Cost of Living Increases: Pensioners

Nigel Mills Excerpts

Monday 21st March 2022 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate. We should reiterate the points we have been making since the uprating orders. It is clear that, for people living on a fixed income like a pension, with no prospect of earning any more, a state pension increase of 3% is not going to be enough to get them all the way through until April 2023. The Government are going to have to find a way to do more to help people over the next 15 months; otherwise, they simply will not be able to make ends meet.

I regret that the motion does not set out specific policies that the Opposition would like the Government to introduce. Instead, it gives a slightly convoluted tour through history, but I think that the Government’s record of support for pensioners over the past 12 years is pretty good, with the new single-tier state pension and the triple lock. Over the past decade, I do not recall there being many calls for more support for people over retirement age. The demands have been, probably quite rightly, on behalf of people of working age. Equally, I am not convinced that it is logical to say that somebody over the state pension age who is still working should pay a lower tax rate than a young person with a young family who is trying to pay a mortgage and all the bills. People who are still earning after retirement should not pay national insurance on their state pension or other pensions, but I am not convinced that it is sensible that they do not pay it on earnings over £9,000 year. We need to find money to pay for bills and for more social care, which will no doubt be used by people over the state pension age before those of working age. I am not sure that that is the right tack to set our face against.

I want to talk about two practical things that the Government could do to help over the next 15 months or so. The first is on pension credit, which has been discussed. We clearly need to ensure that all those who are entitled to it are getting it, but I am not sure why the Government have set their face against a target. In any large organisation, we usually find that what gets measured gets done and that when there is a target, people will try to achieve it. I understand that there is reluctance because we might not hit the target and that that is embarrassing when we measure it, but I think that the embarrassment is far less than the effect of not getting a substantial increase in pension credit take-up. During the pandemic, when the then Health and Social Care Secretary set his target for 200,000 tests a day, it got done by the end of that month, and he himself would say that without having set that stretch target, it would not have got done. Let us have that target. Let us work out what is realistic and reasonable, and then drive the system to achieve it. I think that would help make serious progress.

The second thing that the Government should look at is how to give people on a pension more income before April 2023. The Chancellor seems to like doing one-off payments. I understand that. If we think it is a short-term blip of a crisis, the effects of which might go to into reverse, that can be done quite quickly, with no long-lasting spending effect. The danger, however, is that all those things do not get put on the pension—they do not get indexed every year—and in effect they are worth less money as time goes on. I am afraid that I am not convinced that the increase in bills is going to be a short-term, six-month problem. We all wish that that were the case, but it would probably require a change of regime in Russia, with a new, friendly, democratic and unsanctioned regime giving us free access to their gas at the price we used to pay. I think that assumption is for the birds, so the Government need to have a different plan. On the basis that they probably cannot now increase the pension by more in April, my suggestion is that if inflation is still running at this level in October, they should do a half-yearly pension increase, of perhaps half what is forecast for next April. That would give people a bit more on their pension, up front, for six months. It will cost more money, but it will be only a six-month thing, so it will be an acceleration of the rise people are going to get next year. If they are going to get 8% next April because their energy and food bills have shot up before next winter, give them some or all of that rise before next winter so that they have a fighting chance of being able to get through next winter. That would be a simple thing for the Government to do.

It is tempting to say, “We can wait to the autumn to make that decision”, but part of the reason we are in this mess is that we have had to use September’s inflation number to drive the April state pension increase. If that logic is true and we have to have six months’ warning, we have to use March’s inflation to have a pension rise in October, so we are going to have to make a decision next month. I urge the Chancellor to say to pensioners in the spring statement, “We understand how hard this will be for you. If this problem persists, before next winter we will give you some extra money through a state pension rise of a few more per cent. to give you a bit more money so that you do not have to be saving and penny-pinching. You will have enough to heat and eat through next winter. We will find a way to do that.” I urge the Chancellor to do that on Wednesday.

Pensions Guidance and Advice

Nigel Mills Excerpts

Tuesday 1st March 2022 Westminster Hall

[Nigel Mills (Amber Valley) (Con)]

I beg to move,

That this House has considered take-up of pensions guidance and advice.

It is a pleasure to serve under your chairmanship, Mrs Cummins. I thank colleagues for turning up after we had a late night last night. We have picked a day when pensions are topical, as we have a tube strike over the very issue that we are talking about.

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

Not my fault.

[Nigel Mills]

It is not the Minister’s fault on this occasion.

I do not think the main topic that I am proposing today is one that divides us. I think we would all accept that the problem is that we have a hugely complex pension system. Most people do not really have any understanding of how it works or what their options are, and far too few end up receiving advice or guidance before taking difficult decisions, having probably saved for 30, 40 or more years. They get to the end point and, sadly, do not always understand what they are doing. The huge risk of that situation is that they make a terrible mistake that they could have avoided, which has a detrimental impact on their retirement and reduces their quality of life in their last few years. The real question is what we can do to improve that situation.

We are not here today to talk about the level of pension saving, which is a hugely important topic but one for a different day. We are talking about what we can do to help people who get to the end of their saving journey to get the outcome that they want—the best outcome that they can have with the money that they have. I am not here to criticise auto-enrolment, which has been a huge success. It has hugely improved the situation for many people in work and at least gives them something to worry about when they get to retirement, whereas that would not have been a problem a decade ago. Millions of people would not even have had a pension pot to be thinking about.

Equally, I am not here to criticise the pension freedoms reforms that took place almost exactly seven years ago, which have been a huge success and are hugely welcome. In its recent report, the Works and Pensions Committee accepted that they should stay in place. However, we have to accept that we have a contradiction between the two systems and that we have chosen a way to get people to save pensions by almost tricking them into it, so that they do not realise. They just get defaulted in and do not have to engage, although we wish they would. At the end of that, we now have a hugely complicated system with lots of choices that people are not prepared for, and we need to find a way to prepare them for that, either at some point in their saving journey or when they get to retirement.

This is a problem that is actually getting worse. Statistics show that fewer people than before have taken advice over the last years, and the problem is getting worse because we have more and more people reaching retirement who will not have any defined benefit pension that can provide the majority of their retirement income. In order to ensure their quality of life in retirement, more and more people will be relying on their defined contribution savings and on the decision they make when they hit the age of 50 and get the chance to take a lump sum. It looks like a hugely attractive way to solve their present financial woes, but they do not realise that it makes their future woes a lot worse, having lost a quarter of what they had, which probably was not enough in the first place.

During the pandemic, a lot more working people over a certain age have now decided that they actually quite like being furloughed and have wondered whether they can eke out their retirement savings over a longer period by using the lump sum and not going back to work. It may be a terribly bad decision that they are making. I think the Government are now waking up to the fact that we have lost hundreds of thousands of people from the workforce who could come back but who would quite like not to do so. I am sure we would all like to be able to afford to retire early, but not if that gives us huge financial problems in later life.

[Matt Rodda (Reading East) (Lab)]

I am grateful for the hon. Gentleman’s comments about the importance of pension savings and for his very serious approach to this issue. Does he agree that there is a contradiction here with what the Prime Minister has said about the growth in employment? He may have been somewhat mistaken and inadvertently given a misleading impression that the number of staff on payrolls has increased, but the overall size of the workforce has dropped, as the hon. Gentleman mentioned.

[Nigel Mills]

Yes, I think that is right: employment has grown, but participation has reduced. I have spent many years arguing about whether people are in fake self-employment—not really self-employed but being made to be, or pretending to be, because their employers are being unscrupulous or trying to get a tax advantage. Shifting people who were not really self-employed into thinking that they are employed is quite a good outcome—it makes the data more reasonable. The hon. Gentleman is right: we have lost hundreds of thousands of people who could still be working. When there is a workforce shortage, any measure that could get people from those cohorts back into work would probably be good for the majority of them and for the economy as a whole.

To return to today’s topic, Her Majesty’s Revenue and Customs data tells us that £45 billion was taken from pension pots in the first six years of the pension freedoms policy. Some 3.7 million defined-contribution pensions were accessed in that period, and over 2 million of those pots were cashed in full. This is not a problem for the future when defined-benefit pensions start to run off. It is a situation we have seen over the first five years of pension freedoms. It is happening now. Hundreds of thousands of people are accessing their pension pots without knowing what they are really trying to do.

It is worth quickly noting that we still have a problem with the data. The data that we have shows pots being accessed, not pots being accessed by individuals. We do not know whether the data shows one individual accessing 15 different pension pots from 15 different jobs, or 15 different individuals accessing one pension pot each. If we are to have a proper understanding of the situation, we need better data, so that we know what people are doing and what outcomes they are facing. We raised that as a Select Committee on multiple occasions, but we still cannot seem to get that data to be gathered.

