Lord Freud
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, I feel rather privileged to have been here this afternoon to hear a pantheon of some of the leading pension thinkers in the country concentrate on an issue. As a result it has been a very interesting debate. Clearly we all agree that this is a very important topic. We need to find a solution to the issue of small pots and I will make a case for why the Government believe that automatic transfer is the right solution and why we do not need any alternative provision.
We are clear that the pot-follows-member model, with small pension pots automatically moving and being combined with the individual’s current live workplace pension, will lead to increased consolidation of pension pots, better outcomes in retirement and better member engagement, as well as administrative savings for the industry. The pot-follows-member model builds on the essential foundation of automatic enrolment —the employer/employee relationship that is proving so successful in driving retirement saving, including among those who have never had a pension before. Employees identify with this relationship and with the idea of pots following them to their new employer.
My noble friend Lord German mentioned the research carried out by NOW: Pensions. It showed that 39% of individuals would like their pot to follow them automatically compared with 6% who wanted their pot sent to an aggregator scheme. For the purposes of that research, NOW: Pensions defined the aggregator model as a pot that is automatically moved to a central scheme that meets certain standards. This definition, although high level, is helpful because otherwise we have no clear sense of what an aggregator actually is. Indeed, these amendments do not help define what an aggregator is or how it would work. In fact, these amendments—which have been revised since we discussed them in Grand Committee—appear to be even less workable than before. For instance, they appear to give the decision about where to move the pot to the ceding scheme. By definition, the ceding scheme is the scheme with the least interest in the individual and their outcome in retirement because it is losing the pot.
This seems entirely counterintuitive when compared with the successful current account switching service—CASS—that helps customers move banks. This service puts the onus on the new bank to ensure that the switch happens, because it was recognised that the bank gaining the account will have more interest in making the move as smooth as possible than the old one. It is perhaps not unreasonable that when people move employers and join a new pension scheme they will expect the new scheme to do the work of transferring the pot for them, as happens when they switch their current account, but this would not be true under a push transfer model which these amendments would introduce.
I agree with my noble friend Lord Flight, who points out a real problem with the proposed aggregator model. It really is not clear who chooses where the pension is aggregated. There are other fundamental flaws, such as the lack of any provisions to ensure that the same scheme is used each time—someone could end up with pots in multiple aggregators, undermining the core aim of consolidation. Moreover, there is no definition of what an aggregator is, who could set one up and what the criteria for doing so would be. This lack of clarity will not help the industry in driving forward the development of the implementation model. Noble Lords may say that this detail can be worked out at a later date, but it is exactly this detail that needs to be resolved before any measure can be put on the statute book.
I have real concerns that the House is being asked to accept a theoretical concept, with all the details to be entirely devolved to secondary legislation, but I also have issues with the concept itself. The Government welcome the recent Office of Fair Trading report and accept its conclusions. The OFT was damning of the pensions market, saying that,
“the combination of a complex product and weaknesses in the buyer side of the market means that competition cannot be relied upon to drive value for money for all scheme members”.
We have heard the argument that the introduction of automatic transfers into aggregators will shake up the market and essentially skew it in favour of consumers by ensuring that all can save into large schemes that provide excellent value for money. However, I believe that the aggregator model would skew the market in favour of large providers and would reinforce the dominance of a few big players.
I believe the assumption is that aggregators would in some way be licensed and that schemes would have to meet certain standards to be able to act as aggregators. This would favour current large schemes that have the business model to enable them to accept large numbers of pots from individuals with employers they have previously had no contact with. Alternatively, if the large players in this market do not take the challenge, the Government would have to subsidise an aggregator scheme, which would raise state aid issues in Europe.
Aggregator schemes would enjoy a huge advantage over the rest of the market. They would be the default destination for almost all pots and, as the consumer would not be making an active choice, there would be no incentive to innovate. We have estimated that there will be three-quarters of a trillion pounds in lost pots by 2050, which is a lot of money—
Lord Hutton of Furness
I am very grateful to the Minister for giving way. Can he tell us what assumptions underpin the figure that he has just given to the House?
Lord Freud
Those figures are pretty detailed and I will write to the noble Lord with them if I do not get a detailed breakdown in the next minute or two—which I might. It is a huge amount of money, which the noble Lord will appreciate as well as anyone else, and it is a lot of money to have in a complacent and stagnant market. If, as the noble Baroness, Lady Drake, suggested, employers could choose the aggregators, and these aggregators were to become open to active members, this market dominance would be complete.
Baroness Drake
I do not think I said that the employer could choose the aggregator. I said that if the aggregator was able to have active members as well as aggregated members, that would enhance portability, particularly in some industries, which would reduce the need for transfers and the consequential costs. I do not think I actually said that the operating model would mean the employer chose the aggregator—I left that to the departmental assessment.
Lord Freud
Well, if they started moving to active members as well, whatever the route, it would give this group of organisations an enormous market position. I confirm to the noble Lord, Lord Hutton, that I will have to write to him.
It seems strange that, in response to the OFT’s conclusion that there is a lack of competition in the pensions market, the Opposition are calling for the creation of a market dominated by a few big master trusts. We need only to look at other industries, such as the energy market or banking sector, to see that dominance by a few powerful players can result in real concerns for consumers. If we were to press on regardless with enabling these large aggregators to come into being, we would need to be clear that there would be no turning back. It would be extremely difficult to reverse the process if we found that an aggregator model was not sustainable, and to tackle the vested interests if consumers were getting a poor deal.
We have heard—for example, from the noble Baroness, Lady Sherlock—that the Government are alone in supporting pot follows member. It is not true that few people support it but I agree that there is a powerful lobby supporting the aggregator model. It is hardly surprising that those who are shouting the loudest are those who are lobbying on behalf of master trusts that could come to dominate the market under an aggregator model.
The ABI itself supports pot follows member, as do many groups within it—Aviva, Fidelity, Friends Life, HSBC, Origo, Scottish Life and Scottish Widows—as well as non-members of the ABI such as Alexander Forbes, Altus, Buck, Foster Denovo, the Investment Management Association, JLT and the National Federation of Occupational Pensioners.
This Government’s starting point is the consumer—and it is the individual who wants to see their pension follow them to their new employer, as the research from NOW: Pensions, which we have already touched on, underlines. The ABI’s consumer research showed that 58% of individuals said that the pot should follow them automatically to the new job; 10% were in favour of a new central scheme, the aggregator; 15% said the pot should stay where it is and it is up to you to move it; and 17% said it should be visible with all other pension pots at a central place online. That is the sentiment among consumers.
I appreciate that some consumer groups have concerns. I say to them that we are listening to those concerns and that low charges and scheme quality are top of our agenda, not just for automatic transfers but for all schemes. We want these groups to work with us and the industry now to deliver pot follows member in the simplest, safest way for consumers.
