Pensions

Stephen Timms Excerpts

Tuesday 9th February 2021 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

I wish to raise concerns specifically about the guaranteed minimum pension, which is the subject of the order. Concerns have been raised by the public with the Select Committee. The ombudsman investigated complaints from two people, and concluded that there had been maladministration in introducing the new state pension system in 2016 over its impact on people with a guaranteed minimum pension. The concern being raised in correspondence since is that the problem identified by the ombudsman still has not been properly addressed.

The ombudsman concluded:

“DWP was aware the pension changes could negatively affect people with long periods of contracting out who were due to reach State Pension Age shortly after the new State Pension was introduced…DWP failed to provide clear, accurate and complete information through its pension forecasts, impact assessments and other literature…despite being warned by both the National Audit Office and the Work and Pensions Select Committee that better communication was needed for those with long periods of contracting out…some individuals were not aware that they might need to consider seeking independent financial advice and might need to make alternative provision for their retirement.”

The concern is still being raised that those problems are not yet being properly addressed.



Last August, the permanent secretary at the DWP replied to a letter from the Committee on that subject. He confirmed that compensation of £500 and £750 had been paid to the two people who had raised the complaint with the ombudsman, as the ombudsman had recommended. I asked for an update on responding to being found guilty of maladministration. In response, the permanent secretary wrote that the ombudsman

“also recommended…that we invite others who believe they have suffered a similar injustice as the two individuals to come forward to have their cases considered.”

That was the ombudsman’s recommendation. The permanent secretary wrote:

“We propose to respond…by publishing a factsheet on GOV.UK and I attach a draft. We are currently awaiting the”

ombudsman’s “comments on this.”

The ombudsman will have to decide whether publishing a factsheet meets its recommendations—I must say that I have my doubts—but it certainly falls well short of what the Work and Pensions Committee previously called for. It said:

“Government should not rely on general awareness campaigns or happenchance in promoting that understanding. It should focus on identifying the individuals affected, assessing their potential losses, and communicating with them.”

The permanent secretary also wrote that, in addition, the ombudsman

“recommended that their reports into the matter were shared with the Select Committee and we have sent your office copies of these documents today.”

The report was finalised on 30 September 2019, and it was sent to the Committee on 28 August 2020, and that was only in response to my request for an update.

I also asked how much the Department knew of the negative impact of the policy on individuals and how it was communicated to Parliament. The permanent secretary wrote:

“As was clear from publication of the Government’s White Paper in January 2013, it was an intrinsic feature of the new State Pension that the old regime of additional State Pension and contracting out, along with its various forms over the years, would be replaced by a new, simpler single-tier system. It was a fundamental feature of the changes that the withdrawal of additional State Pension meant also the withdrawal of GMP indexation.”

The ombudsman’s report highlighted that the White Paper did not say that those who had reached state pension age and could no longer add qualifying years would lose out from the changes. The White Paper gave the impression that people would be able to offset the increase in national insurance contributions that they will pay over the rest of their working lives. It implied that people will offset losses through additional national insurance contributions.

The permanent secretary also wrote:

“A detailed account of the change was provided in a response to a”

parliamentary question

“on 6 January 2014 and is attached for reference”,

but that answer does not make it clear that some people would lose out. Even if someone affected had seen that answer, which is unlikely, it would not have helped them to understand the impact on their own pension.

The permanent secretary wrote:

“More generally, the policy, and how it was communicated, was examined by the Work and Pensions Select Committee in its investigation into Understanding the new State Pension in 2016. In addition, the NAO reported on the policy in the same year.”

However, both those events took place after the legislation had been passed, not before. Both concluded that the DWP provided insufficient information to people about potential negative impacts.

The ombudsman, I believe, is right that

“DWP should have acted on the feedback they received through the Work and Pensions Committee and NAO reports. By failing to do so, DWP were not open and accountable and failed to seek continuous improvement…this amounts to maladministration.”

The ombudsman found that the DWP had failed to make its external communications clear and that

“there were some individuals who might financially lose out over the long term from the transition of the second state pension to the new State Pension—specifically in relation to the ending of indexation in relation to the second state pension/Guaranteed Minimum Pension.”

It also concluded that there is an injustice to members of the public who were not aware of the possible negative impacts of the removal of the second state pension and its relationship with the GMP. Up to 2 million people have reached state pension age since 2016. DWP literature has not told them that the 2014 reform could harm them over time. The Department has not fully acknowledged the negative consequences to the pension reforms over the long term. Its literature reassures people that notional losses will be offset and that they will not lose out, but that will not be true for some. The ombudsman says:

“The DWP’s actions, therefore, may have provided false reassurance and reduced the incentive for these people to find out about their future pension situation. This is an injustice for those who wished to plan for the future and might have been negatively affected.”

In addition to compensating the individuals and communicating with the Committee, the ombudsman recommended:

“Within three months of this report, review and report back to us on the learning from this investigation, including action being taken to ensure that affected individuals receive appropriate communication from the DWP about their state pensions. In particular, the DWP should ensure that their literature clearly and appropriately references that some individuals, who have large GMPs and reach State Pension Age in the early years of the new State Pension, may be negatively affected by the changes. The DWP should advise individuals to check their circumstances, and should provide instructions for how to do this; Within three months of this report, review and report back about how other individuals who believe they have suffered an injustice as a result of the maladministration we have found can raise any concerns with the DWP and have them considered”.

Neither of those things has happened so far. It will soon be two years, let alone three months, since the ombudsman published that report. I have given the Minister notice of this question. Can he explain to us how the Department now plans to fulfil its obligations?

There is no doubt that the Department’s claims about the state pension reforms were misleading. They mislead members of the public, potentially seriously, and denied them the opportunity to act to safeguard their position. Can the Minister assure us that the Department has learnt its lessons and that similar mistakes, covering up damaging impacts of its policies on some claimants, will not be repeated in the future?

Social Security

Stephen Timms Excerpts

Tuesday 9th February 2021 Commons Chamber

[Will Quince]

I will of course study in detail the report from the Select Committee, chaired by the right hon. Member for East Ham (Stephen Timms), and look closely at the recommendations made, but when there is emotive language about things such as cuts to universal credit in April that are frankly not true, that drives adverse claimant behaviour, which we as a Department see day in, day out. For example, we see people who would be eligible for universal credit delaying their claim, so they claim not at the point at which they are eligible but when their money has run out and they have hit crisis. And for example, there are hundreds of thousands of people on legacy benefits who we know would be better off on universal credit, but they do not make a claim. Why? Because of the scaremongering and scares from the Labour party.

[Stephen Timms (East Ham) (Lab)]

I do not quite understand the point that the Minister is making. As it stands, Government policy is to reduce universal credit by £20 a week from April. Surely it is perfectly legitimate for Members of this House to draw attention to that.

[Will Quince]

I thank the right hon. Gentleman for that intervention, but it was absolutely clear that the uplift of £20 per week was a temporary measure for one year, and we have also been clear that the Chancellor has yet to make a decision and that all options are on the table.

I have said this before, but it is important to stress the point: discussions remain ongoing with Her Majesty’s Treasury and a decision on the future of the £20 universal credit uplift will be taken by the Chancellor of the Exchequer in due course. The Chancellor has been clear that all options are on the table and that he will take into account the assessment of the economic and health situation as the best way to build on the successful support that the Government have put in place and provided for those on low incomes and in need throughout this year, through our plan for jobs and winter support package. My right hon. Friend Chancellor of the Exchequer has an unenviable task—there is no question about that—but I point out to the House that he has a proven track record of stepping up to support the poorest, most vulnerable and most disadvantaged in our country throughout this pandemic. I have no doubt that he will continue to do so. The scaremongering is not helpful.

We must not forget that the more than £7 billion of additional funding to strengthen our welfare safety net was just one part of a much larger package of support measures for individuals, which has dovetailed with DWP-led support. Those measures include the coronavirus job retention scheme; the self-employment income support scheme; increases to the local housing allowance; local council tax assistance; the local welfare assistance scheme; the covid winter grant scheme; the protection for renters; and the support and protection for homeowners. Despite our delivering an unprecedented package of support since March and the crucial support that we continue to roll out through our jobcentre network throughout the country, we know we must continue to maintain the strength of our welfare safety net, particularly to protect those experiencing financial hardship for the months to come.

The Government propose, in the draft order, to spend an extra £2.7 billion in 2021-22 on increasing benefit and pension rates. With this spending we are upholding our commitment to the country’s pensioners by maintaining the triple lock, increasing pensions by 2.5% and therefore spending on pensioner benefits by £2.2 billion; helping the poorest pensioners who rely on pension credit; and ensuring that working-age benefits, including essential support for disabled people and carers, maintain their value in relation to prices by increasing them by 0.5%. That is in addition to the comprehensive support package already in place to support those affected by the pandemic.

The Government remain committed to providing families and pensioners throughout our nation with a helping hand, should they need it. We will do so by once again increasing the levels of benefits for the next financial year. I commend this order to the House.

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[Stephen Timms (East Ham) (Lab)]

I am pleased to follow the hon. Member for Glasgow East (David Linden) and I congratulate him on his appointment.

This order is an annual routine, but this year is different: the number claiming universal credit has more or less doubled since last March; we are still in a global pandemic; and the order would dramatically cut the universal credit standard allowance. We have already been reminded by my hon. Friend the Member for Feltham and Heston (Seema Malhotra) that for four years, from 2016 to 2020, people claiming around half the benefits covered by this order had their incomes frozen: they were no longer connected at all to the cost of living.

In 2018, the House of Commons Library estimated that, this year, working-age social security spending would be £37 billion less than in 2010 in real-terms 2018-19 prices. The Resolution Foundation says much the same, coming up with a figure for social security spending that is around £34 billion lower in 2023-24 than if the 2010 system had remained in place. People claiming universal credit and working tax credit had a temporary increase of £20 a week. That costs about one sixth of the real-terms cut in annual working-age benefits since 2010—less than 3% of overall pandemic support.

The Minister was right to say that people are scared at the prospect of losing the £20-a-week increase. I think he was kind of hinting—saying, “Well, don’t worry; it is not really going to happen.” But the answer to that problem is not to suggest that other Members of the House should not be talking about the issue; it is for the Government to make a clear statement that they are not going to go ahead with their current policy, which is to cut the benefit in April. I hope we do not have to wait until the Budget, which is still another three weeks away, before we have an announcement about what exactly the Government’s policy is.

The Joseph Rowntree Foundation says that withdrawing the temporary increase will risk sweeping half a million more people, including 200,000 more children, into poverty. In its report this morning, which has been referred to, the Work and Pensions Committee unanimously, on a cross-party basis, called on the Chancellor, as others already have in this debate, to extend the increase for at least a year. We are joined in that call by lots of organisations, as well as by the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), who I see in the Chamber, and the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), both former Secretaries of State; by many other Government Members —we have just heard from the right hon. Member for North Thanet (Sir Roger Gale); and by the House of Lords Economic Affairs Committee, chaired by the noble Lord Forsyth.

The Joseph Rowntree Foundation quotes a woman in London saying:

“That £20 is often the difference between light and heat or no light and heat. If you don’t have gas, you can’t cook.”

That is what many people have been up against during the pandemic. That support must not be withdrawn next month.

The report also looked at the idea that has been floated of removing the increase but giving instead a lump sum—perhaps £1,000, equivalent to a year’s worth of the increase. The Committee is strongly opposed. It is a very bad idea, and the Secretary of State for Work and Pensions made it clear to the Committee last week that she rightly opposes it. Citizens Advice told us that

“having a stable regular income is the best way to support people to budget and manage their money.”

The attraction for the Treasury, of course, would be the hope of withdrawing the increase without people noticing. It would not work.

People claiming benefits other than universal credit and working tax credit have seen, as we have been reminded, no increase at all. In our report in June, as the hon. Member for Glasgow East reminded us, we recommended increasing legacy benefits by the same amount. The report said:

“that does not mean that the Government should simply ignore the needs of those people who are claiming—through no fault of their own—benefits which rely on outdated and complex administrative systems. Those benefits include support for disabled people, people with health conditions, for carers…We recommend that…the Department should immediately seek to increase the rates of relevant legacy benefits by the equivalent amount.”

Since then, the Government have steadfastly refused. The Prime Minister told the Liaison Committee that it is because the Government

“want everybody to move on to universal credit.”

However, until two weeks ago, people receiving severe disability premium were prevented by law from doing so.

It has been argued recently, against the increase in legacy benefits, that the universal credit rise was to help people claiming for the first time, rather than those already claiming, but that was not what the Chancellor said in announcing the increase on 20 March 2020. He said that it was to

“benefit over 4 million of our most vulnerable households”—

the 4 million claiming universal credit and working tax credit at the time. All the other equally vulnerable house- holds, and many more vulnerable than those 4 million, have had no extra help at all. This order increased disability-related benefits by 0.5% at most.

