Pension Schemes Bill [Lords]

Debate between Neil Gray and Guy Opperman

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Monday 16th November 2020 Commons Chamber

[Neil Gray (Airdrie and Shotts) (SNP)]

It is a pleasure to follow my hon. Friend the Member for Gordon (Richard Thomson), whose helpful, informed and persuasive speech matched the characteristics he brought to the Committee stage in support of the work we did there—I thank him for his efforts.

As I said on Second Reading, we broadly support the Bill, but it could do with some sprucing up in certain areas. Sadly, we did not get far in Committee; in fact, the Bill took a step backwards from some of the good work that had been done in the other place, particularly on a lead-in for commercial dashboards and dashboard financial transactions—that was taken away—as well as on the measures providing reassurances to those involved in open DB schemes.

I will turn to those shortly, but first let me deal with new clause 1, which stands in the name of the Chair of the Select Committee, the right hon. Member for East Ham (Stephen Timms), and has been signed by Members on both sides of the House, including me. I concur with what he said in setting out the reasons why this is so important. I also agree with much of what was said by the hon. Member for Amber Valley (Nigel Mills) in supporting the new clause. I am particularly concerned about this area, not least following my work on the Financial Guidance and Claims Act 2018, which brought MaPS into existence. We held serious concerns that the guidance elements that were supposed to be partnering pension freedoms were not strong enough then and we still hold those now.

I touched on this in Committee, but it is worth repeating for colleagues who may be havering on which way to vote that the Government’s opposition to this new clause appears to be based on the work the Financial Conduct Authority is doing and the idea of providing a stronger nudge—we have heard about that—to people getting guidance as they near retirement age. Unfortunately, I am yet to be convinced that any of that does what new clause 1 would do, which would see the DWP writing to pension scheme members, or their survivors five years prior to their reaching the age of eligibility with a scheduled time and date for a pensions guidance appointment. Ministers would then have to write annually to that person until that appointment was taken up, or their desire to opt out was confirmed. That is far more robust than what exists at present and seems to deliver a much stronger possibility of someone taking the appointment than the stronger nudge trials have evidenced. It is worth repeating the point made by the right hon. Member for East Ham in his strong speech, which cited the MaPS stronger nudge trials and showed that there was only a very small increase in the number of people who went on to have that Pension Wise appointment. The DWP claimed that it significantly increased the uptake of Pension Wise guidance but, as I said in Committee, that is pure spin. The outcome of the stronger nudge trials—

[Guy Opperman]

I just want to correct one point, which I was going to try to deal with in more detail later. The claim has repeatedly been made that this is “spin”, but if one studies the stronger nudge behavioural trial, one sees that more than a quarter of the people who contacted their provider in the trial had already received pension advice or guidance in the last year and therefore were excluded from the sample. So this cannot be seen in the context of a simple figure that keeps being restated, as the hon. Gentleman has just done.

[Neil Gray]

The fact remains, and the Minister has not rebuked the point I made in Committee, that the stronger nudge managed to get successful appointments to move from 3% to 11% of cases. That is not a significant improvement. A stronger nudge is just not going to be enough, which is why we argued during the passage of the 2018 Act for an opt-out guidance system. Now we are back to looking at this again. We still support that approach and new clause 1 would deliver it.

Colleagues, including my hon. Friends the Members for Perth and North Perthshire (Pete Wishart), for Kilmarnock and Loudoun (Alan Brown) and for Gordon and the hon. Member for North East Fife (Wendy Chamberlain), have passionately and eruditely explained why we have given such a focus to the so-called plumbers’ pension amendments in new clauses 4 and 5. I look forward to hearing the Minister’s response to the compelling arguments that my colleagues have made, but he should be reminded that these new clauses were arrived at with the support of campaigners who feel that the current legislation does not protect them. After hearing what my hon. Friends have said about the impact this has had over many years on their constituents—and presumably after some lobbying from across the House, because at least 30 colleagues have constituents who are impacted, including, according to the campaigners, the hon. Members for Berwickshire, Roxburgh and Selkirk (John Lamont) and for Moray (Douglas Ross) and the Secretary of State for Scotland—the Minister must surely be eager to do something.

Before the Minister speaks, I wish to point him to the correspondence he should have received last week from the director of Plumbing Employers Action Group Ltd., which should allay his fears about new clause 4 setting a precedent, or about passing on liabilities to other employers, as has already been outlined by my hon. Friend the Member for Gordon. It is worth remembering, through all this, that these plumbers have found themselves in this situation through no fault of their own, but because of a lack of information from trustees regarding their potential section 75 obligations. I hope that new clauses 4 and 5 can be accepted to ensure that nobody falls into bankruptcy and poverty through no fault of their own.

Our new clause 2 would help the UK Government in three areas. It would establish an independent advisory commission to look at the terms of this legislation. The Minister knows that it has been a long-term SNP policy to see an independent pensions and savings commission established. The scope of the Bill does not allow us to go that far, but this advisory commission could eventually become the standing commission we wish to see and a sounding board for long-term pensions and savings policy. It would ensure, for instance, that we never saw a repeat of the WASPI scandal.

In the meantime, new clause 2 would also allow the UK Government out of the bind that they find themselves in over commercial dashboards and financial transactions. We believe, as do many stakeholders in the industry, that the rush to see commercial dashboards with financial transactions could be extremely damaging. The hon. Member for Amber Valley has highlighted that risk.

The Minister has previously suggested that commercial dashboards are necessary to allow the independent public dashboard—the MaPS dashboard—to work, but that can only be the case if a deal has been done with the sector to allow commercial dashboards with transactional ability in exchange for the data that the providers have for the public dashboard. The Government could quite easily mandate that data to be provided without the incentive of early commercial dashboards and the risks of financial transactions. Time is the wisest counsellor of all, which is why I do not understand the Government’s determination to plough on without taking stock, without analysing the risks and without ensuring that savers do not suffer detriment from shifting so quickly to commercial dashboards and financial transactions.

We want to see the MaPS dashboard established quickly to provide impartial and reliable information for savers, and that is why we have brought back amendment 8 to reinsert the wording from the Lords that was removed in Committee. This has cross-party backing and backing from stakeholders. The public dashboard has the ability and the potential to be as revolutionary for pensions and savings as auto-enrolment has been, but that can only be the case if the Government get behind it and give it the space to develop. Also, the commission could help with what Members on all sides repeatedly turned to in Committee—namely, finding cross-party consensus on long-term pensions policy. This could be a safe space for those discussions and ensure that pensions policy stood the test of time, because there would be buy-in from all sides.

Our amendment 7 deals with open DB schemes. We have worked extensively with other parties to try to find a form of words to give the scheme providers comfort that they were not going to be forced into making investment decisions that were inappropriate for them. The importance of this has already been highlighted by the hon. Members for North East Fife and for Gloucester (Richard Graham) , as well as by my hon. Friend the Member for Gordon. There is a major concern that open DB schemes will need to de-risk, and there are potentially serious implications for them of doing so. In Committee, the Minister stated in response to one of my lines of questioning:

“I want to make it clear again—I have said it once, but I will say it again—that the Government are not proposing to introduce a one-size-fits-all funding standard”.––[Official Report, Pension Schemes Public Bill Committee, 5 November 2020; c. 81.]

However, the CBI has contradicted him by saying:

“The regulator’s proposals risk moving back to one-size-fits-all regulation…Businesses and trustees need to be confident that the new code will allow them to make decisions that benefit savers and the long-term health of companies.”

The Minister protested strongly about the Government’s intentions; it may not be their intention to introduce one-size-fits-all regulation, but the Minister is reckoning without the law of unintended consequences. In order to be sure, why not allow a safeguard to be on the face of the Bill to protect against the unintended consequences, identified by the CBI and others, which could otherwise see perfectly healthy DB schemes close down?

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[Neil Gray]

I was just coming on to quote that very passage from the Minister in Committee—

[Guy Opperman]

Of course!

[Neil Gray]

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

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

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

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

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[Guy Opperman]

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

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

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

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

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

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

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

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

[Neil Gray]

Nothing that the Minister has said contradicts anything in our amendment 7 or, for that matter, our amendment 1. It would not be the first time if the regulations did not necessarily live up to the promises made in the passage of the primary legislation, so why not just accept amendment 7 or, indeed, amendment 1 so that the commitment is in the Bill?

[Guy Opperman]

I assure the House that no Minister in my position could accept amendment 1, which was proposed by the House of Lords and has been tabled by the hon. Member for North East Fife (Wendy Chamberlain).

No Government could commit to ensuring that contributions remained affordable or that scheme closures were not accelerated. We cannot be bound to ensure that all schemes that are expected to remain open are treated differently from other schemes, as open schemes in that category do not all share the same characteristics. As I have made clear, some such schemes will be maturing, just like closed schemes; the potential for abuse would open up. A closed scheme could reopen to very small numbers of new members, circumvent safeguards and pursue a riskier investment strategy that would otherwise be inappropriate. We do not want good schemes to close unnecessarily or to introduce a one-size-fits-all regime. I refer briefly to the Pensions Regulator’s comments in paragraph 475 of the consultation:

“We acknowledge that if such schemes do continue to admit new entrants and do not mature then the scheme will not actually reach significant maturity. We are content that such a scheme retains the same flexibility in its funding and investment strategies that all immature schemes have.”

Similar comments are made later, and I refer hon. Members to the statements I made at great length in Committee.

I turn now to amendments 2 to 5. I dealt briefly with the points made by the right hon. Gentleman the Chair of the Select Committee about clause 125 and the work we have done. Let me be clear that that clause will ensure that transfers will not go ahead if the conditions set out in the regulations are not met. Those conditions can relate to the destination of a transfer, so that transfers can be prevented to schemes that do not have the right authorisations or if a member has not supplied the evidence of employment or residency, for example.

Importantly, those conditions can also include other red flags, such as who else is involved in the transfer. If those red flags are apparent, the regulations will enable trustees to refuse to transfer if the red flag is significant or to direct the member to guidance or information that they must take prior to being allowed to transfer. Trustees will also need to undertake due diligence to establish whether those conditions are met.

Clause 125 puts trustees in the driving seat in relation to permitting transfers to proceed. I make it clear that we will continue to work with the Work and Pensions Committee, the Treasury Committee, the various advisory groups and the all-party parliamentary group on pension scams, with whose members I have had detailed meetings in the past month, to ensure how we can have the best possible regulations to determine circumstances in which different conditions for transfers might apply.

I now move on to the dashboard amendments. I welcome the support in the House for the dashboard; I am particularly grateful to the various contributions that made it clear that this part of the legislation is absolutely transformational, bringing pensions information into the 21st century. I accept entirely what was made clear by the hon. Member for Wallasey: this is a huge project, involving tens of thousands of schemes that will need to be brought forward. The first dashboard will have a “find and view” capability only. At an appropriate time in the future, dashboards may act as a safe space for supporting and safeguarding financial transactions. That will be fully considered and informed by user testing and safeguards, and protections would continue to apply.

