Oral Answers to Questions

Rob Roberts Excerpts

Monday 5th February 2024 Commons Chamber

[Mel Stride]

I congratulate my right hon. Friend on the extraordinary work that she does locally to promote apprenticeships. I believe she was involved in a jobs fair on 24 January, hosted by Reed, which was highly successful. The employment rate in her constituency is 81%, well above the national average, which I put down almost entirely to the work that she is doing. She asked how we would proceed. We already have swaps, bootcamps and returnerships, but I am indeed looking at specific areas of the labour market, particularly in the context of migration changes, where we may be able to do more on a strategic basis.

[Mr Rob Roberts (Delyn) (Ind)]

14. What recent assessment he has made of the potential cost of restoring parity in the level of state pension received by UK citizens living overseas.

[The Parliamentary Under-Secretary of State for Work and Pensions (Paul Maynard)]

According to the latest estimate, based on data from March 2022, uprating the state pension where we do not currently do so would cost about £0.9 billion a year if all UK state pensions in payment were increased to current UK levels.

[Mr Roberts]

Following our withdrawal from the EU, we are rightly able to move closer to our partners in the Commonwealth. One way in which we could do that would be to confirm that all British citizens who live in the Commonwealth should be entitled to the appropriate uprating of their state pensions as if they were still in the UK. That would seem to be a matter of simple fairness. Will the Minister meet me to discuss the practicalities of making it happen, and restoring some much-needed common sense to a needlessly complicated situation?

Oral Answers to Questions

Rob Roberts Excerpts

Monday 31st October 2022 Commons Chamber

[Laura Trott]

I am sorry to disappoint the hon. Gentleman but I must repeat that I cannot comment where there is an ongoing investigation.

[Rob Roberts (Delyn) (Ind)]

10. What recent estimate he has made of the number of pension credit claimants.

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

As of the latest public data of February 2022 there were 1.38 million pension credit claimants.

[Rob Roberts]

I welcome the new Minister to her place and hope she can continue the excellent work done by the hon. Member for Hexham (Guy Opperman) in this area. Despite all that excellent work, however, take-up is still relatively low, and my constituency has 20% more over-65s than the UK average. Will the new Minister meet me to discuss how we might be able to make pension credit at least in part an automatic benefit so that struggling pensioners can get the money they are rightly entitled to?

[Laura Trott]

The hon. Gentleman makes a good point but it is difficult to enrol people automatically on pension credit given the data the Government hold. I am, however, keen to see how increased data sharing could be used to produce a larger number of claims.

Oral Answers to Questions

Rob Roberts Excerpts

Monday 21st March 2022 Commons Chamber

[Dr Coffey]

The hon. Lady raises an important point. All parents automatically go into the direct payment process. I am working with my noble Friend Baroness Stedman-Scott, the Minister who has direct responsibility for this portfolio, to see what more we can do to accelerate reform if people are clearly not being compliant and not paying. Meanwhile, our financial investigations unit will investigate where people are hiding money and, if necessary, take them to court to ensure that the money gets paid.

[Rob Roberts (Delyn) (Ind)]

T6. I would like to thank our local DWP officials and work coaches for their efforts to help more people in Delyn into work in the past few months. Some parts of my constituency remain among the most deprived in Wales. Does the Minister agree that improved transport infrastructure is key to ensuring that people can get to jobs? I appreciate that she is not a Minister in the Department for Transport, but will she in principle support my campaign to have a train station reinstated to serve Holywell and Greenfield, to help people to access more jobs and level up their communities?

[Mims Davies]

rose—

Automatic Pension Enrolment

Rob Roberts Excerpts

Wednesday 26th January 2022 Westminster Hall

[Jim Shannon]

I thank the hon. Gentleman for his comments. He is right that it is best to make contributions from an early age. I can speak to that and the benefits of it. Even though I may not have understood that at that time, my mother was insistent, so I enrolled. Today, we see the benefits of all the things we did in the past.

To be eligible for a compulsory pension scheme in Northern Ireland, a worker must be at least 22, under state pension age and earning more than the minimum earnings threshold. I know some young people who have been paying into pension pots from as young as 18, but that is down the employer and employee discretion. I do not see a reason why young people who are in consistent work should not be contributing to their future, as referred to by the hon. Member for Sedgefield (Paul Howell).

As this subject is not taught in schools, young people feel unaware of the importance of taxes and pensions. I urge the respective Ministers to think about that in relation to schools. There may be a way of suggesting to young people at an earlier stage that they need to be making contributions, perhaps through an introduction provided while they are at school.

[Rob Roberts (Delyn) (Ind)]

I find it difficult to believe that the hon. Gentleman started his pension contributions 45 years ago, as he cannot possibly be of that advanced age. He reminisced about how his parents drilled into him the importance of starting early. In his opinion, what has happened since those years? How did we go from the point of saying that it was a personal responsibility? How did we go from the point of our parents drilling into us the importance of saving for deposits for a house, as we heard earlier, and for retirement? Is the situation we have now on automatic enrolment satisfactory in terms of getting us back to where we were before?

[Jim Shannon]

I think the figure gain tells it as it is. We went from 2.1 million people to 21 million people; the increase was massive. People from my generation were very responsive to what our parents told us and we did what they suggested because they knew best. Today the companies are trying hard and encouraging people but, as the hon. Member for Grantham and Stamford said in his introduction, education might be another way of helping us get even beyond where we need to be.

In February 2021, a report from the National Employment Savings Trust looked at the impact of the covid-19 outbreak on its 9.5 million members. It found no significant changes in average contribution levels; the majority had continued to save, with around one fifth contributing more than the minimum contribution rate. That tells us that the scheme is successful for some—potentially, everyone—and helps people to save. I find those figures reassuring and proof that this legislation is beneficial, which may answer the question raised by the hon. Member for Delyn (Rob Roberts).

There is absolutely no doubt that this legislation has brought many benefits. Pensions help people maintain their standard of living in retirement, and savings provide important supplemental income for unforeseen expenses. Pensions are an economically efficient way to fund retirement, which means they are a prudent use of taxpayer money.

Others have expressed a few concerns about the lack of pension provision for the self-employed, and I have a question for the Minister. How and when should pension contribution rates increase above the 8% minimum? It is important that there is provision for the self-employed. There are 134,000 self-employed people in Northern Ireland. In Strangford, and perhaps in other constituencies as well, we have a tradition of many people being self-employed. I had a period of self-employment but continued to pay the pension contributions. That was probably when I increased the number of pension schemes I was in. Perhaps the Minister could indicate how we might encourage the self-employed to be involved. That is my question for the Minister, and I know I will get the response I wish for.

I want to conclude because I am conscious that others wish to speak. Automatic pension enrolment for workers makes sense and is a good deal. Pensions not only help the local economy but are a win-win situation for employers, employees and local business owners. The figures are astonishing: since 2012, more than 10.2 million workers have been automatically enrolled in pension schemes and that is on the increase.

The scheme is a success, and we thank the Government for their encouragement and promotion of it. I only suggest that it could be approached educationally at an earlier stage. I urge the Department for Work and Pensions to look at the issues others will raise on pension enrolment and to step in to solve them. None the less, I thank the Minister and Government for all they have done.

--- Later in debate ---

[Rob Roberts (Delyn) (Ind)]

It is a pleasure to serve under your chairmanship, Mr Dowd. I give credit to my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for securing the debate and, indeed, to the Minister; it is always a pleasure to see him responding to a debate. He must get tired of hearing from everyone, every time we have a pensions debate, “Auto-enrolment has been wonderful and the things the Government are doing are outstanding, but we could always do more.” We are always asking for more. That is the way of things, and I think he has come to appreciate that over time.

As everybody else has done, I pay tribute to my hon. Friend the Member for North West Durham (Mr Holden) and his private Member’s Bill. When I read back through the Bill last night, I saw that it contained many of the things I wanted to cover, so I shall be very brief, which will please everybody no end. I will just mention three points that I hope the Minister can cover later.

My hon. Friend the Member for Sedgefield (Paul Howell) mentioned excluded people. Someone earning £9,000 in each of two different jobs would not be enrolled despite having £18,000-worth of income, which would otherwise clearly qualify. Like those of my hon. Friends the Members for North Norfolk (Duncan Baker) and for Clwyd South (Simon Baynes), my constituency is very rural, and we have lots of people in those circumstances. Something as simple as taking away the £10,000 qualifying point would be a real benefit to those people.

On the under-22s, I was a financial and pensions adviser for a decade and a half, and one of the key things that we always said—the hon. Member for Strangford (Jim Shannon) mentioned it earlier—was, “Start as early as you can.” An extra five years will add in the region of 26% to 30% to the end value of a pension pot. The hon. Member for Kilmarnock and Loudoun (Alan Brown) used the golden words “compound interest”. Those extra years at the start make such a huge difference at the end.