The reason for asking for this debate—and what I would quite like the Minister to recognise when he wraps up—is that we have a large problem here. I am sure that the Minister does recognise that; he has said so on many occasions. I would also like the Minister to set out a direction of travel for the regulators and industry. We know that the take-up of pension advice and guidance is far too low—I will come on to the data in a little while. The Minister has made some welcome steps, which will come into force in a few months’ time, but even those steps will not fix the problem or take us to anything like the level that we need. I know that we do not like targets or benchmarks, but perhaps the Government could set an aspiration, an indication of what good practice is, or what the level should be. We need to set an aspiration for the regulators as to what the level of take-up of advice and guidance should be, and we need a plan for how we get there. I will talk through a few ideas about how we could bridge that gap.

If Parliament does not set the regulators a target, benchmark or aspiration—call it what you will—they will flounder, flap around and go round in circles. We need to be clear: “Here is where you need to get to, and here is how long you have to get there; if you do not get there, we will have to take some different measures of our own.” We had a problem during the debate on the Pension Schemes Bill last year or the year before. Amendments were tabled that called for various solutions, and the fact that they were not adopted means that people think that Parliament does not actually want them, whereas that is not how parliamentary debates work. We move amendments to float ideas, and we debate them. The fact that they are not voted on does not mean that we did not want them; it just means that we think that there may be other ways to achieve them. I hope that we can send a strong message today.

[Guy Opperman]

I did warn my hon. Friend that I would quote back to him his exact words from debate on the Pension Schemes Bill. His speech on Second Reading genuinely struck me, and to try to beef up the process I revised the specific guidance largely on the back of what he and the Chair of the Select Committee, the right hon. Member for East Ham (Stephen Timms), said. My hon. Friend said:

“I personally would prefer a default guidance appointment, with someone having to sign in blood if they really did not want this free, excellent quality guidance before they could access their money.”—[Official Report, 16 November 2020; Vol. 684, c. 69.]

With respect, that is exactly what the stronger nudge is. We have taken on board the exact comments he made on Second Reading of the Pension Schemes Bill.

[Nigel Mills]

I am grateful to the Minister. He did say that he wanted the take-up of pension guidance to be the norm. Even with his changes, which I welcome, the take-up of Pension Wise will increase from a totally inadequate 14% to a really quite unacceptable 22%. I do not know how he defines a norm. I am not sure if there is a written definition of a norm, but I have a feeling that less than a quarter does not count as a norm. In that speech, which I stand by, I said that before they access their pension pot, I want the clear majority of people who have any level of pension savings to have taken guidance or advice.

However, I do not agree that such advice should be mandatory. We cannot put a gun to people’s heads and say, “You cannot have your money unless you sit through this. If you refuse to do it, no matter how long it takes, we’re not giving you your money.” Clearly, we cannot do that, but we can get pretty close to that situation. We need to find processes, techniques and measures that get that percentage up to somewhere much nearer the norm, so that people are not suffering the harm of doing this without understanding the whole landscape of what they are trying to do.

My big concern is not necessarily that people cannot understand the subject, although it is complicated, but that people do not know that there are all manner of uncertainties out there that they have not thought about. It is the “unknown unknowns” that are the problem here.

The beauty of a pension guidance appointment is that it gives people the chance to understand what they do not know, and then gives them the chance to go and find out what they do want to know so that they can make an informed decision. I am not suggesting that we can fix every problem of engagement through an hour or an hour and a half’s pension guidance appointment, but it would give people the tools to get the best possible outcome in their situation.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

The hon. Gentleman is making an excellent speech. Further to his point, the need for clear and impartial guidance becomes even more important given the current levels of fraud. We are seeing people defrauded from their pensions and given very poor advice, which means they lose out on their savings, so having clear and impartial advice becomes even more important.

[Nigel Mills]

The hon. Lady is absolutely right. It is a sad fact that a small proportion of people, but all too many individuals, have not just made a decision that is not optimal but been tricked into something that has cost them the whole or nearly the whole of what they have saved during their working life, because they did not understand that what they were being promised by the snake oil salesman—the conman—was utterly unachievable.

With some kind of briefing or guidance, they would have had a chance to realise that such an outcome was not possible, that there was no way they would get that kind of return and that such an investment strategy was not remotely sensible. We could have saved them in that situation. We must try to get as many people as possible to take up this service, so that we can put such protections in place and people will have a chance to know that such schemes are not real.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I agree completely with what the hon. Gentleman says. I know I have probably used words that he maybe would not, but does he share my concern about the Minister’s intervention? The Minister effectively said, “I listened to the hon. Member’s speech. We are doing a stronger nudge—job done; nothing to worry about.” Is that not complacent?

[Nigel Mills]

I would not use that word. It is a little unfair on the Minister, who has put in place some measures that have not yet come into force, to say that he is being complacent. I urge the Government to see those measures as part of the set of solutions we need.

The Government’s role is to set the aspiration for the level of take-up that we need, so we can then judge the success of their policies. It is a slightly strange situation and we had some rather baffling evidence sessions with the regulators during the recent Work and Pensions Committee inquiry. Everybody accepts that the take-up is not high enough and we should do more, but when asked, “What ought take-up to be?” they say that they do not know and do not have a number. So we know that what we have now is not good enough, but we do not know what is good enough, and therefore we cannot tell when we are going to get to good enough.

It is a slightly strange way of running a strategy, an organisation or a service to not know what is good and what you are aiming for, but to start trying to aim for it in the hope that you might get there by luck. We need a direction of travel, and someone to say, “We think the right target is 60%.” That is the number we had in our Select Committee finding and it seems quite reasonable. We are not asking for 100%, which would not be practical or useful, but we could set that kind of guide.

[Guy Opperman]

My hon. Friend is talking about guidance on its own, but 55% of pots over £10,000 are accessed after taking guidance or advice, and above £100,000 the figure is 74%. Surely on those two, the stats are better, with respect, than he is purporting to suggest, and we must look at this in the context of some people taking advice as well.

[Nigel Mills]

Absolutely. We hope that more people will take advice and have a properly informed situation, rather than just relying on guidance, and I accept that we want to look at those two things in aggregate. The problem on the numbers the Minister is quoting is that there is still a huge gap in respect of the, I think, 45% of people who have not had advice or guidance. My fear is that they are the people about whom we are most concerned: those with some retirement savings—not a huge amount, although not a very small amount—for whom, if they do not make the right decision and understand all the parameters they are dealing with, there could be a material impact on their retirement.

Should we worry so much about those with a £1 million pension pot? They are probably the ones who are taking advice in the first place. For people who have really a very small amount, there is probably not much that they will be able to do differently after they have had the guidance than take it as a lump sum. Are we to think it is okay that we have 45% of people who in the scheme of things have a relatively small amount and who could, by getting this wrong, materially harm their retirement, and that we do not have a plan for how to close that gap? I am not sure that that is a position I would want to take.

This shows that we have a problem here, and we need to find ways to try to fix it. The Minister is getting defensive, but I hope that when he speaks later he will accept that we need to close that gap and that the measures that will come into force in a few months will not be sufficient to close it. We need to look at different ways—

[Guy Opperman]

I am not being defensive; it is just that I do not think that we can look at this matter solely in the context of stronger nudge. We have to look at it in the context of, obviously, the work done with the pension schemes legislation, with the dashboard coming next year; the accumulation pathway, with collective defined contributions coming in; the awareness campaigns, which we are beginning to boost; simpler statements and so much more. Stronger nudge is just one element of about six to eight measures that we are taking to address the problem that my hon. Friend raises, and I accept that he is right to raise it.

[Nigel Mills]

I am grateful to the Minister. There is a danger, or there will be if we are not careful, of us starting to disagree on the fundamentals, whereas I thought we had a broad consensus of agreement that we needed to find a way to go further on the issue. Sir Hector Sants chairs the Money and Pensions Service, whose job it is to deliver financial advice and support to people around the country, and even he agrees. Sir Hector said that

“the vast majority of people, left to their own devices, will probably make a poor decision.”

The problem we have is that a large number of people—unless we are able to convince them to take some kind of guidance or input—are at risk of making a very poor decision that they will not be able to reverse. This is not like taking out the wrong mortgage, which people can change after two years. If people take out the wrong pension, they are stuck with it for the rest of their life. It is not fixable if someone has bought the wrong product.

I accept that all manner of other moving fields around the pension situation all have to come together, but if the Minister was saying—I am sure he was not—that the combination of a slightly-easier-to-read statement that gets sent out once a year, and which might or might not get sent out at the same point and that has some advantages, and the creation of a dashboard, which we hope people will engage with and look at regularly, will fix the fundamental problem of our having a pensions system that is hugely complicated and that people do not engage with or understand, even though they will have to make a difficult decision at some point, I am not that optimistic that we will get such a level of engagement through people’s saving journey that they will not need some input before they make their decision.

When we introduced these freedoms—I was on the Select Committee seven or eight years ago—we said yes to providing those freedoms, but the big ask was, “Are we going to help people on that journey?” I am perhaps a little disappointed that the solution that the then Government came up with was the Pension Wise service. At that point, the Government and the regulators expected huge take-up, and we were worried about the service being swamped and unable to cope, but we have found that Pension Wise has exceeded all expectations—except one. The feedback from people who use the scheme is hugely positive, as is its impact on their understanding of the pension landscape and on the decisions they go on to make. The one expectation it has not met has to do with take-up, which is nothing like what it was. In evidence sessions on pension schemes, people were saying that we might get 75% take-up, but we are stuck in the low teens, and the figure has been falling in recent years.

