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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Pension Schemes Bill [ Lords ] (First sitting)

Seema Malhotra Excerpts

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

[Guy Opperman]

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

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

It is a pleasure to serve under your chairship today, Mr Stringer. May I thank the Minister for the collegiate way in which he has undertaken debate during the progress of the Bill and, indeed, prior to that, on the issues and decisions we are making?

I thank my hon. Friend the Member for Wallasey for her comments on the importance of a continuing cross-party dialogue on the issue of pensions. I was involved in some of the Labour’s Government’s work on addressing pensions inequality for women and the Turner commission. I also pay tribute to the hon. Member for Airdrie and Shotts for his contribution to the collegiate way in which we have all been working together and for raising important issues for debate.

I speak on behalf of the Opposition, along with my hon. Friend the Member for Westminster North. We also speak on behalf of my hon. Friend the Member for Birmingham, Erdington (Jack Dromey), who is unable to be with us this week. Before I begin, I want to thank the Committee Clerks, who are ever helpful, professional and a true credit to the House.

As the Minister well knows, we have always been clear that we support the Bill, but, as hon. Members can see, we have identified some ways in which we believe it could be made better. We will discuss those areas in detail as we progress.

I turn to the general provisions in parts 1 and 2 of the Bill, on collective money purchase schemes, which is the legislative term for collective defined contribution or CDC schemes. The provisions mark a welcome innovation. I join colleagues in congratulating the CWU and the Royal Mail on their groundbreaking agreement to pursue the creation of a CDC scheme. They have forged an exciting pathway to a better pension for around 141,500 Royal Mail employees. Members will be aware that my hon. Friend the Member for Birmingham, Erdington was closely involved in that process.

CDC schemes offer many potential benefits, as the Select Committee on Work and Pensions concluded in a 2018 report:

“Through the pooling of risk between scheme members, CDC may well…provide more generous pensions on average than standard DC saving…To offer more good choices is entirely consistent with both pension freedoms and promoting retirement saving.”

There could hardly be a more important time to focus on reducing risks to people’s pension savings. As we have seen, the coronavirus crisis poses a serious and significant risk to pension funds. Sadly, many members of defined-contribution schemes have suffered pension reductions of around 8% to 10%, due to the financial market reaction to the pandemic. In many cases, that has led to individuals deferring their retirement.

In that context, it is massively encouraging that the modelling conducted by Willis Towers Watson shows that the Royal Mail CDC scheme would have provided better outcomes for savers through this crisis than traditional DC schemes. According to the modelling, even with the severe level of market shock experienced earlier this year, there would have been no effect on current pension levels for CDC schemes. Future pension increases would have been affected, but only by 0.25% a year. That is in stark contrast to the losses that I have outlined for DC pension savers and is to be welcomed in the light of the turbulent economic circumstances we face for the foreseeable future. It is welcome, too, that supporters of CDC schemes make a wide and varied coalition, including the CBI and the TUC.

In summary, Labour supports part 1 of the Bill and the move to create CDC schemes provided, of course, that they are not used as a means of downgrading good DB schemes, a point that has already been made.

--- Later in debate ---

Under clauses 9 and 11, the Pensions Regulator must be satisfied that the persons involved in the CDC scheme are “fit and proper persons” to act in relation to the scheme. If the regulator is not satisfied, authorisation of a CDC scheme cannot be granted. I simply add that clauses 26 to 51 set out the full details. I particularly pray in aid clause 27, which sets out the detail of the supervisory regime.

[Seema Malhotra]

It is a pleasure to respond to the Minister’s comments. I thank him for laying out the Government’s thinking on the clauses and amendments in this group. I will speak to Government amendment 6 and briefly to amendment 25, tabled by my right hon. Friend the Member for East Ham.

I thank the Minister again for his speech and the arguments that he has laid out for seeking to remove the amendment tabled by the noble Lord Sharkey and cross-party colleagues in the other place, which was agreed by peers in June. The Minister commented that, in his view, some of the concerns could be addressed by the implementation of clause 18. I want to come back to why I am concerned that may not go far enough; perhaps this will be an issue of ongoing debate as the Bill proceeds, and in regulations.