That is particularly relevant in my own situation. My daughter is 17 years old. She has decided that university is not for her and has gone into full-time work, but she is not being auto-enrolled. Of course, she can opt to be enrolled when she gets to 18, but, as my hon. Friend the Member for North Norfolk mentioned, it is easier when it is done for us; it is harder to opt out than to opt in to something. I completely appreciate that.

My second point is on qualifying earnings. People may well be under the illusion that if they are earning £30,000 a year, they are contributing 8% of £30,000. Sadly, that is not the case. The lower earnings limit, which is £6,240, is taken off before that 8% is calculated, so someone earning £30,000 grand is only paying 8% of £23,760. Getting rid of the lower earnings limit and making pension contributions start from zero would add another 26% to the final value of someone’s pension pot by the time they come to retirement. Just those two changes—making auto-enrolment available to under-22s and making it count for all earnings—would add 29% and 26% to the final value of a pot. That is a huge amount and would make a huge difference.

My final point, which is very simple, is about complacency risk. We hear that auto-enrolment has been transformative—my hon. Friend the Member for Grantham and Stamford used that word, and we have all heard the statistics—but has it? Eight per cent. is not enough. Even if it was 8% of all earnings, it would not be enough. My cousin is a financial adviser over in America. I talked to him over many years about how I did my processes and worked out how much people should save, with the calculations and the risk levels and all the interesting bits that go into forming a conclusion. He said, “I don’t do any of that. I just tell people, ‘Just do 20% and you’ll be fine.’” He advises people of relatively high net worth, and 20% is a relative amount to different people, but 8% just will not do it.

We have this complacency: because the Government have mandated 8%, people think, “Well, that must be okay, then; that must be what I need to do to get a good standard of living in retirement.” Somebody earning £30,000 per year, leaving out the earnings that do not qualify, will be contributing £1,900 per year over 35 years. Assuming 4% growth, they will have amassed a pot of about £140,000 after 35 years. That does not sound a terrible amount, but when we adjust it for inflation, in today’s prices, that is a pot of about £86,000. That will not buy a lot in retirement.

This is where the two things that I mentioned earlier will come in. If we added 29% and 26% to that pot, while it would still not be a massive amount, or enough to get people to where they need to be, it would certainly be something. As was mentioned earlier—I spoke about personal responsibility—people need to go and see a financial adviser and take the guidance that is available from the Money and Pensions Service.

What we are doing is not enough. People must wake up and open their eyes; what we are doing is great, but we could absolutely be doing more. There are a couple of ways we could do more. Back when we had defined-benefit pensions, the employer would pay about £3 for every £1 that the employee paid. That was unaffordable, and it was the main reason that most defined-benefit pensions were closed down. Under the defined-contribution schemes that existed before auto-enrolment, employers paid about £2 for every £1 that employees paid. Now, that figure is 60p or 70p. Although I talk about personal responsibility, there is a lot more scope for employers to do more, as they used to.

Another potential option would be to roll the principle of auto-enrolment forward into other savings options. Why can we not have an auto-enrolment individual savings account? Why can we not do what my hon. Friend the Member for Grantham and Stamford said about saving for a house deposit? Why can we not use the same principle in other arenas? Why can we not make pensions a bit more flexible, as they are in the United States, where the 401(k) product can be utilised in a lot more ways a lot sooner? That could provide the deposit for a house or be used at other crucial times in life. There are lots of things we could do.

I have offered a bit of a sandwich, with a nice opening and a nice ending, and bit of a demand in the middle. We are doing wonderful things and they have been successful—everybody says so. We can do more and we probably should, and I think the Minister knows that.

--- Later in debate ---

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

It is a pleasure to serve under your chairmanship, Mr Dowd. Like everybody else, I congratulate the hon. Member for Grantham and Stamford (Gareth Davies) on securing the debate. There have been a number of Tory Back-Bench contributions; I was worried that I would end up agreeing with all of them, but I have managed to find a couple of aspects to disagree with—I am pleased about that.

I agree completely that auto-enrolment has been a success. The hon. Member for Grantham and Stamford set out well its history and success. I agree, too, with the principle of creating larger pots for investment in infrastructure. That is an age-old argument, but we never seem to get there; I agree that that needs to change. I am slightly concerned about the talk about pension savings funding housing deposits. I know that people want access to the housing market. However, I worry that, depending on how deposits are funded, that will not take the heat out of the housing market, but will actually increase it, because more people will be chasing a smaller pot of houses. We need more affordable houses as much as new ways to get people deposits.

The hon. Member for Grantham and Stamford made the interesting point that only 12% of job adverts advertise pension contributions. If we are talking about advice and people understanding the benefits of pension contributions, we need to look at that. The hon. Member for Strangford (Jim Shannon), who would have been surprised to have been called so early, further set out the success of the scheme, and talked about his personal experience and, importantly, education—that is clearly important for everybody. It was brave of the Minister, in the current climate, to intervene on the hon. Member for Strangford to talk about cake—fair play.

We heard from the hon. Members for Darlington (Peter Gibson), and for North Norfolk (Duncan Baker). It was very good to hear the employer’s and the director’s points of view. Both Members admitted that they had concerns, but they were pleased to see how successful automatic enrolment is. It is good to have that buy-in.

The hon. Member for Clwyd South (Simon Baynes) spoke about access to advice; I will come back to that, because I agree with him on that point. The hon. Member for Delyn (Rob Roberts) made a good point about complacency. We need to make sure that people understand that they might need to increase their contributions and pay more. That is very important, and it links to the point about getting proper advice.

Finally, we heard from the hon. Member for North West Durham (Mr Holden). I, too, congratulate him on his efforts in bringing forward his private Member’s Bill. He set out his stall really well on that day, as he did, briefly, today. His key point—that for every 50p somebody contributes, they get £1 in their pension pot—sums it up perfectly; it is a great illustration.

As we have heard, auto-enrolment has clearly been a good thing, and a success in getting way more people to save for their retirement. In fact, it has been so successful that we have to ask why it took so long to bring in such a scheme. The Association of British Insurers states that automatic enrolment has brought a further 10 million people into pension saving. As we have heard, 88% of eligible employees participated in their workplace pension in 2020, which is up from 55% in 2012. That is a fantastic step forward.

However, there are concerns that an estimated 12 million people are still under-saving for retirement, and that needs to be addressed. Given what we have heard today about the success of auto-enrolment, and given that the Government think it is important that people save for retirement and believe that auto-enrolment is a success, the Government should logically ensure that as many people as possible are eligible. That means implementing the recommendations of the 2017 review as soon as possible. During the passage of the Pension Schemes Bill, Labour and the SNP worked together to introduce amendments that would do that, so it was disappointing that the Government voted those down. The Minister did commit to implementing the recommendations of the 2017 review by the mid-2020s, but rejecting the amendments does not give confidence.

We know how unstable UK Governments have been in recent years, and now the Leader of the House is threatening us with another general election, so it seems to me—without being too flippant—that there is a risk, if action is not taken sooner rather than later to get legislation through the House, that matters could slip further. As I said, the hon. Member for North West Durham has his private Member’s Bill, which we would support. I am still concerned, though, that we are looking at the mid-2020s. If we agree that this change is so good, we need to look at bringing it forward and getting things moving much quicker.

[Rob Roberts]

The hon. Gentleman makes an excellent point about bringing forward measures, but if we make these changes, is it not really important to give businesses enough lead-in time to plan properly and budget for them, rather than springing a significant change on businesses?

[Alan Brown]

There is a point there, but we have heard from an employer and a finance director that their concerns were allayed once the scheme came in, so I think that there will be fewer concerns as we go forward. Speaking of giving employers notice, we need only think about national insurance contributions. That rise was introduced in a short space of time, so we should not be too concerned about how we phase this in. If we do not do it, more people will lose out, which defeats the purpose.

Everybody here agrees that we should lower the age threshold for auto-enrolment to below the age of 22. I have said that I would rather have 16 than 18 as the threshold. I would be content with a two-stage process on that; we could review the situation with regard to 18 to 21-year-olds, just to see how successful it was, and to check that they were not opting out, but in the long term we definitely need to move to 16-year-olds, who could be in full-time employment. We also need to look at removing the lower limit of the qualifying earnings band, so that contributions are payable from the first pound earned. As we have heard, its removal would benefit the low-income workers who otherwise would have little prospect of a decent private pension.

To repeat what other hon. Members have said, the issue is particularly acute for women, who are more likely to be lower paid, in part-time work and doing multiple jobs. We have a massive gender pensions gap. In a recent report, the Pensions Policy Institute found the following:

“Men have substantially more private pension wealth than women, with disparities increasing across age groups. For those aged 65-69, median pension wealth for men is just over £212,000 compared to just £35,000 for women…Divorced women’s pensions are much lower than divorced men’s.”