However, I resist the amendments in respect of transactions. We have discussed at great length the likelihood of the need for individuals to have a greater say on their pensions. Why would we seek to exclude consolidation going forward? Transactions are not clearly defined in the amendments; they could prevent dashboards from providing useful modelling tools that could inform people of the potential benefits of increasing their contributions. As I made clear to colleagues making the case for the amendments, the consumer association Which? has come out comprehensively against them. It states in its submission on Second Reading:

“we do not agree that the introduction of commercial dashboards should be delayed, or that the transactions should be banned.”

It then goes into more detail:

“there is a need to protect consumers from the risk of commercial dashboards…However, this must be done via the introduction of consumer protections and regulatory oversight rather than a blanket ban.”

The point is also made strongly that the Opposition amendments risk us being left with a dashboard that does not do as much as initially anticipated, resulting in consumers not being as engaged. That could represent a huge missed opportunity. It is crucial that dashboards are both safe and fully functioning to give consumers the most choice and the most exposure to innovation. Therefore, with respect, I will resist the dashboard amendments.

Clause 118 of the Bill, and the FCA regulated activity, will enable the creation of both regulations and FCA rules, which could include signposting to MaPS guidance. The pensions dashboards programme usability working group will explore how best to help users understand the information presented to them and where they can get more help.

In respect of costs and charges, I raised that in great detail in Committee, but colleagues will be aware that the Government intend, and have legislated, that costs and charges should be part of dashboards in the future, just like they will be in the simpler statement. That is legislated for in clause 119(2), and it is appropriate that we proceed with that only once the dashboard delivery group has consulted in a proper way.

As to the restrictions on multiple dashboards for one year, I made the point in Committee that in creating dashboards we need to go where the consumer is rather than forcing the consumer to come to us. That surely is the essence of this issue: it will increase engagement with pensions, and we should reach people where they are. We should not seek to constrain options available but ensure that all opportunities are properly regulated, safe to use and secure.

I turn to the amendments to clause 124—the climate change clause—tabled by the Labour Front Benchers. I am afraid the reality is that Labour’s proposals would direct investment, breach fiduciary duties and lead to divestment and negative outcomes. We want the transformation of the United Kingdom economy and the retrofitting of the country to happen in a partnership with business, legislators, pension schemes and citizens, but I am afraid the amendment would negatively affect that. It would be entirely the wrong way forward.

Labour’s proposal is roundly criticised by the PLSA in a letter in which it strongly endorsed and advocated the Government’s proposals to ensure that the appropriate governance frameworks are in place to support schemes investing in a climate-aware way. It expressed deep concern about the Opposition amendment. With the PLSA’s permission, I will put its letter of 12 November in the House of Commons Library. Likewise, I will put in the Library a letter dated 13 November 2020 from the independent Association of Pension Lawyers, which also massively opposes that proposal. The reality is, the Government are already taking powers to require trustees to set targets in relation to their management of climate risk. We consulted on the use of those powers in August. Our consultation, “Taking action on climate risk”—I note, interestingly, that Labour Front Benchers did not respond to the consultation; I question whether they have even read it—sets them out in great detail.

This is the factual reality: we are already doing what is in the key parts of the amendment in clause 124 as introduced in the House of Lords. In the space of two years, the DWP has made regulations on environmental, social and governance criteria, on stewardship investment and now, in clause 124, on mandatory climate change governance and reporting. We need to allow our proposed policy measures to take effect before reviewing their impact and contemplating further measures. Of the 50 large pension schemes I wrote to last year, 70% are going well beyond the minimum legal requirements. Many have gone considerably further in the past 12 months, as nudged and persuaded by the Government. Fiduciaries do not need such a blunt measure in order to act, so we strongly reject the amendment.

I will turn now to the new clauses, and I will address them in some detail to the best of my ability. I will, if I may, deal with the relatively easy ones. I entirely endorse the view that this Government must bring forward legislation in respect of superfunds in the fullness of time. The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) will understand that that would be a substantial piece of legislation—certainly a 50-clause Bill and possibly more. I entirely accept that further work must be done in this Parliament on automatic enrolment, but I cannot accept new clause 3 or new clause 6.

Pension Schemes Bill [ Lords ] (Fourth sitting)

Debate between Neil Gray and Guy Opperman

Committee stage & Committee Debate: 4th sitting: House of Commons
Thursday 5th November 2020 Public Bill Committees

[Guy Opperman]

My note says early next year. I cannot elaborate further than that but I will write to the right hon. Gentleman before Report and set out in more detail the precise position in respect of the timetable and when we are expecting that to go.

Finally, I turn to new clause 12. I was not aware that it had been selected, so my response to it will be relatively limited. I know the organisation that is in favour of the proposal, but the best argument against it is that the Law Commission, which is definitely not Government and is an esteemed body, looked at this particular point on two occasions, and rejected it both times. There are reasons why. It takes the view that while it is entirely right and proper for the likes of ESG to influence investment, the individual decision-making processes of the trustees should not be influenced as is proposed by the proponents of this argument. I bow to the Law Commission on that, and it is certainly not DWP policy to take that way forward.

There is, however, a current requirement on trustees to disclose, via their statement of investment principles, how they take into account members’ views. Giving trustees the option not to follow those views, which may be from a subset of members, is appropriate and flexible. The regulations already allow trustees to consult members, ensuring that investment decisions are taken in the interest of the membership as a whole, and not driven in one direction by a small cohort of highly engaged individuals. I accept that there is a balance—the Law Commission took this view—between members being allowed to have their say and being involved in the process and a small cohort of particularly active members dictating a policy that would apply to the many. With respect, I rely upon the Law Commission in this, and invite colleagues to withdraw the new clause.

I think I have addressed all 11 new clauses and my voice is beginning to go. If I have not done so or have misspoken, because—as the Committee is aware—I am not able to take notes saying, “Minister please correct that for the record”, I will undertake to do that, as I will throughout this process. I therefore invite colleagues to withdraw the new clauses, except for those that they wish to put to a vote.

[Neil Gray]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Review of automatic enrolment

“(1) The Secretary of State must, by regulations made by statutory instrument, make any amendment to, or repeal or revoke any provision of, this Act, the Pensions Act 2008 or any other primary or secondary legislation in order to implement the recommendations of the Automatic Enrolment Review 2017.

(2) Any regulations made under subsection (1) must be laid before Parliament within six months of the day on Royal Assent is given to this Act.

(3) No regulations shall be made under subsection (1) unless a draft of the regulations has been laid before, and approved by, a resolution of both Houses of Parliament.

(4) Before the end of a period of two years from the day on which Royal Assent is given to this Act, the Secretary of State must lay before Parliament the report of a further review of the operation of automatic enrolment.

(5) The report under subsection (4) must make a recommendation as to whether the Government should bring forward further legislation to implement the findings of the review.”—(Seema Malhotra.)

This new clause would require the Secretary of State to implement the recommendations of the Automatic Enrolment Review 2017 and require a further review of automatic enrolment within two years.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Pension Schemes Bill [ Lords ] (Third sitting)

Debate between Neil Gray and Guy Opperman

Committee stage & Committee Debate: 3rd sitting: House of Commons
Thursday 5th November 2020 Public Bill Committees

[Guy Opperman]

It is a pleasure to serve under your chairmanship, Mr Stringer. I thank colleagues for their attendance and all the parliamentary staff as we try to progress parliamentary business in difficult times.

Clause 123 introduces schedule 10, which amends part 3 of the Pensions Act 2004. The clause is necessary, because it introduces amendments that improve the existing statutory framework for defined-benefit pension scheme funding and strengthen the enforcement powers of the Pensions Regulator to protect members’ pensions better. It follows from the DB White Paper and various consultations that have taken place for a considerable time.

The Government are seeking to overturn the amendment made in the House of Lords. This is with no disrespect to the other place. I respectfully suggest that no Government can commit to ensuring that contributions remain affordable or that scheme closures are not accelerated. We cannot be bound to ensuring that all schemes that are expected to remain open are treated differently from other schemes, as open schemes in this category do not all share the same characteristics. Some will be maturing, just like closed schemes, and it opens up the potential for abuse. A closed scheme could reopen to very small numbers of new members, circumvent safeguards and pursue a riskier investment strategy that would otherwise be inappropriate.

We do not want good schemes to close unnecessarily, or to introduce a one-size-fits-all regime that forces immature schemes with strong sponsors into an inappropriate de-risking journey. What we do want is to build on a well established scheme-specific funding regime that takes account of the key metrics of individual schemes in enabling trustees to assess what can reasonably be supported in terms of investment risk. To ensure that members’ benefits are protected and schemes do not take inappropriate risk, it is vital that trustees look at the characteristics of each scheme and balance scheme liquidity and investment risk with maturity. Open schemes with a strong sponsoring employer that are immature and have managed their risk appropriately should not be forced into an inappropriate de-risking journey.

I make it clear that the Government can commit to using the regulation-making powers available to ensure that the secondary legislation works in a way that does not prevent appropriate open schemes from investing in riskier investments where there are potentially higher returns as long as the risks being taken can be supported and members’ benefits and the Pension Protection Fund are effectively protected.

[Neil Gray (Airdrie and Shotts) (SNP)]

There is a problem with encouraging good open schemes to de-risk. We know where the bond market and gilts market is right now; we know that that puts them at risk. Baroness Altmann has intervened this week to say:

“If you decide to ‘de-risk’, then you are also deciding to ‘de-return’, taking away the upside potential that is so vital for making DB affordable. Deficit schemes just keep getting worse and contributions keep on rising. QE”—

quantitative easing—

“has undermined funding of all DB schemes”.

Is it not crucial, then, that amendment 18, which is the compromise, be allowed to go through, to ensure that good DB schemes are allowed to stay open and continue? Otherwise, as is the position at the moment, the Government are putting those at risk.

[Guy Opperman]

With no disrespect to the hon. Gentleman, I disagree with the premise of what he said, and I disagree with Baroness Altmann, whom I spoke to only two days ago as part of ongoing consultation with their lordships and other peers as to the nature of this type of scheme. I can only reiterate—

[Neil Gray]

It is not just me or Baroness Altmann saying this. The schemes are saying that following this path puts their own good and open schemes at risk for members to continue to enjoy.

[Guy Opperman]

The context is that the regulator has a consultation on this issue. The schemes wish to have a different situation to what is proposed by the regulator. It is worth making clear what the consolation is saying because it supports the argument that the Government are making, and not that of the schemes. Does the regulator’s consultation make it clear that all open schemes will not be treated like closed schemes and forced into an inappropriate and expensive de-risking? To answer the question, I refer to paragraph 475 of the consultation, on page 109:

“We acknowledge that if such schemes do continue to admit new entrants and do not mature then the scheme will not actually reach significant maturity. We are content that such a scheme retains the same flexibility in its funding and investment strategies that all immature schemes have.”