The amendment included by those in the other place was very considered. It spoke about

“the requirement that trustees make an assessment of the extent to which the scheme is operating in a manner fair to all members”.

I believe that is the additional wording in the Bill. It is a very considered amendment, which could only be useful in keeping on the agenda of trustees the important analysis that should take place in relation to decision-making—to be sure about the best possible input and considerations in relation to the performance of the scheme for all its members.

I alluded in my opening remarks to the considerable insecurity that we face as a nation, exacerbated by the impact of covid-19 and its disproportionate impact on different groups and different generations, in terms of the economy and levels of employment and therefore saving into pension schemes. People’s personal finances are likely to be under great strain in the coming years. Not only is there that insecurity, but it is increasingly difficult to encourage young people to save for retirement, with all the other cost pressures in life—paying off debts, for example, or the fact that, at the moment, the average age at which they will purchase their own home is around 34. There are considerable pressures on the personal finances of the next generations, as they plan ahead for their lives.

Thinking about our institutions and how we continue to consider and embed intergenerational fairness should be on Parliament’s radar in all our work. In that context, we see unprecedented public policy challenges in ensuring fairness between different groups in society—from those in hard-hit industries, such as aviation and hospitality, to those affected by the way education is being delivered in the times in which we are living, which could continue beyond the next few months into the next few years, with all that uncertainty. We have also seen that black, Asian and minority ethnic communities have been hit harder by the health and economic impacts of this terrible virus. We can look at income today, but we are really talking about income tomorrow, and the impact on tomorrow of savings today.

It is incumbent on the Government to think about fairness between generations, and how we can stop young people bearing the brunt of the uncertainty and hardship caused by the economic havoc that we are experiencing right now. The impact on them could go unchecked in the medium and longer term. Concern about intergenerational fairness was raised by many respondents to the Government’s consultation on the Bill’s provisions.

Clause 27, as amended in the other place, sought to deal with some of those concerns. It effectively acknowledges that there may be a divergence in interests between different cohorts or sets of members in CDC schemes. Importantly, it does not compel any particular kind of action, but requires trustees to consider fairness and assess the extent to which the scheme is fair to all members. To Opposition Members, that is a very sensible suggestion, and we struggle to understand why it should be controversial for the Government.

I appreciate that the Minister outlined some comments from the CWU and others about the interpretation. He also mentioned treating people in the same way and his interpretation of the current wording of clause 18, which I was just reviewing. If there are different considerations in relation to levels of savings, other ways of joining a scheme or different circumstances, it may be necessary to look differently at different cohorts. Treating people fairly may not always mean thinking of them as the same. When we are thinking about fairness, we may need to be a bit more nuanced in our consideration of different needs and circumstances, and the potential impact of a decision on all cohorts.

Perhaps a different way of interpreting the amendment that was made in the other place would be to see it as enhancing the intention behind clause 18. I repeat that the amendment did not compel any particular kind of action, but made it more explicit what trustees should consider. Baroness Stedman-Scott, the Parliamentary Under-Secretary, said in the other place:

“I welcome the sentiment behind the proposed amendment; it is something to which we want to give further consideration. We need to give careful thought to how such reporting might work in practice and would want to work with trustees, administrators and the regulator to ensure that any such requirement is proportionate, appropriate and clear. We would also want to consult on any such approach to make sure that it is effective. I reassure all noble Lords that we will give this matter careful consideration. Should we need to bring forward such a requirement in regulations, we already have sufficient powers in existing legislation to require schemes to report on fairness in CDC schemes if warranted.”—[Official Report, House of Lords, 30 June 2020; Vol. 804, c. 605.]

I hope that the Minister will continue to keep this issue under review, because we think it is very important for the sustainability of fairness and confidence in schemes. The very considered wording that was proposed and passed in the other place could help the Government in securing the intended outcomes that he described as being behind clause 18. Perhaps he can provide more detail on his plans to incentivise trustees to assess and report on the extent to which CDC schemes are operating in a manner that is fair to all.