The noble Baronesses, Lady Drake and Lady Sherlock, raised concerns about consumer detriment. I remind the House about the work the Government are doing to ensure that all schemes are good schemes. Uniformity is not good for consumers, but only if all aggregators had identical charges and standards would we completely remove the risk of an individual moving to a worse scheme. The noble Lord, Lord Turner, made the point about the interconnectedness of these issues. The Minister for Pensions has confirmed that he remains “strongly minded”—I think that is fairly parliamentary language —to introduce a charge cap. My noble friend asked about the DWP response to the OFT and the consultation on charges. That response is coming soon and we will be discussing that later this afternoon.
Baroness Hollis of Heigham (Lab)
Can the Minister tell us what the department has in mind as an appropriate charge cap?
Lord Freud
Various figures have been talked about, but I do not think I can pre-empt the answer to that question, which will be issued very soon.
In contrast to legislating radically to change the market, we see pot follows member as a way of building on the existing automatic enrolment structure quickly to reach a point where transferring pots is an integral part of the industry. Pot follows member does not prevent industry from innovating in future. Indeed, as individuals become more engaged in pension saving, they may want to be more involved in deciding where their pension pot is and in choosing a preferred scheme.
In response to the point made by the noble Lord, Lord Hutton, there is even scope to introduce an aggregator in future if there is demand for it, so we are not closing any doors by pursuing this route now.
Lord Flight
I think that the Minister just said it, but can he confirm what I view as a crucial point, which is that the individual is still free to choose where he might wish to place his consolidated pension savings and that we are talking only about the default option? Therefore, as people become more informed, some may choose not to consolidate in their employer’s scheme.
Lord Freud
I can confirm my noble friend’s question—or I can give the answer to confirm it.
At this point in time, when we are just starting out with automatic enrolment and successfully getting people saving for the first time, we need to make it as easy as possible for them to build their pension. We need to use inertia in the right way. That means moving a small pension pot to the current live pot where the individual can see it growing, rather than sending it off to a scheme with which the individual has no engagement and in which they have no interest.
Now is not the time to break the link between the individual and his or her employer. Automatic enrolment is going well, with 3 million individuals newly saving and less than 10% opting out. It is reinforcing the workplace pension as a key element of the benefit package that employers offer their staff after decades of decline in occupational pensions.
I have heard the argument that these amendments are designed to give the Government another option, which appears on the surface to be a generous approach. Providing the Government with greater flexibility is one thing, but listening to the debate today, I suspect that few on the Opposition Benches want the Government to have the flexibility to chose anything but the aggregator model.
In practice, the amendments will leave us in limbo and bring back uncertainty at a time when industry is beginning to get behind, and position itself to deliver, pot follows member. As my honourable friend in the other place announced on Monday, officials are currently exploring the feasibility of using HMRC’s PAYE data and system to help us to deliver a secure, efficient and straightforward pot-matching element to implement the process.
In response to the assertion of the noble Baroness, Lady Sherlock, that pot follows member would be hard to set up, we have recently had some very positive workshops with industry representatives and HMRC. The model is already inspiring some exciting and innovative approaches to transferring money with an employee as they move jobs. The cost of the transfer was specifically mentioned by the noble Baroness, Lady Drake. It will be the same for an aggregator as for pot follows member. Altus has challenged the claim that pension transfers are too hard and too expensive by stating that transfers for ISAs and funds cost £1 or less, and that this can be replicated for pension transfers.
After two years of discussion and debate on this issue, even if we cannot agree with the Opposition on the right delivery model, I hope that we can agree that we need to take a positive step forward. On the “pause to reflect” point made by the noble Lord, Lord Hutton, I do not believe that we are rushing into this measure. We first consulted more than two years ago and followed up with two policy papers. We also held extensive discussions with industry and consumer groups within that period. I urge the noble Lords to withdraw their amendment to allow us to work together, and work with industry, to make automatic transfers a reality.
Baroness Sherlock
My Lords, I thank all noble Lords who have contributed to what has been another classic House of Lords debate. I particularly thank my co-signatories to this amendment, my noble friends Lord Hutton and Lady Drake. The Minister referred at the outset to a pantheon of pensions expertise, and indeed it has been. The noble Lord, Lord Bates, joked in Grand Committee that the Pensions Commission was almost quorate since two of its three members were gathered there. I say to the Minister, as I said then to the noble Lord, Lord Bates, that if I were sitting where he was and this pantheon was sitting opposite me and telling me that I was wrong, I would be pausing, just as my noble friend Lord Hutton suggested.
A number of arguments have been made today. The Minister says that the Government have been discussing this for two years but this House has not. When we discussed it in Grand Committee, I do not recall hearing a single supportive speech for pot follows member. I am glad that the researchers of the noble Lord, Lord Stoneham, moved him from his position then to the position that he articulated so clearly today, but I do not think that anyone in this House has heard those arguments made until today. I am glad that we have heard them, and very glad that the Minister has been doing work with the industry to get it ready to deliver what will be this Act. However, it is still a Bill; it is not an Act and this House has every right to make its own decisions. Whatever decisions Parliament makes, I have no doubt that at that point the Minister and his colleagues will go out there to deliver.
What arguments have we heard today against our enabling amendment? First, we have heard that it is not clear what the choice is. Well, that is the point: the amendment says to the Government, “Go back and think again. We will work with you if necessary, but think again”. It is said that there will be a delay. Yes, there will be a delay, but the wrong thing would be to rush ahead and make a decision because you want it now, if the consequences would be very serious because it is the wrong decision. This is too serious to rush into. A lot of criticisms have been made so far. For example, the Minister says that the way in which this amendment is constructed would leave the choice of the aggregator with the outgoing employer. If the Minister looks again at Amendment 23J, he will find in fact that it says that regulations may do one of two things. There is a big “or” between the two; it is either push or pull. Everything about these amendments is constructed to say that we recognise there are choices to be made but think that the Government have not given enough thought to what should be the right way forward for consumers.
We have heard nothing to counter the arguments made across the Benches here. What about all those who leave employment? What about the self-employed, who make up the fastest-growing sector: where do their pension pots go? What happens to the pension pot of the seasonal cricketer mentioned by the noble Lord, Lord Turnbull? I am sorry, but I live in Durham and our cricketers are mostly in the England teams, so I cannot advise him there. However, I can tell him that that person would really struggle under pot follows member. What about all those people in mini-jobs who will find themselves in a position of not having a single employer? Much has been said about the relationship between employer and employee, but the truth is that every model of pension scheme struggles with employee engagement. As the noble Lord, Lord Flight, pointed out, the whole point of this is that it addresses only the position of those who make no active choice themselves, yet those are the people to whom the state owes the greatest responsibility. These are the people whose funds we are moving, without their explicit consent, from one employer to another.
