing a one-size-fits-all regime that forces immature schemes with strong sponsors into an inappropriate de-risking journey. We have also made it clear that we will use secondary legislation to ensure that the requirement for all schemes to have a funding and investment strategy works appropriately for open schemes and ensures that immature open schemes are not prevented from taking appropriate investment risks where that is supportable.

As we have explained, it would be wrong for all schemes that are expected to stay open to be treated differently from other schemes. Not all open schemes in this category share the same characteristics. Some will be maturing just like closed schemes, and it would be wrong to treat such schemes for all purposes as if they were the same as immature schemes.

We hope that we have provided reassurance that open schemes will be able to adopt funding and investment strategies that are appropriate to their individual circumstances. The regime will remain scheme specific and will continue to apply flexibly to the individual circumstances of each scheme, including those that remain open to new members.

We have made it entirely clear that we will frame our secondary legislation in such a way that schemes that are and are expected to remain immature, and have a strong employer covenant, continue to be able to invest in a substantial proportion of return-seeking assets, which will help to keep costs down. I have engaged with a range of parties—I met a number of them in detail on 2 October, and I have subsequently had discussions with a number of organisations—and we are trying to reassure them of the way ahead.

The Pensions Regulator is a regulator, not a legislator. It must regulate in accordance with the legislation made by Parliament, but we believe that the right way forward is a combination of primary legislation, regulations and the defined-benefit funding code, whereby we will seek to effectively balance employer affordability and member security, taking into account the circumstances of different types of schemes as is appropriate.

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Guy Opperman Portrait Guy Opperman
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16 Nov 2020, 12:04 a.m.

I congratulate my hon. Friend on making her point so eloquently and intervening speedily in this short Third Reading speech. I can confirm that the law stays as per the Supreme Court decision, even after we leave the EU. I stand by what I wrote to her in the detailed letter that I drafted to her in October, a copy of which I will place in the House of Commons Library to set the matter firmly on the record.

Before I was so generously interrupted, I was saying that this is a hugely important piece of legislation with cross-party support, for which I thank colleagues from all parties, including the hon. Member for Birmingham, Erdington (Jack Dromey), who cannot be with us tonight. The Bill will affect the lives of millions of our constituents throughout the country; make pensions safer, better and greener; stop scams; introduce CDCs; create pension dashboards; and crack down on callous crooks who take away our constituents’ pensions. It also legislates for a new type of pension scheme, establishing the dashboard and making pensions fundamentally greener. I commend the Bill to the House.

Jonathan Reynolds Portrait Jonathan Reynolds
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I thank all colleagues for their participation in today’s proceedings and throughout the passage of the Bill. In particular, I thank the Minister; my hon. Friends the Members for Feltham and Heston (Seema Malhotra) and for Westminster North (Ms Buck), who led for the Opposition in Committee; and Sophia Morrell and Lily Lewis from our staff teams. I pay tribute to the shadow Pensions Minister, my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). He is a peerless source of knowledge, wisdom and advice, and he has played a significant role in this legislation. Unfortunately, he could not participate in Committee or today’s proceedings because the House does not have in place the measures required to allow all MPs to participate safely on an equal basis during the pandemic. This is clearly not a satisfactory situation, and I know that many Government Members concur with that. I welcome the moves today to finally get this resolved.

On the whole, this has been a positive experience. Perhaps the most significant change made in the Bill is the introduction of the new collective defined-contribution schemes, which we will have to monitor carefully, as well as more substantive measures of benefit to our constituents. This legislation deserves to pass its Third Reading, and it will do so with the support of the Opposition.

Neil Gray Portrait Neil Gray
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Like others, I wish to put on record my thanks to the Clerks, Huw Yardley and Kenneth Fox, and to Djuna Thurley in the Library, for their support. I also thank our SNP researchers Zoe Carre and Linda Nagy for their fantastic assistance, as well as my hon. Friend the Member for Gordon (Richard Thomson) for his considerable and informed support in Committee.

This Bill takes matters forward in the pensions world. It could have gone further, and I regret that it does not, but we thank the Minister and the other parties for working together constructively on such an important piece of legislation. We look with interest to its further stages in the other place.