My right hon. Friend the Member for East Ham may make a few comments on amendment 25, which is intended to require pension schemes to send information on the diversity of the trustee board to the pensions regulator. We believe in the value of this amendment, which is also supported by other colleagues—the SNP in particular. It is important to ensure that there is a diversity of voices in decision making. The debate about diversity on public and private boards comes in cycles. Diversity on public boards was considered under the last Labour Government, with quotas for diversity in recruitment. This is not a party political matter; a lot of research shows that diversity in decision making leads to better and safer sustained outcomes.

When looking at public funds, for example, the diversity of needs should be understood at the decision-making table. We do not need to rehearse the arguments for ensuring that different voices are represented at decision-making tables, whether that relates to gender, those with disabilities or those from particular minority communities.

The same is true of boards in the private sector. Research undertaken by business schools shows that diversity on decision-making boards has often led to considerably better returns on investment, and indeed shareholder returns. There is no sustained, credible argument that not having diversity on boards leads to better business outcomes.

I do not understand why this would not be an important consideration. Amendment 25 simply says that pension schemes should send information on the diversity of the trustee board to the Pensions Regulator. I am sure my right hon. Friend the Member for East Ham will share more information about how trustee boards are less diverse than other boards. That cannot be right for boards that have an increasingly important role in decisions about funds and investments, and about inclusivity and fairness.

This is not only an important consideration in terms of social justice; it is about the performance of the schemes. It is about recognising the importance of having diverse voices and voices that are representative of those within the schemes and those who may benefit from the schemes in the future. This is a matter of obvious importance that should not raise concerns, and it should be included in the Bill.

[Stephen Timms]

I apologise for raising clause 47 in the previous debate; I probably should have waited until now. I am glad we had that debate and I welcome the Minister’s assurance that regulations to enable multi-employer CDCs will come forward within the next year.

I will confine myself in this debate to clause 46 and amendment 25, which stands in my name on the amendment paper. I am grateful to the hon. Members for Airdrie and Shotts and for Gordon for adding their names to it, and to my hon. Friend the Member for Feltham and Heston for the important points she has just made in favour of it. I thank ShareAction for its work on this topic and for the briefing it has provided.

We are all familiar, as my hon. Friend has just reminded us, with the criticism that there is insufficient diversity among directors of FTSE 100 companies. There has been progress, but the Government targets are going to be missed and there is still a long way to go among major company boards. Some 68% of board members are male and only 7.4% are from black, Asian or minority ethnic backgrounds. That proportion falls to 3.3% in the most senior board positions: chair, chief executive and finance director. Only just over half of boards have any ethnic minority members at all.

--- Later in debate ---

[Guy Opperman]

With respect, Mr Stringer, I propose to address all these matters together. Clauses 52 to 102 replicate the measures outlined in clauses 1 to 51 and apply them to Northern Ireland, which has a different system. This required us to replicate the measures in their entirety. In discussing clauses 1 to 51, I outlined why CDCs are the appropriate measure, and I ask the Committee to imagine that I made the same speech, at great length, in respect of clauses 52 to 102.

[Seema Malhotra]

I will not make any further comments. I agree with the Minister.

Question put and agreed to.

Clause 52 accordingly ordered to stand part of the Bill.

[The Chair]

I propose to put as a single question that clauses 53 to 57 stand part, that schedule 4 be the Fourth schedule to the Bill, that clauses 58 to 95 stand part, that schedule 5 be the Fifth schedule to the Bill, that clauses 96 to 99 stand part, that schedule 6 be the Sixth schedule to the Bill, and that clauses 100 to 102 stand part.

--- Later in debate ---

[Guy Opperman]

I am grateful to you, Mr Stringer, and to colleagues for the progress we have made in respect of collective defined contributions. We now turn to part three of the Bill, on regulatory powers. The powers are, in broad terms, agreed, as I understand it, subject to debate on clause 107. It is entirely right that we have set those out in defined benefit and regulator consultations over many years and in the preparations for White Papers and Green Papers, and that enhanced powers will be given to the regulator on an ongoing basis. I recommend the regulations to the Committee.

[Seema Malhotra]

We will not be making any further comments. We support the Minister on these clauses.

[Stephen Timms]

This part of the Bill gives new powers to the regulator, so it is worth recapping the problems that gave rise to the need for them. Most of the thinking here came from the joint work of the former Work and Pensions Committee—I pay tribute to my predecessor as its Chair, Frank Field—and the Select Committee on Business, Innovation and Skills, after the awful problems at two firms: BHS and Carillion.