It is slightly incongruous: we introduced a policy of pension freedoms, recognised at the time that the situation would be difficult for people, and put in place a new guidance system to help them. We thought there would be huge take-up, and said that its use should be the norm. A few years on, the position has got worse, and we have more people retiring with only DC pensions—people who need this input. We have this huge gap in take-up, but think that is probably okay, because there are a few things online that people can find. That is a challenge. We need a sense of urgency and direction, so that we can hold the regulators to account for achievement.

I am grateful to all who helped me prepare for this debate and sent me useful briefings, particularly the House of Commons Chamber Engagement Team, which conducted an online survey of people’s lived experience. That chimed with what we see in our constituency casework and in evidence to the Select Committees. It is clear that people do not understand the situation and do not feel well informed during their saving journey, and then have problems over time.

One quote is from Charlotte:

“Guidance and advice is not provided in my workplace, unless you are almost at retirement age, which is way too late.”

Carole said:

“I have tried researching the information online but I find it very confusing.”

Anne, a constituent of mine, said:

“The Government should arrange pension roadshows to assist people with enquiries etc. Employers should hold pension surgeries and ensure guidance is available. There isn’t enough signposting and guidance in place.”

The evidence is pretty clear: there is a gap, and we need to fix that. What are the solutions? The Minister dragged me into talking about solutions earlier than I had planned; I was articulating the problem. Data on the size of the problem shows that HMRC received about £2 billion more than forecast in the early years of pension freedom as a result of people accessing their pensions. That is likely because people took the whole of their pension, as they now can, and became higher-rate taxpayers for the only time in their working life. That was a hugely foolish decision, giving the taxman 20% of their pension. That would not have happened if the pension had been taken out in a smooth way over years.

I am sure the Government do not want that benefit, but that £2 billion was a third more than was forecast. That suggests that something has gone wrong, and that people have not been making the wisest decisions. A Nobel- prize-winning economist has described working out what to do with a pension as

“the nastiest, hardest problem in finance”.

Nobody knows how long they will live, and many people assume they will live fewer years than they do, and end up with the horrible risk of running out of money.

I will move on to the argument the Minister was keen for us to have about how to improve the take-up of Pension Wise advice, and issuing appointments automatically or by default. I am asking for what the Select Committee asked for in its recent report: for the regulator to undertake trials on how to improve the take-up of pension guidance. We are not asking for tens of hundreds and thousands more appointments, and huge costs. We accept that, even with a stronger nudge, we will not get the figure high enough. We could give people an even stronger nudge and look at some of the options. Those include writing to people when they turn 50 or are approaching state pension age to say, “We have made you an appointment with Pension Wise at half-past three on such a date,” and giving them the chance to change the appointment. Or we could go back one step and say, “In six months’ time, you’ll hit state pension age. Before you can access your pension, you need a Pension Wise appointment. Here is the booking number.” There could be other combinations; for example, the pension provider could make planned appointments.

Whatever the trials and the options we look at, we are trying to work out whether giving people an appointment —a real kick—increases take-up, especially in the hard-to-reach groups that are not using the guidance service. I would have thought there were enough good-quality pension schemes out there that are keen to help their members and that would be willing to participate in a trial with the regulator, who could agree the rules and set the parameters. We could do that for a few thousand people on a representative basis.

[Emma Hardy]

The Treasury Committee got a letter on 16 February from the Financial Conduct Authority about the trials and how they have been designed. I wonder if the hon. Member shares my disappointment that it said,

“We are still in a design phase and have not yet determined all these details. Some of the answers to your questions will depend on further work.”

It does not feel as though there is a sense of urgency about the issue.

[Nigel Mills]

I agree. We had the regulator before the Select Committee, and initially she was quite resistant to do anything beyond giving the stronger nudge that the Minister had provided for, because she did not think Parliament wanted that. We should send the message loud and clear that we want to trial these things and see if they result in higher take-up. None of us would want people at Pension Wise to be sitting around at the end of the phone, waiting for calls, which are not coming in huge numbers, if they were providing something that people really do not want; but people who take these appointments value them, and find them useful. There are all manner of ways that call centres around the country handle unpredictable volume. They know what the take-up will be, and then plan everything with their staff; they move calls around so that they can handle surges in volume, or manage dips in take-up.

I am not saying to the Minister, “Bring in legislation to require a pension guidance appointment for every single saver approaching retirement. Resource Pension Wise to provide that that. Hey, if no-one turns up, it’s just money being lost.” But let us trial things that go beyond what he has already agreed to do, so that we get the take-up we all think we need. If people are not turning up, we will accept that it does not work. If people are turning up totally unengaged, and are there just because they think they have to be and have not bothered to do any research on their own finances, and it is a completely pointless conversation, we will accept that the automatic appointment system does not work. However, if we find, as I suspect we will, that it boosts take-up among the harder-to-reach people, let us roll it out more widely, because we can demonstrate the value of it. If we do not trial any of these things, we will be sitting here in a few years’ time with more people having suffered detriment, and we will be scrabbling around for ideas. We will not have the evidence, because we will not have trialled anything. That is all I am asking the Minister to do.

Another idea we have for improving the outcome is moving the line when it comes to what is advice and guidance, and giving better guidance to the pension schemes about what they can tell their members—what common-sense information they can give people about their options. I am slightly cautious on the latter point, because one of the arguments in favour of pension freedoms, and one of the big problems with the annuity market, was that savers were just defaulting into buying the annuity from their incumbent pension provider, and were not shopping around and understanding their position. They could have got a far better outcome if they bought an ill health annuity, or if they went to a different provider. I do not think we can say that the solution to this problem is for an incumbent pension scheme to tell members what four default pathways they have, and to see which one they want to pick.

Some kind of independent, impartial input should be available to savers, so that they know they can shop around and look elsewhere. The place that is the main contact with the saver should be able to give them useful information, and should be required to give them more useful information than they already do. We should find a way for the regulators to move the line, change the guidance or give some examples to schemes, or give schemes reassurance that they are not breaking the financial advice regulatory rules when giving people what is basically common-sense advice. That would be hugely helpful. If we can, we should reform the system—that is the best way I can put it—so that people do not have to incur the full cost of regulatory advice, which is usually thousands of pounds, and so that we can give people more tailored, individualised guidance on the best option for them. That would be a huge advantage.

It is clear that simple Pension Wise guidance is not the journey’s end that people want. They want something individualised. We need to find a way of making that easier and cheaper for them to get, while keeping it safe; we do not want people being led into buying a product by what they thought was impartial guidance. Making those improvements could give us a dramatic improvement in the situation.

I have spoken for longer than I was expecting to, so I will conclude my remarks by reiterating that I do not think that this issue divides us. We all recognise that we have a problem. We welcome the measures the Government have taken to improve the situation, but I urge the Minister to accept that he needs to go further. We need the regulators to take more action. I urge them to take up the relatively straightforward and low-cost trial options that are out there, so that we can see if we can get a better outcome, and can get more people using a high-quality, free, low-risk guidance service. There is literally no downside to people using it; it is a crying shame that it is not used more. That is all we want to see from this debate.

[Hannah Bardell in the Chair]

--- Later in debate ---

[Nigel Mills]

I am grateful to the Minister and to all colleagues who have taken part in the debate. It is regrettable that we did not quite give the Minister a strong enough nudge to convince him to make a change to the Government’s position at this stage. We will keep a watching eye on that and come back to it, because even with the stronger nudge starting in 93 days, as the Minister said, we know that will not get us to where we want to be.

Hundreds of thousands of people will still make this life-changing decision without the information they need, and without even knowing that they do not have the information that they need. That is not a situation that we want to see and it will inevitably lead to some people suffering detriment that they could dodge with the free, relatively quick and completely painless high-quality guidance service that is out there—a system that we put in place and wanted to become the norm. We wanted high take-up and we have not got there yet.

I recognise that there has been progress and I am sure we will see some progress as the new rules come in from 1 June. I hope that they solve the problem and that it goes away, but I fear it will not and I look forward to the next time we are here debating the issue. Hopefully, we can then make some further progress that we did not quite get to today.

Question put and agreed to.

Resolved,

That this House has considered take-up of pensions guidance and advice.

Social Security and Pensions

Nigel Mills Excerpts

Monday 7th February 2022 Commons Chamber

[David Rutley]

I thank the hon. Gentleman for his question. He will have seen the Chancellor set out last week a three-part plan to deal with rising energy prices. Of course the Government are watching the situation, but, as we will discuss, there is more than just the uprating legislation being put in place to help people through these challenging times.

