Pension Schemes Bill [ Lords ] (Second sitting)

Seema Malhotra Excerpts

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

[The Chair]

With this it will be convenient to discuss the following:

Clauses 108 to 116 stand part.

That schedule 7 be the Seventh schedule to the Bill.

Clause 117 stand part.

That schedule 8 be the Eighth schedule to the Bill.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I am grateful to be able to make some comments about clause 107. This morning’s debate gave us the opportunity to put on the record some of our thoughts and to acknowledge our support for part 3 of the Bill. There has been some debate, and I seek some further assurances from the Minister.

On the role of the Pensions Regulator, we support strengthening the existing sanctions regime with the introduction of new criminal offences and higher penalties for wrongdoing. The pensions landscape has been troubled in recent years by scandals, including the BHS and Carillion scandals, which have had catastrophic consequences for the scheme members involved. My right hon. Friend the Member for East Ham and my hon. Friend the Member for Wallasey also made that point. The Minister made the important remark that callous crooks who put at risk other people’s pensions cannot be allowed to get away with it.

It is right that those who intentionally or knowingly mishandle pension schemes or endanger workers’ pensions face severe penalties, which is why we wholeheartedly support the relevant provisions in the Bill. The only note of concern is the scope of the provisions, and I refer to the very helpful and instructive debates in the other place on that issue. We are firm in the view that the offence must apply to unscrupulous employers or directors of companies, but there is fear that it is so wide in scope that pretty much anyone involved in the management of a pension scheme could be exposed to sanctions, including third parties such as advisers, banks and even trade unions. Colleagues from the SNP have made some of those points effectively.

Government representatives have assured us that the courts will have the necessary discretion to ensure that only those who have genuinely been involved in wrongdoing will be caught by the new offences, but I note that pensions lawyers have realised similar concerns to those that we are raising today. It would be helpful to have further confirmation, following the Minister’s comments this morning, of whether there are further plans to review whether the offences work as intended or whether there are any other unforeseen consequences.

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

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

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

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

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

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

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[Guy Opperman]

The costs are substantial. There are a variety of ways in which this is being paid for, but first and foremost, it will not be paid for by the individual. Our constituents will be able to access the dashboard, and the facility that we are creating, for free. My hon. Friend will have to forgive me for giving a generalised answer, because I cannot give the pounds, shillings and pence now, but I will be happy to do so in writing before Report.

The cost is fundamentally met in respect of the work on state pension; there was a budget announcement many years ago for the expensive work that is required by Her Majesty’s Revenue and Customs to provide the state pension provision as part of the dashboard, as it is our intention that state pensions will be part of this from day one. I believe that £5 million was set aside to pay for that part.

There is ongoing payment for the Money and Pensions Service, which is through a variety of means. Some is from Treasury funding, but it is paid for primarily through the pension levy, which pays for a variety of things in the usual way, from the regulator to the Pension Protection Fund and the Money and Pensions Service. Ultimately, the cost is borne by individual schemes and members, but not by the individual constituent accessing the dashboard—it is not expected in any way that there should be a cost for doing that.

It is clearly our intention and desire that a commercial dashboard should be available. That leads me to a point that I will come back to in more detail: do we go to where the customer is, or do we make the customer come to us? In this particular example, we strongly believe that we should go to where the customer is.

It is entirely right that we design a system with a data portal that could in no way be utilised for bad purposes, but that could be accessed by an individual, whether they are presently with Aviva, PensionBee or another organisation. They can then work with a particular independent financial advisor—whether my hon. Friend the Member for Delyn in a former life or other independent financial advisors—who would have to be specifically approved to do this work. They already have a relationship with those people and they are already in the position of having an understanding. If we do not have that commercial capability, we will lose out on a significant chunk of the market and there will be a significant deficit in the ability of what we all believe is a great idea to have a practical effect. That is the fundamental point in respect of costs. I am happy to give my hon. Friend the Member for West Worcestershire a detailed breakdown before Report and Third Reading.

