Pensions (Extension of Automatic Enrolment) (No.2) Bill

Laura Trott Excerpts

Committee stage
Wednesday 15th March 2023 Public Bill Committees

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to serve under your chairship, Sir Christopher. I will address my remarks purely to the amendments.

I thank the hon. Member for Glasgow East for his work on the subject. He made a deeply personal and heartfelt point about his own experience. However, there has been a wide range of discussion and debate on the matter, and I believe that this afternoon we ought to focus on the Bill itself. I am aware that time is pressing, and given the matters being discussed in the main Chamber, I will leave my remarks at that for now.

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

It is a pleasure to serve under your chairmanship, Sir Christopher.

I have respect for the hon. Member for Glasgow East, as he knows. I listened carefully to what he said. He set out his personal story beforehand, and it is very powerful. I reiterate the points made by my hon. Friend the Member for Stoke-on-Trent North and by the hon. Member for Reading East. This was looked at as part of the 2017 review, and there will be a statutory consultation to follow it up.

[David Linden]

I must say that in moving the amendment, I had rather hoped that more consideration and debate would be given to it. With the greatest respect to the hon. Member for Reading East, I am baffled that the Labour party has nothing to say. Perhaps that is consistent with its policy positions these days. It was not that long ago that hordes of young people at Glastonbury were chanting the name of the former Leader of the Opposition, the right hon. Member for Islington North (Jeremy Corbyn). This rather strikes me as a bit odd. I understand that the Government have not always been the kind of folk who tend to have lots of lovely things to say about the labour movement or young people, but I am particularly baffled that this Labour party has nothing to say, nor any explanation as to why it has arrived at this policy position, other than to say, “We agree with that lot.”

With that in mind, I have sought to stimulate debate—rather unsuccessfully—but I look forward to the Bill making progress, I hope. I do not disagree with the Bill itself, as I said, but when we come to later stages I hope that we can agree to improve automatic enrolment further and to give this a little more consideration than it has been given today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

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[Matt Rodda]

Once again, it is a pleasure to serve under your chairmanship, Sir Christopher. I commend the hon. Member for Stoke-on-Trent North for his work on this Bill, and, indeed, other Members from across the House and the wider policy discussion about the importance of auto-enrolment. As the hon. Member for Rutherglen and Hamilton West rightly said, pensions adequacy is a very important issue facing the whole of our society; it is a matter of great importance. We should, across the House, be encouraging people to save for their future, so it is important to debate this issue today.

I particularly want to say, in the time that I have, that auto-enrolment in itself is a great public policy success of the last few years. It dates back to the work of the Pensions Commission for the last Labour Government. The coalition Government implemented this change in 2012, and there has been growth in the number of people saving for a pension as a result. That is a commendable step forward.

However, pensions adequacy remains an issue and it is important for us to continue to go forward. In doing so, we need to work in a gradual, sensible and practical way to try to encourage auto-enrolment, and to work with stakeholders such as businesses, savers themselves and, indeed, society as a whole to try to take this work forward. In that spirit, I have some questions for the Minister.

This Bill will clearly offer real advantages to many younger people, who will be saving not only a greater sum, but from an earlier point in their life. That will help to build a much better pension pot for those pension savers. My questions for the Minister are primarily about the nature of the consultation, because as we have heard, it is hugely important that we work with pension savers themselves, with employers and with other stakeholder organisations to ensure that there is consensus on this issue and that policy is developed in a sensible way. Therefore I would like the Minister to explain to the Committee a little more about the nature of the consultation: in particular, what work the Department has done to encourage pension savers, especially young people, to be aware of the potential to save more for a pension in the future; the discussion that she has had with employers, both individual employers and employer organisations; and what she will do to continue to work with them, because when this legislation is implemented, it is a step forward for them—it is a greater contribution. We need to work with them.

I would like to know what work the Minister is doing with trade unions. They have a very important part to play in the roll-out of auto-enrolment. I was glad that the hon. Member for Stoke-on-Trent North mentioned that and acknowledged the significant work that they do. I am also interested in the consultation, in so far as it has reached out to advice organisations such as Which? and many others that have an important role in the wider money and savings debate. I hope that she is discussing with them the importance of this.

My second question is about when the Department hopes to use these powers. As has been said, the Bill allows the Government the power to do this and explains how it would happen through a statutory instrument. However, the Bill does not specify when this might happen. The Minister has talked in the past about the mid-2020s. I would be grateful if she clarified how she defines mid-2020s, and whether she will take into account any other factors such as the overall performance of the economy and the nature of any continuing cost of living crisis as we approach that time.

Once again, I thank the hon. Member for Stoke-on-Trent North for his work on this matter, and I thank colleagues from across the House. I look forward to further answers from the Minister about the importance of consultation and bringing stakeholder groups with us on this important journey.

[Laura Trott]

I congratulate my hon. Friend the Member for Stoke-on-Trent North and, in absentia, the Under-Secretary of State for Transport, my hon. Friend the Member for North West Durham, on this excellent Bill, which will expand the benefits of automatic enrolment into workplace pensions to younger people and lower-paid workers.

I think we all agree that automatic enrolment has been a huge game changer in the workplace pension savings market over the past decade. Private sector workplace pension participation among eligible employees has increased by 44 percentage points since 2012, to 86% in 2021. As has been mentioned a couple of times, it has been especially transformative for women, low earners and young people, who historically have been poorly served by or excluded from workplace pensions. The proportion of women in the private sector participating in a workplace pension reached 87% in 2021, above that of men and more than double what it was in 2012.

Thanks to automatic enrolment, the overwhelming majority of eligible workers are now enrolled in a workplace pension, saving an asset for the future. Automatic enrolment is re-establishing a culture of retirement saving for a new generation. However, we know that there is more to do. The Government have made it clear that their ambition has always been to deliver on the 2017 automatic enrolment review measures. The review proposed two key measures: extending AE to young adults aged 18 to 21 by lowering the age criteria for enrolment; and removing the lower earnings limit, which would improve saving levels among low and moderate earners.

Since I took up my role as Minister for Pensions, I have been determined to make progress on AE expansion, and I am therefore delighted to confirm that the Government are supporting my hon. Friend’s Bill to do exactly that. The legislation will mean that younger workers and those who are in lower-paid employment—often because they work part time owing to personal circumstances, such as caring responsibilities—will be able to participate fully in automatic enrolment. For the first time, every worker will benefit from an employment contribution if they are enrolled or opt in; that is key to boosting the overall amounts being saved into a workplace pension. The powers in this Bill allow a Government-defined authority to deliver the changes set out in the 2017 review reforms, which Parliament has debated on numerous occasions, and I think there is broad agreement that it should become law.

On the questions from the hon. Member for Reading East, the Government are clear that implementing the expansion of automatic enrolment can only take place following consultation. That will be a consultation on the implementation approach and the timetable. He mentioned employer and employee engagement in particular. We absolutely need a full comms campaign, and—to the points raised by the hon. Member for Glasgow East—we could also look at what we can do for 16-year-olds. Even if we do not get quite where the hon. Member for Glasgow East wants us to with the age, I think there is more we can do to encourage them to opt in. We can discuss that as part of the consultation.