Should disabled people have had some extra help during the pandemic? The Secretary of State told the Select Committee last week that she was

“not aware specifically of extra costs that would have been unduly incurred”

by disabled people during the pandemic. I spoke to a constituent—a disabled single parent with two daughters, one of whom is disabled. She used to search for bargains in local markets and supermarkets. During the pandemic, she has had to stay safe and not do that. She pays £1.50 or £2 for what used to cost her £1. She feels very hurt that she has had no extra help for those extra costs. Others have to pay supermarket delivery charges of £4 or £5 a time, and another £4 if they buy less than the minimum £40 order. That is a big chunk out of an income of £74.70.

The Select Committee’s coronavirus survey last year showed that people claiming disability benefits have substantial additional costs, such as extra cleaning and carers’ protective equipment. Last week, the Disability Benefits Consortium, in a new survey of disabled people claiming legacy benefits, which my hon. Friend the Member for Feltham and Heston referred to, found that 82% have had to spend more than normal during the pandemic and two thirds have had to go without essentials at some point over the past year. That is the evidence that the Secretary of State said last week that she had not seen. It is very clear, and I hope the Minister will reflect on it.

Unpaid carers have borne an extraordinary burden during the pandemic. Carer’s allowance is going to rise under this order by 35p per week. Carers UK is calling for it to increase by £20, like universal credit.

The standard minimum guarantee in pension credit will be raised, which is welcome, but take-up of pension credit remains much too low. The Minister for Pensions wrote to the Committee last week with an estimate of 63% for pension credit take-up. The charity Independent Age has called today for a new written strategy on pension credit uptake, including trial automatic enrolment. It estimates that the cost to the Government of those eligible for but not receiving pension credit is

“£4 billion a year in increased NHS and social care spending.”

That is a powerful reminder that scrimping on social security imposes large additional costs elsewhere.

The British Association of Social Workers has pointed out that the start of real terms working-age social security cuts in 2010 marked the start of a big surge of children being taken into care, imposing very large new costs on the Exchequer. We need to ensure that the social security system has the resources to do the job that all of us agree it should do. That means maintaining the £20 a week rise in universal credit for at least another year, and ensuring that legacy benefit claimants can, at last, get extra help as well.

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[Will Quince]

I begin by thanking all those who have spoken and taken part in the debate, which covered many important topics. Given the time constraints, I will not be able to cover off all the points raised, but as I said in my opening speech—I will just focus on this for one moment—the statutory annual review of benefits does not include a decision on the £20-per-week uplift to universal credit, which was announced by the Chancellor as a temporary measure in March last year. I repeat, because this is important, that the Chancellor has been clear that all options are on the table. He will take into account the assessment of the economic and health situation when considering the best way to build on the successful support that the Government have provided to those on low incomes throughout this year so far.

I make no apology for using the word “scaremongering”. I understand some of the points that Opposition Members made, but there is a big difference between lobbying for additional Government support going forward and using emotive language and politicising an issue. I gently remind the House that it was this Government who introduced the temporary £20-per-week uplift to universal credit; it was not a measure that Opposition parties were calling for. This Government have not flinched throughout this pandemic in supporting the poorest, the lowest paid and the most vulnerable and disadvantaged, and I have no doubt that the Chancellor and the Government will continue to do so.

Members raised concerns about legacy benefits. First, let me say that I appreciate that many people face financial disruption due to the pandemic. That is why the Government put in place an unprecedented package of support, totalling more than £280 billion, to protect jobs, help families and strengthen our welfare safety net. Just to give a bit of the broader context on welfare spending, in 2021 we will spend more than £100 billion on benefits for working-age people. That is £100,000 million—around £1 in every £9 that the Government spend; double our Defence budget. We spend more on family benefits than any other country in the G7, at more than 3% of GDP. We make no apologies that we will continue to reform our welfare system so that it encourages work while supporting those who need help—an approach based on the clear evidence that work offers families the best route out of poverty.

[Stephen Timms]

Does the Minister accept the evidence that disabled people have seen significant cost increases in the course of the pandemic?

Oral Answers to Questions

Stephen Timms Excerpts

Monday 25th January 2021 Commons Chamber

[Justin Tomlinson]

Further to the principle that if a claimant could be better off on UC than on legacy benefits they have the ability to apply to go on to UC, as a Government we have increased support for people with disabilities through the main disability benefits by an extra £3 billion in real terms since 2010. We are proud of our record.

[Stephen Timms (East Ham) (Lab)]

But people claiming severe disability premium cannot switch to universal credit; they are not allowed to. The costs facing many in that group have increased by more than average during the pandemic. Why is that particular group denied the £20 a week increase?

[Justin Tomlinson]

The SDP gateway comes to an end in a couple of days, so those claimants will also be able to see whether they would be better off under universal credit. However, as I said, it is part of the wider support available, and those with disabilities in particular will have benefited from the annual uprating increases in disability living allowance, personal independence payment and attendance allowance. That is how we have delivered the additional £3 billion-worth of support in real terms for those with disabilities and health conditions.

Universal Credit and Working Tax Credit

Stephen Timms Excerpts

Monday 18th January 2021 Commons Chamber

[Will Quince]

I thank my hon. Friend for that intervention. He is absolutely right that not just in his constituency, but in constituencies up and down the country, our Jobcentre Plus network of dedicated work coaches have worked incredibly hard to process an unprecedented number of claims and they stand ready to help support people back into work. That is exactly why we have secured this additional investment from Her Majesty’s Treasury to, in effect, almost double the number of work coaches across our network across our country.

Work coaches are just one part of the jigsaw; the other is the universal credit system itself. Universal credit has, without doubt, stood up to the challenge of covid-19, whereas the previous legacy benefits system would have buckled under the pressure. Millions more were able to access financial support that is fairer and more generous than the legacy benefits system. We have made the processing of claims and paying people quickly the top priority for this Department. Over 90% of new claimants receive their payment in full and on time.

We have a modern, dynamic, agile, fairer welfare safety net that, in the face of unprecedented demand, ensured that millions of people were paid in full and on time. So what is Labour’s position? It is to scrap it.

[Stephen Timms (East Ham) (Lab)]

Is it now the policy of the Department, as the Prime Minister suggested at the Liaison Committee last week, that people should move from legacy benefits to universal credit in order to gain the £20 per week increase? If that is now the policy, what about the position of those who have been receiving the severe disability premium, who are not allowed to move to universal credit?

[Will Quince]

I thank the Chairman of the Work and Pensions Committee for that intervention. I would be very happy to meet him, alongside the Minister for Disabled People, Health and Work, to discuss, in particular, those in receipt of the severe disability premium. Yes, it is the position of Her Majesty’s Government that we want more people to move over from legacy benefits, including working tax credits, on to universal credit, because it is a modern, more dynamic benefits system; it is the future. However—this is a very important caveat—I would encourage anybody looking to move over from legacy benefits to universal credit to first go on to gov.uk and check their eligibility, because it is important to note, as I know the Chairman of the Select Committee knows well, that on application for universal credit, the entitlement to legacy benefits will cease, so it is very important that people do check.

As I said, we have a modern, dynamic, agile, fairer welfare safety net that, in the face of unprecedented demand, ensured that millions of people were paid in full and on time. Therefore, it is quite astonishing that the position of Her Majesty’s Opposition is to scrap it—a system that, by any measure, has passed the most challenging of tests. This weekend they briefed to the papers with a press released entitled, “Cut to universal credit to hammer families in marginal Conservative seats”, playing politics with the lives of nearly 6 million vulnerable people rather than focusing on helping them through this pandemic. We will take no lectures whatsoever from Labour on universal credit. There is little doubt that had we relied on the legacy benefits system, we would have seen queues down the streets outside jobcentres and long delays leaving families facing financial disruption without support.

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[Stephen Timms (East Ham) (Lab)]

The problem is that the Government have lost the capacity to listen—to listen to their own Back Benchers, to the all-party Work and Pensions Committee, to people claiming universal credit and to the public. That was clear in the contemptuous dismissal of my Committee’s report on the five-week delay between applying for universal credit and receiving the first regular payment. The Government response to that report was published last week. In our meetings, we studied the evidence, sifted the material and listened carefully to what Ministers said in response. It is clear that the five-week delay is forcing people to food banks and pushing them into rent arrears. Social security is supposed to protect people from those things, not induce them as it does at the moment.

On a unanimous, all-party basis, my Committee recommended new starter payments equivalent to three weeks’ worth of standard universal credit, to tide people over in those difficult first few weeks. The Government’s response simply dismissed that recommendation and all the recommendations. Of course, the Government can reject our recommendations. They could carry out their own analysis and reach different conclusions. We recommended that the Department should do its own research on the impact of the five-week wait on food bank demand, rent arrears and claimants’ mental health. The response was:

“The Department will not be conducting nor commissioning any research.”

That was it. The Government do not want to know. They have lost the capacity to listen.

How can it be right that people have to wait until March to find out whether universal credit will be cut by almost a quarter at the end of March? How are struggling families supposed to plan? What justification can there be for having left jobseeker’s allowance and employment and support allowance unchanged? Those claiming them are in exactly the same position as people claiming universal credit. People receiving the severe disability premium have not been allowed to switch to universal credit, even if they wanted to. Why have Ministers singled out disabled people for such harshness?

If the cut goes ahead, it will push child poverty up to levels we have not seen since 1997. There is no justification for going back to £72 per week. There was one very telling point in the briefing circulated by the British Association of Social Workers: the sharp increase in children in care, up from 60,000 to 80,000, with the enormous cost that that imposes, began when the cuts to benefits began. It is a false economy. The £20 a week should be left in place.

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[The Chief Secretary to the Treasury (Steve Barclay)]

It is a privilege to close this debate on behalf of the Government. Let me begin by thanking right hon. and hon. Members across the House for their contributions. Many spoke with great passion. Having listened to the debate, it is clear to me that there is a heartfelt desire, shared on both sides of the House, to support those constituents impacted by the economic consequences of covid. That was reflected in the well measured opening remarks of the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), speaking from the Opposition Front Bench, and in the comments from my hon. Friends the Members for Sevenoaks (Laura Trott), for Barrow and Furness (Simon Fell) and for Guildford (Angela Richardson), among many others.

The Government are acutely aware of the harm that the crisis has done to people’s finances, including the most vulnerable in our society. At every stage of the pandemic, we have striven to support those who have found themselves at the sharp end. As the Minister for welfare delivery, my hon. Friend the Member for Colchester (Will Quince), outlined earlier, that is why we introduced a wide-ranging package of welfare measures worth over £7 billion this year. That included temporarily increasing the universal credit standard allowance and the working tax credit basic element by £20 a week—an increase that has boosted welfare spending by £6.1 billion. As my hon. Friend also pointed out, given the evolving nature of the pandemic, it is right that we wait until the Budget before making future tax and welfare decisions.

[Stephen Timms]

rose—

[Steve Barclay]

I will of course give way to the Chair of the Work and Pensions Committee.

[Stephen Timms]

Is it not unreasonable to force families who claim universal credit to wait until March to find out whether the rate of benefit will be cut by nearly a quarter at the end of March? Surely the Government need to announce their decision sooner.

[Steve Barclay]

I think what that ignores is that a quarter of the scheme is still to run, because there is still almost three months until the end of the financial year.

One should look at the package of measures as a whole. As a number of right hon. and hon. colleagues have pointed out, my right hon. Friend the Chancellor has allocated £280 billion in fiscal stimulus to help weather this crisis—I think the Chair of the Work and Pensions Committee has welcomed a number of these measures. As was further pointed out during the debate, and as Treasury analysis supports, the measures have overwhelmingly supported the poorest families most and reduced losses for working households by up to two thirds. That point was elegantly expressed by my hon. Friends the Members for Bexhill and Battle (Huw Merriman), for Meriden (Saqib Bhatti) and for Redcar (Jacob Young)—he correctly identified that the scale of Government support has been praised by many international observers, including the IMF, which has singled out the UK’s performance.

Let me briefly remind the House of some of the key elements of that support that relate most closely to this debate. The furlough scheme has protected the jobs of almost 10 million people, many of whom are on low incomes. Over 3 million people have benefited from self-employment grants. In addition to the temporary uplift in welfare payments, we have also suspended the universal credit minimum income floor and increased the local housing allowance rates for housing benefit and universal credit.

We have also supported those on low incomes through other measures, including council tax relief through the £500 million hardship fund, and the £500 payments for people on low incomes who have to self-isolate. Our covid winter support package includes the £170 million covid winter grants scheme and a £220 million expansion of the holiday activity and food programme for disadvantaged children. Those points were made during the debate, including by my hon. Friend the Member for Rushcliffe (Ruth Edwards). These measures have provided financial support to millions of families and individuals.

Beyond the state help that those measures have enabled, there can be no doubt that the best way to raise living standards is to keep as many people in work as possible and to support their wages. That is why my right hon. Friend the Chancellor has focused on our pledge to end low pay by increasing the national living wage by 2.2% to £8.91 an hour. Indeed, he has gone further, protecting, creating and supporting employment through our £30 billion plan for jobs—a point that my hon. Friend the Member for Stourbridge (Suzanne Webb) brought to the House’s attention very effectively. Measures including the furlough scheme, along with a raft of other initiatives designed to get people into work, have boosted jobcentre capacity, doubling the number of work coaches, and sit alongside measures such as the new £2.9 billion restart programme to help over 1 million unemployed people back into work.