The Association of British Insurers states that the average pension pot for a woman aged 65 is one fifth of that of a 65-year-old man. Women receive £29,000 less in state pension than men over 20 years. The deficit is set to continue unless further action is taken. We also need to look at expanding the contribution rates beyond the 8% statutory minimum, to allow people to maximise their pot. That builds on what the hon. Member for Delyn was saying.

As I have said, further delays are unacceptable. I hope that the Minister will say that the UK Government will set a clear timetable for their plans for expanding automatic enrolment. Morally, they should do that, given that they have made other decisions that are affecting pensioners both in the here and now and in the long term. We have a cost-of-living crisis, and I note that Tory Back Benchers are now using it as a defence for keeping the Prime Minister in his place, even though the cost-of-living crisis happened on his watch. They are arguing that there is a cost-of-living crisis that warrants our attention, but they still voted through the removal of the triple lock in the November Budget, costing pensioners more than £500 this year alone and a cumulative £2,600 over the next five years. That cut comes despite the fact that UK pensions are already the least generous in north-west Europe in comparison with the average wage.

We have just had the report on the shocking state pension underpayments, and there are comments that the system for state pensions is not fit for purpose. We have seen 118,000 people underpaid as regards benefits. We still have the injustice faced by the WASPI women—Women Against State Pension Inequality—and there are very low take-up rates for pension credit, which the UK Government acknowledge is an issue, but have not remedied.

The SNP continues to demand that the UK Government introduce a proper take-up strategy for pension credit, as the Scottish Government have done for devolved benefits. We continue to call on the UK Government to establish an independent savings and pension commission to ensure that pension policies are fit for purpose and reflect the demographic needs of different parts of the UK.

Another aspect of auto-enrolment that needs to be addressed relates to the self-employed. We have heard about the massive increase in employees in defined contribution schemes, but the trajectory for the self-employed has been the polar opposite—for them, the numbers have gone down: 48% of the self-employed contributed to a private pension in 1998, but the figure went down to only 16% in 2018.

Another key point is about professional advice. It makes no sense for people to save for retirement, or for support for when they are older, but to remain at risk when accessing their pension pots. That important matter was covered by the Work and Pensions Committee in its report “Protecting pension savers”, published last week. I support the calls for the Government to set a goal of ensuring that at least 60% of people use the Government’s Pension Wise guidance service or receive paid-for advice. That is a key consideration.

Pension Wise has proven to be a success. We need to make sure that more people access it. There should be a trial of automatic Pension Wise appointments, in order to encourage more people to access advice that will benefit them. The UK Government should initiate two trials: one in which people automatically get an appointment when they access their pension for the first time, and another in which they get an appointment at age 50, before they access their pensions—a mid-life MOT, as it has been called.

Auto-enrolment has been a good measure, but it needs further action to make it even better, so that it can benefit millions more people. Action to implement the 2017 recommendations should be a priority. I hope the Minister will agree, and will say that they will bring legislation forward at the soonest opportunity.

Oral Answers to Questions

Rob Roberts Excerpts

Monday 8th November 2021 Commons Chamber

[Dr Coffey]

We have a separate body that already makes recommendations. It is called the Low Pay Commission, and the differential in wages is out there. The hon. Member can cite whatever campaigning body he likes; we have seen a huge increase in the national living wage, and that is to be welcomed right across the country as we head towards the national living wage being 66% of median earnings.

[Rob Roberts (Delyn) (Ind)]

T6. Almost exactly a year ago, I had the privilege of serving on the Bill Committee for the Pension Schemes Act 2021, which was widely appreciated by the industry as being an outstanding piece of legislation. One of the best parts of that Bill was pensions dashboards, which enable people to better understand and impact on their pension savings. Can my hon. Friend in a short time give an update on the implementation of pensions dashboards and undertake to write to members of the Committee with a more detailed response?

[Guy Opperman]

I can do that. It is a herculean IT project with 43,000 pension providers, 22 million private pensions and state pensions all coming to your mobile phone, your laptop or your device at home. It will be groundbreaking and will be ready in 2023.

Oral Answers to Questions

Rob Roberts Excerpts

Monday 25th January 2021 Commons Chamber

[Mims Davies]

The Department worked at pace to launch the kickstart scheme in September, with the first applications open in November. Our aim is to take forward applications within one month, but it can take longer if we require additional information. We expect the situation to improve as we adopt processes and embed learnings from the thousands of employers and hundreds of gateways that have joined the scheme early on. My hon. Friend will be pleased to hear that the application from Fotofabric Ltd in his constituency has now been approved.

[Rob Roberts (Delyn) (Con)]

What steps her Department is taking to help people whose sectors have been particularly affected by the covid-19 outbreak to switch careers.

[The Parliamentary Under-Secretary of State for Work and Pensions (Mims Davies)]

Our plan for jobs is providing a range of vital, tailored employment support for all jobseekers who are looking to move sector; targeting support for those impacted by the pandemic; and linking into local recovery plans. The plan includes DWP’s job finding support, or JFS; sector-based work academy programmes, or SWAPs; job entry targeted support, or JETS; and our new restart programme. It will also utilise the forthcoming UK shared prosperity fund.

[Rob Roberts [V]]

Back in 2013, my constituency of Delyn had an unemployment rate of 5.2%; thanks to successful aspirational Conservative policies, this was down to just 3% before the pandemic took hold, but now sits at around 6%. With some sectors—particularly tourism and hospitality—more severely impacted than others, will my hon. Friend confirm that, despite many things being in the hands of a Welsh Government who, I hope, are in their final months in power, the UK Government will continue to provide support and generate opportunities for my constituents to get back into work as soon as possible?

[Mims Davies]

I am happy to confirm that DWP will continue to work hard to support people like my hon. Friend’s constituents. I know that the staff in his three local jobcentres are already delivering training, mentoring circles and kickstart prep courses with partners such as Google, Amazon and the Prince’s Trust, as well as working to develop new resources to help to support local jobseekers.

Future of Pensions Policy

Rob Roberts Excerpts

Tuesday 8th December 2020 Westminster Hall

[Rob Roberts (Delyn) (Con)]

I beg to move,

That this House has considered the future of pensions policy.

It is an honour to serve under your chairmanship, Mr Hosie. There is an old saying that people should not talk about politics or religion; I sometimes wonder whether that extends to the topic of pensions as well. While saving for a house or car is seen as exciting and a real achievement—and rightly so—the same enthusiasm and planning is never given when people are saving for their retirement. It is time such attitudes around pensions and planning for retirement changed. Pensions are becoming increasingly important and we need to talk about them, both here in Parliament and in the wider public domain, if we want people to feel empowered to make their own decisions about their future, and secure a retirement that they deserve.

People are living longer, and the state pension age has increased, but discussions and debates around pension policy and infrastructure have not moved on in any significant way. A recent study found that 22 million working-age adults do not feel that they understand enough about pensions to make decisions about saving for retirement, highlighting that we need to do more to ensure that people feel informed and empowered to do that saving.

The fact that 5 million people in retirement are not satisfied with their financial circumstances proves that more needs to be done to ensure people take steps earlier so that their later years are more comfortable and secure. Only 38% of seven to 17-year-olds say that they have learned at school how to manage money, which showcases that the lack of knowledge and awareness about savings and pensions starts right at the beginning. This tells us that we need to be having frank and honest conversations about pensions much earlier in people’s lives. It is not enough to start discussing savings and retirement at 60; it needs to be happening in education, in the workplace, at key moments in life, and also here in Parliament.

Today’s debate, I hope, is the first of many important and crucial conversations around pensions and how we, as parliamentarians, can look to shape pension policy in a positive way in the years to come. I am going to touch on a couple of broad themes, the majority of which the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman), can respond to, while I appreciate that some of the topics—although relevant—may be for the Treasury to consider rather than my hon. Friend.

Although it is hugely important to start conversations about pensions and retirement as early in life as possible, it would not be right to hold a debate on pensions policy without first looking at how we can help pensioners who may already be struggling. Sadly, pensioner poverty is a real problem across the UK. While it may have decreased over the past 20 years—I commend the efforts of the Minister and the Department in their work on this—Age UK found that 1.9 million pensioners are still living in poverty in the UK. That means that over a quarter of pensioners, despite having worked all their lives, paid their taxes and contributed to our economy, are now living their later years facing more challenging decisions than they necessarily should, wondering whether they can afford to turn the heating on or pay their bills, and watching how every penny is spent.

It does not have to be that way. Many pensioners will be eligible for pension credit: a financial lifeline that tops up their income and prevents them from having to make those difficult decisions, such as keeping warm in their home or having a good meal. Pension credit is also a gateway to other benefits that make a real difference to pensioners’ quality of life, including cold weather payments, NHS dental treatment and, topically, free TV licences for those over 75. Quite simply, pension credit gives older people the financial stability and security to live their lives in a much more worry-free manner.