Trade unions were part of the original 2017 work, and I am very grateful to them for that. We have spoken to them frequently since, as we have to employer organisations. We will hold a series of roundtables now as we move towards the consultation, and we will involve them in the consultation. On timing, I would like to launch the consultation in the autumn, with this Bill going through, I hope, in the near future. I cannot say anything further than “mid-2020s”, I am afraid, but as soon as I am in a position to update the hon. Member for Reading East, I will of course do so.

Our objective is to maintain the broad political consensus for workplace pensions, which has been an important part of the success of the reforms since the beginning. The approach taken in the Bill to guarantee meaningful and detailed consultation to help implement the changes will help to build enduring support for this important work to boost the retirement aspirations of millions of our fellow citizens. Once again, I congratulate my hon. Friend the Member for Stoke-on-Trent North and I commend the Bill to the Committee.

Draft Occupational Pension Schemes (Administration, Investment, Charges and Governance) and Pensions Dashboards (Amendment) Regulations 2023

Laura Trott Excerpts

Wednesday 8th March 2023 General Committees

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

I beg to move,

That the Committee has considered the draft Occupational Pension Schemes (Administration, Investment, Charges and Governance) and Pensions Dashboards (Amendment) Regulations 2023.

It is a pleasure to serve with you as the Chair, Ms McVey. The draft regulations, which were laid before the House on 30 January, continue the Government’s commitment to ensure that millions of hard-working savers in occupational defined-contribution pension schemes get the best possible outcomes.

Subject to approval, the regulations will help DC pension schemes to make greater use of performance-based fees, which are payable to investment fund managers when they deliver high returns on their investments. The change will help to put schemes on a more even playing field with other institutional investors when accessing the same range of investment choices. The regulations also place new duties on the trustees of most occupational DC schemes to disclose additional information about their investments. These duties are designed to ensure that trustees of DC schemes reflect on their investment decisions as part of their ongoing fiduciary duty to create a diversified investment strategy that delivers for savers.

Good investments are central to a well run pension scheme, and decisions made by trustees have a significant impact on growing savers’ pots. Adding performance-based fees to the list of charges that fall outside the regulatory charge cap is intended to make it easier for schemes to access new investment opportunities, such as the infrastructure needed for the transition to net zero. The Government believe that professionally managed investments in those assets, known as illiquids, are well suited to pension savers, given their long-term investment horizons and potential to provide members with higher net returns.

It is estimated that less than 10% of DC investments are in illiquid assets, and the pension charges survey 2020 evidenced that two thirds of DC schemes had no direct investment in illiquid assets in their default arrangements. Research shows that just 7% of UK pension assets are invested in illiquids, compared with an average of 19% among their European and North American counterparts. The Australian DC market invests, on average, somewhere in the region of 20% of assets in illiquid investments; that includes investment in major UK assets such as Heathrow airport and the King’s Cross redevelopment project.

Feedback in recent consultations highlighted that the relationship between performance-based fees and the charge cap can be a barrier to private investment. Although the cap has successfully reduced costs, it has arguably led to more focus on costs rather than on the returns that different asset classes can provide. In January, I launched a consultation on proposals for a value for money framework, which aims to address that by shifting the focus from costs to ensuring that savers get value for money.

The Department for Work and Pensions has published statutory guidance to assist trustees with determining the criteria for specified performance-based fees to be considered outside the charge cap. The guidance is also clear that trustees should seek professional advice on their investments where performance-based fees are prevalent. To ensure transparency to members, any fees incurred are required to be disclosed and value to members is assessed in the scheme chair’s annual statement.

In addition, the draft regulations correct a drafting error at cohort 1(b) of the staging profile contained in part 1 of schedule 2 to the Pensions Dashboards Regulations 2022. The error relates to the staging deadline for

“master trust schemes that provide money purchase benefits only”.

Although we are not aware of any schemes being affected by the minor error, it is none the less appropriate to amend the 2022 regulations to resolve the issue as soon as practically possible.

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[Laura Trott]

I am grateful for the cross-party support for the auto-enrolment work we are taking forward. I look forward to participating in a similar Committee, with a similar cast list, next week.

In the interests of savers, we have ensured that fees are payable only where there is a return. The exact schedule of the return and its rates will be a discussion between trustees, scheme members and investment managers. We brought that into the regulations to ensure that the interests of savers are at the heart of everything we are trying to do.

Green energy infrastructure is exactly what we are trying to promote as part of the illiquids reform. To be clear, I do not think that will be the be-all and end-all of trying to get more investment in illiquids, but it will take us a large degree further forwards. Again, I am grateful for the cross-party support for moving in this direction. Not only is it important for the UK economy as a whole but, from my perspective most important, it is in the interests of pension savers.

The dashboard is a complex project, which had a long history before I came into this post. When I got the job, I asked for a look into how it was going and whether we thought we could meet the deadlines that were set out. I have some concerns about what I saw, and that is why a reset programme is in place at the moment.

Members were all absolutely right to say that we need to get this correct the first time round. I have committed to come back to the House to put new deadlines in place, and I would like to be able to do that before the summer recess—that is certainly what I am working towards. I will be able to confirm that nearer the time. It is important that we get this right, and get it right first time, so that we do not have to do this again. What the dashboard will do is incredibly important and will make a massive difference. We know that lots of people have lost their pots. It is vital that we increase adequacy for pension savers, and the regulations are a vital part of that.

I am pushing as hard as I can to ensure we keep to the deadlines as much as possible. We can move around the upload deadline, but I would like to keep as close as possible to when savers should be able to access this. I will come back to the House before summer recess to hopefully give more detail on that.

[Matt Rodda]

I appreciate the Minister’s candour. It is indeed vital that we get this right. It is an important piece of pensions infrastructure for the future and hugely important to both savers and the pensions industry. Will she be able to update the House on the Government’s spending on the project as well? There are also concerns that the Government may have overspent on some aspects of the project, and the wider project management and governance might need to be tweaked and improved.

[Laura Trott]

Yes, absolutely. When I come back with the regulations, I can provide an update on the spending. I reassure the hon. Gentleman that part of what the reset is doing is looking at the expenditure to ensure that it is in hand. I will have more to say about that when we come back.

The shadow Minister mentioned NI numbers, and that is one of the things we need to look at again. It is really important. I have had representations from industry about this, and I had a meeting on it this week. It should potentially be incorporated, and that is part of what we are looking at as part of the reset programme.

[George Eustice (Camborne and Redruth) (Con)]

I note from the explanatory memorandum that there was another set of regulations in 2021—the Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021—which introduced some initial easements. Why do the Government think those were insufficient? It is not that long ago, so it seems quite soon to make changes again. Was there an oversight in not making the full change last time, or is it the case that we now have enough evidence to know that those regulations did not work?

[Laura Trott]

We are definitely taking this a step further now. In my time as pensions Minister, I have tried to really focus on the value for money, rather than the charges, and that is a shift. We are a step further into our automatic enrolment journey. We now see that we have the coverage, which is really positive, but we need to improve adequacy. In my time as pensions Minister, I will really focus on that and getting returns to savers so they can build up their pot. It can make a massive difference to how effective someone’s ultimate retirement pot is in giving them the retirement they want, and this is another step in that direction. It has been a journey, and this is additional to what we have done previously.

