Oral Answers to Questions

Steve Webb Excerpts

Monday 23rd January 2012 Commons Chamber

[Rehman Chishti (Gillingham and Rainham) (Con)]

13. What steps he is taking to protect the interests of people with small pension pots.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The problems associated with small pension pots can include higher charges, losing track of a pension or facing barriers to moving the pension and getting a decent annuity. That is why we published a paper last month that sets out some radical options for some form of automated transfer system to make it easier for people to build up one large pension pot.

[Rehman Chishti]

Does the Minister have evidence on the number of small pension pots that will be created after automatic enrolment?

[Steve Webb]

I am grateful to my hon. Friend for that question. There is a risk that without action, in an auto-enrolment world hundreds of thousands of new small pension pots will be created each year as people change jobs. That is why it is doubly important that we should have some mechanism to combine those pots so that they are a pension worth having.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The UK is in the grip of a private pensions crisis, with 60% of private sector employees saving nothing for their retirement. In the light of that fact and in the light of the emergence of new competitors in the auto-enrolment market, will the Minister consider ending the statutory restrictions on the national employment savings trust scheme so as to better serve the auto-enrolment market?

[Steve Webb]

The hon. Gentleman raises an important issue. The Labour Government introduced the constraints on NEST—and for a good reason, as it ensured that NEST focused on its target market. The situation has moved on and competitive developments in the market have emerged that were not necessarily foreseen. We are reflecting on the role of those constraints and I look forward to discussing the issue further with the Select Committee on Wednesday.

[Alex Cunningham (Stockton North) (Lab)]

14. What assessment he has made of the likely effect of the closure of the social fund on (a) homelessness, (b) hardship and (c) use of payday loans.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The social fund is not closing as payments for maternity, heating and funeral expenses will continue. Some discretionary payments, particularly community care grants, will be replaced by targeted local provision at the same total level—so it is not a cut in the budget—and universal credit will provide a better service with payments on account supporting many people in need of short and longer-term credit.

[Alex Cunningham]

I am grateful for that update. For some people, the social fund is a crucial safety net, allowing them to avoid catastrophe. One of the major concerns about its abolition is that people will no longer be able to claim crisis loans to pay rent in advance when they move into private rented accommodation. What provision will there be to help formerly homeless people pay rent in advance when moving into independent accommodation?

[Steve Webb]

I know that the hon. Gentleman had written his question before he heard the answer, but the social fund is not being abolished. The new system under universal credit of payments on account will actually be more flexible, allowing people to draw down their universal credit ahead of time. That will be more efficient than the current rigid system of crisis loans.

[Hywel Williams (Arfon) (PC)]

What discussions has the Minister had with the Welsh and Scottish Governments about the transfer of some responsibilities to local authorities and with what result?

[Steve Webb]

We are localising to English local authorities and, as the hon. Gentleman says, to the Scottish Government and the Welsh Assembly. We take the view—we have had a positive response on this from the Welsh Assembly—that the ability to shape a system for Wales is welcomed. Whether the Welsh Assembly chooses to do that through Welsh local authorities or at a national level in Wales will be a matter for it.

[Hugh Bayley (York Central) (Lab)]

15. If he will set a limit on the charges which pension fund managers may levy for the administration of pension funds.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Initial evidence ahead of the roll-out of auto-enrolment later this year is that the creation of NEST, with its relatively low charges, and competition in the market are leading pension providers to offer products for auto-enrolment with lower than average charges. However, we believe that charging levels are important and have taken additional reserved powers under the Pensions Act 2011 to cap charges under auto-enrolment if that proves necessary.

[Hugh Bayley]

The report produced for the Government by Dr Christopher Sier shows that pensioners are losing out because of the excessive fees and charges levied by private pension fund managers. What action will the Government take to cap the amount that private fund managers can milk from the funds they manage on behalf of pensioners?

[Steve Webb]

I think the hon. Gentleman was a Minister in our Department under the previous Administration, and as he knows they chose not to cap charges but to give themselves powers to cap them if it proved necessary. At the moment, our judgment is that the early roll-out of auto-enrolment will deal with big firms who will give good deals and low charges and that we have more competition than was perhaps expected, with NEST coming in at around 0.5% and other providers at or below that point. We are encouraged by developments in the market but we are absolutely prepared to use the capping powers if it proves necessary.

[Mr Marcus Jones (Nuneaton) (Con)]

16. What recent progress he has made on the youth contract.

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[Mr Dave Watts (St Helens North) (Lab)]

T3. What advice can the Minister give the 3,259 people in St Helens who have been told to downsize their home, despite the fact that on existing turnover it will take five and a half years for them to do so while, in the meantime, losing their benefit? What advice would he give those constituents?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I think that the hon. Gentleman is referring to social housing over-occupation. If people are in a particularly difficult situation, local authorities have been given an enhanced amount of discretionary housing payment to help them make that transition. It is vital that we tackle 1 million empty bedrooms in social housing.

[Robert Halfon (Harlow) (Con)]

Going back to the issue of testing the disability living allowance, will the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller) reassure the House that testing will be localised, humane and fair?

--- Later in debate ---

[Ian Murray (Edinburgh South) (Lab)]

T6. Recent reports have shown that more than £3 billion of pension charges are hidden from consumers. Will the Minister tell us what the Government plan to do to make it possible for pension fund trustees and consumers to compare charges between pension funds?

[Steve Webb]

The hon. Gentleman is absolutely right that charges are a crucial issue, so we are working with the National Association of Pension Funds and others who have undertaken an industry-led initiative to make charges information-transparent and consistent, and we are pleased to support them in that.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

May I assure the Secretary of State that a great many of my constituents object strongly to paying through their taxes for people to get more in benefits than they can get on a working wage, or to live in property far beyond anything that they could afford on their wage? It is important that we get the transition right, but the principles are sound.

--- Later in debate ---

[Mr Jim Cunningham (Coventry South) (Lab)]

May I ask the Minister whether employers can still take a pensions contributions holiday and, if so, how many?

[Steve Webb]

Where employers run defined benefits pension schemes, if they are in deficit and have a recovery plan agreed with the Pensions Regulator, there is no obligation on them to overfund above 100%, and there are Inland Revenue rules that affect surpluses, which are still in place.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does my right hon. Friend agree that those well-intentioned but misguided individuals who oppose the introduction of a benefits cap are in serious danger of killing with kindness the very people they seek to help, by condemning them to a lifetime of benefits dependency and worklessness, which the benefits cap will seek to reverse?