Pensions Dashboards (Prohibition of Indemnification) Bill

Laura Trott Excerpts

3rd reading
Friday 20th January 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Laura Trott)]

I am very grateful to my hon. Friend the Member for Cheadle (Mary Robinson) for promoting the Bill and I congratulate her on navigating it through to this stage. I have done a private Member’s Bill so I know that that is no mean feat. It requires a huge amount of work, which has been on display today, as have her skills in getting this through. I also thank the Opposition for their support for the Bill, and I thank all of those who have spoken today: my hon. Friends the Members for Clwyd South (Simon Baynes), for Watford (Dean Russell), for North Devon (Selaine Saxby), for Wantage (David Johnston) and for North East Bedfordshire (Richard Fuller). I will endeavour to deal with as many of his questions as I can, but I will write to him on any I am unable to address. I also pay tribute to my predecessors in this role, my hon. Friends the Members for Hexham (Guy Opperman) and for Brentwood and Ongar (Alex Burghart), who spoke in support of the Bill on Second Reading and in Committee respectively. I am proud to complete the trio.

Private pensions have undergone a quiet revolution in recent decades. It used to be the case that retirement income was guaranteed by the employer via a defined benefit pension. That started to change with the introduction of defined contribution schemes in the early 1990s. Those types of schemes put the risk of the eventual outcome entirely at the feet of the employees, with no guaranteed contribution from employers. That clearly has a huge potential impact on the adequacy of someone’s private pension for retirement, and introduced a huge new complex financial world for individuals to navigate. The intergenerational impact of this is stark. One group of people is able to retire on a guaranteed pension provided by their employer and have protections—provided by the financial assistance scheme and, latterly, the Pension Protection Fund— in respect of the employer going bust. The second group of people are given no guarantees on the value of their pension, if indeed they have one at all, and they are exposed to market conditions, are reliant on the performance of their individual fund, and wildly different levels of contribution are made by the employer—in some cases, none are made at all.

That is why the introduction of automatic enrolment in 2012 was so important. My hon. Friend the Member for Cheadle is right to say that automatic enrolment has been an incredible success and has achieved a transformational effect on retirement savings in the UK, both by employers and by employees. It has seen millions more people working to contribute to their workplace pension and has normalised workplace pension saving. Automatic enrolment is re-establishing a culture of retirement saving for a new generation, with more than 10.8 million workers enrolled into a workplace pension to date and an additional £33 billion more saved in real terms in 2021 than in 2012.

[Matt Rodda]

Will the Minister pay tribute to the work of the Pensions Commission and, indeed, the last Labour Government, who designed the policy? Obviously, it was implemented in 2012.

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[Laura Trott]

The Pensions Commission did a great piece of work. As the shadow Minister rightly pointed out, it was implemented by the Conservatives.

Automatic enrolment was designed specifically to help groups who have historically been less likely to save, such as women and lower earners. My hon. Friend the Member for North Devon referred to women, and automatic enrolment has particularly helped them; millions more have been saving into a pension for the first time. Workplace pension participation among eligible women working in the private sector has risen from 40% in 2012 to a brilliant 87% in 2021—that is the same level as for eligible men in the private sector. We absolutely know that there is more to do, particularly to enable young adults, lower earners and part-time workers to achieve greater security in later life. The 2017 review of automatic enrolment sets out the Government’s ambition to enable people to save more and to start saving earlier by abolishing the lower earnings limit and reducing the qualifying age for automatic enrolment to 18. We are committed to implementing these measures in the mid-2020s.

However, the success of automatic enrolment in increasing the number of pension savings and the number of pension pots people have comes with policy problems that we have to solve. People have an average of 11 jobs in their lifetime. With automatic enrolment, they will often have a new pension pot every time they move job. Research in 2021 suggested that 73% of people have multiple pension pots, and research by Scottish Widows suggests that almost half of workplace pension holders do not know how many pension pots they hold with previous employers. Indeed, they will frequently forget about their pension pots from previous employers altogether.

The first policy issue with automatic enrolment that we therefore need to address is ensuring that pots are reunited with people. While estimates and definitions of lost pension pots vary, the latest survey from the Pensions Policy Institute suggests that the value of lost pots in the UK may have grown from £19.4 billion in 2018 to £26.6 billion in 2022.

The second issue that my hon. Friend the Member for Cheadle alluded to is that many people have multiple pension pots, and it can be difficult for people to keep track of what they have saved for retirement. Having lots of pension pots can be confusing. The Financial Conduct Authority’s recent survey showed that 54% of defined contribution pension holders aged 45 to 64 say they have little or no idea of how much annual income they expect to have from their defined benefit contributions.

Members will be pleased to know that we have a solution to these issues: pensions dashboards. Dashboards will allow individuals to view information about their multiple pensions, including their state pension, in one place, online—even pots they had forgotten they had in the first place. As my hon. Friend the Member for Watford said, it will tell us what our future looks like.

Numerous Members asked about timings. The Pensions Dashboards Regulations 2022, which set out the requirements for relevant occupational pension schemes to be connected to the pensions dashboards digital system, were approved by the House in November 2022 with cross-party support, and they have now come into force. We hope to see the first schemes connecting to the dashboards infrastructure in the coming months.

Members also asked when individuals will be able to access these dashboards. We refer to this as the dashboards available point. As set out in the Pensions Dashboards Regulations 2022, the dashboards available point will be when the Secretary of State for Work and Pensions is satisfied that the dashboards are ready to support widespread use by the general public. The Government consulted last year, and in response to the consultation we set out a broad framework of relevant matters that will be considered before the Secretary of State announces the dashboards available point. That will include consideration of the level of coverage; ensuring the safety, security and reliability of the service; and testing the user experience.

[Matt Rodda]

Could the Minister tell the House what plans the Department has to publicise the roll-out of the dashboards? Clearly many pension savers are already not aware of their full entitlement, and there is a risk that they may not be aware of the dashboard itself.

[Laura Trott]

The timetable set out in the regulations is about pension providers uploading the information to the dashboard. When that is available for individuals is a decision that the Secretary of State then has to take, but the timetable for information being uploaded is public and is the one agreed in the regulations. I hope that that answers the hon. Gentleman’s question.

As my hon. Friend the Member for Cheadle said, in order to ensure compliance with dashboards regulations, the Pensions Regulator has been given power to take enforcement action for non-compliance with any of the requirements in part 3 of the Pensions Dashboards Regulations 2022. That includes the possibility that the regulator may, at its discretion, issue penalty notices of up to £5,000 for individuals or up to £50,000 in other cases, such as corporate trustees. My hon. Friend the Member for North East Bedfordshire asked me lots of questions, and I will write to him, because I need to hurry up.

In conclusion, it is to the huge credit of my hon. Friend the Member for Cheadle that she successfully brought the Bill forward on a cross-party basis and navigated its passage. I am delighted to restate that the Government support the Bill and will continue to support it as it moves through Parliament. I wish it every success.