[Matt Rodda]

I think the right hon. Member for Camborne and Redruth makes an excellent point in asking the Minister about the number of revisions of the programme. Has the Minister discussed with the Cabinet Office and other Departments across Whitehall how the programme benchmarks against what is known about good practice in managing complex IT programmes?

[Laura Trott]

The Cabinet Office has been involved in this. Every big project goes through a major project review process, so the Cabinet Office has been involved.

Automatic enrolment has been a huge success. It has led to nearly 11 million people, as of January 2023, joining a pension scheme, many for the first time. However, being enrolled in a pension scheme is not enough; pension schemes must continue to ensure they are delivering the maximum return for their savers, and illiquid investments will be a huge part of that. I commend the regulations to the Committee.

Question put and agreed to.

Oral Answers to Questions

Laura Trott Excerpts

Monday 6th March 2023 Commons Chamber

[Aaron Bell (Newcastle-under-Lyme) (Con)]

20. What steps his Department is taking to help pensioners with increases in living costs.

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

The Government are committed to helping pensioners with the increased costs of living. From April, pensioners will receive the largest ever cash increase in the state pension, and pension credit will also be uprated by 10.1%.

[Mr French]

I strongly welcome the additional support His Majesty’s Government are providing to all households across the country, especially pensioners, with the costs of living. In contrast, many pensioners in Bexley are facing additional concerns because of Labour’s outrageous ultra low emission zone tax raid on drivers in Greater London. Will my hon. Friend outline what further support is available to pensioners through the likes of pension credit and join me in Bexley to promote it so that more people sign up for this support?

[Laura Trott]

The ULEZ is an outrageous attack on pensioners who can least afford it, and I pay tribute to my hon. Friend for the amazing work he is doing to fight it and to help all pensioners in his constituency. I would be delighted to visit him and see that work for myself.

[Aaron Bell]

I thank the Minister for her answer. With 26,500 pensioners in the borough of Newcastle-under-Lyme, the 10.1% increase in the state pension and pension credit will be very welcome, but what other schemes are the Government putting in place to help people with the cost of living at this time?

[Laura Trott]

Pensioners will receive a further £300 cost of living payment this winter and all on pension credit will receive a further £900.

[Mr Speaker]

I call the Chair of the Select Committee.

[Sir Stephen Timms (East Ham) (Lab)]

The pensions dashboard will provide important support. It was due to be rolled out from August, but last week the Minister, very disappointingly, announced a delay and we do not now know when it will be implemented. Is it a delay of weeks or months, or even longer? Will the Minister give us a full, urgent update before the Easter recess?

[Laura Trott]

Work is ongoing and I will come back to the House at the earliest available opportunity.

[Mike Amesbury (Weaver Vale) (Lab)]

Since 2015, more than 219,000 1950s-born WASPI women—Women Against State Pension Inequality—have passed away. What more are Ministers doing to ensure that WASPI women get the pensions they deserve?

[Laura Trott]

The hon. Gentleman will know that the new state pension is very beneficial for women. We know that under automatic enrolment, more women than ever have got a private pension. On the specific matter he asked about, he will know that there is ongoing work by the ombudsman, and I cannot comment until that is completed.

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

8. What steps his Department is taking to reduce benefit fraud.

--- Later in debate ---

[Mr Philip Hollobone (Kettering) (Con)]

13. How many people have received the pensioner cost of living payment in (a) Kettering constituency, (b) north Northamptonshire and (c) England.

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

In 2021-22, almost 18,000 pensioners in Kettering, over 60,000 pensioners in north Northamptonshire and more than 9 million pensioners in England received a winter fuel payment. We estimate that similar numbers will have received the £300 pensioner cost of living payment in 2022-23.

[Mr Hollobone]

Will those 18,000 pensioners in receipt of the pensioner cost of living payment also receive additional support, such as the £400 energy bill discount, the £150 council tax rebate, the £150 disability cost of living payment and the £150 warm home discount? Will they also benefit from the energy price guarantee, saving a typical household £900 a year?

[Laura Trott]

My hon. Friend is right in this, as in so many things.

--- Later in debate ---

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

I am delighted that the Bill introduced by my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) passed Second Reading on Friday, and I look forward to its Committee next week. This excellent piece of legislation will bring 18 to 22-year-olds into automatic enrolment in full for the first time, and will ensure that people are saving from the first pound earned—two vital steps to ensure that people get the retirement that they want.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

T4. A constituent recently contacted me about the lack of reasonable adjustments in place at the local jobcentre for those with mental health or cognitive difficulties. How do Ministers plan to improve staff awareness and the reasonable adjustments offering?

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[Jonathan Gullis (Stoke-on-Trent North) (Con)]

I want to place on record my thanks to the Pensions Minister for her incredible hard work on automatic pension enrolment to get the age and the earnings lowered. Does she agree that it is a major concern for the people of Stoke-on-Trent North, Kidsgrove and Talke that 25% of people leave work without a workplace pension in place? That is why the Pensions (Extension of Automatic Enrolment) Bill is so important and I am grateful to have had support for it from colleagues across the House.

[Laura Trott]

My hon. Friend is absolutely right, and I congratulate him on his brilliant Bill, which will help women, the lowest paid and part-time workers in Stoke-on- Trent, Kidsgrove and Talke, and beyond.

[Mr Speaker]

Before proceedings on the urgent question begin, I want to make it clear that the question is about the proposed appointment of the second permanent secretary to the Department for Levelling Up, Housing and Communities as chief of staff to the Leader of the Opposition. It is not about the Committee of Privileges inquiry; let me stress that now. The House has charged the Committee with undertaking that inquiry and it must be allowed to complete it without interference. The Committee has been clear that the report issued on Friday does not contain its final conclusions, and that its work continues. It is for the Committee to decide how to weigh up the evidence before it, and any attempt to use this urgent question to prejudice proceedings will be out of order and will not be tolerated. Can I also say that although I was not surprised by the number of requests for this urgent question, I was surprised that they nearly all had the same wording and length of sentences? Whichever side of the House it comes from, I will not be moved by mass lobbying. I was more impressed by the individual ones that took the time to express why this was important than by those that were just a one-line sentence and signed by numerous Members of the House, so please do not try mass lobbying again.

Pensions Dashboard

Laura Trott Excerpts

Thursday 2nd March 2023 Written Statements

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

Pensions dashboards will allow individuals to view information about their pensions, including state pension, in one place online. This will put savers in control and help reconnect them with their lost pension pots—for example, where a pension scheme has lost contact with a member—transforming how consumers think and plan for their retirement.

The pensions dashboards programme, under the supervision of the Money and Pensions Service, is responsible for delivering the digital architecture which underpins pensions dashboards. The project is a significant undertaking, requiring the development of new technology that will permit individuals to find their pensions by searching thousands of pension schemes which collectively hold millions of pensions records. The first connection deadline is currently 31 August 2023. However, additional time is required to deliver the complex technical solution to enable the connection of pension providers and schemes, in accordance with the connection deadlines set out in the Pensions Dashboards Regulations 2022 and the Financial Conduct Authority’s corresponding pensions dashboard rules for pension providers. More time is needed to deliver this complex build, and for the pensions industry to help facilitate the successful connection of a wide range of different IT systems to the dashboards digital architecture.