Much has been made of the fact that we want all the schemes to be of the best quality, but let’s get real—the OFT has already said that the market is not working. The noble Lord, Lord Turner, has described the challenges they found: people are learning when they come to retire that between 25% and 40% of their pension pot has gone in charges. If the Government really are committed to tackling charges I would invite the Minister to intervene again and to give a proper answer to his noble friend, the noble Lord, Lord German, about when the Government will cap pension charges. If he will not tell us now, I have a very simple solution for him—he can vote for our amendment in the next group and cap the charges tomorrow.
Lord Freud
I really do need to take up the invitation. I think that we have made it clear that we will deal with this within this Parliament, which I think means by a date some time in May. I think that that is fairly clear.
Baroness Sherlock
It is interesting, my Lords. What has happened—without wishing to pre-empt the next debate—is that the Opposition pushed the Government to do this but the Government said that it was not necessary. The Minister then went out to consultation and suddenly seemed to get cold feet, and he put it on hold for a year. There is a very small window but I am delighted to hear it. But the Minister can vote for our amendment and need not wait. The Government are again being invited to do it, and my noble friend Lord Hutton has very powerfully made the case for why they should.
I have been careful to try not to put my personal preference in the proposals, but I would be happy to join the Minister in a proper cross-party, consensual discussion about the way forward. The Labour Party introduced auto-enrolment and I pay tribute to the Government for taking it forward. We all share a common objective: to get as many people as possible saving for retirement. They can do so only if they have trust and confidence in the pensions market and in the schemes they are investing in. If they do not have that confidence they will not save and we will all be the poorer. The best way to do it is to ensure that there are schemes in which people can have confidence. I believe this is the right way forward and I wish to test the opinion of the House.
Lord Freud
“( ) But the regulations may not provide for an exception for employers of a particular size.”
Lord Freud
My Lords, it was Parliament’s original intention that everyone should be automatically enrolled, subject only to age and earnings criteria. This has the advantage of a very simple approach. It made it clear that all employers, whatever their size or the nature of their business, would be covered. It relied on individuals to opt out if pension saving was not right for them.
We can now see that automatic enrolment into a workplace pension is working and we are seeing reassuringly low opt-out rates. However, we also recognise that there are some very limited situations in which automatic enrolment simply does not make sense for the jobholder. Opt-out is effective but it does not take away the need for employers and pension schemes to go through the enrolment processes and for the individual then to opt out, even where it clearly makes no sense for that individual to be put into pension saving. This is a waste of employers’ time and frustrating for individuals.
We continue to receive evidence from stakeholders of instances in which it makes no sense automatically to enrol individuals. Our consultation of March 2013, Technical Changes to Automatic Enrolment, sought views on how the automatic enrolment process could be improved and invited views on whether there were certain categories of workers whom it might make sense to exclude from automatic enrolment. The responses strengthened our view that in certain circumstances automatic enrolment is not appropriate and that, for these individuals, the most suitable option is to give their employer the option not to enrol them in the first place.
On 12 February, we published a response to the consultation on how the power to make exceptions to the automatic enrolment duty might be used and identified four situations which merit further consideration: first, people who could face tax charges if they make further pension savings; secondly, people serving a period of notice; thirdly, people about to leave their employment on retirement; and, fourthly, people who have already left their pension scheme following contractual enrolment.
As noble Lords know, Clause 38 gives us the scope to provide broad exceptions to the employer duty, but we have made it clear on more than one occasion that we will not use it to exclude large numbers of employers based solely on size or the nature of the employer’s business. We do, however, acknowledge that the power could, in theory, be used to exclude small and medium-sized employers and we understand the concerns raised by the Opposition on this point. We are content to limit the power so that it cannot be used in this way. Amendment 24 therefore specifies that regulations cannot exclude an employer from their automatic enrolment duties on the basis of size. I beg to move.
Lord Freud
Let me just deal with the first specific question raised by the noble Lord, on the issue of size and what we mean by that. Clearly, the Opposition were primarily concerned when we went through this in Grand Committee that a Government—this one or any other—should not be able to exclude small and medium-sized employers from their duties on automatic enrolment. The primary definition of size here is to prohibit an exception based on the number of workers, which is one central understanding of the size criteria, but it could also mean, as the noble Lord indicated, turnover, profit or VAT registration. We do not have the need to define it further in the Bill because whatever measure of size was used would be prohibited by the government amendment.
On whether there is a better way in which to limit the power, which is the thrust of the noble Lord’s question, we have identified these four circumstances. We are not confident that they are the only circumstances; more may come up. We have considered in legal terms that this is the best way to be able to respond in making sure that when other circumstances arise we can use this power. We believe that it is prudent to leave this Government and future Governments the flexibility to consider other criteria. However, I can say on the record that we have no particular situations in mind here; we are simply leaving ourselves the option to respond to new or changing circumstances.
On the four situations that have been identified, we will develop proposals for workable exceptions, and they may have to work in different ways in different circumstances. As the noble Lord said, we will consult with final proposals and draft regulations in due course, although of course regulations are contingent on Royal Assent.
I hope that with that set of explanations the noble Lord will greet with enthusiasm and delight this amendment in response to his concerns.
Lord Freud
Lord Freud
My Lords, in moving Amendment 25, I shall speak also to government Amendments 26, 30, 31 and 26A.
As my honourable friend the Minister for Pensions announced in a Written Statement in the other place at the start of this week, the Government remain firmly committed to ensuring that consumers receive value for money from their pension savings and to seeing this through during the life of this Parliament—a point that I made earlier. Our response to the consultation on charges, and further proposals on quality and transparency in defined contribution workplace pension schemes, will be published soon. We are taking action to ensure that those who are defaulted into pension saving through automatic enrolment can be confident that their money is invested in well governed and transparently managed schemes.
Amendment 26A demonstrates our firm belief that transparency of costs and charges is fundamental for good scheme governance and to enabling comparison between schemes. On this we are in complete agreement with my noble friend Lord Lawson and the thrust of the amendments which he has tabled on this subject. I take this opportunity to thank him for the helpful discussions we have had on this issue thus far and I look forward to engaging with him further on the detail of these provisions. We have always been clear that disclosure of transaction costs should be improved; that is why we sought views on the best way of doing this in our consultation following on from the Office of Fair Trading study of the defined contribution workplace pension market. In the consultation, we suggested using our existing permissive powers in the Pension Schemes Act 1993 to require improved disclosure of information. However, I am pleased that our Amendment 26A goes further than this and, for the avoidance of any doubt about our intentions, requires the Secretary of State to make regulations requiring greater transparency around the transaction costs incurred by work-based defined contribution schemes. It would also allow the Secretary of State to disapply that duty in limited circumstances in which he is content that there is an alternative regulatory regime in place for specified schemes. The intention is for this to provide for a situation in which the Financial Conduct Authority has made its own rules for disclosure of information about transaction costs in relation to contract-based schemes, in which case the Secretary of State may need to make regulations only for trust-based schemes which are regulated by the Pensions Regulator.