Pension Schemes Bill [Lords]

(2nd reading)
Jonathan Reynolds Excerpts
Wednesday 7th October 2020

(1 year ago)

Commons Chamber

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Department for Work and Pensions
Thérèse Coffey Portrait Dr Coffey
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7 Oct 2020, 12:01 a.m.

My hon. Friend the Under-Secretary of State for Work and Pensions has just told me he will share with the hon. Gentleman the letter that he sent to the Chair of the Select Committee. Generally, pensions legislation has broad support across the House, in recognition of the fact that these are long-term decisions, so of course the Government will look carefully at any amendments in Committee and any points made by the hon. Gentleman. We want to make sure that, going forward, we have conference in the long-term objectives of the changes that the Bill will bring in.

In conclusion, I pay tribute to my hon. Friend the Under-Secretary who is passionate about pensions, exceptionally assiduous and, in my humble opinion, the best Pensions Minister we have had in a very considerable period of time. I hope the House will agree that having safer, greener and better pension schemes is good for our constituents, as we encourage people to invest in themselves today to prepare for a comfortable retirement, and help to make them better informed about how their money is growing and being used for them and the planet. I commend the Bill to the House.

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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7 Oct 2020, 12:02 a.m.

I am grateful to be called to speak in this Second Reading debate. Since I became the shadow Secretary of State earlier in the year, I have been carefully following the progress of the Bill in the other place and am pleased that it has finally reached this House.

First, I record my sincere admiration for and thanks to my colleagues in the other place—noticeably Baroness Sherlock, Baroness Drake and Baron MacKenzie—for their laudable work in carefully and thoughtfully amending the Bill.

In opening the debate for the Opposition, I shall outline our perspective on the Bill as it stands, as well as addressing the three areas—protecting people, protecting pension schemes and protecting the planet—in which Labour would like to see further amendments made as the Bill progresses. However, let me say clearly at the outset that my colleagues and I broadly welcome the Bill. We have been in dialogue with the Government for some time about its contents and the issues that it covers, and I am grateful to the Pensions Minister for his time this week on a number of matters. We will therefore not oppose the Bill today.

My message to the UK’s pensions industry is that it should have confidence in the strong commitment that exists across the House of Commons to a pension system that is sustainable, sufficient and able to meet the challenges of an ageing population. Although we broadly support the measures in the Bill, we believe there is more to be done to create the robust system that we want. As the Bill progresses, we will seek to make those arguments in the usual way.

A new piece of pensions legislation is always an important step. Personally, I am fascinated by pensions, but I appreciate that not all people feel the same way. For many people, retirement feels like a distant concept. The understandable financial pressures that many families experience—especially at the moment—make longer-term considerations harder to contemplate. Even in better times, talk of defined contributions or lifetime allowances can cause some eyes to mist over. I feel strongly, though, that we will not be able to address the major public policy questions we face without getting people of all ages to make a genuine connection between their future prosperity and happiness and the pension plans that they are making today.

The connection I mention is essential because the outlook for today’s young people is drastically different from that in years gone by, and that has become even more critical in the light of this year’s events. We already know that the combination of student debt, higher house prices and—most of all—the impact of the 2008 global financial crisis and the austerity that came after it has meant that for the first time there is a generation of British people who might not be better off than their parents. That is why in last week’s debate on the Social Security (Up-rating of Benefits) Bill I made the point that the triple lock is not just about the level of the state pension for existing pensioners but about how we index the state pension so that it keeps its value for future generations who are not yet retired. We also have to make sure that we have a complementary system of occupational provision in which people have knowledge and control of their savings, with strong regulations to protect consumers’ interests, and in which people can easily comprehend how the decisions they make will affect their retirement plans.

All that brings me to the contents of the Bill. First, I want people to know that their pension savings—their assets—will directly contribute to the future they want for themselves and their family. I am immensely proud of the work that my Labour colleagues did in the other place—much of it behind the scenes—to put climate commitments for pension funds into UK legislation for the first time ever. This is not just lip service, but genuine commitments, formalising the requirements of the Task Force on Climate-related Financial Disclosures and enshrining a commitment towards the Paris agreement for trustees and managers of occupational pension schemes. That is fundamental to tackling the climate emergency and it is a vital contributor to the health of pension funds. The long-term prospects of fossil fuel companies have implicit risks and it is only right that those risks are taken into consideration as part of the financial responsibility that schemes have towards their members.