Given these delays, I have initiated a reset of the pensions dashboards programme in which DWP will play a full role. The new Chair of the Programme Board will develop a new plan for delivery.

The framework set out in the regulations for pensions dashboards remains fit for purpose. DWP will legislate at the earliest opportunity to amend the timing of these obligations to provide clarity to schemes. We will ensure that the pensions industry has adequate time and the necessary technical information to prepare for any revised connection deadlines. I will provide a further update to the House before summer recess.

Pensions dashboards will be a vital tool to help savers plan for their retirement and the Government remain thoroughly committed to their delivery. I know this commitment is shared across the pensions industry. The huge consumer benefits of pensions dashboards are yet to be realised, but it is vital that the foundation upon which the dashboards ecosystem is built is safe, secure, and works for both the pensions industry users connecting to it and the end users of the service. While there are issues to work through, we must not lose sight of these benefits. It is essential that scheme preparation for pensions dashboards continues, and we will press ahead to deliver this technology.

[HCWS594]

Saving for Later Life

Laura Trott Excerpts

Tuesday 7th February 2023 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Hosie. I thank the Work and Pensions Committee for its report and the important role that it plays in scrutinising the work of the Department. I also extend my thanks to the Chair of the Select Committee, the right hon. Member for East Ham (Sir Stephen Timms), for securing this debate. We have had thoughtful contributions from everyone here.

The Committee’s report rightly raises key areas for reflection in our ongoing story of pension saving. The pensions landscape has undergone substantial change in recent years with the new state pension, increased pension saving through automatic enrolment, and increased choice through pensions freedoms, backed up with free, impartial guidance. We have laid a solid foundation to enable people to take responsibility and plan more effectively for the retirement that they want.

We have had numerous pension successes, with the most notable mentioned by everyone here today: the successful delivery of automatic enrolment, which has got 10.8 million more people into saving for retirement. However, the way that people save has undergone a significant shift in recent decades by shifting the retirement outcomes responsibility on to individuals rather than employers. That has thrown up policy challenges, which we have discussed today and were rightly considered in the Committee’s report.

I turn now to the future of automatic enrolment. Last year was the 10th anniversary of AE, which was introduced under a Conservative Government. AE facilitated a dramatic shift in workplace pension savings, with 86% of eligible employees in the private sector now participating in a workplace pension. The Government are committed to building on the success of AE by implementing the outcomes of the 2017 review, as endorsed by the Committee. I am pleased that there is a widespread consensus on that.

We will reduce the age at which people are auto-enrolled from 21 to 18, as well as removing the lower earnings limit. I heard what the hon. Member for Glasgow East (David Linden) said about lowering the age to 16—he tells a powerful story—and we will keep that under review. The 2017 recommendations will change the landscape for the better. They will enable people to save for longer and begin their savings journey from the first pound of their earnings. That will give younger people and people in part-time jobs, particularly women, the opportunity to be brought into the world of pension savings for the first time. I know the Committee is keen for me to set out a timeline. I, too, am keen to set out a timeline, and as soon as I have collective agreement I will come back to the Committee and the House to announce that.

In its recommendations the Committee also asked the Government to look at measures to close the gender pensions gap, which is something we can all agree on. My Department regularly monitors the contribution and participation rates by gender and regularly publishes the data in our workplace pension participation and savings trends publications. As discussed, I want to take that one step further and begin monitoring and reporting on the issue regularly. Although many factors create inequality in pension outcomes, most notably the gender pay gap, I have started working with key stakeholders and colleagues across Government to create a framework to understand the challenge and also to produce a definition of the gender pensions gap.

Agreeing a definition, as discussed by many Members today, is a crucial first step. That will allow us to agree a suitable metric to monitor progress and begin reporting on the issue. Again, I need collective agreement before I can say more, but I will come back to the Committee when I have a timeline for that.

[Sir Stephen Timms]

I welcome what the Minister has just said. Does she envisage annual reporting? Is that the sort of frequency she has in mind for monitoring the size of the gender pensions gap?

[Laura Trott]

I think annual reporting would make sense, but this is something that we need to look into further. I will come back to the right hon. Gentleman and his Committee.

The hon. Member for Glasgow East spoke about the gender pensions gap. We have seen progress in women’s participation, particularly in automatic enrolment, where they are now slightly ahead of men, but I agree that we need to see further work on the issue. I intend to drive that forward.

I turn to measures for the self-employed. When I started this role, I found it striking how low pension savings were among the self-employed. As the right hon. Member for East Ham is aware, the success of AE is down to the employer enrolling the member, which is clearly something that the self-employed do not have. Nest Insight has recently published the results of its trials on behavioural messaging and savings mechanisms on financial digital platforms and money management apps, to test the role of tech-based nudges and the value of flexible savings.

My intention is to make retirement savings easier for the self-employed. To do that, I want to better understand the touchpoints through which the self-employed engage with the Government, which will be the most effective at encouraging them to save into a pension pot. So far, the most obvious point is the tax system. We have begun work with the UK trade body for business software developers to help us better understand the software market and explore the opportunities, both current and new, to support self-employed people to save for their retirement. This includes scoping the feasibility of building and testing retirement savings solutions with incompatible software used by the self-employed to manage their money.

We are also keen to explore and test hybrid saving vehicles that combine accessible and illiquid savings, which could preserve some control for individuals in managing their short-term finances alongside saving for retirement. The next stage of trialling will also build on the evidence from the work with HMRC to test the capacity of nudges to pension guidance systems installed within the existing assessment system, with a view to encouraging the self-employed to start saving. The Government have no intention to make automatic deductions for the self-employed via the making tax digital system, and we agree with my hon. Friend the Member for Torbay (Kevin Foster) that although we welcome all ideas for boosting self-employed pension savings, we do not think that mixing them with the national insurance system is workable.

Many Members mentioned the gig economy, and we are continuing to work with the Pensions Regulator and BEIS on this complex issue. As the right hon. Member for East Ham outlined, the Department’s view is that many gig economy workers are already eligible for automatic enrolment, including those on fixed-term or zero-hours contracts and agency workers. I heard what he said about the guidance produced by BEIS, and I will feed that back to that Department.

[Sir Stephen Timms]

I am grateful to the Minister for giving way again. I hope she is right and the legal position is as she said, but delivering enforcement clearly is not happening at the moment. Does she recognise that the Pensions Regulator needs more powers in order to do the job that she is saying it should be doing already?

[Laura Trott]

I understand and respect the right hon. Gentleman’s concerns, and I will be having further meetings with the Pensions Regulator about this issue. I look forward to discussing the outcomes of those when I appear in front of his Committee.

[Nigel Mills]

Would the Minister consider setting a target for the number of self-employed people who are regularly saving into a pension scheme by a certain date? I think the rate is currently around 16%. If we could get that up to the 48% it was at 20 years ago, that would be a dramatic improvement and would show whether the efforts to encourage people to save are working. Does she accept that targets are the only way to really drive change?

[Laura Trott]

I think what we need to do is set out a plan. I accept that when we look at the various mechanisms that I have outlined today, we should outline the impact that we think they should have. I commit to go away and have a look at that.

