Pension Schemes Bill [Lords]

Debate between Stephen Timms and Shailesh Vara

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

[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.

Pension Freedoms

Debate between Stephen Timms and Shailesh Vara

Wednesday 6th July 2016 Westminster Hall

[The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)]

It is a pleasure to serve under your chairmanship this morning, Mr Gray. I thank the hon. Member for Leeds West (Rachel Reeves) for setting out her case. She speaks with considerable experience, given that she was the shadow Work and Pensions Secretary. I am glad to see the right hon. Member for East Ham (Stephen Timms) also joining us for this debate.

Pension freedoms, which have been widely welcomed, have raised interest and engagement in pensions significantly. The freedoms give people the opportunity to take responsibility for their own retirement. In the first nine months we saw nearly 540,000 pensions being accessed. People are clearly taking control, but, as the hon. Member for Leeds West said, they need to do so after receiving the appropriate information at the right time so that they can make decisions that suit their circumstances.

The Government recognised that in order for people to make the most of the new freedoms they needed to equip them with the tools to make decisions that suit their circumstances, so Pension Wise was launched. This service provides free and impartial guidance to those aged 50 and over to help them to understand what they can do with their defined-contribution pensions following the reforms. I am happy to say that it has been very successful. I hope to give some information to the hon. Lady during the course of this debate that will give her some comfort.

[Stephen Timms (East Ham) (Lab)]

I agree that Pension Wise is providing a good service, but does the Minister acknowledge that, as my hon. Friend the Member for Leeds West (Rachel Reeves) pointed out, take-up of the service has been very low? In my area there is certainly evidence of skilled advisers sitting around twiddling their thumbs quite a lot of the time because the demand has not yet come through.

[Mr Vara]

The right hon. Gentleman makes a good point. I accept that we have more to do. I hope my comments will give him and the hon. Lady some assurance that we are doing things and we recognise there is more to be done. The hon. Lady referred to the number of appointments—73,000 so far—but 2.7 million visits have been made to the Pension Wise website. It is important to look at the two together, rather than just the appointments, because the information provided in the appointments is all available on the website. Many people are accessing the website and finding that they do not need an appointment. That needs to be borne in mind.

I appreciate that, as the right hon. Gentleman said, there is concern about take-up. It is important to remember that the service is not compulsory for everyone who wants to access their pension pot. Using Pension Wise is a voluntary option and people should be given the choice to plan for their retirement in the manner they see fit. However—I emphasise this point—it is important that people know the service is there to support them if they wish to use it.

Pension Wise has already run three national marketing campaigns across TV, radio, print and digital media. Those campaigns complement the current requirement for all pension scheme providers to signpost to Pension Wise whenever a wake-up pack is sent out to a member.

[Stephen Timms]

I am grateful to the Minister for giving way again. As he said, Pension Wise is a voluntary service. Has he noticed the point made by the Association of British Insurers that guidance for people transacting in the secondary annuity market, where the pitfalls are particularly troubling, should be mandatory?

[Mr Vara]

The right hon. Gentleman raises another good point. This is something we are looking at, although he will forgive me for not making any instant decisions. The secondary market is a broad market, with a huge amount of rules and regulations. We started with the initial concept of providing access to pension pots. That is now leading to other issues that rightly need to be looked at, but he will forgive me if I do not comment on those right now.

We have had three national awareness campaigns and we are working on a fourth. This is not an area where we feel we have done enough. There is more to do and we recognise that. The subject of pensions is complex and the Government recognise that there is more to be done.

Last year we consulted on how the provision of free, impartial financial guidance could be structured to make it more effective. The review confirmed that the current guidance offer can be confusing to the public. There is also an overlap in some services. That is why we have consulted on our plans to restructure the delivery of public financial guidance to make it more effective, by directing more funding to the frontline and providing more targeted support.

The latest consultation outlined our proposal for a new guidance model, which involves setting up a new pensions guidance body where individuals can get all their queries on private pensions answered in one place. There will also be a new, slimmed down money guidance body, to ensure people can access the debt advice and money guidance they need. The two bodies will work together to ensure that people who need both pensions and wider financial guidance are directed to the right place. The consultation ended last month and we are currently considering all the responses with a view to publishing our response this autumn.

Most people who seek information on pensions do not distinguish between guidance and advice; they simply want help. Regulated advice will be appropriate for some people, so there is still a need to make sure that affordable and accessible financial advice is available for those who want it. That is why the Government intend to consult, over summer 2016, on introducing the pensions advice allowance, whereby individuals will be able to withdraw up to £500 tax-free from their defined-contribution pension pot to redeem against the cost of financial advice before the age of 55.