I may return to Government amendment 7 but I shall first try to address amendments 1, 2 and 15 on the state pension. I am certain that I will be invited to comment on a variety of matters relating to the women’s state pension increase, but my only comment at the outset is that it is not the Government’s intention to amend the Pensions Acts of 1995, 2007, 2008 or 2011. We intend that the state pension will be part of the original provision of the dashboard. We are working with HMRC, which is responsible for that information, so that we can identify the date of state pension age and the amount that people might be expected to receive at the present stage. We do not intend to take into account what their entitlement would have been with or without the amendments to the 2011Act, as proposed in amendment 1, or what it would have been with or without the benefit of the triple lock, as proposed in amendment 2, or in respect of the 1995 Act, as proposed in amendment 15. I am sure that I will be tempted to cast a view on the future of the triple lock, but I am delighted to say that that is a matter for the Chancellor. As we discussed in the Social Security (Up-rating of Benefits) Bill, the decision has been made in respect of the upcoming year of 2021-22, and that is the extent of the matter at present.

Amendment 14 concerns the extent to which the dashboard should add information on environmental, social and corporate governance matters. I am delighted to have been the Minister who brought ESG into part of this country’s pensions system and drove forward change in the pension and asset management systems, with due credit to Chris Woolard and the Financial Conduct Authority for changing their original views and coming on board with our timetable. I am utterly in support of the principle of ESG and of ensuring that individuals have as much information, on a long-term basis, about what their pension fund is being invested in. However, I shall resist the amendment for several reasons.

First, we intend that the dashboard should start with simple information. We want to ensure that the information available in the dashboard service is easily understood by consumers and that the impact on user behaviour is considered. Trustees must have a policy on ESG and must disclose it in any event, but we do not think that the provision of that information should be prescribed in the Bill, and nor do I want to prejudice the pensions dashboard programme consultation, which began earlier this year, about what information could be shown. The consultation specifically includes signposting users to schemes’ statements of investment principles and implementation documentation, including information on schemes’ ESG policies and work. The programme will publish an initial version of a proposal for data standards by the end of the year, and we will respond in respect of what specific information will flow from that at a later stage.

Amendments 4 and 5 in the name of the hon. Member for Airdrie and Shotts deal with people in vulnerable circumstances. Although I applaud the principles behind them, the matter is slightly more complicated than the amendments necessarily make it appear. I am happy to explain in more detail at a later stage, but it starts with the fundamental principle that the Money and Pensions Service, which oversees the dashboard programme, has a statutory objective to ensure that information and guidance is available to those most in need of it, bearing in mind in particular the needs of people in vulnerable circumstances. It must have regard to that in the development of pensions dashboards.

The pensions dashboard programme usability working group—a catchy title, I accept—will explore how best to help users to understand the information being presented to them and where they can get more help, including those who are most vulnerable. That could include making recommendations about mandatory signposting to guidance and/or advice. Money and Pensions Service guiders are trained to recognise that some customers may need additional or different types of help.

The Financial Conduct Authority will seek to introduce a new regulated activity and amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, consulting on rules relating to that activity. That may also include a requirement to signpost users to guidance and to provide information about how to find regulated financial advice. We believe that the best way to do that is through the FCA rules and not in the Bill.

I will make two other points on the vulnerability issue. The Department for Work and Pensions, the FCA and the Money and Pensions Service all have a duty to comply with the public sector equality duty in section 149 of the Equality Act 2010. Although dashboard providers will be regulated, there has also been a recent consultation on guidance on the fair treatment of vulnerable consumers, and that will be responded to in guidance published by the FCA either later this year or in early 2021.