BHS had two defined-benefit pension schemes. They were in a combined surplus of £43 million when Sir Philip Green bought the company in 2000. The surplus gradually declined and the schemes fell into a combined deficit in 2006, following the period when large dividends had been paid to members of the Green family. By the time of the sale of BHS in 2015, the value of the schemes’ assets was almost £350 million short of their liabilities. As the schemes fell into deficit, the BHS board repeatedly resisted requests from the scheme trustees for increased contributions.

In 2012-13, there were negotiations over a deficit recovery plan and they concluded with a 23-year recovery plan. At the time, eight years was the median rate for a recovery plan and 95% of comparable schemes had a recovery plan of less than 17 years. The plan we got in the case of BHS was for 23 years. The payments under that plan barely covered the interest on the scheme’s deficit and so the deficit continued to grow even while that plan was being followed.

The two Select Committees concluded that the Pensions Regulator had acted too slowly. Having received the 23-year plan in September 2013, it did not send the first information request to the trustees until January 2014. The Committee added, however, that the onus for resolving problems was on Sir Philip Green.

In the case of Carillion, it left a pension liability of around £2.6 billion. The 27,000 members of Carillion’s defined-benefit pension schemes will now be paid reduced pensions by the Pension Protection Fund—one of the biggest calls ever on that fund. I agree with what the Minister said earlier about the success of the fund, which was introduced by the previous Labour Government.

Oral Answers to Questions

Seema Malhotra Excerpts

Monday 19th October 2020 Commons Chamber

[Mims Davies]

I hope the hon. Gentleman and his constituents will acknowledge that, despite the reintroduction of conditionality and sanctions, we fully recognise that these are difficult times. New jobs are being created in the digital, green and logistical sectors that can be carried out safely in line with social distancing and public health rules. There is a recognition that in some sectors there will be challenges, while in others there are opportunities, but we will always make sure that jobcentres respond suitably to local alert levels and always set that conditionality in line with individuals, helping them to progress and always listening to them; if they have a good reason and cannot adhere, we will support them and take that individual approach.

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

In July, the Government chose to reinstate benefit sanctions and conditionality, against the advice of experts. We are now in the covid second wave, with businesses closing, unemployment rising and vacancies halved since March, but last week the Government said that the clinically extremely vulnerable and those they live with could have their benefits cut if they refuse a job that puts them at risk from the virus. Is that really the Government’s policy? Is it not time to end the threats and re-suspend benefit sanctions, or are we no longer in this together?

[Mims Davies]

I understand the hon. Lady’s point, but if someone cannot work and must stay at home, there are ways of getting additional support, and I would urge anybody concerned to use the benefits calculator on gov.uk. I again remind the House that work coaches will always work to ensure that requirements are reasonable, always taking into account the claimant’s circumstances and the situation in the local labour market, and continuing to adhere to public health advice. Claimants who fail to meet the conditionality requirements without good reason may be sanctioned, but as I say, the rates are extraordinarily low—in fact, they have never been lower—and we are determined to help people back into work with the right individual support, based on their individual circumstances.

Oral Answers to Questions

Seema Malhotra Excerpts

Monday 14th September 2020 Commons Chamber

[Dr Coffey]

Indeed, and key to identifying those important opportunities and ways to help people over the age of 25 will be our network of empowered work coaches who engage proactively with claimants to help them to identify the options they need to help to build their skills, increase their confidence and return to employment. We are already doubling the number of work coaches, and my hon. Friend will be interested to know that, in North Devon in particular, we have launched a new 14-week IT connect 50-plus programme, an initiative supporting those over the age of 50 to develop digital skills and apply for jobs online.

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

The Secretary of State said in July that work coaches were the ones who could help to tease out the great skills that people have and what makes a good fit for a new role. She was right, but the pledge she made in July for 4,500 new work coaches to be in post by October has resulted in only 300 being in post to date, as was revealed last week. The crisis has now gone on for six months, and average work coach caseloads are already over 200, so can she tell the House what is going on and why, since April, she has been so slow to act?