[Nigel Mills (Amber Valley) (Con)]

Does the Minister accept that, for people with the least who have to get through next winter, it is hard to defend using an inflation rate from before this winter? Before we get to that point next year, will he have a look at why we must use the September base point? We must have the three weeks of December data showing a 4.8% rise in inflation, which would at least help get the systems working in time for April.

[David Rutley]

That is a thoughtful point from my hon. Friend who is an expert on these matters, but he will be aware that there are practical reasons, as well as data-driven reasons, why we use the September data; we are then able to put these uprated changes through the system in time for April. The pandemic has been a very difficult time for many. The welfare system, particularly universal credit, has proved incredibly agile in response to the pandemic, and we have made unprecedented changes to the system to help people when they need it most. Indeed, since the start of the pandemic—[Interruption.] I am hearing a lot of chuntering from the shadow Secretary of State, but what I am trying to say is that DWP staff have done a fantastic job in response to a huge uplift in the number of people who need universal credit. Those are the people I am keen to praise in this debate, so I hope the right hon. Gentleman was talking about them with his colleague.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

I think the Minister will find that he has managed to unite the whole House and every speaker in this debate. Sadly for him, he will find that every speaker, including me, thinks that the rise we will vote through tonight is not sufficient for the situation we find ourselves in. We will all ask the Government to go away and try to find some more.

We should be aware of the logic behind what we are doing. We are trying to give the people on the least—those who are out of work, those who cannot work, and those who have retired and therefore no longer work—sufficient money to pay all their bills. Unless we believe that people’s benefits are way higher than what they need, if we do not give them an inflationary increase every year, by definition they cannot possibly pay next year for all the things they had last year.

In this pretty unique situation of the rising cost of living, we are asking those with the least to get themselves not only through this winter, but through all of next year and all of next winter, based on an inflation measure that was taken before this winter. What they have to pay their energy bills in March 2023 will be based on a calculation of what was needed in September 2021. That surely cannot be right or logical. When bills are rising as sharply as they are, I cannot see how it is physically possible for people to do that.

Sadly, it does not look likely that we will be sat here in a year’s time with it all having reversed and with the gas price back to where it was a year ago. It does not look like a temporary blip; it looks like some of these prices will be baked in for a long time. There is sufficient uncertainty out there that there could be further challenges to come. I urge the Government to have a long, hard look at whether we really ought to have this system and whether we cannot do better than using September inflation figure to set the benefits and pension rise six months later.

At the start of the pandemic, the Government rightly chose to introduce the £20 uplift in universal credit. We managed to get that done in a matter of days. Last November, at the Chancellor’s financial statement, the reduction in the taper rate was announced and the Government managed to get that into force in a matter of days—on 1 December. Yet now we are told that they have to use the September inflation figure and cannot use a later one, even though we had the December figure in the middle of January, about three weeks ago, and three whole months before the rise comes into force.

I accept that some of the older, clunkier benefits—those whose systems are based on steam-driven 1980s IT that seems to work by shoving KitKat wrappers into the fuse box to patch it—may take a bit longer to programme. However, I would hope that for universal credit and the state pension—the two largest ones and the ones that affect the most people—we could take a more up-to-date figure. That would not fix the situation and wholly resolve the fact that inflation will be at 6% or 7%, but at least people would have got a 4.8% rise based on the December CPI rate rather than 3.1%. That would have been of help.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

The hon. Gentleman speaks with great authority on all these issues. I have been in the House for over a decade, and it is always a pleasure to listen to him on economic matters. In his view, is anything stopping the Chancellor from making a statement in his March Budget to reflect the cost of living and address some of the issues raised in the debate?

[Nigel Mills]

No, I think the Chancellor could do that at any point and, as I said, he can make changes to the biggest benefit system quite quickly if he sees the need to.

The case that I am trying to make to the Minister is that, at times, the Government can act much faster. I accept that huge investment in IT for legacy benefits that we are phasing out may not be effective, but I would have thought that, in the modern world, with the more modern systems, we could move on from basing the April rise on the inflation position six months earlier. I hope that the Government can find a way to base the rise at least on the December measure, so it is only three months out of date. I accept that for most years that would not make much difference, and for some years it could actually mean a slightly lower rise than using the September figure, but at least that would give us the best possible protection against this awful situation. Inflation is already much higher than it was at the reference point, and it will be even higher still by the time these amounts are paid.

I fear that the position is even worse than that at which I started—that of believing that benefits are in the right place and therefore an inflationary rise is needed. I genuinely fear that many of the benefits we have are now lower than people need, so a lower than inflation rise for benefits that are already too low leaves people in an impossible position. That is why I supported retaining the £20 uplift in universal credit.

I have told the Government many times that, if they believe that all these benefits are sufficient for the standard of living that we want people to have, they should do and publish an assessment of the basket of things that people have to buy and prove they can afford to buy them all. I would then happily support them. If such an assessment showed that benefits were too high, we could have a debate, but it is incredibly unlikely that it would show that. It is overwhelmingly likely that it would show that the measures that were necessary over the last 10 years have ended up going too far and that we are not giving people enough for the decent standard of living they ought to have. If that is so, we need to fix them. I challenge the Government to publish that assessment over the next year and prove their case that benefits are okay. Let us then get the inflationary increase done right. We cannot keep having this same debate in which many of us think that benefits are not in the right place and yet we cannot prove it because that is for the Government to do and, for some reason, they do not want to.

[Andy McDonald]

The hon. Member is making an excellent point about the assessment that would be needed. Does he think that, in an assessment of adequacy, it would be relevant to factor in the consequences of underpayment in terms of monetising demand on other services that people go to? There is a cost to poverty and usually it is extraordinarily expensive not just for the person suffering from it but in regard to the demand on other governmental services.

[Nigel Mills]

I absolutely agree that asking people to live without enough money to heat their houses and to eat creates all manner of knock-on consequences that will inevitably end up costing the taxpayer money in the long run. It should not be a big challenge or a contentious point of debate to want to ensure that the benefits we are giving the poorest in society are enough for them to live on, so I cannot see why we would not publish periodic analysis just to check that everything is in working order.

We should remember that many millions of people cannot go and get a different job or work a few extra hours to make up the difference. They cannot work, they are retired or they are not in work—they have no chance to earn an income, so what we give them is what they get, and we need to make sure that it is sufficient.

[Alan Brown]

The hon. Gentleman is making an excellent speech and a very good point. Ministers sometimes concentrate too much on the number of job vacancies across the country, as if somehow they can all magically be filled, but the point is that not everybody can fill those jobs. There are demographics and geography at play—it is not as if people can just uproot themselves and move to get another low-paid job somewhere else. The Government really need a better understanding of where the vacancies are, with skills and training programmes targeted at filling vacancies in the long term.

[Nigel Mills]

The hon. Gentleman is absolutely right: we cannot expect somebody to move hundreds of miles in that situation. Equally, anybody who can work should work, and should be supported and given the training to do that when it is in their best interests. I do not meet many people who can work but do not want to; I think most people who can work with the right support are very keen to.

I will vote for the draft orders tonight. I think our choice is a 3% rise or nothing, so it seems slightly self-defeating to vote against them, but I ask the Government not to take the House’s approval as a sign that it agrees with the position we are in. The Government could use their discretion and make the increase higher than inflation if they wanted to, just as they have chosen many times to make it lower than inflation. We knew that this problem was coming; it has not turned up in the last fortnight and got us chasing around.

I am not even asking for something that would be a long-term cost. All we would be doing is bringing forward to this year the rise we would give people next year, so that they have it in time to pay their higher bills, rather than six months after getting them. That is the impact of the calculation that we do, and if we do not get it right, we will be putting people in an impossible situation.

The idea of having a welfare system that we can control so we can give people transparency and up-front certainty is that it is there to give them the support they need. We cannot keep filling holes with discretionary, complicated schemes that people may or may not find about, that are done differently by councils all around the country, and that may or may not exist in the long term. The whole idea of a universal credit system was that it would be a benefit that rolls everything into one and gives people the support they need. By doing all these occasional one-off top-up schemes, we are admitting that the main benefit is not in the right place.

I urge the Government to take a step back, to remember our core purpose of giving people enough to live on—not luxuriously or hugely generously, but with a decent standard of living—and to be absolutely sure that they have achieved that and are still achieving it. If they have any doubts, they must do the work to publish it and prove it, and if we need to fix it, let us get on with fixing it.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Select Committee on Work and Pensions.

Draft Social Security (Scotland) Act 2018 (Disability Assistance for Children and Young People) (Consequential Modifications) (No. 2) Order 2021

Nigel Mills Excerpts

Tuesday 2nd November 2021 General Committees

[Nigel Mills (Amber Valley) (Con)]

I have a quick question for the Minister. He talked about the 13-week run-on when a child moves from Scotland to England. Can he assure the Committee that that period is long enough for whatever UK assessment process would be required for a child in that situation, so that they receive the UK-wide benefit in place of the Scottish one and the family does not experience any interruption in benefit payment? Is 13 weeks long enough, or should that period be longer? Can we rely on the evidence provided in Scotland to speed up the process, or should we allow a family who know they are about to move to apply for the UK-wide benefit in advance so that there is more chance of a seamless continuation of benefits for their child?