My final comment on the proposals on vulnerable individuals would be on the potential difficulty where, as I explained a dashboard is merely a find-and-view service. Were the amendments taken to their ultimate conclusion, they would require a pension scheme to make further inquiry of the individual themselves before the release of the information. I fear that the practical reality of that in a find-and-view service of this nature is neither appropriate nor in the best interests of all parties. I entirely accept the principle behind the amendments, but I believe that we may be able to navigate the problem in an alternative way.

[Seema Malhotra]

I am grateful to have the opportunity to respond to the Minister, and I thank him for those detailed remarks. I wish to speak against amendment 7, and I will lay out my arguments, and to speak to our amendments 15 and 14 and the reasons why we tabled them. I do not intend to push them to a vote, but we will listen to what the Minister has to say.

It is disappointing to see the Government row back on the positive progress on commercial transactions that was made in the Lords. A serious concern of ours, which was raised in the other place, is that the introduction of commercial dashboards paired with the ability to engage in commercial transaction activities would make it easier for savers to be encouraged into detrimental pensions decisions and inappropriate products.

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[Guy Opperman]

I am certain that the hon. Lady does not want to make an issue of this, but does she not accept that it was the Conservative Government who sat down over Christmas and amended the Bill specifically to address TCFD recommendations and to include climate change in the Bill? We added a new clause on climate change. I totally accept that Labour colleagues worked on a cross-party basis to do that, but it would be wrong to say anything other than that the Government started the process to ensure that climate change was in the Bill and that the TCFD was part of it, and we are doing a consultation on the implications of it. I am sure she does not want to mislead the Committee on that.

[Seema Malhotra]

Indeed, I acknowledged in my opening remarks the Minister’s commitment to this agenda. He has also acknowledged Labour’s working with the Government on this agenda, but also helping to secure the amendments that have led to the new subsections in the Bill. The amendments require trustees and managers to take into account the Paris agreement and domestic climate targets in the overall governance, and disclosure of climate change risk and opportunities. It is a credit to the way in which we have proceeded on this agenda that for the first time climate change has featured in domestic pensions legislation.

The amendment would build on the commitments by providing information relating to the scheme’s performance against environmental, social, and corporate governance targets, adding to the list of information on the dashboard and empowering individuals to better understand the role their savings play in tackling climate change and achieving other social and environmental goals. We are aware that the Government intend to keep the dashboard simple at first—indeed, the Minister commented on that in his opening remarks—but we note that Baroness Stedman-Scott said in the other place:

“We are very interested in how dashboards can support and increase engagement, including whether information on areas such as ESG, which trustees are required to cover as part of their disclosure obligations, may be incorporated into the dashboards. This is to be informed by user testing and may evolve over time.”—[Official Report, House of Lords, 26 February 2020; Vol. 802, c. GC163.]

I know that the Minister has had further conversations on this issue. He also referred to the ongoing consultation about what could be on the dashboard. However, I hope that he will be able to confirm that that is something he hopes to implement as the dashboard is developed further.

[Neil Gray]

It is a pleasure to serve under your chairmanship, Mr Robertson, during this important part of the Committee’s deliberations. Like the shadow Minister, Scottish National party Members are concerned about Government amendment 7. We strongly support the premise of a pensions dashboard and hope that allowing people greater access to information about their pensions will encourage informed choices that ensure long-term savings and investments that provide dignity in retirement. However, we are concerned that the Government amendments to this section of the Bill will mean that the creation of the MaPS dashboard could be a missed opportunity.

Amendment 7 is a case in point. It would allow commercial dashboards to facilitate financial transactions, which we feel is a mistake and is a big reason why we want a lead-in period before commercial dashboards become operational. We feel that the impartial information that we want the MaPS dashboard to provide should be entirely separate from transactions, at least to begin with. That position is supported by the Pensions and Lifetime Savings Association, for all the reasons outlined by the shadow Minister.

Providing digital platforms to bring together a person’s savings landscape is a huge step forward, but exposing that information to marketing and commercialisation will remove the power of the saver to access information that is presented impartially and without commercial motive and hand it to organisations that will encourage individuals to take big decisions about potentially their largest financial asset. As the shadow Minister said, it could also make people vulnerable to scammers.