The regulator adds later in paragraph 481, on page 111:

“This is on the basis that open schemes have a longer time until they become significantly mature than closed schemes (some are not expected to mature at all) and longer investment horizons. Because of this extra flexibility, they can expect higher investment returns over the long-term which can be reflected in their discount rate assumptions.”

I want to make it clear again—I have said it once, but I will say it again—that the Government are not proposing to introduce a one-size-fits-all funding standard and neither is the regulator. Its proposals seek to secure a reasonable balance between the protection of member benefits, fairness between schemes, and the ability of schemes to take more investment risk, especially where an immature scheme has a strong employer and expects to remain open and in a steady status for a long time. There is an ongoing consultation. On 2 October, I met with individual schemes making this case and discussed it for over an hour. I have also engaged with the peers who are the proponents of this amendment.

I regret to say that the Government do not agree that amendment 18 is an appropriate compromise. The amendment is unnecessary and unhelpful. We state that trustees are required to act and exercise their powers, including their investment decisions, in the best interests of their members and we are not seeking to change that. Trustees must first and foremost carry out the terms of the trust in accordance with the trustee, the rules of the scheme and the applicable law. Legislation must set the boundaries within which the trustees can exercise their discretions and ensure that their legislative duties operate in such a way as to protect all members by also protecting the PPF and its levy payers.

There is no mention in amendment 18 of the ability of the sponsor to pay more in the future if investments do not perform as expected, and that must be part of a scheme-specific regime that assesses whether risk is supportable in a transparent and rational way. It is reasonable for schemes to invest in return-seeking assets to try to keep costs down, if that risk is supportable. Indeed, the Government have made that clear—I am the Minister who brought forward the illiquid proposals, which permit investment in venture capital, renewables, social housing and the like. The Government are not against such investment as part of a balanced portfolio. We are not in support of amendment 18.

[Neil Gray]

The Minister protests strongly the Government and TPR’s intentions. Why then not allow those protections and the intentions of the Government to be on the face of the Bill? The Opposition’s amendment 18 would satisfy those concerns and ensure those protections and also what those open schemes are calling for.

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[Neil Gray]

I do not have too much to add to the fantastic speech that has just been made by the right hon. Member for East Ham, the Chair of the Select Committee. I have to say that my heart breaks—I am sure others feel the same—for his constituent and the way that family has been treated and the situation they are now in. That case reinforces the need—if there ever was one—for stronger and more robust action, and that is why we support the amendments and new clause.

I especially concur with the right hon. Gentleman’s points about the actions of trustees where there are red flags and hope that the amendments or the Ministers response will satisfy our concerns that that will be addressed. We support these amendments on pension guidance and protecting against scams. We have been contacted by a number of organisations in this area, not least Just Group plc, who I am very grateful to for its briefing.

The Department appeared to pre-empt some of these discussions with its most recent statement of policy intent, which suggested a stronger nudge towards using Pension Wise. It is worth repeating the point made by the right hon. Member for East Ham that the cited MaPS stronger nudge trials showed only a very small increase in the number of people who actually went on to have a Pension Wise appointment. The DWP claimed that it

“significantly increased the take-up of Pension Wise guidance.”

But, again, this is pure spin.

The hon. Member for Delyn earlier in the Committee stage said that we should look at outcomes. We agree. The outcome of the stronger nudge trials was to get people to Pension Wise appointments in less than one in ten cases. It moved them from 3% to 11%. Eleven per cent. A stronger nudge is just not going to be enough, not by a long chalk. On that trajectory, the most the DWP could hope for, according to Just Group plc, is that between 20% to 25% at the upper end of the range of eligible pension savers would receive their Pension Wise session.

That was a huge concern of ours during the passage of the Financial Guidance and Claims Act 2018. We argued then for an opt-out guidance system, and now we are back to looking at this again. We still support this approach. The Government appear not to be willing to accept what colleagues across the House from all parties, Select Committees, and consumer groups and industry experts say is the best way forward. Instead, they are pushing stronger nudge.

The Government have not provided a timeframe for the DWP’s planned consultation on the new guidance rules for occupational defined-contribution schemes, nor the FCA’s rules for contract-based providers. In previous aspects of the Bill we have been asked to trust the Government to draft the necessary regulations. The same was said in consideration of the 2018 Act in this area, but we are still waiting. While I accept that the Chair of the Select Committee, has been having more intense discussions, I am sceptical. For those reasons and others outlined, we support the amendments and new clause.

[Guy Opperman]

I thank the right hon. Member for East Ham who leads the Select Committee for his kind words and heartfelt speech. I echo the comments in terms of his constituents, who clearly have had a terrible time. My thoughts are with them.

I will try to address the points raised. In respect of clause 125, the objective of the Government is quite clear. We wish to bring forward measures that will significantly and realistically prevent future scams. We believe that transfers will not go ahead if the conditions set out in the regulations are not met. These conditions can relate to both the destination of the transfers, meaning transfers can be prevented to schemes that do not have the right authorisation, and cases where the member has not supplied the evidence of, say, employment or residency. Importantly, those conditions can also include other red flags, such as who else is involved in a transfer. If those red flags are apparent, the regulations will enable the trustees to refuse to transfer. If the red flag is significant, it will direct the member to guidance or information that they must take prior to being allowed to transfer. Trustees will need to undertake due diligence to establish whether those conditions are met or not. Clause 125 puts trustees in the driving seat in relation to permitting transfers to proceed.

The right hon. Gentleman raised a number of specific issues, which I will try to address. The first relates to the scope of clause 125 in respect of DB and DC pension schemes. I take his point on master trusts, but I assure the Committee that the conditions to be met in relation to safe destinations, red flags and guidance before a transfer can proceed will be applicable to members of DB and DC schemes. Those conditions will be in addition to the current advice requirements for DB members seeking to transfer over £30,000 cash-equivalent value.

I have had discussions with the right hon. Gentleman, both in writing and in person, and with other colleagues on the Work and Pensions Committee, stakeholders, interested parties and other parliamentary colleagues. I have also engaged at great length, sadly by Zoom, with the all-party parliamentary group on pension scams, and then followed that up individually.

Colleagues who are concerned about the extent to which the PSIG requirements of red flags are being met should read the exchange of correspondence in the Library, following the right hon. Gentleman’s agreement that I could disclose it, in respect of the background of our meetings in September on two occasions, the letter that I wrote on 6 October, which included the Financial Conduct Authority’s approach of 5 October, and the follow-up letter of 22 October. If that second letter is not in the Library, which I am not totally sure it is, I will ensure that it is by close of business today. I wish also to put on record my thanks for the efforts of the PSIG, Margaret Snowdon and the various other parties who are all working for the common good to ensure that scams are prevented.

I will speak about guidance in a second, but first I will make two points. Clearly we wish to prevent, as far as possible, any scams or misdemeanours taking place, but that will have to be done through primary legislation and secondary regulations. It seems to me, as this process has been developing, that there is a degree of symmetry between the work that stakeholders—the PSIG and others—are doing, the work that this House is doing by passing primary legislation, and the specific drafting and codification of the regulations, which will be the nuts and bolts that will take this forward.

My objective is that we pass clause 125, which provides the statutory framework. My hope is that Royal Assent is received speedily and I suspect that my civil servants, who obviously have nothing else to do in these difficult times, will be able to progress the regulations very soon. I am hopeful that the Work and Pensions Committee report will have been published by then, and the ongoing dialogue that we have had with the Select Committee, cross-party, will continue, so that we frame the regulations that flow from clause 125 to accord with all our stated objectives.

I accept that the devil is always in the detail. We are all trying our hardest to be as precise as possible, without the regulations having been drafted already, but with regard to the four red flag objectives that are set out and that the right hon. Gentleman has rightly brought to my attention on Second Reading and in correspondence, I am confident that the answers that I have given to him in writing, and that the FCA has given, constitute a basis upon which we can regulate to prevent those matters.

The right hon. Gentleman is trying to tease out the extent of the amendments that he has tabled and the extent to which the Government can address them. We are able to address those matters within the confines of clause 125. I stress that we want to ensure that the powers can be applied quickly. I accept that time is of the essence in ensuring that the regulatory powers come forward as a matter of urgency.

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[Guy Opperman]

The right hon. Gentleman flagged that to me. I will attempt to give an answer—he only flagged it to me this morning, but I have tried to devise a precise answer. We are considering how we can use the powers in the Bill to address those specific concerns about self-invested personal pensions. They are clearly an FCA-regulated personal pension scheme that permit investment in a broader range of investments than conventional personal pensions do.

I am asked to point that in 2018 the FCA wrote to SIPP operators to remind of the due diligence requirements to follow when accepting customers’ investments. The FCA considers—this is the instruction I have been given, but I will follow it up in more detail—that most SIPP operators adapted their due diligence procedure in line with the FCA’s expectations, or have voluntarily left the market as a result of the FCA’s scrutiny. I assure the right hon. Member for East Ham and the Committee that that is the extent to which I can give him an answer today.

I will go away and drill down in more detail before Report and Third Reading, because the right hon. Gentleman makes a legitimate point. Clearly, the regulator is a separate one that I do not control, but in the time I have I will come on to how it is that we are trying to get the regulators to work together—how Project Bloom is something that we are addressing on an ongoing basis. We will get back to him before Report. However, my understanding is that we are considering how to address that issue within the confines we have. The point is legitimately made.

[Neil Gray]

Forgive me, for I have not been privy to all the discussions that have been going on. I take Members at their word that the exchanges that have been going on have been constructive. I therefore do not want to break that consensus in any way, but I am looking for some guidance from the Minister, in particular on the red flag amendments. Given that he has accepted that time is of the essence, and accepts the premise and principle of the amendments that we support, why is he unwilling to see them in the Bill? Is there a particular reason? What is his reasoning why those amendments cannot be accepted to ensure that they are in primary legislation as an added protection?

[Guy Opperman]

The simple answer is that this is not something that could be in primary legislation and then enforced; primary legislation is the framework, and it is has to be in the subsequent specific regulations that follow. I can give the hon. Gentleman an assurance on that point, as I have given it to the Chair of the Select Committee.

We accept these matters and believe that clause 125 already addresses the points made by the amendments, but we still have to draft specific regulations to deal with the specific problems, and those will be much larger than clause 125 and way more comprehensive. The process of dealing with a transfer, what particular points apply, how it is a trustee operates due diligence and how it is that that process works, is genuinely a complex process. Detailed provisions have to be gone through, working with the various parties going forward. The point I am trying to make is that we agree with the principle of the amendment, but it should not be on the face of the Bill; we should accept that clause 125 provides the framework, and we then need to deal with the regulations going forward.