As well as helping people to find jobs, we are creating new ones through a range of policies. They include our £8.6 billion investment in infrastructure, decarbonisation and maintenance programmes, and our £2 billion kickstart scheme for young people. Over the long term, we plan to unlock 250,000 highly skilled sustainable jobs that will boost our recovery under the Prime Minister’s 10-point plan for a green industrial revolution.

I have set out to the House the scale of support we are providing to people in this crisis, as well as our commitment to helping the most vulnerable and those on low incomes. Let me add that it would not have been possible to provide that support without the dedication of thousands of workers in the Department for Work and Pensions and on the frontline in jobcentres around the country. Let me echo the remarks of the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Colchester, the Minister for welfare delivery, by pointing out how well the universal credit system has coped with the enormous increase in claimants over the past months, a point recognised quite rightly by my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb), my hon. Friend the Member for Brecon and Radnorshire (Fay Jones)—I am sure colleagues will join me in wishing her a happy birthday—and my hon. Friend the Member for Gedling (Tom Randall).

Despite immense pressures, payments have still been issued swiftly and efficiently to millions of people through the universal credit system. It is clear that every Member of this House is concerned for the financial wellbeing of families and individuals in their constituencies and across the country. That has been reflected in the remarks from all sides of the House during the course of the debate. The Government, too, are acutely aware of the challenges people face. That is why we have spent £280 billion in response to covid, reflecting the Government’s and the Chancellor’s commitment to support individuals, businesses and our public services. As such, we will not move an amendment to this debate.

Question put.

Oral Answers to Questions

Stephen Timms Excerpts

Monday 30th November 2020 Commons Chamber

[Mr Speaker]

I call the Chair of the Select Committee, Stephen Timms.

[Stephen Timms (East Ham) (Lab)]

The number of households affected by the cap has more than doubled since the start of the pandemic, to 170,000. In addition, 160,000 households will come to the end of their nine-month benefit cap grace period in the coming month. So will the Secretary of State consider extending the grace period, to avoid cutting the benefits of hard-pressed families in the run-up to Christmas?

[Dr Coffey]

The statistics indicate that 140,000 households with children have their benefit capped; my understanding is that overall it is about 3.1% of the UC case load. I am conscious of the fact that the right hon. Gentleman wrote to me last week, in his role as Chairman of the Select Committee, with a variety of questions on the benefit cap. I will respond to him shortly, and I believe that is one of the questions he has asked me to address.

Coronavirus Outbreak: DWP Response

Stephen Timms Excerpts

Thursday 26th November 2020 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

I beg to move,

That this House notes the First Report of the Work and Pensions Committee, “DWP’s response to the coronavirus outbreak”, HC 178; and calls on the Government to increase relevant legacy benefits in line with increases to universal credit, to take steps to return people who have been inadvertently left worse off under universal credit compared with their previous benefits, and to suspend the no recourse to public funds visa condition for the duration of the coronavirus outbreak.

I thank the Backbench Business Committee for this opportunity. The new Work and Pensions Committee had an ambitious programme. Our first meeting in March was with the Health and Safety Executive, but in no time we were in lockdown and our programme was set aside. The Department for Work and Pensions has been key in this crisis as so many have lost the means to earn a living, and universal credit has delivered. I have been a frequent critic. I repeatedly pointed out that transition to universal credit could not be completed by October 2017, but the system that we now have has passed the test of this year. It is a national asset, which we should make the most of.

DWP staff have been on the frontline, with many redeployed to handle the tidal wave of claims. They have withstood enormous pressure. In our report, the Committee expresses thanks to them for their dedication and hard work, and that does need to be reflected in their pay; yesterday’s announcement was a heavy blow.

Ministers made good decisions at the start. After a decade of cuts, the £20 increase in universal credit and working tax credit, and the reconnecting of local housing allowance with actual rents, were key for many to surviving the crisis. I had understood that local housing allowance would be kept in line with local rents, so I was dismayed yesterday to hear that it will be frozen—decoupling it once again. My Committee agreed unanimously that the £20 increase should stay and many others have taken that view, including the Joseph Rowntree Foundation’s “Keep the lifeline” campaign. The campaign wrote an open letter to the Chancellor on 30 September with Citizens Advice, the Child Poverty Action Group, Feeding Britain, Oxfam, the Trussell Trust, disability charities and bishops. The Resolution Foundation says that otherwise:

“The basic level of support for an out-of-work single adult would fall to the level it was at when Margaret Thatcher left office”.

The Institute for Fiscal Studies warned of a significant decline in the incomes of 4 million families. The Chair of the Welsh Affairs Committee, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), a former Work and Pensions Secretary, called the £20 a lifeline and urged its retention. I very much regret that the Chancellor rejected those calls yesterday.

The spending projections show universal credit being cut by £20 in April, and people claiming universal credit are left fearing the worst. Our motion calls for the £20 uplift to be extended to legacy benefits. Yesterday, an increase of 37p per week was announced; Ministers must reconsider.

Not increasing jobseeker’s allowance and employment and support allowance for those out of work for ill health was done on the grounds, we were told, that computer systems were slow to change, but they certainly could have been changed by now, and it is absurd that people in otherwise identical circumstances, claiming different benefits because of universal credit roll-out sequencing, are receiving such different support. It is legally questionable. People should not face extended hardship because their benefits are run on out-of-date systems. Ministers were absolutely right to introduce the increase; it should be extended to legacy benefits, too

Our report last month, “Universal credit: the wait for a first payment”, calls for other much-needed changes. The five-week delay between applying and the first regular payment causes great hardship; we called for non-repayable starter payments to tide people over. We also called for “advances” to be renamed “loans”, to make it clear they have to be repaid, because calling them “advances” obscures that.

The motion also highlights the people made worse off by claiming universal credit. Government online advice says: “Apply online for universal credit to get financial support if you’ve lost your job.” For most people, that was sound advice, but not for everyone: if someone on tax credits claims universal credit, their tax credits stop.

We surveyed experiences of the benefits system in the pandemic; 6,000 people responded, and I thank all of them. Some had not realised that claiming universal credit meant losing tax credits. For some, their universal credit entitlement then turned out to be zero—for example, one of my constituents with £16,000 saved. That person was left, as many were, with no support at all. That is benefit mis-selling; Government should put it right.

In May, answering the right hon. Member for North Shropshire (Mr Paterson) here in the Chamber, the Secretary of State said that she would look “very carefully” at whether people should be able to return to previous benefits. That held out some hope, but now she says that allowing it would threaten to unravel the roll-out of universal credit; that is a very poor excuse.

Today’s motion highlights our call, also made by the Home Affairs Committee, for the no recourse to public funds immigration condition to be suspended for the pandemic. Some 3 million extra people have had to claim universal credit this year, but families working legally, with no recourse to public funds on their immigration status, do not have that safety net. They may get discretionary council help, but provision varies immensely. Indeed, Andy Jolly at the University of Wolverhampton has found that many families refused council help, so our report made this call:

“The Government should publish or at least clarify existing guidance for local authorities on what support they can provide for people with NRPF, including…whether measures such as the hardship fund are classed as public funds or not.”

At the Liaison Committee in May the Prime Minister said that people in this situation should get “help” of one kind or another. I agree, but unfortunately they do not. Families facing destitution can apply for exemption, but it is extremely hard. The all-party group on immigration law and policy heard this week from the Unity Project that it takes about 100 pages of evidence; many people cannot provide that. The Home Office takes a month, on average, to determine an application. No destitute family should have to wait a month for Government to decide whether they can claim benefit.

Our report in May also called for an impact analysis of the benefit cap in the pandemic. UC and the local housing allowance were rightly raised, but the benefit cap was not, so many families crashed into the cap for the first time. The Department told our inquiry that the number of people affected by that would be “very small”. We asked for a full analysis of the numbers and the characteristics of households newly subject to the cap, and of the impact on hardship. We now know that far from a very small impact, the number affected by the benefit cap has almost doubled in the pandemic.

In London, with high rents pushing up LHA, many have crashed into the benefit cap for the first time. People claiming benefit after losing their job have a nine-month grace period when the benefit cap does not apply. The employment Minister says that 160,000 households have a grace period due to end next month—the benefit cap will apply for the first time. I wrote to the Secretary of State yesterday, with the Committee’s agreement, about this issue. The Government were right to increase support for struggling families at the start of the pandemic and there should be a cap easement for those about to be hit.

Our report in May pointed out that the future jobs fund did a great job of supporting young people in the last financial crisis. I welcome the kickstart scheme, with its identical structure, that was announced the month after our report. It was disappointing to see yesterday that spending on kickstart will be much lower than planned. That seems to be because employers have to offer at least 30 places, thus shutting out small firms. That should surely be fixed. The Committee will take evidence on the Restart scheme, which was announced yesterday. An evaluation of the Work programme was published on Tuesday. Major commitment to employment support is absolutely right, but we need it—this is unlike what happened with the Work programme—to do a good job with, for example, disabled people.

The importance of dependable social security has never been clearer. The UC system and Department for Work and Pensions staff have passed an extraordinary test, and they have our congratulations and our thanks. The changes outlined in our report are needed now to minimise damage from the crisis, and to look forward and build back better in the months ahead.

[Mr Deputy Speaker (Mr Nigel Evans)]

I have asked Members to consider a five-minute limit. We are not putting the clock on, but Members who go wildly over five minutes will be doing a great disservice to those lower down the call list.

--- Later in debate ---

[David Johnston (Wantage) (Con)]

I congratulate the right hon. Member for East Ham (Stephen Timms) on securing this debate. I think it fair to say that he is well regarded on both sides of the House for his approach to these issues and for his expertise on them, which was reflected in his opening remarks and in his Committee’s report.

I want to speak in this debate because I think the performance of the Department for Work and Pensions during the pandemic has been one of the unsung successes of this period. It saw an increase in claimant numbers between February and August from 2.9 million to 5.6 million. There are few services that saw that level of increase. A lot of services saw a decrease. Some saw an increase, and obviously the biggest pressure was on the health service, but few saw such an increase in this period, and the fact that 93% of people were paid on time is a huge achievement.

I accept that for those among the 7% those delays are very distressing, although I know from my own constituents that the delays are sometimes caused if the Department does not have all the information it needs. I am not saying that that accounts for all the delays—I am sure there have been some things that have gone wrong for that 7%—but I wonder how many services, public or private, could claim a 93% success rate in the past decade or, indeed, the past two or three decades.

I want to pay tribute to the DWP staff. I was at the jobcentre in Didcot just last week, and their commitment and dedication to ensuring that every jobseeker gets the right support hit me in the face the moment I walked in.

[Stephen Timms]

I thank the hon. Gentleman for his kind remarks. Does he think the staff should get a pay rise?

[David Johnston]

We could make the case for all public servants to be given a pay rise at all times, but of course we have to keep a good control over the expenditure that the Government make on behalf of taxpayers. Considerable support has been given, in one of the most generous packages in the world, through the covid period, and I think that has to be taken into consideration when we talk about a pay rise. And of course some public sector workers are getting a pay rise; in fact, I think the majority still are.

I also want to give credit to the ministerial team and the way in which they have worked flexibly, whether in bringing forward the use of Government Gateway identification by six months or in suspending the conditionality on job-seeking for this period. All those things mattered and played an important role. Some of the criticism that has been made of the DWP involves things that I think are reasonable. For example, I think it reasonable still to require evidence of health conditions if someone wants to claim health-related benefits.

I accept the point about not everyone having the right level of digital literacy, but on the other hand, we wanted a system that was quick and easy to access, and we were keeping everybody inside, and I think that probably affected a small but not insignificant minority of people. Some of the other criticisms are about problems that people have with the system as a whole, such as the benefit cap or no recourse to public funds. I am not saying that those issues have not been exacerbated, but they are broader questions than just about the performance of the DWP during this period. I agree with some of the criticisms, however. The delays to mandatory reconsiderations, for example, are a problem. I have seen this for myself, and we have to sort it out. I know that the Department is committed to doing so, and the faster it can do so, the better.

After the Health and Education Departments, the DWP has had tremendous pressure placed on it, and the reason we have heard a lot less about it is that things have gone so well. That is not the case with everything, but it is a service that has gone a lot better than could have potentially been expected at the outset of this crisis, given the increase in the number of claimants. That is backed up by the statistics. The bottom 10% saw no reduction in the income level that they received, and the Government’s package overall reduced the scale of losses by up to two thirds, in the majority of cases, for working people.

The Department should be commended for this. It has some big things on its plate, like the kickstart programme—which I take a particular interest in, given my previous work with young people—and the new Restart programme. It is right to target those people who have been unemployed for at least a year. I think that what we have seen so far bodes well for how it will deliver these programmes.

Pension Schemes Bill [Lords]

Stephen Timms Excerpts

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

[Stephen Timms (East Ham) (Lab)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

New clause 2—Pensions Advisory Commission—

“(1) The Pensions Regulator shall establish a committee to be known as the Pensions Advisory Commission.