The UK Government appear not to have learned from the oft-worn problems associated with pension freedoms. Customer satisfaction in Pension Wise is high, and its evaluation score published last month makes for good reading, yet only 14% of all pension pots accessed—not people who access their pots, but pots accessed—were accessed after receiving guidance from Pension Wise. The House of Commons Library report earlier this summer highlighted that, as a result of pension freedoms, more people were choosing to shift their savings from secure defined-benefit schemes to riskier defined-contribution schemes, and a large proportion of those drawing down their pension were doing so without seeking advice or guidance. That is likely to be exacerbated if commercial dashboards are allowed to contain financial transactions. We think that is really risky. Allowing financial transactions to take place on the dashboard without having first assessed and accounted for the risks is clearly a recipe for trouble, and I urge the Government to reconsider.

We want the dashboard to provide as much information as possible for savers, which is why we tabled amendments 1, 2, 4 and 5 and support amendments 14 and 15, tabled by the Labour Front Benchers. These amendments seek to add information relating to a person’s state pension to the dashboard, ensuring that the impact of policy changes can be tracked by savers. Amendment 1 would show the detriment suffered by 1950s-born women. The Bill’s scope to provide more meaningful help and support to women born in the 1950s, who have seen their state pension age increase with little or, in some cases, no notice, is extremely limited. We have been clear and consistent in our support for women born in the 1950s. We want the Government to carry out a full impact assessment of the detriment suffered by them from various changes, and to use that to inform payments to be made to them. However, these amendments are as far as the Bill’s scope allows us to go. They would give these women more information about how the state pension changes have affected them. They would also act as a strong deterrent against this type of mishandled policy change happening again.

Public dashboards should be as clever as possible, to account for complexity in individual circumstances and to more accurately project lifetime savings. That view is shared by some of those who have provided evidence to the Committee, including the Institute and Faculty of Actuaries and the Pensions and Lifetime Savings Association. Therefore, the SNP has tabled amendments to mandate specific information on the dashboard.

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[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.

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[Guy Opperman]

I am grateful to my hon. Friend for that point. That does not mean to say that we do not have a regulatory system that ensures that there are protections, but the nature of a dashboard and international examples definitely suggest that this is an empowerment and an assistance to individual consumers.

[Seema Malhotra]

Will the Minister give way?

[Guy Opperman]

I will press on, because I am going to answer some of the points that the hon. Lady made. I am mindful that we have spent some time on this particular point and we have a lot to get through.

On matters related to the state pension and triple lock, I leave the triple lock to the Chancellor with good blessing and understanding. I will not get into a rehash of many arguments over the state pension changes made from 1995 and which continued over 13 years of Labour Government. The policy was supported by certain Labour Ministers, including in the DWP. Then, obviously, there was a change of Government and the policy was not necessarily supported. When the hon. Lady talks of the way that people have been treated by the Government, that means all Governments since 1995.

I have persistently defended the actions and the civil servants of the DWP throughout the period between 1997 and 2010. Interestingly enough, so have the courts, because we have recently had the Court of Appeal decision in the BackTo60 claim, which found comprehensively in favour of the Government—not just this Government, but previous Governments—in respect of all matters that apply, including notice.

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[Guy Opperman]

I am not going to comment on his capabilities. The bottom line is that that was a persistent level of policy making made by successive Governments from 1993 onwards and utterly continued by the Labour Government, who, to the best of my recollection, proceeded to raise the state pension age to 65 by 2020 in the 2007 or 2008 Act. It was then clearly increased in the 2011 Act. One can argue about why that was done. Perhaps it was a consequence of the great former Prime Minister Gordon Brown’s efforts at manhandling the economy, or perhaps there were other reasons for taking that approach. However, I make the point that I have consistently defended individual Ministers and the Department for their consistent approach to addressing something that all other western countries have done in respect of state pensions. They have all approached it in broadly the same way.