It is also important to note that, while pension credit makes a huge difference to many individual pensioners’ lives and well-being, it also benefits the whole of society. Research from Independent Age estimates that the cost to the Government of those eligible for pension credit, but not taking it, is around £4 billion a year in increased NHS and social care spending, so it is imperative that we either get the implementation of this benefit right, or reform it altogether.

The question is: does the benefit work effectively for the people it is supposed to serve? Currently, it is not working nearly as effectively as it could, with uptake stagnating at around 60% for the past 10 years. It has never been more than 70%. To put that into perspective, around four in every 10 eligible pensioners are not collecting the free money that is due to them. That means that, at present, around £3.5 billion that is allocated to eradicating pensioner poverty is not reaching older people each year. That is, in part, due to awareness of pension credit being low, despite many advertising campaigns by successive Governments. It seems that wholesale reform is necessary to help reach the people it is designed to help.

The low take-up of pension credit is also due, in part, to the way it is assessed. Instead of being an automatic benefit provided to those who need it, pensioners have to make a claim when they reach the appropriate age, which considers their income level and savings. That is problematic for a couple of reasons, not least that the process can be seen as daunting, overly complicated and difficult to navigate for pensioners. Also, by taking into account people’s savings pots, it discourages long-term responsible economic actions such as saving because people will become ineligible not only for pension credit, but for other gateway benefits I mentioned earlier on.

We need to have a fundamental change in how pension credit is assessed and claimed. We should be looking to help those who need it most by ensuring that financial support is accessible and fair, taking away the blame on people who fail to make that claim. One way to do that would be by making pension credit a full or partial auto-payment benefit, so that no claim has to be submitted, and basing it solely on income levels, which Her Majesty’s Revenue and Customs really should be able to track to ensure that no one is unfairly at a disadvantage for having prudently saved throughout their working life.

While successive Governments have taken steps to raise the profile and take-up of pension credit, as seen through the work to make it claimable online during the pandemic, we need serious, fundamental change if we want pension credit to play its part in eradicating pensioner poverty and helping the poorest households. I want the Government to consider their role in boosting take-up by making it an automatic benefit that solely considers income.

While pension credit is one important issue that the Government should review as we look to bring positive change, many other areas would also benefit from innovation and further development. One such area is the auto-enrolment regime. Auto-enrolment was introduced by the Government to improve pension savings in the UK, and it has worked, reversing the decline of workplace pension saving. Prior to the start of auto-enrolment, the number of eligible employees who enrolled was 10.7 million. That has now increased to almost 19 million—almost 90% of those eligible.

While that confirms the success of its original aims, instead of engaging the wider public in taking an active role in their workplace pensions, being auto-enrolled has meant that the vast majority of savers assume they will automatically have a large pension pot when they retire. However, that is often not the case, and we have added a layer of what I will call complacency risk into the mix of other issues to consider. It is the risk that people will assume that the pot they are building up is going to get them a particular lifestyle in retirement, which may not always match reality.

Do not get me wrong; auto-enrolment has been fantastic in getting pensions moving again. I really believe that we should be looking at what has been done so far as a starting point rather than an end game.

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

I congratulate my hon. Friend on securing the debate. I accept entirely that this is a legitimate discussion about the future progress of automatic enrolment, which has transformed savings among women and young people to the extent that 80% are now saving, up from 40%. He is right that we are doing better than we have previously done, but it is the suggestions for the future that clearly need to take us forward. I support entirely the direction of travel that he is taking us on.

[Rob Roberts]

I thank the Minister for his intervention. The suggestions for the future are about to unfold before his very eyes, as he may have anticipated.

Analysis by the Pensions and Lifetime Savings Association suggests that the current contribution rate of 8% is simply not enough for people to have a good standard of living in retirement. I fear that will be the case for many people in several years’ time who have been auto-enrolled into workplace pensions and assume that, as the rate is automatically set by the Government, that means they will have a comfortable pension pot when they retire. Unfortunately, many people are simply not engaged enough with their pensions to realise that until it is too late, despite them being fundamental to their future. I fear auto-enrolment has created the complacency I mentioned earlier.

To combat that issue the PLSA has proposed an increase in the minimum contribution level, to at least 12%, and I agree. Forty-three per cent. of savers do not know how much of their monthly salary they should be saving, in any case, and the increase would benefit a great many individuals, by increasing their savings further. Additional changes could include reducing the starting age to 18 and removing the lower earnings limit, so that every penny of earned income counts towards pensionable pay. According to the Association of British Insurers that would have the potential to save a further £2.5 billion in pension pots. It would not only increase the number of years over which an individual saved, and consequently increase the pot; it would emphasise the importance of saving from a younger age.

What else can we do with auto-enrolment? Why not think a little more outside the box and create a savings culture in the UK? If covid has taught us anything it is the importance of preparedness and planning for every eventuality. One of the bedrocks of financial planning is having an emergency fund in place, but putting money away each month is perhaps easier said than done—there is always something else to spend it on.

We could look at including a savings element in auto-enrolment. Why not, when payroll makes a deduction for the relevant amount for a pension, put 1% into a savings pot at the same time? There could be an auto-enrolment ISA, and people could be given the ability to increase the percentage to what they can afford. Creating a savings culture on the back of pensions policy could be one of the more pleasant side effects of covid. Many people might be more open to having emergency funds to combat future challenges.

Another area of pension policy that could benefit from further positive change are the annual and lifetime allowances. Bearing in mind that that is a Treasury issue and not necessarily one for the Department for Work and Pensions, I shall not labour the point, but there is no need for an annual allowance if there is a lifetime allowance. Saving should be encouraged, and individuals should not be penalised for taking on extra work and saving more into their pensions. That happened to doctors recently, leading to them not taking on shifts and procedures because of the danger of a significant tax bill. A potential solution to that issue would be to remove the tax penalty for breaching the annual allowance, but keep the restriction on the amount of tax relief available to current limits. There would be no additional cost to the Exchequer, and people would be able to continue saving into their pensions in the same way. Yet those who were unnecessarily penalised under the limits of the annual allowance would not be at a disadvantage. As I have said, it is a Treasury area, and I am sure that the Minister will take great pleasure in passing it along.

Wider change is needed in the pensions industry, and one way to achieve that and encourage people to engage earlier with pensions is by improving the accessibility and reach of financial advice and guidance. Despite having been a financial planner involved in the pensions industry for many years prior to coming to this place, I admit that the topic of pensions can be complex. I can see how, for many without such experience and knowledge, pensions could be viewed as hard to understand or even, God forbid, a boring subject—a terrible thought.

I welcome the Government’s push for a simpler regime, which is coming down the line, to make statements more comprehensible for both the consumer and professionals. Members would not believe the wide range of disparate information that pension providers send out to customers, making it impossible not only to understand what they have but to make accurate comparisons between providers. It is currently extremely complicated, and I look forward to simpler statements that will put the consumer in charge. I keep my fingers crossed that that policy will not be several years in the making, as the wheels of Government tend to take rather an age to turn.

It is right to empower individuals to make their own decisions about their futures, but we should ensure that before they make such life-changing decisions they feel informed and supported, and have considered their own unique circumstances. Advice and guidance about pensions needs to be accessible, affordable and available. Despite the benefits that financial advice can bring, only 8% of all UK adults have received it. That is, amazingly, an increase on previous years, but it is still shockingly low, and it puts individuals’ retirements at risk. Whether that is because people feel that financial advice is unaffordable or only for the wealthy, or because they feel it is a risk and do not trust the financial services industry, we need to work actively to change those perceptions and show that financial advice is for everyone.

I can assure the public that the vast majority of advisers whom I have worked with will treat someone’s £30,000 pension pot with the same care and diligence that they will treat someone’s £300,000 pot, because each sum is just as important to the individual concerned. Indeed, the smaller pot can be considered to be much more important to that individual in many ways, because it will often be a lower-earning individual’s only pension provision, and so the risks of it running out too early are more significant.

If we do not promote the need for and the benefits of financial advice, I worry that we will have a retirement crisis on our hands 20, 30 or 40 years down the line. Recent data shows that 35% of the adult population say they do not have a pension. Of those who do have one, 36% are not sure how much is in their pot. Even more worryingly, the uncertainty around pensions goes further than uncertainty about individual circumstances, with almost half the population admitting that they do not have a clue about how much income they would need to retire comfortably. That clearly shows that widespread advice and education regarding pensions and retirement are urgently needed if we want people to be able to live out their later years in financial security and comfort.

In the past, these types of financial decisions and risks were shouldered by employers, pension providers and life insurance companies. Now, however, with the introduction of greater flexibility and freedom to the pensions marketplace, it is increasingly down to the individual to decide these matters, which is a wonderful thing in some respects, but worrying in others. We should not really place all responsibility for such important decisions on to people themselves. Instead, we should ensure that people feel supported and know where to turn for help and advice.