This amendment would provide for the types of transaction costs covered to be specified in regulations. Here again, we are in agreement with my noble friend Lord Lawson that the full range of transaction costs that may be borne by scheme members should be disclosed. I would like to reassure the House that we do have the powers to ensure that this happens, but the Government need the flexibility to require disclosure of types of costs that might become apparent over time. Government Amendment 26A has therefore been drafted specifically to provide this flexibility and to future-proof the legislation. We will formally consult before making the regulations but, at this stage, and in the first instance we would expect them to include costs such as stamp duty and bid-offer spreads. We would be more than happy to involve my noble friend Lord Lawson, and other noble Lords with an interest in this matter, in the discussion of what the regulations will cover.
The amendments of my noble friend Lord Lawson also provide for making information about transaction costs publicly available on a common basis. This is, again, a suggestion with which we fully agree and thank my noble friend for highlighting this issue. Making such information publicly available will surely support consumers, employers and others in making comparisons and deciding between schemes. Public comparison of charges is something on which we sought views in the recent charges consultation and will publish further proposals soon in the forthcoming government response. Our existing disclosure powers would enable us to regulate for information on transaction costs to be made public, but given the importance of this issue, I am happy to consider between now and Third Reading whether any changes can be made to primary legislation to reinforce and make explicit this commitment to provide for information to be made publicly available.
To touch briefly on the scope of the disclosure requirements, the duty that is created by this amendment applies to money purchase, or defined contribution, pension schemes only. This is narrower than the provisions of the existing power, which will remain, under which regulations can apply to all occupational and personal pension schemes. The reason why the Government are focusing the new duty on the defined contribution market in their package of measures on charges, scheme quality and transparency is that in defined contribution it is members who bear the risk of their investment, and members whose pension savings may be diminished by high or unclear charges. It is also the defined contribution market that the Office of Fair Trading has investigated and recommended action to reform.
Members of defined benefit pension schemes already enjoy a level of protection from such risks. However, the power to require greater transparency of scheme costs and charges could cover all schemes, and we will continue to consider whether we should use that power to require transparency in defined benefit as well as defined contribution schemes.
The new duties to disclose transaction costs will form one part of a wider package of measures to set minimum quality standards for all workplace defined contribution schemes, including taking action to control charges in default funds used for automatic enrolment.
We have, as I said, consulted on these measures and I expect the Minister for Pensions to respond formally soon. The Minister has been clear that we are committed to seeing this policy through during the life of this Parliament which, under the Fixed-term Parliaments Act, means before May 2015. For that reason, I see no need for Amendment 29. We have the power in Schedule 18 to restrict charges. I can reassure noble Lords that we would not have placed this power in the Bill if we did not intend to use it as soon as practicable. With regard to the precise timing of when these regulations shall be laid, I refer noble Lords to the Minister’s strong steer and I fully expect more detail to be available when the formal response is published.
Lord Freud
My Lords, this is a very substantial area and we are making very substantial moves. We are looking for transparency on all charges. We are looking to ensure that that is published. We are looking to make announcements on our capping plans soon. I enjoyed more than anything else the noble Lord, Lord Turner, teetering on the edge of giving investment advice, although I suspect he is privileged to do so here.
I will quickly recap some of the language in our Amendment 26A. It says “some or all” rather than “all” for drafting reasons. We need to set out, as far as we can, in regulations what costs should be included but our intention is to include all transaction costs, which incorporates not just the transaction costs that my noble friend Lord Lawson made the point about but all costs, because we have permissive powers in the Pension Schemes Act 1993 to get all costs, not just transaction costs.
As I said, before Third Reading we will look at whether to include the defined benefit schemes and we will come back to that.
Lord Browne of Ladyton
I am very grateful to the Minister for giving way. On this very point about the transparency of transaction costs, my understanding of the Government’s amendment is that they have given themselves the power to exempt from transparency where there are existing FCA rules in relation to transparency. The existing FCA rules on transparency exempt transaction costs, so how will the transaction costs in such cases be dealt with?
Lord Freud
I am putting it on the record that we will aim to capture all costs, including all transaction costs. As noble Lords know only too well, when you look into this legislation there are bits and pieces scattered all over the place, but I can summarise it in that very simple sentence. It is very similar to the point about proposed new subsection (6): it is just a drafting requirement that we do not overlay things and that we have a clear line. It is not to do with the EU.
I am sorry that the noble Lord, Lord Browne, was concerned about my overconcentration on my noble friend Lord Lawson. I did not mean to do any airbrushing but I did mean to concentrate on the fact that I believe that my noble friend Lord Lawson’s amendments in Grand Committee and at this stage have been especially helpful in pushing this whole debate forward.
Turning to Amendment 29 in the name of the noble Lord, Lord Browne, I would actually be very disappointed in the noble Lord if he was to decide to test the opinion of the House. I have been absolutely clear about the timing of government action. I do not understand why he would want to start stipulating in primary legislation the timing of when regulations would be brought, given the language that I am using to talk about what we are doing.
Even though I may not satisfy the noble Baroness, Lady Drake, with the clarity of my expression, I will go through what we are doing. Consultations have sought views on policy implementation. Employers made clear that they wanted sufficient notice of any new scheme requirements. The Minister remains strongly minded to cap charges and, as former Ministers know and can tell the noble Baroness, Lady Drake, significant policy decisions must go through due process, but the Government response is coming soon.
I hope that I have made it utterly, utterly clear what will happen. That is the reason that I do not want the noble Lord, Lord Browne, to test the opinion of the House, because that seems purely political, given what I have just said, and that is not in the spirit—
Baroness Hollis of Heigham
I thank to the Minister for giving way. Do the words of the Pensions Minister in the other place, “strongly minded”, have the full, unambiguous support of HMRC?
Lord Freud
Yes. I do not want to go into the Lobby on this. I do not think we should; that is not the way that we have conducted the Bill, which we have done by information, support and debating the issues. We should not reduce ourselves to having a debate when we are saying exactly the same thing across the House. That is my request of the noble Lord.
Lord Freud
Lord Freud
“Disclosure of information about transaction costs to members etc
In section 113 of the Pension Schemes Act 1993 (disclosure of information about schemes to members etc), after subsection (4) insert—“(5) The Secretary of State must make regulations under this section requiring information about some or all of the transaction costs of work-based money purchase schemes to be given to some or all of the persons mentioned in subsection (2).