(2) The Commission shall consist of—

(a) members of the Regulator as provided under section 2(1) of the Pensions Act 2004, and

(b) five other persons appointed by Her Majesty on the recommendation of the Secretary of State.

(3) A person appointed under subsection (2)(b) shall exercise only functions in pursuance of the duties in subsections (5) and (6).

(4) The Commission shall be chaired by a person appointed under subsection (2)(b).

(5) It shall be the duty of the Pensions Advisory Commission to submit to the Secretary of State each calendar year, beginning with the year 2022, a report setting out the Commission’s views on—

(a) the impact of provisions in Parts 1, 2 and 4 of this Act on—

(i) persons in different parts and regions of the United Kingdom,

(ii) equal treatment of men and women in access to pension provision, and

(iii) persons with a protected characteristic under section 4 of the Equality Act 2010; and

(b) the effectiveness of the powers in Parts 1 to 3 of this Act in enabling the Pensions Regulator to achieve its objectives under section 5 of the Pensions Act 2004.

(6) It shall also be the duty of the Commission to report to the Secretary of State by 31 October 2021 its views on when commercial operators should be able to enter the market for provision of a pensions dashboard service.

(7) The Secretary of State must lay before Parliament a copy of every report received from the Commission under this section.”

New clause 3—Pension accounts—

“(1) A jobholder to whom section 3 of the Pensions Act 2008 applies may by notice require an employer to arrange for the jobholder to receive into a pension account any contribution which would otherwise be made by the employer into an automatic enrolment scheme.

(2) A contribution by a jobholder or by their employer into the jobholder’s pension account shall be invested in a pension scheme offered by an approved pension provider.

(3) The Secretary of State may by regulations make provision—

(a) about the form and content of a notice given under subsection (1), or

(b) about the arrangements that the employer is required to make.

(4) The Secretary of State may make regulations to set criteria by which a pension provider may be approved for the purposes of subsection (2).

(5) Regulations under this section shall be made by statutory instrument and may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

New clause 4—Employer debt: trustees’ discretion—

“(1) The following changes are made to the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678).

(2) In regulation 2, in the definition of “scheme apportionment arrangement”—

(a) in sub-paragraph (f)(ii), after “apply”, insert “but not if the circumstances in paragraph (h) apply”;

(b) at end insert—

“(h) the consent of the remaining employer or employers shall not be required under (f)(ii) above where all of the following conditions apply—

(i) the departing employer’s debt was treated as becoming due prior to the coming into force of this provision; and

(ii) the departing employer’s debt was less than 0.5% of the scheme’s overall liabilities, as estimated by the trustees or managers on advice of the scheme actuary, as if the whole scheme had been winding-up at the time the debt was treated as becoming due; and

(iii) the employer in question was operating as an unincorporated business during his participation in the scheme; and

(iv) the trustees or managers consider that, in the context of the scheme overall, taking into account factors such as the scheme’s assets, liabilities and the trustees’ or managers’ most recent assessment of the overall employer covenant, there would be no material benefit to the scheme and its members in seeking recovery of the employer’s liability share from the departing employer.”

(3) In regulation 9, after paragraph (14B), insert the following new paragraph—

“(14C) Condition L is that a debt was treated as becoming due from him under section 75 of the 1995 Act but is excluded under this Condition because—

(a) the employer’s debt was treated as becoming due prior to this Condition coming into force; and

(b) the employer’s debt was less than 0.5% of the scheme’s overall liabilities, as estimated by the trustees or managers on advice of the scheme actuary, as if the whole scheme had been winding-up at the time the debt was treated as becoming due; and

(c) the employer in question was operating as an unincorporated business during his participation in the scheme; and

(d) at or before the applicable time, the trustees or managers have made a determination not to pursue the debt on the grounds that, in the context of the scheme overall, taking into account factors such as the scheme’s assets, liabilities and the trustees’ or managers’ most recent assessment of the overall employer covenant, seeking recovery represented a disproportionate cost to the scheme and would be of no material benefit to the scheme overall.””

This new clause would enable pension scheme trustees to exercise discretion not to pursue employer debt following an employer’s exit from a pension scheme where such debt is below a de minimis threshold. This aims to support unincorporated employers who are now retired for business and for whom the current regulation allows no easements.

New clause 5—Employer debt: deferred debt arrangement—

“(1) The following changes are made to the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678).

(2) In regulation 6F—

(a) in paragraph (1), leave out “A” and insert “Subject to the provisions of paragraph (8) below, a”;

(b) at end insert—

“(8) In relation to a frozen scheme, the trustees or managers of the scheme may agree to a deferred debt arrangement where the employment-cessation event occurred at a time prior to the scheme becoming a frozen scheme, providing the conditions of paragraph (3) are met at the time the deferred debt arrangement is entered into.””

This new clause would permit employers in a pension scheme closed to future accrual to apply for a deferred debt arrangement, providing they meet the other statutory tests. This aims to support employers who are still trading but were not able to use the existing deferred debt easement.

New clause 6—Regulation of pension superfunds—

“(1) The Secretary of State shall publish a statement on proposals for primary legislation in relation to a duty on the Pensions Regulator to regulate pension superfunds.

(2) For the purposes of this section, a pension superfund is a defined benefit pension scheme that allows for the severance of an employer’s liability towards a defined benefit scheme and one of the following conditions applies—

(a) the scheme employer is replaced by a special purpose vehicle (SPV) employer, or

(b) the liability of the employer to fund the scheme’s liabilities is replaced by an employer backed with a capital injection to a capital buffer.

(3) The statement under subsection (1) shall be laid before Parliament before the end of a period of six months from the day on which this Act receives Royal Assent.”

This new clause would require the Secretary of State to publish within six months of Royal Assent proposals for primary legislation to place a duty on the Pensions Regulator to regulate pension superfunds.

Amendment 15, in clause 118, page 104, line 19, at end insert—

“(3) Requirements prescribed under subsection (2) must include a requirement that a pensions dashboard service may not include a facility for engaging in financial transaction activities.”

This amendment ensures that a pensions dashboard does not include a provision for financial transaction activities.

Amendment 9, page 105, line 20, at end insert—

“(6A) A requirement under subsection (6)(d) may require the provider of a pensions dashboard service to ensure that the needs of people in vulnerable circumstances, including but not exclusively—

(a) persons who suffer long-term sickness or disability,

(b) carers,

(c) persons on low incomes, and

(d) recipients of benefits,

are met and that resources are allocated in such a way as to allow specially trained advisers and guidance to be made available to them.”

This amendment would require that specially trained advisers and guidance are made available to people in vulnerable circumstances and would provide an indicative list of what vulnerable circumstances should include.

Amendment 10, page 105, line 20, at end insert—

“(6A) A requirement under subsection (6)(d) may require the provider of a pensions dashboard service to communicate to an individual using the dashboard the difference between—

(a) provision of information,

(b) provision of guidance, and

(c) provision of advice.”

This amendment would require the provider of a pensions dashboard service to ensure that users are made aware of the differences between “information”, “guidance” and “advice”.

Amendment 11, in clause 119, page 108, line 18, 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.

Amendment 13, in clause 121, page 112, line 42, 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.

Amendment 8, 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)—

(a) the pensions dashboard service under subsection (1) must have been established for at least one year, and

(b) the Secretary of State must lay before Parliament a report on the operation and effectiveness of the pensions dashboard service under subsection (1) in its first year.”

Amendment 14, page 116, line 37, at end insert—

“(3) Before any other pension dashboard services can qualify under section238A 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.

Amendment 7, in clause 123, page 117, line 34, at end insert—

“(2) In exercising any powers to make regulations, or otherwise to prescribe any matter or principle, under Part 3 of the Pensions Act 2004 (scheme funding) as amended by Schedule 10, the objectives of the Secretary of State must include ensuring that schemes that are expected to remain open to new members, either indefinitely or for a significant period of time, can adopt funding and investment strategies which are suited to the characteristics of such schemes.”

Amendment 1, page 117, line 34, at end insert—

“(2) In exercising any powers to make regulations, or otherwise to prescribe any matter or principle, under Part 3 of the Pensions Act 2004 (scheme funding) as amended by Schedule 10, the Secretary of State must ensure that—

(a) schemes that are expected to remain open to new members, either indefinitely or for a significant period of time, are treated differently from schemes that are not;

(b) scheme liquidity is balanced with scheme maturity;

(c) there is a correlation between appropriate investment risk and scheme maturity;

(d) affordability of contributions to employers is maintained;

(e) affordability of contributions to members is maintained;

(f) the closure of schemes that are expected to remain open to new members, either indefinitely or for a significant period of time, is not accelerated; and

(g) trustees retain sufficient discretion to be able to comply with their duty to act in the best interests of their beneficiaries.”

This amendment seeks to ensure that open and active schemes which are receiving regular, significant cash contributions and closed schemes are treated differently, in accordance with their differing liquidity profile.

Amendment 6, page 117, line 34, at end insert—

“(2) The Secretary of State must, on or before 30 June 2021, lay before Parliament a comprehensive impact assessment of the effect on the charitable sector of changes to defined benefit schemes made under Schedule 10.”

This amendment would require the Government to produce an economic impact assessment of the changes to defined benefit schemes upon the charitable sector.

Amendment 16, in clause 124, page 118, line 45, leave out subsection (8) and insert—

“(8) In this section and in sections 41AA, 41B and 41C—

(a) “the Paris Agreement goal” means the objectives set out in Articles 2 and 4.1 of the agreement done at Paris on 12 December 2015; and

(b) “other climate change goal” means any climate change goal approved by the Secretary of State, but does not apply to a climate change goal which fails to meet the objectives of the Paris Agreement goal.

41AA Alignment with the Paris Agreement goal

(1) Trustees or managers of occupational pension schemes of a prescribed description must develop, set and implement, and from time to time review and if necessary revise, a strategy for ensuring that their investment policy, objectives and practices (including stewardship activities) are aligned with the Paris Agreement goal or other climate change goal.

(2) Such a strategy is to be known as a “Paris-alignment strategy”.

(3) The objective of a Paris-alignment strategy must be to achieve net-zero greenhouse gas emissions by 2050 or sooner, consistent with the Paris Agreement goal or other climate change goal.

(4) Provision may be made by regulations—

(a) requiring the trustees or managers of a scheme, in determining or revising a Paris-alignment strategy, to take into account prescribed matters and follow prescribed principles—

(i) as to the level of detail required in a Paris-alignment strategy; and

(ii) as to the period within which a Paris-alignment strategy must be developed, set and effected;

(b) requiring annual reporting on the implementation of the Paris-alignment strategy and progress against the objective set out in subsection (3); and

(c) requiring a Paris-alignment strategy to be reviewed, and if necessary revised, at such intervals and on such occasions as may be prescribed.”

This amendment enables regulations that would mandate occupational pension schemes to develop a strategy for ensuring that their investments and stewardship activities are aligning with the Paris agreement goals, and include an objective of achieving net-zero greenhouse gas emissions by 2050 or sooner.

Amendment 17, page 119, line 7, after “scheme” insert

“and alignment with achieving the objectives of the Paris Agreement goal or other climate change goal”.

This amendment is consequent on Amendment 16.

Amendment 18, page 119, line 8, leave out “section 41A” and insert “sections 41A and 41AA”.

This amendment is consequent on Amendment 16.

Amendment 19, page 119, line 19, after “41A”, insert “, 41AA”.

This amendment is consequent on Amendment 16.

Amendment 20, page 119, line 21, after “41A”, insert “, 41AA”.

This amendment is consequent on Amendment 16.

Amendment 21, page 119, line 22, at end insert—

“(za) provide for the Authority to undertake a review of, and report publicly on, the extent to which the activities under sections 41A and 41AA are achieving effective governance of climate change risk and alignment of pension schemes with the Paris Agreement goal;”.

This amendment enables the regulator to publicly assess the progress and development of schemes’ strategies to achieve alignment with Paris agreement goals.

Amendment 22, page 119, line 25, after “41A”, insert “, 41AA”.

This amendment is consequent on Amendment 16.

Amendment 23, page 119, line 30, after “41A”, insert “, 41AA”.

This amendment is consequent on Amendment 16.

Amendment 24, page 119, line 37, after “41A”, insert “, 41AA”.

This amendment is consequent on Amendment 16.

Amendment 2, in clause 125, page 120, line 32, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (6ZA) of section 95 of the Pension Schemes Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 3, 4 and 5 are related.

Amendment 3, page 121, line 27, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (5A) of section 101F of the Pension Schemes Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 2, 4 and 5 are related.

Amendment 12, in schedule 9, page 178, 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.

Amendment 4, in schedule 11, page 192, line 20, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (6ZA) of section 91 of the Pension Schemes (Northern Ireland) Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 2, 3 and 5 are related.

Amendment 5, page 193, line 15, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (5A) of section 97F of the Pension Schemes (Northern Ireland) Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 2, 3 and 4 are related.

[Stephen Timms]

I rise to speak to new clause 1, together with amendments 2 to 5, and I am grateful to those from my party, the Conservative party and the SNP who have added their names to them.