Social Security (Up-rating of Benefits) Bill

Nigel Mills Excerpts

2nd reading
Monday 20th September 2021 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate. May I start by paying a tribute to my hon. Friend the Member for North Swindon (Justin Tomlinson), who is in his place, and my hon. Friend the Member for Colchester (Will Quince) who left the Department in the reshuffle last week? We may have had our robust scrutiny sessions, but all of us would recognise that both Ministers were fully on top of their brief, keen on the issues and very competent. We wish them both luck in the important jobs that they will have in future, and we welcome the two new Ministers, including my hon. Friend the Member for Macclesfield (David Rutley). I have enjoyed him being my Whip even more than he enjoyed being my Whip. [Interruption.] To be fair, I think I was the first person to make their Whip vote against the Government during the covid proxy period, so perhaps he really will be glad to have a different job, rather than having to go through that again. None the less, I wish both Ministers all the best in their new roles and look forward to seeing them soon.

I rise to support this Bill. I have been calling on the Government for about a year to fix what will obviously be a problem with the earnings blip due to the reductions at the start of the pandemic and then the hopeful rebound this year. I think it is right that the Government have taken this step and to do it with more than six months’ notice, so that pensioners will not be expecting an 8% rise and then have their hopes dashed in March. Those pensioners now have plenty of warning that that huge rise will not be happening. I think that most people are clear about this given what we have seen over the pandemic, with people losing their jobs, being put on furlough, and losing their earnings. All that insecurity has hopefully passed, but with furlough ending in a few weeks’ time, we may have a further round of that. The idea that a promise that was put in place to ensure the state pension kept pace with earnings would deliver an 8% rise in the state pension, on top of a 2.5% rise the previous year, is not remotely in the spirit of what this promise was meant to be. Most Members who, like me, strongly believe in the triple lock and want it to last a very long time, recognise that it needs to sustainable and reasonable. Had the Government tried to plough ahead and retain the 8% rise, that would have been the biggest threat to the triple lock in the future. It would mean that the Treasury, with its eagle eye, would think that this was a promise that could not be sustained for the long term. I hope we are now clear that this is a one-year suspension and that the triple lock will then be retained in its current form in the long term. That is the right policy and it is what we promised in our manifesto.

I was slightly confused by the Opposition’s approach. They appeared to say that the Government are not being transparent and are breaking a promise, but then accepted that 8% is too high. They therefore seem to be suggesting that the Government should go away and try to find a new definition of earnings that is different from the one that has been used for the 10 years of the triple lock, and that they should come up with a number that is a bit lower than 8% and a bit higher than the 3% or so that inflation would probably give to pensioners. The Opposition seem to think that it would somehow be fairer, more transparent and more honest to say to pensioners, “We aren’t breaking a promise; we’ve just contrived a new definition that gives us the answer that we think is acceptable.” That is clearly nonsensical.

Either we say that we will stick with the 8% that the law puts in place, or we do what the Government are doing here and say, “Look, we can’t stick to that measure. Let’s do something reasonable and have inflation or 2.5%, whichever is higher this year.” That is a clear policy. It is a calculation that we can all see and scrutinise, rather than asking the Government to contrive something that would necessarily be rather odd and artificial, and through which I suspect we would end up in a whole load of court cases while the Government tried to defend why they had picked one arbitrary earnings measure rather than another just to produce a number they were happy with in the first place. I do not see how we could produce a robust process in that situation.

I would have had some sympathy with the amendment of my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), had it been selected, because I believe that the Government should retain the universal credit increase, at least for the next six months until we can be sure that the pandemic is finished. That amendment was not selected, so I cannot face the quandary of voting for it. I will happily support the Government tonight in a sensible measure that saves the public finances an unsustainable increase in the state pension that was never in keeping with the spirit of the promise and which in the long term will preserve the triple lock as the right way of protecting state pensions.

Pensions Update

Nigel Mills Excerpts

Tuesday 7th September 2021 Commons Chamber

[Dr Coffey]

The hon. Gentleman may want to speak to his Cabinet Secretary because, at the moment, the Scottish Government are not using the powers that have already been devolved. I am conscious that they intend to but it is taking quite a lot longer. One of the reasons given by them, reasonably, is the impact of covid. However, he may wish to take this up with his colleagues in Holyrood.

I am conscious of the concerns about pensioner poverty. As I mentioned, we have seen a reduction, with about 200,000 fewer pensioners in absolute poverty before and after housing costs than over a decade ago. We want to maintain that. It might be informative to the House if I mention that material deprivation, one of the other measures of poverty, is at an all-time low, with 6% of pensioners considered materially deprived. The overall trend of pensioners living in poverty has seen a dramatic fall in recent decades. That started off with the Conservative Government and then continued with the Labour Government. We have seen that halve since 1990. However, I assure the hon. Gentleman that this measure is for one year only. That will be on the face of the Bill, and I am confident that that will not be amended.

[Nigel Mills (Amber Valley) (Con)]

Will the Secretary of State confirm that this is a one-year change and that she is not taking the various suggestions to scrap the triple lock completely, so it will be restored from next year? Secondly, does she believe that when we have put this rise through, the pension will realistically have roughly kept pace with the rise in earnings over the three-year period from before the start of the pandemic, or does she think that the rise will end up being a bit less than earnings on a real basis for the average worker around the country?

[Dr Coffey]

It would probably not be wise for me to go down that route, because we are still trying to estimate the likely uplifts in the different metrics. We will not actually use the figures until later in the year, but because of how the machinery of benefit upratings works, we need to be in a position to trigger it in November. Given my hon. Friend’s position on the Work and Pensions Committee, he may wish to ask that question a little later once we have some more detailed analysis in that regard, if that is okay.

Oral Answers to Questions

Nigel Mills Excerpts

Monday 17th May 2021 Commons Chamber

[Justin Tomlinson]

I am conscious that my hon. Friend has raised some specific cases directly with me. As we return to normality, we have received more claims than normal. We are working hard to get through those as quickly as possible, with average clearance times slightly up from 16 to 19 weeks. As face-to-face assessments start to return, those unable to be assessed through paper-based reviews, telephone or video assessments will be prioritised.

[Nigel Mills (Amber Valley) (Con)]

What steps her Department is taking to ensure that the welfare system helps support tenants with rent arrears to sustain their tenancies.

[The Parliamentary Under-Secretary of State for Work and Pensions (Will Quince)]

At the start of the pandemic, we invested almost £1 billion in local housing allowance rates, and we have made £140 million available in discretionary housing payment funding for local authorities in England and Wales, to support those struggling with housing costs. We continue to work closely with the Ministry of Housing, Communities and Local Government to support people to sustain their tenancies.

[Nigel Mills [V]]

I thank the Minister for that answer. Would he accept, however, that there are many tenants who, through no fault of their own, will be in significant rent arrears and therefore facing eviction in the next few months, and will he therefore work on a cross-Government basis to find a solution that means those arrears can be cleared over a sensible period and those tenancies secured?

[Will Quince]

I thank my hon. Friend for his question. We continue to work very closely with the MHCLG to find long-term solutions to housing challenges. Work coaches are trained to identify people with potential housing issues and to provide tailored support, including referrals to homelessness services or debt advice. Discretionary housing payments are available, and the Government will make available a £310 million homelessness prevention grant for local authorities. However, I would of course be very happy to meet my hon. Friend to discuss what further measures we may be able to take.

Pension Schemes Bill [Lords]

Nigel Mills Excerpts

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

Implementation of the pensions freedoms without the intended safeguards has caused a great deal of harm. We must now put those safeguards in place. I welcome the assurances that the Minister has given, and I welcome the fact that the Department will consult widely on the regulations to be drawn up in parallel with the Select Committee inquiry. I hope we can make speedy progress. Drastically increasing the take-up of Pension Wise guidance, as proposed in new clause 1, is a key part of the solution.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in the debate, to follow the right hon. Member for East Ham (Stephen Timms), the Chair of the Select Committee and to speak to the amendments that he has tabled and I have signed. I will start where he did, with the issue of mandatory guidance—or as near mandatory as we could make it, as I raised on Second Reading.

The right hon. Gentleman quoted the key statistics, which show that the take-up of this excellent, high-quality service—it attracts brilliantly good feedback from those who use it, and the people who provide that service accept that it changes the mind of 70-something per cent. of those who actually use it—is feebly low. Trials showed that the figure was somewhere around 3%, before the nudge was implemented. That is not what this Parliament envisaged when, five or so years ago, we introduced the pension freedoms. The safeguard we put in place at that time was to create the Pension Wise service: free guidance so that people would have the chance to check what they were doing was the right thing for them in exercising choices they did not used to have. Those choices are incredibly complicated. In many cases, they are a once-and-for-all: once they have done something, they cannot reverse out of it.