In the time remaining, I will try to address the points about guidance and see if I can assess that in a particular way. Briefly, it is entirely right that people should be supportive of the good work that Pension Wise has done. Demand for the service has grown year on year since we launched it in 2015. The service delivered 205,642 transactions in 2019-20, which was a combination of face to face, telephone and online—more than triple the sessions in the first year of operation—and has had 10 million visits to the website since 2015.

I would push back on the argument for new clause 10, which is that there is no previous engagement. The DWP’s work should also be seen in the context of the work that the FCA does. There is already a multitude of interventions at an earlier stage. Within two months of their 50th birthdays, members receive a single-page summary document that points to the pensions guidance, as required under the Financial Services and Markets Act 2000. Wake-up packs, which were developed in association with all of industry and the interested bodies and are a requirement of the 2000 Act, are received at the age of 55. They include the single page summary document and they point specifically to pensions guidance.

At a later stage, as the individual gets closer to accessing their pension savings and enters the drawdown phase in contract-based pensions, the FCA investment pathway requires that they be presented with four options as to how they want to use their drawdown pot, so it is not the case that there is no engagement prior to the drawdown. That is proposed by the FCA policy statement, which will come into force in 2021.

Although I fully accept that I should be pressed on DWP guidance, the FCA policy statement will come into force in 2021, and, between now and Report, detailed explanation of what that statement entails should be provided to the right hon. Member for East Ham. If it has not been provided to the Select Committee as part of its inquiries on scams, that is a lacunae that needs to be addressed, because it seeks to ensure that all arms of government are working together. The FCA policy statement, and the incoming changes, will definitely make a difference.

Briefly, on the stronger nudge towards guidance, which arose from the Financial Guidance and Claims Act 2018, it is fair to say that where there is transfer from one scheme to another to continue to accumulate and no risk is identified, the transfer can be acted on in accordance with the current requirements. Where a risk is identified, the member must be notified that they will be required to prove that they have taken information or guidance before the transfer can proceed. That is the appropriate effect of what we are legislating for in clause 125 and in the Bill.

Where there is transfer from one scheme to another to access pension freedom with no risk identified, there is the nudge towards guidance and the member is notified that they will need to prove that they have taken guidance or opted out. Where a risk is identified, the points that we have gone through on clause 125 and the prevention of scams come into play. The member must be notified that they are required to prove that they have taken information or guidance, and the amended requirements under clause 125 continue to apply.

There is a graded system depending on the identification of risk to the individual trustees as they proceed. In addition, work has been done to prevent pensions cold calling, and there has been a tightening of the rules to prevent fraud of registered pension schemes. I accept that more needs to be done to bring various departments together. I know that the Select Committee has looked at this area, assessing whether Project Bloom, the multi-agency partnership, and the ScamSmart campaign, are working sufficiently well, and that is something that I have undertaken to improve. The regulator’s evidence to the Select Committee on that exact point argued that a much more beefed-up effort was needed to bring all those particular parties together. Yes, the two arms of government need to work better together, and I hope I have explained how we are doing, but we also need much greater interdepartmental and interorganisational co-operation.

Finally, there has been criticism. I will not go into detail about whether the stronger nudge is a good behavioural insight trial. I support what has been done, but that is a matter of ongoing regulation as well. The appropriate approach would be that we work with the Select Committee on making that as effective as possible on an ongoing basis. I invite the right hon. Gentleman to withdraw his amendment.

Pension Schemes Bill [ Lords ] (Second sitting)

Debate between Neil Gray and Guy Opperman

Committee stage & Committee Debate: 2nd sitting: House of Commons
Tuesday 3rd November 2020 Public Bill Committees

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

Welcome to the Committee, Mr Robertson. We hope that we will be well behaved under your chairmanship.

I take the hon. Lady’s points on board, and I will repeat, as if I said them all, the comments that I made in respect of amendment 20. I stress that subsection (2)(c) sets out a complete defence to any particular assertion of wrongdoing, namely the

“reasonable excuse for doing the act or engaging in the course of conduct”.

The hon. Lady talks about the future. The regulator, who has rightly been much talked about today, is very mindful of the debates in Parliament and of what is said in this place and the other place. I have discussed the ongoing regulation, and the fact that we are going to have to introduce further regulation on these particular clauses and set out the guidance in more detail. I hope that will reassure her that the comments have been taken onboard and that we are not using a sledgehammer to crack a nut.

We all accept that there are grave and serious incidents, such as those that happened with BHS, Carillion and others, but we also want to ensure that the pensions system functions in a fair way. The hon. Lady will also be aware that, as always, all powers are kept under review. It is certainly my hope that we will introduce another pensions Bill before too long. As with any matter, were there to be any disagreement about the implementation, we can always revisit that.

[Neil Gray]

Obviously we have missed out on the amendments tabled alongside the Institute and Faculty of Actuaries. Between now and Report, will the Minister commit to discussing with some of those stakeholders, such as the IFoA, and with us, to lay out how he can allay the fears of stakeholders, if he cannot allay ours?

[Guy Opperman]

As always, I am delighted to discuss with anybody. There is no doubt that we have done huge amounts of discussion and engagement already. My approach would normally be to set out in writing, as a preliminary, what I feel the position is and how we can provide the assurances, and discuss them off the back of that. At any stage, any parliamentarian is perfectly entitled to engage with the regulator and discuss their concerns, because it will be for the regulator to issue the guidance following Parliament passing the Act. I am sure that we can address the point being made.

Question put and agreed to.

Clause 107 accordingly ordered to stand part of the Bill.

Clauses 108 to 116 agreed to.

Schedule 7 agreed to.

Clause 117 ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 118

Qualifying pensions dashboard service

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[Guy Opperman]

It has been a while since I have been compared to a duck, but I know there was a compliment buried in the comments about the depth of the swimming I am doing to try to persuade the Committee. Let me be blunt about the Herculean nature of the task: there are 40,000-plus schemes to be created, with a common dataset to be agreed and then made capable, plus all of the information from state pensions. While I revere everything that the former Chancellor George Osborne did—clearly, there were many great qualities that the great man had— it was a little optimistic of him, by anybody’s interpretation, to say in 2016 that this would be produced by 2019. He also anticipated greater engagement by industry and that it would lead the way. I do not wish to have a dig at industry, but the only reason we are mandating this process is that, while we always have to add regulatory guidance, the industry did not take the opportunity it had to embrace it.

I repeat the point I have made on many occasions, both in this House and outside it, to various industry organisations: it is for the industry to prepare—this relates to the point raised by my hon. Friend the Member for West Worcestershire—its data appropriately, in such a way that it is dashboard compliant on an ongoing basis. I make the strong point that failure to do so will have consequences for the individual organisations, and will clearly have consequences for our constituents, who would not be able to access that particular data.

My hon. Friend the Member for Delyn made a fair point about the small pots problem, which the Chair of the Work and Pensions Committee and I have discussed in private and also debated in broad terms in public. Both of us remain concerned that there is a proliferation of pots, that costs and charges implications apply, as the hon. Member for Wallasey outlined, and that solutions need to be found. We are coming together—including the Work and Pensions Committee—to try to find those solutions. Clearly, one solution would involve consolidation, whether on the basis of ability to take small pots that have been eaten up by costs and charges, or on the basis that one is absolutely passionate about a particular ESG issue and wishes to consolidate around an ESG provider. All of those things would be prevented if I were to allow this amendment to continue. I have great respect for the guru of all pensions matters, Baroness Drake, who I have engaged with at length over the last couple of years. However, I believe she is mistaken in her approach to this, and I do not wish to rule out the capability for financial transactions.

If I have not been clear previously, I make it clear now—as the hon. Member for Wallasey invited me to do—that the original product of the pensions dashboard will be simple. It will be a simple find and view service that will then be built on and overlaid as time goes on, not least because not all particular providers will be on board from the word go. I could wait and wait, and then have a big bang moment whereby every single provider was ready and everything was done. Alternatively, the MaPS can start and other organisations slowly but surely come on board and the process is rolled out as it goes forward. I certainly do not believe that we should rule out the issue of financial transaction.

[Neil Gray]

Will the Minister give way?

[Guy Opperman]

Let me finish the point and then I will give way. On the specific amendment inserted by their lordships, it is unclear what activities would be considered financial transactions. The advice I have been given is that the amendment is very widely drawn and would require new primary legislation before such activities could be commenced in the future. Obviously, while pension Bills are like buses—we wait for ages for one to come along and then do two in a month—I do not anticipate one coming along in a great hurry, though I hope there is another one before the close of this Parliament. However, we definitely assume that this would cover consolidation of pots, transfers between providers, and potentially the raising or lowering of one’s contributions to an individual pension. In those circumstances, it would be utterly illogical, given all the other comments that we are making about the desirability of such an approach, to rule out financial transactions.

[Neil Gray]

Even if I leave to one side what the Minister says about the need for amendment 7, why is he not dealing with this incrementally? Why take the risk not just of allowing commercial dashboards to happen straightaway but of allowing them to be transactional straightaway? Why not build confidence in the system among consumers with the MaPS dashboard, allow a bit of a buffer before commercial dashboards come onstream to ensure that consumers understand what they are entering into, and then, when the regulator and the Government can assess the risks of the transactional ability of the commercial dashboards, come to a point where that is allowed? Why all at the same time? It seems far too risky to me.

[Guy Opperman]

That is an outstanding point, which I am sure the hon. Gentleman will make in respect of clauses 119 and 122 on delay to the onset of the dashboard. Many of the points that the hon. Member for Wallasey made relate to costs and charges, which we will come to later, and to the one-year delay argument. I do not believe that it is appropriate for something that is allowable at present—any one of us could go to our individual provider—

[Neil Gray]

The Minister must understand the greater risk from digitisation when the full suite of people’s financial savings—their biggest financial assets—are sat there. For some people who are perhaps not as digitally savvy as others, and who might be taken in by scams, that is a huge risk. At the moment, the paper-based system is rather different.

[Guy Opperman]

We will come to scams and the work that the Work and Pensions Committee and the Government are trying to do to enhance the protections on an ongoing basis. It is clear that the Financial Conduct Authority regards this as a regulated activity. There will be an authorisation process for individual providers that wish to be able to do it. It will not be automatic by any stretch of the imagination. We are very mindful of this, as are the pensions dashboard working group, various other user groups and the consumer protection organisations that are part of it—from Citizens Advice, to Which? and others. They are utterly committed to ensuring that this will be a safe process. Going back to the fundamentals of the Lords amendment, I do not believe that it is in the consumer’s interests to rule out financial transactions. I certainly would not support that.