[Dr Coffey]

The hon. Lady is perhaps far from what is going on. I think she has very recently visited her local jobcentre to discuss this. I want to encourage her by saying that a number of people can be on-boarded into the Department at any one time, given the comprehensive amount of training that is needed to be a work coach. We have also done this in such a way that many existing DWP civil servants can move from being in the service centres in order to get promoted to being a work coach, building on their valuable experience. I can assure her that we are well on track for making sure that we have the right number of work coaches, and indeed replacement decision makers, on the agreed timescale.

Draft Jobseekers (Back to Work Schemes) Act 2013 (Remedial) Order 2019

Seema Malhotra Excerpts

Tuesday 14th July 2020 General Committees

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

It is a pleasure to serve under your chairmanship, Mr Dowd.

I thank the Minister for her opening remarks. It is a pleasure to be working as her opposite number. As she outlined, the remedial order amends the Jobseekers (Back to Work Schemes) Act 2013, which retrospectively validated sanction decisions and notifications issued under the Jobseeker’s Allowance (Employment, Skills and Enterprise Scheme) Regulations 2011 and the Jobseeker’s Allowance (Mandatory Work Activity Scheme) Regulations 2011.

In 2016 the Court of Appeal found that the 2013 Act was incompatible with article 6 of the European convention on human rights, which concerns the right to a fair hearing. The court issued a declaration of incompatibility, which related to claimants with an undetermined appeal in the tribunal system on 26 March 2013, the date when the Act came into force.

We welcome the remedial order, which will restore the right to a fair hearing for the relevant group of claimants. It gives the courts the power to find in a claimant’s favour and provides the Secretary of State for Work and Pensions with the power to revise sanction decisions in those cases, or to make decisions that supersede them, and to pay the affected individuals the amount to which they would then become legally entitled.

Section 10 of the Human Rights Act 1998 allows a remedial order of this kind to be used to amend an Act of Parliament where there is incompatibility between domestic law and a right under the European convention on human rights, but it is extraordinary that we are here at all. I am pleased that the Government say they take a breach of the convention seriously, but there are two important points to be made.

First, the case and the experience of claimants—it must have been a traumatic experience to take the Government to court at a quite difficult time in their lives—show a strong contrast in conduct, culture and approach between the Department for Work and Pensions workfare scheme at the time, and, for example, the future jobs fund, which was cancelled by the Cameron Government. The future jobs fund worked closely and in a personalised way with young people to get them into good jobs.

Caitlin Reilly, an unemployed geology graduate, and Jamieson Wilson, an unemployed driver, brought their legal challenge to the Department in 2012, on the basis that the DWP forced claimants to take on unpaid work for private companies, at the risk of having their benefits cut through the sanction. As the Minister said, the outcome of the case affected about 5,000 claimants.

Ms Reilly was told by her jobcentre adviser that if she did not attend an unpaid work placement in a Poundland store, she would be sanctioned and her jobseeker’s allowance would be cut. Yet, at the time, Ms Reilly had just completed a paid work experience placement at a museum, where she continued to volunteer, with the ambition of pursuing a career in that field. The Court of Appeal later ruled that the instructions she had been given were unlawful, as the description of the schemes and the notices given to her were both insufficiently clear.

This happened a long time before the Minister was in her post or I was in mine, but there is a point to be made here. The Minister has talked about communications needing to be improved, but there may also be a lesson to be learned about the schemes themselves and how they operated. There were also the consequences of the Department’s instructions in the case of Ms Reilly, which were contrary to the purpose of a system and a programme that existed to help her get back into the employment she sought, in which she could have an ongoing career and sustainable employment. Those methods were in contrast to Labour’s approach through the future jobs fund, where engaging with employers to achieve sustainable and fulfilling work opportunities was a priority, not only at a local level, in how local authorities were involved in delivering employment outcomes, but in the culture that was enabled and created from the centre.

Unfortunately, in this case, Ms Reilly was forced to give up her voluntary work in the museum. The case raises real questions about the quality of work support and the sanctions culture that was in operation—a punitive, rather than an enabling, culture at the heart of the DWP—and there are important lessons for today.