That is why, as a Parliament, we were so keen for people to have that chance of a warning and to understand how this all works. They save up all their money for 40 or so years at work and get to the very end point. In many cases, they do not understand all the options. They do not know what they are being sold and they buy the wrong thing. The data in the FCA’s own retirement outcomes review from about three years ago shows that a high proportion of people are just defaulting into a drawdown scheme with their existing pension provider. They are not shopping around and looking at the other options.

[Ms Angela Eagle]

Does the hon. Gentleman agree that at the moment the decumulation pension industry is unregulated, so there is no transparency on costs or on the kind of charges that may be applied to drawdown schemes? That is another area where people might be being scammed.

[Nigel Mills]

I am grateful to the hon. Lady. If only she was on the Select Committee, because that is an issue I have raised on a few occasions. Over the past decade or so, we have very effectively regulated the accumulation phase, but we have not yet got the decumulation phase in quite the same position, with charge caps. The default pathways are a great step forward that will help people, but there is a real danger even with that that people will end up on a default pathway with their default provider, rather than looking around to see whether there are any better options in the market.

We desperately need to find ways to get more people to access the free high-quality guidance. There is no reason for them not to do so. They do not have to pay a huge fee or wait a long time, and it is not a painful experience. It can be a relatively short phone call just to alert them to the situation and provide information. We need to get those numbers up. Last time we had a pensions Bill we had amendments calling for default guidance. We accepted a compromise that the FCA would do some work and find a way of increasing take-up so we would not need to legislate. The problem is that the FCA, I am afraid, took quite a long time to get round to starting the process. It did studies with some larger pension providers, showing that if they used the nudge with an extra reminder and gave them the information that Pension Wise exists, they could get take-up up to about 14%, or one in seven people.

I accept that we do not want or need 100% of people approaching retirement to take pension guidance. Some will be on such large pensions they will take advice that they pay for. In that situation, there is not much need for them to have simpler guidance. The irony is that the data shows a lot of people use pension guidance as a first step towards advice. They use guidance to work out what their options are and what they might need advice on, and then they go and get advice. That is a perfectly sensible use of guidance. I am not standing here saying let us have 100% of people, no matter if they have a tiny pension pot and there really is not much they can do with it, or if they have such huge ones they should be taking paid-for advice, but the right answer cannot be 14%. Even if we manage to roll out the nudge across every pension scheme in the country, we can only get to 14% of people. That cannot be the extent of our aspiration. That is why there have been various proposals on how we send people an appointment. If they do not take it, they can rearrange it, but until they have taken that appointment, or until they have signed to say that they understand they could have one but that they really, really do not want it, they cannot access their pension pot. I appreciate that some people will be rather angry when they pick up the phone to their pension scheme and are told they have to wait three weeks for a Pension Wise appointment before they can do that, but that, I think, is a price worth paying for them not to make a terrible mistake that they cannot reverse.

There is a real danger if people only get the nudge from their existing provider. We have all heard or taken part in those phone calls where we are told, “Now I’m going to have to switch the recorder on and read out some regulatory messages, but don’t worry, it’s all a bit of nonsense. It’s just one of those things we have to tell you. You don’t really need to listen. At the end just say yes.” Then they record the phone call and in that long spiel of “nonsense” there are the words, “and you have agreed to opt out of your Pension Wise appointment” and that is sufficient. That is the situation we are trying to avoid: people relying on one provider for their information.

I can accept that, as with all Back-Bench amendments, this proposal is not perfect. Is five years the right time? Are we going to end up spending far more than we need to? If, for some reason, the Minister will not accept this and has not come forward with alternative ways of doing this in law, I hope that he will at least accept that, even if we could roll out the nudge to all the providers that are as good as the ones the FCA used, a 14% aspiration is not sufficient. We could all work together, with the Select Committee and other key players, to work out what we think the right percentage take-up of Pension Wise would be, set that as a target for the FCA and if in two or three years it cannot get to that target, we can come back with legislation and put a default position in place. This would be a final warning to the FCA.

[Guy Opperman]

I am conscious of interrupting my hon. Friend’s flow, but that is clearly what the Government are seeking to do. Anyone who reads the 28 October report will see that it specifically states that there should be engagement with the Select Committee and various organisations. It also says that the product of the behavioural tests was limited, but there are many other ways that one can extend this as far as is practically possible.

[Nigel Mills]

I am grateful to the Minister. That document came out on my birthday, so it was a very happy present in some ways. When we read it, however, we have to remember that the process the FCA went through was with some of the largest, most reputable and most capable pension schemes, and even then it got only an 11% increase from the derisory 3% to a 14% take-up. It is not clear to me that, when trying to roll that out over the whole sector, we could even get that high if we were relying on smaller pension schemes or those that did not have the same resources. I hope the Minister will accept that we want to set a target that is much higher than 14%. Whether it needs to be 50% or some other figure is something that we could work on. Perhaps he could tell us in his closing remarks whether he agrees that the Government should set the FCA a much higher target. Would he at least accept the principle that, if we cannot get there by his preferred route of a nudge, we would have to look again at some kind of default system? Perhaps he will come back to that when he wraps up the debate.

One argument that is often used on this issue is that a lot more appointments would cost a lot more and that the levy would therefore go up. Yes, but I think that when we created this structure, we assumed there would be a lot more appointments and that the costs would be a lot higher. The benefits of a retiring person not making a catastrophic mistake with their 40 years’ lifetime savings outweigh the relatively small cost per person of providing the guidance. I know the Minister is very keen, as I would be, on the idea of a midlife MOT, but I do not think that that should replace this proposal. Giving someone a session in the middle of their working life, so that they know what their financial position is and what they can do about it, is not the same as giving someone help as they are about to start decumulating their pension so that they understand their options at that very important time. I am not sure that, if we told most people at the age of 45 what their options would be when they retired at 68, they would still have them in mind when they came to make those decisions. Pension Wise is not a substitute for a midlife MOT. We should have them both, and they should be as widely used as possible.

I personally would prefer a default guidance appointment, with someone having to sign in blood if they really did not want this free, excellent quality guidance before they could access their money. If the Government are not proposing that, I propose the compromise of setting a much higher target and if we cannot get there any other way, we will come back to this yet again.

The other amendments that I have signed cover scam prevention, which I think the Chair of the Select Committee and the Minister have dealt with pretty well. I accept there has to be a balance. If we have freedom of choice, people have to be free to do what they want with their own savings, and if some of the things they choose to do are ill advised or crazy, that is their choice. However, I want them to be able to make an informed choice so that they know the risks of what they are doing and will not be tricked by a heavy sell from a scam provider who is selling something totally unsuitable for someone of that level of means.

It must be right that when trustees have evidence or suspect that what they are being asked to do is clearly not in the best interests of the saver, they can refuse to make the transfer if those red flags appear. If there is other evidence that it just looks to be a rather stupid idea, they should at least be able to slow down the transaction, perhaps delaying it by a month. Perhaps they could refuse to do it unless the person took Pension Wise guidance, or at any rate find some way of slowing it down. One of the things that scammers need is momentum—they rush people into making a decision. The more we can build in delay, the more chance a person has to think again, take better advice, discuss it with a member of their family, take Pension Wise guidance and not want to go ahead with the aggressive step that has been proposed to them. The Minister has come up with a way forward that does not need primary legislation, so I am glad that we are bringing the amendments forward only as probing amendments.

--- Later in debate ---

[Anna McMorrin (Cardiff North) (Lab)]

Is the hon. Member saying that climate really is not very important because that is what I hear him saying on this? He is giving the trustees no confidence in having to make those decisions. How does he expect us to reach zero carbon by 2050 if that is the case?

[Nigel Mills]

I was coming on to say that there are better ways we could do this. I accept that we should encourage funds as strongly as we can to use the vast sums at their disposal to support investment in climate goals and other socially positive activities, but that should be done in part through member choice. There should be eco-friendly pension schemes and socially responsible ones, but they should allow their members to choose to opt into those schemes, and not have them as the default, if they are going to have a lower pension at the end of it.

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

Does my hon. Friend agree that an unintended effect of amendment 16 might be that pension funds feel they have to divest themselves from oil giants and so on? Those are the companies we need to address climate change—we cannot get to net zero without working with them—and divestment is not the right approach.

[Nigel Mills]

I agree, and I was coming on to that argument. I am not sure that achieving net zero can be pushed down to individual pension schemes and individual investment advisers. I suspect we will have to accept that between now and 2050, there will be some businesses out there that are bad for the environment but we are still going to need their products and services. We will need some of those even after 2050. We will achieve net zero by having other businesses that are more positive for the environment, with some still being bad for it. I am not sure that we can require every individual pension scheme to be a net zero investor. Otherwise, there will be a load of things that they just cannot invest in, as they cannot achieve that strategy.

I fully agree with the sentiment and agree that the industry needs to do more. I said on Second Reading that what we do not need are posh written documents that sit there with nice-sounding promises that never get implemented. We need pension schemes and their investment managers to be much more—

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

I will not address this in detail because I will have my own opportunity to do so, but I make it very clear that the amendment does not enforce or mandate pension funds to be net zero. It would ensure that they have an investment strategy, including a stewardship strategy, that is consistent with those objectives. It is drafted specifically to address those concerns and hon. Members have nothing to worry about in that regard.