--- Later in debate ---

[Guy Opperman]

To answer the second point first, there is already standardisation. There is already the charge cap, which allows a certain limit above which an individual cannot charge any more. That charge cap provides a certain percentage that can be incurred for the work provided. There is an ongoing discussion regarding automatic enrolment. If I have a tiny pot of £100 and that has been eaten away on an ongoing basis, then clearly the charges on an annual basis will slowly eat away into that small pot. If I have a much larger pot and I have a small standardised charged capped price that I am being charged, then it is clearly much easier for the pot to be preserved. How one approaches that going forward is extraordinarily difficult.

There is also the diversity of the products being provided—the point made by my hon. Friend the Member for Delyn—and ensuring that there is that diversity is appropriate. How does one try to balance those two things? That is what we are trying to do, with due respect. When will we do this? It seems to me that there are two answers. It is hoped—I use the word “hoped” given that we are now on 3 November—that by the end of this year, or the beginning of next year, these various pieces of work will come together and the Government will publish their views on them. I have been a little preoccupied with this and there are other things that are going on. The small pots review does not report back to the Department until 23 November.

In addition, the dashboard delivery group is at the same stage looking at this precise point about how it will provide this on an ongoing basis. It published its updated programme a week ago—I will have to do this off the top of my head, and if I have got it wrong I will correct it at a later stage—and its expectation is that it will provide more detail at the beginning of next year as part of what the dashboard will look like.

I come back to one final point. The original dashboard was proposed to be a simple find and view system; it is not proposed that this will have complex overlay at the start.

[Neil Gray]

That is all the more reason why allowing these amendments to be made is so important, to ensure that eventually it is mandatory to provide information and transparency about fees and charges. I do not think that anything the Minister has just said would preclude the amendments being accepted. It is a competitive market, there will be different elements within the market that will offer administrations and charges for different products, and that is their whim and their right. I go back to the point I made to the hon. Member for Delyn. I do not see how we are benefiting the consumer by denying them access to that information at that point of access, which is going to be crucial, and I am yet to hear from the Minister why that cannot happen.

[Guy Opperman]

I should have pointed out that we already have legislation within the occupational pension scheme regulations 2018, which already require trustees to publish detailed information on costs and charges on a publicly available website. Members are told where this information can be found on their annual benefit statements. Obviously, we are doing it on simpler statements as well.

On the specific point raised, the hon. Member for Airdrie and Shotts keeps coming back to different charging structures that exist across the pensions landscape, and information about costs and charges are not often directly comparable between schemes. There is a risk that we fail to engage people with their pensions by presenting too much information of a differing nature, or worse, that misunderstanding of costs and charges presented without proper explanations of value for money results in poor financial decisions. It seems to me that the way it is drafted as well, speaking specifically to the administration of the scheme, hides a much wider problem: how does one address the individual nature of differing schemes and the individual costs that apply? With respect, although I have great sympathy for the amendment, I invite the hon. Gentleman not to press it.

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[Neil Gray]

To follow on from the shadow Minister’s comments about amendments 8, 16 and 3, this debate takes us to probably the greatest area of contention in the Bill, which is contentious because of the Government’s intention to remove the Lords amendments that require a year’s buffer before commercial dashboards can enter the market.

It is not just the SNP, Labour or other Oppositions parties that have concerns, but a great number of stakeholders. The Pensions and Lifetime Savings Association says that

“the Government should ensure the first pensions dashboard will be a single, non-commercial product hosted by the Money and Pensions Service (MAPS) and that no other dashboard should go live until a full consumer protection regime is in place.”

In addition, rushing to introduce transactional capabilities is likely to put savers at greater risk of scams and mis-selling. It would be better to wait a year or two, rather than undermine consumer protection.

The PLSA does not support Government amendments 7 and 8, which would allow dashboards to be used to provide transactional services and remove the requirement for the non-commercial pensions dashboard service run by MaPS to have been established for one year before other dashboards services can provide services. The PLSA supports amendment 16, which would require the Secretary of State to report on the operation of the public dashboard service, including consumer protections, before allowing commercial dashboards to operate. It also supports amendment 3, which would extend to five years the period for which the MaPS dashboard would have to have been running before commercial operators could enter the market for the provision of pensions dashboards.

Similarly, the Institute and Faculty of Actuaries says: “The first dashboard must be a single, non-commercial platform. We think it is important that the first dashboard be non-commercial and hosted by the Money and Pensions Service. Initial non-commercial dashboards will to provide greater clarity for consumers and build confidence and trust in the dashboard ecosystem. It will also make it easier for regulators to learn more about how savers use such platforms, and enable them to adjust consumer protection regulation accordingly. In the medium term, multiple commercial dashboards could be permitted to facilitate innovation and choice. However, these platforms and the communications with savers need to be properly regulated to ensure strong consumer protection. We do not support new Government amendments 7 and 8, which would allow the dashboards to be used to provide transactional services and remove the requirement that the non-commercial pensions dashboard service, run by MaPS, must have been established for one year, before other dashboard services can provide services.”

We are clear that commercial dashboards should not be opened to the market for at least a year and we strongly oppose UK Government attempts to undermine that. We feel that a year’s buffer was a compromise position, as there are many people concerned about having commercial dashboards at all, especially when the Government intend them to be transactional. We tabled amendment 3 to underline our opposition to any watering down of the Bill as it stands.

The Lords amendment was a compromise. The UK Government are now unilaterally forging their own path, breaking the cross-party consensus that otherwise would have existed. As the hon. Member for Wallasey rightly said, it is crucial for good governance and good pensions legislation. It seems the Government are looking to implement both commercial and financial transactions on dashboards, before assessing the risk, before assessing consumer behaviour and interaction with the MaPS dashboard, and before taking full cognisance of the risks of pension freedoms, which we are only just starting to understand. Time is the wisest counsellor of all, Mr Robertson.

We want to empower people to make informed choices about their lifetime savings. The public service pensions dashboard is a welcome step towards that and will transform consumer engagement with pensions over the long term, and reunite individuals with lost pension pots. Pensions dashboards run by commercial operators should not be opened to the market until the publicly run MaPS dashboard has been running for a least a year.

We have a long-standing additional commitment to the establishment of a standing independent pensions and savings commission. The scope of the Bill does not allow us to stretch to that on this occasion, but later in deliberations we will consider whether a commission looking at the terms of this Bill should be established. Such an organisation would first be tasked with looking at when commercial operators should be able to enter the market for the pension dashboards.

In our view, the MaPS dashboard, or public dashboard, is a wasted opportunity unless it is properly marketed and promoted by the Government as a safe, independent and impartial space for people seeking information about their pensions. We feel that it would get swamped by commercial operators seeking to promote their own dashboards and their own commercial interests.

We caution the Government to be canny, to take their time and to learn from the implementation, first of all, of the public dashboard, before they move too hastily and have to play catch-up in the regulatory format, because people fall foul by making poor decisions about what is their greatest financial asset.

[Guy Opperman]

I accept that the issue is complex. On the one hand the Government are being urged to proceed with the dashboard and it has been rightly pointed out that we have displayed slowness, in some respects. On the other hand, we are being urged to delay in respect of this particular matter. We do not believe that this is the appropriate way forward, as the Lords indicated, and there are a multitude of reasons why that is the case.

I start with the initial 2018 consultation. The principle behind that was that consumers should always have access to a publicly backed service, which we have legislated for, but should also have the freedom to choose to access the information in the way they feel most comfortable. I go back to the point I made to my hon. Friend the Member for West Worcestershire: do we build a service and make the consumer come to us, or do we build a service where the consumer is already comfortable, in circumstances where there are sufficient protections around that?

Consumers have clearly stated that they expect to be able to access a dashboard through a variety of channels. The pensions industry holds an in-depth knowledge of its customer base, and this represents an opportunity for consumer-focused innovation to create platforms that individuals can engage with. We believe that allowing multiple dashboards is the most effective way to drive consumer engagement and really begin to put people in control of their savings.

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[Guy Opperman]

There is no question: we are deliberately learning the lessons from open banking and the process whereby we took all our various bank accounts and made them accessible under a strict regulatory regime so that our rights were not infringed. There is now a massively enhanced consumer programme that empowers the consumer, drives down costs and does all the other things that we know open banking does. With great respect, I suggest that that is a very good example.

The big difference is that in open banking we are dealing with a relatively small number of banks in this country, unlike in, say, America, whereas with pensions we are dealing with 40,000 different schemes. But the principles are exactly the same. We have learned from the regulatory process and I have met the chief executive of Open Banking. My officials and the dashboard delivery team are engaging with them. No disrespect, but the problems that the Committee has rightly identified today are exactly the same sort of problems that were identified with open banking. These are the same consumer protection organisations, and I shall come to the approach of Which?, which is probably the No. 1 consumer protection organisation in the country. It is firmly on the side of the Government and disagrees with the amendment. My hon. Friend drew me to that.

[Neil Gray]

I draw the Minister back to points that he made earlier, when he said that the information provided on the dashboard will be taken sequentially so that it will be added to over time as we test and learn. Why then in this case are we not operating sequentially? Start with the MaPS, the public dashboard, and bed that in as the point of contact where people have the confidence to go for impartial information about what they are getting, without having to be exposed to marketisation. Learn from that, and then move to the position where commercial dashboards can operate. Learn from that experience, and then bring about transactionality through the dashboard in that process.

[Guy Opperman]

I will delay the introduction of the Which? elements for a moment. Amendment 16, for example, would delay the introduction of other dashboards, which would stifle innovation that could benefit consumers. We feel strongly that the potential exists for the production of a game-changing new system that would enable something that is not possible at the present stage, but that would suddenly be second-guessed and denied, and we will lose much momentum behind the project.

The Committee should not take just my word for it. I will briefly share the comments of Which?, from its submission on Second Reading on this proposal. It addressed this amendment, saying: “This amendment ensures that the publicly owned dashboard will have to be operational for at least a year before commercial dashboard services can operate if the Bill becomes legislation in its current form. Which? agrees with concerns that lessons will have to be learnt on the application of the dashboard, especially with regards to the use of data.

However, we do not believe that this amendment is the answer. It is a precautionary approach, and the risk is that by stymieing the development in this way, the industry will take away its innovation, drive and investment —all of which could benefit consumers. By enabling an individual to access their pensions data safely and securely via non-government providers, this can help to support take-up and engagement with dashboards by increasing the number of channels that individuals can access this information and increasing awareness. It can also help drive innovation to enable individuals to make the most of the information available via dashboards. This will only be possible if dashboard providers are permitted to provide tools and services using this data.

Furthermore, this amendment risks us being left with a dashboard that does not do as much as initially anticipated, resulting in consumers not being as engaged. This could represent a huge missed opportunity. It is crucial to ensure that dashboards are both safe and fully functional to give consumers the most choice and the most exposure to innovation.”