My hon. Friend the Member for Torbay asked what the Department is doing to develop sectoral pension schemes and whether they can be made available for gig economy employers. Collective defined contribution schemes have the potential to transform the UK pensions landscape. He will know that we introduced legislation to allow them for single employers last year, and we are currently consulting on multi-employers. They are really exciting and could be a way forward in this space.

I am conscious of time; I will obviously write to hon. Members to cover anything I do not get to. The Work and Pensions Committee is right to raise concerns about ensuring pensions adequacy. The shift from the promise of retirement income through defined benefit to defined contribution places responsibility on the saver to ensure they have the outcome they want, but I do not think there is widespread understanding of that among the general public. Personal circumstances obviously dictate what individuals consider an adequate level for retirement savings. It is my role as the Pensions Minister to enable people to save adequately, as well as to ensure pension-maximising returns on their savings. The key to that is empowering savers to take control of their financial future. The introduction of simple annual statements, the midlife MOT and the pensions dashboard will make pensions more understandable to the saver and empower them to take control of their retirement outcomes.

My hon. Friend the Member for Amber Valley (Nigel Mills) was entirely right that the pensions dashboard will be crucial to that. We expect to see on the dashboard an understanding of what current savings will lead to as retirement income. What he said about comparing that to what others have was really interesting, and I will take that away.

[Gareth Davies]

There has been a lot of discussion today about the adequacy of the amount saved, but no discussion of what the investments are made in. The UK has one of the lowest levels of investment in illiquid assets—private equity, venture capital and infrastructure. What does the Minister think we need to do to encourage a greater diversity of investment so that our pensioners have greater returns?

[Laura Trott]

My hon. Friend makes a typically excellent point. He is right that we have a lower investment in illiquids than many of our European counterparts. We are at 7%, and they are at 15% or 16%. Last week, I announced a change in regulations, which I believe will come to the House in around March. It will mean that the performance charges can be passed on for the first time, which will hopefully take away a barrier to investment in those types of asset. It is of course for the pension trustees to make investments in the best interest of pension savers, but it is important that we do not put any barriers in the way of that. My hon. Friends the Members for Grantham and Stamford (Gareth Davies) and for Amber Valley are right that we need to focus on returns. If we are going to deal with adequacy, we need to ensure that investments in pension schemes return the maximum amount that they can for savers. Illiquids are part of the story in making that happen.

[Matt Rodda]

I was lucky to enjoy a very interesting visit to a solar farm with the Minister’s predecessor, the hon. Member for Hexham (Guy Opperman). One of the issues there—this relates to the point made by the hon. Member for Grantham and Stamford (Gareth Davies)—is that the obstacles to pension funds investing in illiquids are quite considerable. Does the Minister agree that there is an issue with work across Government on that matter? The delays in that case were to do with electricity connectivity to the site, and there may be other similar delays that are holding pension funds back from investing in illiquids in the UK.

[Laura Trott]

If there is a specific issue with that, I am of course happy to talk to the hon. Gentleman about that separately.

I want to give the right hon. Member for East Ham time at the end to sum up, so I will try to get through the rest of my speech quite quickly. On the generation X issue, we have an issue with the people who fell into the gap between the mid-1990s and 2010, when auto-enrolment was introduced. I praise the work of the Work and Pensions Committee, but I hope the right hon. Gentleman and the hon. Member for Reading East (Matt Rodda) would accept that not enough was done between 1997 and 2010. I cannot wave a magic wand and make that right, but I can raise awareness through pension dashboards and help boost returns through value for money, as discussed. In addition, the state pension has been boosted significantly under this Government.

I thank the Committee for all its work on the stronger nudge. It is important to recognise, as my hon. Friends the Members for Amber Valley and for North Norfolk (Duncan Baker), and the hon. Member for Glasgow East (David Linden), have done, that Pension Wise is consistently given very high feedback. About 47% of pots in 2021-22 were accessed for the first time with Pension Wise guidance. It is important to look at the amounts. If the pot is very small, say £100, it is potentially less valuable to have a Pension Wise appointment, than it would be for a pot of multiple thousands. I note that 73% of pots larger than £100,000 were accessed using Pension Wise guidance. It is important to look at that graduation.

[Matt Rodda]

I thank the Minister for giving way again. Does she agree that it is important for people with very modest pension pots to get access to high-quality advice? They are financially vulnerable in some cases. There have been instances of people approaching retirement taking their pension early, when that is not necessarily in their best long-term interests.

[Laura Trott]

It is absolutely the case that people who want or need guidance should get it. As I was coming to, we are seeing a positive impact with stronger nudge, which we should continue to evaluate. I am conscious of time, so I will wrap up. It is vital that we put pension savers at the heart of everything we do. I am grateful for the comprehensive and thoughtful discussion today, which I look forward to continuing in future.

Raising the State Pension Age to 68

Laura Trott Excerpts

Wednesday 1st February 2023 Commons Chamber

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

I thank my hon. Friend the Member for Amber Valley (Nigel Mills) for raising this important issue, and all the other Members who have contributed to the debate.

The Government remain committed to ensuring that older people can live with the dignity and respect they deserve, and I absolutely reaffirm that the state pension is and will remain the foundation of state support for older people. As has already been pointed out today, changes in the state pension age have been made in a series of Acts by successive Governments from 1995—when the state pension ages of men and women were equalised—onwards, following public consultations and extensive debates in both Houses.

The state pension age is currently 66, and will increase to 67 in 2026-28. As was mentioned by the hon. Member for Reading East (Matt Rodda), Labour legislated for it to increase to 68 in 2044-46, but, following the Cridland review of 2017, the current Government policy is to bring the increase to 68 forward to 2037-39. That is the baseline; we are required under law to review it every six years, and that is what is now being undertaken.

As we heard from my hon. Friend the Member for Amber Valley, the coalition Government of 2010 to 2015 were committed to the “core principle” that people should spend, on average,

“up to one third of their adult life drawing a State Pension.”

They were also committed to giving individuals at least 10 years’ notice of any changes affecting them. The first review of the state pension age following the Pensions Act 2014 was undertaken in 2017, informed by both the Government Actuary’s report and the independent report undertaken by John Cridland. As I have set out, Cridland recommended bringing forward the increase in the state pension age to 68 from 2044 to 2026, as set out in legislation, to 2037 to 2039.

[Sir Stephen Timms]

The two documents from 2017 to which the Minister referred were published four months before the Government’s announcement. Why have the Government not published the documents before their announcement this time around, and will she do so now?

[Laura Trott]

I had a suspicion that the right hon. Gentleman might bring that up. As he rightly pointed out, I have written to him today to explain the rationale behind this, but I will confirm that both documents will be published in full. I look forward to discussing them with his Committee in due course.

[Sir Stephen Timms]

I just want to know why they have not been published. What is the public interest in keeping these things hidden?

[Laura Trott]

As I have said, they will be published in full. On the timing of publication, there is work going on in Government to undertake the review. Once it is finished the documents will be published.

The 2017 review was based on a recommendation to aim for “up to 32%” as the average proportion of adult life spent in receipt of state pension. The review used 2014-based life expectancy data. The Government accepted those recommendations, subject to a further review, before tabling the requisite legislative amendments. The savings from bringing forward this rise to 68 have already been included in published fiscal forecasts.