The second issue I want to raise in relation to that case is the culture of a national politics that opts to fight citizens and seek to win in the courts—including, in this case, by taking away the rights of others to appeal—rather than to learn from rulings what systemic change might be needed to improve the system and its goal of supporting people back into employment.

While this remedial order is welcome, it should never have been necessary. I put on record my dismay at the length of time it has taken to get here—it has been eight years since the original appeal. Families have had their appeals and their lives on hold, with all the stress and strain that that will have caused. Claimants affected by the declaration of incompatibility have been waiting for their appeal or their hearing to be decided since that time. Some may no longer be claiming benefit. Some may have moved away or even passed away.

I thank the Minister for laying out a timetable for resolving this issue—I appreciate some of the difficulties with covid—for her commitment to ensuring that the process starts as soon as possible in the autumn, and for her hope that the issue will be resolved within 12 months. Will she lay out precisely how the Government intend to identify those affected who have entitlements? Do Ministers already have those records? Will she also lay out the approach they intend to take in calculating the entitlement to refunds of sanctioned benefits?

I reiterate that these are real human stories. These people could be her constituents or mine, or any of us on this Committee today. Using this order to insert new provisions into the 2013 Act will achieve the necessary change in the law to restore the right to a fair hearing to those affected, and ensuring fairness must now be a priority.

The delay in bringing forward this order has been quite extraordinary. That was not all due to the Minister, and I appreciate her point that the process has allowed for scrutiny, but it has been a considerably long time. It has been eight years since the original claim went through the courts. The Joint Committee on Human Rights said:

“The Committee does, however, regret the delay between the declaration of incompatibility and the laying of the proposed draft Remedial Order.”

I hope the Minister will understand the concerns about the delay, but it is important that, if there were reasons for the delay that could have been addressed, those should be taken on board and we should not see this situation arise in the future.

To conclude, I hope the Minister acknowledges that mistakes were made by the Department under her predecessors, regarding the treatment of jobseekers between 2011 and 2013; that the law was interpreted wrongly, sanctioned by her Department; that lessons will continue to be learned in terms of the culture and the way in which work support should be designed; and that resources should be in place to deliver that work support to the quality that our citizens need and deserve.

While we welcome and support the remedial order, at this time of national crisis we have approximately nine jobseekers seeking work for every vacancy. I hope the Minister will reflect on the use of sanctions in her Department and on the mixed messages that are coming out and, perhaps, finally agree that applying sanctions at this time is incomprehensible when we look at the situation. Organisations such as Disability Rights UK have this week highlighted the great anxiety that this causes people and their families.

More broadly, I hope the lessons that her Department has learned from this case, and that it learns in the future, mean it spends less time in the courtroom and more time, when things go wrong, better supporting people and getting them quickly back into meaningful, sustainable and fulfilling employment.

[Mims Davies]

I thank the hon. Lady for her constructive views, and I particularly welcome her closing thoughts. We fully agree that getting people back to work and giving them wide support is important.

We will look at this matter on a case-by-case basis and look closely at what happens on the ground and at its impact. That is what this Department does; we are a learning and understanding Department. In this role, I am determined that we will listen and engage with stakeholders, as the hon. Lady mentioned, and learn from the experience of claimants.

I accept that it has taken some time to address this issue. The draft legislation is a successful outcome of what has, frankly, been a long and complex court process. As a result of that, it was important that we considered how to address the issue carefully. I am extremely keen to resolve the appeal cases for claimants as soon as we can. I hope we can all support this order through its final passage, so that we can do that.

We use sanctions as a consequence of people not meeting the agreed commitments that a claimant accepts in order to be entitled to benefits. Sanctions are a last resort. We always apply reasonable judgment before any actions and take into account current circumstances. Our work coaches support us with their judgment of what are reasonable steps. Claimant commitments must be reasonable and, in this unprecedented time, they will be. I understand the points that the hon. Lady raises, but I am clear that we are in a good place as we move forward from the changes at the beginning of July.

The exercise of looking through the 5,000 people, potentially, who we need to understand will be important in terms of how we check all those who have been affected by the new remedial order. If it is determined that a person is affected and a payment is due, it is key that we have gone through their legal entitlements with the administrative practice that we have, and therefore that we can go back to claimants and make the payment appropriately.