The hon. Member for Airdrie and Shotts will be aware that there is already the Pension Tracing Service and “Check your State Pension”, both existing organisations that address these particular points. There is no question but that the words expressed by Which? adequately address the point that it would be utterly wrong of us to promote and push forward the dashboard in circumstances where, upon its launch, even in its primitive format, we said, “You cannot access the dashboard through the provider or financial adviser you’ve been with for 30 years. You may only go through the Money and Pensions Service.” I therefore respectfully say that this is not the right approach and not something the Government support.

In respect of the delay and the parliamentary scrutiny, I would like to make two points. Parliamentary scrutiny is already taking place through the introduction of secondary legislation, which will be subject to the affirmative resolution procedure. The Money and Pensions Service is already legally required, according to the 2018 Act on this issue, to report annually to the Secretary of State on its objectives and functions. This includes the operation of the dashboard, and that report is laid before Parliament, which can debate it if it wishes.

The development of the pension dashboard does not end at the launch. The pension dashboard programme will continue user testing and research on an ongoing basis. That is the whole point of incremental delivery. The amendments, if passed, would no doubt have the consequence of delaying the production of commercial dashboards for some considerable time—the note on which escapes me, but I will try to remember—by requiring a report to the House of Commons and then a further consultation on user testing, which would effectively put back commercial dashboards, certainly by a year, and potentially by two years.

The five-year proposal that the hon. Member for Airdrie and Shotts has put forward would clearly sound the death knell for any commercial dashboard on a long-term basis. With no disrespect, I think that would be a massive missed opportunity.

[Neil Gray]

Amendment 3 is a probing amendment so that we can set out the fact that our feeling was that the Lords amendment was compromised. By quoting Which?, as the Minister rightly has, he seems to be suggesting that we are arguing against commercial dashboards altogether. We want a reasonable buffer in place, and we do not feel that that year would be lost for innovation or for developing a dashboard. Commercial organisations would be perfectly capable of catching up when the time came. That year would allow the Government to ensure that the MaPS dashboard is properly promoted and utilised by people and used for its intention, which is to inform good decision making for long-term savings and investments for a good return on income.

[Guy Opperman]

I am not sure that I can amplify or improve upon the comments that I have already made, save to make the point—again, I believe—that commercial dashboards will have to be part of the accessibility of this particular programme, and I genuinely believe it entirely right that they should be part of it from the word go, so that we can go forward together with those two particular products. Quite frankly, we keep coming back to the point that we should go to where the customer is already, rather than forcing the customer to go to some other place.

Pension Schemes Bill [ Lords ] (First sitting)

Debate between Neil Gray and Guy Opperman

Committee stage & Committee Debate: 1st sitting: House of Commons
Tuesday 3rd November 2020 Public Bill Committees

[Guy Opperman]

I endorse that approach, Mr Stringer, but I also take the opportunity to welcome the cross-party approach to so much of pensions. I am conscious that two former Ministers of the Department for Work and Pensions are sitting on the Back Benches and that they will correct me and intervene regularly. I accept entirely that pensions policy works on a cross-party basis, whether it be automatic enrolment—which was introduced by the Labour Government through the Turner commission, brought forward by way of statute under the coalition, and expanded under this Conservative Government—or such successes as the Pension Protection Fund, which was one of the great successes of Blair’s Labour Administration, and the variety of reforms that we have introduced. There are some cross-party matters, such as the increase in the state pension age, that some parties do not necessarily wish to continue to own and embrace after they have left office, but such is the way of life.

As I tweeted yesterday, this Bill has, effectively, 98% cross-party agreement and, although there may be legitimate debates on how we progress, we have worked on that basis. The hon. Member for Birmingham, Erdington (Jack Dromey) and I have worked together on a tremendous cross-party basis. My wife often comments that I text him way too much. The practical reality is that I have also engaged repeatedly with the hon. Member for Airdrie and Shotts, who represents the Scottish National party. We have exchanged emails, trying to work out where we disagreed and where we agreed, and there is a great deal of common ground. Both SNP spokesmen made that clear on Second Reading, though there is legitimate debate regarding the best way forward on other matters. I look forward to those debates.

[Neil Gray (Airdrie and Shotts) (SNP)]

I concur with the Minister’s remarks on cross-party working. He said that CDC schemes, which we support, would become a third way, but can he clarify whether he sees CDC schemes as replacing good DB schemes? Clearly, we would not see them as an alternative but as a fall-back for when schemes run into trouble in other areas.

[Guy Opperman]

We will debate DB schemes, which I think have a great future. We have gone to great efforts to support the future of DB schemes. This is an alternative way forward that some organisations—Royal Mail is the classic example, but there are others who are looking at this—will welcome. Under no circumstances should it be implied or in any way taken that the Government will do anything other than support DB schemes on an ongoing basis.

--- Later in debate ---

[Neil Gray (Airdrie and Shotts) (SNP)]

It is a pleasure to take part in this Bill Committee with you in the Chair, Mr Stringer. Like the Labour spokesperson, I pay tribute to the Minister, and to the hon. Member for Birmingham, Erdington, for the cross-party work that brought the Bill to this point. We welcome the Bill as it has arrived from the Lords, though we have concerns about some of the amendments put forward. It is an important piece of legislation, and the part that brings about CDC schemes has arrived in a good state, which is why there are so few amendments to these clauses. The Minister has obviously done a good job on the drafting from that point of view.

I thank the Clerks for their time and patience in working with me, my hon. Friend the Member for Gordon and our staff in putting forward our amendments and priorities. We greatly appreciate all their help and support.

Following on neatly from where the Chair of the Select Committee left off, we very much support the creation of CDC schemes. We pay tribute to Royal Mail and the CWU for the work that they have done with the Government to get the Bill to this stage. As I intimated in my intervention on the Minister, and as the Chair of the Work and Pensions Committee, the right hon. Member for East Ham, also intimated, the CDC schemes cannot be seen as a panacea or the right solution for everybody. It is important—I think this will be a theme of our discussions—that people are given access to as much impartial information about their pensions as possible, giving them confidence to make informed decisions about their savings.

For the reasons that the right hon. Gentleman outlined, I wish to put on the record again that although the SNP feels that CDC schemes have major benefits—certainly for some scheme members in DC schemes—we would not wish them to be seen as a replacement for good DB schemes or for people to feel that they are necessary. I look forward to the rest of the debate, which I feel may well be rather more contentious than the issues that we are discussing at this early stage of the Committee.

[Guy Opperman]

I echo the support for the Clerks from this side of the Committee. We had a very helpful session yesterday, and they have been very helpful throughout. I will address the four or five points that have been raised.

On communications, I utterly endorse the point made by the Chair of the Select Committee. He will, I hope, appreciate that over the last three years, one of the major things that I have tried to drive forward in the Department is communications across the level. We are using simpler statements, by taking the 10 to 43-page pension statements that very few people read—putting them in a kitchen drawer and not necessarily taking them on board—and providing a simpler two-page statement and a written version. Our pensions dashboards create an amenable version of the online version, with great, ongoing communication.

On CDCs, I totally endorse the points that the right hon. Gentleman made: it is vital that we learn the lessons from the Netherlands, and that we ensure good communication. The possibility of fluctuations in benefits will be made clear and transparent in key member communications at points throughout their pension journey, including by providing details of fluctuation risks at the point of joining, by emphasising benefit changes in both active and deferred members’ annual benefit statements, and by making clear in retirement information packs that benefits can change during retirement.

Quite simply, that point was not made clear to members in the Dutch example. Some may not have taken it on board at the start, while others perhaps did not quite understand the situation as well as they would have had it been explained to them. We hope that we have learned that particular lesson and have very much taken that on board. I know that the two organisations that are looking at CDCs are very conscious of that and, to their great credit, have held multiple roadshows around the country, talking about this and engaging with people long before the legislation was introduced.

The reality of the situation for the CWU and Royal Mail was that their endorsement of the approach would not have been possible without member engagement from the very start. They have probably engaged more with a pension scheme than anyone has ever done before, prior even to the drafting of the legislation. They very much wanted that engagement to take place.

--- Later in debate ---

[Guy Opperman]

The short answer is yes.

[Neil Gray]

To build on that, does the Minister see the engagement, which he has rightly described as one of the most extensive from an employer and an employee-representative organisation in terms of changes to pension provisions, as being the gold standard going forward, if an employer seeks to switch from a DC to a CDC scheme in the future? Is that the bar that needs to be met?

[Guy Opperman]

I am now straying into industrial relations and how best to manage a company to take someone’s employees with them in a complex negotiation about future pension rights. All I can say is that I have worked and sat down regularly with the leading individuals in the Communication Workers Union and the individuals who have been running Royal Mail—that has changed slightly as it has gone along. I have seen the way in which they have engaged with their workforce and had a proper conversation up and down the country in a series of roadshows. With a large unionised workforce in the modern era, that is the right way in any event. I would certainly endorse that approach. It is clear that the company and the employees have been able to work together—working with the union, working with representatives—and it seems to me that, while I would not say the phrase is “gold standard”, it is an advisable way to proceed and it is good company relations to have a proper dialogue and engagement with individual employees.

The short answer I gave to the Chair of the Select Committee was yes, but the longer answer is that there is a whole supervisory regime, which we will discuss later, under clause 27 and thereafter, which must be submitted to the regulator in order to qualify to be accepted as a CDC. The practical reality of that is that I cannot see a way in which the regulator endorses and allows a company to go down the route of a CDC without all aspects of that communication being considered. Clearly, there are secondary regulations that follow. It is not in the specifics of the Bill, as I understand it. I make the point, when I am answering questions, that I am doing this utterly blind, so it has to be from my memory because I cannot take any notes from anybody. That is the fun of a covid Committee, as the right hon. Member for East Ham will know from chairing a Select Committee.

--- Later in debate ---

[Guy Opperman]

Clauses 26 to 51 complete the parts of the Bill that apply to Great Britain, but not to Northern Ireland. I will briefly address the two amendments. Government amendment 6 removes the provision put in primarily by Liberal Democrat peers in the House of Lords to incorporate a specific requirement of fairness. Unquestionably, as with much of the debate that we will have in Committee over the next two days, it is about the ways in which we proceed where the objective is agreed, and the objective is clearly one of fairness. The Government do not feel that clause 27(3) is appropriate, however, and we will seek to overturn it.

Requiring trustees to make such an assessment is likely to generate confusion unless further clarity is provided, and it may result in legal disputes. We have specifically and intentionally avoided referencing fairness in such a way in any of the CDC provisions, but I make clear to the Committee that we intend to use regulations to set out clear principles and processes that schemes must follow to ensure that different types of members are treated the same where justified.