On 14 December 2021, the Government launched the second periodic review of the state pension age, and work is now under way to complete it, as required by legislation. The review must be published by May 2023, in accordance with section 27 of the Pensions Act 2014. At the autumn statement, the Chancellor committed to concluding the review in early 2023.

As part of the second review, the Secretary of State is considering evidence from two independent reports. The first, a report from the Government Actuary, assesses the latest life expectancy projections from all regions of the UK. There has been a lot of talk about life expectancy today, so I want to put on record the fact that the most recent projections from the Office for National Statistics show a slower rate of improvement in life expectancy than those that informed the Pensions Act 2014 and the Pension Schemes Act 2017. Nevertheless, despite the slower improvement rate, ONS projections continue to show increasing life expectancy over time, and the number of people over state pension age is expected to continue to rise. I can also confirm for the hon. Member for North East Fife (Wendy Chamberlain) that the review will consider the latest recommendations, as well as a wide range of other evidence, before reaching any conclusions about the state pension age.

The second report that will be taken into account is an independent report by Baroness Neville-Rolfe, which will consider recent trends in life expectancy and the range of metrics that we could use when setting the state pension age, including the metrics mentioned by my hon. Friend the Member for Amber Valley. We will publish both documents in full. With respect to the question of whether Baroness Neville-Rolfe will appear before the Select Committee on Work and Pensions, that is a matter for the Committee and for her.

Alongside examining the implications of the latest life expectancy data, the Government review is assessing the costs of an ageing society and future state pension expenditure, as well as considering labour market changes and people’s ability and opportunities to work up to state pension age, bearing in mind recent trends in life expectancy.

My hon. Friend the Member for Amber Valley highlighted the position of those who cannot continue to work. The review will evaluate the impact of previous changes to the state pension age for all individuals, including those with long-term health conditions or disability. The Government continue to provide substantial support for people who are unable to work.

My hon. Friend the Member for Dover (Mrs Elphicke) made some important points about age discrimination. The Government’s business champion for older workers, Andy Briggs, spearheads the Government’s work to promote the benefits of older workers and multigenerational workforces across England, influencing them strategically and by offering practical advice. I will ensure that my hon. Friend’s points about discrimination are passed on to the Department for Business, Energy and Industrial Strategy.

The review will aim to keep the right balance between affordability, sustainability and fairness between generations. The review has not yet concluded—it is very important to emphasise that, given some of the comments today—and I will not pre-empt its outcome. The Government are committed to ensuring that older people have dignity and security in later life, regardless of where in the UK they are living. The Government introduced further targeted support, including cost of living payments of up to £900 for the most vulnerable households and an additional £1 billion, including Barnett impact, to enable the extension of the household support fund in England in the next financial year. Since 2010, the full yearly amount of the basic state pension has risen by over £2,300 in cash terms. That is £790 higher than if it had been uprated by prices, and £945 more than if it had been uprated by earnings. For the first time, from April 2023, the full rate of the new state pension is worth over £10,000 per year.

Automatic enrolment is having a transformational effect on private savings. Over 10.8 million people have been automatically enrolled in a workplace pension, helping to deliver about an additional £33 billion into pension savings in real terms in 2021 compared with 2012. The hon. Member for North East Fife mentioned the PHSO inquiry. She will know that that is ongoing, so it would be inappropriate for me to comment on it until it concludes.

The Government are committed to ensuring that the state pension continues to provide the foundation for people’s retirement income and are proud of the support they have given pensioners since 2010. I welcome today’s debate and thank my hon. Friend the Member for Amber Valley. As I have outlined, the Government take the setting of the state pension age very seriously. I look forward to being able to discuss this matter further—I am sure we will—when the Government finally publish their second review.

Automatic Enrolment Earnings Trigger and Qualifying Earnings Band Review 2023-24

Laura Trott Excerpts

Thursday 26th January 2023 Written Statements

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

Automatic enrolment into workplace pensions (AE) has been a great success to date, with over 10.8 million people having been automatically enrolled and more than 2.1 million employers meeting their duties. Since the introduction of AE in 2012, total annual pension saving by eligible employees has increased by £33 billion in real terms. The Government remain committed to building on this achievement and to transforming the retirement prospects for millions of workers.

The main focus of this year’s annual review of the AE earnings trigger and lower and upper earnings limits of the qualifying earnings band (the AE thresholds) has been to ensure the continued stability of the policy in the light of the impact of covid-19 and prevailing economic factors. We want to ensure that our approach continues to enable individuals, for whom it makes economic sense, to save towards their pensions while also ensuring affordability for employers and taxpayers. The review has concluded that all AE thresholds for 2023-24 will be maintained at their 2022-23 levels. This is consistent with our ambitions to build a stronger, more inclusive savings culture. The Government are considering what more can be done to enable people to have greater financial security in retirement.

Oral Answers to Questions

Laura Trott Excerpts

Monday 23rd January 2023 Commons Chamber

[David Johnston (Wantage) (Con)]

5. What steps his Department is taking to encourage eligible pensioners to apply for pension credit.

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

I hope hon. Members know that pension credit take-up is a priority for me and for the Government. Our £1.2 million communications campaign has been ongoing since April. We had a huge push before Christmas, ahead of the cost of living payments, and I am grateful to the many hon. Members who came to the drop-in session. In addition, I know that my hon. Friend does a huge amount of work in his constituency to boost take-up.

[David Johnston]

I was pleased to support my hon. Friend’s campaign to increase the uptake of pension credit in the run-up to Christmas. Will she update the House as to whether or not that has been a success and whether we have seen an increase in uptake?

[Laura Trott]

I am delighted to tell the House that we saw 7,200 claims in the week commencing 12 December, which is a 177% increase on the previous year. I thank all hon. Members who have worked hard in their constituencies to make this happen.

[Fleur Anderson (Putney) (Lab)]

According to research from the Law Centres Network’s recent pension credit report, nearly 60% of respondents said that they waited between three and six months for claims to be processed. A constituent of mine has been waiting six months and losing out during that time. Will the Minister address the Pension Service’s processing failure and take steps to bring the average time it takes to deal with claims for pension credit down to the target time of six weeks?

[Laura Trott]

I am concerned to hear of that individual case and if the hon. Lady would like to write to me, I will look into it. More broadly, we know that there have been delays; that is partly because the number of claims doubled in 2022. I am pleased to say that in February we expect claim waiting times to get back to normal, but I will, of course, report back to the House on how we are doing on that.

[Mr Speaker]

I call the shadow Minister.

[Matt Rodda (Reading East) (Lab)]

Nearly 1 million pensioners are not receiving pension credit to which they are entitled. To make matters worse, each of those 1 million pensioners is also missing out on a £900 payment from the Government to help them with heating, as the payment is available only to those on pension credit. Why have the Government been so ineffective at raising the take-up of pension credit? Will she also explain why on earth they linked help with heating to pension credit when they knew that 1 million pensioners would miss out as a result?

[Laura Trott]

I appreciate the hon. Gentleman’s interest in pension credit. I hope he will have heard my previous answer about all we are doing to boost take-up and indeed the success that we had before Christmas. I have spoken to him previously about the work we are doing to automate it and make greater use of data; this is an absolute priority for me and for this Government.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

6. If his Department will introduce support for care leavers purchasing their first home.

--- Later in debate ---

[Christine Jardine (Edinburgh West) (LD)]

8. Whether his Department plans to take steps to compensate women affected by changes in the state pension age.

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

State pension age equalisation has been the policy of successive Governments, and as the hon. Lady knows, the phasing in of state pension age increases was agreed to by her party in 2011 and 2014.