Employees often look to their employers for help when it comes to pensions. To further encourage employer involvement, the Government will increase the current £150 tax and national insurance contributions relief to £500 for those employers who arrange pension advice for their employees. It is our view that that proposal and the pensions advice allowance could be complementary, so it would be possible for those who are able to use both to access up to £1,000 of tax-advantaged advice. Such initiatives can give people an understanding of their options, but no one knows their customers better than the pension providers themselves, and I know that organisations within the industry are starting to look at new and innovative ways of engaging with their customers. I hope we can work with the industry so that information and guidance is provided in a way that meets the individual’s needs.

The hon. Member for Leeds West spoke eloquently of the need to increase the take-up of Pension Wise. As well as the fourth awareness campaign that we are working on, Pension Wise delivery partners also promote the service locally in businesses and libraries, for example. A concern was also raised about getting proper advice. Pension Wise offers guidance on how to spot a scam, how people can protect themselves and what to do if they think they have been scammed, on its website and in appointments. If someone suspects they have been scammed, the service will signpost them to the Pensions Advisory Service and Action Fraud. In addition, Pension Wise is a member of Project Bloom and works with other members to raise awareness of scams.

The right hon. Member for East Ham spoke about the secondary market. I can tell him that Pension Wise guidance will be available to those selling their annuity, once the market launches in April 2017.

[Stephen Timms]

I thank the Minister for that answer. May I raise one other issue with him? The ABI says that it

“would like to see the new guidance arrangements enhanced so that providers who want to block transfers to protect their customers (because of concern about the receiving scheme) can refer their customers to the new body to receive impartial guidance on the risks from transferring funds to potential scams and fraudulent investments.”

Is that proposal from the ABI also something that he is reflecting on?

[Mr Vara]

Let me assure the right hon. Gentleman that we are keen to make sure that this works. We are not in any way restricting the stakeholders with whom we speak. We are working with all of them, including the ABI and a whole host of other organisations and people, to make sure that whatever guidance and regulations we put in place are right. We want to get it right as best as possible first time round. I assure him that we are very much taking on board the views of others out there.

To conclude, the hon. Lady was right to raise this important issue. I thank and commend her for doing so.

Question put and agreed to.

Oral Answers to Questions

Debate between Stephen Timms and Shailesh Vara

Tuesday 8th March 2016 Commons Chamber

[Mr Vara]

The hon. Lady refers to a recent case. She will be aware that the court did confirm that the Lord Chancellor has the power to set domestic violence evidence requirements. As for the other issues, we are considering the outcome of the case and will clarify our decision on the way forward in due course.

[Stephen Timms (East Ham) (Lab)]

In his latest annual report, the Lord Chief Justice makes an astonishing admission. He said:

“Our system of justice has become unaffordable to most.”

Does the Minister accept that that is a wholly unacceptable state of affairs?

[Mr Vara]

May I say to the right hon. Gentleman that we work very closely with the senior judiciary? On access to justice, he knows only too well that, despite the reductions that we made to the legal aid budget, it remains, at £1.6 billion, one of the most generous legal aid budgets in the world.

Oral Answers to Questions

Debate between Stephen Timms and Shailesh Vara

Tuesday 26th January 2016 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

5. What steps he is taking to ensure that access to justice does not depend on ability to pay.

[The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara)]

We are committed to ensuring that our justice system delivers faster and fairer justice for all our citizens. Reform of our courts and tribunals will bring quicker and fairer access to justice and create a justice system that reflects the way people use services today. We have also ensured that legal aid remains available for the highest priority cases, for example where people’s life or liberty is at stake, where they face the loss of their home, in cases of domestic violence, or where children might be taken into care.

[Stephen Timms]

The result, as the Lord Chief Justice extraordinarily reported two weeks ago, is that:

“Our system of justice has become unaffordable to most”.

Two constituents were sacked unfairly. One went to tribunal but was unable to afford legal representation and therefore lost. The other immediately gave up. With justice now available to only the well-off, does the Minister have any serious proposals to open up access to justice to ordinary people?

[Mr Vara]

I am grateful to the right hon. Gentleman for raising the issue of employment tribunals, because it allows me to say that this Government’s aim is to ensure that people do not have to go to court or tribunal in the first place, and therefore do not have to incur the legal expenses or experience the stress. In the case of employment tribunals—he might not be aware of this—the ACAS early conciliation service, which is free, was used by 83,000 people in its first 12 months. I very much hope that when constituents bring problems to his surgery in future, he will point them towards that free service.