Those requirements would form part of the authorisation process for the CDC schemes, overseen by the Pensions Regulator. Regulations under clause 18, for example, will require CDC schemes to ensure that there is no difference in treatment between different scheme member cohorts or age groups when calculating or adjusting benefits. That is a clearer, better and more effective approach to delivering fairness in practice, and it is supported by the Institute of Faculty of Actuaries.

I also pray in aid—as we have all cited our support for them—the note submitted by the Communication Workers Union and Royal Mail in written evidence to the Bill. They jointly addressed this specific point, saying:

“We welcome discussions on how to ensure the fairness of future CDC schemes. Royal Mail’s scheme is designed to address the possibility of intergenerational unfairness by not using capital buffers and explicitly preventing the trustees from favouring one group over another. The DWP acknowledged this in its 2019 consultation response. When it comes to Lord Sharkey’s amendment, we agree with Government that we should give careful consideration to how reporting on fairness might work in practice and share their concerns with the additional reporting requirements the amendment introduces. We therefore support the Government amendment which removes Lord Sharkey’s amendment from the Bill.”

I suggest that that statement is telling, and I invite the Committee to support the Government amendment.

[Neil Gray]

Before we decide what to do on this amendment, I am keen to hear from the Minister. He suggested that if the clause was allowed to stay as it is— as it was amended by the Lords—it could garner legal challenge. Could he clarify where he sees that legal challenge coming from and why he thinks that is a concern?

[Guy Opperman]

If clause 27(3) provides specifically for fairness, it may be open to interpretation and mean different things to different people. The legal advice we have received is that it would be inappropriate to include that in the Bill, and that it is far better to address the matter in detailed regulation rather than through a single word in the confines of the Bill.

--- Later in debate ---

[Guy Opperman]

I utterly endorse the speech of the right hon. Member for East Ham. I did not disagree with a single word of it. I could wax lyrical about why the Government, with the support of the Work and Pensions Committee and the special joint inquiry it set up with the Business, Innovation and Skills Committee to address BHS, have introduced this overdue legislation, which is linked to a much-enhanced regulator with a strong direction from Select Committees and the Government that there should be a much more robust approach. The new chief executive of the Pensions Regulator was appointed by the Secretary of State and me with a specific exhortation that they take a different approach.

The actions of Philip Green at BHS and the Carillion case, with which the right hon. Gentleman is extraordinarily familiar, scarred all Members of Parliament. No matter what our political party, we have all seen the impact that those cases have had on individual members of our communities. I take the point that the hon. Member for Wallasey made: these scandals involving organisations and companies that have not been sufficiently regulated, and for which the regulator has not, to be blunt, had the power, to intervene and take a different approach, have affected people’s perceptions of the sanctity and safety of their pension.

We have gone to great effort to ensure, on a cross-party basis and taking on board the various Select Committee recommendations, that we give the regulator enhanced powers. We will come to the significant reality of the criminal sanctions that clause 107 outlines. Without a shadow of a doubt, we are in the business of ensuring that callous crooks who put a pension scheme at risk are not able to function as they did in the past. I most definitely endorse every comment that was made.

Question put and agreed to.

Clause 103 accordingly ordered to stand part of the Bill.

Clauses 104 to 106 ordered to stand part of the Bill.

Clause 107

Sanctions for avoidance of employer debt etc

[Neil Gray]

I beg to move amendment 19, in clause 107, page 90, leave out lines 5 and 6 and insert—

“(c) The person neglected to act in accordance with their duties and responsibilities.”

This amendment and amendment 20 are intended to avoid the risk that routine behaviour by parties involved with pension schemes and others would be judged criminal, and thereby to protect professional advisers from criminal liability for carrying out their role.

--- Later in debate ---

[Guy Opperman]

It is for the regulator to show that that was not a reasonable approach. The burden is on the regulator to bring the offence and to prove it. I will choose my words carefully because this is subject to further regulation and consultation by the regulator, but it is certainly not the case that this is to catch everybody in how they conduct their normal business. However, there has to be a capability to identify and then prosecute and bring action against all persons, if they are found to have committed an offence without reasonable excuse. The ask is to narrow down the scope of the offence. We have just had a debate about circumstances where people have potentially committed things in the past.

[Neil Gray]

I understand the Minister’s riposte, but there are two points here. First, the amendment covers reasonable excuse by allowing consideration to be given to the person’s role in the trust. For instance, in a trade union, to take the argument of the Chair of the Select Committee, consideration would be given to the person’s role.

Secondly, the Minister is asking us to wait until the Pensions Regulator has consulted and says how it thinks it should deal with the matter, but by that point it will be too late to ensure that we have got this measure right. I hope that the Minister looks again at this point and provides better comfort to the likes of the Institute and Faculty of Actuaries, which has a very broad base of professional expertise, and which suggested the amendments. I hope for a more favourable response from the Minister.

[Guy Opperman]

I am happy to write to the hon. Gentleman and set out the position in more detail. I come back to the simple point. If a trade union has a reasonable excuse for asking for a pay rise for its members, given their circumstances in an organisation, there is no reason why it should have any concern whatsoever. The starting point is whether someone has a reasonable excuse to progress a particular thing. If it is clearly part of normal business activities, I would not anticipate a problem.

Pension Schemes Bill [Lords]

Debate between Neil Gray and Guy Opperman

2nd reading & 2nd reading: House of Commons & Money resolution & Money resolution: House of Commons & Programme motion & Programme motion: House of Commons
Wednesday 7th October 2020 Commons Chamber

[Guy Opperman]

I will come to dashboards in more detail. I am happy to discuss this with the hon. Gentleman individually. The long and short of it is that we are keen that there is a detailed authorisation regime and that there are suitable restraints in place to ensure that the system is not open to abuse. This is different from the type of dashboard envisaged by some, which is a repository of all data. We are definitely not going down that route. With the data team, we are designing the dashboard to ensure that it is data accessed by the individual, not a pot that all parties can take data from. It is a detailed conversation and one that I would be delighted to take up with the hon. Gentleman, but I assure him that our objective is to ensure that there are no problems of the kind he raised.

Let me turn to green technology and climate change. I look forward to my visit to mid-Wales and to working with the Welsh Government. I agree with the point made that if one wants to change the world, investing in a pension is unquestionably the right way forward. I endorse the comments of my hon. Friend the Member for West Bromwich West and my hon. Friend the Member for Grantham and Stamford, and I am certain that the Treasury is listening to the idea of green gilts as an alternative vehicle for pension funds to invest in on an ongoing basis.

There is no doubt that, by including TCFDs in the Bill, we are continuing a narrative: this Government are driving forward work against climate change more than any other Government in the world. We are the first Government in the G7 to legislate for net zero. We are leading the way on environmental, social and corporate governance throughout the European Union, as is acknowledged by all our partners in the EU. We are the first Government to legislate to bring TCFDs into law in this country. Without a shadow of a doubt, this builds on the work that we have done, and on the promises and assurances made by my right hon. Friend the Prime Minister in his speech to the Conservative party conference yesterday.

I turn to CDCs, for which there is welcome support across the House. Royal Mail, and all the postmen and women who support all our constituencies up and down the country, are keen to see this measure. I have worked extensively with the Communication Workers Union, Royal Mail and the various organisations that have supported this policy. I do not want to be too Blairite in a spirit of cross-party unity, but there is no doubt that CDCs are the third way in pensions, and a way forward that provides an alternative to the current regime.

With the dashboards, we are trying to bring pensions into the 21st century. We are building on the work that has been done in other markets, whether energy, banking or savings, all of which have similar things with open banking, savings apps and the ability to change an energy provider. I can assure the hon. Member for Birmingham, Selly Oak that the state pension will be part of the dashboard. On the formulation of the dashboard and what it looks like, many people want to talk about the end product. I merely want to get the product up and running, but the end product will, quite clearly, have something about costs and charges, which addresses the point that the hon. Gentleman raised, as did my hon. Friend the Member for West Worcestershire (Harriett Baldwin). I can assure her that charges are under review on an ongoing basis. The dashboard will also, we hope, do much to provide simpler statements, simplifying something that has been very technical for very long time.

We heard about the issue of small pots and the difficulties in understanding those on an ongoing basis. It may have escaped the House’s attention, but the Department has an ongoing small pots review that is working cross-industry to try to assess exactly what the particular problems are. That will include, I assure the House, a consideration of “pot follows member”. Clearly, all that would require future regulation, but we are definitely looking at it as a Department.

We believe very strongly in the importance of a Government-backed, impartial dashboard, and we have committed to having the MaPS dashboard available from the start. We strongly believe, though, that multiple dashboards will help a consumer base with differing priorities. In launching a product, do we expect the customer to find it, or do we launch the product where the customer is? There are different customers who have different expectations and needs, and some already have a relationship with a provider. A variety of dashboards can help to evolve the project.

[Neil Gray]

I thank the Minister for giving way. I want to say at the outset how pleased I am to see him in his place. He should rest assured that the thoughts of my family are very much with his. Likewise, I take a moment to ask the House to remember that my hon. Friend the Member for East Dunbartonshire (Amy Callaghan) would have been here, were it not for her health issues, as the SNP pensions spokesperson.

I think it is clear that Members on both sides of the House, even those on the Government Benches, are not far apart on the issue of the dashboard. Between now and the Committee stage, would the Minister be willing to discuss his intentions with me and with Labour Front Benchers and the Liberal Democrats to see what compromise could be sought in all our interests going forward? This is a really important issue for us. I know the Minister to be someone who seeks consensus where possible, and I hope he would like to do so again in this case.

[Guy Opperman]

I have already engaged in extensive discussions, but I would be delighted to continue to do so both in and out of Committee. I think it is very clear that the Secretary of State and I have gone to great efforts to try to take the House with us in that dialogue and debate, and I can assure the hon. Gentleman that that will continue.

Let me move on to address the powers of the Pensions Regulator. I think it is right for me to put on record that TPR has done a good job during Covid, and, as an organisation, it is definitely improving. I accept that there have been criticisms, but it has unquestionably progressed under the supervision of its current chairman. I agree with my hon. Friend the Member for Delyn that these regulatory powers provide a fresh set of dentures for TPR to ensure that its bite is a little more substantial than its previous bark. That is a fair point well made. This builds on work that has already been done.

Several colleagues have raised the issue of open DB pension schemes. The Government continue to engage with the schemes and the Pensions Regulator, and we want to understand the concerns. I met stakeholders last Friday, and I have discussed this with Opposition Members. The measures in the Bill are designed to deliver clearer funding standards while upholding the flexibility of the scheme funding regime. There is an ongoing consultation, issued by the regulator, which looks at a potential bespoke regime. I have already discussed with the individual schemes whether the consultation is the right way forward, but I am happy to continue that dialogue, as I am on other issues.