We want the dashboard, and I accept that there is a desire to have many other things on it. We want it to be a simple interface that is accessible to all and that is not overlaid by many different things. With user testing over time, it is possible that more information will be outlined, but the comparable example I give—namely, simpler statements—is appropriate and right.

[Seema Malhotra]

I seek clarification on the Minister’s position on ruling out and ruling in. He has said that he does not want to rule out financial transactions on the dashboard in the future, but did he also say that they would not be ruled in without primary legislation?

Secondly, the Minister said that some pension schemes may not participate. What will and what will not be compulsory? For those that might not share all the information, will there be an obligation to share some, so that somebody could look at the dashboard and have a complete scan, even if they do not have all the information, in order to know that they have pots out there?

[Guy Opperman]

I will deal with the first point about financial transactions. If we accepted the amendment as drafted by the House of Lords, we would not be able to proceed with financial transactions without future primary legislation. I passionately believe that, with the suitable guidance and protections that we all want, consolidation is appropriate, and that would be a financial transaction. It should definitely be permissible on an ongoing basis, arising out of information proceeded and obtained by a dashboard. It is absolutely that sort of empowerment that the dashboard will offer, and it is entirely the right thing.

Clearly, that is my view. There is a dashboard delivery organisation and the Money and Pensions Service, and a whole host of user groups are also involved. I have communicated my strong view. I certainly do not want to rule it out in the future, which is the desired effect of the amendment. The reality is that if I allow Baroness Drake’s amendment to go ahead, it would restrict the capability of the dashboard massively in the future. That is not something I am prepared to do.

I have addressed many different points. Given the time, I will pause there and let others reflect.

Question put, That the amendment be made.

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[Seema Malhotra]

I beg to move amendment 11, in clause 119, page 108, line 20, after “scheme,” insert—

“(iva) the total cost of charges incurred for the administration of the scheme”

This amendment would add information about the total cost of charges incurred for the administration and management of occupational pension schemes to the list of information displayed on the dashboard.

[The Chair]

With this it will be convenient to discuss

Clause stand part.

Clause 120 stand part.

Amendment 13, in schedule 9, page 179, line 14, after “scheme,” insert—

“(iva) the total cost of charges incurred for the administration of the scheme”

This amendment would add information about the total cost of charges incurred for the administration and management of occupational pension schemes in Northern Ireland to the list of information displayed on the dashboard.

That schedule 9 be the Ninth schedule to the Bill.

Amendment 12, in clause 121, page 112, line 45, after “scheme,” insert—

“(iva) the total cost of charges incurred for the administration of the scheme”

This amendment would add information about the total cost of charges incurred for the administration and management of personal and stakeholder pension schemes to the list of information displayed on the dashboard.

Clause 121 stand part.

[Seema Malhotra]

I am grateful for the opportunity to speak to amendments 11, 12 and 13, all of which make the same point: that the total cost of charges incurred for the administration of the scheme should be displayed on the dashboard. We believe that this issue is important because the creation of a pensions dashboard creates a real opportunity to introduce much-needed transparency on pensions costs and charges.

Pensions charges can be very difficult to understand or to compare and the lack of transparency can lead to people paying excessive charges without realising it, eroding their hard-earned savings. Improving disclosure in this way is essential for consumers, who need to understand the risks attached to their investments. In a study by Which? carried out in 2019, 300 people were asked for their thoughts on a pensions dashboard. Some 77% said they would be likely to use one. State pension entitlement was the information that 74% of people most wanted to be included. That was followed by projections of total retirement income, 62%; current pension value, 55%; and charges, 54%. Clearly the inclusion of that type of information would be popular with dashboard users and would help people to use their pensions freedoms to protect their savings rather than fall victim to disproportionate charges.