[Nigel Mills]

I am grateful to the hon. Member, but I am not sure what the amendment would achieve then. If we say to a pension scheme, “You need to make sure that your overall investments are consistent with the nationwide net zero strategy”, they can just say, “Of course we are because there is a nationwide net zero strategy and we are just investing in legal businesses”, which we would presumably put taxes or carbon levies on to make sure we push this. It becomes a circle that would presumably mean only that the trustees have to produce a strategy and occasionally review it. It would not actually drive a great deal of different behaviour. I think I would want to see much more activist investment from pension schemes and their investment advisers to ensure that the businesses that they are investing in are sticking to their obligations and strategies on how they can reduce their impact on the environment, making sure that those promises are being kept on a management level rather than setting trustees an impossible target, which I am not sure would even mean what hon. Members seek to make it mean.

[Guy Opperman]

I endorse my hon. Friend’s comments, but surely the key point about clause 124 is that it does set out what we are trying to do on that issue, and it deals with the consultation that we issued in August specifically on the point that the hon. Member for Cardiff North (Anna McMorrin) raised, taking action on climate risk and improving governance and reporting by occupational pension schemes. That is the measure that we should be focusing on.

[Nigel Mills]

I am grateful to the Minister and I agree. The measures in the Bill are very sensible steps forward that will make a great difference. What is proposed in amendment 16 would just create a horrible mess for the pensions industry without really achieving anything further, so I will not support it if it is pushed to a vote.

[Wendy Chamberlain (North East Fife) (LD)]

I would like to speak to amendments 1 and 6, which have been tabled in my name and the names of other Liberal Democrat Members, and in favour of the cross-party amendment 7, tabled in the name of the hon. Member for Airdrie and Shotts (Neil Gray), as well as to his new clauses 4 and 5. I was very pleased to see new clauses 4 and 5 tabled and I pay tribute to the work of the all-party group on plumbers’ pensions—chaired by the hon. Member for Perth and North Perthshire (Pete Wishart)—of which I am a vice-chair.

I have a constituent who was a member of the plumbers’ pension scheme, and the trustees failed to notify him and others that, were they to leave the scheme, he would find himself liable under section 75. He had been a responsible small business employer, enabling all his employees to be part of a pension scheme and to save for their retirement. When he retired and wound up the business, he was not made aware of the consequences by the trustees from a pensions perspective of doing so. That means that through no fault of his own, he is now in a position where, because his business is no longer operating, he cannot apply for current easement schemes and, because his business was not incorporated, he is personally liable for the debt. He is now an elderly man and is being pursued by the trustees. They are threatening to repossess his house and his life savings are at risk. Were that to happen, the sums recovered from him would not even pay off half the outstanding debt.

My constituent told me:

“We are now in the third year of this, and it is taking a toll on my health, and also on the health of my wife.”

If passed, new clause 4 would turn my constituent’s life around. The safeguards are there. His total debt is only a tiny proportion of the total liabilities, and the trustees have determined that the majority of cessation events will be too costly or lengthy to seek recovery. That is one of the issues here: there is an injustice going on that has not received the attention it deserves because relatively few people have been affected by it, but that also presents the opportunity that something can be done and I hope that the Minister will comment accordingly on new clause 4 and look further at this plumbers’ pension issue. It is causing hardship and anxiety for, arguably, an increasingly vulnerable group of people.

I shall now address part 5 and schedule 10 and, in particular, clause 123 on defined-benefit schemes. My colleague in the Lords, Baroness Bowles, tabled the original amendment to clause 123 that would ensure that defined-benefit schemes are treated differently, depending on whether they are open or closed. I pay tribute to Baroness Bowles. Her amendment had cross-party support in the Lords, so it was disappointing that the Government removed it in Committee two weeks ago.

My amendment 1 would reinstate Baroness Bowles’s amendment, and amendment 7 in the name of the hon. Member for Airdrie and Shotts is a revised version of it, which I have also signed. I did not have the chance to sit on the Bill Committee, but I did follow proceedings and I was encouraged by the Minister’s comments during Committee on open defined-benefit schemes. He said:

“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.”––[Official Report, Pension Schemes Public Bill Committee, 5 November 2020; c. 81.]

I welcome those comments, which imply that open schemes should, and will, be treated differently from closed schemes, in accordance with different investment, liquidity and maturity, and I hope the Minister will be able to recommit to that statement on the Floor of the House today. I urge him to accept either amendment 1 or amendment 7, which would put that commitment on the face of the Bill and provide much needed reassurance for open schemes that have contacted me, and, I am sure, have contacted other Members, in advance of this debate.

We need that reassurance because there is real concern about the regulator’s consultation. Looking at the consultation document, there are places where it looks like the regulator is making the right noises on DB schemes.

Pension Schemes Bill [Lords]

Nigel Mills Excerpts

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

[Dr Coffey]

My hon. Friend is right to say that dashboards could encourage more people to consider consolidating their pension pots. There is guidance out there, and the Pensions Minister assures me that we are continuing to review the costs and charges that can happen in that regard. There is an element of administration cost that comes with such transfers, but I can assure my hon. Friend that we are on the side of the consumers who are saving to ensure that their money goes as far as possible for their future.

The Bill sets out the legislative framework for dashboards and makes provision to compel pension schemes to participate and provide good-quality data in a timely manner. The Pensions Regulator and the Financial Conduct Authority will be responsible for ensuring compliance by schemes. In the other place—this is perhaps covering a little of what has already been said—we introduced Government amendments to make it crystal clear that there will be a public dashboard, which will be overseen by the Money and Pensions Service. As I have already shared with the House, we want to ensure that we increase people’s engagement with their pensions, so it is important that the dashboards are accessible to as many people as possible. Some 52 million UK adults have pensions savings, involving over 40,000 schemes. That is why I believe that having multiple dashboards is the best option, ensuring people can easily access information to manage their financial affairs for today and tomorrow.

Part 5 covers a range of policies. Clause 123 and schedule 10 introduce new provisions with regard to scheme funding. Most sponsors and trustees work well together and use the flexibilities of the current scheme funding regime reasonably, but good practice is not universal. The scheme funding provisions seek to help trustees of defined benefit schemes to improve the way they manage scheme funding and investment. They will also enable the pensions regulator to take action more efficiently to safeguard members’ pensions and to mitigate risks to the Pension Protection Fund.

Climate risk is a key worry and concern for many people in this country. The Government are resolute in how we want to help to tackle emissions to achieve our commitment to net zero by 2050. The Bill will make the pensions system greener and support the commitment to get to net zero by 2050. Clause 124 contains regulation-making powers to require scheme trustees and managers, for the purpose of managing climate-related risks, to take climate change goals, including the Government’s net-zero target and the Paris agreement temperature goal, into account. The clause enables regulations to be made mandating pension schemes to adopt and report against the recommendations of the taskforce on climate-related financial disclosures. This will ensure that occupational pension schemes take into account climate change and the response to climate change in the Government’s risk management and investment strategy, and report on how they have done so. Such measures will ensure that occupational pension schemes take climate change into account and require that trustees disclose progress to their scheme members and the public.

Climate change is one of the defining challenges facing the planet for this and future generations, and the trillions invested in pension funds worldwide offers an enormous opportunity to build back better, greener and sustainably. I am extremely proud that we are at the forefront of efforts to effect real and lasting change. These pension measures are among the first of their kind on the international stage.

[Nigel Mills (Amber Valley) (Con)]

Does the Minister agree that the responsibility for pension scheme trustees goes further than just reporting having a strategy? Once they have invested, they need to engage and to monitor their investments to ensure they actually comply with their obligations to try to drive through that performance change.

[Dr Coffey]

I understand exactly the point my hon. Friend makes. My understanding is that the Financial Conduct Authority is changing its guidance or approach to make sure that asset managers are also getting on board. We are trying to ensure that asset managers, as well as trustees, are aware, so we have that collaborative arrangement to make sure we can make progress on this important use of pension funds.

One big concern people have relates to scams. Clause 125 further protects savers from falling victim to unscrupulous scammers when considering transferring their pension pots. The measures allow us to place conditions on a scheme member’s right to transfer their pension savings to another pension scheme. This will protect members from pension scams by giving trustees of occupational pension schemes a level of confidence that transfers of pension savings are made to safe, not fraudulent, schemes. Regulations will proscribe the circumstances where there is a high risk of a transfer to a fraudulent scheme and could require scheme members to obtain information or guidance before transferring.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in the debate on this excellent Bill, and I think that I echo most of the remarks we have heard so far by saying that there is nothing in the Bill really to oppose. It leaves most of us looking for things we would like to add to the Bill, rather than being upset with anything that is already in it.