The UK should be leading the way on green finance, but we have been slipping behind internationally in recent years. I want to explore ways that we can go even further to achieve that goal. The connection between people, really thinking about where their money is invested, is a key component of helping them to become more involved and more informed about their financial future overall.

The Bill also contains the blueprint for the pensions dashboard, one of the most long-awaited policy initiatives in history. We want to future-proof that dashboard, so that one day people can see in black and white an easily understandable measure that tells them how exposed to climate risk their retirement portfolio is. I know that the industry wants to make sure that we learn to walk before we start to run, and that the creation of the dashboard in itself is no small proposal, but I want us to be as ambitious as we can. Frankly, there is no time to waste when it comes to the climate emergency.

That takes me to my second point, on protecting people. For too long, there have been cases of unscrupulous people using the complexity of the pensions industry to exploit those using it. The dashboard, in particular, has a vital role in making information transparent and easily accessible. That includes making sure that it has the capacity to clearly spell out to people what their fees are and who they are really paying, and for what. One of the very good amendments in the other place was to protect the dashboard from private transactions for a fixed period, and I am disappointed that the Government seem not inclined to keep that.

When consumers are presented with the new information that the dashboard will provide, we would prefer to have a moratorium on how products and new services are sold and marketed until people get used to having ready access to this information. In the wake of, for instance, volatile markets brought about by the coronavirus pandemic, it would be very easy for people to panic and make decisions that might not be in their long-term interests. We want to look at how we use the Money and Pensions Service to best mitigate this, especially when it comes to transfers.

Small pension pots, as has been mentioned, continue to be a major problem. How we can use the dashboard to easily consolidate those pots with minimum hassle and cost has to be on our minds. The dashboard will bring a sense of immediacy and transparency to that, but we need to make sure that people make their decisions when they are fully informed.

The other element of this, sadly, is pension scams. Regrettably, George Osborne’s pension freedoms, exactly as was warned of, have been a watershed moment for fraudsters, who have taken advantage of such a significant change in the rules. As the shadow City Minister and now as the shadow Secretary of State for Work and Pensions, I have been made aware of some truly dreadful stories. I remember one especially bad case where the victim not only lost their pension to the scam, but was then pursued by Her Majesty’s Revenue and Customs for many years for the tax payable on that money, because they had accessed it under the age of 55, even though they had been under the impression that they were moving it to a legitimate investment for nowt. That is the kind of scam that absolutely ruins lives, and the penalties and action taken against fraudsters should be severe.

We should also take pride in the fact that there have been several substantial successes in pensions policy in the last few years. Auto-enrolment is a prime example of that—a hugely successful policy begun by the last Labour Government. Thanks to auto-enrolment, by March 2019 more than 10 million people had been auto-enrolled in a pension scheme, according to figures from the Pensions Regulator. Of course we want people to be more engaged in their pensions, but default options that are easy to set up and straightforward to contribute to are essential.

That brings me to my final point, on protecting pension schemes. What that means is ensuring a strong infrastructure so that we have a well-protected and well-functioning system. First, we will urge the Government to retain the cross-party Bowles amendment inserted in the other place. We do not want the regulation to work in a way that unnecessarily closes defined-benefit schemes that would otherwise be open for new members, and that is what we are worried will happen if open and closed schemes have to meet the same investment and maturity profiles. That is why we believe it is wrong to treat open and closed schemes in the same way, but that is another issue we intend to explore further in Committee.

Big challenges demand big answers, and that is why Labour supports the introduction of collective defined-contribution schemes as a potential way to get a better deal for workers than traditional DC schemes might offer. In doing so, we are mindful of the arguments from other countries about the need to ensure intergenerational fairness in those schemes, but we believe that those safeguards can be built in.

However, one area where we feel the Bill is silent is the creation of pension superfunds. These are very large funds of capital intended to consolidate several smaller DB schemes and run them as one large fund on a for-profit basis. Many are advertising substantial returns to potential investors. That is potentially an extremely significant development, and we do not believe it is appropriate for the Government to leave it in the hands of the Pensions Regulator to rule on this matter. The Government know the concerns that we have raised, and concerns have also been expressed by the Governor of the Bank of England and many people in the industry. I do not understand why these measures are not in the Bill, and the Opposition plan to push the Government again for more answers on this in Committee.