I thank my hon. Friends and all hon. Members for joining today’s important debate. This remedial order will amend the 2013 Act so that, for all relevant appeals, where it is right to do so, the court and tribunals can find in an individual’s favour. It also allows my Department to revise or supersede the relevant sanction decisions so that the individual does not need to pursue their appeal.

I am keen to resolve the appeal cases for those individuals as soon as we can. It is of fundamental importance to me that those who appealed a sanction decision but were prevented from having a fair hearing because of the Act should have that right restored.

We aim, as I say, to begin revising all affected cases in the autumn of this year. I recognise the importance of resolving this incompatibility as swiftly as possible. It has taken time to consult and to develop the appropriate best course of action.

[Seema Malhotra]

I thank the Minister for taking this intervention in her closing remarks. Should the Department decide not to agree to a claimant’s claim retrospectively, what will happen in that circumstance, where the Department is, in a sense, marking its own homework?

[Mims Davies]

I thank the hon. Lady for raising that point. That is exactly why we are going to do it carefully and considerately through each individual circumstance. I am not going to comment on individual cases that I do not understand at this point, but I am happy to take that away and write to her to explain where that will land as an issue. As I say, I think a very small proportion of people will be impacted and, hopefully, there will not be a large number of such situations.

As we have heard this morning, there is no argument to justify delaying this process. I hope we will all be able to support this remedial order so that it can complete its final passage and be reported to Parliament. I commend the order to the Committee.

Question put and agreed to.

Oral Answers to Questions

Seema Malhotra Excerpts

Monday 29th June 2020 Commons Chamber

[Dr Coffey]

As my right hon. Friend the Prime Minister has previously said to my hon. Friend, we are concerned about the way that some companies are treating their workforce and we are actively looking into the issue. The furlough scheme has been a huge success in keeping over 9 million employees connected to their jobs, but companies should not be using it cynically to keep people on their books just to then get rid of them. The whole point of the furlough scheme is to help people to get back into their jobs and the country back on its feet.

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

New analysis suggests that up to 1 million people could be added to the current jobless total unless more support is provided from August, with sectors like aviation being harder hit. We have learned from covid to plan early and to work together. However, last week’s DWP Committee report said that the Secretary of State has not provided any persuasive reason for her refusal to share her economic downturn plans. Why is a plan that is the basis of how we get millions of people back into work such a secret? Will she now work with her colleagues for a back-to-work budget so that local partnerships can plan together for what is coming?

[Dr Coffey]

I think the hon. Lady is confusing the element in the Select Committee report with the emergency contingency plan, which is an operational document that is prepared by all Departments in the event of the sort of emergency that requires, for example, redeployment within the Department. In terms of her broader question on what I think she was really referring to, I assure her that, as I pointed out, I am actively working with Ministers across the Government to make sure that we will be there to help people get into the new jobs that we rely on the private sector to create, but will be working across the public sector too.

Oral Answers to Questions

Seema Malhotra Excerpts

Monday 11th May 2020 Commons Chamber

[Mr Speaker]

May I welcome Seema Malhotra to her place as shadow Minister?

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

Our economic recovery will depend much on public confidence, yet polling this morning found that almost half the population believe that the Prime Minister has gone too far. Many have deep concerns that they could put themselves and family members at risk if they cannot properly social distance when they return to work, and it is clear that the workforce and management must agree safe arrangements that people will trust. Will the Government adopt the TUC’s proposals for employers to publish covid-secure risk assessments and urgently increase funding for the Health and Safety Executive, which the Minister knows has been cut by a third since 2010, to enforce these measures?

[Mims Davies]

I thank the hon. Lady and welcome her to her place. I am very interested to hear her policy priorities, ideas, thoughts and views, and I am keen to meet to discuss what the Department for Work and Pensions is doing. It is absolutely right that, as people look to return to work, we have published our plan—a cautious road map—this afternoon. We recognise that this is not a short-term crisis. I can tell her that our Secretary of State has been engaged in broader support for the HSE, which has done a magnificent job—

Universal Credit Roll-out

Seema Malhotra Excerpts

Tuesday 24th October 2017 Commons Chamber

[Debbie Abrahams]

The point is that we need an urgent response to this really important issue. We are calling for a clear set of proposals from the Government that will reflect the will of the House and pause universal credit roll-out while the issues that I raised—and many more that I did not have time to raise—are fixed.