(6) But subsection (5) does not apply in relation to a scheme of a particular description if—
(a) as a result of another enactment, requirements are imposed relating to the disclosure of information about transaction costs of schemes of that description, and(b) in the opinion of the Secretary of State, those requirements provide an adequate alternative to what is required by subsection (5).(7) In this section—
“work-based money purchase scheme” means a money purchase scheme that is—
(a) an occupational pension scheme,(b) a personal pension scheme where direct payment arrangements (within the meaning of section 111A) exist in respect of one or more members of the scheme who are workers, or(c) a personal pension scheme which is or has been registered under section 2 of the Welfare Reform and Pensions Act 1999 (stakeholder pension schemes);“worker” means a person—
(a) who is a worker for the purposes of Part 1 of the Pensions Act 2008, or(b) to whom a provision of Part 1 of that Act applies as if the person were a worker because of a provision of Chapter 8 of that Part;but for the purposes of paragraph (b), ignore section 92 of that Act.””
Lord Freud
Lord Browne of Ladyton
My Lords, Amendment 31A, which stands in my name and in the name of my noble friend Lady Sherlock, proposes the addition of a simple clause to the Bill. The clause would require the provision of an independent annuity brokerage service or the offer of such a service to all members pending retirement. The clause goes on in later provisions to set out how best practice should be defined and maintained in the brokerage service offered to the retiring member or to which he or she is directed. It calls for an independent brokerage service to assist people to annuitise at the point of retirement. This is hardly a radical proposal. It fits the description of best practice and is what many employers with DC pension schemes already offer.
The ABI code of practice says that providers should tell people decumulating that they can shop around and transfer the funds to another provider and advise them to seek advice before so doing. However, that is not enough. As Dan Hyde wrote in an article in the Telegraph in December:
“The process starts with a ‘wake-up’ pack sent to savers months before their named retirement age, in which pages of often unintelligible information, packaged in unhelpful ways, baffle even the well-informed”.
Of course, people can purchase their own independent financial advice but the majority do not retain or use independent financial advisers or accountants. A one-off appointment would be expensive—equivalent to a week’s take-home pay for workers on average wage—even if they knew where to go.
Undoubtedly, employers’ firms can negotiate a better rate but the scandal of annuities is well known and widespread. In one sense, how often do we need to be told? Only last week, in yet another report, the Financial Conduct Authority confirmed again that the annuities market is not working and that it is disorderly. The number of adjectives that can now be found to describe financial services markets is interesting. The Financial Conduct Authority has ordered a further review but we need immediate action. Each week, more than 1,000 people are buying annuities and those transactions are irreversible. Once bought, you cannot change your mind and getting the right one can be the equivalent of an extra £1,500 in savings. With respect to the FCA, it hardly needs another competition market study to find out why consumers do not shop around. The problem is that the pension companies which sell them are simply not doing enough to explain to people that they can shop around.
When this amendment was debated in Grand Committee the Minister used the same diversionary tactic as Steve Webb, the Pensions Minister, did in the Commons and as the Minister who responded to the Westminster Hall debate on annuities did too. Depressingly, I fear that the Minister can be expected to repeat that argument today. It is all very well to suggest that those reaching retirement age can do many other things—other than plan for an annuity—but it is insufficient, in the face of the continued mass selling of inappropriate annuities, to say to people that they have many different opportunities and need lots of different advice beyond annuities. The fact is that the variety in the annuities offered and the deals available is considerable. Those people—1,000 of them each week—need independent support and advice right now.
The need for independent advice at this point may be obvious but the reasons for it are worth repeating. First, on the complexity of choosing the right annuity option, annuities are a complex product and decumulation is a complex process. Comparison between the providers is difficult. Before we debated this in Committee, I saw a quote for an annuity pot of only £30,000. In one short e-mail the following terms were contained: single life, level escalation, anticipated bonus rates and required smooth return rates—every single one of which was without an explanation. It offered four choices to a “conventional lifetime quotation” annuity described as income-choice annuity or with-profit annuity, and out of nine total options the rates varied between £700 and £1,400, with most around the £1,200 mark. It is no wonder, with such complexity, that no one should exercise a choice without advice; and so it is no wonder that over 50% of people just go with their existing provider.
The first comparator website has been launched. This is a step in the right direction. However, the independent pensions consultant, Ros Altmann, who gave evidence to the Commons committee, did not think that it was simple. She said that it was disappointing and not easy to use. Annuities are complex products with multi-options and perhaps there never can be a simple comparison site.
At this point I intend to repeat questions that I posed to the Minister in Grand Committee. They demand answers from the Government, to explain their resistance to this amendment, and they were not answered when we were in Committee.
First, does the Minister accept that annuities are complex and that people need independent advice? Does he accept that purchasing that advice is beyond the grasp of most people, particularly those with no knowledge of investments? If he does so accept, how does he suggest that those who need this advice now can be guaranteed to get it?
Secondly, the variety in the kinds of annuities offered and the deals that people can get is bewildering. The NAPF and others have said that annuitising with the pension scheme provider pays on average 20% less than shopping around. In effect, inertia, or being overwhelmed by the complexity of making a choice, is exploited by pension providers. Insurers are making excessive profits from purchasers failing to shop around. On “Newsnight”, Ros Altmann said that if you had an annuity with the worst performers you would have to live until you were 100 to get back just what you had paid in.
Inertia, as I say, is a powerful force that results in excess profits for insurers. They penalise you, not reward you, for loyalty. Estimates suggest that £1 billion of retirement income is being lost to savers every year just by the force of inertia. The report of the FCA Consumer Panel—the FSCP—was published in December and made many points. I have drawn on these points before in debating this issue and I do so again because they are so powerful.
First, the tactics used by insurance companies and brokers were “tantamount to burglary” of old-age pensioners. The report said that it is nearly impossible for pensioners to know whether they are getting a good deal. Pensioners are hit by excessive profits and exploitative pricing. Insurance companies are making 20 times more profits on annuities than any other financial product. As for poor returns, on a pot of £100,000 Clerical Medical offers £4,664 per annum while Reliance Mutual offers £6,111. Over their expected lifetime people would be just over £36,000 worse off if they made the wrong choice.
As for opaque charges, brokers are incentivised to sell particular products; in some cases they make 6%, or £12,000, on a pot of £200,000. There are sharp practices with brokers shopping around, resulting in a referral fee from each. Many also have exploitative pricing; that is, they have sold a product for a fit person when they are not fit, or an adviser neglects to tell people of other products such as income drawdown because the profit margins are slimmer. Companies can make £35,000 profit over 25 years on a pot of £100,000. I have to say that that was the finding of the report, although the figure was denied by the ABI. The ABI has not, however, said what profit is made.