New clause 1 addresses a serious flaw in the implementation of the pension freedoms that George Osborne announced in his Budget speech in 2014 and that were implemented the following year. This is what George Osborne said in that Budget speech on 19 March 2014:

“Let me be clear: no one will have to buy an annuity. We are going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution schemes will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.”—[Official Report, 19 March 2014; Vol. 577, c. 793.]

That was a recognition that there could be pitfalls in allowing people to do whatever they wanted with their pension savings—for many people, the largest sum of money they would ever have access to—and that the Government would have to ensure that everybody had access to guidance to help them make the best decisions.

The outcome of George Osborne’s promise is the Pension Wise service operated by Citizens Advice, and it is an excellent service. It is free and it is impartial, as George Osborne promised, and it gets very high satisfaction ratings from those who use it. The problem is that hardly anyone does use it, and new clause 1 is intended to fix that. The latest figures show that about one in 33 of those eligible for Pension Wise actually use it. Last month, the Department for Work and Pensions published a document entitled “Stronger Nudge to Pensions Guidance: Statement of Policy Intent”. That proposed the adoption of new nudges, which, according to the trials, would increase the take-up from one in 33 to one in nine. Well, that is not enough.

[Ms Angela Eagle (Wallasey) (Lab)]

On that point, I thank my right hon. Friend for the way he is championing consumer advice in this very difficult space. Does he agree with me that we do not want a stronger nudge, but a great big shove into the arms of impartial, free advice?

--- Later in debate ---

[Stephen Timms]

My hon. Friend is absolutely right, and that is precisely what new clause 1 is intended to deliver.

Monthly data used to be published on the usage of Pension Wise. The Government committed to monthly publication in December 2015 in their response to the Work and Pensions Committee’s report “Pension freedom guidance and advice”, but monthly publication stopped in January 2019. Now the data is only published annually. I tabled a question about that, asking for monthly publication to be resumed. The Minister answered no, and said:

“The annual reporting allows for wider analysis and commentary against the figures rather than that previously published month by month.”

However, nothing is lost by publishing every month.

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

I am grateful to the right hon. Gentleman for our conversation in the Library beforehand, during which he flagged this point to me. Subject to the powers that I have, given that Pension Wise is an arm’s length body, I am very happy to review the annual publication, to go back to a monthly publication. I would simply make the point that the “Stronger Nudge” is happening as a result of the Work and Pensions Committee’s 2018 recommendation. We are enacting what the Committee asked us to do.

[Stephen Timms]

I am very grateful to the Minister for that assurance, and I look forward to monthly publication resuming.

To answer my hon. Friend the Member for Wallasey (Ms Eagle), who I am delighted to see in her place, at the Treasury Committee a couple of weeks ago the chair of the Financial Conduct Authority spoke about defined-contribution pension savers. He said:

“This issue about people making poor choices when exercising the freedoms…is probably the one that I worry about most of all.”

He went on to say that safeguards need to be

“as strong as they humanly can be”.

The FCA has had a go. As the Minister pointed out in Committee, last November the FCA introduced new rules requiring clearer signposting and promotion of pensions guidance. However, it has not worked. FCA data shows that just 14% of pension pots were accessed after guidance was taken in the six months from October 2019 to March 2020—exactly the same proportion as before the new rules.

It was not just George Osborne who had the ambition that everybody should benefit. The Treasury’s public financial guidance review, published for consultation in March 2016, said:

“Guidance is vital to ensure that individuals are fully aware of their options before they make a decision on what to do with their retirement savings”.

The then Economic Secretary, the hon. Member for West Worcestershire (Harriett Baldwin), said the following month that the Government were introducing

“a requirement that, in effect, ensures that consumers with a high-value annuity receive appropriate financial advice before making the decision to sell their annuity”.—[Official Report, 19 April 2016; Vol. 608, c. 876.]

Today, unfortunately, there is no such requirement. Two years later, in April 2018, her successor, the hon. Member for Salisbury (John Glen), who is the current Economic Secretary, said that, before proceeding with an access or transfer application,

“subject to any exceptions, schemes must ensure that individuals have either received Pension Wise guidance or have opted out.”—[Official Report, 24 April 2018; Vol. 639, c. 831.]

That aspiration has simply not been delivered. Today, the Government are taking steps that their own investigation says would make it true in 11% of cases. New clause 1 would finally deliver on the commitment that the Economic Secretary thought he was delivering on two years ago.

It was not just the Treasury. The noble Baroness Buscombe, who was a Minister in the Department for Work and Pensions at the same time as the current Minister, said in the other place on 1 May 2018:

“We all want people to make more informed decisions and to make it the norm to use Pension Wise before accessing their pension.”—[Official Report, House of Lords, 1 May 2018; Vol. 790, c. 1995.]

Everybody agreed that it should be the norm. Today, the Minister has set his ambition at 11% take-up. How can it be that ambition in his Department has shrunk so far? New clause 1 would resolve it using auto-enrolment to increase the take-up of guidance, just as it has been used so successfully to increase pension saving.

[Mr Shailesh Vara (North West Cambridgeshire) (Con)]

The right hon. Gentleman speaks with huge authority on this subject, having formerly been Pensions Minister. He will, however, appreciate that no matter how many times some people are written to, they simply will not respond, so there will be a proportion of people to whom letters are written who will not take up the option of an appointment and will not indicate that they wish to opt out. What does he propose for those people? I dare say there will be a significant number of them. For them, it will be maintenance of the status quo.

[Stephen Timms]

The proposal in new clause 1 is that people should be auto-enrolled into an appointment—that everyone should be given an appointment. That would have the effect, I believe and submit, of very significantly increasing the number of people who access Pension Wise. Pension Wise is a very good service. It is funded by an industry levy. Nine out of 10 of those who use it report high or very high satisfaction—that is a pretty impressive level of satisfaction—but it is hidden away from most people. Lots of people have never heard of it.

[Mr Vara]

I note that the right hon. Gentleman says people would be given an appointment, but if the notification were by email, the fact is that people simply ignore a lot of emails. People do not always look at all the letters that are sent to them, or they mean to refer back to a letter, thinking, “Oh, I’ve got an appointment; I’ll get back to that,” but they do not, for whatever reason. There are also people who move home address and so on, who will never be notified if the letter goes to the wrong address and there has been a time gap, and the pensions people have not registered the new address. I accept where the right hon. Gentleman is going and I have huge sympathy with what he seeks to achieve, but there will still be a substantial number of people who will ignore the appointment that will simply be sent to them as a fait accompli.

--- Later in debate ---

[Stephen Timms]

The great strength of the Pension Wise approach is in providing appointments that deliver guidance to a very large number of people. The issue that the hon. Gentleman talks about will need to be managed in the context of a national service that already exists—one that is helping a significant number already and ought to be helping a lot more. The default should be that people get an appointment.

The chair of the Money and Pensions Service told the Work and Pensions Committee in March that 72% of people change their mind about what they are going to do as a result of talking to Pension Wise. He pointed out that

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

However, the Government’s current policy will leave eight out of nine savers in exactly that position.

Last week, the Minister received a four-page letter from Age UK and other organisations that said:

“The DWP should rightfully be proud of Pension Wise, but usage is still worryingly low, and it is a great concern that the ‘Stronger Nudge’ trials report published by the Money and Pensions Service shows that only a marginal improvement in take-up is likely to result from this approach.”

We have to do much better; they are quite right. The letter goes on to argue that non-advised savers should be opted in automatically, as proposed in new clause 1. It also provides detailed rebuttals to the arguments that the Minister used against this new clause in Committee, which are on the record.

Of course, Age UK is quite right: the Department’s plans are currently inadequate. The letter goes on to point out that the Minister’s suggestion in Committee that the FCA’s introduction next year of its investment pathways might deal with the problem is not going to work either. We cannot sit back while Pension Wise continues to be an excellent service taken up by a very small minority. The Government and regulators need to end their indifference on this. Aspiring to 11% take-up is not enough. We need auto-enrolment into a service that enables better outcomes from pension savings.

One of the reasons for the importance of Pension Wise is that it equips people to avoid being scammed. The Pension Scams Industry Group estimates that 40,000 savers have been scammed out of their savings in the five years since pension freedoms were introduced. Some of them do not yet know about it. A significantly higher number of Pension Wise users than non-users say that they are very or fairly confident about avoiding pension scams, having had an interview with Pension Wise. The default ought to be that people are given an appointment. I hope that the Minister will accept the new clause, but if he does not I hope that the House will have a chance to vote on it.

Amendments 2, 3, 4 and 5 address the scam problem. They are probing amendments, because the Minister has helpfully explained that he intends to introduce regulations under powers in the Bill that have the same effect as the regulations that would be introduced if the amendments were added to the Bill.

I was in touch—the Minister has heard me say this before—with a nurse who works in a health centre in my constituency. Her husband drives a black cab. Some years ago, a financial adviser whom they knew well and who had given them good advice previously called to tell them about an opportunity to realise their pension savings early with no real downside. They took up his offer, and the upshot is that all their savings have gone, and they face a massive tax bill of about £60,000 with no means to pay it. The financial adviser, I gather, is living on a yacht off Tenerife.

All of us can understand how devastating is the impact on hard-working families of being robbed of their life savings in that way. People who have worked hard, who have done the right thing and who are entitled to look forward to a secure retirement suddenly find that their hopes have been destroyed. The Transparency Task Force, one of the groups that urged the Select Committee to undertake its current inquiry on scams, reports cases of spouses who, sometimes for years, have not dared tell their partners what has happened, so awful are the consequences. People wake up every day in dread of the future, often ashamed and embarrassed to have fallen for such bare-faced lies. Scammers groom people and make themselves trusted family friends. They warn savers that schemes will advise them not to transfer their money, and they claim that that is because the schemes want to hang on to it for their own gain. If the saver becomes aware that the receiving scheme has fallen foul of regulators, they say that that was just because someone was late filling in some forms.

It seems absurd that, as the law stands, trustees are compelled to make a transfer if a member demands it, even if they know that the money is going to crooks. Even if the receiving scheme is on the warning list published by the Financial Conduct Authority of firms known to be suspect, the law requires trustees to go ahead with the transfer. If they are slow about it, they can be fined. The Select Committee has launched a three-part inquiry looking at scams. There have been lots of calls for the Committee to look at the issue, because there is widespread revulsion at the scandals that have occurred and fear of the damage to individuals and to the industry as a whole. There is a particular worry that pension freedoms, plus the financial pressures of the pandemic, could create what the Pensions Regulator has called a golden age for pension scams, as people are anxious to get hold of their money.

[Guy Opperman]

I am grateful to the right hon. Gentleman for giving way again. He knows that I have exchanged a series of letters with the Work and Pensions Committee and with him, having met him and the all-party parliamentary group on financial crime and scamming, and that I have placed in the House of Commons Library letters of 6 October and 22 October. Following his suggestion in Committee, I clarified an extra point in a letter dated 11 November, which I placed in the Library. We share his revulsion on these particular points, and believe that clause 125, with suitable regulation, can address these issues.

[Stephen Timms]

I am grateful for the assurances that the Minister has given. One of the problems is that the responsibility for responding to scams cuts across many different bodies. The court ruling last week that the fraud compensation fund could be used to compensate some pension scam victims is a significant development.

The Police Foundation published an important report in September called “Protecting people’s pensions: Understanding and preventing scans”, and that recommends a coherent set of principles for law enforcement and regulators, including: the facilitation of a more co-ordinated and consistent response across the various agencies; a specialist fraud victim support service; regulation for introducers, who are not regulated at the moment; and, new digital technology for the police to support and speed up analysis of the large volumes of evidence collected in investigations.

--- Later in debate ---

[Guy Opperman]

With no disrespect, that is a matter for the trustees. The hon. Gentleman can make the case to the trustees as to whether it would be too costly or too lengthy to receive a recovery.

In respect of new clause 5, the deferred debt arrangements were introduced as an easement to help employers struggling to manage their section 75 debts in an open non-associated multi-employer scheme. The new clause, I am afraid, offers only a temporary respite at best. The debt would still exist and would have to be paid in the future. The employer would have to pay potentially a larger section 75 debt in future if the scheme’s funding position declined further. The employer would also remain liable for deficit repair contributions. The amendment would not, I suggest, help sole traders who want to retire, or who have retired, and want to completely end their liability of the scheme.

In respect of new clause 2 and the Pensions Commission, I am afraid, as I have repeatedly made clear to the hon. Member for Airdrie and Shotts (Neil Gray), that this is not something that the Government can support.

I finally turn to new clause 1, which was proposed by the right hon. Member for East Ham (Stephen Timms) and the Chair of the Select Committee. It is quite clear that there is a common intent across the House to improve guidance to individuals. I cannot support his amendment, not least because it would potentially apply, so I am advised, to defined benefit as well as defined contribution. It is something that would massively enhance the workload of Pension Wise by at least 10 times. He will be aware that there are more than 4.4 million individuals with unaccessed DC pension wealth aged 45 to 54 in the UK. In 2019-20, Pension Wise processed 200,000 transactions. I respectfully suggest—

[Stephen Timms]

Will the hon. Gentleman give way?

[Guy Opperman]

I will give way for the last time.