[Christine Jardine]

One of the very first issues raised with me by constituents when I was elected in 2017 was the inequality faced by women born in the 1950s, yet in the almost six years since then, this Government have done nothing to fix that. Given that the ombudsman has concluded that the Department for Work and Pensions was at fault in its administration, will the Government commit to fulfilling the ombudsman’s recommendations? In the meantime, will the Minister encourage the Scottish Government to use the powers they have to alleviate the suffering of such women?

[Laura Trott]

As the hon. Lady knows, the ombudsman’s investigation is ongoing, so unfortunately I cannot comment further—other than what is in the public domain—at this stage.

[Richard Graham (Gloucester) (Con)]

Of course, the other side of the coin, whether for females or males, is to not leave the workplace too soon. Will my hon. Friend therefore support my initiative to work with our excellent Gloucester Jobcentre Plus in holding an event specifically for the over-50s, both females and males, to see what opportunities our local employers can come forward with? Would one of the Ministers perhaps join me there to support that initiative?

[Laura Trott]

My hon. Friend does sterling work in his constituency. [Interruption.] The Minister for Employment, my hon. Friend the Member for Hexham (Guy Opperman), has just indicated that he would be delighted to join my hon. Friend in Gloucester.

--- Later in debate ---

[Cat Smith (Lancaster and Fleetwood) (Lab)]

20. What recent assessment he has made of the impact of inflation on pensioners.

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

The Government have provided a record amount of support for pensioners this winter. More than 8 million households have received a £300 cost of living payment in addition to other support. Both the state pension and pension credit will be uprated from April by 10.1% in line with inflation. That means that for the first time the full amount of the new state pension will be more than £10,000 per year.

[John Mc Nally]

I thank the Minister for her answer, but the Government are again showing their disregard for the vulnerable of our society by failing to increase state benefits adequately for those who need them most. All the while, the Government disproportionately reward the most affluent areas of this country with their so-called levelling-up grants. Their disregard for the common people, and pensioners in particular, is plain to see. Can the Minister confirm whether there are any plans to reduce the levels of poverty suffered by people that has been caused by her Government and her Department failing to support them adequately?

[Laura Trott]

May I remind the hon. Gentleman that under the Conservatives, absolute pensioner poverty has gone down and the state pension has gone up. This Government do deliver and will continue to deliver for pensioners across the United Kingdom.

[Cat Smith]

Around 1,800 pensioner households in Lancaster and Fleetwood are eligible for but do not claim pension credit. With the rising cost of living, many more pensioners are struggling, so will the Minister lend her support to my campaign to encourage my constituents to check on older friends and relatives to see whether they are eligible for pension credit, and to support them to apply if they are eligible?

[Laura Trott]

I pay tribute to the work that the hon. Lady is doing in her constituency to boost take-up of pension credit. I would love to work with her and all across the House on this important topic that we are all focused on.

[Nigel Mills (Amber Valley) (Con)]

The Minister will know that a lot of private pension schemes increase by inflation each year, but with inflation capped at 5%. Will she encourage the trustees of those schemes, where they have a healthy balance sheet, to increase their pensions by the full 10% this year to help out those pensioners who are struggling?

[Laura Trott]

My hon. Friend does a lot of important work in this area. What he says is sensible, and all pension funds need to be looking at what more they can do to support pensioners.

[Mr Speaker]

I call the Chair of the Select Committee.

--- Later in debate ---

[Jonathan Gullis (Stoke-on-Trent North) (Con)]

The people of Stoke-on-Trent North, Kidsgrove and Talke would like to ask when the Minister for Pensions is going to act on the recommendations of the 2017 automatic enrolment review to lower the age threshold for automatic enrolment from 22 to 18, and to remove the lower limit of the qualifying earnings band, so that contributions are paid from the first pound earned.

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

Automatic enrolment has been a huge success. I know that my hon. Friend does a huge amount of campaigning on this, and we remain committed to implementing the 2017 reforms in the mid-2020s.

[Esther McVey (Tatton) (Con)]

During the lockdowns, conditionality was, understandably, relaxed, but I fear that it has not returned to its pre-covid levels. Can the Secretary of State assure me that those pre-covid levels of conditionality, which are so vital to getting people back into work, will return as a matter of urgency?

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.

--- Later in debate ---

[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.

State Pension

Laura Trott Excerpts

Monday 12th December 2022 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir Robert. I thank all hon. Members for their valuable contributions, and the hon. Member for Battersea (Marsha De Cordova) for opening the debate.

The Government disagree with the petition’s proposed approach. It makes two suggestions: to increase the state pension and to lower the retirement age. I will first address the proposal to increase the state pension to £380 a week. That would equate pensioner income with the national living wage in 2022-23. However, the national living wage and the state pension are two very different provisions, with distinct purposes. A direct comparison cannot be drawn between the levels of the two. The national living wage aims to protect low-income workers and to provide an incentive to work, by ensuring that workers benefit from being employed. However, most pensioners have already left the labour market. Comparisons made in the e-petition between headline state pension amounts and the national living wage do not consider the full package of state measures available to support people in retirement or the fact that pensioners do not pay national insurance or into a pension scheme through automatic enrolment.

We need to be clear with the public that a state pension of £380 per week for every UK pensioner would be unaffordable. It would mean an annual cost of up to £251 billion if it was applied for 2022-23. That compares to the £110 billion we are currently forecast to spend on the state pension. In the UK we have a system of state and private pensions, which jointly provide an income for people in retirement. Most people will have a private or occupational pension on top of the state pension. In the 2021 financial year, the average net income of all pensioners was £361 per week, after housing costs. Crucially, the Government also provide around £67 billion each year in tax relief to boost private retirement savings. It is important to consider all aspects of Government support for retirement, rather than solely the state pension amount.

The Government are committed to ensuring that the state pension continues to provide the foundations for people’s retirement income, and we are proud of the assistance we have given pensioners since 2010. Since 2010, the full yearly amount of the basic state pension has risen by over £2,300 in cash terms. That is £720 more than if it had been uprated by prices, and £570 more than if it had been uprated by earnings.

As all hon. Members here today recognise, the Government have announced plans to apply the triple lock this year. It was announced, according to the normal parliamentary timetable, that from April the state pension will be over £3,000 per year higher in cash terms, which is double what it was in 2010, £790 more than if it had been uprated by prices, and £945 more than if it had been uprated by earnings.

Pension credit has come up a lot today, as it should. Pension credit provides vital additional financial support by topping up the state pension and other retirement incomes. The hon. Member for Battersea referred to the minimum income guarantee, which is what we put in place to ensure that pensioners do not fall below a certain base. It also acts as a gateway to other help, including assistance with rent, council tax, NHS prescriptions and heating bills. Of immediate importance, it is a gateway to the additional cost of living payments we are paying to those on qualifying means-tested benefits. There is more that we need to do to link that up with other information that the Government have. I will be pleased to work with Opposition Members, as well as the hon. Member for Glasgow East (David Linden), in order to try to make that happen.