Universal Credit Work Allowance

Debate between Stephen Timms and Shailesh Vara

Wednesday 6th January 2016 Commons Chamber

[Mr Vara]

I will not give way, as I have limited time available and I am keen to address as many of the points raised as possible. We have turned that situation around. Our reforms, the centrepiece of which is universal credit, are working and are getting people back into work.

[Stephen Timms]

Will the Minister give way?

[Mr Vara]

I will make an exception for the right hon. Gentleman.

[Stephen Timms]

The Government are not going ahead with the tax credit cuts, so why is it right to go ahead with precisely the same cuts for the minority of people who have the misfortune to be claiming not tax credits but universal credit?

[Mr Vara]

It is important that the right hon. Gentleman and others take into account the need to consider the broader perspective: the raising of personal allowances; the introduction of the new living wage; the doubling of free childcare to 30 hours; tax-free childcare from early 2017; and, let us not forget, the fact that every time we fill up our tank with petrol there is a saving of £10 because of the freezing of the fuel duty. It is important to consider everything in a broader perspective, not the narrow perspective that we have heard from so many Opposition Members.

A number of speeches have been made today and, unfortunately, time simply does not allow me to address them all. I shall simply say that the right hon. Gentleman made a passionate contribution. I have huge respect for him and I am sorry that he is no longer on his party’s Front Bench. May I also pay tribute to my hon. Friend the Member for Hertsmere (Oliver Dowden), who made a learned contribution, clearly setting out the reasons why Labour’s proposals are simply not sustainable? My hon. Friend the Member for Lewes (Maria Caulfield) made a powerful contribution, telling us of her experiences growing up, which had the whole House in agreement with her.

This is an important subject and we need to recognise that the IFS has pointed out that no one on existing benefits or tax credits whose circumstances remain the same will lose out in cash terms as a direct result of being moved on to universal credit. These claimants will get transitional protection to avoid cash loss at the point of change. It is important to note that the only people who will be directly affected by the change to work allowances in April will be those already in work, the majority of whom will be single claimants without dependants. [Interruption.] The shadow Work and Pensions Secretary chunters away, but we have checked the Hansard record and found that he was wrong and we were right. Conservative Members await a withdrawal of his earlier comments, which we debated. We have checked Hansard and he should do likewise. For those people who are affected, we have been careful to put measures in place to ensure that they are fully supported. As well as the additional work coach support that these claimants will receive, we have increased the amount available through the flexible support fund to help people progress in work and increase their earnings.

Universal credit is a major reform of welfare that is designed to make sure that work always pays. Through the removal of the requirement to work 16 hours per week that exists in the tax credits system, people will see a financial benefit from every extra hour they work. The universal credit taper means that financial support is withdrawn at a consistent and predictable rate, helping claimants to understand clearly the advantages of work. The IFS has said that anyone being moved on to universal credit from tax credits will be protected—they will not be cash losers. Opposition Members need to take that on board—that comes from the IFS.

Oral Answers to Questions

Debate between Stephen Timms and Shailesh Vara

Tuesday 18th March 2014 Commons Chamber

[The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara)]

We are implementing the reforms of litigation procurement and Crown court advocacy fees that we announced last month. Although making fee reductions is unavoidable, we have listened to the professions wherever we can and taken concrete steps to ease the impact of the changes. Moreover, the Justice Secretary has given a personal commitment that this Government will not seek further savings from criminal legal aid.

The Ministry of Justice and the Legal Aid Agency keep the operation of both the criminal and civil legal aid schemes under continual review. The Government plan to undertake a post-implementation review of the legal aid provisions within the Legal Aid, Sentencing and Punishment of Offenders Act 2012 within three to five years of implementation. That review will include an assessment of the impact of the reforms implemented during that period.

[Stephen Timms]

The cost of legal aid came in at £56 million less than was budgeted last year, and research commissioned by the Law Society from Oxford Economics argues that falling crime will reduce the legal aid bill by £80 million by 2018-19. What assessment has the Minister made of the argument that the spending cuts will be delivered without the scale of service reductions he is currently proposing?

[Mr Vara]

We need to look at the bigger picture and recognise that legal aid expenditure in this country—for England and Wales—is some £2 billion, which makes our system one of the most expensive in the world. Even after the reductions have gone through, the bill will still be one of the most generous in the world. We have to ensure that these reductions go through so that the legal aid budget remains sustainable.