Much as the Opposition spokesman said, there are some key challenges for pensions, and I will address how the Bill tackles those challenges. The three challenges I generally look at are how we can increase people’s engagement with what their pension means, how much they need and what they are likely to have in their retirement; how we can increase the number of people who get a decent pension in retirement, rather than just some small amount of money; and how we can protect what people have actually saved. The Bill makes progress on all three, but the key thing is engagement.

If we can get engagement right, people will understand how important the issue is, what it means and what some of the risks, consequences and benefits are. Through that, we can probably get people saving more, and we can help stop them being a victim of a scam or making a bad choice when they get to retirement.

It is tempting to think, because we have 10 million more people saving for pensions through the great success of auto-enrolment, that we have fixed the engagement problem, but the opposite is true. Auto-enrolment has not been such a success because people have engaged; they just have not chosen to opt out, and that was the whole basis for the inertia that was the reason for the adoption of auto-enrolment. We need to do more to engage people to make them understand exactly what all this means and what their retirement will look like if they carry on saving as they are.

The pensions dashboard is a key component. If we can get that right and people can go on to something and find out how much they have saved, find out what pension they would get from that, find out perhaps what ideally they would have saved by now and what their shortfall is, and then get some ideas for what action they should take over the rest of their working life and how to close that, then we can genuinely improve the outcome people will have from their saving.

The challenge we have with the pensions dashboard is that we will get those improvements in behaviour and the outcomes we want only if people actually go on the dashboard on a regular basis and find the information they need. I would be more sceptical about how advantageous a stand-alone MaPS dashboard would be, because I have a horrible feeling that if we write to people and say, “Here’s your logon and here’s your password,” some people might log on the first day and think, “This is great—it’s really useful,” but would they remember it existed next year, the year after, when they get to their mid-life MOT time and when they get to their retirement? For a whole load of people, that envelope will never get opened, or would go in a drawer and basically just be gathering virtual dust.

We need to get that information to where people are managing their finances—whether their banking app or whatever else people are using. I am not too precious about whether there is a one-year gap before we open up that data, but I think for this to work and to get the advantages we seek, we need to get it further than just one dashboard that people might look at if they remember it exists and they can find their password and their username. That is not how this will really work.

I would not support having two-way functionality. The dashboard has be about sucking out data, not a transactional dashboard. I would hate the idea that someone could go on the dashboard, click a button and do something to their pension after a few beers on Friday night. That would be a crazy thing to get into. The model we have of a dashboard that sucks out data when it is asked for it is the right one. However, we need to get people using it, not just have it gathering real or virtual dust.

The challenge we do really need to address on pensions is how we get people from saving a pretty small amount of money, which will not get them the quality of retirement that they think it will, to saving the amount that they need. That is where collective defined contribution schemes can play a really important part, if they are used as an improvement to DC, not as a weakening of final salary schemes. I think that we would all encourage employers who do want to give their staff the best possible pension to think about whether they can move from a DC to a CDC to give their staff a far better outcome.

The Secretary of State called my hon. Friend the best Pensions Minister in living memory, and I think here that is indeed true. Steve Webb may claim that prize, as perhaps the longest-serving Pensions Minister in living history, but this Minister will not just bring on to the statute book a dream of defined ambition or a third way, but actually see schemes in this space, and it will be a real achievement if we can get these schemes operating.

My only caution is that it when we are selling the advantages, we should be clear that there is no magic. There is no employer guarantee here. The reason why someone gets a much higher pension from this is that the people who, sadly, die earlier in their retirement will in effect be paying for those who have a longer life to have a higher pension. That has always been a feature of defined benefit schemes and it is a feature of annuities, but we should not let people think that somehow this extra pension comes from nowhere. People should understand that they will not have their own pots to pass on to their family if they are one of the ones who, sadly, dies young. At times, the marketing of these has been a little bit over-optimistic about what the benefits of the improved investing strategy or the reduced costs are, when most of the increased pension actually comes from the collective risk sharing.

It is a pity that the Bill has not looked at how we can expand the scope and rates of auto-enrolment. I understand why that has been done, and I know that we have set a mid-2020s timetable for further increases to the rate and changes to the age or the scope of earnings. However, the fact that we have seen opt-outs be far lower than we thought does create the scope to bring forward some of those changes in trying to get people much higher than the 8% savings ratio and nearer to the 12% that we think they really need, or to at least the 12% that we think they really need.

My final area of remarks is on how we protect people and protect what they have saved in relation to scams. There are clearly welcome measures in the Bill, but we possibly could look at how we can go further to make sure that we are putting every tool out there that can possibly be there. We heard evidence at the Work and Pensions Committee this morning from pension scheme administrators, and there is the awful situation where they suspect that the transfer being asked for might be a scam, but they cannot be absolutely sure. They have a duty to make such a transfer, but can we find a way to allow them to delay the transfer a little while so the member can have some more information and a bit of time to reflect and make absolutely sure that that is what they want to do before they go ahead? That sort of change in emphasis in relation to the powers would be really helpful in this situation.

We also need to go further in ensuring that, if people cannot afford advice, they at least take guidance from Pension Wise before they take fundamental decisions. Last time a pensions Bill came before the House—there is one every few years—amendments were tabled to try to make accessing pension guidance if not compulsory, as close to compulsory as we could get. It was suggested that before money was moved, there should be a release code from Pension Wise, to say that the person had taken guidance. The compromise at that point was to get the regulator to go away, do some work, and put measures in place to try to include that nearly mandatory use of guidance. Regrettably, however, the regulator has been incredibly slow, and three years have gone by without us seeing a great deal of action. I hope that this Bill will be clear that that is what we expect the industry to do, and the regulator should put that in place and monitor it.

We want everyone who has saved for decades not to make a horrible mistake at the last minute, and to take that free guidance. Such guidance has huge support and receives overwhelmingly positive feedback, and there is no reason for someone not to take high quality free guidance before risking thousands of pounds that they have saved. I accept that we cannot make that compulsory, but it should be as close to that as possible.

On pension consolidators, the idea of consolidation for weaker, smaller defined benefit schemes is attractive, and I welcome the market moving in that direction and the regulator’s approach so far. However, given that pensions Bills do not come before the House that often, I wonder whether we have missed an opportunity to put some of those rules on a statutory footing. Normally, I would not want the Government to include a clause that allows them to make secondary legislation, as that is not great for parliamentary scrutiny, but I wonder whether the power to introduce such rules could have been included in the Bill, should the regulator start to believe that regulation alone does not have the force or impact that we need. We would not want one of those consolidators to get any kind of market share if we are not sure that it is improving the situation for members, rather than making it worse.

Finally—I asked the Secretary of State about this—the pensions industry can be a huge force for good, and thanks to auto-enrolment it is investing billions of pounds every year. However, it should not invest passively, or just put money in, leave it there, and see what happens. When we have scandals, or corporate failures or disasters, we frequently see that large investors in some companies have not been playing an active role in ensuring the high standards that they should have expected. We must send out a loud and clear message that, where pension schemes and their asset managers are sizeable investors in some of the largest and most significant businesses in our country, we expect them to play an active role in the stewardship of those companies, and not just leave it to others. That is essential if the climate change measures in the Bill are to work. We should not just expect a report every couple of years.

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

I hesitate to interrupt my hon. Friend’s flow, but there is an ongoing consultation on illiquids and consolidation. I endorse what he says about stewardship. He will no doubt be aware of the consultation that closes this week, which specifically encourages active stewardship regarding the management of large funds as he describes.

[Nigel Mills]

I am grateful to the Minister—perhaps he will submit my views to those consultations. This is about a behaviour change. It is not enough for us to just put rules in place; we need such behaviours to become the norm for large pension schemes that are investing huge amounts. That needs to be part of the behaviour; otherwise, we will have yet another report that gathers dust and that nobody really reads. Members and savers expect such measures. They want their money to be invested well—ethically, and in businesses that will improve the climate outcome. That would be good for pension schemes and their members, and companies need to take such measures seriously.

Universal Credit: Court of Appeal Judgment

Nigel Mills Excerpts

Thursday 25th June 2020 Commons Chamber

[Will Quince]

I did not entirely catch the question, but I think the hon. Lady is referring to the disparity between universal credit and legacy benefits. I would say that this Department acted at incredible pace to operationalise and bring in measures as quickly as possible to help those who have been most financially disadvantaged as a result of covid-19. That is why we did it through the vehicle of universal credit. Legacy benefits will be reviewed and uprated ahead of April 2021 as per usual.

[Nigel Mills (Amber Valley) (Con) [V]]

Is there any merit in having another look at the timing of assessment periods, such as having them generally fixed to the end of the month to remove some of the issues that seem to keep arising?

[Will Quince]

It is something I am exploring as I look at our different options. My hon. Friend is an experienced member of the Select Committee, and I am happy to work with him and to hear his ideas. It is important to stress that for the majority of the circa 5 million claimants, the date of their assessment period works well. Changing assessment periods to align with pay dates is problematic. Nevertheless, everything is on the table, and I am looking at all options. The court judgment was very recent—only on Monday—so I hope that the House will give me the time and space to look at this in the granularity of detail that it requires.