We have taken direct action when pensioners have needed it, both through the pandemic and now with the rising cost of living. That includes the £650 cost of living payment, paid in two instalments, to help those on pension credit with the rising cost of living. As we all know—and I would like to emphasise this again—it is not too late for pensioners who are not already getting pension credit to qualify for the second instalment. That is because a claim for pension credit can be backdated for up to three months, provided the entitlement conditions are met throughout that time. To ensure that a successful backdated claim falls within the qualifying period for the second cost of living payment, we are urging people to claim pension credit as soon as possible, and by no later than 18 December.

[David Linden]

I appreciate that the Minister will not necessarily have the figures to hand, but would she be willing to write to me with information on how much the Government are spending on, for example, billboard campaigns and radio advertising to encourage pensioners to take part—in the same way they do with the levelling-up campaign?

[Laura Trott]

I would be more than happy to do so. I know that we spent £1.2 million over the summer. I have signed off a campaign for this winter, with more coming after Christmas, but I will write to the hon. Gentleman with the exact amounts.

That leads me nicely on to the hon. Member for Battersea, who referred to the take-up campaign. We have had a huge take-up campaign over the summer, and we have done one recently as well. We have further communication planned. It is something I am very focused on, and I would like to work with all hon. Members who are interested to ensure that it happens.

[Marsha De Cordova]

Is any work being done to measure the impact of the summer campaign on the take-up of pension credit? Going forward, I am very happy to work with the Minister on this.

[Laura Trott]

We know that claims for pension credit have tripled since the summer. On average, we used to get 2,000 claims a week—that has gone up to 6,000. The seven out of 10 figure that everybody uses comes from the family resources survey, which was last done in 2019-20, which has caused the difficulty with exact details on eligibility. Because of the pandemic, the survey has not been repeated, and there is an 18-month delay on the figures. It is very difficult to get up-to-date data on actual eligibility levels, which is something that we need to address over the longer term. In the interim, though, we have the numbers of people who are making the claims through the line, which, as I have said, have gone up threefold.

[Matt Rodda]

Could the Minister explore the issue of pensioners who do not have English as their first language and other hard-to-reach groups whom Government information often struggles to reach? There have been success stories in the past where particular approaches have worked with some minority groups. Perhaps the Minister could write to me and other colleagues present on that matter.

[Laura Trott]

I am very happy to do so. If there are any specific approaches the hon. Gentleman thinks the Government should be taking, I am very open to any ideas he may have and would happily take them forward.

The £650 cost of living payment is one of a number of measures in the Government’s £37 billion cost of living support package, which will ensure that the most vulnerable households will receive at least £1,200 this year. The package also includes a £400 reduction on energy bills for all domestic electricity customers over the coming months, plus a £150 council tax rebate for 85% of all UK households.

In addition to the steps we have taken to address the cost of living for pensioners, we have also made long-term reforms to the state pension and introduced automatic enrolment to boost private saving. In 2016, the Government introduced the new state pension, which forms a clear foundation for individuals’ private savings to provide the retirement they want. At the heart of its design, we sought to correct some historic unfairness in the previous system, in particular for women, self-employed people and lower-paid workers. More than 3 million women are set to receive an average of £550 more a year by 2030. State pension outcomes are also expected to equalise for men and women by the early 2040s—more than a decade earlier than they would have aligned under the old system.

I want to pause here to mention pensioner poverty, which was brought up by a number of hon. Members. I know it is something we all care deeply about. The Government are committed to action that helps to alleviate the levels of pensioner poverty. We are forecast to spend more than £134 billion on benefits for pensioners in 2022-23, which amounts to 5.4% of GDP and includes spending on the state pension that is forecast to be over £110 billion in 2022-23. Thankfully, there are 400,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10, but there is, of course, always more to do.

Automatic enrolment, as mentioned by the hon. Member for Cynon Valley (Beth Winter), is transforming private saving. More than 10.7 million people have been automatically enrolled into a workplace pension and more than 2 million employers have complied with their duties to date. This has helped to supply around an additional £33 billion into pensions savings in real terms in 2021 compared to 2012. I want to bring up the findings of the 2017 review of measures for automatic enrolment, as the hon. Member for Battersea mentioned her support for the lower earnings limit. The 2017 review of automatic enrolment set out the 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 by the mid-2020s. We have always been clear that changes would be made in a way and at a time that are affordable, balancing the needs of savers, employers and taxpayers, and the Government are absolutely still committed to that.

Together, the new state pension, automatic enrolment to workplace pensions and the safety net of pension credit will provide a robust system for pensioners for decades to come. A number of Members talked about international comparisons; OECD rankings show that, thanks to this Government’s reforms, the UK pensions systems will provide future workers with income replacement rates comparable to the OECD average and higher than countries such as Switzerland, Norway and Germany.

Let me turn to the second suggestion: decreasing the state pension age to 60. The Government have no plans to reverse changes to the state pension age. Previous reforms have focused on maintaining the right balance between affordability, the sustainability of the state pension and fairness between generations. Changes to state pension age were made through a series of Acts, and by successive Governments, from 1995 onwards. Those reforms followed public consultations and extensive debates in both Houses of Parliament. The state pension is funded through the national insurance and tax contributions of the current working-age population. Like increasing the state pension, reducing the state pension age to 60 would massively increase the tax burden on the current working-age population and carry significant cost.

[David Linden]

I wonder whether the Minister might put on record the point that she just confirmed. In the debate on Scottish independence, Unionist campaigners often talk about how the UK somehow furnishes pensions. However, as the Minister just pointed out, the state pension is funded by ongoing national insurance contributions each and every day, which rather bursts the myth that is made by the Better Together campaign in Scotland.

[Laura Trott]

State pension entitlement is obviously built up through contributions over a period of time, but equally there is a huge burden on the state, and that has to be met at a given point. As we have discussed, pension pots are funded widely by both the working-age population and people later in life.

The Government previously estimated that, had we not increased the state pension age for both men and women, the total additional cost to taxpayers—in 2018-19 prices—would have been around £215 billion for the period from 2010-11 to 2025-26. Lowering the state pension age is clearly unaffordable, and would place an ever-increasing and unfair burden on taxpayers. That would not be right, particularly as life expectancy continues to rise.

A number of hon. Members mentioned the Parliamentary and Health Service Ombudsman. The PHSO is undertaking a multi-stage process, and it has not given its final findings on the overall investigation. If the PHSO finds injustice, it will move on to stage 3 and consider any recommendations. The DWP will wait before taking any further steps.

The UK has an ageing population and workforce. The proportion of people aged 50 years and over compared to those aged 16 and over is projected to increase from 42% in 2010 to nearly 50% by 2035. That is nearly 29 million more people. Older workers will bring a wealth of skills and experience to the workplace, and they are vital to the economy. By working for longer, older people have the opportunity to improve their retirement income and benefit from the social engagement that employment brings. The hon. Member for Battersea was absolutely right that we need to support workers in later life, and BEIS is working on exactly that.

In conclusion, I welcome today’s debate and acknowledge the proposals set out in the e-petition. As I have mentioned, the Government provide wide-ranging measures to support people in retirement. Our recent announcement of plans to apply the triple lock this year demonstrates our commitment to providing a strong foundation of support for pensioners.