As your Lordships will be aware, the Pensions Minister, Steve Webb, commissioned a review of annuities from the FCA which reported last week. To no one’s surprise, the FCA concluded that the annuities market was not working. It was “disorderly”, according to the FCA’s chief executive, and the watchdog’s report suggested that four out of five consumers could get a higher income by just shopping around. To many people’s frustration and disappointment, after this extensive review the FCA said that it would launch a further review, a competition market study, to find out what we all already know. Consumers will now have to wait many more months for this second-stage investigation before regulatory action of some description can be started. In the face of 1,000 people a week still making this irreversible decision, that is not good enough.
People who have gone without, who have diligently saved throughout their working lives, are being systematically “burgled”, to use the FSCP’s word, by a profit-hungry industry and its associated sales force. Annuities are building up to be the next scandal and mis-selling crisis. The sector will not sort itself out. We need to strengthen the buyer side, and Parliament needs to take action on behalf of savers. If we do not sort out annuities we will undermine auto-enrolment. This proposed new clause, if accepted, will provide people with guaranteed access—or at least the offer of it—to an independent annuity brokerage service at the point of decision. It will strengthen the buyer side. Annuities are one area of pension policy where the buyer deals directly with the provider and makes choices. With independent support these choices will be better informed choices. Access to an independent service will protect savers from making poor choices that could reduce their income by up to 20%. This small step may help divert us away from the next financial mis-selling scandal—or at least protect Parliament from the criticism that it failed to act when presented with the evidence of the need to do so.
I think that the information I have laid before your Lordships makes the case for the need to provide an independent annuity brokerage service, or at least the offer of such a service, to pension scheme members who are approaching retirement to help the member make wise choices. There are already 400,000 people annuitising each year, and this number will escalate from 2020 onwards when the impact of auto-enrolment starts to kick in. I again urge the Minister to accept the need for it now and in the future. I beg to move.
Lord Freud
My Lords, this amendment is identical to the one that we debated in Committee. I will confirm the government position for the record, as well as respond to the new points made.
The Financial Conduct Authority has confirmed the Government’s concerns that the way the annuity market operates may be disadvantaging consumers. This may be—in the language of the noble Lord, Lord Browne of Ladyton—“tantamount to burglary”, and it clearly continues to be of great concern to the Government. We recognise that it is critical that individuals make the right decision about their retirement income, because some of these decisions are ultimately irreversible. However, the solution offered by this amendment is not the answer to a problem which I acknowledge.
What are the Government doing? First, we are supporting the consumer to make a decision that is right for them. We are leading on and supporting a wide range of initiatives aimed at driving up standards among providers, providing guidance to trustees and educating members. The ABI code of practice is designed to tackle the worst of the inertia selling practices—for example, removing the application form from the pack. It talks about the three decisions that the consumer needs to make: whether they should retire now; what type of income is appropriate—it may be annuities, but it may not be—and telling the consumer how to get a better deal on the open market.
Secondly, the new Pensions Regulator guidance sets out expectations for what trustees should provide for their members. Thirdly, the Money Advice Service is developing its services for people approaching retirement age. Fourthly, the National Association of Pension Funds has published a guide to trustees and employees about the benefits to scheme members of support at retirement and the range of options available to them on the open market.
Those are just some examples of the initiatives that have recently been delivered under this Government. In addition, the noble Lord mentioned the Financial Conduct Authority’s thematic review of annuities and the fact that it has launched a market study on the annuity market. He did not seem to welcome that wholeheartedly but we are very pleased that the FCA has decided to take this step; it is this Government’s changes to the FCA’s objectives that have enabled it do so. HMT and the DWP are currently reviewing the broad range of available research and statistics on at-retirement options, but with emerging findings from the FCA we will have the evidence to inform any further action required.
On the issue of independent advice, individuals already have access to free and independent information and guidance via the Money Advice Service and the Pensions Advisory Service. I need to pay tribute to the noble Baroness, Lady Hollis, who is a board member of the latter organisation.
I come to the core of why this amendment is not the right response. Indeed, it is rather funny that the noble Lord was quoting examples of sharp practice, with brokers shopping around and not informing their clients of the income drawdown. This is the point about, “While there is a problem, this is not the solution”. Making annuity brokers the first port of call for all would simply create a captive market for one part of the industry without effectively adding to consumer protections. Annuity brokers, unless they are also FCA-regulated advisers, are not required to ensure that the product is suitable for the consumer. I must be absolutely clear on this point: this measure would not provide the member with regulated advice. The Financial Services Consumer Panel recently published a report identifying a number of risks for the consumer in going down the non-advised route.
This measure would therefore push people down a brokerage route and could lead to the next mis-selling crisis, not help to avoid it, as the noble Lord suggested. The amendment as it stands would mean that people would be been pushed into receiving non-regulated advice and might end up locked into unsuitable products without recourse to the protections that regulated advice affords. Furthermore, the measure focuses almost exclusively on annuities; it makes reference to information on alternative at-retirement products, but it has to be recognised that annuity brokers are not necessarily impartial—they make their money if a member buys an annuity. Indeed, that is a point that the noble Lord made in his own speech.
This Government’s position is that it is essential for people to understand all their options, not just annuities, and to work with relevant bodies to ensure that appropriate help is available. Clearly, our work is not complete. However, we do not believe that this amendment, pushing people down a single product path, is the right solution. We are committed to ensuring that consumers have the information that they need to make good choices and that the annuities market works effectively for consumers. It is ongoing work but we will continue to challenge the industry if there is no significant improvement. The Financial Conduct Authority’s review findings will be vital in that assessment.
While I welcome the debate, which is clearly an important one, this amendment would not deliver what the Opposition actually want. It risks making things worse for the consumer. It would legislate to make annuities the foremost option for deriving a retirement income when this may actually not be the right route for many, especially those with small pots. It would put the responsibility for providing information to members solely in the hands of annuity brokers, leaving many without the protections afforded by regulated advice. As I said, if that is not a potential mis-selling scandal, I would like to know what is.
I would like the noble Lord not to test the opinion of the House on this because he should not, and he does not actually want to push it.
Lord Browne of Ladyton
My Lords, I am grateful to the Minister. He failed when he played that card last time; he should have learnt.
The use of the word “burglary”, which is not one that comes easily to a Scottish lawyer because we in Scotland have no such concept, is not mine but is from the FSCP’s report. The report which looked into this described such behaviour as tantamount to burglary. I deploy the word because it is evocative but also because it describes quite well what is going on.