We believe that the measures in this Bill are important and worth while. We want well-managed, sufficient and sustainable pension provision that addresses long-term needs and is intergenerationally fair, and we want to begin the process of allowing savers to be much more engaged and in control of their assets. While the Bill does not give us everything we want, it makes solid steps towards that goal, and it is our belief that it deserves to have its Second Reading today.

Andrea Leadsom Portrait Andrea Leadsom (South Northamptonshire) (Con)
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7 Oct 2020, 12:06 a.m.

First, I congratulate my right hon. Friend the Secretary of State and, in particular, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman), on their long-standing commitment to improving security for all our people in older age. My hon. Friend the Member for Hexham has shown over a lengthy period his commitment to securing older age for all in our country.

I would like to make four brief points, which I hope my hon. Friend will take into account as this excellent Bill continues its passage through both Houses. First, I would like to talk about the safety of pensions. There is no doubt that auto-enrolment has been a huge success for many, but Ministers will be aware that some people—particularly those on low pay—have been auto-enrolled into a pension scheme and found, when they tried to get information on their investment, that the company handling their pension is, in fact, a bogus firm.

I vividly recall a constituent coming to see me at my surgery. He was a delivery worker on fairly low pay. He was concerned about his auto-enrolled pension and wanted to know what was happening to his assets. He was trying to get an answer from the administrator for that firm and was simply told that the assets had decreased in value. When he tried to find out more, the firm would not engage with him. It was incredibly difficult for me, as someone who is quite familiar with the asset management sector, to get on to the ombudsman on his behalf. It was very difficult to get answers out of anyone. I urge my hon. Friend to ensure that we have the ability to clamp down hard on scams of all sorts, including by those who provide auto-enrolment schemes, and to enable people who may not be at all familiar with managing assets and their own investments to seek redress where necessary.

My second point is about the structure of pensions. I completely agree that the dashboard concept is a great idea. There is no doubt that it will transform people’s ability to hang on to all their small pension pots from the various jobs they have had. Most people these days have several jobs during their career, not just one or two, and it can be a case of people looking in the back of a drawer and trying desperately to remember the name of the company where they worked for six months. That is why we end up in a situation where lots of people have lots of little pots that they never manage to lay their hands on. I ask my hon. Friend, as he considers the next steps for pensions, to consider properly the potential for creating a lifetime pot that follows the worker. Obviously, that would be a radically different approach to the pensions dashboard that enables people to keep track of all those pots, but, actually, when individuals try to consolidate a pension, quite often the transfer value of that pension is considerably less than the pay-out value if they hang on to it. That is often why one pension pot will try to hang on to a person as one of its members and stop them going somewhere else. In my view, it would be worth while looking at a pot that follows the individual that they then keep paying into wherever they work throughout their career.

In 2014, which seems like light years ago now, I was City Minister and I was very proud to be working with George Osborne, who was Chancellor at the time, to introduce the pensions freedoms. I heard what the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) said about that being an opportunity for scammers. I completely agree that some of the measures that have been put in place have really helped with that, and that, indeed, there have been some major problems. However, I do not agree that we should not have brought in those measures, because the ability of many people to then get a decent amount of money on retirement was quite life-changing for them. It enabled some to have a great holiday. It enabled others to help their children buy their first home, or to pay off their own mortgage to give them greater security as they went into a lower income in a later stage of their life.

At that time, back in 2014, we also upgraded the Pensions Advisory Service, so that people could get good advice on how best to manage their own pension assets. In my view, this has been a positive change, but there is still a very low level of understanding of pensions among members of the public, so for many, making decisions about what to do with their pension freedom or with any kind of investing is a really worrying time. That leaves them open to crooks and scammers. I ask my hon. Friend the Minister what conversations he has had with the Secretary of State for Education about adding an applied practical element to the maths GCSE that would educate young people on issues such as pensions, mortgages, car finance schemes, and, yes, student loans. What more can be done to enable people to familiarise themselves better at a younger age, so that it is not such a mystery to them as they reach the shockingly old age of people like me—