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

I thank my hon. Friend for securing this debate. Is she as surprised as I am by Conservative Members’ denial of the seriousness of these issues? Their comments will give no succour to my constituents, such as the mother of three who is currently sleeping on her cousin’s floor after she was evicted from her home because of non-payment of rent that resulted from delays in universal credit. This is not about the Opposition versus the Government; it is about real people—our constituents—suffering.

[Debbie Abrahams]

My hon. Friend raises an important case. It is absolutely shocking that in 2017, in the fifth richest economy in the world, such cases are brought to our surgeries day in, day out. Things are only going to get worse, and that is absolutely unacceptable.

Universal Credit Roll-out

Seema Malhotra Excerpts

Wednesday 18th October 2017 Commons Chamber

[Neil Gray]

I wholeheartedly agree with my hon. Friend, as do the expert charities and organisations involved in alleviating food poverty. The Secretary of State will, of course, claim to have listened to concerns and made a concession by apparently reducing the time taken to process advance payments and crisis loans. Leaving aside the point that I have already made that for many, myself included, the very fact that these advance payments exist highlights that universal credit is failing, I struggle to see what has changed since his announcement. I know from my written parliamentary question this week that there is no data available on how long the claims took to process previously, but my suspicion is that it will not be too dissimilar to before the supposedly big concession in the Secretary of State’s Tory conference speech. I do not think that anything has really changed.

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

It is important to understand and address all the unintended consequences of universal credit. Does the hon. Gentleman agree that it is vital for the Government to talk more to local authorities, which are often on the receiving end of people in crisis—those who have been made homeless or who are struggling to pay for food for their families? As an illustration, universal credit claimants make up 15.4% of all local authority tenants in my borough, but they account for 49% of all tenant arrears. That is not unusual.

[Neil Gray]

I agree, and I think it is good for agencies to talk to each other to ensure that the system works as smoothly as possible.

In spite of the concessions and potential changes, and in the full knowledge of the evidence of the harm that universal credit is doing to our constituents, the Government are determined to press on. As the House of Commons Library briefing points out, the problems include

“financial hardship and distress caused by lengthy waits before the first payment of UC is received, compounded by the 7-day ‘waiting period’ for which no benefit is paid; some, particularly vulnerable claimants, struggling to adapt to single, monthly payments in arrears; inflexible rules governing Alternative Payment Arrangements such as direct payment of rent to landlords;”

and

“increases in rent arrears, with serious consequences not only for claimants but also for local authorities and housing providers, as a result of exposure to greater financial risk”.

That is why the Scottish Federation of Housing Associations has circulated a briefing ahead of this debate in support of a pause and fix of universal credit. In addition, homelessness claimants have been unable to get help with the full cost of emergency temporary accommodation.

Oral Answers to Questions

Seema Malhotra Excerpts

Monday 9th January 2017 Commons Chamber

[Damian Hinds]

We work closely with the Ministry of Justice on numerous joint initiatives locally and nationally, and we are supporting the development of the MOJ’s new offender employment strategy, but I recognise that we need to improve opportunities for ex-offenders, so I welcome the continued attention of my hon. Friend and his Committee, as well as the Work and Pensions Committee report, to which we will respond in due course.

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

Her Majesty’s inspectorates of prisons and probation found that not a single prisoner had been helped into employment by the Through the Gate provision, which is the Government’s flagship programme for achieving a step change in rehabilitation. Did that surprise the Minister, and what is his response?

[Damian Hinds]

First of all, my response is that this has been a challenge for successive Governments for many years. We do need to do better, but there is good work going on. Ultimately, to improve the situation, we need more prisoners to be work-ready, and we need more employers to be willing to take the plunge and take on a prisoner. Having governors controlling skills provision in prisons will have a beneficial effect on work-readiness, but we all need to encourage more employers to step forward. Initiatives such as the See Potential programme can play an important part in that, as can Ban the Box and the Employers’ Forum for Reducing Re-offending, but of course we need to do more.