Pension Schemes Bill [Lords]

Debate between Neil Gray and Jonathan Reynolds

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

[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.

[Jonathan Reynolds]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Oral Answers to Questions

Debate between Neil Gray and Jonathan Reynolds

Tuesday 19th April 2016 Commons Chamber

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

5. What his policy is on requiring multinational companies to disclose to the public the profits they hold in tax havens (a) in British overseas territories and Crown dependencies and (b) elsewhere.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

7. What steps he has taken to reduce the number of tax havens worldwide.

Universal Credit: North-West

Debate between Neil Gray and Jonathan Reynolds

Wednesday 13th January 2016 Westminster Hall

[Neil Gray]

It is not treating people like children. I totally disagree with that. People in such circumstances often live chaotic lives. Sometimes, although not always, they do not wish to have the responsibility for managing that extra level of financial responsibility. A great many people in my constituency have told me that they would far rather know that they have a roof over their head that is secure regardless of what happens elsewhere, and that they would rather see their benefit paid directly to their landlord. People should be given the choice over that matter, and at the moment they are not. It is being paid to them, and they are being given the responsibility, which is not always welcome.

[Jonathan Reynolds]

I want to clarify for the record that my comment about treating people like children referred to people who have worked for 20 or 30 years and are forced to fill in a graph to show how many jobs they have applied for that day and that week. I do not think that is an appropriate way of treating people who have been in work for a long time and have lost their job; they should be treated with respect and dignity. On the point about paying housing benefit directly to landlords, I believe that there should be a choice. If people want to manage their money themselves, that is fine. There has been a huge increase in housing arrears in every area in which universal credit has been rolled out, which causes huge problems for everybody else because it has to be covered in some way. If that can be alleviated by paying housing benefit directly to landlords, I see no reason why that option should not be available to people.

[Neil Gray]

I appreciate the hon. Gentleman’s intervention.

The New Policy Institute’s report “The rise of sanctioning in Great Britain”, which was mentioned by the hon. Member for St Helens South and Whiston, states:

“The expansion of conditionality under Universal Credit could see a substantial increase in sanctions: if sanctioning occurred at the same rate as for JSA claimants, then the number could almost double, with an additional 600,000 sanctions.”

That is very concerning. The Institute for Public Policy Research, an independent think-thank, found that low-income families in Scotland will face an £800 a year cut in their income by 2020 following the UK Government’s cuts while the richest 40% will see their incomes rise as a result of tax cuts.

A number of National Audit Office reports have come to damning conclusions about the ongoing universal credit transition, highlighting the early setbacks, missed targets and overspending. The numbers simply do not lie: 17,850 claimants were on universal credit in October 2014, but the Government had planned to have 500,000 claimants on universal credit by April this year and 7 million by December 2019. Not only does that show that the Government are completely missing their own targets, but they are spending huge budgets, wasting vital funds that could be better spent supporting poor families who are struggling to make ends meet. Indeed, the NAO published a report in May 2015 entitled “Welfare reform—lessons learned”. Speaking about the report, Amyas Morse, head of the NAO, said that the DWP,

“has had to learn some hard lessons with significant financial and human costs.”