Financial advice is not only needed to help people feel more informed and aware when they make decisions that will affect their lives; it also adds real value to people’s pensions, providing them with a better retirement in the long run. A recent report by the International Longevity Centre found that those who have sought professional financial advice are better off by an average of £40,000 in their pension pot compared with those who did not seek advice. That is not an insignificant amount of money. Ensuring that financial advice is seen as a viable option for people is not only the right thing to do, but crucial if we want people to have the best possible future, as well as the peace of mind that they are making the right decisions to benefit themselves.

Most importantly, how can we make sure that people are accessing the right financial advice and support? Forcing people to access support is not an option. Some people will not even take a vaccine to save lives, for goodness’ sake, so mandating things just because people have an in-built aversion to being dictated to does not work.

One option, however, is to encourage individuals to use guidance services, such as Pension Wise, the free and impartial guidance service that was set up in 2015. Accessing guidance is often the first step towards accessing full financial advice and should be greatly encouraged. Seeking guidance helps people to gain a good initial understanding about their options and also helps to boost their confidence in their ability to do things such as avoiding pension scams, which, sadly, are all too common.

In addition, we know that financial guidance is a great enabler for the full advice process. Data from Pension Wise’s user evaluation report recently found that 36% of customers who booked an appointment with Pension Wise went on to speak to a financial adviser in the following three months, compared with only 22% of non-users. That highlights the fact that we need to emphasise the benefits of these services, and ensure that people use them as early as possible to improve advice take-up and improve the financial outlook for many individuals in the UK.

Currently, it is far too easy to opt out of taking this free guidance from Pension Wise. Many studies over many years have shown that individuals need several exposures to information before they start taking action, so perhaps we need to start them on that journey a little bit earlier, so that they are engaged in the process when the time is right.

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

I commend the hon. Gentleman on his speech, which shows his great expertise in this important policy field, and he is right to press on this issue of financial advice. However, does he agree that the education systems of the respective countries of the UK should play a greater role, so that our children are financially capable when they leave school? When it comes to pensions in particular, the earlier that people start saving for their pension, the better. Interventions need to happen far earlier than they do now.

[Rob Roberts]

Absolutely—that is a very salient and very welcome intervention from the hon. Gentleman. I completely agree.

We need to start financial education in schools about the more basic things: what is a current account? How does it work? What is an overdraft? What is a credit card? The number of people leaving school and university who are already in massive debt before even taking into account things such as university fees is staggering. If we are not getting people on the right footing, I completely agree that we should be looking into developing that. People need to start the journey earlier.

During my research for this speech, I came across an article from years ago with a picture of a young-looking fresh-faced pensions Minister: my hon. Friend the Member for Hexham. He was supporting the concept of a provider’s mid-life MOT. Engagement with the UK population as a matter of course when a person hits particular ages could be a transformative idea. Imagine the benefits of speaking to someone aged 45, when they may be in a more stable home and employment situation after those expensive years of having young children, and providing that person with some guidance on what they should be looking at from a financial point of view! That could have a significant impact on their outlook on pensions and financial planning for their remaining 20-plus years before retirement.

[Guy Opperman]

I am conscious that this job has aged me a great deal and that I look different from the fresh-faced photograph taken in 2017 when I first got it. I have no idea why I have aged so much in the job—aside from putting on the lockdown stone.

On the mid-life MOT, I point my hon. Friend to the Aviva trial and the various other trials done by the private sector. The mid-life MOTs started out as an HR benefit to employees. Their benefit to employees was found to be good, but the benefit to the business and to wider state in terms of wealth, work and wellbeing—the three things on which it is measured—was utterly transformational. I encourage all businesses to follow the initiative of those companies and the public sector to follow the initiative of the DWP, which also pioneered the mid-life MOT.

[Rob Roberts]

Absolutely; I thank the Minister for his intervention. It was in the Aviva article that I saw the fresh-faced youthfulness of the Minister, although he has now turned into an advert for Just for Men. It is working well for him.

The Minister is absolutely right. Adding a health review to that mid-life MOT process could also have untold benefits: it could catch illnesses early and could encourage people to change their lifestyle before problems arise. I completely endorse the Minister’s support of the mid-life MOT process and encourage him to work across Departments to put something together in that space that could drive real change in financial and medical wellbeing.

The banking and financial industry has developed and adapted to the 21st century, and in the same way the financial advice sector needs to undergo wholesale reform and change. Financial advice is often viewed as too expensive, or individuals worry that they do not have enough to invest. Those outdated perceptions of the sector need to change. To do that, the sector needs to become more transparent and to move towards set fees on an hourly rate, or towards a project fee basis. That would help make access to financial advice easier and more affordable.

There is a large amount of worry and mistrust around the financial services industry. It would certainly help boost consumers’ trust and confidence that they were getting the right advice if the advice sector were made more transparent. The inherent unfairness of percentage-based charging is clear. It is simply wrong to charge double the fee for handling a £200,000 investment compared with a £100,000 investment; it literally takes no more time and no more resource to do the work.

Even factoring in slightly more indemnity risk to the adviser for advising on a higher sum would certainly not justify anything like a doubling of the fee. I firmly believe that the public should seek out advisers who charge fees expressed in pounds and pence, and who give a quotation for services based on time expected or a fixed project fee rather than a percentage-based amount.

[Damien Moore (Southport) (Con)]

Does my hon. Friend agree that many providers who give pensions advice should actually be putting their fees and charges explicitly on websites and other promotional materials, so that people can see what the costs would be from the start of the process?

[Rob Roberts]

I very much agree with my hon. Friend. It is now incumbent on advisers when they see clients for the first time to give them an initial disclosure document, which sets out the fees and charges that the client can rightly expect to pay. The disclosure of fees should always be completely upfront and agreed to by the client, before any work is undertaken—that is an absolutely vital part of the process, for sure.

Too many consumers are missing out on the potential opportunities that advice can bring because of a lack of understanding or a perception that advice is too expensive. It is time to develop the financial advice sector and make it work for consumers. I urge the Minister to continue to develop awareness of financial advice and guidance services, and make them as accessible as possible so that the advice gap around pensions can be closed.

One area of pensions where the advice gap is intrinsically linked is costs and charges associated with pensions. In many cases, the associated costs and charges, whether the annual management charge or underlying fund charges, are too much of a focus for consumers, advisers, the regulator and policy—to the detriment of the performance and quality of the actual pension. Instead of focusing on which contract is the cheapest, more time and guidance need to be shared that consider the end result and outcome. This is what will be available to pensioners and what will impact the quality of their retirement.

Even though pension costs may be more expensive, if a contract has the propensity to generate higher returns, it will give a better end result for the individual. In addition, as many people do not seek financial advice regarding their pension, many will lack the knowledge to understand the full impact of any costs and charges, which often leads to people choosing the cheapest contract which may not benefit their situation. The principle of having lower charges and less of a drag on performance is a noble principle, but it does not always work out that principles follow through to superior outcomes. It is the outcomes that people can spend in retirement, not the principle.

Finally, it would not be right to hold a debate that seeks to improve people’s future in retirement without considering how to ensure that the pension industry is becoming green and playing its part in protecting the environment. Given that pension funds—long-term investments—hold around $20 trillion in assets globally, they are an integral part of socially responsible investing and can play a major part in helping the UK to reach net zero. I commend, in his absence, my hon. Friend the Member for Grantham and Stamford (Gareth Davies), whose campaign has led to the UK’s first green investment bond, which is on the horizon.

According to the Make My Money Matter campaign, sustainable pensions are 27 times more impactful in reducing your carbon footprint than stopping air travel and following a plant-based diet combined—27 times! Looking across the whole fund universe, we see that relatively few pension funds have fully embraced socially responsible investing or incorporated environmental, social and governance factors into their processes. While some have suggested that the Government should force private pension schemes to invest in a socially responsible way, that feels like an over-reach—an inappropriate and counter-productive use of power—as it may well encourage disinvestment. The bottom line to keep in mind is that pensions are there to provide retirement income first and foremost; if we can save the planet afterwards, that is an extra bonus. But 68% of UK savers want their investments to consider people and planet alongside profits, while 71% would opt for a fully or partially sustainable pension if they had the choice, showing the demand for socially responsible investment of pensions.

The Pension Schemes Bill has recently created a taskforce on climate-related financial disclosures that puts the consumer in charge and increases the transparency of pension funds regarding investments. There is clearly a demand in the UK for socially responsible investing within pension funds. The Government aim to facilitate that, as shown with the taskforce, and I commend them for it and look forward to seeing how it develops.