I thank many colleagues for their kind words and support for my wife and I following the death of our twin boys. It is genuinely appreciated. This House is a special place when we are presented with adversity. It brings us together, and I think it humanises us that, while we disagree politically, we share the same problems. I echo the comments made by the hon. Member for Airdrie and Shotts and wish the hon. Member for East Dunbartonshire (Amy Callaghan) well.

We are pushing ahead with an innovative and ambitious pensions agenda that is reforming retirement. It delivers on commitments made in a manifesto backed by the people of this country in December 2019. It makes our constituents’ pensions safer, better and greener—safer by cracking down on scams and unscrupulous bosses, better by utilising new technology to develop and create a dashboard, and greener by ensuring that we get to net zero through ethical and sustainable pension investment. I look forward to further discussion, and I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Pension Schemes Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Pension Schemes Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 5 November 2020.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Michael Tomlinson.)

Question agreed to.

Pension Schemes Bill [Lords] (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Pension Schemes Bill [Lords], it is expedient to authorise:

(1) the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided; and

(2) the payment of sums into the Consolidated Fund.—(Michael Tomlinson.)

Question agreed to.

Oral Answers to Questions

Debate between Neil Gray and Guy Opperman

Monday 14th September 2020 Commons Chamber

[Neil Gray (Airdrie and Shotts) (SNP) [V]]

This issue is in addition to the UK Government continuing to deny justice for WASPI women at a time when women are disproportionately impacted, socially and economically, by the coronavirus outbreak. The Scottish National party believes that mistakes were made in the changes to the state pension age and has repeatedly called on the UK Government to oversee a full impact assessment that considers the wide-reaching effects of the detriment felt by 1950s-born women. Will the Minister commit to a full impact assessment on both issues?

[Guy Opperman]

The hon. Gentleman knows that I cannot comment on live litigation, but he also knows that when the High Court heard the judicial review, it found for the Government on all the issues that he outlines. I point out that sections 24, 26 and 28 of the Scotland Act 2016 give the Scottish National party Government in Holyrood extensive powers to intervene, if they choose to do so.

Automatic Enrolment: Lower Earnings Limit

Debate between Neil Gray and Guy Opperman

Tuesday 12th March 2019 Westminster Hall

[Neil Gray (Airdrie and Shotts) (SNP)]

It is a pleasure to take part in this debate with you in the Chair, Sir Gary.

I congratulate my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) on securing this debate and once again leading the agenda in this place on pensions matters. Frankly, as the youngest Member of the Commons, she is an example and a role model to speak so well with authority and eruditeness on an issue that more young people should embrace and engage with. As I approach my 33rd birthday, I include myself and my peers in that youthful bracket—

[Guy Opperman]

indicated dissent.

[Neil Gray]

We are going for consensus in this debate, Minister, so we should continue on that ground.

The SNP supports and has always supported auto-enrolment but, as my hon. Friend the Member for Paisley and Renfrewshire South highlighted, we remain critical friends. Only last month, I raised the delay in scrapping the lower earnings limit threshold when the Minister brought the relevant statutory instrument to the Floor of the House. My hon. Friend mentioned a number of benefits if only the Government would scrap the threshold, and during the SI debate the Minister said that auto-enrolment was a success story. I agree, but we could make it so much more successful if we only got on with it.

I hope that we can build on what my hon. Friend rightly said in arguing for the lower earnings limit to be scrapped and that, in summing up, the Minister will provide us with a clear and concrete timetable for the UK Government to meet and achieve their policy promise. I would also appreciate him clarifying whether implementation of the commitment to scrap the lower earnings limit will require a submission to the comprehensive spending review and, if so, is that being prepared by his Department?

I am sorry that I do not have more contributions to the debate to sum up. It is obviously an important debate and I am sorry that no one other than the Minister—I look forward to hearing from him—and his Parliamentary Private Secretary, the hon. Member for Gordon (Colin Clark), managed to drag themselves away from the unfolding Brexit mess going on in the main Chamber.

I am grateful to those who have contributed to the debate, including my constituency neighbour, the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), for being present and for his speech. He also spoke in favour of the Government’s policy being implemented, and he rightly reiterated much of the information and statistics that my hon. Friend the Member for Paisley and Renfrewshire South provided to the House in her speech. He was also right to refer to the age restrictions; he mentioned the WASPI women, and I am sure he would agree that no one outside the WASPI campaign has done more to raise the profile of those women, argue their case, or represent them in this place than my hon. Friend.

My hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) made a powerful, fact-based speech. She was right to say that the delay in implementing the policy in full is preventing people from being able to plan adequately for their future. I know that is not the Minister’s intention, but he must acknowledge that the longer that the delay is allowed to continue, the more that will be the case. She was also right to ask whether a 16-year-old working the same full-time job as a 26-year-old colleague should continue to be discriminated against by not receiving pension contributions when their colleagues do.

In conclusion, I once again congratulate my hon. Friend the Member for Paisley and Renfrewshire South. She was right to say that things are moving in the right direction and that that is what we want to see, but we want greater and swifter action. The delay, the problems with making progress on realising the pensions dashboard, the WASPI women issues, and the lack of a concrete pensions policy all highlight, in our view, the need for an independent pensions commission. In summing up, on an otherwise troubling day for the Minister and his colleagues in Government, I hope that he will bring some joy and set out a clear, concrete timetable for scrapping the lower earnings limit. I look forward to hearing from him in that regard.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I congratulate the hon. Member for Paisley and Renfrewshire South (Mhairi Black) on securing the debate. It is a fair and legitimate comment that some hon. Members are a little distracted by other matters taking place in the House of Commons, but I make the point that although we may have our differences on Brexit and all the difficult issues that are being debated in the main Chamber, the House is still debating and considering other matters, such as legislation on female genital mutilation, which was passed on a cross-party basis last night, and auto-enrolment, which is crucial to the long-term retirement future of all our constituents from all different backgrounds.

I genuinely welcome the debate. When I saw it on the Order Paper, I felt pleased to have the opportunity to debate auto-enrolment and to address this particular issue. The hon. Members for Paisley and Renfrewshire South and for Lanark and Hamilton East (Angela Crawley) have raised the issue in a series of parliamentary questions. I answered those questions at reasonable, but clearly not sufficient, length on 20 and 21 February, and I will attempt to address them in more detail today.

It is right to celebrate, as other hon. Members have done, the fact that in the constituency of the hon. Member for Paisley and Renfrewshire South, 6,000 men and women are benefiting from auto-enrolment. Thanks are due to the 1,130 employers that have genuinely stepped up to the plate and are in the position to make that contribution through their payroll deduction to employees up and down her constituency.

I should also say that it is a pleasure to serve under your chairmanship, Sir Gary. Given that I have a little time, I make the point that in your Devon constituency, you have 6,000 employees who are benefiting on an ongoing basis, and 1,350 very good employers that should be thanked.

It is embarrassing how often I agree with the hon. Member for Birmingham, Erdington (Jack Dromey), but he is right that this is a cross-party success story that, in my view, all political parties have got behind. I will turn to the points of the hon. Member for Paisley and Renfrewshire South in a second, but the hon. Member for Birmingham, Erdington is right to say that the process was started under a Labour Government with the Turner commission. It was then brought forward under the coalition, when my position was held by a Liberal Democrat, Steve Webb, late lamented of this House—although I think we took his seat, so he is not that lamented.

More particularly, I am the latest in a long line of pensions Ministers and Secretaries of State for Work and Pensions—including the right hon. and learned Member for Camberwell and Peckham (Ms Harman), who is married to the hon. Member for Birmingham, Erdington—who have brought forward these very positive changes. They were developed by the coalition Government, and we have expanded on them.

The key issue in relation to this is the automatic enrolment review of 2017, which, as Members can see, is not a small document. It addresses the issues and was independently commissioned by the Government. A number of experts took a great deal of evidence and addressed what should be done in considerable detail.

In answer to the questions asked by the hon. Member for Paisley and Renfrewshire South, the issue is not whether we will lower the earnings limit; we will do that. Nor is it whether we will lower the age limit from 22 to 18; we will do that. The question is when. I accept that there is a legitimate and real debate to be had in this House when legislation is brought forward as to when those changes should take place. I do not want anyone to be in any doubt: there is no question but that our policy, as set out in the 2017 review, made clear in the House previously and confirmed today, is to bring the age limit down from 22 to 18, and to bring the threshold down to the first pound earned.

I accept that there will be pressure today, as Members have made clear, to do this much sooner. I take the point that the SNP, individually as Members of Parliament and collectively through their shadow Minister, is urging the Government to act sooner. There is a serious point that the House needs to consider; we all celebrate the successes of auto-enrolment but it would be naive and wrong to say that it is an utterly done deal yet.

[Neil Gray]

We accept and are grateful for the Government’s continued commitment to scrapping the lower earnings limit and reducing the age limit. We welcome that commitment today. It is not just the SNP and the official Opposition who have been putting pressure on the Minister. The Minister has put pressure on himself, because he committed that this would be done by the mid-2020s. Is that still likely? If so, my previous question stands: where is the timetable for that to be achieved?

[Guy Opperman]

I will give a long answer to the hon. Gentleman’s question, but I promise that I will answer it. Some 1.4 million employers have met their duties and are now offering members of staff a pension as a right. That is a significant change for those employers, and a significant burden for them. Raising the threshold, from 2% to start with, up to 5% last year and going up to 8% in April, is a significant burden. We are not talking about just the bigger employers, who can cope with it much better and have advanced payroll systems. Some of them have been paying over the odds from the word go and, to their great credit, some companies up and down the country immediately went to 5% or above. There are two key impacts that need to be assessed. We have only just got the information about the April 2018 increase and the opt-outs that took place then. The hon. Gentleman will be aware that there was just under 1% opt-out out because of the increase to 5%.

One of my main jobs in this position, which, contrary to popular belief, I actually asked to do and enjoy doing, is to take the 1.4 million employers and the 10 million employees in this country up to 8% with the minimum number of opt-outs, and the minimum impact on the economic outlook of the country. The harsh reality is that there will be a significant change to the deductions made from individuals’ pay packets, but also to the burden on businesses, whether they are large FTSE 100 businesses or coffee shops or corner shops in our local communities. Dealing with how things go this April is one of the most important, if not the most important, job I have, given the massive impact of this on all our communities. We have only just raised the threshold to 5%. We have the most important rise—a double jump—this April. It would be wrong if the Secretary the State and I, and the wider Government, talked about changing the basis for auto-enrolment before assessing how the 8% rise had gone.

This is quite a complicated process; it will genuinely take the best part of 9 months to go through all the data and get a definitive understanding of where we are on the 8%. At best, I will not know the degree of opt-outs until Christmas. It seems utterly wrong for me to seek to change the nature of the legal basis until I have a real understanding of the impact of the 8% increase.