Pensions Dashboards (Prohibition of Indemnification) Bill

Simon Baynes Excerpts

3rd reading
Friday 20th January 2023 Commons Chamber

[Mary Robinson (Cheadle) (Con)]

I beg to move, That the Bill be now read a Third time.

The Bill is a simple yet important measure designed to safeguard the interests of pensions savers. It will help to ensure that unscrupulous trustees or managers of pensions schemes do not help themselves to the hard-earned savings of pension scheme members to reimburse themselves for penalties incurred under the pensions dashboard regulations. I am proud to have brought the Bill before the House and delighted to have received support from the Government for it. I am proud to have brought the Bill before the House and I am delighted to have received support from the Government for it, confirmed by the Minister for Employment, my hon. Friend the Member for Hexham (Guy Opperman) on Second Reading and reconfirmed by the then Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Brentwood and Ongar (Alex Burghart) in Committee. I thank them both profusely for their support.

I welcome the new Minister, my hon. Friend the Member for Sevenoaks (Laura Trott) the Parliamentary Under-Secretary of State for pensions and financial inclusion, to her place and hope that she will confirm that I have a hat-trick of support from pensions Ministers. The cross-party support throughout the passage of the Bill was also extremely welcome, and I hope that that will continue.

For the benefit of those that were not present for the previous stages of the Bill, I will give a brief recap of its policy background and purpose. Millions more people are now saving for retirement, thanks to the success of automatic enrolment, but as people change job roles throughout their career it can become difficult to keep track of multiple pension pots. Likewise, when people move home, updating their addresses with various pension schemes is not always the top priority, so pension schemes might not have up-to-date contact details for many of their members.

We know that many people have little idea how much they have saved for retirement. Pensions dashboards are an electronic communication service that will help to solve those problems. They will revolutionise the way people interact with their pensions by allowing individuals to see pensions information online, including the state pension, in one place, at the touch of their laptop, smartphone, or tablet. Dashboards will help to reunite individuals with their lost or forgotten pensions and support people in better planning for their retirement.

The Money and Pensions Service, an arm’s length body of the Department for Work and Pensions, will provide a dashboard service. Additionally, to help to cater for the varied needs of the millions of people with pensions savings, it will also be possible for other organisations to provide dashboard services. Those organisations will be regulated by the Financial Conduct Authority, which is currently consulting on rules for pension dashboard operators.

Importantly, the technology behind pensions dashboards has been designed with data security at its heart. Pensions information will not be stored in any central database and will continue to be held only by the pension schemes themselves, or by a third party administering the data on their behalf. Pensions information will only be displayed at the request of the individual. Individuals will retain control over who has access to their data, and will be able to revoke that access at any time.

Following parliamentary approval in November last year, the pensions dashboard regulations came into force on 12 December. The regulations set out requirements for occupational pension schemes to be connected to a digital ecosystem, which will enable the provision of pensions information at the request of a pension scheme member. In the event that trustees or managers do not comply with the requirements of the pensions dashboard regulations, there are powers for the pensions regulator to take enforcement action, including the power to issue penalty notices. Those penalty notices could be up to £5,000 for each breach in the case of individuals, or up to £50,000 in other cases, such as corporate trustees.

However, there is nothing currently in legislation to prohibit trustees or managers from being reimbursed for those penalties using the assets of the pension scheme. It is certainly not right in my view that ordinary pension scheme members should have to foot the bill for failures by trustees to meet the legal requirements.

[Simon Baynes (Clwyd South) (Con)]

Will my hon. Friend clarify whether the dashboards have come into reality yet, or is it just that the regulations are in place and we expect the dashboards to become a reality shortly?

[Mary Robinson]

I thank my hon. Friend for that question. I share his eagerness for the dashboards to be put in place. The regulations are there and the building of the digital ecosystem has been happening. One key part is that the dashboards must be secure, and that is complex. The expectation is that, from 1 April, pension schemes will be able to and be expected to start to connect with the dashboard system, and their ability to do that will run through until, I believe, October 2025. The Minister will clarify those points. I share his enthusiasm, and we want to get the dashboards going as soon as possible.