Information about costs and charges is vital if consumers are to use dashboards to understand which pensions they could use to make additional contributions, whether any of their pensions have excessive charges and when making decisions about how to access their pensions using pensions freedoms. Research by PensionBee found that more than 70% of non-advised drawdown customers accessing their pensions paid more than 0.75% in charges, costing them £40 million to £50 million a year extra – more than £175 million since pensions freedoms were introduced. The long-term impact of high costs and charges for income drawdown can be significant and result in people being able to take less income out of their pensions or running out of money more quickly.

Transparency of charges is a particular concern because the DWP appears to have agreed with the arguments of some in the industry that putting costs and charges on the simpler annual statement would confuse people. The result is that instead of being provided with specific information about how they are paid, people would be signposted towards what could be pages and pages of information on charges. Which? has noted that an approach that believes that consumers are best served by not knowing how much they pay for pension scheme services is irreconcilable with the objectives of the pensions freedoms and the expectations placed on consumers in retirement.

It clearly may not be in the interests of commercial providers to make that information transparent, so I end with a question to the Minister. If the Government do not intend to support Labour’s amendment, which at this stage we plan to press to a vote, how will they ensure that people have the information that they need to avoid excessive charges and avoid making decisions that they may come to regret because they did not know about those charges in the first place?

[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.

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[Seema Malhotra]

I beg to move amendment 16, in clause 122, page 116, line 37, at end insert—

“(2A) Before any other pension dashboard services can qualify under section 238A of the Pensions Act 2004 (qualifying pensions dashboard service) the Secretary of State must lay before Parliament a report on the operation and effectiveness of the pensions dashboard service, including the adequacy of consumer protections.”

This amendment would require the Secretary of State to report on the operation and effectiveness of the public dashboard service (including consumer protections) before allowing commercial dashboards to operate.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 8.

Amendment 3, in clause 122, page 116, line 42, leave out “one year” and insert “five years”.

This amendment would extend to five years the period for which the Money and Pensions Service dashboard would have to have been running before commercial operators could enter the market for the provision of pensions dashboards.

[Seema Malhotra]

We hugely regret that the Government are seeking to remove the amendment, introduced by Baroness Drake, that would have required the Money and Pensions Service dashboard to be up and running for a year before other commercial dashboards could be launched. It has always been Labour’s firm position that just one publicly run dashboard would be the best way to ensure that people receive trusted information about their pensions.

The Work and Pensions Committee produced a report on pension freedoms in 2018, in which it recommended a single public dashboard, to ensure that it would be free from commercial pressures and could provide individuals with a reliable source of information about their pensions. As that Committee noted, this would be in line with the examples of Australia, where a single dashboard is hosted by the Australian Taxation Office, and Sweden, where the only dashboard is run by a public-private partnership.

As the report stated, dashboards should first and foremost provide consumers with accurate and impartial information about all their pensions in one place. In a multiple dashboard system, providers would have incentives to use their dashboards to promote their own products or otherwise discourage switching away. There is also a danger that dashboard providers could use different underlying assumptions, producing rival income projections from the same raw data.

The pensions dashboard was conceived as a means of empowering consumers, to promote competition in the product market. There is a risk that in a multiple-dashboard system, providers could instead compete on the information provided. Which? and the Association of British Insurers have argued that regulation would be necessary to ensure that the dashboards were consistent. There is a simpler solution. By providing information on all pension entitlements in one place, the pensions dashboard would be a vital tool in informing and engaging customers, and empowering them to exercise pension freedoms in their own interest. A single, publicly hosted dashboard would be the best way of providing savers with simple, impartial and trustworthy information. However, the Government have said their intention is to progress plans for multiple dashboards.