I am grateful to the Minister for setting out the Government’s ambition in this regard, which is far-reaching, complicated and, I understand, ambitious, but the scandal continues. While we discuss the complexity of all this and indeed add further complexities to it, 1,000 people a week, most probably through inertia, are buying annuities, many of which are tantamount to burglary of their savings. We are suggesting with this amendment that we must do what we can to try to stem that process, while all the other complex things that need to be done—I accept the detail and the challenge of that—can be done. The scale of the scandal demands a deep and wide perspective of responses; I accept that. However, there is something we can do about this. Given that these people are going down this path without independent advice, the purpose of the amendment is to get them access to that information and that service so that they can make choices.
I now come, in just a few sentences, to the core issue that the Minister used as his principal push-back against this amendment. I suspect that he did not read all of the amendment carefully enough. Had he got as far as proposed new subsection (3), he would have seen that all this advice has to be best practice, defined by the Pensions Regulator after public consultation—a form of regulation—and that that process has to be subject to a continuing review. It was intended, in the flexible sort of way in which I have got used to this Government working, to provide a process of engagement, discussion and consultation that allowed best practice to develop in this area and to improve the performance of those people who provide independent annuity brokerage services. This is a model that I have learnt, in my time in your Lordships’ House, from the conduct of the coalition Government. I commend it to the Minister, I commend it to the House and I wish to test the House’s support for it.
Lord Freud
“( ) A person credited with a length of notional pensionable service because of pension credit rights is to be treated for the purposes of this paragraph as having pensionable service of that length (in addition to any pensionable service that the person is treated as having under sub-paragraph (8)).”
Lord Freud
My Lords, in moving government Amendment 32 I will speak also to government Amendments 33 to 41.
As noble Lords will be aware, we are proposing to change the compensation cap in the Pension Protection Fund to recognise long service in a scheme. The standard cap shall be increased by 3% for each year of pensionable service over 20 years. Schedule 20 contains most of the provisions needed to implement the long-service cap. However, some technical amendments are needed to reflect particular situations and I shall address them in groups.
Amendments 32 to 34 deal with the identification of pensionable service for certain individuals—obviously an important issue, given that the long-service cap kicks in once a person has 21 years of service. For example, a person who has been a member of a scheme for 10 years has that amount of pensionable service. However, they might also have transferred into that scheme a pension built up in a previous employment. Where the PPF has deemed service, say 15 years, in respect of this transfer, these amendments will permit the two periods to be added together so that the individual will be treated as if they had 25 years’ service in total.
Amendments 37 and 38 deal with a scheme in the process of assessment when the legislation commences, where the scheme applies for the decision not to transfer the scheme to the PPF to be reconsidered. While the application is being considered, the current cap will apply for the purposes of assessing the scheme’s protected liabilities.
Amendments 35, 36, 39 and 40 are needed to clarify the scope of the legislation dealing with those who are in receipt of compensation when the long-service cap becomes law, for people sharing compensation and with benefits entitlements arising at different times. Amendment 41 is a minor correction needed to the current legislation.
In Grand Committee, the Government tabled a new clause, now Clause 50, dealing with the compensation cap. As my noble friend Lord Bates explained at the time, the clause was needed to ensure that the legislation reflects the policy and current practice when applying the compensation cap separately to compensation based on benefits deriving from different sources which are payable on the same day—for example, where an individual has entitlement to a pension but also a pension credit deriving from a divorce settlement. Clause 50 has a retrospective effect so as to cover payments already made. However, it applies only to cases where the two benefits were payable on the same date.
Amendment 41 is needed to provide retrospective cover in cases where compensation derived from different sources is payable on different dates. It modifies the relevant provision of the Pensions Act 2004 to allow us to bring forward regulations that have a retrospective effect, so that such payments already made in accordance with the accepted policy and practice are covered.
Getting the long-service cap into legislation has been a long process, requiring amendments at various stages of the Bill, and I thank noble Lords for their patience. I beg to move.
Lord Browne of Ladyton
My Lords, on behalf of these Benches, I welcome these amendments. In doing so, I take the opportunity to ask for an assurance that entitlement to a pension credit secured by a spouse as part of a divorce settlement will not be weakened by any of these amendments. If the Minister is unable to respond immediately to that, I will be content for him to write in due course.
Lord Freud
“(9A) Where a person becomes entitled to relevant compensation in respect of benefits under two or more connected occupational pension schemes at the same time, this paragraph applies in relation to the relevant compensation in respect of each benefit as if—
(a) a reference to the length of the person’s pensionable service were a reference to the total length of the person’s pensionable service under all of the schemes (ignoring any period of overlap), and(b) sub-paragraphs (8) and (9) apply for the purposes of working out the length of the person’s pensionable service in respect of each scheme as if a reference to the admissible rules were to the admissible rules of that scheme.”
Lord Freud
“(8) Regulations under paragraph 26(9) of Schedule 7 to the Pensions Act 2004 (modifications for cases where compensation becomes payable on different occasions) made in consequence of this section may be made with retrospective effect.”
Baroness Sherlock
My Lords, Amendment 41A in my name and that of my noble friend Lord Browne calls for the Secretary of State to review and report to Parliament on the impact of the Bill on specific groups. I recognise that the department undertakes research, but this amendment picks up on something slightly different: the impact on specific groups about which concern has been expressed during the passage of the Bill through Parliament, or where provision is in effect a work in progress.
This is a major Bill that will have a significant impact on the majority of our citizens—indeed, on pretty much all of those who have yet to reach state pension age. If the Bill proves to be even half as good as the 1948 Act, it may be in place for a long time. The amendment calls for reviews of provisions made in the Bill to check that we have got it right and to enable us to make any necessary adjustments for those who are unfairly disadvantaged, or where provisions seem not to be working as we might have hoped.
Paragraph (a) of the proposed new clause calls for a review of existing and future beneficiaries of the state pension scheme. When there are winners and losers we should review that to make sure that we have got the balance right. We should also include within the review an assessment of whether transitional arrangements are adequate and working.
Paragraph (b) relates to the operation of private pension schemes. Given the debates this evening, I hardly need detain the House further by sharing our views on whether the private pensions system is working well; I think that we all know that there are challenges. Some of the changes that are needed, such as to the annuity market, may well need primary legislation, but many will not. The review will take the opportunity to look at whether the various changes, legislative or not, which the Government have made and promised, are working effectively.
Paragraph (c) relates to the concerns expressed by many women born between 6 April 1951 and April 1953. I am sure that all noble Lords have had many communications from women in that category who are affected. In Grand Committee, the Minister was pressed by various noble Lords, including my noble friend Lady Hollis and the noble Lord, Lord Paddick, to be clear as to whether or not this cohort of women would be better or worse off under the new system. The assumption of the Government is that they will be better off, but I never got a satisfactory response to the question I posed in Committee as to why the Government think that women born between 1951 and 1953 are better off under existing arrangements, and yet also claim that women will mostly be better off under the new pension arrangements. I still do not quite understand how both can be right. The amendment asks the Government to report to Parliament on the actual impact of these provisions, rather than simply relying on analysis of what the impact is likely to be.