As I said at the beginning, pension policy is a topic that can often be overlooked. It is overly complex, too technical and not relevant to the many immediate, pressing issues of the day. But it does not have to be overlooked. Pensions policy is an incredibly important topic that will impact all of us in later life as we look to retire, and it is the responsibility of all of us to look at how we can shape it positively to provide the best retirement for as many people as possible. The contributions and sacrifices that our older citizens have made throughout this pandemic, and indeed throughout their lives, are considerable, and it is only right that our policies recognise and reflect that hard work and allow them to live out their retirement in comfort with the peace of mind that their pension will see them through.

I look forward to the contributions of colleagues, including the Minister and the shadow Minister. Although great strides have been made through the Pension Schemes Bill, there is more to do if we want our pensioners to have the retirement they deserve.

[Several hon. Members rose—]

--- Later in debate ---

[Rob Roberts]

I thank the Minister for summing up. I am interested to hear about using the BBC to enhance pension credit take-up. I suggested that very thing to my right hon. Friend the Work and Pensions Secretary just last week at Department for Work and Pensions questions, so it is good to know that there is movement on that. I was very pleased to hear about auto-enrolment, changes to age limits, losing the lower earnings limit and adding a savings element—all very good.

I thank all hon. Members. There seemed to be wide-ranging agreement on things such as promoting the idea of automation where we can and financial education. That may include not only knowledge of facts but the skills, critical thinking and analysis that will serve our young people well. There was cross-party support and agreement on many issues, although sadly not for the comments of the hon. Member for East Renfrewshire (Kirsten Oswald) on Scottish independence. That is for another day.

I appreciated the hon. Member for North East Fife (Wendy Chamberlain) channelling her inner Donald Rumsfeld and trying to tackle the unknown unknowns. I think we will allow our mortal Minister to tackle the known unknowns before we give him any powers of clairvoyance. That is definitely a wise thing to be doing. I appreciate everyone’s contributions, including that of the Minister.

Question put and agreed to.

Resolved,

That this House has considered the future of pensions policy.

[Stewart Hosie (in the Chair)]

In order to allow for the safe exit of hon. Members participating in this item of business and the safe arrival of those participating in the next, I am briefly suspending the sitting.

Oral Answers to Questions

Rob Roberts Excerpts

Monday 30th November 2020 Commons Chamber

[Will Quince]

The universal credit system has risen to the challenge, going up from 2.2 million to 5.8 million claimants. That is why we have this modern, agile, dynamic system. It has performed incredibly well and I have no doubt that it will continue to do so.

[Rob Roberts (Delyn) (Con)]

T15. Further to the Secretary of State’s previous answer, take-up of pension credit remains low, which is a particular challenge in my Delyn constituency, which has a much higher proportion of over-65s than average. Will she commit to meeting me to discuss how we can use places such as the BBC and other Government agencies to enhance the take-up of this important benefit?

[Dr Coffey]

I know that the Pensions Minister—the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman)—will be delighted to meet my hon. Friend and to look at this matter. We take this absolutely seriously, in terms of wanting people to get the benefits to which they are entitled, and I am sure that he, as a very diligent local MP, will be able to use every lever that he has to improve the prospects of his constituents.

Pension Schemes Bill [ Lords ] (Second sitting)

Rob Roberts Excerpts

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

That would build on the success of the Labour Lords in leading the Government to amend the Bill in the House of Lords with regard to other areas of environmental and climate change reporting. We also support amendment 15, which seeks to add to the dashboard a person’s pension age and any related information regarding recent changes.

[Rob Roberts (Delyn) (Con)]

It is a pleasure to be able to speak to clause 118 and discuss the related amendments. I am delighted finally to be here. I am sure that my hon. Friend the Minister will not thank me for pointing out that it was the Budget speech in 2016 that said that we would have a fully functioning dashboard by 2019. We got there in the end, or we are getting there in the end. I am delighted that we are making progress.

It is very important for everyone to remember—I failed to do so and have caused a lot of hair pulling for the Minister and his team over the last few weeks—that the Bill seeks to lay out the foundation, the framework, for the data standards that will be adopted and is not necessarily about getting bogged down in the minutiae of what the dashboard will look like in the end and the final functionality of it. We live in an information age. The watchwords of both the Pensions Regulator and the Financial Conduct Authority for at least the last decade have been all about informed decisions. Pensions are a vital part of anyone’s life and they need to catch up with the rest of the world. We risk non-engagement from this and future generations if we cannot give them the information that they want in the manner in which they want it.

Auto-enrolment has been an amazing thing and has seen millions more people saving in pensions. We have a complacency risk coming down the line; people think that where we are with auto-enrolment is going to be sufficient to get them the retirement they dream of. We run the risk of that not necessarily always being the case, but that is another story for another day.

Auto-enrolment has led to multiple pots over many people’s working lives. How do we track those? How do we service them? How do we maximise their value? How difficult is it now for consumers to be able to look at all of those different pots and understand how they relate to each other and what that is going to mean for them at the end of the day?

I was delighted that about six weeks ago the Minister put in place a small pots working group, which will be very useful in understanding where to go in relation to small pots. There are currently 8 million or so in the UK, with the expectation that by 2035 that will have gone up to around 27 million. It is a huge issue that needs addressing. The biggest problem with small pots is their erosion over time due to the effect of charges. We definitely need to address that issue in some way.

On the amendments, I start with Government amendment 7. The ability to conduct transactions is not inherently bad and there are already safeguards in regulations. To rule out every type of transaction in primary legislation feels heavy-handed.

In Committee in the Lords, Earl Howe said:

“It is of course very important that individuals access advice and guidance before making decisions on undertaking significant pensions transactions.”—[Official Report, House of Lords, 2 March 2020; Vol. 802, c. GC207.]

I completely agree with the noble Earl. The regulations are in place around what is significant; it is the word “significant” that is key. There is no need to rule out everything in primary legislation. Why go to all the trouble of informing people about what they have got, if we do not give them any means of interacting with it?

Financial transactions could be to increase or decrease a contribution level or make a one-off lump sum payment. How empowering it would be for the consumer to be able to do that and look, in real time, at the impact of those changes on the end result. We must not restrict the ability to make any transactions; regulations around what transactions should be allowed are already there and will undoubtedly be strengthened in further regulations down the line.

Talk about people losing the safeguards around DB schemes or being moved into DC are wildly off the mark. That cannot be done now, so why on earth would anyone be able to do it just because we change from paper transactions to making transactions through the dashboard? We do not allow it now; why would we allow it in future? It is a ludicrous and scaremongering suggestion, and I do not like it.

Amendments 1, 2 and 15 are not relevant. The dashboard should show what people are going to get, not what they would have got if the rules were different or they had not changed or the Government had not changed this or that policy. It is supposed to be an accurate picture of what someone is actually going to get, at that time. Seeing multiple sets of figures, only one of which is correct and actually relevant to what they are going to get, would just cause confusion for the consumer.

Unfortunately, as many people have let out of the bag, the amendment on the state pension age and the WASPI women in particular was tabled specifically to highlight a campaign issue and the unfairness of a Government policy decision. It cannot be good law and it will create a horrible precedent, however well-meaning the amendment might be, to put such provisions in primary legislation. I hesitate to say it, but it feels a little like tabling amendments to incite dissatisfaction in previous Government policy, but I am sure that hon. Members would never seek to do that.

The Minister said in his opening remarks everything that I had written down on amendments 4 and 5. I found amendment 14 very interesting. People who are concerned with environmental, social and corporate governance targets will always seek them out, and always have done. We do not need to force that information on people who do not want it. Believe it or not, plenty of people think that their pension is something to provide them with an income in retirement, not necessarily a tool to solve the ills of society.

There are consumers who want that level of detail, and they will undoubtedly be able to select the dashboard provider that meets their needs and gives them all the information that they want, but there is no need to make that happen in primary legislation because the market will work itself out and the people who want that information will be able to access it via other providers.

[Seema Malhotra]

I understand that the hon. Member is concerned about the provision of information, but can he see a downside to it being there?

[Rob Roberts]

No, but I also do not see a downside to lots of other types of information being there, so why this type and not others? The purpose of primary legislation should not necessarily be to say all the things that should be there. Lots of things potentially should be there, but that does not mean that they have to be there, and prescribing that they must be there does not really fit in.

[Seema Malhotra]

I understand that, but the information is designed to assist in decision making, and may be helpful for those who are reviewing their pensions. In the context of much change across society and concern about such issues, does the hon. Member agree that that information may be helpful to those who want to base decisions on ESG information, and has no downside for those who do not?

[Rob Roberts]

That may be, but as I mentioned earlier, it muddies the waters. If people want to access that information, there is a slew of providers out there. If they want the one that provides the most ESG information, they will gravitate towards it. We do not need to override the general public’s ability to make an informed choice by legislating to make it happen. As I mentioned earlier, “informed choices” are the big words. The ability to go that way should be entirely left in the hands of the consumer.