[Stephen Timms]

On his point about the shared intent, I quoted in my speech what Baroness Buscombe said in the other place on 1 May 2018. She was speaking, I think, for him. She said:

“We all want people…to make it the norm to use Pension Wise before accessing their pension.”—[Official Report, House of Lords, 1 May 2018; Vol. 790, c. 1995.]

Does that remain the Government’s intention?

[Guy Opperman]

I stand by section 19 of the Financial Guidance and Claims Act 2018, which specifically sets out that where a scheme member makes an application to transfer pensions rights or start receiving flexible benefits, they have to be referred to appropriate pensions guidance and provided with an explanation of the nature and purpose of the guidance. Before proceeding with an application,

“the trustees or managers must ensure that the beneficiary has either received appropriate pensions guidance or has opted out of receiving such guidance.”

What we are proposing as a result of section 19 and the stronger nudge proposals is what the Work and Pensions Committee asked us to do. I mean no disrespect to the right hon. Gentleman, but our esteemed colleague who sadly is not with us anymore, Mr Frank Field, the former Member for Birkenhead, made the case very robustly in documents I am happy to disclose to the House—documents that the right hon. Gentleman will have as Chair of the Committee—that what the Government are doing is the right way forward. Because of that, we changed the previous Bill to do exactly what we are proposing to do now.

However, I am very keen to work with colleagues across the House and with the Work and Pensions Committee to take forward the proposals to enhance and improve the guidance that is available. I hope that the right hon. Gentleman will work with me and the Government to ensure that that takes place. I may not have responded to some colleagues, for which I apologise, but I thank all colleagues for their support of his groundbreaking Bill.

[Stephen Timms]

I welcome the debate we have had on this set of new clauses and amendments, and I welcome many of the things that the Minister said. On new clause 1, I am not sure whether he does still stand by what his noble Friend said on his behalf two years ago about the use of Pension Wise becoming “the norm”. If that is still his intention, I have not heard anything this evening to make me think that there is a plan to deliver on that intention. New clause 1 would deliver on that intention. I think it is widely agreed across the House that we should make access to that guidance the norm, so I would like to press new clause 1 to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Stephen Timms]

I echo the thanks that have been expressed by all three Front-Bench spokespeople. I welcome the content of the Bill and the progress made on collective defined-contribution schemes and the pensions dashboard. I was looking back at a report of the Work and Pensions Committee published before I became the Chair, which said:

“A pensions dashboard is long overdue”—

then I looked at the date of the report, and it was 2015. It will still be another three years before we get that dashboard, but the Bill is undoubtedly a very important step forward in that journey.

I welcome the commitments that the Minister made on scams and addressing the changes that are needed. I was disappointed that when I intervened on him on Report, he was not able to reaffirm the commitment that the Department appeared to have, and which was expressed on his behalf in the other place on 1 May 2018, that Pension Wise should become “the norm”.

[Guy Opperman]

I do—I said so.

[Stephen Timms]

That is welcome. We agree, then, that taking up Pension Wise guidance should be the norm, and I look forward to working with him on making that a reality from the very distant place we are in at the moment. I welcome the progress that the Bill represents, and I look forward to it being firmly on the statute book.

Supporting Disadvantaged Families

Stephen Timms Excerpts

Monday 9th November 2020 Commons Chamber

[Dr Coffey]

First, I congratulate my hon. Friend: he has been exemplary in volunteering in his in Watford constituency throughout the pandemic. I know that he will continue to serve his constituents well.

I believe that this approach is far more comprehensive in the number of children it will help, particularly by focusing on using local expertise. One thing that people may not be aware of is that councils have access to information on people who are on benefits, and of course councils in the upper tier will hold information on who is on free school meals if they wish to decide that that is the best way to target support. I want to make sure that every child who is vulnerable this winter is supported, and I believe that our councils are well placed to make sure that that happens, alongside the ongoing activity for a child’s future potential.

[Stephen Timms (East Ham) (Lab)]

I do hope that the Secretary of State will have the good grace to acknowledge and thank Marcus Rashford for his campaign, as I certainly do.

I welcome the additional support that the Secretary of State has announced today. Will she outline how the funding is going to be allocated among all the local authorities in England? What will the basis for that allocation be? I welcome her reference to

“funding available for every child in the UK”;

will she confirm that families with no recourse to public funds will be eligible for help from the funding she has announced?

[Dr Coffey]

I thank the Chairman of the Work and Pensions Committee for his comments. In answer to his first question, the approach is the same as that taken earlier in the year, using the index of multiple deprivation. A letter should go out to colleagues today setting out the amount of money that every council gets, but, candidly, the right hon. Gentleman can take the amount that was distributed earlier in the year, which was intended to spread over three months from the beginning of August, and divide it by 63 and multiply it by 170.

Yes, of course I congratulate Marcus Rashford. He has shown his passion for wanting to make sure that no child goes hungry. That is a passion that I share, and I think it is a passion that everybody in this House shares, which is why we are working on it right across Government, as we are today. We have been working with other Departments to get this package together—it has not just arrived by magic; it is part of an ongoing plan to support families to support children so that they can do better in life. That is why the package takes a holistic approach, looking at health and education. We will continue to make sure that we have a family strategy—which, again, I am working on with a variety of Departments —to really try to make sure that families, including every child, are well and truly supported.

Pension Schemes Bill [ Lords ] (Fourth sitting)

Stephen Timms Excerpts

Committee stage & Committee Debate: 4th sitting: House of Commons
Thursday 5th November 2020 Public Bill Committees

[Richard Thomson (Gordon) (SNP)]

It is good to see you back in the Chair, Mr Robertson.

I rise to speak to new clauses 3 and 4, which stand in my name and those of my hon. Friends the Members for Airdrie and Shotts, for Perth and North Perthshire (Pete Wishart), and for Kilmarnock and Loudoun (Alan Brown). I should make it clear to the Minister that it is our intention to make amendments of this nature on Report, so we will hear with interest what he has to say in response to the points we make today.

On Second Reading, I spoke about the impact that section 75 of the Pensions Act 1995, which deals with employer debt, could have on an individual employer within a multi-employer pension scheme. I cited the example of the Plumbing and Mechanical Services (UK) Industry Pension Scheme, but in reality the issue could apply to any scheme of a similar nature. I appreciate that not all of us go to sleep at night and dream of the implications of section 75 of the 1995 Act, so if members of the Committee will bear with me for a moment, I will run through them.

Section 75 sets out regulations that are intended to deal with deficiencies in assets in pension schemes; those regulations have evolved and been amended since they were first introduced in the 1995 Act. The key change came into force in September 2005: any employer who left a scheme or prompted a trigger event, such as retiring or moving from being a sole trader to a partnership or a limited company, was required to pay a section 75 debt. That debt is calculated on a buy-out basis, which assumes that the whole scheme is being bought out by an insurance company, so it is a very expensive way of valuing a pension scheme. Also, part of that buy-out debt comprises the orphan liabilities of past employers, who may have become insolvent or left the scheme before 2005 but did not pay their own section 75 debts, so not only is the scheme being valued generously, but those who remain in it are left to pick up the debt of others who have been able to leave it without that burden being placed upon them.

In the case that I raised, the scheme trustees for the Plumbing and Mechanical Services (UK) Industry Pension Scheme estimate that some 60% or £1.3 billion worth of the total scheme’s liabilities are, in fact, orphan. The trustees did not apply the section 75 debt when the provision was introduced in 2005, saying that, because of the nature of the scheme, it would have been impossible to do so. During that period, they lobbied Government to change the legislation, but the employers were unaware that the legislation was not being applied or indeed that any debts were even due until spring 2016, when they became aware of that situation.

I am given to understand that that has had some pretty serious consequences for the plumbers who have since retired and who have triggered the section 75 debt. It particularly affects a small group of around 30 retired plumbers aged between their late 60s and early 90s, who retired between 2005 and 2016. Some easements were introduced to the section 75 legislation over that period, but none of them apply to this small group, because the trustees did not advise them. I am told that they had a section 75 debt until 2018, and onwards.

The individual debts that I am talking about here have a wide range—up to £1.2 million, but with the majority being in the region of about £700,000. Such debts are totally unaffordable for this group, who were unincorporated sole traders for the most part. Naturally, they and their families are absolutely beside themselves with worry about this situation. If the debt is pursued, as legally it must be, it could lead to their bankruptcy and the repossession of their homes, all in pursuit of assets that, even if they are realised, would still fail to repay the outstanding debt.

As I say, there have been some easements. Deferred debt arrangements were introduced in April 2018 as a statutory easement, to allow an employer who had triggered the section 75 debt simply to defer debt but retain a liability to the scheme. That has allowed employers to continue to trade without facing possible insolvency, dependent on the size of the debt, and it allows employers to continue supporting the scheme. However, this scheme closed to benefit accrual in June 2019. Employers who triggered section 75 before the closure of the scheme, and who continue to trade, are not able to use that easement, as it is only available while a scheme is still open. That is one of the proposals in the new clauses.

The second proposal is to amend legislation to allow the application of a deferred debt arrangement in a closed scheme environment. New clause 3 gives flexibility to waive a debt in certain circumstances, as set out in the clause, where the debt is below a de minimis level; 0.5% for the fund value is suggested, bearing in mind that is a reasonable valuation of the fund and of buying it out on a commercial basis. However, new clause 4 would extend the availability of existing deferred debt arrangements for employers who are still trading, but who do not qualify to use the existing easement at present.

Hopefully we all understand the purpose of section 75, but the obligation to apply it in this case is causing untold misery to groups of small employers who have never sought to do anything other than the right thing by those in their employ. I struggle to believe anyone would have deliberately written that legislation or set up and operated the scheme in such a way to engender this kind of outcome. New clauses 3 and 4 would allow the Minister to resolve this issue mathematically, without undermining the important role that section 75 plays in safeguarding the funding of pension schemes. It is our intention to return to this issue on Report, but I would be grateful for the Minister’s observations on how we might tackle this. If we are not to tackle it in this way, in what way—if any—can the Minister envisage it being addressed in the future?

[Stephen Timms (East Ham) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I am very interested by the points raised so far; I am particularly interested—as many others are—in what the Minister has to say in response to the points raised by the hon. Member for Airdrie and Shotts and my hon. Friend the Member for Westminster North about auto-enrolment and where we are going on that.

I will speak to new clauses 9 and 12, and I am grateful for the briefing provided by the organisation ShareAction on the issues raised in these new clauses. One thing I did not need any briefing about was the fact that, 22 years ago, I became the Pensions Minister for the first of two terms in the role. My hon. Friend the Member for Wallasey was a Minister in the Department at the time, which was then called the Department of Social Security. I picked up some work on ethical investment in pension funds started the previous year by my predecessor in the job, John Denham. John made quite a groundbreaking speech on this in July 1998. He wanted a fair hearing for ethical investment to encourage open and honest debate on the issues it raises for the pensions world, and the legal framework within which all pension fund investment must be carried out. It prompted a big debate and much discussion.

One of the officials told me he was given the task of making John’s wish to support pension funds in adopting ethical—although the term was changed quickly to socially responsible—investment policies a reality. At the time, the conventional wisdom was that pension funds had a statutory obligation to maximise the returns on pensions savings and were not allowed by law to take any other considerations into account. The official told me he went around the City looking for ideas and drew a blank until he happened to speak to a senior member of staff at the central finance board of the Methodist Church, who explained how they had been applying ethical principles to their investment strategy for years. One weekend, I remember thinking about all of this, and the official put a copy of a speech—or rather, a sermon—delivered by John Wesley in my red box to help me to understand where all this was heading.

--- Later in debate ---

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

It is a pleasure to serve under your chairmanship, Mr Robertson. I am beginning to regret agreeing to address 11 separate new clauses at once—it seemed like a great idea before lunchtime. Given the multitude of speeches I have heard and the multitude of notes to which I have to refer, I am sure that the next 15 minutes will be entertaining. Here goes. I will try to address the new clauses in sequential order to assist colleagues in their understanding, and at least then my notes will prove relatively useful.

On new clauses 1 and 5, the former Secretary of State, David Gauke—he is much missed in this place—set out provisions for the automatic enrolment review to be enacted by this and future Governments. There is a cross-party approach, particularly on automatic enrolment, that was started by the Labour Government, continued by the coalition Government and brought forward on an ongoing basis by the Conservative Government. In my view, the DWP’s single biggest achievement on pensions in the last couple of years has been the double jump to 8% of automatic enrolment in 2019. Opt-outs were very low and the increase in savers has been massive, with well over 10 million people now saving. Savings by young people and women have increased from approximately 40% to well above 80%.

Our thanks are due to all the businesses who provide support on that. That goes to the heart of the issue: even though it is a defined-contribution system, contributions are not made purely by the individual concerned; a 3% contribution is made by businesses, with some assistance from the Chancellor and tax rebates.