Paragraph (d) focuses on the need for a review of the knowledge of young people of the system. Young people currently face a challenging work environment with high youth unemployment, the potential for high debts if they go to university and astonishingly high rents. We may safely conclude that, for most of them, concern about living in poverty in their dotage is not chief among their concerns, so a call to start contributing to an auto-enrolled pension may not ring loud. Yet that is of course the very best time to address those concerns.
Better financial education is needed, coupled with information about the importance of providing in future for their retirement. We owe it to young people to encourage them to consider making pension provision as soon as they are able to do so. This amendment seeks to keep track of the Government’s strategy to ensure that our young people are armed with a greater understanding of the need to proactively engage with pension decisions.
This is a far-reaching Bill and we should therefore make sure that we have got it right. Paragraph (e) of the proposed new clause recognises that the Select Committee, and indeed the Government, may identify other matters that should be reviewed and reported to Parliament.
The principle underpinning the Bill is that people should have a state pension that is simple to understand and that they should take responsibility for saving for their old age through work-based pensions. We also need to have it acknowledged today that the state owes a duty of care to the large numbers coming under auto-enrolment. In light of the broad consensus that industry must improve its standards and reduce its charges, its progress towards that should be monitored by Parliament. The amendment sets out a method of parliamentary scrutiny to ensure that we have got it right and that the Pensions Bill will last us, as the Minister aspires, for decades to come. As there will be an election before enactment—and, of course, a change of Government, one hopes—the amendment is prudent. I recommend it to the House. I beg to move.
Lord Freud
My Lords, I do not think that anyone in the House can be under any misapprehension but that the Government value extremely highly the role of evidence, analysis, consultation and evaluation in policy-making. Our approach to designing this once-in-a-generation package of pension reforms has been heavily informed by a robust and wide-ranging evidence base. However, looking at the text of the amendment and its timing, I must make clear that the provisions on the new state pension, and many of the other provisions in the Bill, will simply not have been commenced by spring next year—the time used in this amendment. Therefore, all that would come out of such an amendment would be a rehash of the information that has already been provided to Parliament: there would be nothing to add. We have no particular objection to this amendment in terms of sentiment, but its timing is just not appropriate.
I will not spend a lot of time going through all the issues, which we have gone through in huge detail over the past weeks and months. However, I will touch on how we will monitor the impacts in the future and what the plans are. It is clearly imperative, as the noble Baroness said, that a set of reforms of this nature is accompanied by a strategic approach to monitoring at sensible intervals. I am not saying anything that noble Lords will disagree with when I state that pensions is a very long-term policy area, and that the impact of many measures will not be felt fully for decades.
As a society we are asking people to do more to think ahead and plan for their retirement. As a Government it is our duty to do the same in looking at the retirement outcomes of the population as a whole. Our retirement outcomes framework, published in September 2013, provides an overview of projected future retirement incomes, looking at the impacts of government pension reforms as a whole and across state and private systems.
Baroness Hollis of Heigham
Perhaps the noble Lord could write to me if he does not have the answer at his fingertips. I respect his concern for evidence and policy base, but, as he will know, that depends on longitudinal statistics and their consistency. There has been quite a lot of dispute about threats to discontinue some of the longitudinal statistics which show households below average income, recipients of benefits, what is happening with pension credit, and so on. My noble friend Lady Lister, who is not here at the moment, has been concerned about that. Can the noble Lord write to us and tell us what series of statistics will be kept from the implementation of this Act, so that we can track, for example, the groups that my noble friend has mentioned—the 1951 to 1953 group—and what is happening to people who will lose their derived rights as married women, widows, divorcees and so on? What assurances can he give us about how we can be sure that we are in a position, if we need to be, to adjust policy because we have the information to hand?
Lord Freud
That is clearly a relevant and central set of issues, and it is quite technical. As the noble Baroness invited me to write, I will make sure that we produce a comprehensive look at exactly what these series are and what they will contain. I will be happy to arrange that.
Baroness Hollis of Heigham
Also, what if any future surveys does the Minister expect the Government now to engage in as a result of this Act coming into force?
Lord Freud
I am happy to make sure that we itemise those in a way that will help noble Lords keep an eye on what they need to monitor as we go along.
We will update the modelling as evidence becomes available on the impact on work and saving of automatic enrolment, the single-tier state pension, and state pension age changes. As noble Lords will know, the department conducts a six-monthly tracking study of attitudes and behaviours in relation to pensions, later life and automatic enrolment. A similar exercise will start after Royal Assent, to monitor awareness and understanding of the reforms.
We are committed to the principle of post-legislative scrutiny, but such scrutiny must have scope to provide insights beyond the impact assessment and consultation practices to which we are already committed. I know that the noble Baroness accepts the point on timing, but the timing of this amendment would not add materially to the powers of the Work and Pensions Select Committee. Indeed, there is an awkwardness about the timing, because it straddles the next election. However, we look forward to continuing to develop pensions strategy with that committee’s input.
I know that the noble Lord does not appreciate my asking for the other side to withdraw this amendment and not press it to a vote, but that is the position I am in. Maybe there is more warmth to my request than there has been this evening.
Baroness Sherlock
My Lords, that would not be hard. I thank the Minister for that response, and I thank my noble friend Lady Hollis for pressing him for more detail on how this will be monitored in future.
I am very grateful to the Minister for setting out the Government’s commitment to post-legislative scrutiny and for setting out his commitment to making sure that the impacts of the Bill are analysed carefully, and with the use of evidence. I will press him to do two things. The first is to give particular attention to the two groups mentioned by my noble friend Lady Hollis. The women born from 1951 to 1953 feel very strongly that they have missed out on something important with this. If the Government turn out to be right, and they are better off under the current system, it is important not just that the Government find that out but that they share that knowledge as widely as possible. If that is the case, those women will be reassured—and, if not, they have a right to know anyway. Can the Minister also look at the position of those who would have been affected by, for example, the removal of derived rights, and whether the transitional protections are working well for them?
Secondly, as well as all the work that has been done to an appropriate timescale, will the Minister give some thought to how that might best be shared with the House? The proceedings have been very good as the Bill has moved through Parliament. A lot of issues have been raised—in this House in particular—and a lot of expertise has been brought to bear on this, and we have all learnt a lot from the process. Having done that, rather than have the results of it disappear into the department, marvellous as it is, it would be helpful if they could come back out so that we can all learn from that, both for the Bill and for future legislation. However, I will take his assent to those marvellous suggestions as read, and on the basis of that—and because he asked so nicely—I beg leave to withdraw this amendment.