Rather than preventing the introduction of commercial dashboards for a set period of time, our compromise amendment would merely compel the Government to review the operation of the public dashboard, including the adequacy of consumer protections, before allowing for commercial rivals to operate. If commercial dashboards are to be allowed, there must be strong and proactive regulation of all pensions dashboards and any other organisations involved in the storage, processing and presenting of pensions data. Organisations such as The People’s Pension and Which? have said that clear legal duties need to be placed on the operators of dashboards to act in the best interests of consumers.

The Government also envisage a role for what they call integrated service providers, which will store vast quantities of pensions data. It is not clear whether the Government intend for them to be regulated, or for the Money and Pensions Service, the TPR or the FCA to be able to authorise them and set regulatory standards. Unless the regulators have the ability to set standards and intervene in the operation of ISPs, any problems in the ISPs market will have to be tackled by contacting the individual pension schemes. That would be time-consuming and could lead to long periods of time when individuals’ pensions data is unavailable on pensions dashboards. Any scandals or data breaches that occurred in unregulated ISPs could also have a significant detrimental impact on the reputation of pensions dashboards and the overall framework for people to access their pensions data securely and safely.

The common-sense step proposed in the amendment would allow proper consideration to be given to the risks proposed by private providers. In many ways, the concerns underpinning the amendment are similar to those associated with Government amendment 7—that the introduction of commercial dashboards, paired with the ability to engage in commercial transaction activities, would impact on the reliability of the information presented to savers and open up the risk of people being persuaded into disadvantageous pensions positions.

I would be grateful for the Minister’s views on this matter, which I understand he is keen to share. If he still intends to progress with commercial dashboards, will he announce concrete steps and detail on how and when they will be regulated by the FCA? I am sure he will say a few words about integrated service providers. Will they store vast quantities of pensions data, and will they be subject to regulation and standards that are set by the TPR, MaPS and the FCA?

[Neil Gray]

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

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

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

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

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

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

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

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

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

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

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

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

--- Later in debate ---

I want to address the point that the hon. Member for Feltham and Heston made about data because I want to be utterly clear with her that this not about the storage of data. If she thinks that that is what the dashboard is doing, that is a misunderstanding of what it is proposed that the dashboard should do. I want to absolutely nail that, because we made great efforts to ensure that this is not a data repository process but a find-and-trace service that empowers individuals or their IFAs. She asked whether there will be consumer protections, going forward. The answer is yes, and we will discuss some of them under clause 125. Obviously, this will be an activity regulated by the FCA and there is ongoing regulation on a multitude of bases.

[Seema Malhotra]

The Minister is right that there will be no storage of data on the dashboard––in a sense, it is drawing in that data dynamically––but could he explain the role of the integrated service providers?

[Guy Opperman]

I explained this at great length earlier, but I will attempt to repeat what I said. I will jump through the verification hoops. The reality is that an individual gets verification and the information passes from the pension finder service to the connected pension schemes asking them to match the individual’s information. The pension scheme finds a match and confirms it to the pension finder service, which responds to the individual via their chosen dashboard saying that it holds the data. When the individual next logs on to their dashboard, the information from the pension scheme will be viewable by the individual. I drew the analogy of the cashpoint, which, I suggest, is the appropriate analogy, whereby if I bank with Barclays and I withdraw from an HSBC account, Barclays does not know what is in my account. That is the process by which we are trying to proceed.

--- Later in debate ---

[Guy Opperman]

Other countries have done things in different ways—they do not necessarily have the pension system that we have. We have a very substantial private pension system; some other countries will not have such private pension systems—the hon. Lady will have to ask them. It is argued that the right way forward—having looked at what countries such as Israel and Denmark have done—is to have a parallel system and two systems, commercial and public, working together. We already have a public system, whether it is “Check your state pension” or the pension tracing service, that exists with commercial providers. What we do not have is the great capability of dashboard and I believe, with respect, that we are doing the appropriate thing to drive that forward.

[Seema Malhotra]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 8, in clause 122, page 116, leave out lines 38 to 45.—(Guy Opperman.)

Question put, That the amendment be made.