I am pleased to say that the problems I have highlighted are being solved and addressed by the Bill. It provides powers for criminal proceedings to be brought against trustees or managers of occupational pension schemes if they reimburse themselves from pension pots to pay penalties imposed for compliance breaches under the dashboard regulations. If a trustee or a manager is found guilty of that offence, the provisions would allow for a maximum sentence of up to two years in prison, a fine, or both.

As I said on Second Reading, the Bill does not impose any new costs or requirements on occupational pension schemes or their sponsoring employers. Section 256 of the Pensions Act 2004 already prohibits reimbursement for penalties incurred under a number of other areas of pension legislation. The Bill will simply extend that prohibition to include pensions dashboards. I hope we can all agree that this is an uncontentious measure that is worthy of our support. I look forward to its making progress through the other House.

[Simon Baynes (Clwyd South) (Con)]

I thank my hon. Friend the Member for Cheadle (Mary Robinson) for bringing the Bill before the House. As with other Bills that we have considered today, it is astonishing that its requirements even need to be made—pension trustees or managers using scheme assets to reimburse themselves and repay civil penalties is, in any situation, an extraordinary concept. The Bill will be righting a potential wrong, which is extremely important.

Before I came to this place, my background was in the financial services industry. When I was a county councillor in Powys, I was a member of the pensions and investment committee. I have also had considerable experience of acting as a trustee to various charities, overseeing their financial affairs. So, from my point of view, this is a subject of particular interest.

My hon. Friend made the vital point about how pension dashboards, as an electronic communication service, will allow individuals to see their pensions information—including their state pension—in one place online. I am pleased to hear that we are not far off pension schemes being connected to the technology—that is from 1 April—and that they will have until October 2025 to be, I presume, fully up and running. Anything that can be introduced that demystifies the pension world and makes information more accessible to people is vital.

My hon. Friend made two other points about the dashboards, one of which was about uniting people with lost pensions. That might sound peculiar to some, but those who have been in different employments will have been members of different pension schemes and companies—parents may have set up a pension for them—and so on. That is therefore a much more important point than it might appear at first sight.

My hon. Friend’s second point was about better help in retirement in general. At a time when inflation and interest rates are high, and the cost of living is difficult for people, the pensions issue could not be more important. With prices going up sharply, anything that we can do to help people in retirement on a static income, or an income that is not growing much, is vital.

I am delighted that the pensions Minister, my hon. Friend the Member for Sevenoaks (Laura Trott), is present; she is a true champion of the pensions industry and an expert on the subject. I have heard her speak on the subject on several occasions. The point of my hon. Friend the Member for Cheadle about automatic enrolment is extremely pertinent, because the whole pensions industry has been transformed in recent years, particularly under the Conservative Government, so more people are involved in it. The ability to have pensions dashboards as an electronic communication is therefore vital.

To go back to my original point, it is extraordinary that there is nothing in legislation, backed by a criminal sanction, to prohibit the trustees or managers from drawing on and reimbursing themselves from the pension schemes. As somebody who was involved in that industry, one way or another, for a long time, I could not imagine being on a board of trustees where anybody would ever consider doing that, but clearly it does happen. My hon. Friend’s point is that those are, potentially, substantial amounts of money. The financial penalty under the current non-compliance requirements in part 4 of the Pensions Dashboards Regulations 2022 is up to a maximum of £5,000 in the case of an individual or £50,000 in other cases, such as corporate trustees. So if those were to be reimbursed from the schemes, they would be substantial subtractions.

[Mary Robinson]

My hon. Friend is right to say that it is important that a trustee should not be able reimburse themselves from the scheme for any wrongdoing under any pensions legislation. In fact, under the Pensions Act 2004, some of those regulations are already in place. It appears from the Pensions Regulator that, until now, prosecutions and penalties have not been issued; I am sure that the Minister will want to clarify that. This is very much about having a deterrent when the dashboard is set up. The deterrent effect needs to be strong to ensure that those people, whose pensions are in the schemes and on the dashboard, are properly protected.

[Simon Baynes]

I thank my hon. Friend for that clarification. Indeed, the deterrent is vital, not only to ensure that the trustees and managers do not take that course of action, but to give a general sense of confidence in the schemes to everybody who contributes to them. As I said, I am very impressed by my hon. Friend for promoting the Bill, which has my wholehearted support as a Member of Parliament and as somebody with considerable experience of the industry. It is high time that we passed the measure.