We will unquestionably implement the automatic enrolment review, as previously stated, by the mid-2020s. As I said earlier, my view is that there will be a further pensions Act in this Parliament with a view to implementing that. It will, without a shadow of a doubt, require primary legislation both to institute the short points necessary for automatic enrolment and to give an indication of its direction. Primary legislation is also needed for superfunds. I was told that CDCs would need relatively little legislation until, after a lot of work, our 52 clauses were drafted, but I believe that automatic enrolment would require a relatively small Bill. However, there is no doubt that superfunds would need a large Bill, and I will come to that later. The mid-2020s remain our target.

Clearly, we have to balance the current fiscal situation and the fact that this Government, with the support of all Members of the House, have put additional burdens on business, whether by raising the living wage—the rate of which has been massively increased for low-income workers since the days of the minimum wage—or other costs. For certain larger businesses, there is the apprenticeship levy among other things. Unquestionably, the Chancellor, the Prime Minister and the Secretary of State for Work and Pensions have to look at the fiscal framework, and they will have to decide how to do that and whether there should be an increase above 8%.

To the question about whether we will reduce the lower earnings threshold and raise the age groups, the answer is yes, we will. I have made and continue to make that point repeatedly in Parliament.

[Stephen Timms]

I welcome the Minister’s commitment to legislate in this Parliament. Can he give us some indication of when in the next four years that Bill might be introduced? December 2024 would be rather late to legislate for something to take effect the following year. Will he reassure us that it will be done a little earlier than that?

[Guy Opperman]

I am always nervous about saying that the legislation will come in on this or that particular date because—as the right hon. Gentleman will understand, having held my current job—it is way above my pay grade. I have been trying to get this Bill into this House for a considerable time: well over a year, in fact. The election got in the way of the first attempt, and clearly other things are taking place—whether relating to covid or other legislation.

All I can say is that we will, I hope, have time for such legislation at some stage. It is a matter for the Prime Minister, the Chancellor and the Cabinet, and the usual write-around process that applies, to decide when there will be a further piece of pensions legislation. I cannot be any more specific. Frankly, if I gave a date, the Whip, my hon. Friend the Member for Halesowen and Rowley Regis, would wrestle me down and say that it is not for me to make Government policy and announce a specific date.

I can only say that our intention is that what we are discussing should take place in the mid-2020s. As we all know, summer can be a very long month when one is defining things in Parliament; I take the point that, if it is to happen in the mid-2020s, legislation has to be in order at some particular stage.

The great advantage of the Government’s review of automatic enrolment, “Maintaining the Momentum”, is that it sets out the procedures through which the Government are going to proceed in terms of the lower earnings rate and the change of age. Because of the way payroll works and the sophistication of payroll now that we have automatic enrolment up and running, I am advised that the changes are relatively easy to make. I accept that businesses will need some time, but it will not be like the original version of automatic enrolment, when we had to completely invent a system; this is an expansion of a pre-existing system. The right hon. Gentleman can remind me of that when things do not necessarily go like a Swiss watch, but that is my confidence on the matter. I hope that that provides assurances.

I will touch on one particular point: expansion of 8%. I endorse the comment that 8% is not sufficient—there is common belief about that. We are looking at international models, and Australia is the best example of the way forward. Clearly, I hope that in the longer term we would increase automatic enrolment, but there has to be a balance as to who is going to contribute to that. Will the employer have a larger role, paying more than the 3% that they do at present? Alternatively, will it be solely down to the individual? How can one offset that in respect of tax rebates and other such things?

Such policy work needs to be done on an ongoing basis and will take a little time. We have to be mindful of the fact we are in the middle of particularly difficult fiscal times because of covid. Imposing further burdens on businesses has to be balanced with the desire, which all of us have, to ensure that people have greater savings on an ongoing basis. This is a work in progress. I do not have any difficulty in being held to account for that: quite right, too—I would like to make progress as well. How we make progress is complicated.

The next amendment that the hon. Gentleman for Airdrie and Shotts brought forward was new clause 11, regarding automatic enrolment again. On the simple point about small pots, I should say that the matter is already a work in progress. I endorse so much of the broad thrust of what the amendments are saying. I totally endorse the principle the issue of small pots needs to be examined. The Work and Pensions Committee, to be fair to it, is beginning to look into that, as we discussed earlier. We have convened at the Department. I have asked all the industry sector and some of the third sector people, who clearly matter in this light, to come together and give me a report before the end of November, on a very provisional basis, about what they see as the key challenges and approaches going forward.

I would clearly be surprised if I were not summoned before the Work and Pensions Committee in due course to discuss these matters, in order to try to formulate policy. It seems to me that there is great scope, and a desire, to address a small problem on a long-term basis. In my view, that has to be wrapped up with a consideration of costs and charges as a whole. I would not want to deal with the issue in a bite-sized piece; if I can do it, I will attempt to do it in the round.

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[Stephen Timms]

I want to press the Minister on the timescale. I take the point that a response will be published early next year, so when does he expect the arrangements to be in place so that people can see the statements online?

Pension Schemes Bill [ Lords ] (Third sitting)

Stephen Timms Excerpts

Committee stage & Committee Debate: 3rd sitting: House of Commons
Thursday 5th November 2020 Public Bill Committees

[Seema Malhotra]

I take on board the points the Minister has made. This is an area that may requires further dialogue, and we will reflect on what the Minister has said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 124 ordered to stand part of the Bill.

Clause 125

Exercise of right to cash equivalent

[Stephen Timms (East Ham) (Lab)]

I beg to move amendment 21, in clause 125, page 121, line 11, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (6ZA) of section 95 of the Pension Schemes Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 22, 23 and 24 are related.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 22, in clause 125, page 122, line 4, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (5A) of section 101F of the Pension Schemes Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 21, 23 and 24 are related.

Amendment 23, in schedule 11, page 193, line 20, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (6ZA) of section 91 of the Pension Schemes (Northern Ireland) Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 21, 22 and 24 are related.

Amendment 24, in schedule 11, page 194, line 15, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (5A) of section 97F of the Pension Schemes (Northern Ireland) Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 21, 22 and 23 are related.

New clause 10—Pensions Guidance—

“The Secretary of State must write to members or survivors of pension schemes five years prior to the age of becoming eligible to access their benefits, to state a scheduled date and time for a pensions guidance appointment, or the option to reschedule or defer this appointment; and write annually until a pensions guidance appointment has been taken, or the member’s desire to opt out has been confirmed.”

This new clause would ensure members or survivors of pension schemes receive an impartial pensions guidance appointment prior to the point when they become eligible to access their pension benefits, with an appointment booked each year until such time that the member has received impartial guidance.

[Stephen Timms]

I am pleased to be serving under your chairmanship this morning, Mr Stringer.

The Work and Pensions Committee, which I chair, discussed amendments 21 to 24, and I am grateful to Labour colleagues on the Committee, the Conservative Vice Chair of the Committee, the hon. Member for Amber Valley (Nigel Mills), and the right hon. Member for New Forest West (Sir Desmond Swayne) for putting their names to the amendments. I am grateful to the hon. Members for Airdrie and Shotts and for Gordon for doing so today as well. This is a tripartisan amendment, as all good pension policy should be.

Last weekend, I was in touch with a nurse who works at a health centre in my constituency. Her husband drives a black cab. Some years ago, a financial adviser they knew well and who had given them good advice previously called and told them about an opportunity to realise their pension savings early with no real downside. They took up his offer. The upshot is that all their savings have gone and they now face a massive tax bill of about £60,000 with no means to pay it. The financial adviser, I understand, is living on a yacht in Tenerife.

All of us can understand just how devastating is the impact on hard-working families of being robbed of their life savings in that way. People who have saved conscientiously, worked hard and done the right thing, and who are entitled to be able to look forward to secure retirement, suddenly find that their hopes have been destroyed. The Transparency Task Force, one of the groups that urged the Select Committee to undertake an inquiry on scams, reports cases of spouses who, sometimes for years, have not dared tell their partner what has happened, so awful are the consequences. People wake up every day in dread of the future. They are often ashamed and embarrassed to have fallen for such a barefaced lie. Scammers groom people; they become trusted family friends. They “warn” savers that schemes will advise them not to transfer their money, and claim that that is because the schemes want to hang on to it for their own benefit. If the saver does become aware that the receiving scheme has fallen foul of regulators, they will say that that was just because someone was late filling in some forms.

It seems absurd that, as the law stands, trustees are compelled to make a transfer if a member demands it, even if the trustees know that the money is being handed over to crooks. Even if the receiving scheme is on the warning list, published by the Financial Conduct Authority, of firms known to be suspect, the law requires trustees to go ahead with the transfer; and if they are slow about it, they can be fined.

The Select Committee on Work and Pensions has launched an inquiry on the impact of the pension freedoms five years after they were introduced in April 2015, and the first of three parts is looking at pension scams. It is striking how loud a call there has been, from many different places, for the Select Committee to look at this matter. It reflects widespread revulsion at some of the scandals we have seen and fear of the damage that they do—certainly to individuals, but also to the industry as a whole. There has been a particular worry that the pension freedoms plus the financial pressures of the pandemic could be creating what the Pensions Regulator has called a golden age for pension scams, so the inquiry is looking at the prevalence and impact of scams.

Margaret Snowdon, who leads the Pension Scams Industry Group, told the Select Committee at its meeting on 16 September that, based on a survey that the group carried out a couple of years ago, it estimates that some 5% of pension transfers in the last five years have been into scams. The amount may total £10 billion over that period and 40,000 people may have been affected; some will not yet know that they have been scammed. And this is carrying on. Responsibility for preventing and responding to scams cuts across many different bodies, and our witnesses reflect that. It is a tragedy that many victims see very little, if any, of their money ever returned.

The Bill was amended in the other place before the summer break—the amendment was, I am glad to say, accepted by the Government—so that if a defined-benefit transfer application raises one of the red flags on a prescribed list of features likely to indicate that there is a scam going on, the trustees must delay the transfer until the saver has taken financial advice.

These four amendments are based on work by the Pension Scams Industry Group. I pay tribute to Margaret Snowdon and her colleagues for their hard work. The amendments would empower trustees to refuse a transfer altogether if they had good grounds, based on the red flag analysis, for believing that a proposed transfer involved moving pension savings into a scam. It would say to the trustees, “You don’t have to do this.” The amendments provide for the making of regulations that prevent a transfer from taking place, depending on the results of that due diligence on the receiving scheme undertaken by the trustees or the scheme managers. That would allow a period of consultation and evidence gathering before regulations were drafted and implemented, to ensure that the detail was right.

I am grateful to the Minister for the helpful discussions we have had on this point since the summer. I know that he is as appalled as I am by the impact of scams, and that he has been looking very carefully, with his officials, at whether it is possible to achieve the effect of the amendments—without actually accepting them—by using powers already in the Bill. I am looking forward to what he will have to say to us today about that. From what I have seen, and thanks to the work of his officials, it does look as though it might well be possible to deliver the effect of the amendments with regulations under the Bill as it stands. I was sceptical about that to begin with, but thanks to the work that the Department has now done, I can see that that might well be the case.

I want to sound one note of caution. I understand that the Department would like to exempt from its proposed regulations certain categories of scheme. For example, it would want to guarantee that a transfer to an authorised master trust should not be blocked on the basis of a red flag assessment. Actually, I have no problem with exempting authorised master trusts, given their oversight by the Pensions Regulator, but it would be a serious mistake to exempt FCA-registered schemes, because a lot of scams are FCA registered.

I am told, for example, that it is perfectly possible for schemes to be both FCA registered and on the FCA warning list. Typically, those might involve an overseas adviser, probably not FCA registered, who would use the platform of a UK self-invested personal pension which is FCA registered to offer exotic investments overseas. That is precisely the form that many such scams take. When the regulations are drawn up, whether under my amendments, if they are accepted, or under the existing powers as the Minister intends, it is important not to create a large loophole to allow the bulk of the crimes to carry on. We certainly need to improve drastically the protection for savers. Implementation of the pension freedoms without safeguards has inflicted great harm. We must now put essential safeguards in place.

I come now to new clause 10. Last week, the Department published a document entitled, “Stronger nudge to pensions guidance: statement of policy intent”. That does not sound like a document that will set the world or fire, but I think its content is widely regarded as rather timid and disappointing. It does not deliver the default guidance approach that Members on all sides wanted when the Financial Guidance and Claims Act 2018 became law and was debated.

Consumer organisations are also calling for people to be directed to an appointment automatically, rather than expecting them to sort one out for themselves. We know how successful harnessing inertia to bring people into pension saving has been; we should harness inertia as well when people come to access their pension savings—auto-enrol in, but auto-enrol out, too. New clause 10 would auto-enrol pension savers into an appointment with Pension Wise these as they approach the point of accessing their pension. Put savers’ interests first and recognise the dangers in hasty, badly made decisions.

Pension Wise is delivered by Citizens Advice. It is immensely popular with the rather small number of people who use it. Nine out of 10 of those who use it report high or very high satisfaction. That is a pretty impressive level of satisfaction, yet the service is hidden away from most people. A significantly higher number of users than non-users say that they are very or fairly confident about avoiding pension scams having used Pension Wise. The default ought to be that people get an appointment.