As I said, the Minister mentioned everything that I wanted to on amendments 4 and 5, but I reiterate that I am very happy to see the pensions dashboard finally taking a few steps closer towards completion. Hopefully the clause will stand part of the Bill.

[Ms Angela Eagle (Wallasey) (Lab)]

It is a pleasure to see you in the Chair this afternoon, Mr Robertson, after the dynamic chairing from your colleague this morning; we made a lot of progress. I will make some observations about dashboards, and talk particularly about Government amendment 7, which, as colleagues know, removes the Drake amendment that was added in the other place. However, I will first comment on how potentially beneficial a good working pensions dashboard coming into existence would be for many millions of pensioners looking to plan for their retirement.

Many of us who have been involved in pensions policy making—in Opposition, in Government or both—know that the holy grails in this area are: first, to get people to think about pension saving in the first place; secondly, to get people, especially when they are younger, to think that they may ever reach retirement age, and to start planning for what their income might be when they get there; and thirdly, having established from a young age that interest in considering what their income will be when they are older and in setting money aside to ensure that they have a secure income, to ask them to navigate the current pensions landscape in the UK, which is asking an awful lot of most of our citizens, because it is extremely complicated and changes over time. We have the confluence of many different sorts of pension availability, from the much more effective DB schemes, which used to be more common but in which 10 million people still have savings, it has to be pointed out, to the evolving and developing DC and individual savings schemes.

--- Later in debate ---

[Ms Eagle]

I want to briefly add some emphasis to the points made by my hon. Friend the Member for Feltham and Heston from the Front Bench. This is really a battle between those who like to add horrendously high charges, in very small print, and transparency so that people can make decisions in possession of the right kind of information. Surely enabling that transparency is at the heart of what the pensions dashboard is all about. Financial services, particularly things like pensions, have always featured a uniquely complex, difficult and opaque pricing system, which can often eat away significantly at the money that people who are investing can expect to live on when they retire.

Thankfully, trail commission has now been abolished, at least to my knowledge, but it has been replaced with other opaque pricing systems that take people’s money away. The hon. Member for Delyn was right to say that pots that are very small are being eaten away by charges. Most people who put money into pots would have had no real knowledge or understanding of the price of keeping that money there, because it would not have been up front in the information; it would have been hidden away in hundreds or perhaps thousands of pages of tiny print.

The amendments, which I fully support, are all about getting price and cost transparency on the dashboard, which was clearly created to include such information. I will not understand it at all if the Minister has reasons for not doing so.

[Rob Roberts]

I rise to speak briefly to amendments 11, 12 and 13. I did not mention it earlier, but the general problem with small pots being eroded away by charges, especially in the auto-enrolment phase, is that many of them have set charges in pounds rather than percentage-based charges. If someone has 10 pots of £1,000 and they all have the same percentage charging structure, the charges will be exactly the same as one scheme with £10,000 in it; what causes the problem is that some schemes have a set charge in pounds per year.

Unfortunately, an awful lot of the time we focus too much on the cost of plans and the impact of charges: the principal-based tail is wagging the outcome-based dog. It is the outcome that is most important, because people cannot spend the principal; they spend the outcome. That is easily illustrated: if scheme A has a 0.5% charge and a return of 5% a year, and scheme B has a 1% charge and a return of 7% a year, scheme B is a better scheme despite having a higher charge. It is not the charging that is important.

The hon. Member for Wallasey mentioned people who will be put off from investing in schemes that are looted and abused in such ways. She was 100% correct; there were many nods on both sides of the Committee Room at the idea that that would put people off. Focusing too much on charges also potentially puts people off. It is worrying and scary, and potentially angers the consumer, who would not understand the figure for the total charges if it is expressed in a significant way. If we say, “Over the lifetime of your plan, you will incur £30,000-worth of charges,” without some kind of explanation or context showing what that relates to, people will see that as excessive and ridiculous.

[Neil Gray]

I do not think it is fair to characterise this as a focus just on charges. New clause 11 contains an idea for how small pots can be managed, in terms of the unintended consequences of automatic enrolment. I struggle to understand the rationale of the hon. Gentlemen’s argument about the lack of transparency being provided to consumers and enabling them to take informed decisions about the plans they enter into. I do not see the logic of suggesting that hiding that or allowing schemes to continue putting it in the small print is beneficial to consumers.

[Rob Roberts]

I am not necessarily advocating a lack of transparency; I am advocating a focus on the outcome, rather than on every element of the journey along the way. There are lots of things that we currently do not talk about, in terms of the costs and charges. We look at the costs and charges of the scheme in general, and it is not necessarily a requirement for the costs and charges of the individual funds that make up the scheme to be included in those calculations. There are lots of things that could be included in there, but it is the outcome that is important, not necessarily the minute detail of every element along the way.

[Richard Thomson (Gordon) (SNP)]

I do not think anyone would disagree that overall it is the outcome that is important, but historically the trouble is that consumers have often been encouraged to look at outcomes that may or may not have been realistic over an extended period of investment, and have not had the full awareness that they ought to have had of the charges. Surely as part of educating the consumer we should be drawing their attention to the charges and helping them to understand them in the context of everything that is important. If we want engaged, informed consumers, surely we should not be telling them not to worry their little heads about the charges; we should be making it transparent and open.

--- Later in debate ---

[Rob Roberts]

I understand the hon. Gentleman’s point, but it is for the regulator to determine how projections are shown and what information the individual requires to make an informed decision. It does not necessarily belong in primary legislation. It should come later, and the regulator should implement it. I understand that point, but amendments 11, 12 and 13 would all do exactly the same thing: they all focus on the wrong things, when I believe we should be focusing on the outcomes.

[Guy Opperman]

I hope to be able to bring some agreed consensus on this. Colleagues will be aware, because they have read the Bill in great detail, that subsection (2)(a)(iii) on page 108 sets out what pensions information should be provided. It includes

“the rights and obligations that arise or may arise under the scheme”.

It is very much the case that individual costs are already envisaged as being part of the clause and the scheme.

I will explain why I will resist this amendment. First, the context is that it is already in the Bill. Secondly, if I have not made it sufficiently clear in the past, I am happy to make it clear today that we anticipate that costs and charges should be a part of dashboards in the future, but the question is when and how? There is common ground that in the longer term, there should be an understanding of what individuals are being charged for the service they are being provided. There is a much wider debate, which we have tried to have to the best of our ability, about how it is that a pension is run and then the individual is burdened with individual costs, depending on the nature of the different schemes.

I am very clear that, first, I consider the provision otiose because it is already within the confines of the Bill. Secondly, it is the Government’s intention that costs and charges should be part of dashboards in the future. Thirdly, we value transparency. Lord knows I started this morning with the point that simpler statements are being introduced. Contrary to what the hon. Member for Wallasey said, simpler statements will include costs and charges.

Pension Schemes Bill [Lords]

Rob Roberts 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

[Rob Roberts (Delyn) (Con)]

As a financial planner for many years, I confirm that for a large majority of the UK population the topic of pensions is something to be avoided and put off to a later date. Looking at the sparseness of today’s call sheet and at the Benches around me, that seems also to be the case for many right hon. and hon. Members. Many UK pensions involve complicated borrowing and are hard to understand, and we cannot all be pension geeks like me and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds).

In April 2006 we went through pension simplification—a misnomer if ever there was one. That was about the time that I was becoming involved in pensions, and if what came out of pension simplification is simple, I would have hated to have worked with what came before. This does not need to be complicated. Pensions are the simplest of things—they are an investment with a tax-efficient wrapper around them. People save for their retirement, with tax benefits as an incentive to do so. It is no more complicated than that.

Other industries have adapted and evolved to suit new technologies as they come up. The banking industry is a great example of that, and it has embraced new technological advances such as online banking. More than 76% of people in the UK now use online banking regularly, compared with just a third of people back in 2007. Just as the banking industry developed to meet the needs of modern society, it is now time for the pension sector to do the same and move into the 21st century, and the Bill seems to be the first step in doing just that.

A recent YouGov survey found that three in five workers have no idea how much they have saved in their pension, and more than a quarter of working age people with a pension say that they never check what is in it. Given the United Kingdom’s increasingly ageing population, it is more important than ever that individuals plan for the future and protect their savings, but currently, there are barriers to doing that.

As I have said in other debates in the House, my main reason for being involved with the Conservative and Unionist party is one of empowerment, and of enabling people to take control of their lives, make better decisions, and shape their own futures. Once again, I am proud to be a member of the party that empowers people to have the freedom and knowledge to make informed choices about their life, and form the retirement that they want and deserve.

The Bill enables people to make better decisions about their pension by giving them access to their pension savings in one place. Like other hon. Members, I support the idea of the pensions dashboard, which will make it much easier for people to see information about their pensions online. By having all their savings in one place, people will be more likely to keep track of them and engage with their pension pot, allowing individuals to understand their pension savings and make better choices along the way.