Progress on take-up has been poor. Pension Wise reaches only a fraction of those who need it most—non-advised pension savers at the point when they choose to access their pension savings. The FCA estimates that between one in 10 and one in eight savers—a tiny proportion—first use Pension Wise when accessing a pension, and what should be the norm is instead the preserve of a minority. We should not be surprised about that. Pension planning is complicated, people do not know the ins and outs, and it very easily drops down a to-do list with all the other things going on, despite its importance.

In the statement of policy intent of last week, the Department said it will implement a guidance policy based on the “Stronger Nudge trials” of the Money and Pensions Service. Those trials did show a very limited increase in appointment bookings resulting from the nudges that were tested, but it is nowhere near enough. That is why the amendment is necessary.

Two nudges were tested. The first was that the pension provider offered to book a Pension Wise appointment for the consumer; the second was that the customer was transferred to the Money and Pensions Service, who then booked a Pension Wise appointment for them. The document sets out that, with both nudges, around 11% of pension holders attended a Pension Wise appointment, compared with 3% in the control group.

It is perfectly true that one in nine is a better level of take-up than one in 33, but we can surely agree that we must do far better than that. Auto-enrolment was needed for pension saving precisely because the nudges that we had all tried for years did not work. That is why we now have more than 10 million extra people saving into work- place pensions. Pension saving has become the norm, and impartial pensions guidance must become the norm as well. That is what the amendment would deliver.

--- Later in debate ---

[Guy Opperman]

I thank the right hon. Member for East Ham who leads the Select Committee for his kind words and heartfelt speech. I echo the comments in terms of his constituents, who clearly have had a terrible time. My thoughts are with them.

I will try to address the points raised. In respect of clause 125, the objective of the Government is quite clear. We wish to bring forward measures that will significantly and realistically prevent future scams. We believe that transfers will not go ahead if the conditions set out in the regulations are not met. These conditions can relate to both the destination of the transfers, meaning transfers can be prevented to schemes that do not have the right authorisation, and cases where the member has not supplied the evidence of, say, employment or residency. Importantly, those conditions can also include other red flags, such as who else is involved in a transfer. If those red flags are apparent, the regulations will enable the trustees to refuse to transfer. If the red flag is significant, it will direct the member to guidance or information that they must take prior to being allowed to transfer. Trustees will need to undertake due diligence to establish whether those conditions are met or not. Clause 125 puts trustees in the driving seat in relation to permitting transfers to proceed.

The right hon. Gentleman raised a number of specific issues, which I will try to address. The first relates to the scope of clause 125 in respect of DB and DC pension schemes. I take his point on master trusts, but I assure the Committee that the conditions to be met in relation to safe destinations, red flags and guidance before a transfer can proceed will be applicable to members of DB and DC schemes. Those conditions will be in addition to the current advice requirements for DB members seeking to transfer over £30,000 cash-equivalent value.

I have had discussions with the right hon. Gentleman, both in writing and in person, and with other colleagues on the Work and Pensions Committee, stakeholders, interested parties and other parliamentary colleagues. I have also engaged at great length, sadly by Zoom, with the all-party parliamentary group on pension scams, and then followed that up individually.

Colleagues who are concerned about the extent to which the PSIG requirements of red flags are being met should read the exchange of correspondence in the Library, following the right hon. Gentleman’s agreement that I could disclose it, in respect of the background of our meetings in September on two occasions, the letter that I wrote on 6 October, which included the Financial Conduct Authority’s approach of 5 October, and the follow-up letter of 22 October. If that second letter is not in the Library, which I am not totally sure it is, I will ensure that it is by close of business today. I wish also to put on record my thanks for the efforts of the PSIG, Margaret Snowdon and the various other parties who are all working for the common good to ensure that scams are prevented.

I will speak about guidance in a second, but first I will make two points. Clearly we wish to prevent, as far as possible, any scams or misdemeanours taking place, but that will have to be done through primary legislation and secondary regulations. It seems to me, as this process has been developing, that there is a degree of symmetry between the work that stakeholders—the PSIG and others—are doing, the work that this House is doing by passing primary legislation, and the specific drafting and codification of the regulations, which will be the nuts and bolts that will take this forward.

My objective is that we pass clause 125, which provides the statutory framework. My hope is that Royal Assent is received speedily and I suspect that my civil servants, who obviously have nothing else to do in these difficult times, will be able to progress the regulations very soon. I am hopeful that the Work and Pensions Committee report will have been published by then, and the ongoing dialogue that we have had with the Select Committee, cross-party, will continue, so that we frame the regulations that flow from clause 125 to accord with all our stated objectives.

I accept that the devil is always in the detail. We are all trying our hardest to be as precise as possible, without the regulations having been drafted already, but with regard to the four red flag objectives that are set out and that the right hon. Gentleman has rightly brought to my attention on Second Reading and in correspondence, I am confident that the answers that I have given to him in writing, and that the FCA has given, constitute a basis upon which we can regulate to prevent those matters.

The right hon. Gentleman is trying to tease out the extent of the amendments that he has tabled and the extent to which the Government can address them. We are able to address those matters within the confines of clause 125. I stress that we want to ensure that the powers can be applied quickly. I accept that time is of the essence in ensuring that the regulatory powers come forward as a matter of urgency.

[Stephen Timms]

I am grateful for the Minister’s perceptiveness in our discussions. May I check that he accepts the point that I made, that there should not be a carve-out for all FCA-registered schemes? FCA-registered schemes have been part of the problem in quite a lot of the scams that have arisen over the past few years.

--- Later in debate ---

[Guy Opperman]

The simple answer is that this is not something that could be in primary legislation and then enforced; primary legislation is the framework, and it is has to be in the subsequent specific regulations that follow. I can give the hon. Gentleman an assurance on that point, as I have given it to the Chair of the Select Committee.

We accept these matters and believe that clause 125 already addresses the points made by the amendments, but we still have to draft specific regulations to deal with the specific problems, and those will be much larger than clause 125 and way more comprehensive. The process of dealing with a transfer, what particular points apply, how it is a trustee operates due diligence and how it is that that process works, is genuinely a complex process. Detailed provisions have to be gone through, working with the various parties going forward. The point I am trying to make is that we agree with the principle of the amendment, but it should not be on the face of the Bill; we should accept that clause 125 provides the framework, and we then need to deal with the regulations going forward.

In the time remaining, I will try to address the points about guidance and see if I can assess that in a particular way. Briefly, it is entirely right that people should be supportive of the good work that Pension Wise has done. Demand for the service has grown year on year since we launched it in 2015. The service delivered 205,642 transactions in 2019-20, which was a combination of face to face, telephone and online—more than triple the sessions in the first year of operation—and has had 10 million visits to the website since 2015.

I would push back on the argument for new clause 10, which is that there is no previous engagement. The DWP’s work should also be seen in the context of the work that the FCA does. There is already a multitude of interventions at an earlier stage. Within two months of their 50th birthdays, members receive a single-page summary document that points to the pensions guidance, as required under the Financial Services and Markets Act 2000. Wake-up packs, which were developed in association with all of industry and the interested bodies and are a requirement of the 2000 Act, are received at the age of 55. They include the single page summary document and they point specifically to pensions guidance.

At a later stage, as the individual gets closer to accessing their pension savings and enters the drawdown phase in contract-based pensions, the FCA investment pathway requires that they be presented with four options as to how they want to use their drawdown pot, so it is not the case that there is no engagement prior to the drawdown. That is proposed by the FCA policy statement, which will come into force in 2021.

Although I fully accept that I should be pressed on DWP guidance, the FCA policy statement will come into force in 2021, and, between now and Report, detailed explanation of what that statement entails should be provided to the right hon. Member for East Ham. If it has not been provided to the Select Committee as part of its inquiries on scams, that is a lacunae that needs to be addressed, because it seeks to ensure that all arms of government are working together. The FCA policy statement, and the incoming changes, will definitely make a difference.

Briefly, on the stronger nudge towards guidance, which arose from the Financial Guidance and Claims Act 2018, it is fair to say that where there is transfer from one scheme to another to continue to accumulate and no risk is identified, the transfer can be acted on in accordance with the current requirements. Where a risk is identified, the member must be notified that they will be required to prove that they have taken information or guidance before the transfer can proceed. That is the appropriate effect of what we are legislating for in clause 125 and in the Bill.

Where there is transfer from one scheme to another to access pension freedom with no risk identified, there is the nudge towards guidance and the member is notified that they will need to prove that they have taken guidance or opted out. Where a risk is identified, the points that we have gone through on clause 125 and the prevention of scams come into play. The member must be notified that they are required to prove that they have taken information or guidance, and the amended requirements under clause 125 continue to apply.

There is a graded system depending on the identification of risk to the individual trustees as they proceed. In addition, work has been done to prevent pensions cold calling, and there has been a tightening of the rules to prevent fraud of registered pension schemes. I accept that more needs to be done to bring various departments together. I know that the Select Committee has looked at this area, assessing whether Project Bloom, the multi-agency partnership, and the ScamSmart campaign, are working sufficiently well, and that is something that I have undertaken to improve. The regulator’s evidence to the Select Committee on that exact point argued that a much more beefed-up effort was needed to bring all those particular parties together. Yes, the two arms of government need to work better together, and I hope I have explained how we are doing, but we also need much greater interdepartmental and interorganisational co-operation.

Finally, there has been criticism. I will not go into detail about whether the stronger nudge is a good behavioural insight trial. I support what has been done, but that is a matter of ongoing regulation as well. The appropriate approach would be that we work with the Select Committee on making that as effective as possible on an ongoing basis. I invite the right hon. Gentleman to withdraw his amendment.

[Stephen Timms]

I am grateful to the Minister and to everyone who has taken part in this debate. I welcome a lot of what he has said. On guidance, he told us that the FCA writes to everyone at age 50, but it seems to me that what it should do is say, “Your appointment with Pension Wise is at the following time and place”, taking advantage of that opportunity to increase significantly the likelihood of the guidance being taken. I am grateful to him, however, for saying that further information will come forward before Report and that the discussions and deliberations on the four amendments will also carry on between now and Report. At this stage, therefore, I do not propose to press any of the amendments to a vote.

[Seema Malhotra]

I want to make a few comments. I appreciate the exchange between the Minister and my right hon. Friend the Member for East Ham. I recognise the complexity of the different regulators that the Minister alluded to, and the need to join things up. From a consumer perspective, it is very important to join up different regulators, because it is difficult and confusing for individual consumers or citizens to deal with multiple regulators on different issues. Invariably, we end up with multi-year battles that are exhausting for them and their families. Therefore, ensuring that we have stronger remedies in place is critical to reduce some of the risk.

I support my right hon. Friend and appreciate Minister’s comments about not carving out FCA-regulated schemes that still pose a risk for those at risk of scams. The Minister has mentioned further regulations to come and that the exchange between him and my right hon. Friend the Chair of the Select Committee has been placed in the House of Commons Library—it will be important to review that—but the test will be the extent of the improvements to the system and of the tightening of protections. Those who are vulnerable to pension scammers are at serious risk, and gaps in regulation increase their vulnerability. It is not a harm-neutral situation. This is a uniquely difficult time, and it is a sad fact of the pensions world that there are people who seek to capitalise on that.

The hon. Member for Airdrie and Shotts also made some important comments. I want to lend our support, but we also need to keep this under review as we debate the regulations. We support the amendments, although my right hon. Friend the Member for East Ham has chosen not to proceed with them at this stage. They propose a sensible set of measures to counteract the risks that people, particularly those who are especially vulnerable, face right now.

Amendments 21 to 24 could play a part in future stages of the Bill. They would strengthen the protections to prevent individuals from transferring their pensions into scam schemes. We also welcome that the amendments have been tabled on a cross-party basis by members of the Work and Pensions Committee. It would be helpful to see how quickly those concerns move on to the Minister’s radar, and his imperative to act on them. We welcome both the ongoing dialogue with the Chair of the Select Committee and the proposed route map for addressing the issues under existing powers, which we hope will dramatically increase protection against scammers.

New clause 10 is intended to protect people from scams by auto-enrolling pension scheme members in pensions guidance appointments. That principle is extremely important, and the arguments for a much-needed source of information and impartial advice were well made. That would empower individuals to make good pensions decisions, and through that empowerment they would be more resistant to scammers.

We strongly support the intentions of new clause 10 and amendments 21 to 24, tabled by my right hon. Friend the Member for East Ham. I congratulate him on his Select Committee’s work on this crucial issue, which is a serious matter and could become more so for all our constituents. It is important to have the right protections to give savers greater confidence, particularly with continued pension scheme reform. I urge the Minister to act speedily to ensure that the arms of government that he talked about continue to work closely. I am sure that we can encourage and support him, on a cross-party basis, to move that along more quickly.

I would like to acknowledge the work of Pension Wise and Citizens Advice, and the services that they provide. There will, I hope, be ways—perhaps through what we can do here—to raise awareness of the services that those organisations offer, and, importantly, of pre-emptively encouraging people to get advice in what is a difficult area. We all fall prey to that: when something is incredibly confusing, as my right hon. Friend said, it gets put at the bottom of the pile, often until it is too late. These protections will go a long way to giving more people, particularly younger generations, the confidence to save and save early, which makes a difference.

[Stephen Timms]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(James Morris.)