I remain cautious, however, because a little information can be a bad thing, and I worry a little about individuals who would benefit from professional advice trying to take complex decisions on their own, rather than seeking a properly qualified financial planner. As my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) said, on average people have 11 jobs in their lifetime, and under the current auto-enrolment regime, they may have a different pension pot each time. It is therefore hard for people to monitor and keep up to date with their pension savings, to say nothing of the millions of people who have lost track of pensions from jobs they had decades ago.

The Minister and I have had many conversations about pension tracing, and I remain hopeful that because pensions have always been logged by a national insurance number, there is potential within the new dashboard system for a way to proactively inform individuals about pensions that they might have and not be aware of, without them needing to know the details of a job that might have been some significant time ago. According to the Association of British Insurers, 20% of adults admit to having lost a pension pot. The actual figure will be much higher, because some people will not even realise that it has happened. Research suggests that there is almost £20 billion in forgotten pensions; recovering that would be a massive boost for pensioners in these difficult times.

Mr L, for example, visited my office a couple of years ago wanting to access his £50,000 pension to clear the remaining balance of his mortgage and give him a little comfort. After a bit of investigation, we uncovered that he actually had £260,000, and we made a new plan not only to clear the mortgage but for him to retire seven years earlier than planned. That can be a transformative process to go through.

If we want to encourage people to engage with their pensions and their retirement plans, their pensions data needs to be readily available and we need to give them the right to choose how they engage with it, whether that is online, through an app on their phone, through the Money and Pensions Service or, indeed, via their own provider. The right to choose has already been extended to other areas of people’s financial lives. With the creation of a pensions dashboard, that right will finally be extended to pensions, and people will have the freedom to make their own decisions about their future.

I look forward to hearing the Minister’s plans for ensuring that data on multiple pensions cannot be viewed by competitor providers and that people’s personal information remains protected from predatory sales practices. I have some sympathy with the points made by the hon. Member for Airdrie and Shotts (Neil Gray) and others that the MaPS platform should be primary, but I recognise, as my hon. Friend the Member for Newcastle-under-Lyme just mentioned, that innovation often lies in the hands of private firms, normally to the benefit of the consumer.

Moving on from dashboards, the existing pension frameworks—defined-benefit and defined-contribution schemes—can create significant risk and cost for employers on one hand, and do not provide the most predictable retirement income for scheme members on the other. In addition to the dashboard, individuals in some circumstances will be provided with greater freedom of choice through the introduction of collective defined-contribution schemes, which are a better, more affordable and more reliable alternative for both scheme members and employers.

Under those schemes, savers in a company can pool their money collectively in a single fund that pays an annual pension income. By addressing the binary nature of UK pension legislation, the Bill will give individuals greater opportunities to invest in a variety of schemes that benefit them and their needs. As risk is shouldered collectively across the membership rather than by individual members, collective defined-contribution schemes will lead to greater stability and security. That is just another measure that shows that the Government are listening and working with the needs and views of both the industry and our constituents.

Let me touch briefly on charges and costs, which others have mentioned, and sound a note of caution that I hope my hon. Friend the Minister will heed. For many years, there has been a huge focus on costs and charges in pensions, and I worry that it is sometimes skewed the wrong way. I have seen a number of clients over the years who have transferred pension funds into options with much lower charging structures, only to see significantly lower growth. Something with a 1% charge that delivers a 5% return is a much better option than something that has a 0.2% charge but returns only 3%.

I am pleased that the Bill will strengthen the powers of the Pensions Regulator so that members of pension schemes have increased protection for their savings. That gives a fresh set of dentures to a regulator that previously may have lacked a little bite, and it is a welcome reform. Although TPR performs an incredibly important role in protecting workplace pensions and building people’s confidence in retirement saving, there has been a significant change in the industry since its creation in 2005, and it is time that it had some more authority, so I am glad that the Bill will update its role and powers so that it is fit to meet the needs of pensions in the 21st century.

The regulator will have greater powers to deter reckless behaviour, such as extended information-gathering powers, and new civil and criminal sanctions will be introduced. If we are to encourage people to save in their pensions for their future, it is right that they should feel confident that their savings will be protected by a robust regulatory structure. The measures in the Bill will build important trust in pension schemes and put consumer interests first.

Ultimately, the Bill showcases the heart of the Conservative and Unionist Government’s values: empowerment, freedom and choice. It will give people the freedom to make informed decisions about their future, the ability to choose where to save their pension and the confidence to make the right decision about their future and retirement, knowing that it will be protected, and I am pleased to support it.

In closing, may I also take a moment to say on my behalf—and I am sure, on behalf of hon. and right hon. Members from all parts of the House—how pleased we all are to see my hon. Friend the Minister at the Dispatch Box after his recent tragic loss? I know the whole House was devastated to hear his news, and we hope that he and his partner are doing well. Others have paid tribute to his passion and assiduity in preparing the Bill, and I add my voice to their praise.

[Duncan Baker (North Norfolk) (Con)]

It is an honour to follow the self-confessed pension geek and guru that is my hon. Friend the Member for Delyn (Rob Roberts). I hope that when I come to draw my pension, it is revealed, as in the story of his constituent, that it is actually five times greater than I ever expected it to be. I am sure it was all down to the wonderful advice that was given.

[Rob Roberts]

Past performance is no indication of future guaranteed performance. The small print says so quite clearly.

[Duncan Baker]

If I wrote a headline for this Bill, it would be something along the lines of, “If you want to save the planet, start a pension.” That would chime very well with my hon. Friend the Member for West Worcestershire (Harriett Baldwin), who is encouraging young people to start a pension, as I am myself, but in a roundabout way, this Bill does just that. While the thought of pensions may give rise to a tendency for many to glaze over and think about things another day, this piece of legislation is a welcome move. That is proven by the wide base of support. As the Minister has been roundly thanked, I will applaud him and add my thanks, because this is a really great piece of legislation.

While I cannot profess to having the same level of knowledge as some Members in the Chamber today, I was in a former life a finance director, and I recall feeling some dread when auto-enrolment first arrived. I remember bemoaning the scheme, which at the time was more expensive to administer than the meaningful contributions that an employee would pay in when the rates were so low. How those cynics were wrong, including me, because its success speaks for itself. We now have more than 10 million workers in an auto-enrolment scheme in this country. People did not opt out when the contributions increased. Nearly 90% of eligible employees participate in a workplace pension now.

With an ageing population, the need to save for one’s retirement is in anyone’s view vitally necessary, much like many of the constituent parts of the Bill. Auto-enrolment has created inertia to save. It trusts people to think about their retirement, but the next stage is to bring back control—this is why the Bill is so good and important—so that people know what they have and where it is. As the old saying goes, “If you cannot measure it, you cannot manage it”, and for that reason I wholeheartedly welcome the implementation of the pension dashboard in the Bill.

It is a common fact—we have heard it many times today—that people lose control of their pension pots. People move jobs many times throughout their career. We have heard it is about 11 times on average, and there is some £20 billion in pension pots that people no longer necessarily know the location of. The dashboard is a progressive and necessary step in continually improving our pension system and empowering people to know what they have and where it is, not to mention beneficial for pension companies and contributors given that we are always told how small pots are not the most beneficial or economically efficient. What is more, the Bill gives clarity, transparency and support to help make people make informed decisions.

I welcome clause 125. We have heard time and again of the dreadful and immoral scams to which people have sadly fallen victim. For many, pension savings are their largest financial asset. If someone falls victim to a scam, their loss can be just shy of £100,000. Adequate restrictions to protect consumers with a layer of due diligence and a red flag are a sensible brake, which will help to avoid such repercussions.

I welcome the introduction of collective defined-contribution schemes. CDCs create a collective pot from which everyone who owns and shares the fund can benefit, and we are already hearing welcoming noises about that. The Bill provides legislation and the regulatory framework for new collective money purchase schemes and, as such, it helps to widen the desire for alternative collective arrangements.

But back to saving the planet. Clause 124 represents a hugely significant step, and it is in tune with the speech that the Prime Minister gave yesterday. Climate change continues, quite rightly, to take centre stage in so much of our legislative agenda. This is the first pensions Bill ever to mention climate change. Pension trustees must now consider climate change as financially material to members’ investments. Under the regulations of the taskforce on climate-related financial disclosures, schemes must consider the response to climate change as both a risk and an opportunity in their governance risk management strategy, and they must publish that information.

When we think of the billions upon billions invested in pension funds, we can see that allowing pension schemes and the market to embrace the green agenda will enable people to put their own savings into helping us to achieve net zero. Perhaps for the first time ever—even if we never quite thought we would say this—saving for our retirement can now be seen as saving the planet as well.